Final Exam #1
NASAA requires that the "intra-year" update for material changes be filed within _________ days of the change for State registered advisers and for notice filings made by Federal Covered advisers.
30 days
A Chartered Financial Analyst (CFA) wishing to register in a State as an investment adviser is exempt from: A. taking a proficiency examination in the State B. filing a registration document Form U-4 in the State C. from paying an annual registration fee to the State D. all of the above
A
A Registered Investment Adviser is a director of a private corporation. The corporation goes public, and the adviser wants to recommend the purchase of the stock to his clients. All of the following statements regarding this action are true EXCEPT this action is: A. permitted without restriction since the company is trading publicly B. permitted as long as the existence of the control relationship is disclosed in writing in the RIA's disclosure document C. a potential violation of the insider trading rules D. a potential violation of the conflict of interest rules
A
A Registered Investment Adviser that accepts customer funds MUST: A. segregate the funds from proprietary adviser assets B. must deposit the funds to the adviser's general bank account C. pay interest on the funds at the legal rate specified by the State D. provide each customer with an account statement at least monthly
A
A firm is retained by a company that wishes to make acquisitions of other companies to act as a finder. The finder can be considered to be a broker-dealer: A. under no circumstances B. if it receives compensation contingent on the closing of a deal C. if it receives a flat fee for services rendered D. if it signs a written contract with the company
A
How frequently do account statements need to be sent to customers? A. Quarterly B. ASAP C. Monthly D. Annually
A
Under the Uniform Securities Act, all of the following are excluded from the definition of an investment adviser EXCEPT: A. issuers B. lawyers C. accountants D. teachers
A
A broker-dealer has a place of business in State A does business exclusively in State A and is registered in the State. The broker-dealer has no office in State B and is contacted by a client in State B who wants to sell some securities that he inherited. State B does not have a de minimis rule for broker-dealers. The client is not interested in opening an account and only wants the broker-dealer to do this transaction and remit the proceeds to the customer. Which statements are TRUE? I In order to effect this transaction, the broker-dealer must be registered in State B II In order to effect this transaction, the broker-dealer is not required to be registered in State B III In order to effect this transaction, the securities involved must be registered in State B IV In order to effect this transaction, the securities involved are not required be registered in State B A. I and III B. I and IV C. II and III D. II and IV
B
An Investment Adviser Representative (IAR) wants to take a part-time job giving SCUBA lessons. This is permitted: A. under no circumstances B. if the Investment Adviser that employs the IAR says that it is allowed C. if the Investment Adviser Representative does not earn any compensation for giving the SCUBA lessons D. if the Investment Adviser Representative does not give investment advice or sell securities
B
An investment adviser has placed a block trade for 100,000 shares of ABCD stock. The trade is filled in 2 separate lots of 50,000 shares each, with one lot filled at $50.01 per share and the other lot filled at $50.03 per share. The adviser has developed a methodology of allocating shares purchased at the lowest price to clients with a history of referring other clients and to clients with more assets under management and has been doing this unknown to staff and clients for many years. The investment adviser is guilty of: A. failure to supervise B. breach of fiduciary duty C. failure to adhere to prudent investor standards D. insider trading
B
The Administrator can require all of the following regarding federal covered securities offered in a State EXCEPT: A. notice filing for the issue in the State B. registration of the issue in the State C. filing of documents relating to the issue in the State D. payment of a filing fee in the State
B
Under the provisions of the Uniform Securities Act, which statements are TRUE? I An investment adviser with a place of business in the State, need not register in that State if it is only dealing with insurance companies II A broker-dealer with no place of business in the State, need not register in that State if it is only dealing with insurance companies III If a broker-dealer is registered with the Financial Industry Regulatory Authority, then it is also registered in that State IV If a broker-dealer has its registration revoked, then the registration of its agents will also be revoked A. I and III B. II and IV C. I, II, IV D. I, II, III, IV
B
What is the retention period for customer correspondence A. 2 years B. 3 years C. 5 years D. 7 years
B
Which State-registered investment adviser MUST report that it takes custody on Form ADV? A. An adviser that is affiliated with a parent bank or trust company B. An adviser that directly deducts management fees each quarter from client accounts C. An adviser that has discretionary authority over client accounts under a limited power of attorney D. An adviser that receives payments from clients at the time that services are rendered
B
Which statements are TRUE regarding the post-registration requirements of the Uniform Securities Act? I Broker-dealers are subject to post-registration requirements II Broker-dealers are not subject to post-registration requirements III Agents of broker-dealers are subject to post-registration requirements IV Agents of broker-dealers are not subject to post-registration requirements A. I and III B. I and IV C. II and III D. II and IV
B
An adviser buys blocks of shares at differing prices and then place the lower-priced shares in its proprietary account and give its customers the higher-priced shares. What is the advisor guilty of?
