Series 63: Practice Questions 2
All the following descriptions would meet the definition of agent under the Uniform Securities Act, EXCEPT:
A subsidiary of a bank, registered as a broker-dealer that sells nonexempt securities to the public A broker-dealer that sells only exempt securities within the state
A Canadian broker-dealer has many clients who vacation frequently in the United States. In order to continue doing business with these customers while they are in the United States, the broker-dealer must file all the following material with the Administrator, EXCEPT:
A Form B/D;
Which of the following firms would NOT be required to register as a broker-dealer in State P?
A firm without an office in State P that sells municipal securities to pension plans, banks, and other institutional investors in State P
A hedge fund is being sold to investors as a private placement under Regulation D. An agent believes that this fund would be an excellent investment opportunity for several of his clients. The agent may discuss the fund with which of the following clients?
A middle-aged couple who are both physicians with a joint annual income of $400,000
Which of the following choices would be required to register as a broker-dealer in State B?
A regional broker-dealer with offices in States A, C, D, and E only, and five retail clients who reside in State B
According to the Uniform Prudent Investor Act (UPIA), a trustee is prohibited from making which of the following investments on the trust's behalf?
A second mortgage on property owned by a real estate partnership for which the trustee is the general partner
According to the NASAA Model Rule on the Ethical Business Practices of Investment Advisers, which of the following statements is TRUE regarding investment advisory fees charged to customers?
Advisers may not charge fees that are unreasonably high in relation to fees charged by other advisers for similar services
A securities agent and an investment adviser have offices next door to each other. The adviser directs brokerage business to the agent for execution and, in return, the agent rebates the adviser 10% of the commissions generated by these transactions. According to NASAA Model Rules, this practice is:
Acceptable, provided it is disclosed on the adviser's Form ADV
Which of the following activities would NOT meet the definition of an exempt transaction under the Uniform Securities Act?
An agent sells units in a Canadian limited partnership to several of her clients
Under the Uniform Securities Act, which of the following choices is NOT disclosed in an investment advisory contract?
Any other states in which the investment adviser is registered
Paul is an investment adviser representative for Bruce Asset Management, a federal covered investment adviser. Although Paul's office is located in State A, he conducts business with clients from State A, State B, and State C. Which of the following choices reflect(s) the state registration requirements in this situation?
Paul must be registered in State A
The Administrator may require a broker-dealer to take all the following actions, EXCEPT:
Register all its employees as agents
A client wants to invest a rollover from a 401(k) account into an IRA upon retiring. Which of the following choices would be the most suitable recommendation?
Balanced fund
Your client is planning a two-week fishing expedition. His friend appears at your office with a handwritten note from the client, giving the friend trading authorization over the account. According to the Uniform Securities Act:
Because the authorization is in writing, it is acceptable
Which of the following statements is NOT TRUE concerning the registration requirements of securities professionals?
Broker-dealers with no place of business in a state, who limit their agents to selling exempt securities in a state, need not register
A broker-dealer has been selling unregistered, nonexempt securities in nonexempt transactions without the permission of the state securities Administrator. What action would the state Administrator most likely take?
Require the broker-dealer to offer letters of rescission
According to the NASAA Model Rules for Sales of Securities at Financial Institutions, a networking arrangement between a financial institution and a broker-dealer must:
Set forth the compensation schedule for both parties
Which of the following choices is considered a stock offering under the Uniform Securities Act?
Shareholders receive the right to purchase additional shares in a subsidiary at a prearranged price
A person working for a broker-dealer gives information relating to prices and sales of securities but receives no direct compensation related to these activities. This individual:
Does not need to be licensed
A broker-dealer must keep all the following records, EXCEPT:
Form ADV for any investment adviser for which the broker-dealer provides safekeeping services
An investment adviser is managing a trust that is scheduled to terminate in 50 years. The beneficiaries will receive the income that the trust generates until that time. Once the trust terminates, the corpus will be distributed among the remaining beneficiaries. According to the Uniform Prudent Investor Act, which of the following investment strategies is NOT suitable for this trust?
