Series 63 Simulated Exam Missed Questions
If an agent needs to borrow money for a business venture, which of the following customers could he borrow from? A) An established customer with whom the agent has been doing business for at least one year B) Any accredited investor C) A lending institution D) Borrowing from customers is always prohibited
C) A lending institution Borrowing from a customer is strictly prohibited unless the customer is a lending institution.
The Uniform Securities Act invests the Administrator with many powers over the activities of agents and broker-dealers. Which of the following actions does NOT fall within the Administrator's powers? A) Issuing cease and desist orders without a hearing B) Issuing subpoenas to persons residing outside the Administrator's state C) Suspending an agent's registration without an opportunity for a hearing D) Conducting investigations of broker-dealers residing outside the Administrator's state
C) Suspending an agent's registration without an opportunity for a hearing Under the USA, no suspension or revocation may take place before a hearing.
An agent based in Alabama directs a solicitation to a customer who lives in Connecticut while the customer is temporarily in Indiana. The customer does not accept the offer until he arrives back in Connecticut. According to the Uniform Securities Act, the Administrators of which of the following states have jurisdiction? A) Alabama and Connecticut B) Alabama and Indiana C) Indiana and Connecticut D) Alabama, Connecticut, and Indiana
D) Alabama, Connecticut, and Indiana The Administrator from any state from which an offer is made, directed, or accepted has jurisdiction over the offer.
Margin is borrowing money from a broker-dealer to buy a stock using the investment as collateral. In many cases, the brokerage firm then uses that collateral for a loan from a bank. Which of the following account documents authorizes the firm to pledge the customer's stock? A) The hypothecation agreement B) The securities pledge agreement C) The credit agreement D) The loan consent agreement
A) The hypothecation agreement The hypothecation agreement gives permission to the broker-dealer to pledge a customer's margin securities as collateral. The firm hypothecates customer securities to the bank, and the bank loans money to the broker-dealer on the basis of the loan value of these securities.
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) 15 days B) 30 days C) 60 days D) 45 days
A) 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 NASAA Model Rule on Agency Cross Transactions requires that an investment adviser send a written disclosure document to affected clients that includes such items as the total number of agency cross transactions during the period for the client, as well as the total amount of all commissions or other remuneration the investment adviser has received in connection with agency cross transactions for the client during the period no less frequently than A) annually B) within a reasonable period of time following any transaction made in reliance upon this rule C) quarterly D) semiannually
A) annually When an investment adviser is going to be performing agency cross transactions, these disclosures must be made as least annually.
Under the Uniform Securities Act, registration would NOT be required of A) individuals employed by issuers of non-exempt issues who work on the company's assembly line B) individuals employed by broker-dealers who limit their activities to managing the company's sales force C) broker-dealers D) individuals employed by broker-dealers to make cold calls to solicit new clients
A) individuals employed by issuers of non-exempt issues who work on the company's assembly line Employees of issuers who have nothing to do with the sale of the issuer's securities, such as working on the assembly line, are not doing anything that requires registration under the act. Broker-dealers, individuals soliciting for new clients for the broker-dealer, and those supervising securities sales activities of the broker-dealer are required to register in the appropriate states.
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) Broker-dealers receiving special compensation B) Investment adviser representatives C) Economists whose advice is strictly incidental to their professional activity D) A wholly owned subsidiary of a commercial bank that is in the business of offering investment advice
B) Investment adviser representatives 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 are NOT excluded from the definition of broker-dealer? A) Issuers of securities B) Persons who effect securities transactions as part of a regular business solely for their own accounts C) Banks D) Agents
B) Persons who effect securities transactions as part of a regular business solely for their own accounts Although broker-dealers generally act on behalf of others as well as themselves, there are cases where firms strictly trade for their own positions, such as over-the-counter market makers.
