S66 UNIT 1
i and ii
A federal covered investment adviser is one who: i. has $110 million or more in assets under management ii. manages an investment company registered under the Investment Company Act of 1940 iii. limits his advice to securities listed on the NYSE iv. is affiliated with a federally chartered bank
C
A firm is registered as an investment adviser under the Investment Advisers Act of 1940. It has decided to raise its annual management fee from $1,500 to $1,800 and require that it be paid 1 year in advance instead of quarterly. The firm would: A. need client permission to make this change B. need SEC permission to make this change C. now come under the balance sheet requirements of the ADV D. be in violation of the law that prohibits prepayments more than 6 months in advance
B
A principal purpose of the SEA of 1934 is generally considered to be: A. establish specific statutory standards for contractual agreements b/w corporations issuing bonds and the reps of investors who own the bonds B. protect the public against unfair and inequitable practices in the OTC market and on stock exchanges C. reimburse customers of failed BDs D. establish standards to govern activities of organizations that engage in the business of providing securities investment advice
D
A publicly traded corporation offers its employees an opportunity to purchase shares of the company's common stock directly from the issuer. A specific employee of the company is designated to process any orders for that stock. Under the USA, the employee: A. must register as an agent of the issuer B. need not register as an agent of the issuer C. may receive commissions without registration D. must register as an agent if commissions or other remuneration will be received by the employee, either directly or indirectly
i and ii
A registered investment adviser runs a promotion offering free information to all who request it. Which of the following statements to people who respond DO NOT comply with the advertising interpretation of the USA? i. "the offer is yours, free of charge; all I need are the name of 5 friends who might be able to use our service." ii. "such a deal; our information about the market is free to anyone who makes only one trade with our BD affiliate." iii. "thank you for responding; if we can help you after you read our information, please let us know."
C
A resident of Albany, NY, is visitin relatives in Albany, GA. While there, she receives a phone call from her agent in the Troy, NY, office of Capital City Investments who offers a security that the client immediately agrees to purchase. The next day, she sends her payment from Georgia. The agent sends the trade confirmation to the purchaser's residence address in New York. This agent is registered in 12 states, including New York and Georgia. The security is not exempt and was not registered. Which administrator has the authority to pursue action against the agent? A. Georgia B. NY C Both Georgia and NY d. the administrator of any of the 12 states in which the agent is registered
D
A speculative salesperson may indicate to a prospective customer that the sec has approved a securities issue if: A. the sec has not initiated action against either the company or the underwriter on the issue B. the sec has not opened an investigation of the company, the underwriter, or the market makers of the security C. a registration statement is in effect with the sec D. none of the above
C
A state-registered investment adviser maintains custody of client funds and securities. On Thursday, the chief financial officer of the firm informs the chief compliance officer that their net worth is $31,578. Under the provisions of the USA, the firm would: A. do nothing, as their net worth is far in excess of the minimum requirement of $10,000 B. send a detailed financial report to the Administrator by the close of business Friday C. send a detailed financial report to the administrator by the close of business Monday D. need to increase the amount of thier surety bond
B
A transaction exemption would be available under the USA when an agent for a BD: A. sells a large block of an unregistered nonexempt security to an individual who meets the definition of an accredited investor B. sells a large block of an unregistered nonexempt security to an insurance company that is not authorized to do business in this state C. sells a retail client $10,000 of U.S. Treasury bonds D. receives an unsolicited order from a client to purchase heating oil contracts
C
Aaron is a client of XYZ financial services. over the past several years, Aaron has been suspicious of possible churning of his account, but has taken no action bc account performance has been outstanding. After reviewing his most recent statement, Aaron suspects that excessive transactions have occurred. He consults his attorney, who informs him that under the USA, any lawsuit for recovery of damages under the USA must be started within: A. 1 year of occurrence B. 2 years of occurrence C. 3 years of occurrence or 2 years of discovery, whichever occurs first D. 2 years of occurrence or 3 years of discovery, whichever occurs last
D
According to the USA, an investment adviser may have custody of a customer's funds and securities if: A. it has received the permission of the administrator B. it has received permission from the SEC C. it does not share in the capital gains of the account D. the administrator has been informed of the custody
A
