Series 63 Missed

An investment adviser's advertising is permitted to state,

"We are offering our monthly stock market report free of charge for the next six months to the first 100 people who email us their name and address."

If the Administrator has summarily suspended an investment adviser representative's registration, the registrant may request a hearing by written request and the hearing will be granted within

15 days.

An agent unintentionally sells nonexempt securities that have not been registered. Under the Uniform Securities Act, the broker-dealer may write a letter and offer to buy back the security plus interest, minus any income received. The client gives up the right to bring action against the firm in court if he does not respond within how many days of receipt of the letter?

30 days

Under the Uniform Securities Act, which of the following is an agent?

A broker-dealer that charges a commission as a regular part of its business

Which of the following persons with an office in the state is excluded from the Uniform Securities Act's definition of broker-dealer?

A person engaged in the business of making short-term loans to individuals resident in the state

In some instances, rather than using an investment banker to distribute its securities to the public, an issuer will hire a sales force or use its own employees to make the sales. The individuals involved in the selling in this state would not be defined as agents under the Uniform Securities Act if selling on behalf of which of the following issuers?

A savings institution organized and supervised under the laws of any state (savings institution is the only issuer where the act grants an exemption from the definition of agent to those individuals selling on its behalf.)

Over which of the following would an agent have discretionary authority?

An account in which the agent chooses portfolio securities on behalf of the client

Which of the following statements regarding discretionary accounts is true?

An order in which an investor designates the security's name, the number of shares, and whether to buy or sell and gives the agent discretion as to time or price only is not considered discretionary.

When does a customer have to receive the OCC's options disclosure document?

At or prior to the time the account is approved for options trading

All of the following are exempt transactions as defined under the Uniform Securities Act except

Broker-dealer B offers a private placement to 15 regular public customers and closes the offering at the end of 30 days. (Under the Uniform Securities Act, an unregistered private placement may be offered to no more than 10 prospective purchasers, with the exception of financial institutions and other broker-dealers.)

A state-registered investment adviser offers wrap fee programs to certain clients. Which of the following statements about wrap fee arrangements is not true?

Because this investment adviser offers wrap fee programs, it must make certain annual disclosures to the SEC.

During a virtual client meeting, an agent learns that her client is interested in adding an option position to his account, one that will generate income for the client without introducing a significant added level of risk. Which of the following options positions would be most appropriate for this client?

Covered call option position (An investor who sells (or writes) a covered call will receive the income from the option premium, which will add to the overall return of the portfolio.)

Each of the following statements about post-registration provisions is true except

the securities Administrator does not have the authority to conduct an onsite examination of an investment adviser registered in his state if the adviser does not have an office in that state.

Under the Uniform Securities Act, which of the following is excluded from the definition of investment adviser? I. A bank II. An investment adviser representative III. A lawyer giving suggestions to a client on where to invest the proceeds of a divorce settlement that he helped her obtain IV. An investment adviser with an office in the state whose only client is a closed-end investment company registered under the Investment Company Act of 1940

I, II, III, IV

Farrier and Nail has applied for registration as a broker-dealer in the state. The application is required to contain I. the business history of the firm's principal officers. II. the types of business the firm is engaged in. III. information obtained from a recognized credit reporting agency on each of the firm's principal officers. IV. a record of any conviction of any principal officer for any misdemeanor within the previous 10 years.

I and II (The only misdemeanors appearing on Form BD are those involving investments or an investment-related business or bribery, forgery, extortion, or similar offenses. Other misdemeanors, even when there is a conviction, are not disclosed.)

Under the Uniform Securities Act, which of the following are securities? I. Commodity option contract II. Treasury stock III. Keogh plan

I and II. (A commodity option contract and treasury stock are securities under the USA. A commodity option contract is a security, while a commodity futures contract is not. A Keogh plan is a vehicle for an investment, but it is not a security in and of itself.)

The James Henry Company (JHC), an SEC-registered securities broker-dealer with offices in Chicago and Los Angeles, limits its clientele to banks and trust companies. JHC makes a sale of U.S. government securities to the Wall Street Bank located in New York City. Which of the following statements are true under the Uniform Securities Act? I. The security itself is exempt from registration. II. The transaction is exempt. III. The broker-dealer is not required to be registered in the state of New York.

