Exam III
An agent has willfully violated a provision of the Uniform Securities Act. If the agent can prove she had no prior knowledge of the rule violated, which of the following choices is the maximum penalty? A) $5,000 fine B) No maximum penalty C) $5,000 fine and three years in prison D) $10,000 fine and five years in prison
A) $5,000 fine The maximum criminal penalty is a $5,000 fine and three years in prison. Under the Act, there can be no prison sentence imposed if the person can prove she had no prior knowledge of the rule.
A person working for a broker-dealer gives information relating to prices and sales of securities but receives no direct compensation related to these activities. This individual: A) Does not need to be licensed B) Must be licensed as a broker-dealer C) Must be licensed as an agent D) Must be licensed as an investment adviser representative
A) Does not need to be licensed An individual employed by a broker-dealer who gives information relating to prices and sales of securities, but who does not receive transaction-related compensation, does not need to be licensed as an agent
A security issued by a U.S. municipality is considered a(n): A) Exempt security B) Federal covered security C) Exempt transaction D) Exempt issuer
A) Exempt security Even though a U.S. municipality is an exempt issuer, this question asks you to identify the status of the security. Securities issued by a U.S. municipality are exempt securities.
An investment adviser representative was the subject of a customer complaint two years ago in the state of Idaho and resigned his position as a result. The Administrator conducted an investigation, the results of which were not made public. He is currently applying for a mortgage for a new home in Boise. The bank where he is applying requests his employment history and contacts the investment adviser for verification. The personnel manager at the firm is reluctant to give the bank any information about its former employee and directs the bank to contact the state Administrator. When the bank calls the Administrator, what information can it expect to receive? A) The Administrator will not release any details of the complaint B) The Administrator will provide the details of the complaint since it was securities-related C) The Administrator will contact the investment adviser for authorization to release the information D) The adviser must contact the Administrator for approval to release the information to the bank
A) The Administrator will not release any details of the complaint According to the Uniform Securities Act, neither the Administrator nor any of his officers or employees may disclose nonpublic information obtained in the course of performing their duties, except among themselves or when it is necessary as part of a proceeding or investigation.
When registering as an agent, which of the following information is NOT required on the U4 Form? A- Consent to Service of Process B- Any conviction of a misdemeanor involving a security C- The agent's financial condition D- The state or province of birth
A- Consent to Service of Process All are required to be disclosed on the U4 Form, except a Consent to Service of Process. While required for registration, it is not a part of the U4 Form.
An employee of XYZ Corporation is selling common stock to the public but is not being paid a commission. Under the Uniform Securities Act, which of the following statements is TRUE? A- The employee would be considered an agent of the issuer and would need to register B- The employee would be considered an agent of the issuer but would not need to register C- The employee would be considered an agent of a broker-dealer and would need to register D- The employee would be considered an agent of a broker-dealer but would not need to register
A- The employee would be considered an agent of the issuer and would need to register Under the Uniform Securities Act, an individual representing a nonexempt issuer in sales to the public is defined as an agent of the issuer (XYZ Corporation) and must register as such whether or not compensation has been paid.
An apparent violation of the Uniform Securities Act has occurred. Which of the following is NOT included in the list of possible actions that may be taken by the Administrator? A- Without providing for a hearing, the Administrator can immediately revoke the suspected violator's registration. B- Without providing prior notice, the Administrator can begin investigating the situation and the registrant. C- Without providing prior notice, the Administrator can force the registrant to halt the activities in violation by issuing a cease and desist order related to the violation. D- Without providing prior notice, the Administrator can start a civil suit against the registrant which alleges wrongdoing and forces compliance with existing regulations.
A- Without providing for a hearing, the Administrator can immediately revoke the suspected violator's registration. An Administrator is not permitted to revoke a registration without providing appropriate prior notice, the opportunity for a hearing, and written findings, facts, and conclusions related to the alleged violation. The Administrator can initiate an investigation, issue a cease and desist order, or initiate civil proceeds without prior notice. However, firms and individuals who are subject to these actions have an opportunity to appeal.
