unit 1 quiz
A broker-dealer would most likely hire an agent to A) sell securities to clients. B) engage in marketing for the broker-dealer. C) solicit for advisory clients. D) implement the firm's new recordkeeping program.
A) sell securities to clients. "Agent means any individual other than a broker-dealer who represents a BD or issuer in effecting or attempting to effect purchases or sales of securities." They are not there to do marketing or handle recordkeeping. Soliciting for advisory clients would be done by an investment adviser representative, not an agent.
All of the following are self-regulatory organizations (SROs) except A) the SEC. B) FINRA. C) the CBOE. D) the MSRB.
A) the SEC.
An investment adviser registered with the state who maintains custody of customer funds and securities is generally required to provide the Administrator with a surety bond in the minimum amount of $35,000. The bond provides protection to advisory clients when A) the investment adviser or one of its representatives converts customer funds for personal use. B) the Administrator in one of the states where the investment adviser does business determines that the firm is not properly registered in that state. C) the investment adviser is operating at a loss. D) a customer following recommendations made by the investment adviser loses more than the fees charged for the advice.
A) the investment adviser or one of its representatives converts customer funds for personal use. A surety bond is a form of insurance policy protecting customers of an investment adviser from losses due to the IA or one of its IARs committing a criminal act, such as theft of a customer's money. It has nothing to do with losses in the market or the advisory firm losing money.
What is the official designation of the person or agency that enforces the USA in each state? Administrator Transfer agent Registrar Issuer
A. Although some states use other terms, the only one on the exam for this office is Administrator.
As defined in the Uniform Securities Act, an offer or an offer to sell A) only applies to attempts involving properly registered securities. B) includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value. C) includes every disposition or purchase of a security for value. D) is effective only when made by a properly registered agent.
B) includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value. An offer or an offer to sell is the attempt while the sale is when the attempt is successful. Offers can be made by those who are not agents and can be made in an attempt to sell exempt securities as well as registered ones.
The Administrator could issue all of the following orders except a cease and desist order. a court order. a stop order. a summary order.
B.a court order. The only issuer of court orders is a court. The Administrator may apply to the court for the order, but it is only the court who can issue it
If the Administrator has summarily suspended an investment adviser representative's registration, the registrant may request a hearing by written request and the hearing will be granted within A) 30 days. B) 45 days. C) 15 days. D) 60 days.
C) 15 days. When an Administrator summarily suspends a registration, the registrant has a right to a hearing if the request is made in writing. The hearing must be granted within 15 days of receipt of the request. Registration of professionals takes place at noon of the 30th day, and an appeal for review of an Administrator's order must be filed within 60 days.
The Administrator is vested with many powers. Some of those affect securities professionals, some affect securities, and some affect both. Which of the following relates solely to securities professionals? A) A summary order B) A stop order C) A cease and desist order D) A final order
C) A cease and desist order A cease and desist order applies only to registered persons, not securities. Likewise, a stop order applies only to securities. Summary and final orders can apply to both.
Who receives the proceeds from a nonissuer transaction of a bond? A) The Administrator B) The beneficiary C) The seller D) The issuer
C) The seller A nonissuer transaction is one where the proceeds from the sale go to someone other than the issuer. That would be the person who is selling the bond.
Under the Uniform Securities Act, the term person would include all of the following except an unincorporated association. a child prodigy, gifted in math, in the custody of his parents, for whom his parents opened an account at a major securities firm. a political subdivision. an individual.
a child prodigy, gifted in math, in the custody of his parents, for whom his parents opened an account at a major securities firm. The term person is extremely broad. Excluded from the term would be a minor, a deceased individual, and one who has legally been determined incompetent.
Which of the following could be an agent of a broker-dealer? A) An individual over the age of majority B) Anyone meeting the definition of a person C) A partnership D) A corporation
A) An individual over the age of majority By definition, an agent must be a natural person (an individual). As a person, the individual cannot be a minor. However, not all persons can be agents, only natural persons. That eliminates business structures such as partnerships and corporations.
Under the Uniform Securities Act, the term nonissuer refers to A) an agent. B) an investment adviser. C) a person other than the issuer. D) a corporation.
C) a person other than the issuer.
Under the Uniform Securities Act, the term person would include any natural person who has a valid U.S. passport. a political subdivision. an unincorporated association. an inter vivos trust. A) III and IV B) I and II C) I, II, III, and IV D) II, III, and IV
D) II, III, and IV The term person has an extremely broad definition. It is best to remember the three things that are not persons: minors, individuals who have been judged incompetent, and deceased individuals. Minors can have passports; any natural person would include them and they are not persons under the act.
The Podunk Bank Corporation (PBC) has a controlling interest in the First Bank of Podunk. PBC also controls the Podunk Savings Bank and PBC Securities, a registered broker-dealer. Based on this information, it is logical to conclude that PBC is A) probably listed on a major stock exchange. B) an investment adviser. C) a diversified investment company. D) a bank holding company.
D) a bank holding company. A bank holding company is defined as a company that owns and/or controls one or more banks or one that owns, or has controlling interest in, one or more banks. It is not unusual for the holding company to also control financial related entities such as a broker-dealer and/or an investment adviser
On the Series 63 exam, in most cases, solicitors A) must be registered as investment advisers. B) must be registered as agents. C) are exempt from registration. D) must be registered as investment adviser representatives.
D) must be registered as investment adviser representatives.