I, II, II

Which of the following activities are prohibited under the Uniform Securities Act? I. Engaging in a practice not expressly forbidden by the act but defined as unethical by courts, self-regulatory organizations such as FINRA (NASD), or both II. Deliberately omitting a material fact when soliciting a client III. Selling recommended securities to a client from one's own account without disclosing this fact to the client

I, II, III

Which of the following are required to provide a consent to service of process to the Administrator in a state in which registration is sought? I. An agent employed out of state but who seeks registration in a state in which business is conducted II. A federal covered investment company not required to be registered in a state in which business is conducted but required to supply notice filing materials by the state Administrator III. A broker-dealer registered in 25 states that seeks registration in a 26th state IV. An investment adviser with less than $100 million in assets under management who is not covered by federal legislation

I, II, III, IV

An investment adviser representative may perform which of the following functions? I. Solicit for advisory business. II. Manage advisory accounts. III. Earn commissions on sales of recommended securities. IV. Supervise those who render advice.

I, II, IV (An IAR may not earn commissions on the sale of securities unless also registered as an agent. All of the other activities listed are permitted. Remember, unlike FINRA, there is no principal category of registration. In other words, there is no such thing as an investment adviser principal.)

XYZ common stock is listed for trading on the NYSE. Under the Uniform Securities Act, which of the following XYZ securities (other than common shares) are exempt from state registration? I. XYZ first mortgage bonds II. Warrants to purchase XYZ common stock III. XYZ preferred stock

I, II, and III (Common stock listed on the New York Stock Exchange is a federal covered security and, under the NSMIA, exempt from state registration requirements. Any security equal or senior to an exempt security is exempt as well. Warrants are equal to the common stock and the preferred stock, and mortgage bonds are senior to the common stock.)

Which of the following statements relating to notice filing are correct? I. It is available only to federal covered securities. II. A notice filing is effective for one year, beginning from the later of filing with the Administrator or the effective date determined by the SEC. III. Renewal is accomplished by filing with the state a copy of records filed with the SEC, along with a signed consent to service of process. IV. Failure to pay required fees could lead to the issuance of a stop order.

I, II, and IV

Under the Uniform Securities Act, a private placement is considered an exempt transaction when directed I. to no more than 10 noninstitutional persons. II. to no more than 15 noninstitutional persons. III. in 9 consecutive months. IV. in 12 consecutive months.

I, IV

Under the Uniform Securities Act, the Administrator has the power to deny or revoke exemptions for which of the following types of securities? I. Stock issued by a bank organized under the laws of another state II. Securities of nonprofit organizations III. Investment contracts issued by employee benefit plans

II and III

Which of the following may not be used as the basis for a recommendation to customers?

Information obtained while acting in a fiduciary capacity for a corporation that indicates the strong possibility of future mergers

Investment advisers as fiduciaries have ethical obligations to act in their clients' best interests and in an ethical manner. Engaging in which of the following practices would be unethical for an investment adviser?

Lending money to an individual client where the loan is based on a personal relationship with the customer existing outside of the adviser-client relationship

Under the Uniform Securities Act, which of the following is an agent?

Mark Blodgett an employee of XYZ Manufacturing Corporation, receives commissions when he represents XYZ in the issuance of securities exclusively to existing employees, partners, and directors of the corporation. (he recieved a comission)

Simus Fund, a new open-end investment company, is preparing its registration statement with the SEC. Under the provisions of the NSMIA of 1996, this company would qualify for sale in a state by

Notice Filing (When a new open-end investment company registers with the SEC, it carries the legal status of a federal covered security, and the NSMIA provides that individual states may not impose normal registration requirements. Instead, the procedure used to notify the Administrator that the securities will be offered for sale in the state (along with payment of a fee) is known as notice filing.)

The term agent as defined in the Uniform Securities Act, would not include which of the following individuals?

One who represents an issuer in effecting exempt transactions (needs action)

An individual with a place of business in State A manages client assets on behalf of a covered investment adviser. This individual wishes to expand his client base by working one day per week out of the firm's office in State B. Which of the following actions must the person take to practice within that particular state?