According to the Uniform Securities Act, the Administrator has the power to require persons wishing to register as an agent to A) post a surety bond and pass an exam B) post a surety bond, pay filing fees, and pass an exam C) have minimum net capital, pay filing fees, pass an exam, and post a surety bond D) have minimum net capital, post a surety bond, and pass an exam
B) post a surety bond, pay filing fees, and pass an exam The Administrator may require that, as a condition of registration, the agent post a surety bond (if given discretion by clients over their accounts) pay filing fees, and pass an examination that may be written, oral, or both. Minimum net capital orders apply to broker-dealers, not their agents.
If an agent chooses to appeal an Administrator's order, the agent must file for review of the order with the appropriate court A) within 180 days of order entry B) within 60 days of order entry C) immediately D) within 30 days of order entry
B) within 60 days of order entry
A broker-dealer is registered in State X. It has no offices in State Y, although it does do business in that state. Under the Uniform Securities Act, registration in State Y is required if the client is a(n) A) broker-dealer B) bank C) state employee D) issuer whose securities are involved in the transactions
C) state employee
Which of the following is required to register as an investment adviser with the state securities Administrator? A) The author of a book on money and banking that was sold to residents of the state in which it is published B) A person with no office in the state whose only advisory clients are investment companies and banks in the state C) A newly formed investment advisory firm with $130 million in assets under management D) An investment advisory firm with less than $100 million in assets under management that opens an office in the state
D) An investment advisory firm with less than $100 million in assets under management that opens an office in the state An investment adviser must register in a state if it manages less than $100 million in assets. Publishers of general circulation books are exempt from state registration, as are investment advisers with no offices in the state whose only customers are banks in the state. Investment advisers with $110 million or more in assets under management must register with the SEC, not the state Administrator.
An IAR is registered in New York and Vermont. While working in his New York office, he places a call to the cell phone of one of his clients who happens to be on vacation in Ohio. After describing the reasons for a particular stock recommendation, the client asks the agent to call back tomorrow. The agent does so and reaches the client in Indiana. The client decides to purchase 100 shares of the stock. When the client arrives home, he notices that he has already received his stock certificate from the transfer agent located in Illinois. In this case, jurisdiction resides with the Administrator of 1. New York 2. Ohio 3. Indiana 4. Illinois A) I, II, III, and IV B) II and III C) I and IV D) I, II, and III
D) I, II, and III The Administrator has jurisdiction from the state in which the offer was made (NY), received (OH), and accepted (IN). Mailing of the certificate is of no consequence.
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) Municipal bonds B) Securities issued by the Government of Brazil C) Securities of a federally chartered bank D) Securities issued by a federal credit union
D) Securities issued by a federal credit union 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.
An investment adviser who has no office in a state is exempt from registration in a state if, during any 12-month period, he has no more than how many retail clients in the state? A) 5 B) 20 C) 35 D) 10
A) 5 There are provisions for exclusions from the definition of investment adviser in the Uniform Securities Act. Out-of-state advisers who have no place of business in the state are not defined as investment advisers if they have no more than 5 noninstitutional (retail) clients in this state in a 12-month period. This is known as the de minimis exemption.
If AAA Investment Advisers has entered into a written advisory contract with a client that contains a discretionary power, all of the following information must be stated in the contract EXCEPT A) AAA Investment Advisers shall be the only party eligible to make investment decisions in the account B) AAA Investment Advisers has discretionary authority to make investment decisions on behalf of the client C) The amount of the fee AAA Investment Advisers charges annually on the value of assets under management D) consent of the client is required for AAA Investment Advisers to assign the contract to another manager or adviser
A) AAA Investment Advisers shall be the only party eligible to make investment decisions in the account The discretionary power authorizes the investment adviser to make the investment decisions without prior approval of the client. However, nothing in that power prohibits the client from personally making the decision to buy or sell any assets in the account.
