Series 66
A) January 29, 2018 *The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal-year end.
If a federal covered adviser's fiscal year ends on October 31, 2017, it must file its annual updating amendment to its Form ADV no later than A) January 29, 2018 B) December 31, 2017 C) February 28, 2018 D) March 30, 2018 *The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal-year end.
D) a trustee of an irrevocable trust *Although the term trustee is found in the list of persons engaged in exempt transaction, the USA limits it to trustees in bankruptcy.
Included in the USA's definition of an exempt transaction would be any transaction by any of the following EXCEPT A) a trustee in bankruptcy B) a guardian C) a marshal D) a trustee of an irrevocable trust
C) registration. *Stating that a securities offering has been approved by a regulatory body is misrepresentation of the registration of the security. As an intrastate offering, the registration format would be qualification, but that is not the misrepresentation here.
MaryBeth Williamson is the CEO of MBW Software Associates. MBW is having an offering of common stock to investors on an intrastate basis. Williamson has been telling potential investors that the registration of the stock indicates approval by the state. Under the Uniform Securities Act, she is committing misrepresentation of A) qualification. B) material information. C) registration. D) authorization.
B) manages $13 million in assets for 4 clients *Under the Dodd-Frank Bill, investment advisers with less than $100 million in assets under management must register with the states. If the adviser manages a registered investment company, the adviser must be federal covered. If the person serves as a pension consultant with $200 million or more in AUM, the person has the option of registering with the SEC. A person whose sole advice deals with U.S. government securities is excluded from the federal definition of investment adviser and, therefore, under the NSMIA, is considered a federal covered adviser.
Registration with the state as an investment adviser would be required for a person with an office in this state who A) manages the portfolio of the KPF Balanced Fund, a registered open-end investment company with $22 million in net assets B) manages $13 million in assets for 4 clients C) only gives advice on securities issued by or guaranteed by the government of the United States D) serves as a pension consultant to the XYZ Employees Retirement Plan, covering 1,200 employees with total assets of $278 million
B) revoke your registration *Revocation is the strongest action the Administrator can take without a court action.
The Administrator has a number of punitive powers. If, while registered, you did something improper, the worst thing that the Administrator could do to you is A) deny your registration B) revoke your registration C) suspend your registration D) cancel your registration
C) the SEC *The Investment Advisers Act of 1940 is federal law, and that comes under the jurisdiction of the SEC.
The responsibility for administering the Investment Advisers Act of 1940 lies with A) the Investment Advisers Association (IAA) B) the Administrator C) the SEC D) FINRA
A) 20
Under the Securities Act of 1933, a registration statement for a security generally becomes effective how many days after it is filed? A) 20 B) 31 C) 30 D) 10
A) Notice filing *Under the NSMIA, the Administrator may request copies of the documents filed with the SEC by federal covered securities, but does not review them because of lack of jurisdiction. There is greater review of the information filed in a registration by coordination, but because the primary responsibility falls upon the SEC, the states sometimes just spot check the documents. However, registration by qualification or application for professional licensing becomes effective only after an active review of registration information and upon order of the Administrator.
Under the USA, the least active review of registration documentation is performed by state Administrators before which of the following becomes effective? A) Notice filing B) Application C) Coordination D) Qualification
C) I, II, and III *In the event of a civil judgment, the purchaser is able to claim for a return of the original investment, not current market, plus interest at the state's legal rate. This interest is reduced, however, by any income received on that security. In addition, the broker-dealer or agent is liable for courts costs and attorney's fees.
Uniform Securities Act provides for civil penalties in the event of illegal activities of broker-dealers and their agents. Under the act, the maximum that a purchaser would be entitled to claim would be attorney's fees court costs interest at the state's legal rate the greater of the original consideration paid for the security or the current market value A) I, II, III, and IV B) III and IV C) I, II, and III D) I and II In the event of a civil judgment, the purchaser is able to claim for a return of the original investment, not current market, plus interest at the state's legal rate. This interest is reduced, however, by any income received on that security. In addition, the broker-dealer or agent is liable for courts costs and attorney's fees.
A) I and II *Rescission must occur by the earlier of 2 years after the discovery of the facts or 3 years after the occurrence. The offer of rescission is based on the price originally paid for the security plus interest at a rate determined by the Administrator (less any income received from that security).
