Test 1A and 1 B
Under the USA, the term Sale means: -a solicitation of an offer to sell -an offer to sell -a contract to dispose of a security for value -an attempt to dispose of a security for value
A contract to dispose of securities for value.
Which of the following is NOT defined as a security under the USA? -Common stock issues by a bank -Treasury bonds issued by the US government -Bonds issued by the Canadian national government -A fixed annuity contract
A fixed annuity contract.
How often must an investment company file reports with the SEC as required by the investment Company Act of 1940? -Monthly -Semiannually -Quarterly -Annually
Annually
An agent's customer says that ABC Corporation is about to be bought out. The customer wishes to place an order to buy ABC common stock based upon this yet unreleased information, which he claims he learned from an office in the company. How should the agent respond in this situation? -Discuss the matter with other, more experienced agents of the firm to evaluate the validity of the information -Accept the customer's order and mark it solicited -Bring the information to the attention of the firm's supervisory principle named to handle such matters in the Supervisory Procedures Manual -Bring the information to the attention of the State Securities Administrator
Bring the information to the attention of the firm's supervisory principal named to handle such matters in the Supervisory Procedures Manual.
The term "churning" means: -switching a client's accounts from an income fund to a growth fund -excessively trading securities in the account of a client primarily for the purpose of generating commissions for the agent -trading unsuitable securities in a client's account -a bond swap in a customer's account for tax benefits
Excessively trading securities in the account of a client primarily for the purpose of generating commissions for the agent.
It would be considered a prohibited activity to an agent to engage in any of the following activities except: -executing a transaction in a nonexempt security in a discretionary account. -failing to record exempt transactions on the broker-dealer's books and records. -trading in the account of a conservative client exclusively in initial public offerings with proper trading authorization from the client. -sharing in the profits of an account as a reward for the agent's recommendations exceeding the S&P 500
Executing a transaction in a nonexempt security in a discretionary account.
Which of the following best describes a 12b-1 fee? -a fee charged by some mutual funds to redeem shares that have been held less than one year. -fee charged by some mutual funds to cover sales and distribution expenses. -a fee charged to all mutual funds to cover the expense of FINRA regulations. -a fee imposed against a mutual fund company for violating SEC rules.
Fee charged by some mutual funds to cover sales and distribution expenses.
Under the Uniform Securities Act, the administrator can require which of the following from Broker-Dealers and investment advisers? -Filing of sales literature. -Maintaining of records. -Filing of financial statements. -Filing of amendments to registrations.
Filing of sales literature. Maintaining of records. Filing of financial statements. Filing of amendments to registrations.
Under the Uniform Securities Act, which of the following activities is an example of Churning? -frequent purchases one day and sales of the same stock the next day to make changes in a client's portfolio in order to align with a customer's investment objectives. -following a practice of purchasing Class A shares of a mutual fund for a client, holding them for no more than one month, and liquidating and use the proceeds to purchase Class A shares of another mutual fund offered by a different underwrit. -bond swap -a client engaging in day trading.
Following a practice of purchasing Class A shares of a mutual fund for a client, holding them for no more than one month, and liquidating and using the proceeds to purchase Class A shares of another mutual fund offered by a different underwrite.
Which of the following financial instruments is NOT considered a security? -Collateralized mortgage obligation (CMO) -Tradable collateralized credit card trust certificate -Ginnie Mae certificate -Home mortgage
Home mortgage
Under the USA, each of the following is specifically excluded from the definition of a Broker-Dealer except: -investment adviser -international bank -agent -issuer
Investment Adviser
Under the Securities Act of 1933, the Securities and Exchange Commission has the authority to: -issue stop orders -approve new issues -review standard registration forms
Issue stop orders. Review standard registration forms.
A major stockholder of XYZ Corporation makes frequent purchases and sales of this stock on the open market to give the impression that it is actively traded. This unethical practice is best described as: -front running -pegging -positioning -matched orders
Matched orders
Agents A and B want to share commissions. Agent A is licensed in XYZ and B in XYC. Which of the following statements is true regarding sharing commission? -commissions cannot be shared -all commissions from agents a and b can be shared -only the commissions from states x and y could be shared -only the commissions from state z and c could be shared
Only the commissions from X and Y could be shared.