Pay state registration fees if required by the Administrator (Individuals with a place of business in a state who manage client assets while employed by federal covered investment advisers, must register as investment adviser representatives in that state (or any others in which they, the IAR, maintain a place of business). Registration will generally involve paying the registration fees. Because this individual is already registered in State A, it is not necessary to pass another exam to become registered in another state. It is the IA who may be required to notice file with the Administrator.)

Which of the following sales would be exempt from the antifraud provisions of the Uniform Securities Act?

Sale of a term life insurance policy (life insurance is not a security)

Which of the following statements regarding registration provisions is not true?

The Administrator may not, as a condition of registration by qualification or coordination, require that the security be deposited in escrow and the proceeds be impounded until the issuer receives a specified amount.

NASAA has created a Model Rule dealing with the creation of and delivery requirements for an investment adviser brochure. Which of the following statements correctly identify the delivery requirements?

The brochure must be delivered to prospective and new advisory clients no later than entering into the advisory contract.

A margin account is a type of brokerage account in which the broker-dealer lends the investor cash to purchase securities using marginable securities in the account as collateral. Which of the account documents authorizes the use of those securities as collateral for that loan?

The credit agreement (It is the credit agreement, sometimes referred to as the margin agreement, that contains all of the terms of the loan. In addition to explaining how the interest is charged and the right of the firm to liquidate collateral if a call for additional funds is not made, the credit agreement contains the terminology authorizing the broker-dealer (BD) to use the value of the account as collateral for the margin loan made by the BD to the client. The hypothecation agreement permits the BD to pledge the client's margin securities as collateral for a loan that the BD takes out. In simple terms, there are two loans taking place: The loan from the BD to the client, with the client's securities used as collateral. That is covered in the credit agreement. The loan from a bank to the BD, with the client's securities used as collateral for the BD's loan. The authorization for the BD to use those securities is found in the hypothecation agreement.)

Under the Uniform Securities Act, which of the following is not a requirement for a preorganization subscription to be an exempt transaction?

The offer of the security may not be advertised.

Because the Series 63 is a law exam, it is incumbent on Series 63 students to recognize the difference between several similar terms. For example, in which of these cases would a person not be defined as a broker-dealer?

The person is excluded from the definition of a broker-dealer. (When one is excluded from the definition, none of the rules and regulations applying to that term affect the person. One can be a broker-dealer yet be exempt from registration. The person is still a BD but does not have to register (is exempt). Limiting the business to a single state or a single securities marketplace has no impact on the definition.)

A client sues an agent for selling an unregistered nonexempt security. Shortly before the case comes to trial, the client dies.

The suit survives the death of either party to the suit.

Which of the following statements regarding Form ADV Part 2 is true?

Unless there are no material changes, it must be delivered to clients annually. ( Form ADV Part 2 is the brochure)

Under the Uniform Securities Act, each of the following is an exempt transaction except

a Canadian government bond maturing in 10 years. (The Canadian government bond is an exempt security, not an exempt transaction. Unsolicited orders, transactions between broker-dealers, and trades with institutional investors such as insurance companies are all examples of exempt transactions. Remember, with a transaction, there must be an action—either a purchase or a sale.)

Why is a bond issue by San Jose, Costa Rica not exempt from state registration?

With the exception of Canada, no foreign securities, other than those issued or guaranteed by the sovereign government, are exempt securities. Perhaps you read too quickly and thought it was San Jose, California (which would be exempt). There is a limited-offering exemption, but it is limited to no more than 10 retail (noninstitutional) investors in a 12-month period.

When an agent has a personal relationship with the issuer of a security and has a bias toward recommending that issuer's stock, it would be considered

a potential conflict of interest that must be disclosed.

A natural person with at least $5 million in investments meets the definition of

a qualified purchaser. (When it happens that more than one choice could be correct, you must always choose the one that most accurately defines the question. Although an individual with $5 million in investments would probably meet the requirements of a qualified client or an accredited investor, the more specific answer is the qualified purchaser. That is the only choice where there is a $5 million minimum. Individuals are never institutions.)

An investment adviser wishes to advertise a proprietary charting system used to time the market. To be in compliance with the Uniform Securities Act,

a statement reflecting the limitations and difficulties of using the system must be included in the ad. (An advertisement describing a charting system or any type of formula must always state that there are limitations and difficulties to using said system.)

