Series 63 Missed QBank Questions
An investor who resides in New York reads a newspaper ad for advisory services in a newspaper published in New Jersey. More than 80% of the newspaper's circulation is in the state of New York. According to the Uniform Securities Act, an offer has been made in A) neither New Jersey nor New York B) New Jersey and New York C) New Jersey D) New York
A, An offer is not made when a newspaper is circulated but not published in the state, or if it is published in the state but has more than two-thirds of its circulation outside of the state.
State laws provide for exclusions from the definition of investment adviser. Which of the following persons is specifically excluded under the Uniform Securities Act? A) Investment adviser representatives B) A wholly owned subsidiary of a commercial bank that is in the business of offering investment advice C) Economists whose advice is strictly incidental to their professional activity D) Broker-dealers receiving special compensation
A, The USA specifically excludes IARs from its definition of investment adviser. Excluded are banks but not subsidiaries offering investment advice. Once broker-dealers receive special compensation, such as in a wrap fee program, they lose their exclusion. Economists are not included in the list of exclusions.
Under the Uniform Securities Act, which of the following is considered a place of business of a registered investment adviser representative? I. An office from which the representative regularly provides advisory services to clients II. A location published in a professional directory, indicated on business cards, or telephone book listing that identifies it as a place where the representative will be available to meet or communicate with clients III. A hotel or auditorium at which the representative has advertised to the public that he will be available to conduct advisory business at that site IV. A hotel meeting room identified only to current clients as a place the representative will be available to conduct advisory business A) I, II, and III B) I only C) I, II, III, and IV D) I and II
A, The Uniform Securities Act defines a place of business as one where the IAR regularly provides investment advisory services, solicits, meets with, or otherwise communicates with clients, or any other location held out to the public as a location where the representative will do any of these activities. The frequency of use is not a factor. Publicly advertising a hotel location only used once makes it a place of business that year and will probably subject the representative to regulation by the Administrator of the state in which the hotel is located. A hotel room is not included when it is not advertised and only used with existing clients, presumably when the adviser is traveling through their state.
A broker-dealer would NOT be acting unethically if the firm was A) engaging in transactions that do not result in the transfer of ownership between buyers and sellers B) acting as agent for both buyer and seller on a transaction C) trading securities between house accounts and customer accounts to create trading volume or the appearance of interest in a security D) engaging in trades between other broker-dealers to increase or decrease the price of securities
B, A broker-dealer may act as agent for both buyer and seller in a transaction. All the other activities represent market manipulation and are, therefore, unethical practices.
When a broker-dealer acts in the capacity of a principal in a trade, the firm has acted A) for the benefit of the client B) as a contra-party to the trade C) as an agent D) in an unethical manner
B, In every trade, there are 2 principals—the buyer and the seller. If the broker-dealer is one of the principals (either buyer or seller), the firm is the contra-party to the other side of the trade.
Under the Uniform Securities Act, which of the following is NOT an exempt transaction? A) A sale of securities by the executor of an estate B) The sale of U.S. government securities to an individual with a net worth in excess of $2 million by a registered broker-dealer C) The sale of a non-Nasdaq over the counter stock to a closed-end investment company D) A sale of stock through a rights offering to existing shareholders of the issuing corporation if no commission is paid
B, In the case of a U.S. government security, the security is exempt, but the transaction is not. The USA does not care about the wealth of the individual; unless specifying the order was unsolicited, or the individual was acting in the capacity of an executor (or similar circumstance), sales to individuals are never exempt transactions. All of the other choices are exempt transactions since they are either to an institutional investor, existing owners for no consideration, or by a fiduciary.
An investment adviser representative may share in the profits and losses of a customer's account A) as long as both the customer and the representative's employer agree in writing B) if the investment adviser representative deducts the advisory fee charged the customer from any profits earned C) under no circumstances D) provided a written contract is executed between the investment adviser and the client
C, Unlike agents, investment adviser representatives are not allowed to share in the capital appreciation or depreciation of their customers' accounts.