Breach of fiduciary duty
A Federal Covered Adviser discovers a material error in its Form ADV. When must Form ADV be amended with the State to correct the error? A. Never B. Within 5 business days C. Within 30 calendar days D. On the SEC filing anniversary
C
A broker-dealer maintains a web page that is limited to general information on products and services and that does not offer personalized investment advice. If the broker-dealer updates the web page, the broker-dealer: A. is under no obligation to maintain a copy of the superseded web page because an offer of securities has not been made in the State B. is only required to maintain the current web page for inspection by, or filing with, the Administrator C. must maintain an archived copy of the superseded web page and a copy of the current web page for inspection by, or filing with, the Administrator D. must file the revised web page with the Administrator within 10 business days of posting on the Internet
C
ACME Advisers has as a client, a large broker-dealer - ACCO Brokerage. ACME wishes to open an account to buy securities on margin at ACCO Brokerage. Which statement is TRUE? A. This is prohibited because of the inherent conflict of interest B. This is prohibited under the Uniform Securities Act C. This is permitted because the broker-dealer is in the business of lending money on securities D. This is permitted because investment advisers can arrange loans from any willing lenders
C
ACME Securities is a registered broker-dealer in State A. ACME is soliciting individuals to work for the firm in their spare time, from a home office. For selling ACME's products to customers, these individuals will be paid 25% of commissions generated. Since these individuals are not working in ACME's office, ACME has classified them as independent contractors. Which statement is TRUE? A. These individuals are not required to be registered as representatives in State A because they are not ACME employees B. These individuals must register themselves as representatives in State A because they are not ACME employees C. These individuals must be registered as representatives in State A by ACME Securities D. These individuals only need to be registered in State A by ACME if they become full-time representatives
C
In most States, persons convicted of fraudulent actions involving an offer of securities may be: I fined $1,000 II fined $5,000 III imprisoned for 3 years IV imprisoned for 5 years A. I and III B. I and IV C. II and III D. II and IV
C
In order to revoke a registration, the Administrator must do all of the following EXCEPT: A. find that the action is in the public interest B. cite a cause for the action found in the Uniform Securities Act C. obtain a court order revoking registration D. provide an opportunity for the aggrieved person to have the order reviewed
C
The amount of commission charged to a customer to effect a securities transaction: A. is not required to be disclosed B. must be disclosed prior to executing the transaction C. must be disclosed on the trade confirmation D. must be disclosed on the account statement
C
The updated Form ADV must be sent to the investment adviser's clients within ________ days of year end if there is a material change. A. 90 B. 30 C. 120 D. 60
C
Under the Uniform Securities Act, the financial records of a broker-dealer must be retained for: A. 5 years, with the prior 2 years records readily accessible for audit B. any time period specified by the State Administrator C. the time period specified by the Securities Exchange Act of 1934 and if the record is not specified in the 1934 Act, then the time period specified by the Administrator D. the lesser of the time period specified by the State Administrator or the time period specified in the Securities Exchange Act of 1934
C
What is the retention period for customer account statements A. 2 years B. 3 years C. 6 years D. 7 years
C
Which of the following information MUST be recorded on an unexecuted order ticket where the trade has been canceled? I Time of execution II Time of receipt III Time of cancellation IV Solicited or unsolicited A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV
C
Which security is NOT subject to registration under the Uniform Securities Act? A. Subordinated debentures of a Canadian Paper company B. Preferred stock of a bank holding company C. Equipment trust certificate of a railroad subject to Interstate Commerce Commission regulations D. Limited partnership investing in issues of Federally chartered savings and loans
C
Which terms are defined under the Uniform Securities Act? I Investment Adviser II Investment Adviser Representative III Broker-Dealer IV Broker-Dealer Representative A. I and II only B. III and IV only C. I, II, III only D. I, II, III, IV
C
Who must register in a State as an investment adviser? A. A person selling a subscription to a service that gives timing of buy and sell orders for specific investment company securities that are exchange traded B. An investment adviser representative who has been registered with an investment adviser for more than 5 years C. An on-line broker-dealer who offers a "no maximum number of trades" program for a 90-day period for a set dollar amount D. A bank that is offering "Raise-Your-Rate" Certificates of Deposit for a set promotional period
