SERIES 63 QUESTIONS
`Under the Uniform Securities Act, which of the following would NOT be considered an exempt transaction? A) The sale of ABCD common stock, listed on the Nasdaq Stock Market, to the Fidelity Trust Company B) An agent sells U.S. Treasury notes to an individual client C) An executor liquidates the estate's portfolio D) The purchase of an unregistered nonexempt security by an individual client at that client's request
B) An agent sells U.S. Treasury notes to an individual client
Which of the following entities would NOT be considered to be exempt issuers under the Uniform Securities Act? A) United States Treasury B) City of Cancun, Mexico C) City of Calgary, Alberta D) State of Michigan
B) City of Cancun, Mexico
Under the Uniform Securities Act, which of the following are TRUE regarding the registration of a successor firm? The successor firm need not be in existence when the application for registration is filed. A filing fee is required with the application. The successor firm's registration will be effective for the unexpired portion of the year. A) I and II B) I and III C) I, II and III D) II and III
B) I and III
If an investment adviser representative is engaged in criminal activity while violating a rule under the Uniform Securities Act, but had no knowledge of the rule violated, the maximum penalty that may be imposed is a: A) $5,000 fine B) $10,000 fine and 2 years in prison C) 3 years in prison and a fine of 3 times the amount of the loss D) $5,000 fine and 3 years in prison
A) $5,000 fine
When does a customer have to receive the Options Disclosure Document? A) Before the first order. B) With the confirmation of the first options transaction. C) Within 15 days of account approval by the firm's designated options supervisor. D) Within 5 business days of the first options trade.
A) Before the first order.
There are several ways that a securities professional's registration can be terminated. Nonpunitive termination of a securities professional's registration could be done through: cancellation suspension revocation withdrawal A) I and IV B) II and III C) II and IV D) I and III
A) I and IV
It has long been custom for broker-dealers to provide research and other customer-related services to investment advisers who direct brokerage business to them. Details about what is and what is not allowable are found in: A) Section 28(e) of the Securities Exchange Act of 1934 B) Section 414 of the Uniform Securities Act of 1956 C) the Dodd-Frank Act of 2010 D) Section 206 of the Investment Advisers Act of 1940
A) Section 28(e) of the Securities Exchange Act of 1934
A registered investment adviser advertises that it is offering a free 6-month subscription to their advisory newsletter. Which of the following qualifiers is acceptable under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers? A) Your free subscription will start once we have received your name and mailing or email address. B) Your free subscription will start once you have furnished us with the names and addresses of three of your friends. C) Your free subscription will start upon receipt of your completed financial profile. D) Your free subscription will start after your 3rd trade with our affiliated broker-dealer
A) Your free subscription will start once we have received your name and mailing or email address.
The NASAA Model Rule on Agency Cross Transactions requires that an investment adviser send a written disclosure document to affected clients that includes such items as the total number of agency cross transactions during the period for the client, as well as the total amount of all commissions or other remuneration the investment adviser has received in connection with agency cross transactions for the client during the period no less frequently than: A) annually B) quarterly C) semiannually D) within a reasonable period of time following any transaction made in reliance upon this rule
A) annually
All of the following information would be found on a trade ticket EXCEPT: A) the price of the security at the time of the order B) the time of order entry C) the customer account number D) was the order solicited or unsolicited
A) the price of the security at the time of the order
A new issue is being sold by a registered broker-dealer. An agent for the firm prepares a sales brochure that contains only positive information gleaned from the prospectus. The sales brochure is handed out along with a copy of the effective prospectus. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, this: A) would be prohibited because material information is being omitted B) is permitted because the sale brochure only contains information found in the prospectus C) would be prohibited because a sales brochure may never accompany a prospectus D) is permitted because the agent is delivering the prospectus along with the sales brochure
A) would be prohibited because material information is being omitted
Under the Uniform Securities Act, the term person would include: any natural person who has a valid U.S. passport a political subdivision an unincorporated association an inter vivos trust A) I, II, III, and IV B) II, III, and IV C) I and II D) III and IV
B) II, III, and IV
The Administrator of State X receives a phone call warning that within the next couple of weeks, a scam is going to be perpetrated in his state by someone from State Y. The tipster even supplies the Administrator with names of people who will be involved and ends the conversation by telling the Administrator that he himself is a resident of State Z. Which of the following would be done? A) The State X Administrator would contact a court of competent jurisdiction to obtain an injunction. B) The State X Administrator would immediately begin an investigation. C) Because several states are involved, the Administrator must turn this information over to the SEC. D) The State X Administrator would publish a warning to all residents
B) The State X Administrator would immediately begin an investigation.
