63 Exam 5

Which of the following choices is NOT a security under the USA?

A Treasury bond futures contract: Futures contracts are not considered securities. Limited partnerships are defined as securities. Under the USA, a viatical is a security. Short-term notes are securities that may be exempt from registration. (89608)

At retirement, a client wants to invest a rollover from a 401(k) account into an IRA. Which of the following investments is the most suitable recommendation?

A balanced fund: A person who has just retired is presumably seeking income. However, it may be advisable to invest at least a portion of her assets in growth-oriented investments since she may be retired for 20 to 30 years. Of the choices given, a balanced fund, which invests in both stocks and bonds, is the best answer. A balanced fund provides the investor with both income and capital appreciation because it invests in both stocks (appreciation) and debt securities (income). On the other hand, a large-cap stock fund will provide capital appreciation, but probably little income and too much risk. Treasury bonds provide safety and income, but little appreciation. An annuity will probably have a surrender period and high expenses. Additionally, since the annuity provides tax-deferred income, buying an annuity in an IRA or other tax-deferred account would be counter-productive. (32373)

An investment adviser's compensation could be based on:

A percentage of the value of the fund averaged over a prescribed period: An investment adviser's compensation could be based on a percentage of the value of the fund averaged over a prescribed period. An investment adviser may not receive compensation on the basis of sharing in capital gains or a percentage of the appreciation in the account, even if the client signed an agreement to do so. (75631)

A trustee is managing a trust that has beneficiaries ranging in age from 2 through 17. Under the Uniform Prudent Investor Act (UPIA), how should the assets of the trust be managed?

All beneficiaries' interests should be weighed prior to making any investments: Under the Uniform Prudent Investor Act (UPIA), a trustee managing an account that has multiple beneficiaries must act impartially when investing and managing the trust's assets. When making investments, a trustee must take into account the different interests of all beneficiaries. (75884)

IA Incorporated is an investment adviser. BD Securities is a brokerage firm with offices down the hall. IA Incorporated and BD Securities have an agreement under which IA directs brokerage transactions to BD and receives a 15% rebate on the commissions that BD charges. This arrangement is:

Acceptable, provided IA discloses the arrangement to its clients in writing: The NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers states that an investment adviser must disclose all conflicts of interests in writing to clients. These conflicts include the scenario described in this question where the investment adviser (or any of its employees) is receiving compensation (a rebate) for the execution of client transactions. (75713)

A high-ranking executive wants to sell his shares of his company's stock. The company is about to announce its quarterly earnings. The executive may sell this stock:

After the company issues a press release stating its earnings: The executive will need to wait until after the company has publicly announced its earnings and the information has been disseminated to investors. Otherwise, he risks being charged with insider trading. Insider trading is defined as selling or buying securities based on nonpublic material information. Earnings are material information, which the executive is likely to be privy to before being announced to the public. Once the company issues the press release, the information is public, and the executive may sell his shares. Note that many companies have internal policies forbidding their executives from trading in their companies' shares for a period beginning a month or so before earnings are announced and ending a few days after the information is released. (75650)

All of the following persons are excluded from the definition of investment adviser, EXCEPT:

An attorney who sets up a financial planning practice: Lawyers, accountants, teachers, and engineers are not considered investment advisers if they provide financial advice that is incidental to the practice of their profession. However, when any of these entities starts to charge a fee for their advice, they lose the exemption and must register as an investment adviser. In this question, the best answer is that the lawyer is considered an investment adviser because she set up a financial planning practice (i.e., the service is no longer incidental). Although the engineer is receiving a fee, it's for providing consulting services, not financial advice. (32365)

Which of the following choices is considered a securities offering?

An investor purchased bonds and receives a warrant as a bonus: According to the Uniform Securities Act, the security that the investor received as a bonus would be considered a stock offering. The Act specifically states that a stock dividend, or shares received due to a corporate action is never considered an offer or offer to sell a security. A tender offer is an offer to buy a security from existing shareholders. (89583)

Decisions settled by arbitration:

Are binding upon all parties to the arbitration: Decisions settled by arbitration are binding upon all parties to the arbitration. The parties must agree to accept the findings of the arbitration panel before submitting to arbitration. (75882)

An order ticket must include all of the following information, EXCEPT:

Authorization of a registered principal: An order ticket must include the client's account number, the time and price at which the order was executed (to the extent feasible), and the time the order was entered. A registered principal is not required to approve all orders before they are executed but is required to review all orders afterward. (75561)

All of the following choices are TRUE regarding an agent, EXCEPT:

If an agent leaves a broker-dealer to go to another broker-dealer, it is the sole responsibility of the agent to notify the Administrator: When an agent leaves one broker-dealer to work for another broker-dealer, the Administrator must be notified by the agent and both broker-dealers. All of the other statements are correct. (75566)

An investment adviser is registered in State A, where all of its offices are currently located. One of its representatives lives in State B and is in the process of opening a satellite office there to see if she can attract more clients in State B. Right now, the adviser's only clients in State B are institutions. What must take place before the IAR may commence doing business from her new office?

