s63 MISSED

Investment advisers are prohibited from: I Assigning a customer's contract without permission II Charging a retainer fee III Charging commissions on trades effected for the client IV Changing partnership management without notifying clients

Charging retainer fee = okay

Under the Uniform Securities Act, the unintentional omission of material facts when offering or selling a security can result in: I Civil liability II Civil penalties III Criminal liability IV Criminal penalties

Civic liability only. There are no civic penalties

Which of the following are exempt securities, or are excluded from the definition of a security, under the Uniform Securities Act? I Common stock of a New York Stock Exchange listed issuer II Common stock of a Canadian mining company III Contracts requiring periodic payments of fixed amounts into fixed annuities IV Endowment contracts

Common stock of canadian mining company is not excluded. Exempt = I, III, IV

Which of the following information MUST be included on a customer confirmation? I Whether the transaction was solicited or unsolicited II Whether a payment for order flow was made III The customer name and account number IV The price of execution

Confirmation = II, III, IV Whether transaction was solicited or not = required on an order ticket

I Common shares of a public utility II Subordinated debentures of a bank holding company listed in the Pink Sheets III Common shares of an industrial company listed in the OTCBB IV Investment company securities

Pink sheets and OTC BB are NOT exempt.

hich State-registered adviser is considered to have taken custody of client funds? An adviser: I that accepts $300 of advisory fees II that accepts $600 of advisory fees III as a prepayment covering the upcoming 3 months IV as a prepayment covering the upcoming 6 months

$500 or more, 6 months in advance!! = prepayment

The Uniform Securities Act prohibits which of the following? I Guaranteeing of customer accounts II Discretionary customer accounts III Soliciting customer orders for unregistered exempt securities IV Soliciting customer orders for unregistered non-exempt securities

- Guaranteeing of customer accounts - Soliciting orders for unregistered non-exempt soliciting orders for unregistered exempt - is OKAY.

The Administrator of State X receives a complaint from a customer of an Investment Adviser that is registered in State X, claiming that the investment adviser stole funds. The initial response of the Administrator of State X will be to:

A audit the investment adviser B investigate the complaint C issue a cease and desist order against the investment adviser D require that the customer produce evidence supporting the claim Investigate the complaint first!

Which of the following persons with no place of business in a State, is EXCLUDED from the definition of an "Investment Adviser"?

A bank that receives special compensation for rendering advice about securities B A person who gives advice for a fee about investment grade corporate bonds C A person who gives advice for a fee about municipal securities D A person who gives advice about securities for a fee solely to lawyers and accountants Answer =A. The best answer is A. Excluded from the definition of an investment adviser are: Investment Adviser representatives (agents) Depository Institutions (banks, savings and loans, trusts) Professionals (accountants, lawyers, teachers, engineers, whose performance of these services is wholly incidental to their professional practice) Broker-dealers Newsletters that give general investment advice Federal covered advisers

Which of the following statements are TRUE? It is unlawful for anyone to conduct business as a broker-dealer in a state unless also registered as an agent. A registration statement may be filed by an issuer itself, a broker-dealer, or any other person on whose behalf the offering is to be made. Registration of an agent is not effective when the agent is not associated with a broker-dealer registered under the act. An agent's registrations are automatically renewed 1 year after approval, provided no violations occurred during the year.

A registration statement may be filed by issuer itself, broker-dealer, or any other person Registration of agent is not effective when agent is not associated with broker-dealer.

The amount of commission charged to a customer to effect a securities transaction must be disclosed: A prior to executing the transaction B on the trade confirmation C on the account statement D on the Form 1099

Amount of commission - on trade confirmation

All of the following persons are excluded from the definition of a broker-dealer or are exempt from registration as a broker-dealer under the Uniform Securities Act, EXCEPT a firm: A with an office in the State that effects trades exclusively with other broker-dealers B with no office in the State that effects trades exclusively with trust companies and other financial institutions C with no office in a State with a broker-dealer "de minimis" exemption that has a few clients in the State in the preceding 12 months D with an office in that State that is a trust company that deals with the public

A.

Registration by Qualification can be stopped by the Administrator if it is in the public interest and the: A applicant cannot show that the registration is not incomplete in any material respect B applicant can show that the registration is incomplete in any material respect C Administrator cannot show that the registration is not incomplete in any material respect D Administrator can show that the registration is incomplete in any material respect

A.

The Administrator may summarily deny or revoke the exemption of which type of security? A Non-Profit Charitable Organization Issues B Securities guaranteed by a Canadian province C Federal Credit Union Issues D Insurance Company Issues

A.

Which of the following would MOST likely be an investment adviser that is State registered? A Certified Financial Planner B Adviser with assets under management of $100 million C Investment Company D Trust Company

A.

Under the Uniform Securities Act, an investment adviser with $5,000,000 of assets under management that is registered in the State is required to: A keep the records specified by the Administrator B file advertising with the Administrator relating to exempt securities C register with the SEC D recommend registered securities only

A. Keep records specified by administrator

Which one of the following items would be included in the computation of an investment adviser's net capital? A Sofa in the investment adviser's office B Business reputation (goodwill) of the investment adviser C Copyright held by the investment adviser for a finance book D Franchise right held by the investment adviser

A. sofa = net capital All intangibles are automatically excluded, so goodwill, marketing rights and copyrights are all deducted, However, conference room furniture is included for an adviser that is a corporation or a partnership, so this is the best choice.

Unintentional violations of the Uniform Securities Act are considered to be a: A misdemeanor subjecting that person to civil liability only B misdemeanor subjecting that person to civil liability and civil penalties C felony subjecting that person to criminal liability only D felony subjecting that person to criminal liability and criminal penalties

Answer = A. If it is a willful violation - criminal liability

Which of the following may be required to be filed with the Administrator? I Advertising II Sales Literature III Circulars IV Customer Complaints

Advertising, Sales Literature, Circulars Customer complaints are NOT required to be filed

All of the following activities comply with the requirements for agency cross transactions EXCEPT A) a client consents (in writing) to the adviser's dual role in the transaction as both adviser to the client and broker to the other party B) an adviser sends an annual statement to clients that reveals the total number of agency cross transactions for the client and the total amount of commissions the adviser received from those transactions C) before obtaining a client's written consent in an agency cross transaction, the adviser must disclose that it will receive commissions from both parties and that the transactions involve a conflict of interest D) after proper written disclosure, an adviser recommends the transaction to both the seller and buy

Adviser cannot recommend a trade to both buyer and seller D.

Investment advisers may be formed as: I Partnerships II Corporations III Associations

All

Under NASAA rules, the Form ADV filed with the State must be updated: A quarterly within 30 days of quarter end B quarterly within 90 days of quarter end C annually within 30 days of fiscal year end D annually within 90 days of fiscal year end

Annually within 90 days of fiscal year end.

An investment adviser representative would be denied registration for all of the following reasons EXCEPT the IAR: A is insolvent B failed to pay registration filing fees C was convicted of a securities misdemeanor 11 years ago D is not affiliated with an investment adviser

Answer = C. convicted of securities misdemeanor 11 years ago

Under NASAA rules, which record is NOT required to be retained by an investment adviser? A Written customer complaint received 4 years ago B Advertising copy distributed to the public 2 years ago C Trial balance of the investment adviser prepared 1 year ago D Customer account statements prepared 6 years ago

Answer = D. Only 5 years

Strong "Know Your Customer" requirements are part of a firm's policies and procedures covering:

Anti Money Laundering

In March, an investment adviser wishes to increase its annual management fee from 1% of assets annually to 1.25% of assets annually, starting the following July 1st. In order to do this: I the investment adviser must amend the Form ADV filed with the State immediately II the investment adviser must amend the Form ADV filed with the State within 30 days III the adviser's customers must approve of the change by July 1st IV the adviser's customers are not required to approve the change

Any material changes = II and III.

All of the following must register as an agent when representing a broker-dealer EXCEPT A) An individual selling shares of a trust company chartered in this state B) A partner in a broker-dealer who has no securities sales functions C) An employee who accepts solicited orders D) An individual who represents an underwriter only in transactions between an issuer and the underwriter

B.

It would likely be considered a conflict of interest when an agent A) buys a security for his own account shortly after many of his clients have acted on his buy recommendation for that stock B) recommends a stock to many of his clients immediately after purchasing some of those shares himself C) only recommends securities in the industry in which he was formerly employed and in which he has had specialized education and training D) does not recommend securities that he believes present environmental hazards

B.

The amount of commission charged to a customer to effect a securities transaction must be disclosed: A prior to executing the transaction B on the trade confirmation C on the account statement D on the Form 1099

B.

Under the provisions of the Uniform Prudent Investor Act, a trust: A can only invest in securities that are included on that State's "Legal List" B can customize its investments based on suitability as determined by the needs of the beneficiaries C must determine that each individual investment is prudent D gives the trustee complete discretion as to which investments are suitable

B.

Which information is NOT required to be recorded on executed order tickets? A Time of order receipt B Price of security at time of order receipt C Time of order execution D Price at which the order was executed

B. Price at order receipt is not relevant

Which of the following persons with no place of business in a State, is EXCLUDED from the definition of an "Investment Adviser"? A A bank that receives special compensation for rendering advice about securities B A person who gives advice for a fee about investment grade corporate bonds C A person who gives advice for a fee about municipal securities D A person who gives advice about securities for a fee solely to lawyers and accountants

Bank

Under the Uniform Securities Act, for an agent to share in the gain and loss of a customer account, which statements are TRUE? I The Administrator must approve the arrangement II The broker-dealer must approve the arrangement III Any sharing percentage must be proportionate to capital contributed IV Any sharing percentage must be based upon a "fairness and reasonableness" test

Broker-dealer must approve arrangement Any sharing must be proportionate Sharing in the gain or loss in a customer account by an agent is prohibited unless: the customer agrees in writing (this is evidenced by the customer signing a joint account agreement with the agent); the broker-dealer approves of the account in advance; and any sharing is in direct proportion to capital contributed.

Under the Uniform Securities Act, an Investment Adviser MUST inform a client about: I Change of address II Addition of new partners to the advisory partnership III Change of phone number IV Addition of client accounts from another advisory firm that was "bought out"

Change of address, addition of new partners, change of phone numbers There is no requirement for IV. - for notifying customers of addition of new advisory clients, since this would have no impact on the customer.

Which of the following is the MOST appropriate investment for an estate account? A Investment grade long term bonds B Long Treasury Bonds C Treasury Bills D Insured Municipal Bonds

C. treasury bills

All of the following may be required by the Administrator to maintain registration EXCEPT: A Filing financial reports with the Administrator B Filing of renewal fees with the Administrator C Filing of sales literature with the Administrator D Filing of a renewal consent to service of process with the Administrator

Consent to service - renewal is not required - only for initial application

Under the Uniform Securities Act, copies of order memoranda maintained by investment advisers must contain all of the following information EXCEPT: A time of execution of the order B person who placed the order C name of account for which order was entered D name of broker-dealer to which the order was sent

Copies of order memorandum do NOT need A time of execution

Criminal violations of the Uniform Securities Act are punishable by: I $5,000 fine II $10,000 fine III 3 years in jail IV 5 years in jail

Criminal violations under USA: $5,000 fine and 3 years in jail Under the fed: $10,000 and up to 5 years

Under the Uniform Securities Act, a person could give advice about all of the following securities without having to register in the State as an investment adviser EXCEPT: A Treasury Bonds B Ginnie Mae Pass-Through Certificates C Fannie Mae Debentures D State General Obligation Bonds

D The best answer is D. A person who gives investment advice relating solely to U.S. Government securities (including Agency securities), is excluded from Federal registration under the Investment Advisers Act of 1940. Any person excluded from registration with the SEC under the Investment Advisers Act of 1940 is a "federal covered adviser" and cannot be required to register in the State. Note that if the person gives advice about municipal bonds (Choice D), that person is not excluded and must register.