Under the terms of the Uniform Securities Act, which of the following is an investment adviser for purposes of state regulatory jurisdiction? A) An investment subsidiary of a bank holding company located in the state that manages $70 million in assets B) An accountant located in the state who offers general securities advice as an incidental part of his business C) A commercial bank with a place of business in the state that advises clients on investment matters D) A federal covered adviser with clients in the state
A, A bank holding company's investment subsidiary that manages less than $100 million in assets is an investment adviser subject to the Uniform Securities Act (USA). Under the language of the USA, a commercial bank is excluded from the definition of investment adviser whereas a bank holding company subsidiary is not. While a federal covered adviser is an investment adviser in practice (that is, it performs the functions of an investment adviser), it is excluded from the definition of an investment adviser under the USA to avoid duplicate regulation. An accountant located in the state that offers general securities advice as an incidental part of his business is not an investment adviser.
According to the Uniform Securities Act, a consent to service of process must accompany which of the following? I. Agent's registration application II. Civil complaint against a broker-dealer III. Broker-dealer's initial registration application IV. Investment adviser's renewal A) I and III B) II and IV C) II and III D) I and IV
A, A broker-dealer, an agent, an investment adviser representative, or a state-registered investment adviser must file a consent to service of process with the Administrator upon filing a registration application. Because this is a permanent document, a consent never accompanies a renewal. The consent to service of process gives the Administrator the right to process legal complaints against the applicant. In some states, a federal covered adviser may also be required to furnish a consent to service of process as part of the notice filing procedure.
One of the surest ways to explain to a client that an investment opportunity presented via social media is likely to be a scam is A) the promise of high returns with low risk B) that an escrow account has been established at a recognized bank C) if an SEC-registered prospectus is available D) the ready availability of audited financial reports
A, A high return with low risk is almost always an indication that something is not right about an investment. Even though SEC registration is no guarantee of success, at least we know the issuer has gone through the rigor of filing the registration statement and making full disclosure. An escrow account offers investors protection and audited financial statements allow for a true look at the issuer's financial condition.
An agent receives inside information concerning an impending merger. Under the Uniform Securities Act, the agent may divulge the information to A) anyone after public notice B) no one other than the Administrator until there is a public announcement C) anyone 3 days before a public announcement D) his best customers 3 days before a public announcement
A, After the inside information has become public, it may be disseminated to anyone. If an agent acquires MNPI, she should report to her supervisor. Reporting inside information to the Administrator is neither required nor appropriate.
Under the Uniform Securities Act, an individual representing an issuer in the sale of its securities to the general public is defined as an agent if the issuer is A) an insurance company authorized to do business in the state B) a foreign government with which the United States currently maintains diplomatic relations C) any political subdivision of any Canadian province D) a trust company organized and supervised under the laws of any state
A, Agents represent broker-dealers or issuers. However, an individual representing an issuer in the sale of certain exempt securities or in an exempt transaction is not an agent. Even when authorized to do business in the state, an insurance company is not one of the exempt issuers qualifying for the exemption from agent's registration for those who selling the company's securities while representing the company. Banks and trust companies, yes, but not insurance companies. Please see the list in your LEM.
Which of the following conditions would most likely meet compliance standards of state regulators? A) Training both supervisory personnel and agents on the difference between interactive and static content B) At a minimum, a firm that permits use of social media sites, holding biennial training as part of its continuing education obligations. C) Requiring only those in a supervisory role need to recognize the difference between business and non-business communications. D) Maintaining an under-the-radar system of monitoring social media use by its agents is permissible when determining compliance with NASAA's rules.
A, Before allowing associated persons to use social media for business purposes, a firm's policies and procedures must provide for personnel training and education relating to the parameters of permitted use. Both supervisory personnel and agents need to understand the difference between interactive and static content, between business and non-business communications. A firm should consider requiring training in the use of social media before permitting use. At a minimum, a firm that permits use of social media sites must hold annual training as part of its continuing education obligations.