When a sale violates provisions of the Uniform Securities Act, which of the following statements regarding civil liabilities is (are) TRUE? I. A buyer may not sue for compensation later than 3 years after the sale. II. A rescission offer must include interest. III. A rescission offer must be at the current market price. A) I and II B) I only C) II only D) I, II, and III
C) a court-appointed guardian for a minor *Among the list of exempt transactions are sales made by fiduciaries, such as court-appointed guardians. Because there is no legal paperwork required, the custodian for a minor under UTMA (or UGMA) is not considered a fiduciary for purposes of this rule.
A transactional exemption would be offered when a sale is made by A) a custodian for a minor appointed under the Uniform Transfer to Minors Act B) a broker-dealer C) a court-appointed guardian for a minor D) an investment adviser
A) take action against the agent for selling unsuitable investments *Selling high-yield bonds, bonds with a speculative rating, would not be suitable for an investor with this profile. Nor would small-cap stocks because their risk level is certainly more than what this investor can accept. Rescission is only an option when a sale is made in violation of the act. No such violation is apparent here. If action was taken and a suitability violation was proven, revocation or suspension could not take place without a hearing.
A customer in a low tax bracket is retired and living on a fixed income. An agent constructs a portfolio consisting of high-yield bonds and small-cap stocks for this customer. If this came to the attention of the Administrator, under the Uniform Securities Act, the Administrator would probably A) take action against the agent for selling unsuitable investments B) not take action against the agent C) force the agent to offer rescission D) suspend the agent's license until the bonds mature
C) investment advisers. The Uniform Securities Act excludes from the definition of broker-dealer, a person who has no place of business in this state if he effects transactions in this state exclusively with or through 1. the issuers of the securities involved in the transactions, 2. other broker-dealers, or 3. banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers. Please note that investment advisers are not included in this list. What is confusing is that the USA offers almost the exact same exclusion for investment advisers and that list includes other investment advisers as well as broker-dealers.
A person who has no place of business in this state would not be considered a broker-dealer if he effects transactions in this state exclusively with all of the following except A) the issuers of the securities involved in the transaction. B) insurance companies. C) investment advisers. D) other broker-dealers.
C) after proper written disclosure, an adviser recommends the transaction to both the seller and the 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.
All of the following activities comply with the requirements for agency cross transactions EXCEPT A) 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 B) 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 C) after proper written disclosure, an adviser recommends the transaction to both the seller and the buyer D) 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
D) the total amount of the security that will be offered in other states *The total amount of the security to be offered in other states need not be specified although identifying those states is required. The amount of the security to be offered in the state of registration is required, as it generally provides the basis on which the registration fee is calculated. A stop order from another state that affects the offering of the security within the state must be included. The registration statement will always describe the intended use of the proceeds.
All of the following must be specified in a security's state registration statement EXCEPT A) the expected use of the projected proceeds of the offering B) the amount of securities to be offered in the state C) a stop order from another state that affects the offering of the security within that state D) the total amount of the security that will be offered in other states
D) at least the information required by Appendix 1 of Form ADV Part 2A, but not if another adviser has already furnished such a statement on the program to the client *The required disclosure statement for wrap fee programs must contain at least the information in Appendix 1 of Form ADV Part 2A, but duplicates need not be provided to clients who have already received the required disclosure on that program from another adviser.
An investment adviser compensated for a client's participation in a wrap fee program must provide the client with a written disclosure statement containing A) only the services and fees of the program B) at least the information in Form ADV Part 2A C) at least the information required by Appendix 1 of Form ADV Part 2A, even if another adviser has already furnished such a statement on the program to the client D) at least the information required by Appendix 1 of Form ADV Part 2A, but not if another adviser has already furnished such a statement on the program to the client
D) The employing broker-dealer must offer the right of rescission within 30 days of discovery. *There is no specified time limit on when the right of rescission must be offered. The 30-day period is the length of time the client has, after receiving the notice, to accept or reject the offer. Agents are prohibited from soliciting sales for unregistered, nonexempt securities and any broker-dealer who employs an agent who does so may be sued. The agent may also be subject to civil penalties. Both agents and their broker-dealers may be sued when a sale results from an improper solicitation. If money is made, the client may keep it.
If an agent solicits a client to purchase nonexempt, unregistered securities, and the solicitation results in a sale, which of the following statements is NOT true? A) The broker-dealer may be sued if the client loses money, but if money is made the client may keep it. B) The agent may be subject to civil penalties. C) The broker-dealer who employs the agent may be sued. D) The employing broker-dealer must offer the right of rescission within 30 days of discovery.