Which transaction is included in the definition of an "offer to sell"? A A successful attempt to dispose of a security for value B A gift of a non-assessable security C A security given to a person as a "gift" with the sale of another security D An unexecuted contract to sell a security (an open order)

D.

A registration application is considered to be "complete" when the proper documents: A are sent to the Administrator B and the filing fee are sent to the Administrator C are received by the Administrator D and the filing fee are received by the Administrator

D.

An agent accepts an unsolicited telephone order from a new customer to buy shares of a NYSE stock at the current market price. The salesman executes the order and then forwards the new account form to the manager for the manager's signature. Which statement is TRUE? A The agent's actions are allowed because the stock is listed on a recognized exchange B The agent's actions are allowed as long as the stock purchased is consistent with the customer's investment objective C The agent's actions are prohibited because the customer is required to sign the new account form before any trades are allowed D The agent's actions are prohibited because the manager has to approve the opening of the account prior to the first trade

D.

An attorney that has been appointed executor of a deceased customer's estate contacts an investment adviser in a State to invest and manage the estate's financial assets until they are distributed to the heirs. The attorney offers to pay an advisory fee that is based on a percentage of assets under management. Which statement is TRUE regarding this arrangement? A The advisory contract must be approved by the probate court judge prior to the adviser taking control of the financial assets B The advisory contract must be approved by the heirs prior to the adviser taking control of the financial assets C The contract is null and void because executors are not permitted to delegate investment and management functions over estate assets D The contract is valid as long as the adviser exercises reasonable care to comply with the terms of the delegation

D.

Furthermore, if the customer agrees to open an account, the site states that: "The first month of trading will be free." Which statement is TRUE regarding this communication? A This communication is permitted without restriction B This communication is prohibited in each State C This communication is permitted only if the broker-dealer and the agent are registered in each State where a customer completes the Web form D This communication is permitted only if the broker-dealer and the agent are Federally registered

D.

It would be correct to state that SIPC A) offers protection, up to the SIPC limits, for the principal value of a client's account B) offers protection to customers of broker-dealers with the same limits as FDIC C) insures against market value losses in a customer account with a member broker-dealer D) offers protection for the net account value, up to the SIPC limits, in the event of a broker-dealer's insolvency

D.

Which statement is TRUE under NASAA rules? Within 120 days of fiscal year end, the customer must be given a copy of the: A Form ADV Part 1 B Form ADV Part 2 C Form ADV Part 1 only if there are material changes D Form ADV Part 2 only if there are material changes

D. Form adv part 2 only if there are material changes

To qualify for the private placement exemption, all of the following are required EXCEPT: A any purchases must be made with investment intent B no more than 10 persons can purchase the issue during a 12 month period C no commissions can be paid for soliciting individuals to purchase the issue D all purchasers must reside in one state

D;

Which action can ONLY be taken in a court of law? A Enjoining a person from engaging in the securities business B Issuing a cease and desist order to a person in the securities business C Subpoenaing witnesses in other States D Subpoenaing witnesses within that State

Enjoining a person A. - only in law

All of the following are defenses against identity theft that must be used at a broker-dealer or investment adviser EXCEPT: A encryption of data B installation of anti-malware software C password protection for system entry D cyber insurance

Except - cyber insurance

An investment adviser representative would be denied registration for all of the following reasons EXCEPT the IAR: A is insolvent B failed to pay registration filing fees C was convicted of a securities misdemeanor 11 years ago D is not affiliated with an investment adviser

Except: C.

Under the provisions of the Prudent Investor Act, a Registered Investment Adviser should consider all of the following when investing and managing trust assets EXCEPT: A General economic conditions B Possible effect of inflation C Trading patterns of plan beneficiaries D Investment tax consequences

Except: C. trading patterns of plan beneficiaries

A sales representative who fails to register as an agent of a broker-dealer: I has committed a felony II has committed a misleading Act III is subject to civil liability IV is subject to criminal liability

Failing to register - has committed a misleading act. subject to civil laibility. not enough for criminal liability

Registration of securities in a State by Filing becomes effective:

Filing = after 5 days

One way that a financial institution participates in the fight against money laundering is through the filing of A) FinCEN Form 104 for large deposits B) IRS Form 1040ML when money laundering is suspected C) FinCEN Form 112 for large cash transactions D) FBI Form FD-772

FinCen 112

If a customer of a broker-dealer fails to pay for a securities purchase by the 4th business day from trade date, the customer's account must be:

Frozen

Under the Uniform Securities Act, if an agent hears material inside information, the agent: I should not transmit the information to others II should not trade based upon the information III must wait 1 year before trading that security IV must notify the Federal Bureau of Investigation within 1 business day

I and II

Which of the following transactions would constitute a violation of the Uniform Securities Act? An individual representing the issuer of a non-exempt security in an exempt transaction without registration as an agent While acting on behalf of an issuer, an individual, who is not registered as an agent, sells shares of an unregistered nonexempt security to fewer than 15 noninstitutional clients The sale of a Canadian government bond to the resident of a state in which the agent is not registered Representing an issuer of municipal bonds without being registered as an agent in the issuer's state

II and III

Under NASAA rules, which of following are unethical practices when recommending a mutual fund to a customer? I Recommending a letter of intent if the customer does not have the immediate funds to reach a breakpoint II Not disclosing to a customer the sales charge discount if a purchase is made at the breakpoint level III Not disclosing to a customer that dividends can be automatically reinvested without any sales charge imposed IV Recommending the purchase of shares which results in the customer simultaneously holding shares in different investment company portfolios with similar investment objectives

II and IV

An investment adviser representative has worked with a client and his spouse for 10 years and has an excellent relationship with the couple. The representative has been notified that the husband is unconscious and is in the hospital. The account has several open orders that have not yet been executed. What can the representative do regarding the disposition of these orders?

Instructions can be taken from spouse The best answer is A. This one is a little vague, but here goes! In a customer account, instructions can only be taken from the customer (or customers in a joint account); or from any person to whom a written power of attorney has been granted by the customer. Just because an individual is that person's attorney does not mean that he or she has a power of attorney over that customer's account - such a power of attorney must be granted in writing by the customer. The question states that the adviser has "worked with the client and his spouse for 10 years" without mentioning whether the account is a joint account; an individual account; or an individual account where the wife has a power of attorney. But, because the representative has been working "with the client and his spouse" we can infer that is either a joint account or an individual account where the wife has a power of attorney. Thus the best choice offered is to accept orders from the wife. The other 3 choices have no plausible validity unless a written power of attorney has been granted by the customer.

The Administrator of State X receives a complaint from a customer of an Investment Adviser that is registered in State X, claiming that the investment adviser stole funds. The initial response of the Administrator of State X will be to:

Investigate the complaint

An application to register securities may be filed by all of the following EXCEPT a(n):

Investment adviser Applications to register a security in a State cannot be filed by agents

Under the Uniform Securities Act, which statements are TRUE regarding investment advisers that take custody of customer funds? I The administrator must give written approval before an adviser can take custody of customer funds II The administrator can require a higher surety bond for advisers that take custody of customer funds III Statements of account must be sent to customers whose assets are held in custody at least quarterly

Investment adviser does not require prior approval

An investment adviser is opening that day's mail and receives a check from a customer for $8,000, however the adviser shows no balance due from the customer - the check was mailed in error to the adviser. 5 business days later, the investment adviser mails the check back to the customer. Under NASAA rules, the investment adviser: I is deemed to have taken custody of the customer's funds II has not taken custody of the customer's funds III must keep a record of the check received IV is not required to keep a record of the check received

Is deemed to have taken custody Must keep a record of check If a client inadvertently gives securities or funds to an investment adviser, as long as they are returned within 3 business days, then the adviser has NOT taken custody. Since the adviser mailed the check back 5 business days later, it is defined as having "taken custody." If the adviser inadvertently receives a check made out to a third party, as long as the adviser mails the check to the third party within 3 business days, then the adviser has NOT taken custody. Regardless, the adviser must keep a record of the receipt of the check.

What is the maximum dollar fine that can be imposed for criminal liability and criminal violations of the Uniform Securities Act?

Max for criminal violations under USA = $5,000

Which of the following orders MUST be retained as a record by broker-dealers? I Executed orders II Unexecuted orders III Canceled orders IV Subscription orders

Must be retained - all except for subscription orders

NASAA Model Rule 502 (c) applies to:

NASAA Model Rule 502: sets rule for advisory contracts. only state state registered advisers, but also federal covered advisers to where they are deceptive.

Under the provisions of the Uniform Securities Act, which statements are TRUE? I An investment adviser with a place of business in the State, need not register in that State if it is only dealing with insurance companies II A broker-dealer with no place of business in the State, need not register in that State if it is only dealing with insurance companies III If a broker-dealer is registered with the Financial Industry Regulatory Authority, then it is also registered in that State IV If a broker-dealer has its registration revoked, then the registration of its agents will also be revoked

Once you have a place of business - you MUST register. True = II and IV.

When can an Investment Adviser borrow from a client? A If the client is a broker-dealer B If the client is an accredited investor C If the client is the sister-in-law of the President of the Investment Advisory firm D Under no circumstances

Only borrow - from A. NASAA does not allow IAs to borrow from their clients, unless the client is a broker-dealer (which would be in the business of giving margin loans), a bank that is in the business of loaning funds, or an affiliate of the investment adviser. This rule contrasts starkly with the FINRA rule for borrowing by broker-dealers.

Delivery of a prospectus is required if a: I new issue of corporate bonds is being offered to the public II trade in a corporate bond takes place in the secondary market III new issue of government bonds is being offered to the public IV trade of a government bond takes place in the secondary market

Only for primary market - not for exempt securities - government, agencies, municipals

**** If a representative that transacts business in a State terminates employment with an investment adviser, notice must be given to the Administrator by the: I Investment Adviser II Officer or Director of the Investment Adviser III Investment Adviser Representative

Only investment adviser If representative of an investment adviser terminates employment - adviser must notify Broker dealer Both terminated agent and broker-dealer must notify Federal covered adviser - only IAR must notify

An investment adviser representative quits her employment with a State-registered adviser so that she can attend graduate school. After completing her MBA, she intends to reassociate with the same advisory firm in a management capacity. Which statement is TRUE about notifying the State Administrator of the IAR's termination?

Only the Investment Adviser is required to notify the Administrator, but if the IAR learns that the adviser has not given notice, the representative must do so

Which of the following are prohibited practices under NASAA guidelines? I An investment adviser lending money to a customer II An investment adviser lending money to a customer that is a relative III An investment adviser lending money to a customer through a bank affiliate IV A broker-dealer lending money to a customer where securities are collateral under Regulation T

Prohibited: I and II

Which of the following are prohibited under the Uniform Securities Act? I Effecting a public offering of unregistered non-exempt securities II Failing to tell a customer all facts about a securities transaction III Failing to tell a customer that a transaction will incur larger than normal expenses IV Maintaining a discretionary account for a customer

Prohibited: I and III Failing to tell a customer all facts about a securities transaction is not a violation; failing to disclose all material facts about a securities transaction is a violation.

Which of the following is NOT a qualified custodian under NASAA rules?

Qualified custodians are = FDIC insured deposit taking institutions; Registered broker-dealers holding customer assets; Registered futures commission merchants holding customer assets; and Foreign financial institutions holding financial assets for customers. A FDIC Insured Bank B Registered Broker-Dealer C Foreign Financial Institution D National Securities Clearing Corporation Answer = D.