A customer of a broker-dealer viewing a trade confirmation notices that there was a markup added to the price of 100 shares of stock recently purchased. This tells the customer that the broker-dealer

acted in a principal capacity. (Securities firms are called broker-dealers (BDs) because they can act either as brokers (agency capacity) or as dealers (principal capacity). Trade confirmations must always indicate the capacity in which the BD acted in the transaction. When there is a markup (or markdown), the firm is acting in a principal capacity. In our question, the BD is not representing the seller; it is the seller. That is why dealers are contra parties to a trade.)

Mildred Peabody, a retired schoolteacher, has heard about enormous profits made recently in meme stocks. She calls her agent at her broker-dealer and instructs the agent to liquidate her AAA-rated municipal bond position and use the proceeds to buy two meme stocks that have recently experienced significant price volatility. In this situation, the agent should

advise the customer that the internet stocks are not suitable in light of that customer's circumstances and execute the order only following written acknowledgment from the customer that the agent did not solicit that trade.

All of the following activities comply with the requirements for agency cross transactions except

after proper written disclosure, an adviser recommends the transaction to both the seller and buyer. (An adviser cannot recommend a trade to both buyer and seller in an agency cross transaction, a transaction in which the adviser acts on behalf of both buyer and seller. The adviser can act as broker to both parties upon proper written disclosure and consent, provided the adviser did not recommend the transaction to both sides.)

Certain securities may be sold without registration because of the way the sale takes place. When that is the case, it is

an exempt transaction. (An exempt transaction always involves a purchase or sale (a transaction).)

Under the Uniform Securities Act, an individual is subject to registration as an agent if he engages in transactions between an issuer of a nonexempt security and

an individual investor with assets in excess of $5 million. (A person representing an issuer in an exempt transaction does not have to register as an agent. Transactions between an issuer and an underwriter, an insurance company, or a banking institution are exempt. Transactions with investors, not meeting the definition of institutional investor, even a wealthy investor, are not exempt and require registration as an agent.)

The most common way in which to distinguish whether social media content is static or interactive is the ability for others to

change it. (Static content can only be changed by the originator (or someone under that person's control).

Active Technicians (AT), a state-registered investment adviser serving primarily retail accounts, would be in compliance if it

did not send an annual brochure to its clients because there was no material change from the previous year.

In designing a client's portfolio, a registered investment adviser representative of Greater Wealth Advisory Services recommends the purchase of several stocks from the inventory of Greater Wealth's wholly owned broker-dealer. Under current regulations, this activity requires written

disclosure to the client and consent prior to completion of the transaction. (Unlike broker-dealers, investment advisers must obtain the consent of and make written disclosure to the client of the intent to act as agent or principal in any transaction with that advisory client. SEC Release IA-1732 requires that this be accomplished before the completion of the transaction, where completion is defined as the settlement date. The client consent may be oral or written.)

A stock that is listed on the New York Stock Exchange is

exempt from state registration requirements. (Securities listed on the New York Stock Exchange (NYSE), NYSE American LLC (formerly known as the American Stock Exchange), or Nasdaq Stock Market are federal covered securities and do not need registration in any state under the Uniform Securities Act.)

The term qualified client would include a natural person who has

had net income of at least $200,000 for each of the two previous years with an expectation of meeting that in the current year. (A qualified client can meet one of two standards. Either the natural person has at least $1.1 million under the investment adviser's management or has a net worth (spouse can be included) of more than $2.2 million exclusive of the equity in a primary residence. It is the accredited investor who has the $200,000 annual income or $1 million net worth requirement.)

The Uniform Securities Act defines an investment adviser and specifies the conditions under which registration with the state is required. There are, however, cases where an exemption from registration is offered. For example, it is not necessary for an investment adviser to register when it

has no place of business in the state and advises only savings and loan associations. (An investment adviser who has no place of business in the state and deals only with savings and loan associations is not required to register with the state securities Administrator.)

An individual functioning as an investment adviser representative for a federal covered adviser with no place of business in this state would be required to register in this state if

he conducts frequent public seminars in the state. (Under the Uniform Securities Act, conducting seminars open to the public in a state is considered to be having a place of business in the state.)

