securities questions series 65
There are various ways in which an investment adviser may be compensated for services rendered. All of the following would be permitted under the Uniform Securities Act EXCEPT
1% of the increase in account value over the next quarter
Under the Uniform Securities Act, the Administrator has the authority to issue stop orders approve new issues review standard registration forms
1&3: issue stop order and review standard registration forms
Which of the following statements regarding the powers of the Administrator under the USA would NOT be true?
A final order of the Administrator may not be appealed.
Which of the following is NOT an issuer under the USA?
A) A corporation that proposes to issue securities but has not done so as of yet B) A new company that offers shares to the public in an IPO C) A company whose shares trade on the New York Stock Exchange D)** A broker-dealer trading securities as an agent for the account of others
The Administrator in Texas has jurisdiction over an offer of securities made on a radio program originating in Texas on a radio program originating in Oklahoma in a newspaper circulated in Texas but published in Oklahoma
A) I, II, and III B) I and II C)** I only D) III only
Under the Uniform Securities Act, all of the following are included in the definition of the term exempt transaction except
A)** a sale of securities to an individual investor with a net worth of more than $5 million B) a sale of unregistered nonexempt securities in an unsolicited transaction C) a sale of securities to a bank D) a sale of nonexempt securities to a broker-dealer
If Perfect Pasta, Inc., a privately held company in Illinois that owns four restaurants, wants to issue shares to public investors who are residents of Illinois, the company
A)** must register by qualification B) is exempt from registration because there are fewer than 10 restaurants in the state C) must register by coordination D) may issue shares under the notice filing procedure available for covered securities
Which of the following is NOT a fraudulent business practice when committed by a registered broker-dealer?
Acting as agent for both buyer and seller on a transaction
may deny applications only on the basis of the limitations of the law
An applicant for registration as an investment adviser discloses on Form ADV that it plans to use palm readers to help determine investments most suitable for their clients. Under the Uniform Securities Act, the Administrator
Which of the following actions taken by an agent is not prohibited?
Borrowing money from a bank who is the agent's client
Under the USA, which of the following fits the definition of a sale?
Contract to dispose of a security
Which of the following is an unethical practice for agents of broker-dealers?
Effecting securities transactions not recorded on the books of the employing broker-dealer without prior written authorization
The NASAA Statement of Policy on Unethical or Dishonest Business Practices of Broker-Dealers and Agents describes many actions considered by NASAA to be prohibited under the intent of the USA, as amended. Under that Statement of Policy, which of the following actions would be a prohibited practice? Stating material facts in such a manner that they may be easily understood by a prospective client Making unsuitable investment recommendations even when the client agrees with your assessment Exercising discretion without previous written authority Using inside information, but only if the client makes money as a result of the trade
Making unsuitable investment recommendations even when the client agrees with your assessment Exercising discretion without previous written authority
If a federal covered investment adviser wishes to sell his business to another advisory firm, which of the following statements is TRUE?
No approvals are required.
Based on the Investment Advisers Act of 1940, which of the following would be excluded from the definition of investment adviser?
Persons whose advice relates solely to government securities.
When an investment adviser prepares a BCP, it should be based on the size of the firm the firm's annual net income the number of locations of the firm the types of services provided
the size of the firm the number of locations of the firm the types of services provided
It has been a great year at Capital Funding, Inc., an SEC-registered broker-dealer that is also registered in 22 states. The company decides to share its good fortune with employees by paying a year-end bonus equal to 31% of annual salary. In order for clerical personnel to receive this bonus,
they must be employees of the broker-dealer
It would be permissible for an investment adviser to make which of the following statements?
A) Because of the past performance of previous recommendations, this account is guaranteed to perform at least as well as the S&P 500. B) According to past returns, the account is expected to earn at least 15%, with a minimum of 8% guaranteed. C) The account is guaranteed to earn a rate of return equal to a Treasury bill. D)** Past appreciation of all accounts over the past three years has exceeded 20%.
Under federal law, which act regulates the activities of broker-dealers and associated persons?
A) Trust Indenture Act of 1939 B) Uniform Securities Act C) Securities Exchange Act of 1934 D) Investment Company Act of 1940
Under the USA, the term "security" refers to all of the following EXCEPT
A) put, call, straddle, or option B) certificate of deposit for a security C) bonds D)** commodity futures contract
An agent in this state would be acting illegally if he sold
A)** nonexempt securities properly registered in a neighboring state but not registered in this state B) securities guaranteed by a federal credit union organized under the laws of the state C) federal covered securities not registered in the state D) revenue bonds of Illinois in Florida that were not registered in Florida
Which of the following persons must register as an investment adviser under the Uniform Securities Act?