To use Registration by Coordination, an issuer must file a registration statement with the:

SEC.

An investment adviser directs its trades to a broker-dealer paying non-discounted rates. In return, the broker-dealer provides the adviser with proprietary investment analysis software that it has developed. This is: I a soft dollar arrangement II a quid pro quo arrangement III permitted under the Uniform Securities Act IV prohibited under the Uniform Securities Act

Soft dollar arrangement - is permitted under the USA.

A broker-dealer located in State A makes an offer of securities to a customer whose principal residence is in State B. The customer has temporarily moved to State C and has asked the post office in State B to forward the mail to the customer's address in State C. Which State Administrator(s) has (have) jurisdiction over the offer? I State A II State B III State C

State A only

Which statements are TRUE about the use of testimonials in advertising? I Testimonials are permitted in broker-dealer advertising II Testimonials are prohibited in broker-dealer advertising III Testimonials are permitted in investment adviser advertising IV Testimonials are prohibited in investment adviser advertising

Testimonials - permitted in broker-dealer advertising, Testimonials - prohibited in investment adviser advertising

During the past year, an agent of a registered broker-dealer has offered partnership units to wealthy investors in a private placement. The agent finds that he has been named in a civil lawsuit filed by one of the buyers of the private placement units, claiming that untrue statements were made by the agent in connection with the sale of the issue. Which of the following is a defense against the buyer's claim that is most likely to be upheld by a court of law?

The agent can claim that the buyer was informed of all material facts and is filing a frivolous lawsuit to extract a large settlement from the agent B The agent can claim that because the investor was wealthy, he or she is "sophisticated" and understood the merits of the transaction prior to entering into a contract to buy the partnership unit C The agent can claim that he took reasonable care to ensure that no untrue statements were made at, or before, the sale of the securities and that the agent did not, and could not, know of the untrue statement D The agent does not have to make a showing in a court of law because the burden of proof rests on the claimant and not on the defendant in civil suits C.

An agent receives physical certificates from a customer that the customer wishes to deposit to his brokerage account. Which statement is TRUE?

The agent must forward the certificates to the broker-dealer immediately

Which of the following is a "non-issuer" transaction? A The sale of a new issue of bonds by a corporation B The trade of 100 shares of stock on an exchange floor C The sale of mutual fund shares to a customer D The sale of Treasury Bills by the U.S. Government

The best answer is B. A "non-issuer" transaction is a trade where the proceeds do not go to the issuer. The sale of bonds by a corporation benefits the issuer; the sale of mutual fund shares benefits the issuer (the fund company); and the sale of Treasury Bills by the Government benefits the issuer. A trade in the secondary or trading market results in the proceeds going to the seller - who is not the issuer. This is termed a "non-issuer" transaction.

A fee payment is NOT required to be made when a(n): A agent of a broker-dealer registers in a State for the first time B new broker-dealer files as a successor to a firm that has ceased operations C renewal registration is filed by an investment adviser by December 31st of that year D notice filing is made in the State by a Federal Covered Adviser

The best answer is B. If a new broker-dealer is created as a successor firm to an existing registered broker-dealer that has ceased business operations at some point during the year, then the State does not require a new filing fee to be paid. The fee is paid at the initial registration and for every annual (on December 31st) renewal registration thereafter. When the successor firm files its year-end registration renewal, the full fee for the next year must be paid.

*********Which of the following orders would be performed in a discretionary account? A A customer places an order to buy 100 shares of IBM at the best price available B A customer places an order to sell 100 shares of KO at the market C A customer places an order to buy 100 shares of any computer stock priced at under $40 D A customer places an order to sell 100 shares of GE when it gets to a certain level or lower

The best answer is C. If an agent chooses more than price and time of execution for a customer, the trade is considered to be "discretionary." If the agent chooses any more than price or time - that is, the size of the trade or the security to be traded - a power of attorney is required.

As the first purchase in a new cash account, a customer buys a stock that has been trading in the secondary market in your State for 5 years in a solicited transaction. When must the prospectus be delivered to the customer?

There is no requirement. Prospectus is only needed for PRIMARY market

The directors of a company decide to offer shares of the company from the company's unissued stock directly to company employees. The proceeds of the sale go to the company, but the directors take a commission from the employees on these sales. All of the following statements are true EXCEPT:

This is a non-issuer That is wrong this is an issuer transaction

A customer contacts her IAR (Investment Adviser Representative) and tells her to: "Sell my 1,000 share XYZZ stock position if the price falls to $35 per share." After receiving this customer's order, the IAR stumbles across an XYZZ company press release that has not yet been distributed stating that the company has lost an extremely large government contract. The press release occurs 3 days later, at which point the stock's price dives and becomes worthless. The IAR was able to sell the customer's stock at $35 when the price was falling. Which statement is TRUE about this?

This is not an insider trading violation because the customer placed the order before the IAR knew of the non-public information

A federal covered investment adviser makes a loan to one of her clients for the purpose of buying a residence for personal use. The loan is secured by a lien on the house. Which statement is TRUE?

This is not permitted because an adviser cannot make a loan to a client The best answer is D. Investment advisers are prohibited from lending money to clients - no ifs, ands, or buts. On the other hand, broker-dealers are permitted to lend money to customers where securities are collateral, in compliance with Regulation T of the Federal Reserve Board.

The Administrator can be under the obligation to file a U-6 Form for all of the following reasons EXCEPT: A a written complaint about an investment adviser representative is received from a customer that alleges a felony B a cease and desist order was entered by the Administrator against an investment adviser representative, barring the IAR from soliciting advisory business in the State C an investment adviser representative was the subject of a monetary sanction imposed by a court of law in the State D an investment adviser representative is the subject of oral complaint from a customer alleging that the IAR made performance guarantees that were never realized

U6 form: MUST be for WRITTEN. complaints. The U-6 Form is filed by regulators when they take disciplinary or legal action against a broker-dealer, agent, investment adviser or investment adviser representative. This information goes into the CRD (Central Registration Depository) or IARD (Investment Adviser Registration Depository) and is available for viewing by the general public and customers on BrokerCheck. One of the required U-6 reports is for written (not oral) customer complaints that allege a felony like theft or embezzlement. This goes into the BrokerCheck file and is made public, with a notation that this is an allegation and is not yet proven. If it is proven, then the resulting disciplinary action is reported on the U-6 and shown in BrokerCheck; if it is dismissed, then this is reported as well so that the allegation is removed from the agent's or IAR's BrokerCheck report.

An institutional buyer is defined under the Uniform Securities Act as: A an institution with at least $100 million of assets available for investment B an accredited investor as defined under Rule 506 of Regulation D of the Securities Act of 1933 C any person defined by the Administrator by rule or order D any institution that is regulated by the Federal Reserve, SEC, or State Insurance or Banking Commissioners

USA exempts from registration - any broker-dealer or investment adviser that does not have an office in state and only deals with institutional buyers The Uniform Securities Act exempts from registration in a State, any broker-dealer or investment adviser that does not have an office in the State and that only deals with "institutional buyers." These institutional buyers include banks, savings and loans, trust companies, insurance companies, investment companies, pension and profit sharing plans, other financial institutions, and anyone so defined by the State Administrator by rule or order. The Uniform Securities Act does not set minimum capital standards to be defined as an institutional buyer.

When making a sales presentation to a new client, an IAR makes a sale of advisory services to the customer, having the customer sign a sales contract. The IAR gives the customer a glossy brochure, but does not have the customer sign it. The brochure states that the client has 2 business days to back out of the contract. Under NASAA rules, why is this considered to be unethical? A Because the customer did not sign the brochure B Because the customer should have been given the brochure 48 hours prior to having the customer sign the sales contract C Because the customer must be given 5 business days to back out of the contract D Because the customer has a 30 day right of rescission under the Uniform Securities Act

When advisory services are sold to new client - client must be delivered form 2A and 2B - these customers must get the brochures at least 48 HOURS prior to it. They have FIVE DAYS TO TERMINATE without penalty.

Which TWO of the following are tests for whether registration as an investment adviser is required under the Uniform Securities Act? I Whether the investment adviser has an office in that state II Whether the investment adviser is an individual III Whether the investment adviser accepts a fee for rendering advice IV Whether the investment adviser gives advice relating to the advisability of investing in securities

Whether investment adviser accepts a fee Whether investment adviser gives advice relating to advisability

If an agent withdraws from employment from a broker-dealer, the withdrawal takes effect: A promptly B within 5 days C within 10 days D within 30 days

Withdrawal - 30 days

The Department of Treasury requires notification for which of the following instances?

Withdrawal of $11,000 or more The Department of Treasury requires that any deposits in excess of $10,000 must be reported to FinCen

An investment adviser is opening that day's mail and receives a check from a customer for $5,000; however there is no payment due from the customer. The customer mailed the check in error. The same day, the investment adviser mails the check back to the customer. Under NASAA rules, the investment adviser: I is deemed to have taken custody of the customer's funds II has not taken custody of the customer's funds III must keep a record of the check received IV is not required to keep a record of the check received

Within 3 days (if returned) - not taking custody so II and III

In order for an agent to share in the gains and losses of a customer's account, all of the following statements are true EXCEPT the:

agent cannot invest any of his own funds into the account The best answer is D. Agents are prohibited from sharing in the gains and losses of a customer's account unless there is a written agreement between the customer and the agent which has been approved by the broker-dealer; and the agreement specifies that sharing in gain and loss is proportionate to the capital contribution of each participant in the account.

An issuer has filed a registration statement in a State for a new issue of securities that is effective and sale of the issue has started. The issuer finds that there is great demand for the offering and wishes to increase the number of shares being issued. In order to do this, a(n):

amendment must be filed, as long as it is within 6 months of the date of sale along with the payment of an additional filing fee and a late registration fee

Under the Uniform Securities Act, a limited offering transaction would be considered an exempt transaction if the offer is directed to no more than 10 individuals during any 12-month period the issuer believes that each noninstitutional purchaser is buying the securities for investment purposes commissions are not paid to agents of the broker-dealer offering the securities to noninstitutional clients purchases by retail clients are not accompanied by any form of consideration

answer = I, II, and III

An investment adviser has placed a block trade for 100,000 shares of ABCD stock. The trade is filled in 2 separate lots of 50,000 shares each, with one lot filled at $50.01 per share and the other lot filled at $50.03 per share. The adviser has developed a methodology of allocating shares purchased at the lowest price to clients with a history of referring other clients and to clients with more assets under management and has been doing this unknown to staff and clients for many years. The investment adviser is guilty of

breach of fiduciary duty - if the adviser favors one client over another in the allocation of the block, the adviser has violated its fiduciary duty (if it fails to disclose this conflict of interest to its clients).

Under the Uniform Securities Act, which of the following is TRUE regarding the registration of securities? A) The Administrator may require that a prospectus be delivered to every purchaser of a registered security no sooner than the time at which the security is delivered. B) Registration by coordination becomes effective on a date ordered by the Administrator. C) State registration by coordination is available only if a federal registration statement has been filed under the Securities Act of 1933 in connection with the same offering. D) The effectiveness of a registration statement assures the accuracy of the information contained in the statement.

c

The National Securities Markets Improvement Act requires that broker-dealer net capital standards:

can be set by the State Administrator at the same level as that set under the Federal requirement

In order for an investment adviser to be compensated with a performance fee, all of the following must be disclosed in writing EXCEPT: A that the fee arrangement may create an incentive for the adviser to make investments that are riskier B that the fee arrangement is based on both unrealized appreciation and realized capital gains C the nature and significance of any index used as a comparative measure and the reason why the adviser believes that any comparative index used is appropriate D that the fee computation can be based on periods ending no earlier than the last day of each calendar quarter

d. Before entering into an advisory contract that charges a performance fee, the adviser must disclose in writing: that the fee arrangement may create an incentive for the adviser to make investments that are riskier; that the investment adviser will get compensation based on both unrealized appreciation and realized capital gains; the basis for valuing any illiquid investments used in computing unrealized appreciation; the periods that will be used to measure performance and their significance to the computation of the fee; and the nature of any index used as a comparison of investment performance, the significance of the index, and the reason why the adviser believes the index is appropriate.