Investing in Treasuries and money-market securities
A client lists capital preservation as his only investment objective. The agent recommends that the client purchase blue-chip stocks and investment-grade bonds. The agent then tells the client to sell some of the stock every two weeks. According to the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, the agent has:
Made unsuitable recommendations
An investment adviser is registered in State A and State B. A broker-dealer is registered only in State A. The client of the investment adviser is a resident of State B. The investment adviser asks the broker-dealer to purchase a nonexempt security, which is registered in State B, for the advisory client. The broker-dealer:
May accept the order if the broker-dealer has no place of business in State B
A client who is interested in buying shares in an IPO asks an agent to underline the most important parts of the preliminary prospectus. The agent:
May not do this without violating the federal securities laws
Persons providing investment advice do NOT need to register as investment advisers if they:
Only deal with insurance or investment companies and have no place of business in the state Are a savings institution, bank, or trust company Are in a profession making the performance of this service incidental (an accountant or lawyer) Deal only with broker-dealers or other investment advisers and have no place of business in the state
Under the Uniform Securities Act, which of the following persons becomes registered automatically as an investment adviser representative when the investment adviser's registration becomes effective?
Only those officers, directors, and partners with management responsibilities
An investment adviser representative was the subject of a customer complaint two years ago in the state of Idaho and resigned his position as a result. The Administrator conducted an investigation, the results of which were not made public. He is currently applying for a mortgage for a new home in Boise. The bank where he is applying requests his employment history and contacts the investment adviser for verification. The personnel manager at the firm is reluctant to give the bank any information about its former employee and directs the bank to contact the state Administrator. When the bank calls the Administrator, what information can it expect to receive?
The Administrator will not release any details of the complaint
A woman in Alabama is reading a daily financial newspaper containing an advertisement that could be interpreted as an offer to sell securities. The newspaper is published in New Jersey, but its circulation is spread evenly throughout the United States. According to the Uniform Securities Act, which of the following statements is TRUE regarding the advertisement?
The ad is not an offer of a security in any state
An investment adviser with no place of business in a state will not be required to register with the Administrator under which of the following conditions?
The adviser will provide advice only to mutual funds
An agent of a broker-dealer executes a securities transaction that is not recorded on the broker-dealer's books and records. According to NASAA Statements of Policy, this would NOT be an unethical business practice if the agent had done which of the following
The agent received the broker-dealer's written authorization prior to the execution of the transaction
A person is applying for registration as an agent. The applicant filed for bankruptcy nine years ago. The agent's home is currently in foreclosure, and there is a tax lien on the property. Which of these issues is the agent required to disclose?
The bankruptcy The tax lien
In a soft-dollar arrangement between an adviser and a broker-dealer, the broker-dealer would be permitted to pay:
The cost of a conference concerning the future of the computer software industry
An employee of XYZ Corporation is selling common stock to the public but is not being paid a commission. Under the Uniform Securities Act, which of the following statements is TRUE?
The employee would be considered an agent of the issuer and would need to register
A registered investment adviser is normally required to post a surety bond to satisfy the Uniform Securities Act requirements. Under which TWO of the following conditions could this requirement be waived?
The investment adviser does not maintain custody of client assets The investment adviser has a net worth of $50,000
A broker-dealer is registering a new issue with the Administrator of State A. What information must be sent to the Administrator?
The number of shares The Articles of Incorporation The financials
According to the Uniform Securities Act, which of the following statements is NOT TRUE concerning private placements?
The offer may be made to 35 or fewer persons in that state during any 12-month period
Advertising and sales-related materials would need to be filed with the Administrator in which of the following circumstances?
The securities are listed on a foreign exchange
A broker-dealer has filed an application to withdraw its registration. Which of the following statements is TRUE?
The withdrawal will become effective when the Administrator determines whether there is an action for revocation of the firm's license pending at the time the application was filed
An agent misrepresents the risks associated with U.S. Treasury bills, notes, and bonds. Under the Uniform Securities Act, which of the following statements would BEST describe the consequences?
There are potential civil liabilities and the client may sue for damages
Trading in WXYZ has been particularly heavy and the stock's price has been fluctuating wildly. A customer calls her agent and asks what the current price of the stock is, since she is considering selling her position in WXYZ. The agent has been extremely busy and last saw a price of 22 on the stock 20 minutes ago. The agent tells the customer, "Last price I have for it is 22." The agent then takes another phone call. The investor enters an order online to sell the stock and receives an execution at 19. Which of the following statements is TRUE regarding the price given by the agent for the stock?
This statement is misleading since the agent did not indicate how old the price was