Under the Uniform Securities Act, the registration requirements for agents would never include A) minimum capital B) surety bonding C) an examination D) a consent to service of process
A) minimum capital
Which of the following persons are investment advisers subject to state registration? A) Any other person that the Administrator excludes by rule or order B) A financial planner or other person that provides investment advisory services to others for compensation C) A federal covered investment adviser D) A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation
B) A financial planner or other person that provides investment advisory services to others for compensation
In some instances, rather than use an investment banker to distribute its securities to the public, an issuer will hire a sales force or use its own employees to make the sales. The individuals involved in the selling in this state would NOT be defined as agents under the Uniform Securities Act if selling on behalf of which of the following issuers? A) A building and loan association organized under the laws of any state and authorized to do business in this state B) A savings institution organized and supervised under the laws of any state C) A federal savings and loan association D) A credit union organized and supervised under the laws of this state
B) A savings institution organized and supervised under the laws of any state Although each of the answer choices meets the USA's definition of exempt security, the savings association is the only issuer where the act grants an exemption from the definition of agent to those individuals selling on its behalf. Please note that a savings institution is not the same as a savings and loan or building and loan association.
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) a foreign government with which the United States currently maintains diplomatic relations B) an insurance company authorized to do business in the state C) a trust company organized and supervised under the laws of any state D) any political subdivision of any Canadian province
B) an insurance company authorized to do business in the state 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.
In designing a client's portfolio, a registered investment adviser representative of Greater Wealth Advisory Services recommends the purchase of several stocks from the inventory of Greater Wealth's wholly owned broker-dealer. Under current regulations, this activity requires written A) disclosure to the client B) disclosure to the client and consent prior to completion of the transaction C) consent of and the disclosure to the client before the execution of the transaction D) consent of the client
B) disclosure to the client and consent prior to completion of the transaction Unlike broker-dealers, investment advisers must obtain the consent of and make written disclosure to the client of the intent to act as agent or principal in any transaction with that advisory client. SEC Release IA- 1732 requires that this be accomplished before the completion of the transaction, where completion is defined as settlement date.
Under the USA, which of the following is considered a broker-dealer in a state? A) First Federal Company Trust B) A broker-dealer with no place of business in the state who only does business with other broker-dealers C) XYZ broker-dealer with an office in the state whose only clients are insurance companies D) An agent effecting transactions for a broker-dealer
C) XYZ broker-dealer with an office in the state whose only clients are insurance companies Anytime the question tells you that there is a place of business in the state, regardless of who its clients are, the firm is considered a broker-dealer in that state and is required to register as such.
Under the USA, each of the following is specifically excluded from the definition of a broker-dealer EXCEPT an A) agent B) international bank C) investment adviser D) issuer
C) investment adviser The USA specifically excludes agent/issuers and banks, international or domestic, from the definition of a broker-dealer. Investment advisers also may have to register as broker-dealers if their method of operation requires it.
In conducting investigations, the Administrator may NOT A) publish information of any violation over the vigorous objections of a violator B) make investigations both inside the state and in other states to determine whether violations of the USA have occurred in his state C) make investigations outside the state to determine whether violations of the USA have occurred in that other state D) require a person to file a statement in writing and under oath
C) make investigations outside the state to determine whether violations of the USA have occurred in that other state The Administrator may require written statements under oath, publicize violations, and investigate anywhere necessary to determine whether or not a violation of the act took place in his state. However, he is not authorized to conduct investigations in other states to determine whether a violation of the USA has occurred in those states.
Under the Uniform Securities Act, all of the following could be cause for disciplinary review action by the state securities Administrator EXCEPT A) Tom, a registered investment adviser, fails to disclose that he recently filed for bankruptcy protection B) Joe files an application for registration as an investment adviser and omits the fact that he was convicted of fraud 12 years ago C) the ABC Advisory Group, a registered investment adviser, employs several investment adviser representatives as independent contractors D) Ed is suspended from conducting business in the securities industry for a period of 6 months by FINRA
C) the ABC Advisory Group, a registered investment adviser, employs several investment adviser representatives as independent contractors
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) Antiques dealer who receives a fee for advising customers as to the value of antiques and rare coins C) Bank that offers investment counseling to its high net worth customers D) A broker-dealer who receives a flat fee for analyzing a customer's investment objectives and recommending a portfolio of securities
D) A broker-dealer who receives a flat fee for analyzing a customer's investment objectives and recommending a portfolio of securities 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.
