63
b
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, A) you should refuse to open the account B) you would make reasonable inquiry about the client's financial situation, objectives and needs C) you would probably run a credit check on the client D) you are limited to use only the documents provided by the client
a
According to the NASAA investor advisory regarding fees charged by broker-dealer firms for services and maintenance of investment accounts, A) the schedule should be made available on the broker-dealer's public website without requiring any login or password B) as long as the schedule is available in electronic form, it is not necessary to provide a paper version to retail customers C) the schedule should be made available on the broker-dealer's public website and should be password protected D) fee schedules should only be delivered by hand or postal mail to reduce cyber security threats
a
According to the Uniform Securities Act, a sale is a(n) A) contract to transfer ownership of a security for value B) offer of an equivalent contract C) attempt to transfer ownership of a security D) solicitation of an offer to buy
d
An agent's recommendation for the purchase of a municipal security to a customer who wants fixed income and is in a relatively low tax bracket would in most cases be unsuitable and unethical a securities felony grounds, in extreme cases, for suspension or revocation of the agent's license outside regulatory jurisdiction A) I only B) II and III C) IV only D) I and III
c
Buzzy Rogers, an agent with the brokerage firm of Speedy Executions, Inc. (SEI), has just received notice from his supervisor that a final order has come down from the Administrator of State Z suspending his agent's registration for 6 months. Buzzy's options would include A) terminating with SEI and registering with a different broker-dealer B) accept the suspension; under the USA, there is no provision of an appeal C) filing an appeal in the appropriate state court within 60 days of the date of the order D) filing an appeal with the SEC within 90 days of the date of the order
a
Consent of the client before completion of a trade made between the firm and a client must be made when A) an investment adviser will be acting in the capacity of a principal B) a broker-dealer will be acting in the capacity of a principal C) a broker-dealer will be acting as a contra-party to the trade D) a broker-dealer will be acting in the capacity of an agent
d
Each of the following statements regarding registration of securities by coordination is true EXCEPT A) the registration becomes effective at the state level concurrent with SEC registration if the Administrator has not entered an order to deny it B) the registration statement must contain or be accompanied by consent to service of process C) the Administrator may reduce the required time that the registration statement must be on file prior to becoming effective D) state registration must be effective prior to federal registration
b
If Wallace resigned his position as an agent with Rockland Securities to work for Gibraltar securities, which of the following parties must notify the Administrator of Wallace's move? A) Wallace B) Wallace, Rockland and Gibraltar C) Rockland Securities D) Gibraltar Securities
a The net worth of the individual is irrelevant. Broker-dealers with no offices in the state who engage in transactions in the state with certain institutional investors, such as insurance companies or investment companies, need not register in that state. Transactions between the issuer and a broker-dealer are exempt transactions.
If XYZ is a registered broker-dealer with its lone office located in State T, under which of the following circumstances must it also register in State L: XYZ's only dealings in State L are directly with issuers of securities in State L. XYZ engages in extensive transactions with the largest insurance company in State L. XYZ routinely sells nonexempt securities to extremely high net-worth residents of State L. XYZ purchases exempt securities from extremely high net-worth residents of State L for resale to residents of State T. A) III and IV B) II, III and IV C) I and II D) I only
b There is a requirement for a consent to service of process to be filed along with the registration statement, not after the effective date
Registration by coordination automatically becomes effective with federal registration if all the following conditions are satisfied EXCEPT A) maximum and minimum proposed offering prices and maximum underwriting discounts and commissions have been on file for 2 full business days B) a consent to service of process is filed no later than 5 days after the effective date C) no stop order is in effect D) the registration has been on file with the Administrator for at least 10 days, or some other period designated by the Administrator
b
The Uniform Securities Act requires that an administrative order appeal must be requested within how many days after the order has been entered? A) 45 days B) 60 days C) 15 days D) 30 days
c
A customer buys $20,000 worth of stock with a required 50% initial margin deposit of $10,000 cash. When he places the order, the customer tells the agent he cannot risk more than $4,000 in the stock market. Following a highly unfavorable news release causing a significant price drop, regulators halt trading in the stock. When the stock is permitted to reopen, the stock's price is half the client's purchase price and the client receives a maintenance margin call for $3,000. The customer is outraged that he has a (unrealized) loss of $10,000 and must deposit $3,000 more to maintain the position. In the above situation, the agent has acted A) lawfully, because the agent cannot control regulatory trading halts B) unlawfully, because the customer was not urged to enter a stop loss order on the stock C) unlawfully, because the agent failed to warn the customer of the true risk of margin trading D) lawfully, because the customer agrees to the risk of margin trading upon signing the margin agreement
b An individual is exempt from registering as an agent only when representing the issuer in one of the limited group of five exempt securities, or in any exempt transaction. Oddly enough, a federal credit union is not on that list.