Both the investment adviser and the investment adviser representative must register in State B: An adviser with no place of business in a state and whose only clients in that state are institutions does not need to register there. In this case, however, the adviser loses the exemption as soon as it opens an office in State B. Both the adviser and its representative must register in State B before the IAR may start soliciting clients from his new office. (75595)

An agent holding limited discretionary authority over a customer's account may:

Buy or sell securities in the account without consulting the customer: An agent holding limited discretionary authority over a customer's account may buy or sell securities in the account without consulting the customer. Only full discretionary authority allows an agent to withdraw money from a client's account. An agent may not receive a fee for using his discretion in trading a customer's account. Borrowing client assets is never allowed. (75879)

According to the Uniform Securities Act, an employee of a broker-dealer who is not registered as an agent may do which of the following?

Clear transactions: A person need not be registered as an agent to post records (clear transactions) or perform operational tasks. (88896)

Under the Uniform Securities Act, a state Administrator may NOT deny, suspend, or revoke any registration, or bar or censure a person if the applicant was:

Convicted of a misdemeanor eight years ago: An Administrator may deny, suspend, revoke, bar, or censure a person for a securities misdemeanor within the last 10 years, not just any misdemeanor. All of the other reasons given are valid. (75492)

Which of the following activities by an agent of a broker-dealer is considered an unethical business practice?

Executing a transaction for a client and not recording it on the books of the broker-dealer: It is considered an unethical business practice for an agent of a broker-dealer to effect transactions in securities and not record them on the books of the broker-dealer. The other choices represent honest and ethical business practices that agents should adhere to when dealing with their clients. (75748)

A purchaser wishes to take action against a seller to recover money paid for securities issued in violation of blue-sky laws. Under the Uniform Securities Act, the burden to prove that the stock was sold in violation is on the:

Purchaser: The purchaser must prove that the stock was sold in violation of blue-sky laws. (75625)

A brokerage firm that operates on the premises of a bank must do all of the following, EXCEPT:

Disclose that it is a member of both FINRA and the FDIC: A brokerage firm would be a member of FINRA, but not the FDIC. The firm must do all of the things listed in the other choices. (75652)

An agent opening a brokerage account on the premises of a bank should:

Disclose that security products are not insured by FDIC: An agent opening a brokerage account on the premises of a bank should disclose that security products are not insured by FDIC, nor are they guaranteed by the bank and they are subject to possible loss of principal. FDIC only insures bank deposits, not the principal or any loss incurred in owning securities. (89429)

One of your clients has shown great interest in a security you recommended as a suitable investment, but decided to wait awhile and watch it. You notice that the price of this security is rapidly moving up, so you try to call your client but are unable to reach him. You, as an agent, may:

Do nothing: Unless the client has given the agent written discretionary authority, the agent is not permitted to execute a transaction without contacting the client, regardless of the circumstances. (75707)

Which of the following transactions would NOT be considered an unethical business practice by a broker-dealer?

Effecting a transaction in a security while acting as an agent for both buyer and seller: It is considered an unethical business practice for a broker-dealer to effect transactions in a security for manipulative or deceptive purposes. A broker-dealer may effect an agency transaction with two clients whereby the firm represents both the buyer and the seller. (32428)

An agent conducts a public sales seminar regarding investing in U.S. Treasuries Funds. Which of the following statements would be prohibited under NASAA's Statement of Policy on Dishonest and Unethical Business Practices of Broker-Dealers and Agents?

Everyone should own Treasuries: Any blanket statement that everyone should own a specific security violates the prohibition against making unsuitable recommendations to investors. There are very few securities that are suitable for all investors. Also, this is a public seminar and there is no indication that the agent has asked the prospective investors anything about their financial situation or objectives. How does he know that this security is appropriate for anyone who might walk in? (89594)

If the Administrator has summarily suspended an agent's registration, within how many days of the agent's written request must a hearing be scheduled?