The president of a biotechnology company is selling his corporation's convertible bonds to the public, and is not receiving compensation. In this capacity, he is considered to be: A) A broker-dealer B) An agent of the issuer C) An agent of a broker-dealer D) Excluded from the definition of an agent
B) An agent of the issuer Persons who represent non-exempt issuers in sales to the public are defined as agents and must be registered whether or not they receive compensation. Persons who represent non-exempt issuers in sales to existing employees are only defined as agents (and must be registered) if they receive compensation related to the transaction(s).
Antoine is an agent for Cyberspace Securities. One of his clients, Mr. Mole, works for the research department at TransGalaxy, Inc. Until now, Mr. Mole has invested in bond mutual funds and conservative stock funds. Today he calls Antoine and places an order for 10,000 shares of TransGalaxy. Which of the following statements is TRUE? A) Antoine must accept the order since he may not knowingly fail to follow client instructions B) Antoine should bring this order to the attention of a supervisor immediately, since it may indicate insider trading C) Antoine must refuse to accept the order, since investors may not purchase stock in companies for which they work D) Antoine must accept this order since it is unsolicited
B) Antoine should bring this order to the attention of a supervisor immediately, since it may indicate insider trading It may also be a violation of the USA to assist an investor who is using insider information. A situation like this should be treated as a red flag that should be brought to the attention of a supervisor.
A client is traveling and would like her investment adviser representative to pay some personal bills while she is away. Under the Uniform Securities Act, such an activity: I- Should be backed up in writing II- Constitutes custody III- Falls outside the scope of securities market regulations A) I only B) I and II only C) II and III only D) I, II, and III
B) I and II only When an investment adviser has access to customer funds and securities, custody exists. Written authorization is required for this type of activity and usually is referred to as full discretionary authority.
An agent handling a client's account may share in the profits or losses as long as all of the following conditions are met, EXCEPT: A) The client has approved of it in writing B) The broker-dealer employing the agent has approved it C) The client and agent have a mutual agreement as to the proportion of profits and losses the agent will share D) The agent may only share in direct proportion to the amount the agent has contributed to the client's account
C) The client and agent have a mutual agreement as to the proportion of profits and losses the agent will share
Paul is the CEO of a publicly traded company and has a sizeable position in his company's stock. He is NOT permitted to sell a portion of his shares if: A) The company issued a press release last week to announce its earnings B) The company is scheduled to announce its earnings next week C) The board of directors approved the transaction D) Paul failed to file Form 10b5-1 with the SEC
B) The company is scheduled to announce its earnings next week Paul may be liable for insider trading if he sells his shares before the company announces its earnings.
Which of the following choices warrants the denial of registration by the Administrator? A) The registrant was arrested for insider trading B) The registrant was charged in a stock manipulation scheme C) The registrant was convicted of a drug-related felony D) The registrant was convicted of a misdemeanor
C) The registrant was convicted of a drug-related felony The Administrator may deny registration for any felony conviction, not just those involving securities.
Michael is dually registered as both an agent and an investment adviser representative. Michael receives fees for giving investment advice and a commission for each investment product that the client agrees to purchase as a result of his advice. Which of the following statements is TRUE? A) This practice is a conflict of interest and is prohibited according to the NASAA model rule B) This practice is not prohibited as long as it is fully disclosed in the adviser's brochure C) This practice is acceptable if the investment adviser and the broker-dealer are affiliated D) This practice is acceptable as long as the commissions are reasonable
B) This practice is not prohibited as long as it is fully disclosed in the adviser's brochure this practice is allowed as long as it is disclosed to clients. This disclosure would normally be part of the adviser's brochure.
State Administrators have certain authority regarding the establishment of requirements related to net capital and registration of broker-dealers. Which of the following BEST describes this authority? A- Administrators must establish minimum net capital requirements that are equal to those of the SEC. B- Administrators can act in the public's best interest and establish appropriate minimum net capital requirements for broker-dealers. C- Administrators can only enforce the minimum net capital requirements that are set by the SEC. D- Administrators have no authority to establish or enforce minimum net capital requirements for broker-dealers.
B- Administrators can act in the public's best interest and establish appropriate minimum net capital requirements for broker-dealers. The Administrator may set minimum net capital requirements which are deemed to be in the public's best interest and appropriate. Remember, as it relates to minimum net capital requirements, a state Administrator cannot impose a requirement that exceeds the SEC (federal) requirement.