According to the Uniform Securities Act, a person representing an issuer in the sale of which of the following securities would have to be registered as an agent? A) Securities of a federally chartered bank B) Securities issued by a federal credit union C) Municipal bonds D) Securities issued by the Government of Brazil
a
All of the following actions must be completed by the time customers enter their first option trade EXCEPT: A) receipt of a completed options agreement. B) delivery of the options disclosure document (ODD). C) completion of the new account form. D) approval by a designated options supervisor.
a
An agent is discussing an equity index annuity purchase with a client. The agent explains that there are several which she feels are equally suitable for the client, but one of the companies is offering a trip for 2 to Las Vegas for reaching certain sales goals. She continues by stating that this sale will put her over the goal and win her the trip. If the client purchases that annuity, the agent A) should pack her bags for the trip; she earned it B) should only sell what is suitable for the client based on all available information C) should pack her bags and leave the firm before the compliance department learns of her actions D) will probably be disciplined for failure to disclose the potential conflict of interest
c
An agent may share in the profits and losses of a customer's account if A) the customer approves B) sharing is limited to the agent's proportional contribution C) prior written consent is obtained from the customer and the employing broker-dealer D) the employing broker-dealer approves
a
An agent's customer wishes to purchase a small amount of a thinly traded stock that is only available through a regional exchange of which your firm is not a member. Because of the extra work involved, your firm must charge higher than normal commission rates. After the agent discloses the higher rates to your customer, she instructs the agent to proceed with the order, which is then executed. In the above situation, the agent has acted A) lawfully, because the higher than normal commissions were justified and disclosed to the customer in advance of entering the order B) lawfully, because firms may charge according to the services provided C) unlawfully, because commissions may not exceed normal range D) unlawfully, because a broker-dealer may not accept an order for a stock traded on an exchange on which it holds no membership
c
An applicant for registration as an investment adviser discloses on its application to the Administrator that it plans to use palm readers to help determine which investments are most suitable for their clients. Under the Uniform Securities Act, the Administrator A) is empowered to deny this application for just cause B) will request that the applicant furnish past performance records to determine whether this method of investment analysis has merit C) may only justify denial for reasons listed in the Uniform Securities Act D) will probably turn to the SEC for guidance
a
An individual functioning as an investment adviser representative for a federal covered adviser, with no place of business in this state, would be required to register in this state if A) he conducts frequent public seminars in the state B) he only dealt with investment companies located in the state C) he had a time-share in the state D) the investment adviser had a small office in the state
a
An investment adviser has devised a charting system and wishes to advertise this fact in order to obtain additional clients. To do so, the USA would require A) a statement as to the limitations of and difficulties involved in using this system B) if the system is indeed foolproof, verification of that fact C) past performance since inception of the system must be shown D) disclosure of the length of time the charting system has been employed
a
An investor who trades securities for her own account is a(n) A) public customer who does not need to register B) agent for a broker-dealer and must register in her state of residence C) broker-dealer who does not need to be registered at the state level D) broker-dealer and must register with the state
d
When a sale violates provisions of the Uniform Securities Act, all of the following statements regarding civil liabilities are true EXCEPT A) a buyer may not sue for compensation more than 3 years after the sale B) the decision to accept or reject the offer must be made within 30 days C) the rescission offer must include interest D) the rescission offer must be at the current market price
c
If two agents of a broker-dealer agree to work together as a partnership in soliciting business and they agree to split commissions, this practice is A) in violation of the Uniform Securities Act's prohibition against sharing in the profits of an account B) permitted only if their supervisor audits the partnership's financial performance C) permitted D) not permitted under the terms of the US
a
The Administrator may do all of the following with respect to federal covered securities EXCEPT A) require that the issuer meet minimum financial standards B) require the payment of a filing fee to the state C) require submission of a consent to service of process D) initiate enforcement action in the case of fraud committed in the Administrator's state
c
Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, it would be prohibited for an agent A) indicate to a client that a specific transaction will incur higher than normal commissions B) accept an unsolicited order from his client who lives in a neighboring state C) to borrow money or securities from a client who is a member of his immediate family D) sell an unregistered nonexempt security to an employee benefit plan with assets in excess of $10 billion
d
Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following are required for an agent to lawfully share in the profits of a customer's account? 1The customer's written approval 2The broker-dealer's written approval 3The agent may share only in proportion to his or her own financial contribution to the account A) II and III B) I, II, and III C) I and III D) I and II
b Once the registrant is found guilty at a hearing, the Administrator is authorized to take all of the above actions against a person's registration.
