Series 65 Midterm

two exemptions from the brochure rule

1. client is an investment company 2. advice being rendered is impersonal and the charge is less than $500

MT Securities is a broker-dealer registered in 42 states. MT Securities makes a market in over 100 different stocks and participates in the underwriting of approximately 22 IPOs per year. Which of the following actions would be prohibited under NASAA's Statement of Policy on Dishonest and Unethical Business Practices of Broker-Dealers and Agents?

Acquiring shares of an IPO as part of the underwriting syndicate and holding a small portion for the firm's investment account, hoping to gain from market appreciation

Which of the following persons is required to register with the SEC as a federal covered adviser?

An adviser that gives advice to registered investment companies only

The Uniform Securities Act considers which of the following to be investment advisers subject to registration in the state?

An adviser with no place of business in the state who advises wealthy customers in the state on a fee basis only An adviser with a place of business in the state whose total fee income in the state amounts to $150

Which of the following statements best explains an agency cross transaction for an advisory client?

An agency cross transaction for an advisory client means a transaction in which a person acts as an investment adviser in relation to a transaction in which the investment adviser, including an investment adviser representative, acts as a an agent for both the advisory client and another person on the other side of the transaction

Under the Investment Advisers Act of 1940, which of the following would NOT meet the criteria of persons associated with an investment adviser?

An individual whose only function is posting trades to client accounts

Which of the following corporate actions would have an effect on the company's working capital?

Calling in a portion of a 20-year bond at par

Which of the following qualifies under the Section 28(e) safe harbor provisions for soft-dollar compensation?

Clearance and settlement services provided by the broker-dealer

The registration requirements of the Securities Act of 1933 would NOT apply to which of the following?

Fixed annuities and other fixed insurance contracts

Which of the following firm's earnings are likely to exhibit the greatest degree of sensitivity to the business cycle?

Furniture producer (durable goods)

Which of the following statements regarding investment risk is NOT correct?

Systematic risk may be reduced or eliminated by effective portfolio diversification.

Which of the following statements is CORRECT regarding an unsolicited trade in an unregistered nonexempt security?

The Administrator may, by rule, require that the customer acknowledge, upon a specified form, that the sale was unsolicited and that a signed copy of each such form be preserved by the broker-dealer for a specified period.

The Uniform Securities Act permits amendments to a registration statement after its effective date so as to change which of the following?

The number of shares to be offered

An investment adviser may borrow from all of the following clients EXCEPT

a mortgage broker who helped the adviser negotiate mortgage terms for its office building

The consumer price index is best described as

a weighted average cost for a basket of goods and services

A consent to service of process allows the Administrator to

be the registrant's attorney to receive service of any lawful process in any noncriminal suit, action, or proceeding against the registrant, or the registrant's successor

Centripetal Investment Advisers (CIA) has its principal office in State X and is also registered in States Y and Z. CIA would be considered to be maintaining custody of client assets in all of the following cases EXCEPT

checks made out to 3rd parties are forwarded within 3 business days

The NASAA Model Rule dealing with business continuity plans is NOT concerned with

ensuring that the investment adviser continues to generate profits during a business interruption

XYZ Securities, Inc., a FINRA member broker-dealer, is registered in all 50 states. XYZ has its principal office in State C and a branch office in State A. If the State U Administrator wished to examine certain financial records of XYZ's, the Administrator would be able to do all of the following EXCEPT

examine those records located in State U - This broker-dealer does not have a place of business in State U so there are no records located there

Federal covered securities, as defined under the Uniform Securities Act,

include shares of an investment company registered with the SEC under the Investment Company Act of 1940

Anyone who represents an issuer in effecting transactions between the underwriter and the issuer

is excluded from the definition of agent under the Uniform Securities Act

The Uniform Securities Act requires that broker-dealers and investment advisers maintain certain records relating to their business operations. If the firm wished to upgrade to a modern system, such as disk storage,

it could do so if the system met certain requirements, including that the information on the disk could not be altered

Under the NASAA Model Custody Rule, an investment adviser would be permitted to take or have custody of any securities or funds of any client if

notification was given to the Administrator that he has or may have custody and custody was not prohibited by that state's rules

When a corporation files for bankruptcy, heading the priority for payment would be holders of

senior debt

A broker-dealer (BD) registered in multiple states must meet the record retention requirements of

the SEC

A corporate executive decides it is in the company's best interest to purchase a yacht. Over the years, the company has built up substantial retained earnings and will use accumulated funds to make the purchase. An analyst interested in how this purchase will affect the company's debt to asset ratio would examine

the balance sheet

When registering a security under the Uniform Securities Act, the registrant must indicate all of the following EXCEPT

the effective date of the offering - effective date is determined by the state Administrator or the SEC

After an investigation, the Administrator wishes to have the registration of an investment adviser revoked. In order to do so, all of the following are true EXCEPT

the investment adviser may elect to withdraw its registration

An agent discovers that he has sold a customer an unregistered, nonexempt security that she thought was exempt. The broker-dealer offers to buy it back on behalf of the agent. Under the Uniform Securities Act,

this is legal and is called rescission

If the yield curve becomes inverted, a likely cause would be that the Fed has

tightened short-term credit

Sarah has just filed an application for registration as an agent with Kapco Securities, a registered broker-dealer in a state where that violation is only considered a misdemeanor. When viewing this agent's application, the Administrator will

treat the crime as any felony

An investment adviser representative may share in the profits and losses of a customer's account

under no conditions

The NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents includes prohibitions against certain practices designed to manipulate market prices of securities. An activity that would fall within the spectrum of the prohibitions would be

wash trades