Which of the following are discretionary orders? I. A customer sends a check for $25,000 to an agent and instructs the agent to purchase bank and insurance company stocks when the price appears favorable. II. A customer instructs an agent to buy 1,000 shares of ABC Corporation at a time or price determined by the agent. III. A customer instructs an agent to purchase as many shares of XYZ as the agent considers appropriate. IV. A customer instructs an agent to sell 300 shares of LMN, Inc., when the agent deems the time or price appropriate. A) I and III B) II and IV C) II and III D) I and IV
A, Discretion authorizes a representative to choose the security, the amount of shares, or whether to buy or sell. Time or price alone are not discretionary decisions.
An Administrator has specific authority under the USA to do all of the following EXCEPT A) issue emergency injunctions to prevent a violation of the act B) require that the proceeds from an offering be held in escrow until issuer receives a certain percentage of the sale of the securities offered C) enforce subpoenas in the state at request of an Administrator of another state for alleged violations that occurred in another state D) suspend the registration of a security if the suspension is in the public interest and the offering has excessive commissions
A, Injunctions are judicial orders that can only be issued by a court of law, not by an administrative agency such as a state securities Administrator.The Administrator may impound the proceeds of an offering in an escrow account until the issuer receives a specified amount. The Administrator may also suspend a security's registration if excessive commissions are charged as part of the offering. State Administrators have the authority to cooperate with each other in enforcing the provisions of USA by ensuring that the subpoenas from other states are enforced.
Sharon Smith is an agent for Highwater Securities, a broker-dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act, A) Sharon must be registered in State X in order to accept the order B) because Highwater Securities is registered in all 50 states, Sharon must also be registered in all of them C) because Sharon has no place of business in State X and the client is an institution, Sharon may accept the order without registering in State X D) because Sharon has no place of business in State X and the order is unsolicited, Sharon may accept the order without registering in State X
A, Regardless of whether the security is exempt or the transaction is exempt, one must be licensed in any state which is the domicile of a client placing an order. One does not have to be registered as an agent in every state the BD is, only in those where she expects clients to reside.
All of the following are investment adviser representatives EXCEPT I. a receptionist/switchboard operator employed by ABD Advisers, Inc. II. an account representative employed by ABD Advisers, Inc. III. a vice president of ABD Advisers, Inc., who serves on the firm's advisory committee IV. ABD Advisers, Inc. V. an employee who solicits new customers for ABD Advisers, Inc. A) I and IV B) II and V C) II, III, IV, and V D) II, IV, and V
A, The Uniform Securities Act defines an investment adviser representative as anyone who is a partner, officer, director, or other employee or person associated with an investment adviser other than clerical or ministerial personnel who (1) make recommendations or provide advice regarding securities, (2) manage accounts or portfolios of clients, (3) determine which recommendations or advice should be given, (4) solicits, offers, or negotiates for the sale of, or sells, advisory services, or (5) supervises any such persons. An individual or a firm may be registered as an investment adviser, but only an individual can be an investment adviser representative.
Under the Uniform Securities Act, all of the following are excluded from the definition of an investment adviser EXCEPT A) a federal covered adviser B) a person in the business of providing advice on municipal bonds for compensation C) banks D) broker-dealers and their agents
B, Although municipal bonds are exempt securities, that only refers to their exemption from registration with the state or SEC. Any person who is in the business of giving advice on securities would be defined as an investment adviser and, therefore, would require registration.
What document must accompany an initial registration application for those persons required to register under the Uniform Securities Act? A) A birth certificate confirming the registrant is over 18 years of age B) Consent to service of process C) Proof of citizenship D) State photo identification
B, The USA requires that a consent to service of process accompany an application for registration. Proof of citizenship is unlikely to be requested by a state Administrator because foreign nationals can register. Proof of age is not a requirement.