All of the following securities are exempt from registration under the Uniform Securities Act EXCEPT: A Railroad common stock B Municipal bonds C Canadian common stocks D Foreign government bonds

except: C. canadian common stocks

The president of a bank wishes to sell the subordinated debentures of that bank to individual investors. Under the provisions of the Uniform Securities Act, the president:

excluded from definition of agent

If a customer of a broker-dealer fails to pay for a securities purchase by the 4th business day from trade date, the customer's account must be:

frozen for 90 days

An Investment Adviser Representative (IAR) wants to take a part-time job giving SCUBA lessons. This is permitted:

if the Investment Adviser that employs the IAR says that it is allowed

A customer has placed an indication of interest to buy a non-exempt new issue security that is currently in the "quiet period." The customer has been delivered a preliminary prospectus. Once registration is effective, to be confirmed as purchasing the issue, the customer:

must receive a copy of the final prospectus

For larger accounts, a broker-dealer is least likely to waive its normal fee for

transferring the account to another broker-dealer

Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, in which of the following circumstances may an investment adviser representative share in profits and losses in a customer's account?

never permissible Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, only an agent may share with a customer in a joint account with permission of the client and the broker-dealer. Unlike FINRA rules, there is no requirement that the agent have a financial interest in the account. Only AGENTS can share with customers.

Under the Uniform Securities Act, which of the following securities is non-exempt? A Equipment trust certificates issued by a railroad subject to ICC regulation B Common stock issued by savings and loans C Warrants issued by industrial corporations D Unlisted debentures of a company whose common stock is listed on the American Stock Exchange (NYSE American)

not warrants

If a representative that transacts business in a State terminates employment with an investment adviser:

notice must be given to the Administrator by the investment adviser only

A limited partnership unit was initially sold to an investor for $25,000. The unit is illiquid and there is no current market for the security. As part of the partnership agreement, the general partner has the right to assess the limited partners if the partnership suffers a cash shortfall. The investor wishes to give the partnership unit to a close friend as a birthday present. This action is:

permitted - The best answer is C. The offer of the gift of an assessable security is not a gift - the issuer has the right to assess the holder for more monies, if they are needed to run the business. This gift relieves the giver of a liability to pay; which is the same thing as the recipient of the "gift" - the buyer - actually paying for the security. Thus, a buyer paying for a security; or relieving the seller of a liability; is a "sale" of that security. In this case, the final contract sale has not occurred, since the investor "wishes" to give this gift, so this is an offer to sell.

An IAR discusses a trading strategy with one of her clients, who tells the IAR to sell her ABC stock position whenever you see an opportunity. After this conversation, the client leaves the IAR's office for a vacation. Two days later, the IAR sees that ABC stock has risen in price and believes that this is an opportune time to sell the position. The IAR should:

place the trade and get written discretionary authority from the customer within 10 business days

A broker-dealer is a syndicate member in a negotiated underwriting of revenue bonds issued by the City of Jacksonville, Florida Industrial Development Authority. If the issue is oversubscribed, under NASAA rules, it would be unethical for the bonds to be sold to:

residents of Florida B employees of the broker-dealer that are Florida residents C institutional investors in Florida D investors that are non-residents of Florida B.

The President of a small company owns 100% of the company's stock. The President sells some of the company's stock to four employees and officers of that company without taking a commission. Under the Uniform Securities Act, the President is:

selling securities in an exempt transaction, so no registration is required The best answer is B. Common stock of a corporation is a non-exempt security that must be registered unless it is sold in an exempt transaction. This transaction qualifies as a private placement since the offer is made to less than 10 persons and no commission is being taken by the President. Private placements are exempt transactions, meaning that the security involved is exempt from registration in the State.

Which order is NOT required to be retained as a record by a broker-dealer?

subscription order - not required

An Administrator wishing to set the net capital requirement for a broker-dealer may not require an amount greater than that

than that required by 1934

All of the following information must be recorded on an order ticket EXCEPT:

time and date of execution

Under the Uniform Securities Act, an agent that sells securities to a customer in a transaction that is not recorded on the books and records of his or her broker-dealer:

will cause the agent to become a statutory broker-dealer

Under the Uniform Securities Act, persons providing investment advice do not have to register as investment advisers if they have no place of business in the state and they limit their clientele to individuals who meet the accredited investor standards deal only with institutional investors have five or fewer noninstitutional clients in the state during any 12-month period deal only with other registered investment advisers

- Deal only with institutional investors - Have 5 or fewer noninstitutional clients deal with only other registered investment advisers

Under NASAA recordkeeping rules for investment advisers, a communication to a client must be retained if it is circulated to MORE than:

1 person

An investment adviser receives a check from a customer made out to the adviser that the customer sent to the adviser inadvertently. This adviser will NOT have taken custody as long as it returns the check to the customer within:

3 Business days

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

3.1.2 Neither!!

Which of the following statements is TRUE regarding the compensation of an unlicensed solicitor for referring a customer to an investment adviser? A A referral fee cannot be paid to an unlicensed solicitor B A referral fee may be paid to an unlicensed solicitor only if there is a prior written agreement detailing work to be performed and compensation to be paid C A fixed fee may be paid to an unlicensed solicitor only if the investment adviser is a "federal covered adviser" D The referral fee can be paid as long as the amount is fair and reasonable

A

Who is responsible for filing a U-5 Form with IARD when an investment adviser representative is terminated and associates with another advisory firm? A The investment adviser that is the former employer is responsible B The investment adviser that is the new employer is responsible C The Investment adviser representative is responsible D No one is responsible for notifying IARD when the investment adviser representative is terminated

A

Which of the following transactions are NOT exempt from registration? A) Transactions with intrastate manufacturing companies B) Transactions with pension or profit-sharing trusts C) Isolated nonissuer transactions D) Unsolicited nonissuer transaction

A pension trust - exempt

An investment adviser has determined that ABCD stock would be an appropriate investment for his client, but only if the price falls from the current level of $50 per share to $35 per share. What MUST the adviser do prior to placing an order to buy ABCD stock for the client's account?

A Obtain verbal authority for that specific transaction B Obtain verbal authority to exercise discretion over the account C Obtain verbal authority to exercise discretion only over price and time of execution in the account D Secure an appointment as trustee over the account to formalize the fiduciary relationship Obtain verbal authority for that specific transaction. If an adviser wishes to recommend a transaction to a customer, the customer must agree to do the transaction prior to execution (this assumes that the adviser does not have discretion). This is usually done verbally. Written authorization is needed only to take account instructions from someone other than that customer.

An investment adviser, age 33 and married, needs cash for the down payment to buy her first house. She asks her father if he can "help out" with the down payment. Her father is one of her advisory clients. Which statement is TRUE about this situation?

A The investment adviser can accept the money from her father if he gives it as a gift B The investment adviser can accept the money from her father if he gives it as a loan C The investment adviser cannot accept the money from the father, whether given as a loan or a gift D The investment adviser can only accept the money from her father if there is a written agreement that details the terms and conditions A. gift is okay The best answer is A. Investment advisers cannot lend money to customers or borrow money from customers. The only exception is if the customer is a bank, broker-dealer, or affiliated company of the adviser. Note that an investment adviser can accept a gift!

An investment adviser wishes to offer all of the medical professionals at a local hospital a reduced advisory fee in the hopes of attracting new assets to manage. Which statement is TRUE about an adviser offering discounted rates?

A The investment adviser is permitted to offer a discount to any potential customer in order to attract new business B The investment adviser is not permitted to offer the discount unless the Administrator is notified that a discount may be offered C The investment adviser can offer the discount as long as charges to all of the investment adviser's customers are fair and reasonable D The investment adviser can offer the discount as long as the fact that non-medical professionals that are unaffiliated with the hospital pay a higher fee is disclosed in the Form ADV Part 2A They are permitted to - as long as C. all are fair and reasonable

An Investment Adviser prepares a 4-color glossy brochure to be given to potential customers instead of the Form ADV Form Part 2A. The brochure includes all of the information found in the ADV Part 2A, but is much livelier in its presentation. An Investment Adviser Representative uses the brochure to solicit a new client, who signs a contract with the firm that includes a clause giving the customer 2 business days to back out of the contract without incurring any penalty. Which statement is TRUE under NASAA rules?

A This procedure complies with NASAA rules regarding the use and delivery of investment adviser brochures B This procedure violates NASAA rules because only the Form ADV Part 2A can be delivered to customers C This procedure violates NASAA rules because the customer must be given 5 business days to back out of the contract without penalty D This procedure violates NASAA rules because a written receipt must be obtained from the customer indicating that the brochure was delivered The best answer is C. ***NASAA requires that new customers be delivered the investment adviser brochure. It is OK to prepare a customer brochure that includes all of the ADV Part 2A information. The rule on delivery of the brochure is that either: the brochure must be delivered 48 hours prior to entering into either a verbal or written contract with the customer to provide advisory services; or if the brochure is delivered at the time that the contract is signed, the customer has 5 business days to terminate the agreement without penalty.

Under NASAA rules, within 120 days of fiscal year end, each customer must be sent a(n):

A brochure B updated brochure C brochure and brochure supplement D an updated brochure and brochure supplement Answer = D. Updated brochure and brochure supplement

A broker-dealer located in State A has all of its agents registered in State A. The broker-dealer has no office in neighboring State B. The broker-dealer would be required to register in State B if its clients in State B consisted solely of:

A broker-dealers B investment advisers C government employees of State B D deposit taking institutions Except for: C. If a broker-dealer has no office in a State; and it only deals with institutional customers in that State, then it is excluded from registration in that State. Broker-dealers, investment advisers and deposit taking institutions such as banks are all institutional clients. On the other hand, the sale of securities to government employees of State B would require that broker-dealer to be registered in the State, since the broker-dealer is now dealing with "average investors."

Considered custody if:

A exercises discretionary authority by placing trades of securities for that customer B accepts a check from the customer made payable to the fund custodian to buy a mutual fund C accepts commissions for effecting trades for that customer's account through an affiliated broker-dealer D receives quarterly management fees from the custodian by direct deduction with client consent

All of the following individuals would be allowed to effect transactions in the account of a customer who is mentally incapacitated EXCEPT a(n):

A individual named in the customer's living will B individual given a durable power of attorney C conservator appointed by a court of law D joint tenant that owns the account with the customer Except A - living will

Under NASAA rules, each Registered Investment Adviser must establish, implement and maintain a Business Continuity and Succession Plan that:

A is based on the investment adviser's business model including the size of the firm, types of services provided, and number of business locations B ensures that key management personnel have been familiarized with the policies and procedures to be followed in the event of a significant business interruption C designates the investment adviser's independent outside accountant as the person to take responsibility in the event of a significant business interruption D announces to the public in local newspapers and on the internet the fact that a significant business interruption has occurred Answer = A. NASAA has a Model Rule covering "Business Continuity and Succession Planning for Investment Advisers" (Broker-Dealers are already covered under a similar FINRA rule). It states that every investment adviser must establish, implement and maintain a Business Continuity Plan based on the facts and circumstances of the RIA's business model including the size of the firm, types of services provided, and number of locations of the investment adviser. The plan must provide, at a minimum, for: The protection, backup, and recovery of books and records; Alternate means of communicating with customers, key personnel, employees, vendors, service providers and regulators, including providing notice to these persons of significant business interruption, cessation of business activities or death or unavailability of key personnel; Office relocation in the event of temporary or permanent loss of a principal place of business; Assignment of duties to qualified persons in the event of death or unavailability of key personnel; and Minimizing service disruptions and client harm that could result from a significant business disruption.