A) be considered an assignment of the advisory contracts and would require consent of the clients. *A change of management control is deemed to be considered an assignment of the advisory contracts held by LAMI and SAMCO. In order for those contracts to be continued by SLAMCO, consent of the clients is required. It is only when a change to a minority interest in an advisory firm organized as a partnership that notification within a reasonable period of time is required. Although SLAMCO would have to register with a new FORM ADV, as a successor company, no registration fees would be due until renewal on December 31.
In an effort to benefit from the economies of scale, Liquid Assets Management, Inc. (LAMI) and Strategic Assets Management Company (SAMCO), both registered with the Administrator as investment advisers, have merged into a new firm with the name of Strategic and Liquid Assets Management Company (SLAMCO). This would A) be considered an assignment of the advisory contracts and would require consent of the clients. B) require notification to the clients within a reasonable period of time. C) be an unethical business practice. D) require the filing of a new Form ADV along with the proper registration fee.
B) purchasing shares directly from advisory clients *There are 2 principals in every securities trade: the buyer and the seller. In this case, buying shares directly from clients who own those shares places the IA in the position of being one of the principals. This is an action that must be disclosed in writing to the client no later than completion of the transaction. In an agency cross transaction, the firm is acting as an agent—that's the reason for the term.
In order to be in compliance with the rules, an investment adviser would have to disclose that the firm was acting in a principal capacity when A) engaging in an agency cross transaction B) purchasing shares directly from advisory clients C) directing securities transactions to an affiliated broker-dealer D) the trade is being executed by an officer or partner of the firm
A) they are not registered as investment companies Private funds lose that distinction if they become registered as investment companies under the Investment Company Act of 1940. It is the adviser to a private fund who has a limitation on the amount of AUM, not the fund. In some cases, specifically when using the 3(c)(7) exemption, there is no limit to the number of investors. In many cases, the advisers to these funds, although exempt from registration, are considered exempt reporting advisers and must file a Form ADV Part 1 answering most of the questions on the Form.
One of the exemptions from registration under state and federal law applies to investment advisers to private funds. One characteristic of all private funds is that A) they are not registered as investment companies B) they have no more than 100 investors C) their advisers are exempt from filing reports on Form ADV D) they have assets of less than $150 million Private funds lose that distinction if they become registered as investment companies under the Investment Company Act of 1940. It is the adviser to a private fund who has a limitation on the amount of AUM, not the fund. In some cases, specifically when using the 3(c)(7) exemption, there is no limit to the number of investors. In many cases, the advisers to these funds, although exempt from registration, are considered exempt reporting advisers and must file a Form ADV Part 1 answering most of the questions on the Form.
B) The Administrator of the state where the alleged fraud occurred may investigate the charge. *Once an investment adviser's AUM reaches $110 million, registration with the SEC is required. That makes PPA a federal covered adviser. Although covered advisers are exempt from the jurisdiction of the state for most things, one area in which they are not is when the antifraud provisions of the USA are breached. In that case, jurisdiction will usually rest with the Administrator of the state where the alleged fraudulent activity took place. In some states, the Administrator will refer the charges to the Administrator of the state where the IA's principal office is located, but that is not mandatory. Because the violation is of the USA, the SEC has no jurisdiction. Without an investigation, how can the charges be proven true (or false)?
Parsimonious Planning Associates (PPA), an investment adviser with over $250 million in assets under management, is accused of violating the antifraud provisions of the Uniform Securities Act. Which of the following statements is true? A) The Administrator of the state where PPA's principal office is located is the only person authorized to investigate the charge. B) The Administrator of the state where the alleged fraud occurred may investigate the charge. C) No investigation may take place until the charges are proven true. D) Because PPA is a federal covered adviser, only the SEC has the jurisdiction to investigate the charge.
B) Toronto Stock Exchange *Federal covered securities include those on exchanges registered with the SEC, such as the NYSE, the NYSE American LLC (formerly known as the American Stock Exchange [AMEX]), and the Nasdaq Stock Market, as well as investment companies registered under the Investment Company Act of 1940.
Securities traded in which of the following marketplaces would be excluded from the definition of federal covered securities? A) New York Stock Exchange B) Toronto Stock Exchange C) Nasdaq Stock Market D) NYSE American LLC (formerly known as the American Stock Exchange [AMEX])
C) II and III *The Administrator may deny, suspend, or revoke a registration for many reasons, but those reasons must be in the interest of the public. The Administrator may determine that an applicant, in his initial application for registration for an investment adviser, is not qualified to act as an adviser and thus limit the registration to that of a broker-dealer. The Administrator can also take into consideration whether the registrant will work under the supervision of a registered investment adviser or broker-dealer when approving an application. Lack of experience is insufficient reason for denial.
