Series 63 Unit 5

Soft-Dollar Compensations

Client portfolio management software Registration fees for conferences Research provided by a broker-dealer providing brokerage services in the form of Execution and clearing of securities trades

Examples of identity theft would include

-taking over an individual's credit card account -applying for new credit cards in the compromised individual's name

If something happens to a margin account that puts it under the margin requirements while a client is on vacation. The agent should

Do his best to reach the client, and, if unsuccessful, notifying his supervisor, who will direct that sufficient securities in the account be liquidated to meet the margin call

One way that a financial institution participates in the fight against money laundering is through the filing of

FinCEN Form 112 for large cash transactions

Churning involves

I.Encouraging customers to make frequent changes in their holdings in an effort to maximize commissions II.Excessive activity in a customer's discretionary account III.Transactions that are excessively large considering the customer's financial situation

Which of the following statements are TRUE of a discretionary account at a broker-dealer?

I.It must be approved by a designated supervisory individual of the firm. II.It must be reviewed frequently to minimize the chances that the account has been churned.

An elderly widow with no independent income wishes to invest the proceeds from her recently deceased husband's life insurance. Which of the following would be the most suitable recommendation?

Large-Cap Income Stocks (Safety and Income)

Which of the following sales would be exempt from the antifraud provisions of the USA?

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

Under which of the following circumstances can an agent conduct customer transactions without the activity being recorded on the books and records of his broker-dealer employer?

The transactions are authorized in writing by the broker-dealer before execution of the transactions.

When discussing cybersecurity, the term "covered account" refers to

a personal or family account for which the firm must provide data protection

Although all new accounts must be approved by a designated supervisory before any trading activity may take place, there is one type of account that must be approved by a specially qualified supervisor. That would be

an options account

A broker-dealer offering a security for sale must

be prepared to sell the security at the quoted price

When an agent is discussing possible discounts related to the purchase of mutual funds shares, she would be referring to

breakpoints

An agent receives a complaint letter from a customer. The agent has not committed any violation of the Uniform Securities Act, nor does the letter accuse him of any. The customer is simply angry about having to pay certain charges in connection with a transaction that have been established by the agent's broker-dealer and that were disclosed to the customer in advance. The agent should

bring the letter to the attention of the agent's immediate supervisor

Buying on one exchange and selling on another is called

Arbitrage ( it is an accepted business practice)

An agent has inside information on a public corporation that will probably cause the price of the stock to fall when it becomes generally known. A good customer calls with an order to buy a large amount of that stock. The agent should

discuss the matter with the broker-dealer's compliance officer

an agent may not use the term "no-load" to describe a mutual fund if

it has a 12b-1 charge in excess of .25%

Agent commission charged will be somewhat higher than normal on this security. The compensation to the broker-dealer must be disclosed

Before the order is placed On the trade confirmation

Which of the following would be least likely to meet the cyber security definition of a covered account?

Business accounts ( not included in the term covered account)

SIPC

offers protection for the net account value, up to the SIPC limits, in the event of a broker-dealer's insolvency

An agent may share in the profits and losses of a customer's account if

prior written consent is obtained from the customer and the employing broker-dealer

An investment adviser with custody of customer funds and securities must send the customer a statement of account activity no less frequently than

quarterly

Under USA, a state-registered investment adviser may have custody of a customer's funds and securities if

the Administrator has been informed of the custody

A key factor in a covered account is

the ability of the customer to move funds out of the account on multiple occasions (multiple payments)

If the sale is made by someone not in the securities business

the anti-fraud provisions do not apply.

In order to function as a broker-dealer on the premises of a financial institution

the broker-dealer must clearly distinguish between the operations of the broker-dealer and the retail banking operation

to determine whether an investment adviser is trading excessively in a customer's account, regulators primarily examine whether the

transactions matched the investor's objectives

A potential client is not very forthcoming with financial information, objectives and goals. In order to be able to make suitable recommendations to a client,

you would make reasonable inquiry about the client's financial situation, objectives and needs

An agent submits a list of recommendations to a customer that includes 5 different securities. The customer chooses to buy a round lot of 1 of the 5 securities recommended (a stock in which the agent's broker-dealer makes a market). The firm, in completing the trade, charges a markup that is larger than normal for a stock transaction. Is this allowable under the Uniform Securities Act?

No, under the circumstances given, it is a prohibited practice to charge a higher than normal markup.

Agent A with Firm Y and Agent B with Firm Z conduct a joint seminar. They agree to share the commissions on any resulting business. Under the Uniform Securities Act, which of the following statements regarding sharing commissions is CORRECT?

Sharing of commissions by agents of two unrelated firms is prohibited.

A customer with liquid net worth of $25,000 tells an agent that she has $1,000 to invest. Explaining how diversification can reduce risk, the agent recommends that the customer purchase 8 different over-the-counter stocks, each trading at approximately $1 per share. With regard to the above situation,

high-risk penny stocks are not suitable recommendations for this low-net-worth customer

An agency cross transaction

transaction in which a person acts as an investment adviser in relation to a transaction in which the adviser or related person acts as a broker-dealer for both the advisory client and another person on the other side of the transaction