C
An individual who lived in State B is an existing client of Broker-Dealer. She has temporarily relocated to State A. She contacts her agent located in State B to buy securities. Which statement is TRUE? A. The Broker-Dealer and the agent must be registered in State A only B. The Broker-Dealer and the agent must be registered in State B only C. The Broker-Dealer and the agent must be registered in both States A and B D. The Broker-Dealer is only required to be registered in State B and the agent must be registered in both States A and B
D
An investment adviser prepares an advertisement that will be used in newspapers in a large city. Under NASAA rules, the advertisement would be permitted to contain a(n) A. testimonial from a famous client of the firm B. offer of free research given to any customer that signs an investment contract C. listing of the firm's "Top 10 Picks" showing performance over the past year D. a toll-free number to call for more information
D
Form _____ is used to notify the administrator if custody is taken A. U-4 B. F-4 C. U-2 D. ADV
D
Registration by Filing would NOT be permitted for which of the following reasons? I An Administrator in another State has issued a stop order relating to this issue II The issue is only going to be offered in one State III The Securities and Exchange Commission denies effectiveness to the Federal registration statement IV The Administrator has not received a copy of the latest prospectus A. I and III only B. II only C. I, II, III D. I, II, III, IV
D
The Administrator, in regards to the registration of securities, may: I impound the proceeds from the sale of the securities until the issuer receives a specified dollar amount II require the filing of original copies of confirmed subscription agreements III require the delivery of a prospectus IV require that the issuer file quarterly reports of sales of the issue A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV
D
The wife of a customer who maintains an individual account with your firm telephones, and states that they are short of money, and that they will not be able to pay for the most recent securities purchase in the account. The securities have appreciated substantially since trade date, and the trade settles in 3 business days. The wife tells the agent to liquidate the position. Which actions by the agent are NOT allowed? I The agent may arrange for a loan to the customer of the money needed to purchase the securities II The trade may be canceled III The agent may sell the securities in the account; and may send the customer a check for the profit when that trade settles IV The agent may sell the securities in the account; but cannot send the customer a check for the profit until the original purchase is paid A. I and II only B. III only C. III and IV only D. All of the above
D
Under NASAA rules for State-registered advisers, transactions must be recorded in customer account records no later than: A. trade date B. settlement date C. 10 business days following the end of the month in which the transaction was effected D. 10 business days following the end of the quarter in which the transaction was effected
D
Under NASAA rules, the Form ADV filed with the State must be updated: A. quarterly within 30 days of quarter end B. quarterly within 90 days of quarter end C. annually within 30 days of fiscal year end D. annually within 90 days of fiscal year end
D
Under the provisions of the Uniform Securities Act, the ability to make a civil claim is lost: A. upon the death of a customer who purchased the issue B. upon the death of the person who gave the investment advice to purchase that issue C. if the purchaser signs a waiver of rights at, or prior to, completion of the purchase D. if three years have elapsed since the security was purchased
D
What is the retention period for customer confirmations A. 2 years B. 7 years C. 1 year D. 3 years
D
What're the qualified custodians I. registered broker-dealer II. FDIC insured bank III. registered futures commission merchant IV. foreign financial institution that holds client assets A. II IV B. I IV C. I II III D. I II III IV
D
Which of the following IS excluded from the definition of an investment advisor? I. Investment advisor reps (agents) II. Depository Institutions (banks, savings and loans, trusts) III. Professionals (accountants, lawyers, teachers, engineers, whose performance of these services is wholly incidental to their professional practice) IV. Broker-dealers V. Newsletters that give general investment advice VI. Federal covered advisers (advisers with at least $100 million of assets under management and advisers to investment companies) VII. Anyone who is excluded from the definition of an adviser under Federal law, which is the same as the State list, but also includes persons who give advice solely about U.S. Government guaranteed obligations A. I III B. V, VI, VII C. I, II, III, IV, V, VI D. I, II, III, IV, V, VI, VII
D
Which of the following are the federally covered securities I Securities listed on the NYSE, AMEX or NASDAQ II Registered investment company securities III Securities sold under the Regulation D federal private placement exemption IV Securities sold only to qualified investors (wealthy or institutional investors) A. I B. II III C. I III IV D. I II III IV