A client of an agent has recently sold a home. Before making an investment decision, the client suggests that the agent hold the money in safekeeping. Which of the following is TRUE of this arrangement? A- In order to act as a custodian for the client's money, the agent must have a power of attorney B- Agents are prohibited from acting as a custodian for money C- Before agreeing to accept the client's money, the agent must have written approval from their broker-dealer D- When acting as a custodian for a client's money, the agent must post a bond and notify the Administrator
B- Agents are prohibited from acting as a custodian for money According to the NASAA Model Rule—Dishonest or Unethical Business Practices of Broker-Dealers and Agents, an agent may not take custody of a customer's money or securities. ONLY A BROKER-DEALER may act as a custodian for customers' money or securities.
Each of the following are considered adequate cause for a state Administrator to revoke an IA's registration, EXCEPT: A- The IA was convicted of a misdemeanor for securities fraud five years ago B- An IAR of the advisor went through personal bankruptcy four years ago C- The IA recently violated CFTC and Commodities Exchange Act regulations D- It was recently revealed that the IA violated the Investment Company Act
B- An IAR of the advisor went through personal bankruptcy four years ago Except B, all of the other choices will cause an Administrator to revoke the IA's registration. Violations of other securities laws or industry regulations, as well as violations relating to misdemeanors in the securities industry within the past 10 years, are all potential reasons for the revocation of an IA's registration.
All of the following must be obtained by an agent opening a new account for a customer, EXCEPT: A- A street address B- An e-mail address C- Tax identification number D- Date of birth
B- An e-mail address
Under the Uniform Securities Act, which of the following choices is NOT considered a security? A- A certificate of interest in an oil and gas leasing program B- An equity-indexed annuity C- A multi-level distributorship agreement DA certificate of interest in a real estate investment trust
B- An equity-indexed annuity Any insurance policy, endowment policy, or annuity contract, under which an insurance company promises to pay a fixed sum of money either in a lump sum or periodically, is not considered a security. A variable annuity is a security
An agent's customer places an order and tells the agent to buy XYZ stock "when the price is right." The customer goes out of town on business and cannot be reached when the agent learns of news about XYZ which the agent believes will drive the price of the stock up. Which of the following actions should the agent take? A- Buy the stock for the customer at the current market price. B- Do nothing until the customer can be reached. C- Asks for discretionary authority over the account from the her broker-dealer's Compliance Department. D- Purchase the shares for her own account and later sell the shares to the customer at the purchase price if the customer agrees.
B- Do nothing until the customer can be reached. Discretion that's limited to the time and/or price of execution can be given to an agent, but ONLY UNTIL THE END OF A TRADING DAY. For any time exceeding one day, the authorization must be in writing in the form of a discretionary account. NASAA's Model Rules prohibit an agent from executing a trade without written authorization or exercising discretionary trading authority without the prior written authorization of the client.
Under the Uniform Securities Act, which of the following statements is TRUE regarding the registration of investment advisers (IAs) and investment adviser representatives (IARs)? A- IARs are not required to be registered in a state as long as the IA is registered there. B- IARs are required to be registered in a state even if the IA is registered there. C- IARs are required to register in a state even if the IA is provided an exemption from registration there. D- IARs that are giving advice about exempt securities don't need to be registered even if the IA is required to be registered.
B- IARs are required to be registered in a state even if the IA is registered there. Under the USA, it's unlawful for any registered investment adviser to employ an investment advisor representative unless the IAR is also registered
An agent of a broker-dealer routinely conducts investment seminars in order to attract new clients. Which of the following statements is TRUE? A- A supervisor must be present at every seminar B- The broker-dealer must approve all written materials that are used at the seminar C- The Administrator must approve all sales materials that are distributed to investors at the seminar D- All seminars must be recorded for compliance purposes
B- The broker-dealer must approve all written materials that are used at the seminar A principal must approve all written seminar materials and guest speakers beforehand (including advertising or notices for the seminar itself). If an agent regularly conducts sales seminars, then a supervisor should attend random seminars to fulfill the broker-dealer's obligation to supervise the agent. However, there is no need for a supervisor to attend every seminar.