An applicant for registration as an investment adviser discloses on its application to the Administrator that it plans to use palm readers to help determine which investments are most suitable for their clients. Under the Uniform Securities Act, the Administrator

may only justify denial for reasons listed in the Uniform Securities Act. (Although disclosure of methods of analysis is required, the Administrator is not empowered to pass judgment on the merits of those methods.)

On the Series 63 exam, in most cases, solicitors

must be registered as investment adviser representatives. (Solicitors are persons who refer business to investment advisers. As such, because they are paid by those IAs, in general, they are registered as IARs. Because they refer to IAs, they themselves are not IAs or agents.)

When opening an account at a broker-dealer, if the most recent copy of the firm's fee schedule is not available, NASAA recommends that the client

not place any assets in the account until it is provided. (It is proper for fees to be disclosed at the time a customer account is opened. If not presented, clients should ask for the fee schedule and make sure it's up to date. If it is not readily available, clients should not place any assets into the account until it is provided. NASAA believes that clients have the right to know the fees in advance.)

Differences between static and interactive content on social media include the fact that

only interactive content can be modified by persons other than the originator.

Under the Uniform Securities Act, broker-dealers may not be required by the Administrator to

post a surety bond if they do not have investment discretion over client accounts or do not maintain custody of customer funds and/or securities.

Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, advertisements must comply with rules set out under the Investment Advisers Act of 1940. Those rules include

requiring a written agreement between an investment adviser and a promoter who receives more than $1,000 over a 12-month period for endorsing the services of the adviser.(Among the requirements of the rule is that an adviser who compensates a non-affiliated third party promoter for endorsing the services of the IA must have a written agreement with that promoter if the compensation will exceed $1,000 over a 12-month period.)

Under the Uniform Securities Act, all of the following could be cause for disciplinary review action by the state securities Administrator except

the ABC Advisory Group, a registered investment adviser, employs several investment adviser representatives as independent contractors.

State securities laws generally limit agents to employment with a single broker-dealer unless

the Administrator, by rule or order, authorizes employment with more than one broker-dealer. (The USA generally limits agents to single employment unless the Administrator, by rule or order, authorizes multiple affiliations.)

When it comes to safeguarding confidential information pertaining to the account(s) of an individual customer or family, the rules deal primarily with what is called a covered account. A key factor in determining if an account meets the definition is

the ability of the customer to move funds out of the account on multiple occasions. (A covered account is an account, primarily for personal, family, or household purposes, that involves or is designed to permit multiple payments or transactions. Where the money goes is less of a factor than the frequency of transactions. The only time when a single-transaction account might be covered is if there is reason to believe that the identity of the customer is at risk—not likely when wiring to a family member. Institutions are not included in the definition, and owning the stock underlying the sale of a call option means the option is covered—totally different from the topic here.)

An agent omits certain details about an issue during a sales presentation. These omissions would be fraudulent if

the information was material and was necessary to make other statements not misleading. (All material information must be disclosed. Omission or misstatement of material information would be fraudulent activity.)

Each of the following statements about post-registration provisions is true except

the securities Administrator does not have the authority to conduct an on-site examination of an investment adviser registered in his state if the adviser does not have an office in that state.

All of the following are exempt from state registration under the Uniform Securities Act except

variable annuities or other variable insurance products offered by an insurance company. (A variable annuity (or other variable insurance product) offered by an insurance company is a nonexempt security under the Uniform Securities Act. Securities issued by or guaranteed by an insurance company are covered by extensive state insurance regulations and are exempt from state securities registration. Securities issued by banks are exempt because banks are covered by extensive state and federal banking regulations.)

An individual meets the USA's definition of an agent in all of the following cases EXCEPT

when acting on behalf of an issuer of an exempt security in an underwriting and receiving no compensation related to the sale

An Administrator may deny or revoke a security's exemption

without a hearing if the issuer is given an opportunity for a hearing after the revocation. (An Administrator may deny or revoke a security's exemption without a hearing if the issuer is given an opportunity for a hearing after the revocation. The issuer requesting an exemption must prove the exemption; this is not the responsibility of the Administrator. The Administrator may not revoke exemptions of federal covered securities.)