Although all new accounts must be approved by a designated supervisory before any trading activity may take place, there is one type of account that must be approved by a specially qualified supervisor. That would be A) a margin account B) an options account C) a discretionary account D) an IRA
B) an options account
Under the USA, all of the following statements are true regarding investment advisory contracts EXCEPT that they A) must disclose the method used for computing the adviser's fee B) cannot allow for prepaid advisory fees C) must be in writing D) can only allow fees to be performance related under certain limited circumstances
B) cannot allow for prepaid advisory fees
Fusion Financial is a broker-dealer registered in States A, B and C with its home office in State B. A complaint is filed against the firm by a client who resides in State A. Under the powers granted under the Uniform Securities Act, the Administrator of State B could do all of the following EXCEPT A) subpoena witnesses from State C B) issue an injunction against Fusion Financial C) gather evidence from State B D) gather evidence from State A
B) issue an injunction against Fusion Financial
First Securities Advisers, Inc., a subsidiary of First Securities Broker-Dealers, Inc., requires customers to have a minimum of $250,000 under management and charges them 1% in advisory fees based on the amount of assets in their accounts. Clients also pay commissions for securities transactions in their accounts at First Securities Broker-Dealers, Inc. First Securities Advisers, Inc., has A) violated the Uniform Securities Act by charging commissions in addition to advisory fees B) not violated the prohibition against performance fees C) violated the prohibition against charging performance fees D) violated the Uniform Securities Act by charging excessive advisory fees
B) not violated the prohibition against performance fees
Under the Uniform Securities Act, the Administrator may designate another officer to: A) set recordkeeping requirements B) serve subpoenas C) grant registration exemptions D) issue a cease and desist order
B) serve subpoenas
A properly licensed agent in Illinois, Missouri, and Iowa has a client who moves from Illinois to Michigan on July 1, 2014. On September 1 of that year, the agent sells him 100 shares of a nonexempt security in a nonexempt transaction. On October 1, 2015, the client discovers that the agent's firm never licensed him in Michigan and that the agent is subject to civil liability to the purchaser. The statute of limitations for this sale runs out on: A) 9/1/2015 B) 10/1/2017 C) 9/1/2017 D) 10/1/2018
C) 9/1/2017
An investment adviser maintains custody of customer's funds and securities. In order to comply with the Uniform Securities Act, the adviser must, at least quarterly, send written notice to each custodial client stating the: location of the assets under custody changes to the location of the assets under custody amount of prepaid fee to be refunded upon early termination of the contract value of the assets under custody A) II and III B) III and IV C) I and IV D) I and II
C) I and IV
To protect the public, the Administrator may: deny the registration of an agent with insufficient net capital require an applicant for registration as both a broker-dealer and an investment adviser to limit activities to those of a broker-dealer due to lack of qualifications to render investment advice require an applicant for registration to submit to an oral examination A) I and III B) I and II C) II and III D) I, II, and III
C) II and III
All of the following are unethical business practices for an investment adviser representative EXCEPT A) placing an order to purchase or sell a security for a client's account without specific authority to do so B) placing an order to purchase or sell a security for a client's account per the instruction of a third party, without having first obtained a written third-party trading authorization from the client C) borrowing money or securities from a client who is a broker-dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds D) deliberately misinforming a client regarding the representative's age
C) borrowing money or securities from a client who is a broker-dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds
In general, a broker-dealer will disclose any changes to its fee schedule A) when requested by the client B) to the Administrator and then to the clients C) by notifying clients of the change in advance D) within 30 days following the change
C) by notifying clients of the change in advance
In designing a client's portfolio, a registered investment adviser representative of Greater Wealth Advisory Services recommends the purchase of several stocks from the inventory of Greater Wealth's wholly owned broker-dealer. Under current regulations, this activity requires written A) consent of and the disclosure to the client before the execution of the transaction B) disclosure to the client C) disclosure to the client and consent prior to completion of the transaction D) consent of the clien
C) disclosure to the client and consent prior to completion of the transaction
After receiving the broker-dealer's quarterly list of recommendations, an existing client calls an agent to inquire about a specific stock on the "buy" list. The agent responds that, while there is great potential for growth, the stock is highly volatile and, based upon the client's financial means and objectives, represents too high a risk. However, the client is excited about the stock and asks the agent to sell all of the account's current holdings and purchase as much as possible of the subject security. The agent should A) tell the customer that the order will be entered right away, but in fact not execute it B) suggest that the client sell half of the current holdings and use those funds to buy the desired security C) reiterate to the customer why this stock is not a suitable investment D) execute the order with no questions asked
C) reiterate to the customer why this stock is not a suitable investment
One major difference between the customer identification program (CIP) and the new account opening rules of the regulatory bodies is that A) the CIP requires a statement of the customer's goals while the regulators only require current financial information B) the CIP requires a residence address for individuals while the regulatory bodies will accept a PO Box C) the CIP requires date of birth while the regulators only require proof of legal age D) the CIP only applies to individuals while the rules of the regulators apply to retail and institutional accounts
C) the CIP requires date of birth while the regulators only require proof of legal age
An agent mistakenly sold an unregistered, nonexempt security to a customer. Which of the following actions should the broker-dealer take? Offer to buy the security back from the customer Ask the customer to sign a customer agreement Register the stock by qualification Offer to pay interest at an annual rate determined by the Administrator, less income paid, from the date the security was purchased A) I and III B) I, II, III, and IV C) II and III D) I and IV
D) I and IV
Under the USA, which of the following fits the definition of a sale? A) Attempt to dispose of a security for value B) Issuing a prospectus C) Solicitation of an offer to buy a security for value D) Contract to dispose of a security
D) Contract to dispose of a security
According to the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following conditions must be met for an agent to share in the profits or losses of the customer's account? The agent has the employer's written consent The agent has the customer's written consent The agent has a capital stake invested in the account The percentage of the profits/losses shared is proportionate to the agent's personal investment in the account A) II, III, and IV B) I, II, and III C) I, II, III, and IV D) I and II
D) I and II
Different types of accounts have different times for receipt of customer information. Which of the following does NOT correctly state the required time for the specified account? A) Written discretionary account authorization must be received by an investment adviser within 10 days after the initial discretionary trade. B) The options account agreement must be received within 15 days after the customer's account has been approved. C) Written discretionary account authorization must be received by a broker-dealer before exercising discretion. D) Margin account agreements must be received before the first margin trade in the account.
D) Margin account agreements must be received before the first margin trade in the account.