Under the Uniform Securities Act, which of the following would NOT be considered an exempt transaction? A) The sale of ABCD common stock, listed on the Nasdaq Stock Market, to the Fidelity Trust Company B) The purchase of an unregistered nonexempt security by an individual client at that client's request C) An executor liquidates the estate's portfolio D) An agent sells U.S. Treasury notes to an individual client
D) An agent sells U.S. Treasury notes to an individual client Even though the bonds are an exempt security, the sale to an individual client is not an exempt transaction. Sales to institutions, sales by fiduciaries, or unsolicited transactions are all exempt.
Under the USA, which of the following fits the definition of a sale? A) Solicitation of an offer to buy a security for value B) Attempt to dispose of a security for value C) Issuing a prospectus D) Contract to dispose of a security
D) Contract to dispose of a security Sales involve any contract or disposition for value; solicitations and attempts to dispose are offers.
A broker-dealer with no place of business in the state would not be required to register with the Administrator unless one of its clients was A) a savings institution B) a unit investment trust registered under the Investment Company Act of 1940 C) another broker-dealer D) an employee benefit plan with assets of less than $1 million
D) an employee benefit plan with assets of less than $1 million As defined in the Uniform Securities Act, "Broker-dealer" does not include a person who has no place of business in this state if he effects transactions in this state exclusively with or through the issuers of the securities involved in the transactions, other broker-dealers, or banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, employee benefit plans with assets of at least $1 million, or other financial institutions or institutional buyers.
Under industry rules, customers who wish to trade options must receive a copy of the Options Disclosure Document (ODD): A) at or before the mailing of the next monthly statement. B) within 15 days of account approval. C) at or before the mailing of the confirmation representing the first options trade. D) at or before account approval.
D) at or before account approval.
Any individual who represents an issuer in effecting transactions between the underwriter and the issuer A) must be registered as an underwriter B) must be registered as an agent C) must be registered as an investment adviser D) does not meet the definition of "agent" as promulgated under the Uniform Securities Act
D) does not meet the definition of "agent" as promulgated under the Uniform Securities Act Under the Uniform Securities Act, a person representing an issuer in securities transactions between an underwriter and an issuer is not deemed an agent and is exempt from the agent registration requirements of the act.
The state securities Administrator has the authority to A) issue a ruling under its authority with no requirement to publish that ruling B) amend or alter the Uniform Securities Act C) issue and enforce an injunction against a registered party D) make, amend, or rescind rules,forms, and orders necessary to administer the USA
D) make, amend, or rescind rules,forms, and orders necessary to administer the USA
An investment adviser has its home office in State C. Their only business is with registered investment companies, large employee benefit plans, and broker-dealers. They have no place of business in State D, but provide investment advice to several registered investment companies in that state. State D has recently adopted the Uniform Securities Act and the Administrator feels that the IA should be required to register there. Under the USA A) the Administrator is correct, the firm must register B) this firm would be exempt from registration with the State D Administrator since it is doing business in more than one state C) as long as the IA does not have an office in State D, there are no conditions that would mandate registration there D) the firm does not have to register because they have no place of business in the state and their only clients in that state are registered investment companies
D) the firm does not have to register because they have no place of business in the state and their only clients in that state are registered investment companies As a federal covered adviser (they have investment companies as clients), they would not have to register with the state, other than perhaps do a notice filing. However, with no office in the state, even that would not be required.
Conceptual Financial Solutions (CFS), a broker-dealer registered in States S, B, F and G, has a television commercial broadcast on a station whose studio is located in State S. An individual client who resides in State B, makes an offer to buy based on that advertisement. The State B Administrator would have jurisdiction A) only if the security or the transaction was not exempt B) at the time the broadcast is received in State B C) when the client made the offer D) when CFS accepts the buyer's offer
D) when CFS accepts the buyer's offer