All of the following books and records must be readily available at a branch office, EXCEPT: A- Customer account agreements B- The broker-dealer's audited financial statements C- Order tickets D- Compensation records for agents
B- The broker-dealer's audited financial statements Broker-dealers must maintain all of these records. However, certain records should be maintained at a branch or local office so that an examiner can easily access them. These records include customer account information, suitability information, customer complaints, order tickets, sales blotters and the personnel and compensation records of the agents assigned to that office. Note that not all of these records need to be physically stored at the branch. The office, however, must have a way of quickly retrieving them and making them available to examiners.
According to the SEC, an investment adviser may publish the comments it receives on a third-party review site on its own Internet site if: A- The site is preapproved by a registered principal and the adviser edits the comments it receives B- The site is independent of the adviser and the adviser does not cherry-pick the reviews it receives C- The site is approved by the SEC's investment advisory committee or the appropriate state authority D- An adviser may never refer to these types of comments without violating the testimonial rule
B- The site is independent of the adviser and the adviser does not cherry-pick the reviews it receives According to SEC guidance, an investment adviser (or an IAR) may publish the comments it receives from an independent social media site on its own Internet site or social media page as long as it has no control over the comments. In other words, the site must be neutral. It must permit both positive and negative comments and the adviser must not be able to tailor or sort them so that the favorable ones are highlighted.
An IAR receives a tweet with a link to an article about a promising new tech company. The IAR retweets the link with the following message "Interesting article about a new tech startup." It is discovered later that the article was published by a stock promoter who falsified several key pieces of information. Neither the IAR nor the adviser had any knowledge that the content was falsified. One of the IAR's twitter followers invested in the company's stock based on the article and sustained a large loss. Can the adviser or the IAR be held responsible for the misleading statements in the article? A- Yes, they have both become entangled with these statements B- Yes, they have adopted the content C- Yes, under the fiduciary theory D- Only if the purchaser bought the stock through an affiliated broker-dealer
B- Yes, they have adopted the content By retweeting the link to the article, the IAR has adopted the content. There is a possibility that the IAR and the advisory firm could be held liable for the purchaser's losses.
Under what circumstances may the Administrator of State X issue a cease-and-desist order on behalf of the Administrator of State Y? A) Only when the agent involved is also registered in State X B) Only if the Administrator in State X receives a written request from the Administrator of State Y C) Anytime the Administrator of State X believes that the agent is about to violate the law in State X D) Never
C) Anytime the Administrator of State X believes that the agent is about to violate the law in State X The USA gives the Administrator the power to issue a cease-and-desist order anytime he believes that anyone has violated the securities laws of his state or believes that someone is about to do so. The Administrator of State X has no jurisdiction in State Y.
A broker-dealer is opening securities accounts for retail customers at a bank branch. According to the NASAA Model Rules for Sales of Securities at Financial Institutions, what must the broker-dealer's agents do as part of the account opening process? A) Verify that the client is a qualified investor B) Provide the client with a written copy of the networking arrangement between the broker-dealer and the bank C) Make a reasonable attempt to obtain a written acknowledgement from the client that he has received the disclosures required under this rule D) Notify the client of the address and telephone number of the state securities Administrator where he can lodge complaints
C) Make a reasonable attempt to obtain a written acknowledgement from the client that he has received the disclosures required under this rule Under NASAA rules, a client who opens a brokerage account at a bank must be informed both orally and in writing, that securities: Are NOT insured by the FDIC (Federal Deposit Insurance Corporation) Are NOT the same as bank deposits or obligations and are not guaranteed by the bank Have risks—the investor may lose her principal
An agent has created a LinkedIn profile for business purposes. The profile states that she is affiliated with Broker-Dealer A and discusses her professional qualifications and experience. Before the profile is made available to the public, it must be: A- Registered with the Administrator B- Filed with FINRA C- Approved by a registered principal of Broker-Dealer A D- Approved by the Chief Compliance Officer of Broker-Dealer A
C- Approved by a registered principal of Broker-Dealer A This type of static content placed on the Internet is considered a retail communication by FINRA. It must be approved by one of the firm's registered principals before it may be used.