Which of the following conditions would most likely meet compliance standards of state regulators? 'A) Requiring only those in a supervisory role need to recognize the difference between business and non-business communications. B) At a minimum, a firm that permits use of social media sites, holding biennial training as part of its continuing education obligations. C) Maintaining an under-the-radar system of monitoring social media use by its agents is permissible when determining compliance with NASAA's rules. D) Training both supervisory personnel and agents on the difference between interactive and static content
D) Training both supervisory personnel and agents on the difference between interactive and static content
The First Fidelity Building and Loan association, organized in State A and authorized to do business in State B, has an offering of common stock being made in State B. In order for an individual selling the offering to be excluded from the definition of agent in State B, the individual A) would have to be employed by First Fidelity B) would have to be employed by a broker-dealer registered in State B C) would have to be employed by a broker-dealer registered in State A D) could not sell without being registered as an agent in State B
D) could not sell without being registered as an agent in State B
One way in which an investment adviser acting in the capacity of an agent in a transaction with a client differs from a broker-dealer performing the same task is that the investment adviser A) shall notify the Administrator of its capacity in the proposed transaction B) may not charge a commission on the transaction C) shall disclose the agency capacity before the transaction D) shall obtain client consent before completion of the transaction
D) shall obtain client consent before completion of the transaction
As fiduciaries, investment adviser representatives owe their clients an affirmative duty of utmost good faith and full disclosure of all material facts. This affirmative duty of disclosure is required by the investment adviser representative in all of the following situations EXCEPT A) when the advice being provided is outside the scope of the services provided by the investment adviser and is not under supervision or control of a supervisory person B) when a family member has a beneficial interest in a private medical equipment firm that the IAR recommends to a client C) when compensation is received from the affiliated broker-dealer for transactions that are executed through the brokerage house D) when donating funds to a nonprofit medical research institute that owns securities the IAR has recommended
D) when donating funds to a nonprofit medical research institute that owns securities the IAR has recommended
Which of the following transactions would NOT be exempt under the Uniform Securities Act? A) A registered dealer sells Canadian government securities to an individual client B) A customer calls his broker-dealer to order a specific security C) Securities are sold that were collateral for a defaulted loan D) The executor of an estate sells securities to liquidate the property
A) A registered dealer sells Canadian government securities to an individual client
A federal covered investment adviser is a person: A) registered, or excluded from the definition of investment adviser, under the Investment Advisers Act of 1940 B) registered under the Uniform Securities Act C) exempt from regulation under the Securities Exchange Act of 1934 D) registered with North American Securities Administrators Association (NASAA)
A) registered, or excluded from the definition of investment adviser, under the Investment Advisers Act of 1940
A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclosing which of the following fees? A) Commissions B) Account closing fees C) Markups and markdowns D) Advisory fees
B) Account closing fees
An individual wishing to register as an agent for a broker-dealer would be required to file an application for registration that would include all of the following EXCEPT: A) the appropriate fees B) the applicant's fingerprints C) a consent to service of process D) citizenship information
B) the applicant's fingerprints
When describing a federal covered security to a client, it would not be proper to state A) "the security is only suitable for sophisticated investors" B) "in some cases,the security is exempt from registration with the both SEC and the state" C) "it would never have been exempted it if the government thought it was highly risky" D) "this security is not available to just anyone"
C) "it would never have been exempted it if the government thought it was highly risky"
An agent based in Alabama directs a solicitation to a customer who lives in Connecticut while the customer is temporarily in Indiana. The customer does not accept the offer until he arrives back in Connecticut. According to the Uniform Securities Act, the Administrators of which of the following states have jurisdiction? A) Alabama and Indiana B) Indiana and Connecticut C) Alabama and Connecticut D) Alabama, Connecticut, and Indiana
D) Alabama, Connecticut, and Indiana
Under the Uniform Securities Act, a person whose business model is selling reports on a subscription basis concerning specific securities to investors based on their individual objectives will be defined as: A) a broker-dealer B) an agent C) a publisher D) an investment adviser
D) an investment adviser
Under the Uniform Securities Act, the Administrator has the power to do all of the following EXCEPT A) administer oaths B) take evidence C) subpoena witnesses D) indict offenders
D) indict offenders
Under the Uniform Securities Act, an Administrator who believes a violation has occurred or is about to occur may: issue a cease and desist order without a prior hearing bring action to obtain an injunction and have a receiver appointed over the alleged violator's accounts seek a court order requiring the alleged violator to make restitution to others A) I, II, and III B) I and III C) I and II D) II and III
A) I, II, and III
Certain securities transactions are considered exempt from the registration and advertising filing requirements of the Uniform Securities Act. Included in that group would be all of the following EXCEPT A) sale of a security limited in its offering to no more than 10 retail investors in any calendar year B) an offer of preorganization certificates made to 25 persons with 8 of them subscribing, but making no payment C) a sale of stock to a pension trust with assets of $3 million D) a purchase of stock by an underwriter from the issuer in a firm commitment underwriting
A) sale of a security limited in its offering to no more than 10 retail investors in any calendar year
Under the USA, all of the following issues would be exempt from registration EXCEPT A) stock issued by an insurance company not offering policies in this state B) an investment contract issued in connection with an employee stock purchase plan C) stock issued by savings and loan association authorized to do business in this state D) bonds issued by the city of New Orleans
A) stock issued by an insurance company not offering policies in this state
Under the Uniform Securities Act, which of the following are defined as sales? A) I and II B) I and III C) III and IV D) II and IV
B) I and III
Under the Uniform Securities Act, the Administrator has the power to deny or revoke exemptions for which of the following types of securities? Stock issued by a bank organized under the laws of another state Securities of nonprofit organizations Investment contracts issued by employee benefit plans A) II only B) II and III C) I and II D) I, II, and III
B) II and III
Under the Uniform Securities Act, which of the following is TRUE regarding civil liability of agents? A) A plaintiff who immediately refuses to accept an offer of rescission loses the right to sue. B) Persons who control a civilly liable person may also be sued to recover losses. C) The maximum amount a customer may recover is limited to the amount paid for the security plus interest. D) An agent may be sued up to five years after a sale is made.
B) Persons who control a civilly liable person may also be sued to recover losses.