Which of the following are NOT agents as defined in the USA? I. A broker-dealer acting on behalf of a properly registered issuer II. An individual representing the U.S. government in the sale of its securities III. An individual who, acting on behalf of a broker-dealer, sells exempt securities or engages in an exempt transaction IV. An individual who represents an issuer selling a nonexempt security in a nonexempt transaction A) I and III B) III and IV C) I and II D) II and III
C, A broker-dealer by definition is not an agent. An individual who, while acting on behalf of the issuer, sells certain exempt securities, such as those issued by the U.S. government, is not an agent. The exclusion from the definition of an agent only applies to those individuals who are selling on behalf of the issuer (never a broker-dealer) and only when the transaction is exempt or the issuer is one of a specified list of exempt issuers.
Under the Uniform Securities Act, which of the following is included in the definition of an investment adviser? A) Publisher that receives a yearly subscription fee for a newsletter that provides nonspecific investment advice B) Bank that offers investment counseling to its high net worth customers C) A broker-dealer who receives a flat fee for analyzing a customer's investment objectives and recommending a portfolio of securities D) Antiques dealer who receives a fee for advising customers as to the value of antiques and rare coins
C, A broker-dealer who receives fees for investment recommendations is an investment adviser because that fee is considered special compensation relating to securities advice. The antiques dealer provides nonsecurities related advice. Publishers may provide generic investment advice without registering as investment advisers. Commercial bankers are excluded from the definition of an investment adviser.
When it comes to safeguarding confidential information pertaining to the account(s) of an individual customer or family, the rules deal primarily with what is called a covered account. A key factor in determining if an account meets the definition is A) if the customer owns the underlying security on which the call option is sold B) that the account is in the name of an institutional customer C) the ability of the customer to move funds out of the account on multiple occasions D) the ability of the customer to make a one-time wire to a foreign bank account owned by a family member
C, A covered account is an account, primarily for personal, family, or household purposes, that involves or is designed to permit multiple payments or transactions. Where the money goes is less of a factor than the frequency of transactions. The only time when a single transaction account might be covered is if there is reason to believe that the identity of the customer is at risk—not likely when wiring to a family member. Institutions are not included in the definition and owning the stock underlying the sale of a call option means the option is covered—totally different from the topic here.
Included in the USA's definition of exempt transaction would be any transaction by any of the following EXCEPT one by A) a marshal B) a guardian C) a trustee of an irrevocable trust D) a trustee in bankruptcy
C, Although the term trustee is found in the list of persons engaged in exempt transaction, the USA limits it to trustees in bankruptcy
An employee of an issuer who sells the issuer's common stock exclusively to trust companies and savings institutions is A) an agent of the issuer and must be registered as such B) an officer of the issuer and is automatically registered as an agent C) not required to register as an agent of the issuer D) a broker-dealer and must be registered as such
C, Among the exceptions from the definition of an agent is when representing issuers in an exempt transaction (in this case, transactions with trust companies and savings institutions). Therefore, no registration is required.
An investment adviser is preparing an advertisement. Which of the following would be acceptable? I. An endorsement on radio or TV from a celebrity who is a client of the firm II. Identifying its best investment recommendations for the past 6 months III. Offering to provide its investment recommendations for the past 12 months IV. Promoting its system of charts and formulas while mentioning its limitations and difficulties A) I and IV B) I and II C) III and IV D) II and III
C, Any mention of investment recommendations in any investment adviser's advertisement must always include all recommendations (not just good ones) made over the course of the last 12 months. If the investment adviser uses charts or formulas, any mention of them must always include a statement to the effect that they have limitations and may be difficult to use. No outside endorsements are ever allowable on the exam.
An agent is licensed to sell variable annuities. An insurance company, whose products are available through the agent's broker-dealer, is offering an all-expense paid trip to Panama City Beach to any individual who places at least $1 million of clients' money into one of the company's deferred variable annuities. In order to recommend this company's products to clients, A) disclosure of the risks inherent in variable annuities shall be made B) the agent shall offer the client a rebate of a portion of the commission earned C) the agent shall disclose the potential conflict of interest D) consent of the insurance company is required
C, Anytime there is an incentive involved in a security offering, the potential conflict of interest shall be disclosed to the potential investor. Rebates of commissions on variable insurance contracts are not permitted under both securities and insurance regulations. What about the risk disclosure? Yes, that must be made, but, does that really address the question? Sometimes there is a 2nd choice that could also be correct (as in this case). However, you must always answer within the context of the question—what do you do when there is an incentive offered?