An investment adviser representative who prepares financial plans for customers is also a registered life insurance agent in that State. If the agent recommends that a customer sell a mutual fund holding and use the proceeds to buy life insurance, all of the following should be disclosed to the customer EXCEPT the fact that the:

A recommendation to purchase life insurance is in no way connected to the services offered by the advisory firm B agent will earn a commission on the life insurance purchased by the customer C sale of the mutual funds may result in a taxable event to the customer D recommendation to buy life insurance does not make the investment advice any less objective

Which of the following conditions must be met in order for an agent to share in the gains and losses of a customer's account? I The agent and customer must enter into a written agreement to share in the account II The agent can only share to the extent of capital contributed by the agent, and must share in both gain and loss III The agreement must be approved by the broker-dealer before it takes effect

All

Which of the following investment advisers are NOT required to register in a State? I An investment adviser with at least $100,000,000 of assets under management registered with the SEC under the Investment Advisers Act of 1940 II An investment adviser with no place of business in the State who deals solely with financial and institutional investors III An investment adviser with no place of business in the State who deals solely with broker-dealers IV An investment adviser with no place of business in the State who has no more than 5 clients in that State over the last 12 months

All

Which statement is TRUE about the participation of an agent of a broker-dealer in an Internet Chat room about investing? A The agent is prohibited from participating in the Chat room B The agent can only make general statements about investing in the Chat room C The agent can make recommendations of registered securities in the Chat room D The agent can make recommendations of both registered and unregistered securities in the Chat room

Agent can only make general statements

An agent may engage in which of the following? I Soliciting orders for exempt unregistered securities if he is registered in the State II Soliciting orders for non-exempt unregistered securities if he is registered in the State III Effecting transactions in a State where he is not registered, but the broker-dealer is registered IV Effecting transactions in a State where the broker-dealer is not registered, but he is registered

Agent may engage in: I. Soliciting orders for exempt unregistered securities if he is registered All others - no allowed Agents cannot effect trades in a State where they are not registered; or where their broker-dealer is not registered.

Misstatements of material fact in a securities registration are violations of the Act for which of the following persons? I Broker-dealer underwriting the securities II Agents of the broker-dealer underwriting the securities III Issuer of the securities IV Directors of the issuer of the securitie

Agents - are not responsible.

Which statements are TRUE regarding registration of agents? I Agents can be registered in a state without affiliating with a broker-dealer II Agents can only be registered in a state if they are affiliated with a broker-dealer III Agents must only be registered in the state where they have an office IV Agents must be registered in any state into which they direct offers of securities

Agents can only be registered in a state if they are affiliated with a broker dealer Agents must be registered in any state into which they direct officers

The Administrator, in regards to the registration of securities, may: I impound the proceeds from the sale of the securities until the issuer receives a specified dollar amount II require the filing of original copies of confirmed subscription agreements III require the delivery of a prospectus IV require that the issuer file quarterly reports of sales of the issue

All

A broker-dealer is required to register with: A the SEC B FINRA C the state where it is located or does business with the public and the SEC D all of the above

All of the above

An Investment Adviser has adopted an external Business Succession Plan. Who is responsible for servicing the IA's client accounts if the managing director of the Investment Adviser suddenly dies? A Another Investment Adviser Representative currently in the firm B Another Investment Advisory Firm to which investment management has been transferred C The custodian bank that holds client funds and securities positions D An immediate family member of the deceased managing director

Answer = Another investment advisory firm to which investment management has been transferred

The Administrator can deny a registration as an investment adviser representative if the individual: I is currently under suspension by FINRA II has been expelled by FINRA III was convicted of a disorderly conduct misdemeanor 8 years ago IV was convicted of theft 8 years ago

Answer = I, II, and IV theft - is a felony convicted of a securities misdemeanor - but iII isn't.

Which statements are TRUE regarding the post-registration requirements of the Uniform Securities Act? I Broker-dealers are subject to post-registration requirements II Broker-dealers are not subject to post-registration requirements III Agents of broker-dealers are subject to post-registration requirements IV Agents of broker-dealers are not subject to post-registration requirements

Answer = I. and IV.

Which of the following is defined as an offer which comes under a State Administrator's jurisdiction? A An offer to sell a security made by an agent in another state to a customer that lives in the Administrator's state B Neither the customer nor the agent reside in the Administrator's state, but the offer is made in the State while the customer is on a brief vacation C The offer is made by TV broadcast originating from another State D Neither the customer nor the agent reside in the Administrator's state, but the offer is accepted in the State by the customer while on vacation

Answer = An offer to sell a security made by an agent in another state to a customer that lives in the Administrator's state The best answer is A. An offer made by an out of state agent into another State comes under both State Administrators' jurisdiction. Offers made through a television broadcast originating in another State are excluded from the Administrator's jurisdiction in the State where received. Only the Administrator in the State from which the broadcast originates has jurisdiction. If a customer is briefly vacationing in a State, and is contacted by his broker-dealer (who has no office in that State) while he is on vacation, then the broker-dealer does not have to be registered in that State (and therefore its agents do not have to be registered). Thus, this offer would not fall under the jurisdiction of the Administrator of the State in which the customer is vacationing.

An issuer has filed a registration statement in the State proposing to offer 500,000 shares in a combined primary and secondary distribution, consisting of 300,000 newly issued shares and another 200,000 shares being offered by the officers of the firm. Under Uniform State Law, the: A 500,000 shares being sold is an issuer transaction B 300,000 shares being sold is an issuer transaction and the 200,000 shares being sold is a non-issuer transaction C 300,000 shares being sold is a non-issuer transaction and the 200,000 shares being sold is an issuer transaction D 500,000 shares being sold is a non-issuer transaction

Answer = B. 300,000 shares - issuer 200,000 shares - non-issuer transaction

A person with no place of business in the State who conducts securities transactions with the issuer of non-exempt securities B A person with no place of business in the State who represents an issuer in the sale of exempt securities to non-institutional customers for compensation C A person with no place of business in the State who represents an issuer in the sale of non-exempt securities to the issuer's employees without receiving compensation D A person with no place of business in a State who conducts securities transactions with financial institutions in the State for compensation

Answer = person with no business place who represents an issuer in the sale of exempt securities to non-institutional clients for COMPENSATION. Choice B is defined as a broker-dealer because the firm is selling securities to retail customers in the State for compensation. It makes no difference whether the securities involved are exempt or non-exempt.

An issuer that is listed on the NYSE is making an offering of convertible debentures. Under Uniform State Law, which statement is FALSE? A The Administrator can require that the issuer make a notice filing in the State B The Administrator can bring an enforcement action against the issuer if the offering is fraudulent C The Administrator can subject the offering to State review and approval D The Administrator can require the issuer to pay a filing fee in the State

Answer = A. Because it is listed on NYSE - it is a federal covered security. Not required to be registered with SEC.

All of the following real estate investments would be defined as a "security" under the Uniform Securities Act EXCEPT: A a condominium time share unit that will be rented for 50 weeks per year by an outside manager and will be used personally for 2 weeks per year B a condominium apartment that will be used as a vacation home by the purchaser for 2 weeks per year and will be held open for rental by the purchaser for the remaining 50 weeks per year C shares of a real estate investment trust that buys rental apartment complexes to generate income using third party management D promissory notes issued by a borrower secured by real estate investments

Answer = A. isn't a security

A long-standing customer of a broker-dealer suffered a stroke and is in a coma. Who can place orders in the client's account? A The son of the incapacitated individual, who recorded a video document 15 years ago giving instructions to allow his son to trade the account B The ex-wife of the incapacitated individual, who was named in a durable power of attorney signed 15 years ago by the client C The current wife of the incapacitated individual who was named in a durable power of attorney that that client forgot to sign D A letter written and signed by the client's spouse, naming the individual who has a durable power of attorney over the account

Answer = B. Power of attorney must be signed.

A new customer wants to open a discretionary account by initially depositing $20,000 in cash. He signs the authorization form and indicates to an agent that his investment objective is long-term growth. He wishes that the agent immediately invest his money to take advantage of market timing. Which statement is TRUE? A As long as the customer is an American Citizen born in the United States and this is verified, the agent may invest the money in a manner consistent with the customer's objective B Once the new account form is approved by the State Administrator, the agent can start investing as long as the investment is consistent with the customer's objective C The agent should contact her branch manager as cash deposits or withdrawals exceeding $10,000 must be reported to the Department of Treasury D The agent should contact her State Administrator as amounts exceeding $10,000 must be reported to the Secretary of the State

Answer = C. The best answer is C. The Department of Treasury requires that any deposits of cash made by a customer; or withdrawals of cash made by a customer; in the amount of more than $10,000, must be reported to FinCEN (Financial Crimes Enforcement Network).

Under the Uniform Securities Act, an "Internet Communication" by a Broker-Dealer will not be deemed to be "transacting business" in the State where the communication was received if all of the following conditions are met EXCEPT: A the communication is limited to general information on products and services B the communication contains a legend that the Broker-Dealer can only transact business if it is registered in the State C there are no follow-up individualized responses to prospects that involve effecting securities transactions for a fee unless the Broker-Dealer is registered in the State D the communication must prominently disclose, with a link, the name of the State Administrator to whom complaints can be forwarded by the recipient of the communication

Answer = except D. The best answer is D. In order for an "Internet Communication" to NOT be considered an offer of securities brokerage or investment advisory services in a State, 4 conditions must be met: The communication must be limited to general information on products and services and does not involve effecting securities transactions, attempting to effect securities transactions, or the rendering of personalized investment service for compensation; The communication must contain a legend that the Broker-Dealer, Investment Adviser, BD Agent or IA Agent may only transact business in the State if first registered in that State; or if that "person" is excluded or exempted from registration; Any follow-up individualized responses to persons that involve effecting securities transactions; or the attempt to effect securities transactions; or the rendering of investment advice for compensation; cannot be made unless that "person" has complied with the State's registration requirements (or is exempted or excluded); and The Internet Communication must contain a "firewall" or other procedure designed to ensure compliance with the above requirements.

An application to register securities may be filed by all of the following EXCEPT a(n): A Broker-Dealer B Investment Adviser C Issuer D Officer of the company who is selling shares that are personally owned

Application to register securities cannot be made by investment adviser or an agent.

Under the NASAA Model Rule covering Investment Adviser records, the adviser's articles of incorporation must be retained for how long after the adviser ceases business operations? A 1 year B 2 years C 3 years D 5 years

Articles of incorporation - 3 years

A broker-dealer is physically located and registered in State A. The broker-dealer has an existing client in State A who is a student finishing undergraduate studies. The client has just been accepted to medical school in State B. Which statement is TRUE about the broker-dealer contacting the client while she is in medical school in State B? A The broker-dealer can contact the client while she is in medical school in State B without having to register in State B using the "existing customer" exemption B The broker-dealer can contact the client while she is in medical school in State B without having to register in State B because students are considered to be residents of the State where they live with their parents; not the State where they go to school C The broker-dealer can contact the client while she is in medical school in State B without having to register in State B because of the reciprocity agreements that all States maintain regarding registration requirements D The broker-dealer must be registered in State B in order to contact the client while she is in medical school in State B

B

Under the Uniform Securities Act, a "sale" of a security has occurred if a: I stock dividend is paid II listed option is exercised III gift of assessable stock is made IV loan of stock is made to a short seller

II and III

When can a solicitor of a Federal Covered Adviser contact potential clients in a State without having to be registered in that State? A Under no circumstances B If the solicitor is not physically located in the State and the solicitor only contacts institutional clients in that State C If the solicitor is not physically located in the State and the Federal Covered Adviser has made a notice filing in the State D At any time because the Federal Covered Adviser has registered with the SEC

B.