Which of the following are NOT exempt securities under the Uniform Securities Act? A) Anglican church bonds B) Preferred stock traded on the OTC Link of the OTC Markets Group (formerly known as the Pink Sheets) C) Equipment trust certificates issued by a regulated common carrier D) $50,000 denomination commercial paper that has received a rating in the top 3 grades, maturing in 6 months
B) Preferred stock traded on the OTC Link of the OTC Markets Group (formerly known as the Pink Sheets)
Which of the following types of compensation is an investment adviser prohibited from accepting? A) Commissions on trades effected for clients B) Quarterly fee based on account performance C) Annual fee as a fixed dollar amount D) Annual fee based on a percentage of assets under management
B) Quarterly fee based on account performance
If a manufacturing company in the registration process with the SEC is considering registering its securities in a state, the method that it would use to register in the state is: A) implementation B) coordination C) qualification D) notice filing
B) coordination
Under the Uniform Securities Act, an accountant who charges hourly fees for securities recommendations in the regular course of his accounting practice is: A) not included in the definition of an investment adviser because he receives an hourly rate instead of a commission B) included in the definition of an investment adviser because he is compensated for giving investment advice in the regular course of business C) included in the definition of an investment adviser because accountants are not among the professionals excluded from the definition D) not included in the definition of an investment adviser because he is an accountant
B) included in the definition of an investment adviser because he is compensated for giving investment advice in the regular course of business
An investment adviser is registered in New Jersey and has offices in Georgia and Arkansas. One of their IARs lives in Georgia and in addition to his local clients, has one client who lives in Arkansas. The IAR would be required to register in: A) Georgia, Arkansas and New Jersey B) Georgia and Arkansas C) Georgia D) Georgia and New Jersey
C) Georgia
Under the Uniform Securities Act, which of the following statements are TRUE about the authority of an Administrator? A cease and desist order may be issued prior to a hearing. A cease and desist order may be issued after a hearing. A cease and desist order is valid for a maximum of 30 days. A cease and desist order may be used to suspend the offering of a security. A) II and IV B) I only C) I and II D) I, II and III
C) I and II
Disciplinary proceedings under the Uniform Securities Act require the Administrator to provide which of the following? An opportunity for a hearing Written findings of facts and conclusions of law Appropriate prior notice A) I and III B) I and II C) I, II, and III D) II and III
C) I, II, and III
Under the Uniform Securities Act, a state securities Administrator who believes that a registered investment adviser representative is about to violate a provision of the act would initially: A) issue an order that permanently bars the investment adviser representative from conducting business in the state B) seek a court injunction to prevent the pending violation C) issue a cease and desist order D) withdraw the investment adviser representative's license
C) issue a cease and desist order
Under the Uniform Securities Act, which of the following is included in the definition of an investment adviser? A) Bank that offers investment counseling to its high net worth customers B) Publisher that receives a yearly subscription fee for a newsletter that provides nonspecific investment advice C) Antiques dealer who receives a fee for advising customers as to the value of antiques and rare coins D) A broker-dealer who receives a flat fee for analyzing a customer's investment objectives and recommending a portfolio of securities
D) A broker-dealer who receives a flat fee for analyzing a customer's investment objectives and recommending a portfolio of securities
Which of the following is(are) unethical business practices of investment advisers? Charging a client an unreasonable advisory fee Guaranteeing a client that a specific result will be achieved as a result of advice that will be rendered Recommending an investment to a client without reasonable grounds to believe the investment is suitable for that client Continuing to exercise discretionary investment authority under an oral agreement with the client A) I only B) I, II, and III C) II and III D) I, II, III, and IV
D) I, II, III, and IV
Under the Uniform Securities Act, which of the following are NOT excluded from the definition of broker-dealer? A) Banks B) Agents C) Issuers of securities D) Persons who effect securities transactions as part of a regular business solely for their own accounts
D) Persons who effect securities transactions as part of a regular business solely for their own accounts
A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclose all of the following fees EXCEPT A) the cost of overnight delivery services B) safekeeping of customer funds and securities C) interest on debit balances in margin accounts D) markups and markdowns on trades done as a principal
D) markups and markdowns on trades done as a principal
If it is in the public interest, under the Uniform Securities Act, an agent's registration may be suspended by the Administrator for all of the following reasons EXCEPT A) it has been discovered that the agent is not properly supervised B) the agent is enjoined by a court of law from engaging in the securities business C) the agent is convicted of willful violations of the USA D) the agent is accused of violations of the antifraud provisions of the USA
D) the agent is accused of violations of the antifraud provisions of the USA
Which of the following is NOT required to register as an agent under the Uniform Securities Act? A) An individual pursuing a graduate degree in finance, hired for the summer as an intern, who receives $10 for each prospect turned into a client B) A person who attempts to sell mutual fund shares by direct mail and is paid an hourly wage C) A person who attempts to sell mutual fund shares by telephone and is paid a straight salary D) A person who represents the issuer selling U.S. government or municipal bonds
D) A person who represents the issuer selling U.S. government or municipal bonds
Under the Uniform Securities Act, there are certain cases when a person in the business of effecting securities transactions for itself or its clients is not considered to be a broker-dealer in the state. In order for this exception to exist, all of the following conditions must be present EXCEPT: the person must not deal with any employee benefit plans with assets of not less than $1 million the person must limit its business activities to other broker-dealers and financial institutions the person must not have a place of business in the state all employees must be licensed as agents with the Administrator in at least one state
D) I and IV
An agent discovers that he has sold a customer an unregistered, nonexempt security that he thought was exempt. The broker-dealer offers to buy it back on behalf of the agent. Under the Uniform Securities Act a customer rejecting the offer within 30 days forfeits the right to sue this is legal and is called rescission the offer also must include interest this cannot be done under any circumstances A) III and IV B) I and III C) I and II D) II and III
D) II and III
A security has been registered under Qualification. Which of the following statements is CORRECT? The registration is valid for one year from the effective date. The registration is valid for one year from the effective date unless the underwriter or issuer still has some unsold shares. The registration is valid until the next December 31st. The registration statement may be amended to increase the number of shares in the offering as long as the public offering price and the underwriter's compensation is not changed. A) II and III B) I and III C) I and IV D) II and IV
D) II and IV
Which of the following would subject an agent to a denial of registration? An arrest for fraudulent behavior in selling securities to an insurance company 2 years ago Conviction of a securities-related misdemeanor eight years ago Losing a civil lawsuit three years ago that related to the agent's actions as a landlord Failure to pay filing fees A) II, III, and IV B) I and IV C) I, II, and III D) II and IV
D) II and IV
Which of the following is NOT an exempt transaction as defined in Section 402 of the USA? A) Sale of XYZ common stock, traded on the OTC Bulletin Board, to an individual investor by the executor of an estate B) Sale of common stock by the county sheriff at the request of the state securities Administrator C) Corporate bond sale to an insurance company D) Isolated sale of a corporate bond on behalf of the bond's issuer
D) Isolated sale of a corporate bond on behalf of the bond's issuer
Broker-dealer A wants to promote and reward teamwork. The firm plans to pay out a small percentage of the firm's profits to the clerical staff as a bonus for their hard work. Under NASAA rules, is this permitted? A) No, this cannot be done. B) Yes, if the entire clerical staff is registered as agents for the firm. C) Yes, if all of the agents agree to it. D) Yes, no registration is necessary.
D) Yes, no registration is necessary.