An investment adviser who only serves institutional clients and whose only office is in this state
If Brokers, Inc., a broker-dealer registered in this state, refuses to comply with the Administrator's order to retain records for 2 years longer than required by the Securities Exchange Act of 1934, which of the following statements are TRUE? The securities Administrator cannot require registrants to retain books and records longer than required by the SEC. Brokers, Inc., is not in violation of the Securities Exchange Act of 1934. Both the securities Administrator and Brokers, Inc., are in violation of both the Securities Exchange Act of 1934 and the Uniform Securities Act. Brokers, Inc., must comply with orders issued by state securities regulators whether or not the orders are in compliance with the NSMIA.
Brokers, Inc., is not in violation of the Securities Exchange Act of 1934. Brokers, Inc., must comply with orders issued by state securities regulators whether or not the orders are in compliance with the NSMIA.
If a federal covered adviser's fiscal year ends on November 30, 2017, it must file its annual updating amendment to its Form ADV no later than
February 28, 2018: The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal-year end.
Under the Uniform Securities Act, which of the following negates a client's right to a civil suit for damages? The advice that is the subject of the suit was given more than 3 years ago. The client has died. The client willingly signed a statement waiving the adviser's compliance with the provision of the act on which the suit is based.
I only, the advice that is the subject of the suit was given more than 3 years ago.
As defined in the NSMIA, federal covered securities would include open-end investment companies registered under the Investment Company Act of 1940 closed-end investment companies registered under the Investment Company Act of 1940 that trade on the OTC Bulletin Board bonds listed on the OTC Link where the company's common stock trades on Nasdaq bonds issued by the Province of Ontario
I,II,III: open-end investment companies registered under the Investment Company Act of 1940 closed-end investment companies registered under the Investment Company Act of 1940 that trade on the OTC Bulletin Board bonds listed on the OTC Link where the company's common stock trades on Nasdaq
Under the USA, which of the following statements regarding the withdrawal of an IAR's registration is TRUE? The withdrawal automatically becomes effective 90 days after filing. If disciplinary action is initiated within 30 days after filing, the automatic effective date may be delayed. The Administrator may institute disciplinary proceedings within one year after the effective date of the withdrawal.
If disciplinary action is initiated within 30 days after filing, the automatic effective date may be delayed. The Administrator may institute disciplinary proceedings within one year after the effective date of the withdrawal.
Written discretionary authorization is not required for an agent to choose which of the following order instructions? Security to be bought or sold Number of shares to be bought or sold Time of execution Price of execution
Time of execution Price of execution
According to the USA, under what circumstances is an employee of a licensed broker-dealer in a state allowed to sell exempt securities as an unregistered agent?
Under no circumstances is an employee of a licensed broker-dealer in a state allowed to sell exempt securities as an unregistered agent.
Under industry regulations, when may an agent be given discretionary power to buy or sell securities for a client?
When authority is given by a written document
On last year's annual updating amendment filed with the SEC, Alpha Investment Advisers indicated that it had more than $140 million in assets under management. Due to a reduction in the size of the firm, this year's annual updating amendment shows that assets under management have fallen to the $75 million level and are expected to remain there. Which of the following actions are required for Alpha?
Withdraw from SEC registration within 180 days of the adviser's fiscal year-end
One of the most significant features of the UPIA is the ability of a trustee to delegate investment decisions to a qualified third party. Delegation is permitted as long as the fiduciary to whom the powers are delegated
acts with skill and caution.
An Administrator may summarily suspend a registration of an agent or an IAR pending final determination of proceedings under the Uniform Securities Act. However, the Administrator may not enter a final order without appropriate prior notice to the applicant as well as the employer or prospective employer of the applicant opportunity for a hearing findings of fact and conclusions of law prior written acknowledgment of the applicant
appropriate prior notice to the applicant as well as the employer or prospective employer of the applicant opportunity for a hearing findings of fact and conclusions of law
An agent registered with a broker-dealer in this state would be permitted to do all of the following EXCEPT
borrow money, with written permission of the customer and the broker-dealer, from an immediate family member who is a client
An investment adviser wishes to engage the services of a third party to solicit new clients for the firm. To be in compliance with the Investment Advisers Act of 1940, the solicitor must be registered as an IAR compensation may not be sales related the solicitor must not be subject to statutory disqualification disclosure of the solicitation arrangement must be made to clients upon request
compensation may not be sales related the solicitor must not be subject to statutory disqualification
An agent made written disclosure to his employing broker-dealer that he intends to execute a series of private securities transactions with individuals who do not have accounts with his broker-dealer. The agent did not acquire express written permission from the broker-dealer and did not receive compensation for executing the transactions, but did receive written acknowledgment of receipt of the agent's notice. In this case, the agent
is guilty of selling away.