All of the following are "issuer" transactions EXCEPT the: A sale of a new issue of bonds by a corporation B trade of 100 shares of stock on an exchange floor C sale of mutual fund shares to a customer D sale of Treasury Bills by the U.S. Government

B. An "issuer" transaction is one where the proceeds from the offering go to the issuer. A "non-issuer" transaction is a trade where the proceeds do not go to the issuer. The sale of bonds by a corporation benefits the issuer; the sale of mutual fund shares benefits the issuer (the fund company); and the sale of Treasury Bills by the Government benefits the issuer. A trade in the secondary or trading market results in the proceeds going to the seller - who is not the issuer. This is termed a "non-issuer" transaction.

Prior to effecting a transaction for a customer, an agent is obligated to disclose: A the amount of commission to be charged B if the commission to be charged will be higher than normal C the bid-ask spread on that security D the last reported trade in that security

B. if commission to be charged will be higher than normal

An investment adviser enters into an arrangement with a broker-dealer where the adviser, in return for directing trades to that broker-dealer, will receive payments for order flow. The payment, of one cent for each trade, is conditioned upon the adviser directing a minimum number of trades each month. Which statement is TRUE about this arrangement? A This is a prohibited practice and violates that adviser's fiduciary responsibility to its clients B This action on the part of the adviser is permitted only if it is disclosed in the Form ADV Part 2A ("Brochure") given to clients C This action on the part of the adviser is permitted because it reduces the adviser's operating costs D This action on the part of the adviser is permitted because it is based on a minimum number of trades occurring each mont

B. must be disclosed

Filing of advertising with the Administrator is NOT required for: I U.S. Government securities II Municipal securities III Investment company securities IV Options Clearing Corporation securities

Not required for US gov securities, municipal securities, investment company securities Not options securities

Under the Uniform Securities Act, the omission of material facts when offering or selling a security can result in: I Civil liability II Criminal liability III Criminal penalties

Ommission - civil liability

An Investment Adviser Representative writes a blog published on the Internet about how to achieve the best returns for clients, while minimizing risk. Which statement is TRUE about this? A This can only be done if the Investment Advisory firm that employs the IAR approves of the content B This can only be done if the Investment Advisory firm that employs the IAR authorizes the distribution of the communication C This can only be done if the Investment Advisory firm that employs the IAR both approves the content and authorizes the distribution of the communication D This action is prohibited

C.

An institutional buyer is defined under the Uniform Securities Act as: A an institution with at least $100 million of assets available for investment B an accredited investor as defined under Rule 506 of Regulation D of the Securities Act of 1933 C any person defined by the Administrator by rule or order D any institution that is regulated by the Federal Reserve, SEC, or State Insurance or Banking Commissioners

C.

Bonds issued by a church located in Sullivan County, in the State of Indiana, are being offered to congregants of affiliated churches in the State of Illinois. Which statement is TRUE? A The bonds are only exempt securities if the offer is made to church congregants in Illinois and not to the general public B The bonds are only exempt securities when being offered to residents of the State of Illinois C The bonds are only exempt securities in either Indiana or Illinois, as long as a notice filing specifying the material terms of the offer is made in the State D The bonds are non-exempt securities that must be registered in each State where offered

C.

Steven is registered as an agent with Maple Leaf Securities, a Canadian broker-dealer located in Toronto with no offices in the United States. One of Steven's clients has recently made a permanent move to Florida. Which of the following statements with respect to Steven is CORRECT? A) Steven 's current Canadian registration is sufficient to deal with a client who moves to another country. B) Steven and Maple Leaf Securities must register with both FINRA and the State of Florida. C) As long as the only dealings with this client are with a previously established Canadian tax qualified retirement plan, Steven only has to file an application and a consent to service of process. D) Under no circumstances is Steven permitted to have any dealings with this client once residence in Florida has been effective for more than 30 days.

C.

The Administrator is authorized to do all of the following EXCEPT: A revoke the registration of all agents associated with a broker-dealer when the broker-dealer's registration is revoked B subpoena the books and records of a broker-dealer after a suspension order is issued C suspend a registration pending a hearing without stating a reason for the suspension D obtain an injunction against any person suspected of violating the Act

C.

The Administrator may, by rule A) suspend federal law if the Administrator believes it to be in the public interest B) suspend the registration of a federal covered adviser because the contract did not meet the requirements for a state-sanctioned investment advisory contract C) forbid investment advisers registered in that state from taking custody of client funds D) allow an agent to waive provisions of the USA

C.

Under the National Securities Markets Improvement Act of 1996, which statement is FALSE? A Federal covered advisers cannot be required to be registered in the State B Federal covered securities cannot be required to be registered in the State C Federal covered advisers cannot be investigated by the State Administrator D Federal laws supersede State laws covering the same actions

C.

hich of the following practices is considered unlawful under the Uniform Securities Act? A) An individual, with no place of business in the state, claiming to be registered and authorized to solicit business in the state in which the prospective client resides B) An agent accepting indications of interest in securities that are in the process of registering with the SEC C) An agent soliciting orders from retail clients for unregistered, nonexempt securities D) A broker-dealer maintaining its records electronically

C. This is illegal - unless transaction is exempt

An IAR discusses a trading strategy with one of her clients, who tells the IAR to sell her ABC stock position whenever you see an opportunity. After this conversation, the client leaves the IAR's office for a vacation. Two days later, the IAR sees that ABC stock has risen in price and believes that this is an opportune time to sell the position. The IAR should: A not place the order and try and contact the client B place the trade and notify the client in writing within 2 business days C place the trade and get written discretionary authority from the customer within 10 business days D get approval from his or her direct manager before placing the trade

C. place trade and get written discretionary authority within 10 days

Under the National Securities Markets Improvement Act of 1996, which statement is FALSE? A Federal covered advisers cannot be required to be registered in the State B Federal covered securities cannot be required to be registered in the State C Federal covered advisers cannot be investigated by the State Administrator D Federal laws supersede State laws covering the same actions

C. Federal covered advisers cannot be investigated by state administrator - is false

If a customer wishes to purchase an initial public offering of a non-exempt security, then the customer must receive a: A preliminary prospectus at, or prior to, confirmation of sale B preliminary prospectus at, or prior to, settlement of the transaction C final prospectus at, or prior to, confirmation of sale D final prospectus at, or prior to, settlement of the transaction

C. final prospectus at, or prior to, confirmation of sale

n issuer has filed in a State to register a new issue by coordination. The registration has been stopped by the Administrator. Now the Administrator has vacated the stop order. This situation could occur if: A the offering is being made in violation of State law and the SEC has granted effectiveness to the Federal registration B the Administrator serves upon all named parties a copy of the order and notifies the parties of their right to request a hearing C the registrant has failed to pay required filing fees but the registrant has remedied the situation D it is in the public interest for the Administrator to vacate the stop order

C. if the registrant has failed to pay required fees - and paid. and now, Admin has vacated the stop order

Which statements are TRUE about the "burden of proof" needed to vacate a stop order entered by the Administrator in a securities registration? I If the issue is being registered by coordination, the burden of proof is on the Administrator to show that registration should not be allowed to proceed II If the issue is being registered by coordination, the burden of proof is on the applicant to show that registration should be allowed to proceed III If the issue is being registered by qualification, the burden of proof is on the Administrator to show that registration should not be allowed to proceed IV If the issue is being registered by qualification, the burden of proof is on the applicant to show that registration should be allowed to proceed

Coordination - burden of proof is on Administrator Qualification - burden of proof is on applicant

Which of the following are defined as correspondence? I Written letter to a client II E-mail III Instant message IV Group e-mail

Correspondence = written letter to client, email, and instant message Group email is considered Sales literature - more than 25.

The intentional omission of material facts when offering or selling a security can result in: I Civil liability II Criminal liability III Criminal penalties

Criminal liability and penalties Willful omission of facts - criminal liability and penalties Unintentional - civic liability

Under the Uniform Securities Act, for an agent to share in the gains and losses of a customer account, which statements are TRUE? I The customer must agree to the arrangement in writing II The broker-dealer must agree to the arrangement in writing III The Administrator must agree to the arrangement in writing IV Sharing is permitted only in direct proportion to capital contributed to the account

Customer agrees in writing, broker-dealer agrees in writing, sharing is permitted only in direct proportion.

Which records MUST be retained in a state-registered investment adviser's principal office? A Financial reports B Client advisory contracts C Investment adviser's bank statements D Records of customer purchases and sales orders

Customer purchases and sales orders - D

Which records MUST be retained in a state-registered investment adviser's principal office? I Financial reports II Customer securities positions III Investment adviser's bank statements IV Records of customer purchases and sales orders

Customer securities Records of customer purchases

An investment adviser has been formed and the firm and its representatives file their first registration with the State on July 1st. On June 30th of the following year, the firm files renewal registrations for itself and its representatives. Which statement is TRUE under the Uniform Securities Act?

The firm's registration and its representatives' registrations lapsed after December 31st of the preceding year

Which of the following statements are TRUE about an offer of rescission? I The offer can only be made prior to the institution of a lawsuit alleging a securities violation II The offer can only be made after the institution of a lawsuit alleging a securities violation III An offer must be made to buy back the security at the original purchase price and the customer must be paid interest at the legal rate in the State, less any dividend or interest income received from that security IV An offer must be made to buy back the security at the current market price and the customer must be paid interest at the legal rate in the State, less any dividend or interest income received from that security

I and III

Stellar Advisers has a large base of sophisticated customers, including deposit taking institutions. One of these customers - Security Savings and Loan, offers to lend the adviser $500,000 at Prime less 3%. This is a very attractive interest rate. Under the Uniform Securities Act, which statement is TRUE about Stellar Advisers accepting this offer? A This is prohibited because investment advisers cannot borrow at lower than market rates of interest B This is prohibited because investment advisers are prohibited from borrowing funds to run their businesses C This is permitted only if Stellar Advisers and Security Savings and Loan are under common ownership D This is permitted as long as the loan is not conditioned upon Stellar Advisers providing services to Security Savings and Loan that it is not offering to other unaffiliated third parties

D.

Under the Uniform Securities Act, the basic definition of a security is: A any investment made for profit with at least 10 participants B an investment that is transferable to another person without restriction C an undivided interest in a business enterprise with other parties D an investment in a common enterprise for profit with management by a third party

D.

Series 63 Databank - REVIEW MISSED FINAL 10 - QUESTION 6 OF 30 A member firm is negotiating with an issuer to underwrite an add-on common stock offering and a registration statement has not yet been filed. A research analyst at the firm has been following the company for the past 5 years and now wishes to change the broker-dealer's rating from "Hold" to "Buy." The member firm should: A issue the report in its normal fashion B issue the report only to its best customers C buy the stock in the market before issuing the report D not issue the report until at least 3 days after the effective date

D. not issue the report at least 3 day after effective date Member firms doing underwritings are prohibited from issuing research reports for 10 days following the effective date for IPOs; and 3 days following the effective date for add-on offerings.

An investment adviser representative of a Federal Covered adviser with no office in the state only has non-institutional clients. Where must the investment adviser representative register?