According to the USA, which of the following is a prohibited activity? A. an agent enters into an agreement to share in the profit/losses of the customer's account without prior written consent of the employing BD B. an agent and spouse jointly own their own personal trading account at the firm C. an agent, with the written authorization of the customer and the BD that the agent represents, participates in the profits and losses of an account D. an agent refuses a client's request to share in the performance of the client's account
A
According to the USA, which of the following is an example of market manipulation? A. creating the illusion of active trading B. omitting material facts in a presentation C. guaranteeing performance of a security D. transactions in excess of a customer's financial capability
D
All of the following are exempt from registration under the SEA of 1933 EXCEPT: A. an intrastate offering B. a reg D offering C. a us gov security D. an interstate offering of preferred stock
D
Among the groups and organizations required to register with the sec by the SEA of 1934 are: A. corporations w listed securities B. securities exchanges and securities traded on exchanges C.brokers and dealers operating in interstate commerce and national securities associations D. all of the above
A
Among the provisions of the investment company act of 1940 designed to protect the interests of investors is the provision that: A. any change in fundamental investment policy must be approved by SH's B. communication with the public must be approved by FINRA before its use C. selection of company investments must be approved by SEC D. for diversification purposes, an investment company may own up to 10% of the shares of another investment company
A
An administrator can deny an individual's application for registration as an investment adviser representative for all of the following reasons EXCEPT: A. lack of experience B. conviction for a securities-related misdemeanor within the past 10 years C. failure to pass a written exam D. submitting an incomplete application
i, ii, and iii
An administrator may summarily suspend a registration of an agent or an IAR pending final determination of proceedings under the USA. However, the administrator may not enter a final order without i. appropriate prior notice to the applicant as well as the employer or prospective employer of the applicant ii. opportunity for a hearing iii. findingds of fact and conclusions of law iv. prior written acknowledgemtn of the applicant
B
An investment adviser owes an undivided loyalty to its clients and therefore is considered to be a(n): A. agent B. fiduciary C. principal D. custodian
i and ii
An investment adviser registered with the SEC could use the term investment councel if i. their principal business consists of rendering investment advice ii. a substantial portion of their business involves investment supervisory services iii. they maintains full investment discretion
ii and iv
As defined in the USA, an investment adviser is all of the following EXCEPT: i. a BD who charges for investment advice ii. a publisher of a financial newspaper iii. a person who sells security analysis iv. a CPA who, as an incidental part of his practice, suggests certain tax-sheltered investments to his affluent clients
C
Fearing loss of a potential sale, an agent omits facts that a prudent investor requires to make informed decisions. Under the USA, this action is: A. fraudulent for nonexempt securities B. fraudulent for exempt securities only C. fraudulent for both exempt and nonexempt D. not fraudulent if there was willful intent to omit the information
C
GEMCO securities, a registered BD, has a policy of hiring unpaid interns from business schools. GEMCO is currently the lead underwriter on a new issue and has assigned three of its interns to specific tasks. One is entering the data as indications of interest are received, the second is calling clients to offer to deliver their prospectus via email instead of mail, and the third is calling clients to offer the new issue and accept indications of interest. Which of the interns would need to register as agaents? A. b/c their is no compensation, none need to B. the second and third C. only the third D. all would need to
C (#49)
If an agent chooses to appeal an Administrator's order, when must the agent file for review of the order with the appropriate court? A. immediately B. within 30 days after order entry C. within 60 days after order entry D. within 180 days after order entry
C
If an agent thought that a technology stock was undervalued and actively solicited all customers, the agent: A. did not violate the USA if all material facts were disclosed B. committed an unethical sales practice bc the firm has not recommended this tech stock C. committed an unethical business practice D. did not commit a violation if all clients were accurately informed of the price of the stock
A
If its in the public interest, the USA provides that the state administrator may deny the registration of a person for all of the following reasons EXCEPT: A. the applicant is not qualified owing to lack of experience B. a willful violation of the USA has taken place C. the applicant is financially insolvent D. the applicant is enjoined temporarily from engaging in the securities business
B
In general, registration statements for securities under the USA are effective for: A. a period determined by the Administrator for each issue B. 1 year from the effective date C. 1 year from the date of the issue D. 1 year from the previous January 1