The Administrator may I. deny a registration if the registrant does not have sufficient experience to function as an agent II. limit a registrant's functions to that of a broker-dealer if, in the initial application for registration as an investment adviser, the registrant is not qualified to act as an adviser III. take into consideration that the registrant will work under the supervision of a registered investment adviser or broker-dealer in approving a registration IV. deny a registration, if it is prudent in view of a change in the state's political composition A) III and IV B) I and II C) II and III D) I and IV
A) III and IV *Under the USA, the term "guaranteed" refers to a guarantee of interest, principal, or dividends by a party other than the issuer.
The USA would permit an agent to use the term "guaranteed" to refer to a security that is backed by the U.S. government a bond that is backed by the taxing power of a governmental body a bond whose interest and principal payments are guaranteed by someone other than the issuer a stock whose dividend payments are guaranteed by someone other than the issuer A) III and IV B) I and III C) II and IV D) I and II
B) when an adviser only provides advice to registered investment companies *An adviser that only provides investment advice to investment companies registered under the Investment Company Act of 1940 is federal covered and does not have to register in a state, regardless of whether or not it has a place of business there. An adviser that provides advice only to 401(k) plans or other tax qualified employee benefit plans with $1 million in assets (not $250,000) is not required to register in a state in which it does not have a place of business. The assets of the adviser is not what determines becoming a federal covered adviser; it is assets under management and the determining factor is the AUM now, not the range over the previous 10 years.
Under all of the following circumstances, the USA requires investment advisers with no place of business in the state to register EXCEPT A) when an adviser only provides investment advice to 401(k) plans with assets of $250,000 or more B) when an adviser only provides advice to registered investment companies C) when an adviser with numerous clients in the state has not been subject to disciplinary action within any state within the last 10 years D) when an adviser has maintained assets of $100 million or more for 7 out of the last 10 years
D) I, II, III, and IV *Incomplete information on the registration statement, unreasonable underwriting compensation, failure to pay filing fees, and a security subject to an administrative stop order in federal court are all grounds for suspension, denial, or revocation of an issuer's registration statement.
Under the USA, which of the following are grounds for suspension, denial, or revocation of an issuer's registration statement? Information in the registration statement is incomplete Unreasonable compensation to the underwriters Failure to pay filing fees The security is subject to an administrative stop order in a federal court. A) I and II B) I and III C) II and IV D) I, II, III, and IV
C) may appoint an officer who has the power to subpoena records, administer oaths, or require production of documents and books *Public or private investigations may be conducted by the Administrator to determine whether violations of the act are about to take place or have already occurred. These investigations may take place inside or outside the state. In conducting the investigation, the Administrator, or any officer designated by him, may subpoena records or compel testimony from individuals.
Under the Uniform Securities Act, an Administrator investigating violations A) may subpoena records only with court approval B) may subpoena records but may not compel individuals to testify C) may appoint an officer who has the power to subpoena records, administer oaths, or require production of documents and books D) must maintain the confidentiality of all records
A) had no more than 5 clients in that state within the past 12 months *An adviser who had no more than 5 clients in a state within the prior 12-month period or deals exclusively with institutions is not required to register in a state in which he has no place of business.
Under the Uniform Securities Act, an investment adviser would be exempt from registration in a state in which he has no place of business if he A) had no more than 5 clients in that state within the past 12 months B) had no more than 10 clients in that state within the past 12 months C) is registered as a broker-dealer D) had no more than 15 clients in that state within the past 12 months
C) has no place of business in the state and deals with savings and loan associations only *An 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 adviser with a place of business in the state must register with the Administrator whether clients are exclusively broker-dealers or federal covered advisers and regardless of the number of clients.
Under the provisions of the Uniform Securities Act, it is NOT necessary for an investment adviser to register when it A) has a place of business in the state but has conducted business with 3 individual investors during the preceding 12 consecutive months B) is headquartered in a state where it conducts most of its business with broker-dealers only C) has no place of business in the state and deals with savings and loan associations only D) has a place of business in the state but deals exclusively with federal covered advisers
D) does 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.