Dealing only with non-institutional clients - fed covered adviser registers with the state

When a broker-dealer application becomes effective in a State, who is NOT required to separately register? A Directors of the broker-dealer B Salespersons of the broker-dealer C Supervisors of salespersons of the broker-dealer D Managing directors that oversee marketing of broker-dealer services

Directors of the broker-dealer

Which statements are TRUE regarding the post-registration requirements of the Uniform Securities Act? I Agents of broker-dealers are subject to post-registration requirements II Agents of broker-dealers are not subject to post-registration requirements III Agents of investment advisers are subject to post-registration requirements IV Agents of investment advisers are not subject to post-registration requirement

Do not apply to agents, but they apply to broker-dealers

Regulation SP applies to customer information that is: I Obtained from non-public sources II Obtained directly from the customer III Obtained through examination of the customer IV Obtained through observation of the customer

Does not apply to public sources

All of the following are requirements for an internet communication (a website) posted by a broker-dealer, agent, investment adviser or investment adviser representative EXCEPT the communication must A attempt to effect securities transactions or the rendering of personalized investment advice for compensation in the State B include a firewall or other implemented procedure to ensure that prior to any subsequent communication with prospective clients in the State, that the broker-dealer, agent, investment adviser, or investment adviser representative are registered in the State, or are exempt or excluded from registration C include a legend that states that: "The broker-dealer, agent, investment adviser or investment adviser representative may only transact business in the State if registered in the State or if exempted or excluded from registration" D include a legend that states that: "Follow ups or individualized responses to persons in the State by the broker-dealer agent or investment adviser representative that involve either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made absent compliance with State registration requirements or an applicable exemption or exclusion."

EXCEPT: A

All of the following are exempt transactions as defined under the USA EXCEPT A) the executor of an estate liquidates 1,000 shares of IBM held by the estate B) Mammoth Mutual Fund purchased 250,000 shares of common stock in a nonissuer transaction C) broker-dealer B offers a private placement to 15 regular public customers and closes the offering at the end of 30 days D) broker-dealer A has put together a syndicate of 15 broker-dealers to purchase the entire issue of XYZ Corporation's preferred stock

Except = C. private placement = no more than 10.

Under the provisions of the USA, all of the following transactions are exempt EXCEPT A) a transaction pursuant to an offer directed by the issuer to no more than 10 individual investors in the state within a 12-month period, as long as no payment is made by the investors B) transactions in preorganization certificates if no commission is paid, no subscriber makes any payment, and the number of subscribers does not exceed 10 C) transactions by executors D) liquidation of a security pledged as collateral for a loan

Except A.

In order for an investment adviser to be compensated with a performance fee, all of the following must be disclosed in writing EXCEPT: A the periods that will be used to measure performance and their significance in the computation of the fee B the fee arrangement is based solely on realized capital gains C the nature and significance of any index used as a comparative measure D the reason why the adviser believes that any comparative index used is appropriate

Except for: the fee arrangement is based solely on realized capital gains

All of the following would be defined as a "sale" or "offer" under the Uniform Securities Act EXCEPT: A a stock dividend given to existing shareholders B a bonus of stock that is given for completing a securities purchase C stock warrants given to purchasers of a debt offering D subscription rights given to existing shareholders for a different class of securities than originally purchased

Except: A. stock dividend given to existing shareholders

A broker-dealer has a marketing agreement with a local bank and has located offices in each of the bank's branches. If a bank customer makes an inquiry about mutual funds offered by the broker-dealer in the branch, all of the following are true EXCEPT: A oral disclosure is required that the products offered are not FDIC insured; are not deposits; and are subject to risk of loss of principal B written disclosure is required that the products offered are not FDIC insured; are not deposits; and are subject to risk of loss of principal C the customer's signature must be obtained on a document acknowledging receipt of the appropriate risk disclosures D reasonable efforts must be made to obtain the customer's signature on a document acknowledging receipt of the appropriate risk disclosures

Except: C

All of the following information is required for an investment adviser representative to register in a State EXCEPT: A work history B residential history C legal actions taken against the employee D misdemeanor convictions involving securities occurring within the past 10 years

Except: C.

All of the following items would be EXCLUDED from the computation of an investment adviser's net capital EXCEPT: A goodwill B marketing rights C conference room furniture D copyrights

Except: C. conference room furniture

All of the following are EXCLUDED from the definition of an agent EXCEPT an individual who represents the issuer in the: A sale of municipal securities to the public B private placement of common stock C sale of common stock to the issuer's employees D sale of federal covered common stock to the public

Except: C. sale of common stock to issuer's employees Excluded from the definition of an agent are individuals who represent issuers (not broker-dealers) in: - Represent issuers in exempt securities/transactions Sales of specified exempt securities such as Treasury, Agency and Municipal debt (but not all exempt securities); Exempt transactions, such as the sale of securities only to institutions or underwriters or private placements as defined under State law; Sales of specified covered securities (basically private placement issues and sales to persons with investment assets of at least $5,000,000 and investment managers handling assets of at least $25,000,000) - however if the individual is selling federally covered "nationally traded" securities or investment company securities, he or she must register as an agent; and Sales of securities to employees of that issuer if no remuneration is paid - (the example here is a corporate employee who places company stock into employee 401(k) accounts).

HYIPs are typically: A registered securities sold by licensed individuals B registered securities sold by unlicensed individuals C unregistered securities sold by licensed individuals D unregistered securities sold by unlicensed individuals

HIY = unregistered, sold by unlicensed

Under the Uniform Securities Act, an investment adviser who has no place of business in a State is exempt from registration if the: I firm's clients consist solely of institutional investors in the State II firm has no more than 5 clients other than financial or institutional investors within a 12 month period III firm's advice relates solely to municipal securities

I and II no place of business, - only institutional investors, no more than 5 clients. The best answer is B. An investment adviser with no place of business in a State is exempt from registration if its clients consist solely of institutional investors; or if the firm has no more than 5 clients in a 12 month period other than institutional investors. Under State law, no exemption from registration as an investment adviser is permitted if the firm's advice relates solely to exempt securities, such as municipals. Please note, however, that an adviser that gives advice solely about U.S. government securities is a type of federal covered adviser that is not required to register in the State.

Which of the following are prohibited practices under NASAA guidelines? I An investment adviser lending money to a customer II An investment adviser lending money to a customer that is a relative III An investment adviser lending money to a customer through a bank affiliate IV A broker-dealer lending money to a customer where securities are collateral under Regulation T

I and II = prohibited.

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.

I and III

Which of the following are NOT included in the definition of an agent in the Uniform Securities Act? A licensed broker-dealer An officer of an issuer who only represents the issuer in selling shares to a broker-dealer underwriting the company's securities An officer who represents an issuer of non-exempt securities in the sale of those securities to the public without receiving any compensation An employee of a broker-dealer whose only transactions are with institutional clients

I and II

An investment adviser headquartered in State A wishes to solicit customers in State B. Which statements are TRUE? I If the investment adviser has an office in State B, it must register in State B II If the investment adviser has an office in State B, it need not register in State B III If the investment adviser has no office in State B, it must register in State B IV If the investment adviser has no office in State B, it need not register in State B

I and III If investment adviser has no office, it must register. If it has an office, it must register.

Which statements are TRUE about the retention of customer account records for broker-dealers under Uniform State Law? I Customer trade confirmations must be retained for 3 years II Customer trade confirmations must be retained for 6 years III Customer account statements must be retained for 3 years IV Customer account statements must be retained for 6 years

I and IV Customer trade - 3 years Customer account - 6 years

Under NASAA recordkeeping rules for investment advisers, any advertisement, circular or other communication: I must be retained if it is circulated to 2 or more persons II must be retained if it is circulated to 5 or more persons III cannot recommend the purchase or sale of a specific security IV can recommend the purchase or sale of a specific security and if it does not state the reasons for the recommendation, a memo must be retained indicating the reasons for the recommendation

I and IV.

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

I, II and III

Under the provisions of the Prudent Investor Act, a Registered Investment Adviser should consider which of the following when investing and managing trust assets? I General economic conditions II Possible effects of inflation or deflation III Trading patterns of plan beneficiaries IV Investment tax consequences

I, II and IV Trading patterns of plan beneficiaries have no bearing on this

Under the Uniform Securities Act, which of the following are defined as either a "sale" or an "offer to sell" common stock of an issuer? I Any offer to sell the common stock for value II Any solicitation of an offer to buy the common stock for value III The sale of a bond with detachable warrants to buy the common stock of that issuer IV The gift of the common stock to an employee of the issuer

I, II, and III The gift of the common stock to an employee of the issuer - is not considered to be a sale, unless assessable

Which of the following statements are TRUE about unsolicited customer transactions effected through a broker-dealer? I The Administrator may require that the customer acknowledge the transaction with a written statement II The transaction is exempt under State law III No commissions may be paid to the broker effecting the transaction IV The transaction is defined as a "non-issuer" transaction

I, II, and IV

Which statements are TRUE about surety bond coverage required for a registration application under the Uniform Securities Act? I In lieu of posting a surety bond, the Administrator must accept a deposit of cash in the appropriate amount II In lieu of posting a surety bond, the Administrator must accept a deposit of securities in the appropriate amount III The Administrator is permitted to waive the surety bond requirement for registrants whose net capital or net worth exceeds a stated dollar amount IV If there is a surety bond requirement, the Administrator is not permitted to accept cash or securities as a substitute

I, and II, and III

Which statements are TRUE about an adviser offering discounted rates? I An investment adviser is permitted to offer a discount from standard rates to selected categories of customers II An investment adviser is permitted to offer a discount from standard rates only if all customers are given the discount III The investment adviser can offer the discount as long as charges to all of the investment adviser's customers are fair and reasonable IV The investment adviser can offer the discount as long as the fact that discounts are offered is disclosed in the Form ADV Part 2A

I. and IV. Discounted rates - permitted for selected custoemrs Requires - disclosure

Which of the following statements are TRUE about an offer of rescission? I The offer can only be made prior to the institution of a lawsuit alleging a securities violation II The offer can only be made after the institution of a lawsuit alleging a securities violation III An offer must be made to buy back the security at the original purchase price and the customer must be paid interest at the legal rate in the State, less any dividend or interest income received from that security IV An offer must be made to buy back the security at the current market price and the customer must be paid interest at the legal rate in the State, less any dividend or interest income received from that security

I. the offer can only be made prior to lawsuit III. can be made to buy back the security at original purchase price - minus dividend or interest income

Among the many exempt transactions under the Uniform Securities Act are the private placement and the preorganization certificate or subscription. While these two exemptions have several requirements in common, they have which of the following differences? The private placement exemption places a limit on the number of sales to retail investors while the preorganization certificate places a limit on the number of offers to all investors. Payment for the purchase may be made in the case of a private placement, while no money changes hands in a preorganization subscription. It is expected that noninstitutional buyers of the private placement are purchasing for investment only, while no such requirement exists for the investors in a preorganization certificate. Commissions may be paid on the sale of a private placement to noninstitutional clients, while no remuneration is payable on the sale of a preorganization subscription.

II and III

Among the many exempt transactions under the Uniform Securities Act are the private placement and the preorganization certificate or subscription. While these two exemptions have several requirements in common, they have which of the following differences? The private placement exemption places a limit on the number of sales to retail investors while the preorganization certificate places a limit on the number of offers to all investors. Payment for the purchase may be made in the case of a private placement, while no money changes hands in a preorganization subscription. It is expected that noninstitutional buyers of the private placement are purchasing for investment only, while no such requirement exists for the investors in a preorganization certificate. Commissions may be paid on the sale of a private placement to noninstitutional clients, while no remuneration is payable on the sale of a preorganization subscription.

II and III 2.3.2

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

II and III The Administrator may deny or revoke the exemption granted to a nonprofit organization or investment contracts issued by employee benefit plans. Any transaction exemption, except one relating to a federal covered security, may be revoked as well. However, there are certain security exemptions that the USA does not grant the Administrator the power to deny. Included in that list is any security issued or guaranteed by any bank organized under the laws of any state.