D
Registration is effective when ordered by the Administrator in the case of registration by: A. coordination B. integration C. notice filing D. qualification
ii, iii, and iv
Section 402 of the USA contains a listing of those securities that are granted an exemption from the registration and advertising filing requirements of the Act. Included in that listing would be: i. corporate debentures ii. bonds issued by a Canadian province iii. bonds issued by the District of Columbia iv. securities issued by a credit union authorized to do business in the state
A
The head of research for your firm has just prepared a very positive report on DEF Industries, Inc. The report will be placed on the firm's website later today and copies mailed to clients for whom the security is deemed appropriate. Tonight, this analyst will be appearing on CNBC and will be describing why he has issued this "strong buy" recommendation. As an investment adviser rep, you would: A. be permitted to contact your client with this recommendation right now B. be permitted to contact your clients with this recommendation tomorrow C. not be permitted to contact your clients until it was ascertained that the report was general public knowledge D. be required to send your clients to the firm's website before making any comments regarding this security
i and ii
The securities act of 1933 covers which of the following? i. sale of new issue to the public ii. use of deficiency letters iii. insider trading iv. trading on national securities exchange
D
There are certain circumstances under which clients might wish to give their agents discretionary power over their account. An agent empowered to do which of the following would be considered using discretion? A. determining the specific price B. determining the specific time C. making the decisions in the account while awaiting delivery of the proper paperwork D. picking the specific security
ii only
Under federal law, an application for becoming an associated person of a BD would be denied for an individual: i. convicted of a felony 122 months ago ii. pleading no contest to a misdemeanor involving a financial matter 65 months ago iii. accused of a securities-related felony 110 months ago
ii and iv
Under the NASAA model custody rule, an investment adviser would be considered to have custody of client assets if that adviser inadvertently receives: i. a check from a client from a client made out to the IA and does not return the check within 24 hours ii. a check from a client made out to a third party and Does not forward the check within 3 business days iii. stock certificates from a client and does not forward them within 3 business days iv. stock certificates from a client and does noT return them within 3 business days
ii and iii
Under the SEA of 1934, the term municipal security would NOT include a(n): i. City of Chicago school district bond ii. U.S. Treasury bill iii. Province of Ontario library construction bond
i and iiii
Under the SEA of 1934, the term municipal security would include a(n): i. New Jersey Turnpike revenue bond ii. Illinois Tool Co debt issue backed by their full faith and credit iii. State of Texas general obligation bond
i and iii
Under the USA, BDs are required to prepare and maintain certain records. Which of the following statements reflects the position of the act? i. a firm registered in more than one state must meet recordkeeping requirements of the state where its principal office is located, even if those are less comprehensive than those of some of the other states where it is registered ii. a firm must maintain records of every email sent from the office by agents iii. a BDs website is considered advertising iv. once a BDs trade blotter has been posted, it may be discarded
B
Under the USA, all of the following may provide investment advice incidental to their normal business without requiring registration as an investment adviser EXCEPT: A. a teacher B. an economist C. a lawyer D. an engineer
C
Under the USA, an agent is: A. a BD who sells registered securities to the general public B. an individual who represents an issuer of a security issued by a Canadian province C. an individual representing a BD who sells federal covered securities D. an individual who represents an issuer in an exempt transaction
ii and iv
Under the USA, an investment adviser may legally have custody of money or securities belonging to a client if the: i. investment adviser has insufficient net worth or is not appropriately bonded ii. administrator has not issued a rule prohibiting custody iii. investment adviser does not also have discretionary authority over the account iv. investment adviser has notified the administrator that custody is maintained
ii only
Under the USA, an issuer is any person who issues, or proposes to issue, a security for sale to the public. According to the USA, which of the following is NOT an issue? i. the city of chicago, which is involved in a distribution of tax-exept highway improvement bonds ii. a partner in the AAA oil and gas partnership sells his interest in the investment iii. the AAA manufacturing company, which proposes to offer shares to the public but has not completed the offering iv. the US government, which proposes to offer Treasury bonds
i, ii, iii, and iv