A broker-dealer purchased some corporate bonds for its inventory. Four months later, some of the bonds have appreciated by as much as 150%. When selling these bonds to customers, the broker-dealer realizes an enormous profit. This would be A) prohibited due to excessive mark-up B) permitted since the broker-dealer held the bonds for at least 4 months C) not permitted without disclosure of the broker-dealer's cost to clients D) acceptable because the profit was generated as a result of market appreciation
D) acceptable because the profit was generated as a result of market appreciation
Under the Uniform Securities Act, the requirements for filing of advertising and sales literature dealing with an exempt security with the Administrator A) always apply B) apply only to advertising C) apply only to sales literature D) do not apply
D) do not apply
A new agent is having a hard time making sales. In order to be more productive, he offers to share in any losses with clients. And, on the other hand, he will share in their profits as well. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, this is: A) permitted if the client has given verbal authorization to the agent B) permitted if the broker-dealer authorizes this activity C) prohibited as investment adviser representatives are not allowed to share in client accounts D) prohibited unless the client gives written authorization and approval is granted by the broker-dealer
D) prohibited unless the client gives written authorization and approval is granted by the broker-dealer
As defined in the Uniform Securities Act, which of the following persons is included in the term agent? A) An individual, employed by a broker-dealer who sells NYSE-listed securities exclusively to institutional clients B) An individual who sells to public investors, the sovereign debt securities of a foreign government with which the United States has diplomatic relations in the capacity of an employee of that government C) An individual who represents an issuer in an exempt transaction D) A broker-dealer who sells registered securities to the general public
A) An individual, employed by a broker-dealer who sells NYSE-listed securities exclusively to institutional clients
An elderly widow with no independent income wishes to invest the proceeds from her recently deceased husband's life insurance. Which of the following would be the most suitable recommendation? A) Large-cap income stocks B) Call options C) Municipal bonds D) Oil and gas exploration program that you know is going to strike
A) Large-cap income stocks
All of the following are exempt transactions under the USA EXCEPT: A) initial sale of shares to in-state residents of a local manufacturing company B) a rescission offer, sale, or purchase C) a securities transaction by an executor D) a sale of common stock by an administrator of an estate, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator
A) initial sale of shares to in-state residents of a local manufacturing company
An investor who resides in New York reads a newspaper ad for advisory services in a newspaper published in New Jersey. More than 80% of the newspaper's circulation is in the state of New York. According to the Uniform Securities Act, an offer has been made in: A) neither New Jersey nor New York B) New York C) New Jersey and New York D) New Jersey
A) neither New Jersey nor New York
An individual who has applied for registration as an agent of a broker-dealer has just passed the Series 63 exam. This individual may begin soliciting brokerage clients A) when informed by the broker-dealer that the agent's registration is effective B) when informed by the Administrator that the representative's registration is effective C) immediately D) within 48 hours
A) when informed by the broker-dealer that the agent's registration is effective
An IAR is registered in New York and Vermont. While working in his New York office, he places a call to the cell phone of one of his clients who happens to be on vacation in Ohio. After describing the reasons for a particular stock recommendation, the client asks the agent to call back tomorrow. The agent does so and reaches the client in Indiana. The client decides to purchase 100 shares of the stock. When the client arrives home, he notices that he has already received his stock certificate from the transfer agent located in Illinois. In this case, jurisdiction resides with the Administrator of: New York Ohio Indiana Illinois A) I and IV B) I, II, and III C) I, II, III, and IV D) II and III
B) I, II, and III
Under the Uniform Securities Act, which of the following are exempt from the requirements to file advertising and sales literature with the Administrator? Any unsolicited transaction involving an exempt security Any unsolicited transaction involving a nonexempt security Any solicited transaction involving an exempt security Any solicited transaction involving a nonexempt security A) I and III B) I, II, and III C) III and IV D) II and IV
B) I, II, and III
The Administrator of a state securities department conducted a hearing regarding misconduct by an investment adviser registered at the state level. The Administrator required the adviser, as well as several clients who had lodged complaints against the adviser, to take a sworn oath that their testimony was true. Does the Administrator have the power to require sworn oaths?: A) Yes, the Administrator has the power to require witness oaths because an Administrative hearing is functionally a legal proceeding. B) Yes, because the Administrator is empowered to administer oaths as provided in the Uniform Securities Act, as enacted in the Administrator's state of jurisdiction. C) No, the Administrator was merely attempting to emphasize the seriousness of the hearing, but he holds no such power. D) Yes, the Administrator may require witness oaths because the Administrator is appointed as a judge.
B) Yes, because the Administrator is empowered to administer oaths as provided in the Uniform Securities Act, as enacted in the Administrator's state of jurisdiction.