Under the Uniform Securities Act, as a result of a hearing, the disciplinary actions that may be taken by the Administrator include which of the following? 1Permanent revocation of a registration 2Bar from employment with any registrant 3Restriction on a registrant's performance of any activity in the advisory or brokerage business A) II and III B) I, II, and III C) I and III D) I and II
a
Under the Uniform Securities Act, the federal covered security exemption from state registration includes 1 securities issued by investment companies registered under the Investment Company Act of 1940 2 securities traded on the Nasdaq Stock Market 3 securities traded on the New York Stock Exchange 4 securities traded on the NYSE American LLC (formerly known as the American Stock Exchange) A) I, II, III, and IV B) II and III C) III and IV D) I and II
d A firm will be responsible for the content of a linked third-party site if the firm "adopts" its content on any of the firm's sites.
Western Securities, Inc. (WSI) is a broker-dealer that also offers portfolio management. One of WSI's portfolio managers notices an article on asset allocation that harmonizes with WSI's investment philosophy. If WSI should post a link to this article on its website, it would probably be considered A) estrangement B) entanglement C) fulfillment D) adoption
c The issue becomes who initiates the trade. The trade ticket should be marked as unsolicited. The security involved in the trade can be one that is nonexempt and unregistered in the state.
When the USA refers to unsolicited orders, which of the following is TRUE? A) Under certain conditions, an Administrator may prohibit a broker-dealer registered in the state from accepting any unsolicited orders. B) If the order ticket is appropriately marked, the Administrator may not challenge a broker-dealer's assertion that the order was unsolicited. C) Unsolicited orders are defined as exempt transactions under the USA. D) A client may not purchase, at his own initiative, securities trading in the secondary market if the agent is otherwise prohibited from soliciting the order.
c
Which of the following can be substituted for a surety bond? A) Real estate B) Cash or commodities C) Cash or marketable securities D) Commodities, cash, or securities
d
Which of the following is defined as fraud under the Uniform Securities Act? A) An agent sold securities that were discovered to be fraudulent 4 years after the sale. B) An agent unknowingly offers for sale a security that enhances the wealth of his clients in a transaction prohibited by the state Administrator. C) An agent unknowingly sells an unregistered nonexempt security in which the client loses a large portion of his net worth. D) An agent engages in transactions that his state legislature has declared fraudulent but no judicial body or case law has found such transaction to be fraudulent.
d
Which of the following statements is TRUE? A) An Administrator may issue a stop order without prior notice and opportunity for a hearing. B) An Administrator can summarily suspend a pending registration. C) An Administrator may not vacate an order without a hearing. D) An Administrator may cancel a registration for the same reasons he revoked or suspended a registration.
b
Which of the following statements regarding a cease and desist order are TRUE? It is an order to stop a specified activity immediately. If the registered agent continues to violate the statute, the registered agent may become the subject of a court issued injunction. It may be issued by the state Administrator. A) I and II B) I, II, and III C) I only D) I and III
d
Which of the following transactions are NOT exempt from registration? A) Unsolicited nonissuer transactions B) Transactions with pension or profit-sharing trusts C) Isolated nonissuer transactions D) Transactions with intrastate manufacturing companies
a
While the Administrator has great power, the USA does place some limitations on the office. Which of the following statements regarding those powers are NOT true? A) Investigations of serious violations must be open to the public. B) In conducting an investigation, an Administrator can compel the testimony of witnesses. C) An Administrator in State A may only enforce subpoenas from State B if the alleged violation would be a violation of the State A's statutes. D) An Administrator may, by order, deny the registration of a securities professional who has been convicted of any felony within the past 10 years.
a
You are an agent for a fully licensed broker-dealer and one of your clients is the chairman of a drug company who tells you that the government will shortly disapprove a patent for a new drug. According to the Uniform Securities Act, you should A) promptly inform your supervisor B) tell your best customers to sell their holdings of the corporation immediately C) contact the SEC because you have inside information D) sell the company's shares short for your discretionary customer accounts