Under the USA, any partner, officer, or director of a registered investment adviser is an investment adviser representative if a function of the position involves: i. offering advice concerning securities ii. managing client accounts or portfolios iii. determining securities recommendations for representatives to disseminate iv. supervising personnel engaged in advisory activities but not directly dealing with the public
i, ii, iii, and iv
Under the USA, the Administrator may bring an action against an agent's registration if the agent: i. borrows money from his wealthy clients' accounts ii. solicits orders for nonexempt unregistered securities iii. buys and sells securities in accounts to generate a high level of commissions iv. alters market quotations to induce a client to invest in an attractive growth stock
B
Under the USA, which of the following is considered a BD in a state? A. First Federal Trust Company B. XYZ BD with an office in the state who only clients are insurance companies C. An agent effecting transactions for a BD D. a BD with no place of business in the state who only does business with other BD in the state
B
Under the USA, which of the following persons is responsible for proving that a securities issue is exempt from registration? A. underwriter B. the person requesting the exemption C. state administrator D. there is no need to prove eligibility for an exemption
i and iii
Under the USA, which of the following would be considered an exempt transaction? i. an existing client calls you to purchase 1,000 shares of a common stock that is not registered in the state ii. at the suggestion of the agent handling her account, a client purchases some U.S. Treasury bonds for inclusion in her IRA iii. shares of a bank's IPO are sold to an institutional client iv. shares of an insurance company's IPO are sold to an individual client
C
Under the Uniform Securities Act, which of the following would be included in the definition of an investment adviser representative? A. an employee, highly skilled in evaluating securities, who performs admin or clerical functions for an investment adviser B. an individual who renders fee-based advice on precious metals C. a solicitor for an investment advisory firm who is compensated for the service rendered D. an agent who offers incidental advice on securities whose sole compensation is from commissions on transactions
ii only
Under which of the following cases could an agent offer a security for sale? i. a registrations stmnt has been filed with the sec but has not yet become effective ii. a reg stmnt has been filed with the sec and has become effective iii. the agent is aware of negotiations going on between an issuer and the employing BD investment banking dept
B
Which of the following accurately describes a cease and desist order as authorized by the USA? A. an administrator's order to an issuer to suspend sale of its security as a result of improper disclosures in the registration statement B. an administrator's order to refrain from a practice of business believed by the admin to be unfair C. a court-issued order requiring a business to stop an unfair practice D. an order from one brokerage firm to another to refrain from unfair business practices
i, ii, iii, and iv
Which of the following actions taken by an agent are prohibited? i. borrowing money or securities from a high net-worth client ii. selling speculative issues to a retired couple of modest means on a fixed income iii. failing to follow a customer's orders so as to prevent investment in a security not adequately covered by well-known analysts iv. backdating confirmations for the benefit of the client's tax reporting
i and iii
Which of the following are prohibited practices? i. an investment advisory firm organized as a partnership fails to inform its clients of the departure of a partner with a very small interest in the partnership ii. an investment advisory firm charges an annual fee equal to 2% of the first $250,000 in assets under management; 1% of the next $500,000; and .5% for everything in excess of $750,000 iii. the majority stockholder of a registered investment adviser pledges his stock as collateral for a loan taken out by the firm to expand its services without obtaining client consent for assignment of their concerns iv. an investment advisory firm engages in agency cross transactions
iii only
Which of the following is (are) issuer tranactions? i. JOhn inherited securities of the XYZ corporation from his father who, as a founder to the company, received the shares directly from the company as a result of stock options ii. John sold the securities he had inherited from his father to his neighbor, Peter, at the market price without charging a commission iii. John's father, a founder of XYZ corporation, purchased shares of XYZ directly from the corporation subsequent to its founding without paying commission iv. John purchased shares in XYZ corp in a transaction made in the OTC market
C
Which of the following is NOT a prohibited practice under the Investment Advisers Act of 1940? A. scalping B. failure to maintain a file of all advertisements circulated to 10 or more persons C. maintaining required records easily accessible for only 5 years D. maintaining required records easily accessible for only 2 years
D
Which of the following is defined as a security under the USA? A. a guaranteed, lump-sum payment to a beneficiary under a modified endowment policy B. fixed, guaranteed payments made for life or for a specific period under an annuity contract C. commodity futures contract D. an investment contract