Under the USA, a person representing the issuer is not considered an agent in any of the following transactions EXCEPT: A) investment contracts issued in connection with an employee's stock purchases, savings, pension, profit-sharing, or similar employee benefit plan B) nonexempt, initial public offerings confined to a single state of registration C) when the transactions are exempt D) promissory notes, drafts, or bankers' acceptances with a maturity of nine months or less
B) nonexempt, initial public offerings confined to a single state of registration
Conceptual Financial Solutions (CFS), a broker-dealer registered in States S, B, F and G, has a television commercial broadcast on a station whose studio is located in State S. An individual client who resides in State B, makes an offer to buy based on that advertisement. The State B Administrator would have jurisdiction A) only if the security or the transaction was not exempt B) when CFS accepts the buyer's offer C) when the client made the offer D) at the time the broadcast is received in State B
B) when CFS accepts the buyer's offer
Which of the following would have to register as an investment adviser under the Uniform Securities Act? A) An economics professor who occasionally gives a lecture to business groups about the stock market B) A trust company C) A petroleum engineer who frequently is a paid speaker at seminars dealing with investment opportunities in oil and gas exploration limited partnerships D) An accountant who advises clients about investments as an incidental part of services
C) A petroleum engineer who frequently is a paid speaker at seminars dealing with investment opportunities in oil and gas exploration limited partnerships
Which of the following statements are TRUE? An agent must register in the state in which he advertises and solicits a security. To make sales, an agent need not register in a state in which the broker-dealer is already registered. Under no circumstances may an agent register with two unrelated broker-dealers. A secretary for a broker-dealer who, as a courtesy, takes orders for the broker-dealer's clients must be registered. A) II and III B) III and IV C) I and IV D) I and II
C) I and IV
Under the Uniform Securities Act, which of the following is excluded from the definition of investment adviser? A bank An investment adviser representative A lawyer giving suggestions to a client on where to invest the proceeds of a divorce settlement that he helped her obtain An investment adviser with an office in the state whose only client is a closed-end investment company registered under the Investment Company Act of 1940 A) II and IV B) I, II, and III C) I, II, III, and IV D) II and III
C) I, II, III, and IV
Under the Uniform Securities Act, the Administrator is required to provide which of the following in a disciplinary proceeding? Appropriate prior notice Opportunity for a hearing Written findings of fact and conclusions of law A) III only B) I and II C) I, II, and III D) I and III
C) I, II, and III
An investment adviser representative may perform which of the following functions? solicit for advisory business manage advisory accounts earn commissions on sales of recommended securities supervise those who render advice A) II and IV B) I, II, III, and IV C) I, II, and IV D) II and III
C) I, II, and IV
According to the Uniform Securities Act, once an individual passes the appropriate exam, asset-based compensation is permitted immediately when registration has been granted by the state Administrator after notification of investment adviser representative status by the appropriate supervisory person of the firm when permission is received from the SEC A) I only B) I and IV C) II and III D) II and IV
C) II and III
The Uniform Securities Act holds that persons performing certain activities shall be registered as investment adviser representatives. That requirement would apply to which of the following? A) Margaret, who works as a registered agent for a nationally known broker-dealer and deals exclusively with recommending investments for client's IRAs B) Mark, who is employed at AAA Broker-Dealers earning commissions on transactions made based on research conducted by his firm's securities analyst C) John, who opens an investment advisory firm where he devotes his time exclusively to management responsibilities as the sole proprietor of the firm D) Paul, who works for a life insurance company soliciting individuals to purchase variable annuities and variable life insurance
C) John, who opens an investment advisory firm where he devotes his time exclusively to management responsibilities as the sole proprietor of the firm
Under the provisions of the Uniform Securities Act, a securities agent may NOT: A) be registered with two broker-dealers under common control B) be registered with a licensed real estate broker as well as with a licensed securities broker-dealer C) accept an unsolicited order for an exempt security from a retail client of the broker-dealer who resides in a state in which the agent is not registered D) be licensed by both an independent insurance company and a securities broker-dealer
C) accept an unsolicited order for an exempt security from a retail client of the broker-dealer who resides in a state in which the agent is not registered
An agent implies to his customers that he has inside information that will have a dramatic effect upon the price of the company's stock. In truth, he does not have this kind of information and no trades result. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, this would: A) not be prohibited because the policy does not deal with braggarts B) be prohibited because he is acting on inside information C) be prohibited because he is giving misleading information to his clients D) not be prohibited because no sale based on inside information actually took place
C) be prohibited because he is giving misleading information to his clients
Under the Uniform Securities Act, all of the following statements regarding a broker-dealer withdrawing its registration are true EXCEPT: A) it cannot take effect if the Administrator is instituting a revocation proceeding B) it is generally effective 30 days after written notification C) it prevents the broker-dealer from re-registration in the future D) it must be in writing
C) it prevents the broker-dealer from re-registration in the future
All of the following statements regarding the selling of private placements under the USA are true EXCEPT that: A) they can be offered without limitation to institutional investors B) no commission or other remuneration may be paid for soliciting noninstitutional buyers C) they can be offered to a maximum of 35 noninstitutional investors in 12 consecutive months D) the seller must reasonably believe that all noninstitutional buyers are purchasing for investment purposes only
C) they can be offered to a maximum of 35 noninstitutional investors in 12 consecutive months
Under all of the following circumstances, the USA requires investment advisers with no place of business in the state to register EXCEPT: A) when an adviser has maintained assets of $100 million or more for 7 out of the last 10 years B) when an adviser with numerous retail clients in the state has not been subject to disciplinary action within any state within the last 10 years C) when an adviser only provides advice to registered investment companies D) when an adviser only provides investment advice to 401(k) plans with assets of $250,000 or more
C) when an adviser only provides advice to registered investment companies
Which of the following are exempt transactions under the Uniform Securities Act? XYZ Company signs an agreement to sell 1 million shares of its stock to ABC broker-dealer, who will then act as an underwriter in marketing the shares to the public. A non-issuer sale of securities listed on the Nasdaq Stock Market to several individual clients of the agent. Mr. Jones sells 100 shares of an unregistered security he owns to his next--door neighbor for $1,000. A customer calls a registered agent and asks to buy 1,000 shares of SPHG, a company the agent is not familiar with, and the agent fills the order. A) I, III, and IV B) I and III C) I and II D) II and IV
A) I, III, and IV
Under the Uniform Securities Act, which of the following are NOT considered investment advisers or investment adviser representatives in this state? An individual who sells advisory services in several states, including this one, for AAA Advisers, Inc. United Trust Company of America An agent for a broker-dealer advising customers for a fixed separate fee stated as a percentage of the customer's assets under management An investment adviser with no office in the state that does business exclusively with other investment advisers located in the state A) II and IV B) I, II, III, and IV C) I and II D) IV only
A) II and IV
Which of the following would be causes for concern about cyber security? A broker-dealer keeps all of the firm's financial records in a ledger book A broker-dealer stores some of the firm's financial records electronically A broker-dealer's agents operate as independent contractors and maintain devices that access personally identifiable information about clients A broker-dealer's bookkeeper prefers to do the books from home on a personal computer A) II, III, and IV B) II and IV C) I and III D) I, II, III, and IV
A) II, III, and IV
A "margin account" is a type of brokerage account in which the broker-dealer lends the investor cash to purchase securities using marginable securities in the account as collateral. Which of the account documents authorizes the use of those securities as collateral for that loan? A) The credit agreement B) The hypothecation agreement C) The secured agreement D) The loan consent agreement
A) The credit agreement
An agent is registered in State X but not in State Y. The agent sells a resident of State X a new State Y municipal revenue bond. If the bond is not registered for sale in State X, which of the following statements is TRUE? A) The sale was legal because the bond is not required to be registered for sale in State X. B) The sale was illegal because municipal revenue bonds are not exempt securities. C) The sale was legal because the sale took place in State X to a resident of that state. D) The sale was illegal because the bond is not registered for sale in State X.