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 A) promptly notifies the Administrator of the firm's failure to comply B) selects another broker-dealer and opens the account there C) goes ahead with the account opening but refrains from trading until its receipt D) does not place any assets in the account until it is provided
A) I, II, III, and IV *The securities exempt from the registration requirements of the Uniform Securities Act include securities issued by the U.S. or Canadian government or any state, province, or political subdivision; securities issued or guaranteed by any foreign government with which the United States has diplomatic relations; securities issued by banks, savings and loans, insurance companies, and credit unions; securities issued or guaranteed by common carriers and public utilities (e.g., railroads); securities listed on national exchanges (e.g., NYSE, Nasdaq); securities issued by nonprofit, religious, or charitable organizations; commercial paper; investment contracts issued in connection with employee benefit plans; and any securities issued by cooperatives or associations.
Which of the following are exempt securities under the Uniform Securities Act? A security issued by a bank A Canadian government bond A security listed on the NYSE A security issued by a charitable or other nonprofit organization A) I, II, III, and IV B) I and III C) I only D) II and IV
A) II and IV *Unsolicited customer orders, regardless of the type of security involved, are always exempt transactions as are sales by fiduciaries. The private placement exemption is limited to 10 non-institutional offerees, so 14 purchasers would certainly be over the limit. While a security issued by a foreign government with which we have diplomatic relations is an exempt security, a solicited sale by an agent to an individual client is not an exempt transaction.
Which of the following are exempt transactions as defined in the Uniform Securities Act? An agent sells a security issued by a foreign government with which the United States has diplomatic relations to an individual client An agent fills a buy order based upon an unsolicited request from an existing client to purchase a nonexempt security The sale of an unregistered nonexempt security in a private, nonpublicly advertised transaction to 14 noninstitutional investors over a period not exceeding 12 months The sale of unlisted securities by a trustee in bankruptcy A) II and IV B) I and III C) III and IV D) I and II
C) An agent sells shares of an IPO listed on the NYSE to an individual customer Transactions by a fiduciary, such as the executor of an estate, are included in the definition of an exempt transaction, as are transactions with certain institutional clients like investment companies and insurance companies. The OTC Pink Market is a medium for the trading of highly speculative, thinly capitalized issues. Because the order is unsolicited, the transaction is exempt. Sale of a new issue of stock to an individual client would not be an exempt transaction, regardless of where the stock is traded. It is important to distinguish between an exempt transaction and an exempt security.
Which of the following does not meet the USA's definition of an exempt transaction? A) Transactions by an executor of an estate B) An unsolicited sale of an OTC Pink Market stock C) An agent sells shares of an IPO listed on the NYSE to an individual customer D) Transactions with an investment company registered under the Investment Company Act of 1940 Transactions by a fiduciary, such as the executor of an estate, are included in the definition of an exempt transaction, as are transactions with certain institutional clients like investment companies and insurance companies. The OTC Pink Market is a medium for the trading of highly speculative, thinly capitalized issues. Because the order is unsolicited, the transaction is exempt. Sale of a new issue of stock to an individual client would not be an exempt transaction, regardless of where the stock is traded. It is important to distinguish between an exempt transaction and an exempt security.
D) A client may purchase, at his own initiative, securities trading in the secondary market through an agent who otherwise is prohibited from soliciting the order. *If a client requests the purchase of a security that an agent is prohibited from soliciting, the agent can accept the order and mark the order unsolicited. This is the most common of the exempt transactions.
Which of the following statements regarding unsolicited orders is TRUE? A) The state Administrator may not require the client to sign an acknowledgment that the order was unsolicited. B) The state Administrator may not prohibit the solicitation of specific securities in the state. C) Unsolicited orders are nonexempt transactions under the USA. D) A client may purchase, at his own initiative, securities trading in the secondary market through an agent who otherwise is prohibited from soliciting the order.
B) assist registered employees of the firm by doing research on securities they are following *While registration as an agent is pending, the applicant can take no active role in the sale or offering of securities. However, performing research on an internal basis does not involve contact with the public in a sales effort and would be permitted.
While an application for registration as an agent of a broker-dealer is still pending, that person would be permitted to A) limit her acceptance of orders to those from the broker-dealer's existing clients B) assist registered employees of the firm by doing research on securities they are following C) engage in no activity at the office other than studying for the exam D) accept unsolicited orders only
B) I and IV *A key to recognizing static social media content is that it is usually not changed once published and does not provide a method for interaction (commenting) once published.
With regard to a broker-dealer's use of social media, static content would be considered as a planned communication to a target audience that is generally not altered communication that does not provide for interaction with the author once published content used to engage in real-time interactive communications with a target audience a blog that gives readers the opportunity to post comments A) I and II B) I and IV C) II and III D) III and IV