D (#59)
Which of the following people would NOT meet the definition of a person associated with an investment adviser? A. an individual who solicits potential clients to open advisory accounts B. a vice president of a registered investment adviser C. a brokerage firm that is considered to be the parent of a registered investment adviser D. the typist responsible for operating the desktop publishing system that prepares the investment adviser's weekly research bulletins
C
Which of the following persons is defined as an agent by the Uniform Securities Act? A. silent partner of a BD B. secretary of a branch office sales manager C. clerk at a BD who is authorized to take orders D. president of the state university who sits on the BDs BOD
B
Which of the following practices is prohibitive under the USA? A. actively trading a security in which an unusually high trading volume has occurred B. Offering services that an agent cannot realistically perform because of this BD limitations C. altering the customer's order prior to execution at the request of a customer, which subsequently results in a substantial loss D. failing to inform the firm's principal of frequent oral customer complaints
ii and iii
Which of the following statements concerning investment advisers are true? i. an investment adviser who is exempt from registration is also exempt from the anti fraud provisions of the USA ii. the SEC can cancel the registration of a federal covered investments adviser if it fInds that the adviser is no longer in business iii. an investment adviser who represents that their qualifications and methods of security analysis have been passed on by the SEC has violated the act
B
Which of the following statements made by an investment advisers would be fraudulent? A. "we believe that fundamental analysis is the best way to select stocks for our clients" B. "our fees are nonnegotiable" (when ADV Part 2A clearly indicates otherwise) C. "we require any associated person determining general investment advice to be a CFA" D. "we have over $40 billion in AUM representing both institutional and retail clients"
A
Which of the following statements may NOT be made by an agent in regard to a security registered with the SEC under the Act of 1933? A. the SEC has approved of this issue and that's why I'm so glad to be able to offer it to you, B. This issue is lawful for sale, C. This issue is suitable for you on the basis of your objective and the personal profile you have provided me, D. None of the above
C
Which of the following statements regarding provisions of the Investment Advisers Act of 1940 is TRUE? A. big gains registered investment advisers must disclose its sources of information for specific recommendations they make to their clients B. an investment adviser must obtain client permission to accept a buyout offer for all of the adviser's stock C. five partners advisers ltd. must inform all clients that one of the 5 partners has retired and been replaced by a new partner D. pledging a client's contract as collateral for a loan to the adviser would not be considered an assignment of the contarct
B
Which of the following statements regarding the SEC's power to revoke the registration of an investment adviser is TRUE? A. if it is determined that an investment adviser is insolvent, the SEC may revoke the registration B. failure to adequately supervise a person associated with the adviser could be cause for the SEC to revoke the firm's registration C. revocation would occur, with appropriate notice, when a firm's annual updating amendment was received by the SEC 120 days after the end of the registrant;s fiscal year D. an investment adviser receiving substantial prepayment of fees from 50% of its clients that fails to include a copy of its balance sheet in its brochure delivered to all clients would give the SEC cause for beginning revocation proceedings
i and ii
Which of the following transactions are exempt from registration under the USA? i. a trustee of a corporation in bankruptcy liquidates securities to satisfy debt holders ii. an offer of a securities investment is directed to 10 individuals in the state during a 12-month consecutive period iii. a sale of securities by the trustee of the Lorgan family children's trust iv. agents for an entrepreneur offer pre-organization certificates to fewer than 10 investors in the state for a modest commission
i and ii
Which of the following would be an agent as the term is defined in the Uniform Securities Act? i. a rep of a licensed BD who sells securities to the general public ii. an assistant to the president of a BD who accepts orders on behalf of the senior partners iii. a subsidiary of a major commercial bank registered as a BD that sells securities to the public iv. an issuer of nonexempt securities registered in the state and sold to the general public
i, ii, and iii (#55)
Which of the following would be deemed to be an assignment of an investment advisory contract? i. all of the stock in NLT advisers, a corporation, is acquired by MMS advisers, inc. ii. the lucky seven partnership is an investment adviser with 7 partners. Four of the partners make a fortune and decide to retire. They are replaced by new partners. iii. Albert is an investment adviser. his clients accounts are automatically debited monthly for his fee. Because of this steady cash flow, his banker readily accepts a pledge of these accounts as collateral for a loan.