Fifteen days: The Administrator may suspend or postpone an agent's registration. Upon entering the order, the Administrator will notify the registrant as well as that person's employer (or potential employer) of the order. The Administrator will also send notification that the person has a right to a hearing within fifteen days of a written request. (75523)

Under the Uniform Securities Act, the statute of limitations for criminal violations of the Act is:

Five years: The statute of limitations for criminal violations under the Act is five years. (75687)

H&H Securities is a broker-dealer registered in State B. Several material pieces of information contained in the documents it filed with the Administrator have recently become inaccurate as the result of a merger. What must H&H do in order to comply with the USA?

H&H must file an amendment promptly with the Administrator of State B: According to the Uniform Securities Act, if the information contained in any document filed with the Administrator becomes materially inaccurate or incomplete, an amendment must be filed by the registrant promptly. (75596)

The Uniform Securities Act requires that an investment adviser deliver a written disclosure document to an advisory client or prospective advisory client. In which TWO of the following situations is the adviser NOT required to send this document to clients? 1. The firm advises only investment companies but does not send its brochure to them 2. The firm sends a newsletter to subscription clients who pay an annual fee of $120 3. The firm has no office in the state 4. The firm advises only institutional investors

I and II: According to the Uniform Securities Act Rule 203, an investment adviser must give a client or prospective client a disclosure document (usually Form ADV Part 2) either 48 hours before or at the time of opening the account. Exceptions to this rule include an adviser whose clients are only investment companies or where the contract is for impersonal services for which the client pays a fee of less than $500. Please note, while an investment company is an institutional investor, not all institutional investors are investment companies. An investment adviser is required to provide the brochure to institutional investors other than investment companies. While there are many exemptions regarding institutional investors, this rule is NOT one of them. (89551)

Agents may use their own judgment when effecting transactions by deciding which of the following choices without obtaining the client's written consent? 1. Price 2. Security 3. Time

I and III only: If an agent does not have written discretionary authority, the agent may only decide the price and/or time of the transaction. (75646)

An agent's application includes which of the following choices? 1. A filing fee 2. Work history 3. A Consent to Service of Process

I, II, and III: An agent's application contains all of the items listed. (75512)

According to the Uniform Securities Act, which of the following persons has authority over a securities transaction? 1. The Administrator in the customer's home state 2. The Administrator in the broker-dealer's home state 3. The Administrator in the state where the transaction occurred

I, II, and III: Any or all of the Administrators listed could have authority over the transaction. (75524)

Under the Uniform Securities Act, a person's registration may be revoked or denied for which of the following reasons? 1. The person was convicted of a non-securities-related misdemeanor three years ago 2. The person was convicted of a drug-related felony seven years ago 3. There is mounting evidence that the individual is involved in a securities-related fraud 4. The person was convicted of a securities-related misdemeanor six years ago

II and IV only: Under the Uniform Securities Act, the Administrator may deny, revoke, cancel, or withdraw the registration of any person if he has been convicted within the past 10 years of any felony or any misdemeanor involving a security. The Administrator may not take any action if a person has been accused or indicted, but has not been convicted. (75506)

Which TWO of the following reasons would allow the Administrator to deny an agent's registration? 1. The applicant has been convicted of a misdemeanor within the past 10 years 2. The applicant neglected to disclose a bankruptcy filing six years prior 3. The applicant has a history of losing arbitration cases with public customers in the previous two years 4. The applicant failed to disclose he was formerly employed at another broker-dealer in the last four years

II and IV: Failure to disclose bankruptcy filings or employment history of the past 10 years would constitute grounds for the Administrator to deny registration to an agent. These are material facts about an agent. Remember, all material facts must be disclosed under the USA. A misdemeanor conviction is not grounds for denial, provided it is not securities-related. Since this choice does not mention securities-related, you must assume it is not. Arbitration case loses may be cause for concern, but they are not grounds for denial. (89643)

Under the Uniform Securities Act, which TWO of the following practices are prohibited? 1. Accepting orders from a client's brother with written, third-party authorization 2. Recommending securities without regard for the client's financial resources 3. Quoting a price that is marked up from the current offering price 4. Crediting a portion of mutual fund's sales load back to a client's account

II and IV: Under the Uniform Securities Act, recommending securities without considering a client's resources or rebating commissions (loads) are considered prohibited practices. It is acceptable to take an order from someone with written, third-party authorization. Quoting a price that includes a markup is an acceptable practice. (89576)