If an investor bought stock on one exchange and sold it at a higher price on another exchange, this practice constitutes: -violation under both the Uniform Securities Act and Federal Law -violation of the Uniform Securities Act -offense punishable by three years in the county jail -perfectly acceptable market arbitrage
Perfectly acceptable market arbitrage
Under the Uniform Securities Act, the definition of security includes a wide range of items. One of these is a two party agreement representing a promise to repay a sum on a specific date. That meets certain requirements, is exempt from registration. -debenture -loan contact -futures contract -promissory note
Promissory Note
The Uniform Securities Act permits excessive trading activity that generates high commissions and low returns in a customer's account: -that is discretionary -with written permission of the customer -when it is consistent with the customer's needs -under no circumstances
Under no circumstances
Under the USA, the term Sale means: -a solicitation of an offer to sell -an offer to sell -an attempt to dispose of a security for value -a contract to dispose of a security for value
a contract to dispose of security for value
According to the Uniform Securities Act, a sale is: -solicitation of an offer to buy -offer of an equivalent contract -contract to transfer ownership of a security for value -attempt to transfer ownership of a security
contract to transfer ownership of a security for value.
A registered investment adviser has been investigated by the Administrator for fraudulent misrepresentations purportedly made to several clients. If an IA is found to have been in violation of the Uniform Securities Act, this may result in: -a $10,000 fine per violation -a receiver being appointed over the adviser's assets -a prison term of 5 years per violation -the requirement that the investment adviser make restitution to the victims
A receiver being appointed over the adviser's assets. The requirement that the investment adviser make restitution to the victims.
Which of the following statements regarding civil liabilities under the Uniform Securities Act are True? -In a fraudulent securities transaction, the customer is entitled to recover the amount of the transactions witch interest at a rate set by the Administrator, less any income earned on the security plus attorney's fees. -Cause of action under the USA survive the death of either plaintiff or defendant. -No suit may be initiated more than three years after the transaction or two years after the discover of the violation, whichever occurs first. -Rights and remedies in this act are in lieu of any others that existed under the other laws
In a fraudulent securities transaction, the customer is entitled to recover the amount of the transactions witch interest at a rate set by the Administrator, less any income earned on the security plus attorney's fees. Cause of action under the USA survive the death of either plaintiff or defendant. No suit may be initiated more than three years after the transaction or two years after the discover of the violation, whichever occurs first.
Under the USA, each of the following is specifically excluded from the definition of a Broker-Dealer except: -agent -investment adviser -international bank -issuer
Investment adviser.
Which of the following is NOT a security? -corporate equity -variable annuity -corporate debt -participating whole life insurance that pays annual dividends
Participating whole life insurance that pays annual dividends.
Which of the following is NOT a security? -variable annuity -corporate debt -corporate equity -participating whole life insurance that pays annual dividends
Participating whole life insurance that pays annual dividends.
If an investor bough stock on one exchange and sold it at a higher price on another exchange, this practice constitutes: -violation under both the Uniform Securities Act and Federal Law -violation of the Uniform Securities Act -offense punishable by three years in the county jail -perfectly acceptable market arbitrage
Perfectly acceptable market arbitrage.
Which of the following would most likely be considered a prohibited practice under the Uniform Securities Act? -Recommending tax shelters to low-income retirees -stating that a state Administrator has approved an offering based on the quality of information found in the prospectus -soliciting orders for unregistered, nonexempt securities -employing any device to defraud
Recommending tax shelters to low income retirees. Stating that a state administrator has approved an offering based on the quality of information found on the prospectus. Soliciting orders for unregistered non exempt securities. Employing any device to defraud.
Broker-Dealers and investment advisers must keep all of the following records except: -records of the incoming and outgoing telephone calls -account books -electronic correspondence -memoranda
Records of incoming and outgoing telephone calls
All of the following are exempt securities under the Uniform Securities Act except: -securities issues by a bank holding company -securities issues by a Canadian province -securities issued by the Canadian government -securities issues by a federal savings and loan association
Securities issued by a bank holding company.