D
Which of the following can the administrator, in a state, require for federally covered securities? I a notice filing in a State; II the filing in the State of any documents filed in connection with the III Federal registration of the issue; IV the payment of a filing fee in the State; V the filing of a consent to service of process A. I II III B II III IV C. I II III IV D. I II III IV V
D
Which of the following government issues are exempt under state law? A. U.S. Government Treasury Bills, Bonds, Notes, STRIPS (zero-coupon issues) and TIPS (Treasury Inflation Protection Securities - bonds indexed for inflation) B. Government agencies C. Municipalities and Foreign Governments D. All of the above
D
Which of the following information would NOT be found in a registration statement for a security that is going to be registered by qualification in a State? A. Current equity and debt capital of the issuer B. Description of issuer's business, product lines and competitive environment C. Use of proceeds of the offering D. Analysis of company profitability as compared to industry norms
D
Which of the following is NOT included in the registration statement for a securities offering Current balance sheet and income statement; Business description; Use of proceeds of offering; Offering Terms; Legal Opinion; Accountant's Opinion. A. I and II B. III and IV C I II III V D I II III IV V VI
D
Which of the following issuers are exempt? A. Gov and municipal issuers B. Issuers already regulated under other laws C. Large established companies D. All of the above
D
Which of the following scenarios is/are exceptions to the rule investment advisors are prohibited from borrowing from customers A. If the customers are banks B. If the customers are broker dealers C. This is prohibited at all times D. A and B
D
Which of the following statements are TRUE regarding customer funds or securities and broker-dealer's funds or securities? I Broker-dealers are allowed to commingle customer funds or securities with their own funds or securities positions II Broker-dealers are prohibited from commingling customer funds or securities with their own funds or securities positions III An agent can take customer securities into his or her own possession to deliver to the broker-dealer IV An agent cannot take customer securities into his or her possession to deliver to the broker-dealer A. I and III B. I and IV C. II and III D. II and IV
D
Which statement is TRUE about an offer of rescission? A. The offer can only be made prior to the institution of a lawsuit alleging a securities violation B. An offer must be made to buy back the security at the original purchase price C. The customer must be paid interest at the legal rate in the State, less any dividend or interest income received from that security D. All of the above
D
Which transaction is included in the definition of an "offer to sell"? A. A successful attempt to dispose of a security for value B. A gift of a non-assessable security C. A security given to a person as a "gift" with the sale of another security D. An unexecuted contract to sell a security (an open order)
D
To qualify for registration by filing, the issuer must do which of the following A. have been in business continuously for the past 3 years B. have previously registered its equity securities with the Securities and Exchange Commission, which class of securities must be held by at least 500 shareholders C. have filed all required reports with the SEC during the past 36 months; and must have been "timely" in filing all reports during the preceding 12 months D. have either a: net worth of $4,000,000 or; net worth of $2,000,000 and net pre-tax income from operations for at least 2 of the last 3 years E. All of the above
E
Which of the following, per NASAA, is not allowed to be included in an advert put together by an Investment Advisor? A. Testimonials B. any report or research will be provided for free unless this is offered without condition; C. cannot represent that any chart, graph, or device being offered can, by itself, determine which securities should be bought or sold without prominently disclosing its limitations and the difficulties with respect to its use; D. cannot contain false, untrue or misleading statements; E. None of the above
E
True or False: All of the following must be stamped on an order ticket, even if the order has not gone through I Time of execution II Time of receipt III Time of cancellation IV Solicited or unsolicited
False
True or False: NASAA rules for State-registered advisers require that customer account records be posted no later than 10 business days following the end of the month in which transactions were affected
False
True or False: The Act defines Investment Adviser, Investment Adviser Representative, and Broker Dealer, along with Broker Dealer Representative
False
True or False: The spouse of a customer with an INDIVIDUAL account also has authority over said account
False
True or False: Under NASAA rules, investment advisers must update their Form ADV (State registration form) annually within 30 days of fiscal year end, to reflect current and accurate information.