A) The sale was legal because the bond is not required to be registered for sale in State X.
In order for a surety bond to meet the requirements of the Uniform Securities Act, it must provide that: A) any customer who can prove a violation is entitled to collect against the bond B) the bond must remain in force no less than two years after the withdrawal of registration C) it is in the form of cash or marketable securities D) because bonds are transferable, any agent's bond may be used to meet the obligation of another agent
A) any customer who can prove a violation is entitled to collect against the bond
While a student at college nine years ago, Joe was convicted of possession of marijuana (a misdemeanor in that state) and received a suspended sentence. Joe now resides in a different state where the same offense is a felony. If Joe disclosed the matter on his application to ABC Securities, Joe's registration may: A) not be denied based on this conviction because it was a misdemeanor in the state where he went to college B) not be denied based on this conviction because it was nine years ago C) be denied based on this conviction because it was less than ten years ago D) be denied based on this conviction because the crime is a felony in the state where he seeks registration
A) not be denied based on this conviction because it was a misdemeanor in the state where he went to college
An issuer employs its officers and directors to sell newly issued shares of the company to the public. To comply with the USA, the officers and directors would have to be registered as agents of: A) the issuer B) the broker-dealer and the issuer C) neither a broker-dealer nor the issuer because the transactions are exempt D) the broker-dealer
A) the issuer
The James Henry Company (JHC), an SEC-registered securities broker-dealer with offices in Chicago and Los Angeles, limits its clientele to banks and trust companies. JHC makes a sale of US government securities to the Wall Street Bank located in New York City. Which of the following statements is (are) TRUE under the Uniform Securities Act? The security itself is exempt from registration. The transaction is exempt. The broker-dealer is not required to be registered in the state of New York. A) I only B) I, II, and III C) I and II D) II only
B) I, II, and III
Which of the following would be required to register as an agent under the Uniform Securities Act? An officer of a broker-dealer who does not deal with customers or supervision of sales A director of a broker-dealer who is not involved in day-to-day operations A trader who is authorized to handle customer orders An individual who makes cold calls to pre-qualify prospects and lets a principal in the firm handle all customer trades A) I, II, III, and IV B) III and IV C) I and IV D) I and II
B) III and IV
If an individual acting on behalf of an issuer engages in the sale of securities issued by a savings institution organized and supervised under the laws of any state, which of the following statements is TRUE? A) The individual is engaging in a prohibited transaction. B) The individual is not required to be registered. C) The individual is acting as a broker-dealer and must be registered as a broker-dealer. D) The individual can only participate in this transaction with permission from the Administrator.
B) The individual is not required to be registered.
Under the Uniform Securities Act, all of the following are exempt from state registration as investment advisers EXCEPT A) publishers of financial publications that are not addressed to clients' specific individual investment situations B) a financial planner who provides fee-based investment advisory services to clients and currently has a total of $18 million in assets under management C) investment advisers with no office in the state who only advise employee benefit plans with assets of not less than $1 million D) investment adviser representatives
B) a financial planner who provides fee-based investment advisory services to clients and currently has a total of $18 million in assets under management
An applicant for registration as an investment adviser discloses on its application to the Administrator that it plans to use palm readers to help determine which investments are most suitable for their clients. Under the Uniform Securities Act, the Administrator A) will request that the applicant furnish past performance records to determine whether this method of investment analysis has merit B) may only justify denial for reasons listed in the Uniform Securities Act C) will probably turn to the SEC for guidance D) is empowered to deny this application for just cause
B) may only justify denial for reasons listed in the Uniform Securities Act
In some instances, rather than use an investment banker to distribute its securities to the public, an issuer will hire a sales force or use its own employees to make the sales. The individuals involved in the selling in this state would NOT be defined as agents under the Uniform Securities Act if selling on behalf of which of the following issuers? A) A building and loan association organized under the laws of any state and authorized to do business in this state B) A federal savings and loan association C) A savings institution organized and supervised under the laws of any state D) A credit union organized and supervised under the laws of this state
C) A savings institution organized and supervised under the laws of any state
As defined in the Uniform Securities Act, an agent is a(n): individual who represents an issuer of nonexempt securities in nonexempt transactions registered broker-dealer that deals in registered securities individual who sells nonexempt securities as a representative of a registered broker-dealer individual who has no place of business in the state and sells securities to an existing client who is not a resident of the state A) II and III B) I and IV C) I and III D) II and IV
C) I and III
Before taking any disciplinary action with respect to a registration under the Uniform Securities Act, the Administrator must always do which of the following? Obtain the approval of the appropriate state court Find that the action is in the public interest Cite a cause listed in the act A) I and III B) I and II C) II and III D) I, II, and III
C) II and III
Which of the following are exempt securities under the Uniform Securities Act? Common stock, not listed on any regulated exchange, purchased by an open-end investment company Preferred stock issued by an insurance company authorized to do business in this state Municipal bonds issued by Toronto, ON Private placements A) II, III, and IV B) I and II C) II and III D) I and III
C) II and III
Securities issued by which of the following are exempt from registration? Any savings and loan association organized under the laws of any state Any bank organized and supervised under the laws of any state Any bank organized under the laws of the United States Any federal credit union A) I, II, and IV B) I and II C) II, III, and IV D) I, III, and IV
C) II, III, and IV
Which of the following are required to register with a state Administrator? A) An employee of a federal covered investment adviser who has no natural person clients and is limited to performing administrative functions B) An investment adviser who has no place of business in the state and has fewer than 6 advisory clients in the state C) Investment adviser representatives of federal covered advisers who have a place of business in the state and limit their clientele to employee benefit plans with a minimum of $10 million in assets D) A person that only provides impersonal investment advice through newspaper columns, magazine articles, or a financial publication of general and regular circulation
C) Investment adviser representatives of federal covered advisers who have a place of business in the state and limit their clientele to employee benefit plans with a minimum of $10 million in assets
Under the Uniform Securities Act, which of the following is NOT an exempt transaction? A) The sale of a non-Nasdaq over the counter stock to a closed-end investment company B) A sale of securities by the executor of an estate C) The sale of U.S. government securities to an individual with a net worth in excess of $2 million by a registered broker-dealer D) A sale of stock through a rights offering to existing shareholders of the issuing corporation if no commission is paid