Under the Uniform Securities Act, the term issuer refers to *** A) a partnership that proposes to raise capital by selling partnership interests in a private placement. B) an investment adviser who issues research reports on a monthly basis. C) a corporation that makes an all-cash purchase of a competing business. D) a broker-dealer selling the shares of a new corporate issue to the public.
A) a partnership that proposes to raise capital by selling partnership interests in a private placement. Under the Uniform Securities Act, issuer means any person who issues or proposes to issue any security. An example of that is the partnership issuing partnership interests to raise capital. When a broker-dealer sells shares of a new corporate issue to the public, it is the corporation who is the issuer (it is the one who is receiving the money).
Under the Uniform Securities Act, the term guaranteed security refers to a guarantee of all of these except A) capital gains. B) principal. C) dividends. D) interest.
A) capital gains. When a security is guaranteed, that means that someone other than the issuer has guaranteed timely payment of interest and principal on a debt security, or the payment of dividends on an equity security. No one ever guarantees that the investor will have a capital gain.
As defined in the Uniform Securities Act, which of the following is not a state?*** A) Puerto Rico B) New Mexico C) Ontario D) Utah
C) Ontario Ontario is a Canadian province, not a state. The term state includes Puerto Rico, Washington, D.C. and any territory or possession of the United States.
A client of a broker-dealer discovers that the agent handling the account has forged the customer's signature on several checks and taken the money. In the event the agent cannot provide the funds to repay the customer, protection is offered in the form of A) FDIC insurance. B) a court hearing. C) a surety bond. D) a garnishment of the agents pay.
C) a surety bond. From time to time, there are stories about securities professionals who commit crimes such as forgery. Broker-dealers protect their customers by purchasing a surety bond. This is a form of insurance policy that pays the claimant (the customer) for cases like this. FDIC insurance is limited to banking institutions.
In some cases, the Uniform Securities Act requires a broker-dealer to provide a form of insurance protecting customers from crimes like embezzlement or theft. The broker-dealer provides this insurance in the form of A) SIPC coverage. B) FDIC coverage. C) a surety bond. D) an errors and omissions policy.
C) a surety bond. Investment advisers and broker-dealers often must post a surety bond as part of the licensing or registration requirements. The surety bond protects customers against financial losses in the event that the firm or its agents misuse or misapply funds. Examples would be losses due to theft or forgery. SIPC protects customers when a broker-dealer goes into liquidation. FDIC is bank coverage and an errors and omissions policy will not cover fraudulent behavior.
One thing that banks, insurance companies, and investment companies have in common is that, under the Uniform Securities Act, they are all included in the definition of A) accredited investors. B) exempt investors. C) institutions. D) sophisticated investors.
C) institutions.
Under the Uniform Securities Act, an exempt security is one that A) is excluded from registration with the state. B) cannot be sold in the state to retail investors. C) is exempt from registration with the state. D) must be registered before it can be offered for sale in the state.
C) is exempt from registration with the state. When something is exempt, it means it doesn't have to comply. In the case of an exempt security, registration with the state is unnecessary. As an exempt security, it may be sold without registration to retail and institutional investors.
As defined in the Uniform Securities Act, which of the following can only be a natural person? A) A holding company B) A broker-dealer C) An investment adviser D) An investment adviser representative
D) An investment adviser representative Only a natural person can be an investment adviser representative. Although there are sole proprietorship investment advisers and broker-dealers, those business more often are structured as legal persons (e.g., corporations or partnerships).
A membership organization offering a facility to trade stocks for its members is A) FINRA. B) the SEC. C) a stock market. D) a stock exchange.
D) a stock exchange. A stock exchange is one part of the stock market. It is where members trade securities listed on that exchange. The best-known example is the New York Stock Exchange. FINRA is a membership organization, but it has nothing to do with buying and selling securities. The SEC is the federal regulator of the industry.
The federal act that essentially eliminated the dual system of state and federal registration of certain investment advisers is A) the Dual Registration Elimination Act of 2001. B) the Securities and Exchange Act of 1934. C) the Uniform Securities Act of 1956. D) the National Securities Markets Improvement Act of 1996.
D) the National Securities Markets Improvement Act of 1996. It is the NSMIA, passed in 1996, that created the category of federal covered investment adviser—an adviser that is not required to register at the state level. The USA is not federal law and the Securities and Exchange Act established regulation of exchanges. There is no Dual Registration Elimination Act.
Under the Uniform Securities Act, an issuer is any person who issues or proposes to issue a security for sale to the public. According to the USA, which of the following is not an issuer? A) The AAA Manufacturing Company, which proposes to offer shares to the public but has not yet commenced the offering B) The City of Chicago, which is involved in a distribution of school district general obligation bonds C) The United States government, which proposes to offer Treasury bonds D) The Energy Resources Partnership, which issues certificates of interest or participation in its oil, gas, and mining titles
The Energy Resources Partnership, which issues certificates of interest or participation in its oil, gas, and mining titles Under the USA, an issuer is any person who issues or proposes to issue a security. However, with respect to certificates of interest or participation in oil, gas, or mining titles or leases, there is not considered to be any issuer even though those certificates are included in the definition of security. Examples of issuers are a municipality such as the City of Chicago, which issues school district general obligation bonds; the AAA Manufacturing Company, which proposes to offer shares to the public even though it has not completed the offering; and the United States government, when it proposes to offer Treasury bonds.