A client wants to purchase commercial paper. The licensed agent may indicate to the client that the security need not be registered if the minimum denomination is $50,000 the maximum maturity is 270 days it is rated in 1 of the 3 highest rating categories by a recognized rating agency it is in book entry form
the minimum denomination is $50,000 the maximum maturity is 270 days it is rated in 1 of the 3 highest rating categories by a recognized rating agency
Although generally prohibited, there are conditions under which a state-registered investment adviser is permitted to charge performance-based fees. Which of the following meets the necessary criteria?
A) Charging a performance-based fee to an aggressive entrepreneur whose net worth is $1.8 million who has $500,000 under the adviser's management B) Charging a performance-based fee to an individual with a net worth in excess of $10 million without describing that there is an incentive for the adviser to take greater risks C) Charging a performance-based fee to an individual who meets the definition of an accredited investor D)** Charging a performance-based fee to an elderly client whose net worth is $2.3 million, with only $150,000 under the adviser's management
Which of the following persons are included in the definition of an agent under the Uniform Securities Act? An individual who represents First Securities Brokers, Inc., in selling shares of XYZ Corporation, a New York Stock Exchange listed company An individual who, as part of the job description, represents the City of Chicago in selling its bonds to the public An individual who represents a corporation traded on the New York Stock Exchange in selling securities to the public An individual who is employed by the Federal Reserve Board to sell Treasury Bills to retail investors
A) I and II B) III and IV C) II and IV D)** I and III
Under the Uniform Securities Act, an agent registered in one state may transact business in another state in which he is not registered with which of the following? An existing client visiting the state for a 2-week period An existing client who moved to the state 6 months ago An existing client who moved to the state less than 30 days prior An acquaintance from another state who requests that the agent execute transactions on his behalf
A) II and III B) I and IV C) II and IV D)** I and III
Which of the following is an issuer transaction?
A) 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. B) John purchased shares in XYZ Corporation in a transaction made in the over-the-counter market. C) John sold the securities he had inherited from his father to his neighbor, Peter, at the market price without charging a commission. D)** John's father, a founder of XYZ corporation, purchased shares of XYZ directly from the corporation subsequent to its founding without paying a commission.
Which of the following best describes a nonissuer transaction?
A) One that is generally prohibited under the USA B)** One that occurs between investors in the secondary market C) One that involves investors in the primary market D) One that provides capital to a corporation that is offering stocks or bonds to the public
Which of the following securities of Synergy, Inc., (an issuer whose stock trades on the Nasdaq Stock Market), does NOT have an exemption from registration with the state?
A) Synergy, Inc., debentures B)** Synergy's oil and gas limited partnership units (Synergy, Inc., is the general partner) C) Synergy, Inc., preferred stock D) Synergy, Inc., senior bonds
Under the Uniform Securities Act, a person who exclusively provides advice on commodities is
A) a registered investment adviser representative B) a registered insurance agent C) an options representative D)** not a registered investment adviser
All of the following situations are exempt transactions complying with the requirements of the USA EXCEPT
A) broker-dealer A has put together a syndicate of 15 insurance companies and pension funds to purchase the entire issue of XYZ Corporation's preferred stock B) Mammoth Mutual Fund purchased 250,000 shares of common stock in a nonissuer transaction C) the executor of an estate liquidates 1,000 shares of IBM held by the estate D)** broker-dealer B offers a private placement to 15 regular public customers and closes the offering at the end of 30 days
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 the Investment Advisers Act of 1940, this activity requires written
A) consent of and the disclosure to the client prior to execution of the transaction B) consent of the client C) disclosure to the client D)** disclosure to the client and consent prior to completion of the transaction
Under the brochure rule of the Investment Advisers Act of 1940
A) each client must be delivered a written disclosure statement no later than 48 hours after signing the contract B) each client must be offered a written disclosure statement at least 48 hours before signing a contract C) each client must be offered a written disclosure statement at the time of signing the contract D)** each client must be delivered a written disclosure statement no later than at the time of agreement to contract for the adviser's services
Rachel is an agent registered with a broker-dealer in this state. It would prohibited for her to
A) execute a transaction in a discretionary account after having received the necessary documentation B)** solicit sales of a security whose registration is not yet effective C) disclose to a client that a transaction in a thinly traded stock will result in a higher-than-normal commission D) share in the profits and losses in a client account without a financial contribution to the account
Under the Uniform Securities Act, the Administrator is empowered to do all of the following except
A) issue a cease and desist order. B)** file a civil suit against a broker-dealer who has sold an unregistered nonexempt security to a resident of this state. C) require an agent to submit a written statement relating to an investigation. D) publish information relating to violations committed in the state.