Which of the following actions by an investment adviser or IAR would violate the testimonial rule? I- An adviser encourages its personnel to post favorable comments about its services on a third-party Web site, under screen names, and then uses these comments in its own advertising II- An adviser offers discounted services to people who post comments on an independent Web site and then refers to these comments on its own social media page III- An adviser uses the rating it has received from an independent third-party review site in its print advertising IV- An IAR quotes the positive, unsolicited comments posted on the IAR's social media page in sales literature A- I only B- II and III only C- I, II, and IV only D- I, II, III, and IV
C- I, II, and IV only Advisers and IARs may refer to the ratings they receive from third-party social media sites in print advertising as long as the site is independent and not materially connected to the adviser.
Broker-Dealer X just hired a new agent. The agent has two existing securities accounts: an IRA account with a large mutual fund group in which he may only purchase this these types of securities and a regular account with Broker-Dealer Y. The agent must: A- Immediately close both of the existing securities accounts, open an account with Broker-Dealer X and transfer all the assets to this new account B- Notify the State Administrator on Form U4 about the existing accounts C- Notify Broker-Dealer Y that the agent is now employed by Broker-Dealer X D- Notify both the mutual fund group and Broker-Dealer Y that the agent is now associated with Broker-Dealer X
C- Notify Broker-Dealer Y that the agent is now employed by Broker-Dealer X The agent must notify Broker-Dealer Y that he is now employed by Broker-Dealer X. The agent does not need to notify the mutual fund company since the only securities he is allowed to purchase in that account are mutual fund shares.
How long does a broker-dealer need to maintain records of customer suitability information? A- Three years B- Five years C- Six years D- As long as the broker-dealer is in business
C- Six years The broker-dealer must keep records of customer suitability information for at least six years from the time the information was last updated or the account is closed.
A client asks her IAR to develop an updated comprehensive financial plan for her. After creating the plan, the IAR realizes that the client is likely to encounter serious tax consequences over the next several years as a result of changes in the plan. Despite this, the IAR is confident that the financial plan he developed is the best plan for the client. What should the IAR do? A- The IAR shouldn't mention the possible future tax consequences and should deliver the updated financial plan to the client. B- Despite the fact that the IAR believes the financial plan is the best for the client, he should rework it due to the tax consequences. C- The IAR should suggest that the client seek the assistance of a tax accountant or refer her to one. D- Since the IAR cannot provide the best financial plan that eliminates serious future tax consequences, the IAR should transfer the client's account to another IAR.
C- The IAR should suggest that the client seek the assistance of a tax accountant or refer her to one. If the IAR is convinced that the updated financial plan is optimal for the client, he should refer the client to a tax accountant in order to determine whether the tax consequences can be minimized. Part of providing clients with overall service is recommending or bringing in other professionals.
Which of the following may be grounds for denial of the registration of an agent? A- Filing a Consent to Service of Process B- The agent was previously registered with another broker-dealer C- The agent fails to pay a registration fee D- The agent was convicted of a misdemeanor
C- The agent fails to pay a registration fee Along with the application and a Consent to Service of Process, the agent must pay a registration fee. A misdemeanor conviction may be grounds for denial, but only if the misdemeanor conviction was securities related (i.e., not just any misdemeanor)
An agent has been given the login and password for a client's account. The client has provided written authorization for the agent to login and place trades in the client's account. This activity is considered: A- Acceptable, provided the authorization was filed with the Administrator. B- Acceptable, provided the broker-dealer's policies allow for it. C- Unacceptable, since it likely violates the terms of service of the broker-dealer's online account access system. D- Unacceptable, since it's strictly prohibited under the Uniform Securities Act.
C- Unacceptable, since it likely violates the terms of service of the broker-dealer's online account access system. Since the agent is logging into the website using the client's credentials, it's impossible to determine which transactions were entered by the agent and which were entered by the customer.
An agent of a broker-dealer receives an e-mail from a customer requesting that $20,000 be wired immediately from the client's account to a numbered account in a foreign country. The e-mail address is the one listed in the account record for that customer and the e-mail contains the correct account number. The agent should: A- Notify the customer's spouse or next of kin about the request B- Notify law enforcement about the unusual request C- Verify that the e-mail really did come from the customer D- Follow the client's instructions promptly
C- Verify that the e-mail really did come from the customer The agent should verify that the request actually did come from the client. The agent could do this by calling the customer or using some other method outlined in the firm's procedures. Agents should be particularly cautious if the money is going to a third party.