One of the portions of the USA Patriot Act that affects the opening of an account for a new customer is A) the requirement to obtain suitability information B) the "know your customer rule" C) the customer identification program D) the Transportation Security Administration (TSA)
C, The customer identification program (CIP) is mandated by the Patriot Act and requires that broker-dealers (and other financial institutions) obtain certain specified information about new customers. The "know your customer" rule was written many decades before the Patriot Act. The Patriot Act, through the CIP, is concerned with validating identity, not suitability.
Under the Uniform Securities Act, which of the following is NOT excluded from the definition of broker-dealer? A) Issuers of securities B) A broker-dealer domiciled in another state, having no offices in this state, dealing exclusively with broker-dealers in this state C) A person with an office in this state whose securities business is limited to effecting transactions with institutional investors D) Agents
C, The definition of a broker-dealer is a person in the business of effecting transactions in his account or for the account of others. If the person has an office in this state, regardless of who the clients are, registration with this state is necessary. Under the USA, one is not defined as a broker-dealer if there is no office in the state and transactions are limited in this state to other broker-dealers.
Which of the following are exempt transactions under the Uniform Securities Act? I. XYZ Company signs an agreement to sell 1 million shares of its stock to ABC broker-dealer, who will then act as an underwriter in marketing the shares to the public. II. A non-issuer sale of securities listed on the Nasdaq Stock Market to several individual clients of the agent. III. Mr. Jones sells 100 shares of an unregistered security he owns to his next--door neighbor for $1,000. IV. A customer calls a registered agent and asks to buy 1,000 shares of SPHG, a company the agent is not familiar with, and the agent fills the order. A) I and II B) II and IV C) I, III, and IV D) I and III
C, Transactions between an issuer and an underwriter, isolated nonissuer transactions (Mr. Jones), and unsolicited nonissuer transactions (SPGH) are exempt under the Uniform Securities Act. Transactions in federal covered securities (listed on national exchanges or the Nasdaq Stock Market) are transactions in an exempt security, but, because the sales are being made to individual clients, the transactions might not be exempt.
An issuer employs its officers and directors to sell newly issued shares of the company to the public. To comply with the USA, the officers and directors would have to be registered as agents of A) neither a broker-dealer nor the issuer because the transactions are exempt B) the broker-dealer and the issuer C) the issuer D) the broker-dealer
C, Unless something in the question indicates that the securities being issued are exempt, employees, including officers and directors, who sell shares of their companies to the public fall under the definition of agent under the USA.
Examples of identity theft would include I. taking over an individual's credit card account II. applying for new credit cards in the compromised individual's name III. lending money in the name of the compromised individual IV. purchasing lottery tickets in the name of another individual A) I and IV B) III and IV C) I and II D) II and III
C, When an individual's identity is stolen, it is common to find that the thief takes over the current credit card accounts and also applies for new ones. Identity thieves borrow money in the name of the compromised individual, they don't lend it and, although buying a lottery ticket in the name of someone else could help evade taxation on a big prize, the publicity attached to the winning ticket would certainly not be something the thief would relish.
Each of the following statements about postregistration provisions is true EXCEPT A) a correcting amendment must be filed with the Administrator if any information filed becomes inaccurate or incomplete B) both broker-dealers and investment advisers must comply with recordkeeping rules C) a registered investment adviser may be required to file advertisements D) the securities Administrator does not have the authority to conduct an on-site examination of an investment adviser registered in his state if the adviser does not have an office in that state
D, Administrators have the authority to conduct an on-site examination of a registered investment adviser even if there is no place of business maintained in the Administrator's state. Under the Act, Administrators may require the filing of advertising used by broker-dealers and investment advisers, who must also comply with certain recordkeeping requirements and file correcting amendments.