C) The sale of U.S. government securities to an individual with a net worth in excess of $2 million by a registered broker-dealer
A sale or offer to sell would NOT include: A) a stock dividend that requires only a nominal payment by the shareholder B) a sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer C) a purported gift of nonassessable stock D) any security given or delivered with, or as a bonus on account of, any purchase of securities
C) a purported gift of nonassessable stock
The Uniform Securities Act does NOT grant the Administrator the authority to commence an action against a broker-dealer registered in her state based upon: A) learning that nine years ago, the Administrator of another state found that the president of the firm violated the securities laws of that other state B) suspicion that the broker-dealer has violated the securities laws of her state C) a shareholder, with no management role in the broker-dealer, being unable meet his financial obligations as they come due D) discovering the firm has liabilities that exceed its assets
C) a shareholder, with no management role in the broker-dealer, being unable meet his financial obligations as they come due
An individual representing the issuer in the sale of that issuer's securities to the public would have to register in this state if: A) the issuer is the state of Idaho B) the transaction is exempt C) the issuer is a federal savings and loan association authorized to do business in this state D) the issuer is a bank organized under the laws of the United States
C) the issuer is a federal savings and loan association authorized to do business in this state
An agent wishes to share commissions with an administrative assistant who provides many useful services. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, A) this is permitted if there is a written agreement between the agent and the administrative assistant that has been signed by the broker-dealer B) administrative personnel may never receive sales related compensation C) this is permitted if the assistant is properly licensed D) this is permitted only if the administrative assistant is employed by the same or affiliated broker-dealer
C) this is permitted if the assistant is properly licensed
In October 1987, the SEC promulgated Release IA-1092, which had the effect of broadening the definition of investment adviser. As a result of the Release, which of the following would NOT be included in the definition? A) Financial planners who prepare comprehensive financial plans for families and individuals B) Entertainment agents earning a fee for negotiating contracts for their clients and then placing a portion of the client's' royalties into appropriate investments as market conditions dictate C) Persons who receive a nominal fee for assisting employee benefit plan administrators in selecting investment managers for the plan's assets D) Commercial banks offering a full range of advisory services for their high-net-worth clients
D) Commercial banks offering a full range of advisory services for their high-net-worth clients
The Uniform Securities Act defined many terms. Among them is the term sale. Which of the following would be included in the definition of sale? An offer of common stock in a new issue properly registered or exempt from registration in the state A gift of assessable stock An investor exercising preemptive rights previously received directly from the issuer An investor elects to forgo a cash dividend and receive the equivalent in stock instead A) III and IV B) I and IV C) I and II D) II and III
D) II and III
Lucy, an agent of XYZ Securities, works out of an office in Ohio. She calls her client Clark, an individual investor and a resident of Kansas, and recommends that Clark purchase 500 shares of Perfect Pasta, Inc. common stock. Lucy read a report that Perfect Pasta plans to introduce a low carbohydrate pasta into the marketplace. Perfect Pasta, Inc. common stock is neither exchange traded nor traded on Nasdaq. At the time Lucy makes the recommendation, the stock is not registered with the Securities Departments of Ohio or Kansas. Which of the following statements best reflects this transaction? A) Lucy has violated the USA because Perfect Pasta, Inc. failed to register its stock with the Securities Department in Ohio. B) Lucy has violated the USA because Perfect Pasta, Inc. failed to register its stock with the Securities Departments in both Kansas and Ohio. C) Lucy has not violated the USA because the transaction with Clark is an exempt transaction. D) Lucy has violated the USA because she solicited an order in an unregistered, nonexempt security.
D) Lucy has violated the USA because she solicited an order in an unregistered, nonexempt security.
The term "agent", as defined in the Uniform Securities Act, would not include which of the following individuals? A) One who represents a registered broker-dealer selling unregistered exempt securities B) One who represents a registered broker-dealer selling securities listed on the NYSE to individual clients C) One who represents an issuer of any exempt security D) One who represents an issuer in effecting exempt transactions
D) One who represents an issuer in effecting exempt transactions
An individual with a place of business in State A manages client assets on behalf of a covered investment adviser. This individual wishes to expand his client base by working one day per week out of the firm's office in State B. Which of the following actions must the person take to practice within that particular state? A) Pass an oral or written examination B) Comply with the notice filing requirements of the state C) Become licensed as a broker-dealer D) Pay state registration fees if required by the Administrator
D) Pay state registration fees if required by the Administrator
Securities of a new company's initial public offering have been SEC registered, and the Registration Statement is effective. The securities were not registered in State X before the effective date, and the Administrator has determined that an offering of the securities in State X is not considered to be in connection with the same offering. A broker-dealer in State X wishes to publicly offer the securities in that state. These securities must be registered with the Administrator of State X in which of the following ways? A) Allocation B) Coordination C) The securities need not be registered D) Qualification
D) Qualification
Under the Uniform Securities Act, which of the following is NOT a requirement for a preorganization subscription to be an exempt transaction? A) No commission may be paid to anyone for soliciting potential subscribers. B) There may be no more than ten subscribers. C) No payment may be made by any subscriber. D) The offer of the security may not be advertised.
D) The offer of the security may not be advertised.
An individual functioning as an investment adviser representative for a federal covered adviser, with no place of business in this state, would be required to register in this state if: A) he only dealt with investment companies located in the state B) he had a time-share in the state C) the investment adviser had a small office in the state D) he conducts frequent public seminars in the state
D) he conducts frequent public seminars in the state
The Uniform Securities Act grants an Administrator a great deal of authority. Those powers would include all of the following EXCEPT the power to: A) have the court appoint a receiver for the defendant's assets after the issuance of an injunction B) issue a cease and desist order with or without prior hearings C) seek court orders for the payment of restitution against any violators of the act D) impose fines for criminal violations of the act up to $5,000
D) impose fines for criminal violations of the act up to $5,000
Under the USA, each of the following is specifically excluded from the definition of a broker-dealer EXCEPT an A) issuer B) international bank C) agent D) investment adviser
D) investment adviser