Which of the following statements are TRUE regarding customer funds or securities and broker-dealer's funds or securities? I Broker-dealers are allowed to commingle customer funds or securities with their own funds or securities positions II Broker-dealers are prohibited from commingling customer funds or securities with their own funds or securities positions III An agent can take customer securities into his or her own possession to deliver to the broker-dealer IV An agent cannot take customer securities into his or her possession to deliver to the broker-dealer

II and IV Agents and broker-dealers - prohibited from commingling

Which of the following information MUST be included on a customer confirmation? I Whether the transaction was solicited or unsolicited II Whether a payment for order flow was made III The customer name and account number IV The price of execution

II, III, IV Whether transaction was solicited or unsolicited - ticket.

An Administrator is allowed to start a suspension or revocation action against a registered broker-dealer: I on the basis of facts known at the time of the initial registration II after one year has elapsed from the time a broker-dealer withdraws from registration III on the basis of a conviction for violating the Securities Exchange Act of 1934 IV on the basis of a suspension order being entered by the Administrator of another State

III and IV

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

Location, and value

All of the following are included in the definition of federal covered security EXCEPT A) ABC common stock, domiciled in Delaware, listed on the NYSE, and sold to a resident of Delaware B) City of Portland, Maine, GO bond sold to a resident of Augusta, Georgia C) ABC common stock, domiciled in Delaware, listed on the NYSE, and sold to a resident of Maryland D) City of Portland, Maine, GO bond sold to a resident of Augusta, Maine

Municipal bonds, exempt securities under the Securities Act of 1933, are also federal covered securities with one significant exception: if the issuer is a political entity in this state and it is sold to a resident of this state, it is not considered a federal covered security in this state.

In order for a surety bond to meet the requirements of the Uniform Securities Act, it must provide that A) the bond must remain in force no less than two years after the withdrawal of registration B) it is in the form of cash or marketable securities C) any customer who can prove a violation is entitled to collect against the bond D) because bonds are transferable, any agent's bond may be used to meet the obligation of another agent

Must provide - C.

Registration by Coordination in a State would MOST likely be used for which securities offering? A Mutual fund shares registered under the Investment Company Act of 1940 B Secondary offering of a company that is NASDAQ listed C An initial public offering made under a Rule 147 Intrastate exemption D Initial public offering of an issue that will be listed in the OTCBB

Mutual fund shares listed on Nasdaq or stock exchange - federal covered securities - not required to be registered at state level. Nasdaq listed - not at state level Rule 147 - exempt from sec but must be registered in state. IPO - qualification OTC BB - It will be registered with the SEC.

An investment adviser representative of a Federal Covered adviser with no office in the state only has insurance companies as clients. Where must the adviser representative register?

Neither SEC or state

Under what circumstances may an agent draw on a graph or chart in a mutual fund prospectus during a presentation to a customer? A Under no circumstances B When the drawing will help the customer to understand the presentation C When the graph or chart appears misleading to the customer D When a customer has drawn on the graph or chart

No circumstances

An issuer has filed a registration statement in the State proposing to offer 500,000 shares in a combined primary and secondary distribution, consisting of 300,000 newly issued shares and another 200,000 shares being offered by the officers of the firm. Under Uniform State Law, the 200,000 shares being sold by selling shareholders are a(n)

Non-issuer

Under NASAA rules, which of the following records must be retained for 5 years by a Federal Covered Adviser? A Communications to 2 or more persons B Order memoranda C Canceled checks D None of the above

None of the above NASAA does not set rules for federal covered advisers. Only the Investment Company Act of 1940 does.

The Prudent Investor rule prohibits investments in: I Futures II Options III Speculative Stocks

None of the above. Prudent investor rule does not prohibit investments in these.

NASAA has the power to set record retention rules for a Federal Covered Adviser that cover which of the following records? I Communications to 2 or more persons II E-mails to clients III Trial balances IV General ledger

None of these - NASAA does not have rules for federal covered advisers

The Administrator may summarily deny or revoke the exemption of which type of security? A Non-Profit Charitable Organization Issues B Securities guaranteed by a Canadian province C Federal Credit Union Issues D Insurance Company Issues

Nonprofit church

The Administrator, by order, can deny any exemption from registration for which of the following? I A municipal bond issued by another state, sold in the Administrator's state II An isolated non-issuer transaction III A sale of securities to a bank trust department IV A private placement

Not = to muni or gov bonds

Filing of advertising with the Administrator is NOT required for: I U.S. Government securities II Municipal securities III Investment company securities IV Options Clearing Corporation securities

Not required for - US government securities - Municipal securities - Investment company securities - these are federal covered securities

All of the following information is required on an order ticket EXCEPT: A time of order receipt B time of order execution C whether the trade was solicited or unsolicited D whether the order was placed verbally or in writing

Order ticket required: - time of order receipt - time of order execution - whether trade was solicited or unsolicited not required = whether order was placed verbally or in writing

Instead of charging a customer a per trade commission charge, a broker-dealer wants to charge its customers that are active traders a flat monthly fee equal to 8% of the value of monthly trades. The broker-dealer identifies its active traders and tells them of the new arrangement. Which statement is TRUE?

Prohibited - this is excessive

The term "Investment Adviser" includes: A lawyers who give advice about investments as part of an estate tax plan B depository institutions that recommend bank products as investments C publishers of reports on securities tailored to client situations D broker-dealers who make recommendations to clients and charge commissions on the resulting trades

Publishers of reports on securities tailed to client situations Excluded from the State definition are: investment adviser representatives; professionals such as lawyers and accountants who give incidental advice without taking a fee; broker-dealers since they also give incidental advice without taking a fee for the advice (instead they earn a commission on the trade); financial publications that are not tailored to specific client situations; and depository institutions such as banks, and savings and loans (they are already highly regulated under other laws).

An elderly client of a Registered Investment Adviser has gifted securities to his adult son at the end of each year, in an amount equal to the annual gift tax exclusion. The client has a stroke that has affected his ability to communicate and the RIA is approached by the adult son about continuing the annual giving of the gift. The RIA should: A go ahead and continue giving the annual gift because this is in accordance with the prior practice in the account B ask the son if he has a durable power of attorney granted by the father and obtain this prior to giving the annual gift C follow the instructions in the client's will D visit with the client and ask him whether he should give the gift, directing the client to squeeze his hand if the answer is "Yes"

RIA should: B. ask son if he has a durable power of attorney The best answer is B. This client is incapacitated. If the client gave his son a durable power of attorney prior to the stroke, then the son is authorized to act on the father's behalf. (Remember that a durable power of attorney continues on the giver's mental incapacitation; while a non-durable power of attorney ceases upon the giver's mental incapacitation.) Otherwise, the RIA can do nothing. Choice C is wrong because the client is not dead! Choice D is simply amusing.

If an agent fails to renew his or her license at the end of the year, the: A registrant must retake the Series 63 or 66 examination B registration expires with no action by the Administrator C registration is automatically renewed and a late fee is assessed D registration is revoked

Registration expires with no action by administrator

Under the provisions of the Uniform Securities Act, required records for broker-dealers must be kept in accordance with the provisions of the:

Required records of broker-dealers = 1934 rule

Which statements are TRUE about the applicability of recordkeeping rules to investment advisers? I SEC recordkeeping rules apply to Federal Covered advisers II SEC recordkeeping rules do not apply to Federal Covered advisers III NASAA recordkeeping rules apply to State-registered advisers IV NASAA recordkeeping rules do not apply to State-registered advisers

SEC - Federal Covered advisers NASAA - state registered advisers

The State Administrator is supervised by: A the State governor B the State secretary C NASAA D the State treasurer

State secretary

A sales representative who knowingly misappropriates customer securities for personal use: I has committed a fraudulent and misleading Act II has committed a felony III is subject to civil liability IV is subject to possible fines and/or imprisonment

Stole customer securities = Has committed a felony, is subject to fines

Under the Uniform Securities Act, a structured security issued by an investment bank is a(n): A exempt security B non-exempt security C federal covered security D investment company security

Structured security = non exempt security

Under the provisions of the Uniform Securities Act, to register as an investment adviser representative, which of the following are NOT required? I Posting of a surety bond II Filing of a consent to service of process III Passing of a qualification examination IV Posting of minimum net capital

Surety bond - not required for IAR. Not required = I and IV.

The Administrator can require the posting of a surety bond by: A Agents only B Broker-Dealers only C Investment Advisers only D All of the above

Surety bond - required by all

A person who renders investment advice relating solely about municipal securities is: A defined as an investment adviser and must register under the Act B exempted from the definition of an investment adviser, and is not required to register under the Act C defined as a broker-dealer and must register under the Act D defined as an agent and is required to register under the Act

The best answer is A. A person who gives investment advice relating solely to municipal securities is not exempted from registering as an investment adviser under State law. (Please note, however, that a person who gives advice solely about U.S. Government guaranteed securities is excluded from the definition of an investment adviser under the Investment Advisers Act of 1940. This is another type of federal covered adviser, for which there is no state registration.)

If a representative that transacts business in a State terminates employment with an investment adviser: A notice must be given to the Administrator by the representative only B notice must be given to the Administrator by the investment adviser only C notice must be given to the Administrator by both the investment adviser and the representative D no notice is required to be given to the Administrator

The best answer is B. If a representative of an investment adviser terminates employment, the adviser must notify the Administrator promptly. Notice that this is different than the requirement for a broker-dealer, where both the terminated agent and the broker-dealer must notify the Administrator. Also note that this is different than the requirement for a federal covered adviser, where only the investment adviser representative must notify the State Administrator. IA terminate employment - adviser must notify Broker-dealer - both notify

A broker-dealer is registered in all 50 states. Which of the following statements is correct regarding the firm's obligations regarding maintaining of books and records?

The broker-dealer need only satisfy the requirements of the SEC.

A customer that typically buys NYSE-listed stocks places an order to buy a very thinly traded stock that is quoted only in the Pink Sheets. Because of the extra work involved in handling this transaction, the firm imposes an extra $150 charge in addition to the regular commission. Which statement is TRUE?

The extra charge must be disclosed to the customer at the time that the order is placed

Criminal violations of the Uniform Securities Act are punishable by: I $5,000 fine II $10,000 fine III 3 years in jail IV 5 years in jail

Under USA = 5,000 and 3 years Under fed = 10,000 and 5 years

Which of the following information would NOT be found in a registration statement for a security that is going to be registered by qualification in a State? A Current equity and debt capital of the issuer B Description of issuer's business, product lines and competitive environment C Use of proceeds of the offering D Analysis of company profitability as compared to industry norms

What is NOT found: D. analysis of company profitability

I An agent is permitted to share commissions with an agent at another broker-dealer that is under common control of the agent's broker-dealer II An agent is not permitted to share commissions with an agent at another broker-dealer that is under common control of the agent's broker-dealer III An agent is permitted to share commissions with an investment adviser representative at another investment adviser that is under common control of the agent's broker-dealer IV An agent is not permitted to share commissions with an investment adviser representative at another investment adviser that is under common control of the agent's broker-dealer

What is true? Agent is permitted to share commissions with an agent at another broker-dealer that is under common control Agent is not permitted to shares commissions with an investment adviser representative at atnother IA that is under common control I and IV. An individual can work for both broker-dealer, acting as an agent earning commissions; and can also work for an investment adviser as an IAR, earning fees. And both the broker-dealer and investment adviser can be owned by the same parent entity or company. However, there is no "cross-over" between the two in how fees are charged.

Registration by Coordination permits simultaneous State registration of securities when the SEC registration:

When Securities act of 1933 becomes effective