Under the Uniform Securities Act, an accountant who charges hourly fees for securities recommendations in the regular course of his accounting practice is
A) not included in the definition of an investment adviser because he is an accountant B) not included in the definition of an investment adviser because he receives an hourly rate instead of a commission C)** included in the definition of an investment adviser because he is compensated for giving investment advice in the regular course of business D) included in the definition of an investment adviser because accountants are not among the professionals excluded from the definition
One way in which an investment adviser acting in the capacity of an agent in a transaction with a client differs from a broker-dealer performing the same task is that the investment adviser
A) shall notify the Administrator of its capacity in the proposed transaction B) shall disclose the agency capacity before the transaction C) may not charge a commission on the transaction D)** shall obtain client consent before completion of the transaction Explanation In order to act as an agent (or principal) in a trade with an advisory client, there are 2 requirements: The client receives full written disclosure as to the capacity in which the adviser proposes to act Consent of the client Both of these are required before the completion of the transaction.
An agent tells his customer that a corporation has graduated to the level of quality acceptable for trading on the New York Stock Exchange and, therefore, has less market risk. If he recommends the stock to the customer based on the exchange's listing requirements, the agent has acted
A)** fraudulently, because listing on the New York Stock Exchange does not reduce the client's loss exposure and, therefore, the agent misled his client B) fraudulently because the NYSE listing requirements are not a matter of public knowledge C) properly, because the New York Stock Exchange requires that the companies it lists are substantially capitalized D) properly, because returns were not guaranteed
Agents A and B work for the same firm and wish to share commissions. Agent A is licensed in states X, Y, and Z. Agent B is licensed in states X, Y, and C. Which of the following statements is TRUE in regard to their sharing commissions?
Only the commissions from states X and Y could be shared.
An individual is employed by a federal covered investment adviser for the sole purpose of giving advice related to monitoring investment portfolios, but only to qualified employee benefit plans. Under the Uniform Securities Act, this individual is
defined as an IAR because the individual is rendering investment advice
An agent is using social media to try to build her business. If her Facebook page allows for followers to "like" her, that would be considered
interactive content
An investment adviser need not register in a state if it has
no place of business in the state and only advises 3 insurance companies located in the state
Plenitude Premier Solutions (PPS) is registered in State C. If PPS wished to maintain custody of client funds or securities,
prompt notice would have to be given to the State C Administrator on Form ADV.
In order to be in compliance with the rules, an investment adviser would have to disclose that the firm was acting in a principal capacity when
purchasing shares directly from advisory clients
Under the NSMIA, the term "federal covered adviser" includes a person 1 registered with the SEC under the Investment Advisers Act of 1940 2 registered as an investment adviser in two or more states 3 excluded from the definition of investment adviser under the Investment Advisers Act of 1940 4required to register with the state Administrator
registered with the SEC under the investment advisers act of 1940 and registered as an investment adviser in two or more states.
All of the following statements are consistent with the Uniform Securities Act EXCEPT
state Administrators do not require consent to service of process to be submitted with notice filings for covered securities
Under the NASAA Model Rule on Custody Requirements for Investment Advisers, an adviser who has custody of client securities or funds must submit to a surprise audit of client accounts by an independent accountant each year provide an audited balance sheet to the Administrator each year and include a balance sheet with his disclosure statement (brochure) to all prospective clients send monthly statements to clients on the status of their accounts
submit to a surprise audit of client accounts by an independent accountant each year provide an audited balance sheet to the Administrator each year and include a balance sheet with his disclosure statement (brochure) to all prospective clients
As a result of an SEC hearing, an investment adviser's penalty is $5,000 and a 50-day suspension. If the IA wishes to appeal this verdict, a request for review must be filed with
the U.S. Court of Appeals within 60 days of the order
Under the Uniform Securities Act, a client who purchased securities from a broker-dealer may request the trade be rescinded if
the security was sold in violation of the USA
One method of securities registration under the Uniform Securities Act is Qualification. The effective date of a security registered using this method is
when so ordered by the administrator