Under NASAA's Statement of Policy on Unethical or Dishonest Business Practices of Broker-Dealers and Agents, which of the following activities (if performed by an agent) are considered fraudulent, dishonest, or unethical? I. Executing a transaction in a margin account without securing an executed written margin agreement from the customer, promptly after the initial transaction in the account II. Executing a transaction either with or for a customer at a price not reasonably related to the current market price III. Guaranteeing a customer against loss on securities purchased IV. Personally providing safekeeping and custodial services for clients' cash and securities A) I and IV B) II and IV C) I, II, and III D) I, II, III, and IV
D, An agent may not take personal possession of clients' cash and securities. The broker-dealer, however, can provide safekeeping and custodial services. Agents must execute trades at prices related to current market prices and may not guarantee the performance of a security. An agent may execute a trade in a margin account providing the agent receives a written margin agreement promptly after the initial trade.
Which of the following securities is(are) exempt from state registration and filing of advertising materials? I. New York City municipal revenue bonds II. Montreal bonds guaranteed by the province of Quebec III. Preferred stock of the National Bank, N.A., a member of the Federal Reserve System IV. Preferred stock of Local County Bank, organized and regulated solely by the banking laws of the state of Illinois A) I only B) I and III C) IV only D) I, II, III, and IV
D, Any security issued by a bank that is federally regulated is exempt under the USA. State banks are exempt if regulated by that state. Municipal bonds are exempt if issued by a municipality in the United States or Canada.
Which of the following is commingling? A) Placing customer accounts in a common trust B) Borrowing money from a client and then putting those funds in the agent's personal account C) Placing mutual funds, cash, and securities in the same customer account D) Placing the broker-dealer's funds in the same account with nondiscretionary customers
D, Commingling is mixing clients' funds or securities with those of the broker-dealer, whether discretionary or not. Placing funds in a common trust is not commingling and is not prohibited. Accounts holding several types of securities is not considered commingling. Borrowing money from a client is prohibited, but is not commingling.
An agent registered with XYZ Securities, Inc., conducts seminars to increase his client base. As a result of the contacts made at these seminars, he frequently encounters individuals with established relationships with other professionals. This agent would be permitted to share commissions earned on any business generated by these individuals with I. the client's lawyer who prepared their estate plan II. a properly licensed agent with ABC Securities, Inc III. a properly licensed agent with XYZ Capital Markets, Inc., an affiliate of XYZ Securities, Inc IV. a properly licensed agent with XYZ Securities, Inc A) I and II B) I and IV C) II and III D) III and IV
D, Commission sharing is permitted only between agents of the same or affiliated broker-dealers.
Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, it is permissible for an agent to do all of the following EXCEPT A) solicit transactions in unregistered exempt securities B) charge larger commissions because of a larger array of services the agent's firm offers C) split commissions with another agent at an affiliated broker-dealer D) open a joint account with a customer with written consent of the employing broker-dealer
D, In order for an agent to open a joint account with a client, written consent of both the client and the employing broker-dealer is required. Exempt securities are unregistered because they are exempt from registration, so solicitations for trades are no problem. Splitting commissions with agents of the same broker-dealer or different broker-dealers under common control is also permitted. However, 2 registered agents representing nonaffiliated broker-dealers may never share commissions. The Policy does permit commission charges to reflect the quality and quantity of services provided to the client.
An agent is currently registered with Broker-dealer X and would like to register with Broker-dealer Z. Under the Uniform Securities Act, A) the agent would have to sell different types of securities for each broker-dealer B) permission would have to be granted by FINRA C) one can never be registered with more than one broker-dealer at the same time D) registration would be required with each broker-dealer
D, Multiple registrations are permitted if the broker-dealers are affiliated by direct or indirect common control, OR, an exception is made by the Administrator. In either case, each registration requires the filing of a separate Form U-4.