An IAR receives an unsolicited tweet from a satisfied customer that says "My portfolio just hit a new high. Up 200% in less than 2 years. U r the greatest!!!" The IAR retweets this statement to all of her twitter followers. The IAR has: A- Violated the testimonial rule B- Violated the rules about performance advertising C- Violated both the testimonial rule and the rules about performance advertising D- Not violated either the testimonial rule or the rules about performance advertising
C- Violated both the testimonial rule and the rules about performance advertising By retweeting the customer's comment, the IAR has potentially violated both the rule against the use of testimonials in adviser advertising and the rules about performance advertising. Advertisements of past performance must conform to a number of specific rules. By retweeting the customer's statement about his portfolio increasing 200% in less than two years, the IAR has advertised his past performance without following these rules.
Under the Uniform Securities Act, which of the following persons that engages in the business of advising others regarding securities is NOT excluded from the investment adviser definition? A) An investment adviser representative B) A bank, savings institution, or trust company C) A licensed broker-dealer whose advice is incidental to its business D) A person whose advice relates only to exempt securities
D) A person whose advice relates only to exempt securities
All of the following documents may need to be filed with the Administrator, EXCEPT: A) A prospectus for a limited partnership B) A pamphlet for an oil and gas program C) A brochure for a mining company D) An offering circular for an endowment policy
D) An offering circular for an endowment policy The Administrator may require the filing of sales and advertising literature for securities investments. Limited partnerships, oil and gas programs, and mining companies issue securities. Endowment policies are insurance products, not securities.
A bank president is selling his bank's debentures to banking clients. In this capacity, he is considered to be: A) A broker-dealer B) An agent of the issuer C) An agent of the broker-dealer D) Excluded from the definition of agent
D) Excluded from the definition of agent Those persons representing the issuer, who are involved in the direct marketing of certain exempt securities, are excluded from the definition of a securities agent.
You are the chief financial officer of Colfax Advisers, LLC, a registered investment adviser located in Dallas, Texas. Your firm manages portfolios and has safekeeping services for its clients. The state of Texas requires that all registered advisers who have custody of client assets, maintain a minimum net worth of $35,000. In reviewing the month-end financials for the firm, you calculate the current net worth at $32,875. What would your best course of action be considering these circumstances? A) Increase net worth to $35,000 and notify the Administrator of the increase B) Notify the Administrator and post a $35,000 bond C) Cease operations in the state and file a notice of withdrawal D) Notify the Administrator within one business day and file a statement of financial condition
D) Notify the Administrator within one business day and file a statement of financial condition If the investment adviser's net worth drops below the required minimum (as set by the Administrator), the adviser must file a deficiency notice with the Administrator within one business day and also file a report on its financial condition.
A client and an agent are close personal friends. The client places an order for a new issue of stock that the agent's firm is underwriting. The client does not have enough money to pay for the stock on the settlement date. The agent deposits enough of her own funds in the client's account to cover the shortfall, which the client pays back within five business days following settlement. Which of the following statements is TRUE? A) Since the loan was repaid within five business days following settlement, this is not a violation of the Uniform Securities Act B) Because the agent extended the loan as a friend and not as an agent of the broker-dealer, this activity is acceptable C) This may be undertaken only if the broker-dealer grants permission in writing prior to settlement of the trade D) This is not an acceptable practice
D) This is not an acceptable practice Under the Uniform Securities Act, this is never acceptable. It is considered an unethical practice for agents to engage in the practice of lending to or borrowing money or securities from a customer.
Which of the following statements is TRUE regarding an options account? A- Before entering an options order, the customer must return the signed options account agreement B- Before entering an options order, the Registered Options Principal (ROP) must receive the Options Disclosure Document C- Before entering an options order, the customer must return the options account agreement D- Before entering an options order, the broker-dealer must deliver the Options Disclosure Document to the customer
D- Before entering an options order, the broker-dealer must deliver the Options Disclosure Document to the customer When opening an options account, the customer must receive the Options Disclosure Document. This document must be sent to the customer no later than the time the Registered Options Principal approves the account for trading. The firm may not enter an order for the customer until the account is approved for trading. Thus, the firm must send the document to the customer before the customer's first options order is entered. The customer has 15 days to return the options account agreement
An individual is an investment adviser representative of a state-registered investment adviser. Under the Uniform Securities Act, even if the IAR has no place of business in the state, registration is required if her clients include which of the following? A- Another investment adviser B- A mutual fund C- An employee benefit plan D- Eight accredited investors
D- Eight accredited investors If an investment adviser's clients are limited to investment companies (mutual funds), employee benefit plans, and other investment advisers, the adviser (and its IARs) is exempt from registration under the USA. However, accredited investors can include wealthy individual investors. To do business with more than five of these clients, registration is required.