False
True or False: While not for profit issues are exempt, securities of NASDAQ, Blue Chip, listed companies are not exempt
False
True or False: a firm that offers personalized investment plans for a fee, whether in-person or via a website, is defined as an investment adviser and is not required to register in the state
False
True or False: A sale is a completed contract to sell
True
True or False: An "offer to sell" is any attempt or offer to dispose of a security, or a solicitation of an offer to buy a security or an interest in a security, for value.
True
True or False: An agent must given written notice to their employer if they're taking outside work
True
True or False: An investment advisor is not required to register in most states if it has no office in a state and affects 5 or fewer transactions in the state within a 12 month period
True
True or False: Any civil suits must be brought to court no later than 3 years after the contract of sale was executed
True
True or False: As a condition of broker-dealer registration, all records must be retained for the period specified under Federal law (Securities Exchange Act of 1934 or Investment Advisers Act of 1940).
True
True or False: Borrowing from and lending money to customers is illegal
True
True or False: Broker Dealers are prohibited from commingling customer funds or securities with their own funds or securities positions. Agents are also prohibited from taking customer securities into their possession to deliver to the broker dealer
True
True or False: Having custody means an advisor directly holds those customer funds and has access to customer funds or securities
True
True or False: If a broker-dealer offers "wrap" account, which wraps all services offered in the account (such as recommendations, asset allocation, trade executions) into a flat annual fee, this is an advisory product and the firm must register separately as an investment adviser to do this.
True
True or False: If a broker-dealer offers a non-managed fee based account that gives unlimited trading for a flat annual fee this is an advisory product and the firm must register as an investment adviser to do so.
True
True or False: If a customer relocates to state B and his/her broker dealer/agent are located in state A, then the agent is the only one who needs to register in states A and B
True
True or False: If a finder is involved in the sale of securities as opposed to assets, and receives transaction-based compensation, such as compensation contingent of the closing of the deal, then the finder is considered to be a broker dealer and will need to register
True
True or False: If a security is exempt, it means that it is not required to be registered in the state
True
True or False: If an adviser has the ability to directly deduct fees from client accounts, it meets the definition of having/taking custody
True
True or False: If an issue is regulated under other laws, its exempt
True
True or False: If the administrator feels that the requirements for a federally covered security haven't been met, then it can compel the issuer to register the securities in the State.
True
True or False: If the broker dealer prohibits jobs outside of work, then the agent must obey the broker dealers' rules
True
True or False: It doesn't matter if a broker dealer hires an employee on full time, part time, or as a contractor, if they transact securities, they will need to register
True
True or False: Non profit institutions are exempt
True
True or False: Per NASAA, advertisements can include a list of recommendations made with their performance as long as all recommendations over that period (a minimum of 1 year) are included, along with the market price at the time of the recommendation and the current price of the security. This list cannot be deliberately selective.
True
True or False: Post registration requirements ONLY apply to Broker Dealers and not their agents
True
True or False: Prompt written notice must be given to the clients of the qualified custodian's name, address, and the manner in which the funds are being held
True
True or False: The Administrator cannot require the registration in the State of a federal covered security.
True
True or False: The IA must be audited on a surprise basis at least annually to verify client funds and securities positions.
True
True or False: The SEC filing rule for Federal Covered advisers is that the change must be filed promptly
True
True or False: The administrator can specify a record retention period for any record. However, this cannot be longer than the guidelines set by federal law
True
True or False: The securities of Blue Chip companies are also exempt issues
True
True or False: There are exceptions to the rule that investment advisors cannot borrow from customers
True
True or False: There is still a "sale," if there's an "offer to sell."
True
True or False: There's no requirement to disclose the amount of commission charged on a trade prior to executing the trade for the customer
True
True or False: corporate commercial paper that is "investment grade" issued in minimum $50,000 units also count as exempt issues
True
True or False: if a customer account is charged a fee for each transaction (e.g., a commission), then this is an account at a broker-dealer
True
True or False: if a flat annual fee is charged, either as a flat dollar amount or a flat percentage of assets, then the account is an advisory account
True