A broker-dealer is running a sales contest offering a bonus to any agent who sells a specified amount of a money market mutual fund. An agent is only a few sales short of reaching the target. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, it would be prohibited for the agent to A) contact existing clients and suggest that they refer family members who might open accounts B) ask the members of his golf foursome to purchase fund shares to help him reach the goal C) participate in this contest D) imply that the money market fund is similar to a savings account
D, NASAA has a special Statement of Policy dealing with unethical business practices related to investment companies. One of the provisions considers it unethical is comparing money market mutual funds to savings accounts. The nature of money market funds is such that there generally would not be any suitability problems recommending friends or clients ask others to open an account with you.
Which of the following statements regarding broker-dealer registration under the Uniform Securities Act are TRUE? I. In the absence of any action by the Administrator, the effective date of a registration is noon of the 45th day. II. The Administrator may initiate a disciplinary action within two years of a broker-dealer's withdrawal of registration. III. The Administrator may request that the broker-dealer furnish a statement of assets and liabilities. IV. If, before the effective date of the registration, the Administrator requires amendments to the application, the registration will be considered to have first been filed upon filing of those amendments. A) I and IV B) II and III C) I and II D) III and IV
D, Normally, registration of persons becomes effective at noon of the 30th day following filing. If the Administrator requires the filing of amendments, the clock starts over again with the filing of those amendments. Broker-dealers have financial requirements, and the Administrator has a maximum of one year after termination to initiate any actions.
Exemption from the registration requirements of the USA would be granted to all of the following EXCEPT a A) bond issued by a Canadian province B) security issued by a credit union authorized to do business in the state C) bond issued by the state of New Jersey D) corporate debenture
D, Securities issued by any province or state, as well as a credit union authorized to do business in the state are exempt securities. Without further information about the debenture, we don't know whether or not it is federal covered and, therefore exempt. This is an excellent example of choosing the correct answer because the other 3 choices can't be the right one.
Different types of accounts have different times for receipt of customer information. Which of the following does NOT correctly state the required time for the specified account? A) The options account agreement must be received within 15 days after the customer's account has been approved. B) Written discretionary account authorization must be received by an investment adviser within 10 days after the initial discretionary trade. C) Written discretionary account authorization must be received by a broker-dealer before exercising discretion. D) Margin account agreements must be received before the first margin trade in the account.
D, The NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents requires that margin account agreements must be received promptly after the initial margin trade in the account. All of the other choices are correct regarding the relevant time of receipt.
An Administrator does not have jurisdiction over an offer to sell that is made in a I. TV broadcast originating outside the state II. newspaper published outside the state III. newspaper published inside the state where more than two-thirds of its circulation is outside the state A) II and III B) II only C) I only D) I, II, and III
D, Under the broadcast and publishing exceptions, the Administrator does not have jurisdiction if the offer is made in a TV or radio broadcast originating outside the state or in a newspaper published outside the state. Furthermore, if a newspaper is published inside a state but more than two-thirds of its circulation is outside the state, the Administrator does not have jurisdiction.
Which of the following investment adviser compensation arrangements is (are) permitted under the Uniform Securities Act? I. The value of a client's account at the start of the year is subtracted from the value at the end of the year. The investment adviser's compensation is 5% of the difference. II. The investment adviser charges an annual fee of $2,000, but the agreement calls for a waiver of the fee if the client's portfolio value has not increased by at least $20,000. III. The investment adviser charges a fee of 1% of the average value of the account portfolio during the year. IV. The investment adviser charges a flat fee of $1,000 if the client's portfolio assets are $100,000 or more or $2,000 if the client's assets increase to $200,000 or more. A) I and IV B) I and II C) III only D) III and IV
D, Unless the question states that it relates to the exception for wealthy investors ($1 million under management of the investment adviser or $2.1 million in net worth), always assume that performance-based compensation is not permitted. Flat fees and fees based on total portfolio value are permitted.