According to the Uniform Securities Act, a security is said to be guaranteed as to: 1. Prevention of investment loss 2. Interest 3. Dividends 4. Principal

II, III, and IV only: Under the Uniform Securities Act, by definition, the term guaranteed refers to a security for which payment of dividends, interest, and principal are guaranteed. For example, the U.S. Treasury guarantees the interest on the bonds it issues. A utility can also guarantee payments of dividends on its securities, though, of course, if the utility goes bankrupt, the guarantee does not mean much. This is a definitional term only. Do not confuse this with guaranteeing a customer profits or something similar. (89510)

Under the Uniform Securities Act, which of the following issuers must file a registration statement with the state Administrator? 1. Corporations with stock listed on the Toronto Stock Exchange 2. Federal Savings and Loan Associations 3. Federal credit unions 4. For-profit corporations

IV only: Choices (II) and (III) are exempt issuers and would not be required to file a registration statement. Nonexempt securities would be subject to this rule. Stock listed on most foreign exchanges must be registered, but there is an exemption for stock listed on the Toronto Stock Exchange, choice (I), and TSX Venture Exchange. Stock issued by for-profit companies would need to be registered. (75606)

According to the Uniform Securities Act, if an advisory firm concentrates its advice on New York Stock Exchange securities, the firm:

Is not engaging in a violative practice: There is nothing wrong with giving advice that is limited to NYSE issues. Only members of the NYSE are subject to its rules. (75599)

Under the Uniform Securities Act, which of the following statements is NOT TRUE regarding a cease-and-desist order?

It must have come from the SEC: An Administrator will authorize a cease-and-desist order against an investment adviser if she feels a violation of the Act is about to occur or if the Act has already been violated. The order does not need to come from the SEC. (75743)

Mark W. is an agent of Broker-Dealer X. Unknown to his firm, Mark spends his evenings trading the stock of a small, unlisted company through Internet bulletin boards. He dominates and controls the trading in this stock. Under the Uniform Securities Act, which of the following statements is TRUE of Mark's activities?

Mark W. may have to register as a broker-dealer: Mark W. appears to be in the business of effecting transactions in securities for others and for his own account, and may need to register as a broker-dealer in those states in which he is doing business. The fact that he is using the Internet does not provide an exemption. (75436)

Under the Uniform Securities Act, which of the following persons automatically becomes registered as an investment adviser representative when the investment adviser's registration becomes effective?

Only those officers, directors, and partners with management responsibilities: Only officers, directors, and partners who have management responsibilities (i.e., not silent partners) become automatically registered as investment adviser representatives when their employing firm registers in a new state as an investment adviser. (32327)

An agent of a broker-dealer is also employed as an investment adviser representative. A client asks the agent for assistance in placing the shares of his start-up company's initial public offering (IPO). Under what conditions may the agent accept the client's offer of commissions for completing the offering?

Only with the written permission and supervision of the broker-dealer: This is an allowable action provided written permission is obtained from the supervising broker-dealer and the transactions are recorded on the broker-dealer's books and records. If the agent fails to notify her firm, it is considered selling away, which is an unethical and prohibited business practice. (67713)

Which of the following investments by a fiduciary MOST likely violates prudent investor standards?

Recommending that 100% of a client's retirement assets be invested in employer stock: Prudent investor standards explicitly recognize the need for diversification. Investing 100% of a portfolio in employer stock would expose a client to both business and asset concentration risk and most likely would not increase her expected rate of return. (75769)

An agent, who is registered in State A, receives a call from a prospective client in State B. The client wants to place an order to buy some stock, but the agent is not registered in State B. The prospective client's mother, however, lives in State A. The agent should:

Refuse the order: In order to sell a security in a state, the broker-dealer and the agent, usually, must be registered in that state. (75591)

An agent unknowingly misrepresents the risk associated with a security. Under the Uniform Securities Act, which of the following statements is correct?

Since the agent unknowingly made misrepresentations regarding a security, the agent is not subject to disciplinary action: Unknowingly making misrepresentations regarding a security is not considered fraudulent as there was no willful intent to mislead. As such the agent is not subject to disciplinary action by the Administrator. If the misrepresentations were intentional the Administrator may deny, suspend or revoke the agent's registration. (89422)

An agent is employed by a broker-dealer that is registered in State A. The agent may NOT take which of the following actions?