i, ii, and iii (#56)
Who of the following are exempt from registration as an investment adviser under the Investment Advisers Act of 1940? i. an adviser whose clients consist solely of insurance companies ii.. an adviser to 7 private funds with total assets under management in the US of $125 million iii. an adviser whose only office is in Georgia who deals only with Georgia residents, none of whom is a private fund, and does not deal in securities listed on any national securities exchange iv. an adviser in Florida with only 10 Florida clients who advertises in telephone and business directories and specializes in dealing in New York Stock Exchange issue
churning
a BD effecting transactions in a discretionary account that are excessive in size or frequency in view of the financial resources and character of the account is considered to be ______________.
B
a manufacturing company whose debt securities are consistently rated AAA wishes to issue $20 million in 6-month commercial paper. The proceeds will be used to acquire the latest in computer-controlled lathes. Under the SEA of 1933, this issue: A. is exempt from registration, B. is not exempt from registration, C. would only be exempt from registration if the denominations were a minimum of $50,000, D. is straddling a commingled arbitrage
B
all of the following statements regarding investment advisers are NOT true EXCEPT A. there are specific educational requirements that all investment advisers must meet B. the term scalping is the practice whereby an investment adviser, before the dissemination of a securities recommendation, trades on the anticipated short-run market activity that may result from the recommendations C. an investment adviser's books and records must be maintained in an easily accessible place for 3 years under the act D. federal covered advisers may not maintain custody of funds and securities of clients residing in a state if custody is prohibited by the administrator of that state
C
an exemption from registration under the SEA of 1933 is available to securities that are: A. offered to the public only when the total amount is more than 4MM B. sold in more than one state by persons resident in those C. sold only to persons resident in one state when the issuer is a resident doing business within that state D. listed on natl exchanges
B
it would be most CORRECT to state that, as defined in the SEA of 1934, a securities information processor: A. clears trades make on regulated stock exchanges B. distributes information on trades or quotations for nonexempt securities C. processes information provided by the sec D. secures the information necessary to process a trade
B
the investment company act of 1940 permits a reduction in sales charge when reaching a break-point for: A. a designated agent of an investment club B. purchasers meeting the definition of any person C. clients of fee-only investment advisers D. a mother and her 35 year old son purchasing in separate accounts
B
under the SEA of 1933, the sec: A. approives sec registered with it B. attempts to make certain that all pertinent information is fully disclosed C. passes on the investment merit of the sec D. guarantees that the statement made in the prospectus and reg stmnt are accurate
i and ii
which of the following statements under the investment company act of 1940 are TRUE? i. holding companies are not included in the definition of an investment company ii. investment companies are prohibited from owning more than 3% of another investment company's shares iii. mutual funds must file semiannual reports with their shareholders and the sec
i, ii, and iii
which of the following terms are defined in the SEA of 1934? i. securities info processor ii. transfer agent iii. market maker iv. prospectus