Which of the following actions by an investment adviser could violate the Testimonial Rule? A- The adviser has written policies and procedures that require the approval of social media sites used for business purposes in advance B- The adviser permits its investment adviser representatives to maintain their own Web sites and social media pages C- The adviser refers to the rating it received from a third-party social media site on its own Web site D- The adviser invites clients to "like" its Facebook page
D- The adviser invites clients to "like" its Facebook page According to SEC guidance, asking customers to "like" an adviser's Facebook page could violate the Testimonial Rule. Advisers may refer to the ratings they receive from third-party social media sites as long as the site has no material connection with the adviser. IARs can have their own profiles and pages on sites such as LinkedIn and Facebook as long as the adviser can supervise these sites and maintain the required records. (Remember these sites are advertising and must comply with same recordkeeping and supervisory rules as more traditional advertising.)
Under the Uniform Securities Act, a state Administrator may require the application for registration as an investment adviser to include which of the following? A- A list of the past five years of records of both current and formerly employed investment adviser representatives (IARs) B- A record of client securities and the location and manner in which they are or will be held C- The compliance procedures of the IA D- The financial condition and history of the IA
D- The financial condition and history of the IA When filing the initial application for registration, an investment adviser must include its financial condition and history. Once the IA is registered, it must comply with the other requirements listed.
An agent has filmed several YouTube videos explaining variable annuities to investors. Based on this information, which of the following statements are TRUE? I- The videos must discuss both the advantages and disadvantages of variable annuities The videos must be preapproved by a qualified supervisor The videos must be preapproved by the Administrator Copies of the videos must be maintained for at least three years
I, II and IV only The videos are advertising—they must be fair and balanced. They must discuss both the advantages and disadvantages of variable annuities. The videos also need to be approved by a registered principal and the broker-dealer must keep copies of them for at least three years after they are last used.
An agent associated with Broker-Dealer A wants to open an account with Broker-Dealer B. Broker-Dealer B must: I- Notify Broker-Dealer A in writing about the agent's intention II- Send duplicate confirmations and statements to Broker-Dealer A if requested III- Have the account approved by a principal of Broker-Dealer B IV- Inform the agent that Broker-Dealer A will be notified
I, II, III, and IV
An agent is registered in State A. Her broker-dealer is registered in State A and State B. The agent's client has moved to State B. In order to continue to service the client, which of the following is TRUE? I- The agent must register in State B II- The agent may continue to service the client for up to 60 days while their registration is pending III- The agent must be a member of an SRO (i.e., FINRA) IV- The agent must be registered in at least one state
I, II, III, and IV All the conditions must be met in order to service the client in State B.
The Administrator may take administrative action against an agent who willfully violates any provision of which of the following acts? I- The Securities Act of 1933 II- The Securities Exchange Act of 1934 III- The Investment Advisers Act of 1940 IV- The Investment Company Act of 1940
I, II, III, and IV The Uniform Securities Act established a cause for administrative action against an applicant or registrant (i.e., agent) who willfully violates any provision of federal security acts.
An agent for Broker-Dealer A terminates employment and is hired by Broker-Dealer B in the same state. Who must notify the Administrator of these changes? I- The agent II- Broker-Dealer A III- Broker-Dealer B
I, II, and III When an agent leaves one broker-dealer and joins another, the Administrator must be notified of these changes by all parties involved (the agent, the previous firm, and the new firm).
Which following statements about new customer accounts are TRUE? I- A customer may use a P.O. Box as the address of record when opening a new account II- The broker-dealer must obtain the customer's suitability information before the first transaction in the account is executed III- All accounts must be approved by a registered principal IV- The customer's new account information must be kept for at least 6 years
III and IV A qualified principal of the firm must approve all new accounts, and the customer's new account information must be kept for at least 6 years after it is last updated, or the account is closed.