Joan owns and operates a jewelry store and she has contracted to purchase 5000 Swiss watches paying the manufacturer in Swiss Francs 3 months from the date of contract. To protect (hedge) her currency risk, she purchases call options on Swiss francs. Which of the following statements best describes her transaction in the Swiss franc calls in light of the USA? -She has engaged in a prohibited transaction because American investors are generally prohibited from trading in foreign currencies under the USA. -She has engaged in a securities transaction because options on foreign currencies are considered to be securities under the USA. -She has not engaged in a securities transaction because options on foreign currencies are not considered to be securities under the USA. -She has not engaged in a securities transaction because she purchased the options to hedge a business risk.
She has engaged in a securities transaction because options on foreign currencies are considered to be securities under the USA.
Under the Securities exchange act of 1934, which of the following are municipal bonds? -Treasury bonds -State bonds -Bonds issued by a city
State Bonds. Bonds issued by a City.
Which of the following is(are) TRUE regarding the Securities Exchange Act of 1934? -The act bars the use of credit to purchase new issues. -The act prohibits the simultaneous purchase and sale of a security to create the appearance of trading. -The act prohibits the spread of false rumors to induce others to trade.
The act bars the use of credit to purchase new issues. The act prohibits the simultaneous purchase and sale of a security to create the appearance of trading. The act prohibits the spread of false rumors to induce others to trade.
A customer has filed a complaint with the Administrator that alleges churning in his account. When investigating the case, mitigating factors would include all of the following except: -objectives of the client -character of the account -account activity -the length of time the business relationship has existed
The length of time the business relationship has existed.
Under the Securities Act of 1933, securities issued by charitable organizations are exempt if: -no commissions are paid on the distribution of shares -the organization is funded by government grants -the organization is a nonprofit company -the net earning from the organization are paid to less than 10 private stockholders
The organization is non profit company.
Civil Liabilities may arise under the Uniform Securities Act if an agent: -acting on behalf of an issuer fails to guarantee the safety of a new issue of debt securities rated BBB or higher. -uses an artifice or scheme that could reasonably be considered misleading in connection with a securities offering. -effects a sale of nonexempt new issue of securities before filing a registration statement in that state. -fails to disclose an immaterial fact.
Uses an artifice or scheme that could reasonably be considered misleading in connection with a securities offering. Effects a sale of a nonexempt new issue of securities before filing and registration statement in that state.
Mountain High Securities is a Broker-Dealer registered in Wyoming and Colorado with their principal office located in Colorado. With reference to the Uniform Securities Act, it would be correct to state that: -the administrator of Colorado would have to approve of the broker-dealer method of recordkeeping -meeting the recordkeeping requirements of Colorado is sufficient even if those of Wyoming are more stringent -the books and records could not be kept in digital form -it is required that any broker-dealer meet the recordkeeping requirements of each state in which they are registered.
meeting the recordkeeping requirements of Colorado is sufficient even if those of Wyoming are more stringent.
If a broker-dealer purchases 100,000 shares of common stock from an individual investor, this is a: -private placement -prohibited transaction -nonissuer transaction -local transaction
nonissuer transaction
While a student at college 9 years ago, Joe was convicted of possession of marijuana (misdemeanor) and received a suspended sentence. Joe now resides in a different state where the same offense is a felony. If Joe disclosed the matter on his application to ABC Securities, Joe's registration may: -not be denied based on this conviction because it was 9 years ago - be denied based on this conviction because it was less than 10 years ago -be denied based on this conviction because the crime is a felony in the state where he seeks registration -not be denied based on this conviction because it was a misdemeanor in the state where he went to college
not be denied based on this conviction because it was a misdemeanor in the state where he went to college.
An agent receives a notice of execution for 500 shares on a customer's order for only 400 shares. Which of the following actions should he take? -promptly report the execution of 500 shares to the customer and waive commissions on the overage -promptly sell the 100 shares overage at the best available price -report the problem immediately to his supervisor -break the trade within 5 minutes, enter a corrected order, and place the transaction on the error log
report the problem immediately to his supervisor.
To be in compliance with the Investment Company Act of 1940, it is permissible for the portfolio manager of an open-end investment company to buy all of the following securities except: -stock on margin -shares of other mutual funds -high yield bonds -call options
stock on margin