Solicit orders for a corporation's preferred stock that is not registered in State A: Agents may not solicit orders for unregistered, non-exempt securities. This is the situation presented by the agent soliciting orders for preferred stock that is not registered in State A. The agent may solicit the municipal bonds because he is registered in State A. The agent may sell stock that is not registered in State A as long as the transaction is unsolicited. (32348)

An investment adviser is in charge of managing the assets of a large charitable trust. The income generated by the portfolio is used to support schools for disadvantaged children. Given the nature of the trust and the Uniform Prudent Investor Act (UPIA), which of the following investments should the adviser NOT recommend for the trust's portfolio?

Tax-exempt municipal securities: One of the main reasons for purchasing municipal securities is that they generate tax-exempt income. The trade-off for investors is that municipal securities usually have lower yields. Charities and nonprofit organizations do not pay income taxes. Their income is already tax-exempt. Therefore, the trust would get lower yields without corresponding tax benefits if it purchased tax-exempt municipal securities. (75847)

Which of the following documents must be filed with the state Administrator for registration of all broker-dealers, investment advisers, agents, and investment adviser representatives?

The Consent to Service of Process: The Consent to Service of Process appoints the state Administrator to serve as the applicant's attorney for the purpose of receiving and processing noncriminal complaints. It is required of all registrants when they file for registration in a state. The other forms listed may or may not be filed by certain persons, but the Consent to Service of Process is the only form that is required of ALL persons. (89640)

Steve Taylor, a client of ABC Brokerage, is told by his agent that the price of a security he owns is higher than it actually is. The client sells the security based on this information and incurs a loss. Under the Uniform Securities Act, which of the following statements is TRUE?

The agent is subject to action taken by the Administrator, as well as civil and criminal action: It is a fraudulent and prohibited practice to give inaccurate quotes to customers. Persons doing so would be subject to action taken by the Administrator, as well as civil and criminal actions. (75714)

An agent of a broker-dealer recommends that a client purchase stock worth $10,000. The client agrees and the trade is executed. Two days later, the client tells the agent that he cannot pay for the stock. Which of the following statements is TRUE?

The agent may have violated antifraud provisions of the Uniform Securities Act by recommending transactions beyond the client's ability to pay: An agent must always have reasonable grounds for recommending a particular security. The recommendation must not only take into account the security, but also the financial condition of the client. An agent may not recommend transactions that are excessive in size in relation to the client's financial resources. (75741)

An agent opens a new account for a client and enters a market order to buy 200 shares of XYZ. At the end of the day, the agent turns in a new account form and a copy of the order ticket for approval by the supervisor. Which of the following statements is TRUE?

The agent needed approval for the new account prior to the execution of the first order: Although prior approval from a supervisor is not required for every order, every new account must be approved by a supervisor prior to the execution of the first order. (75559)

A client purchases 200 shares of XAM stock and pays his broker-dealer the required sum of money. The client requests the securities be shipped directly to his home. Which of the following statements is TRUE regarding this transaction?

The broker-dealer should honor the client's request: A client is allowed to purchase securities and request that they be shipped to his home for safekeeping. It is considered an unethical business practice for a broker-dealer to engage in a pattern of unreasonable and unjustifiable delays in delivering securities purchased by clients. (75645)

A firm that is expecting to take its shares public has recently hired a new employee to assist in selling shares to investors. According to the Uniform Securities Act, which of the following statements is TRUE?

The employee would be required to register in any state in which he solicits investors: In this question, the employee is considered an agent of the issuer. Since the stock is going to be sold publicly, the shares are required to be registered along with the employees of the issuer selling them. There are situations in which employees may be exempt from registration (e.g., engaged in exempt transactions) however, registration is generally required if shares are being sold to the public. (75775)

In which of the following situations does the registration of a broker-dealer result in an Administrator automatically registering an individual of the firm as an agent?

The individual is a director of the broker-dealer and is actively engaged in the business of the firm: The registration of a broker-dealer in a state will automatically constitute the registration of an individual as an agent if this person is actively engaged in the business of the firm and is a partner, director, officer, or occupies a similar status. (89676)

The Administrator of State X has declared the registration statement of a company effective. What part of its registration statement may the issuer change by amendment without being required to file a new registration statement with the state?

The number of shares: Under the Uniform Securities Act, an issuer may amend its registration statement after it becomes effective to change the number of shares in the offering. The issuer is not required to file a new registration statement to effect this change. (32361)

Advertising and sales-related materials would need to be filed with the Administrator in which of the following circumstances?

The securities are listed on a foreign exchange: In general, all advertising and sales-related materials created by broker-dealers and investment advisers must be filed with the Administrator. If the security or the transaction is exempt under the Act or is a federal covered security, the materials do not need to be filed with the Administrator. Any transaction with an institutional investor is an exempt transaction. A security issued by a common carrier is an exempt security. As a reminder, a common carrier is an entity that moves people or products between states, and is regulated by the Interstate Commerce Commission, for example, freight companies, railroads, and airlines. According to the NASAA Model Rules, securities listed on the Toronto Exchange, and the TSX Venture Exchange (Canada) are exempt. Securities listed on other foreign exchanges are not exempt automatically. (89533)

Which of the following statements is NOT TRUE concerning the limited registration status of Canadian broker-dealers?

They are exempt from the antifraud provisions of the Uniform Securities Act: The Uniform Securities Act has a section concerning rules governing the limited registration of Canadian broker-dealers and their agents. It allows broker-dealers and agents properly registered in Canada with no place of business in a state to be exempt from certain provisions of the Uniform Securities Act. No person engaging in a securities or advisory business is exempt from the antifraud provisions of the Act. (75446)

Avery is an agent who has sold Company Q stock short. Hoping to lower the price of Q, he later Tweets a message stating that the Food and Drug Administration is about to revoke its approval of one of Company Q's most important products. He has no basis for this statement. None of his followers act on the information and the price of the stock rises. Avery closes out his short position at a loss. According to the Uniform Securities Act, which of the following statements is TRUE?

This is fraudulent because Avery floated a rumor in an attempt to manipulate the price of the stock: Any attempt to manipulate the price of a security is fraudulent no matter who does it. This applies to all persons, not just to securities professionals. Stating an opinion about a stock's price when the person has a reasonable basis for the opinion is perfectly acceptable. However, deliberately spreading rumors or making false statements constitutes fraud. All social media communications are considered written communication. (89582)

Rick and his brother Dave both work as agents for Broker-Dealer N, which is located in State J. Rick has been called by an old college buddy in the next state (State H) who wants to set up an account and buy some stock. However, Rick is not registered in that state, although Dave and Broker-Dealer N are. Rick proposes that Dave set up the account and split the customers' commissions. Which of the following statements is TRUE?

This is not permissible since Rick is not registered in State H: Since Rick is not registered in State H, he would not be entitled to split commissions. However, if Rick were properly registered, splitting commissions would be possible. (75543)

Nick is an agent for Broker-Dealer S. He works primarily with institutional clients. Today he has taken a large number of orders from his clients for ABCD stock. The stock's price was very volatile during the day, resulting in many different execution prices on the orders. Nick was so busy that he did not have time to write the account names or numbers on the tickets before they were entered for execution. At the end of the day, he must decide which account numbers to write on the various tickets. He chooses to allocate the most advantageous prices to his best customers. Which of the following statements is TRUE?

This procedure is not acceptable since Nick should have completely filled out the ticket before entering each order: Order tickets must be prepared prior to order-entry. (75584)

The maximum civil penalty for insider trading violations is:

Treble damages: This question is one that requires you to memorize some facts, specifically the differences between civil and criminal penalties. A person who engages in insider trading will be subject to both. This question specifically asks you for the civil penalties. The maximum civil penalty for insider trading violations is three times the amount gained or loss avoided (treble damages). The maximum criminal penalties per violation for individuals are a fine of $5,000,000,20 years in prison, or both. Only corporations are subject to a criminal penalty of $25,000,000 per violation. (89509)

An agent for a broker-dealer is registered in State A. The agent has a prospective client who lives in State B and wants to open an account, but neither the agent nor the broker-dealer is registered in State B. The agent suggests that the client use her parents' address to open the account since they reside in State A and she is currently visiting them. May the broker-dealer open the account?

Under no circumstances: The agent will be violating the registration provisions of the Uniform Securities Act if she opens the account. She will also knowingly create a false account record, which will violate both state and federal securities laws. Although the client is currently visiting in State A, she resides in State B. Both the broker-dealer and the agent must be registered in the state where the client resides. (89634)

Under the Uniform Securities Act, the Administrator may waive the requirement that a broker-dealer maintain a bond:

When the registrant's net capital exceeds a certain amount: Administrators are given flexibility to determine whether a bond is needed. The Uniform Securities Act states that an Administrator may waive the requirement that a broker-dealer maintain a bond if the registrant's net capital exceeds a certain amount. Investment advisers must maintain a minimum net worth. (89595)