Series 63 Final Exam 6
An order ticket must include all of the following information, EXCEPT the:
Client's name
An agent has willfully violated a provision of the Uniform Securities Act. If the agent can prove she had no prior knowledge of the rule violated, which of the following choices is the maximum penalty?
$5,000 fine
A broker-dealer that is registered in State A is underwriting the IPO for a local company, which will not be listed. As required, the broker-dealer is making the final prospectus available electronically to all purchasers. How long does the broker-dealer need to keep the prospectus on file electronically?
90 days
Which of the following firms would NOT be required to register as a broker-dealer in State P?
A firm without an office in State P that sells municipal securities to pension plans, banks, and other institutional investors in State P
Which of the following funds may an agent describe as no-load?
A fund with no front-end sales charges or contingent deferred sales charges together with a 12b-1 fee of .25%
Under the Uniform Securities Act, all of the following choices describe an investment adviser representative, EXCEPT:
A person acting in a ministerial capacity who speaks with clients of the firm
Under the Uniform Securities Act, which of the following persons that engages in the business of advising others regarding securities is NOT excluded from the investment adviser definition?
A person whose advice relates only to exempt securities
According to the Uniform Prudent Investor Act (UPIA), a trustee is prohibited from making which of the following investments on the trust's behalf?
A second mortgage on property owned by a real estate partnership for which the trustee is the general partner
According to the Uniform Securities Act, which of the following persons is considered a broker-dealer in State B?
A sole proprietor located in State A who has several clients in State B
Which of the following practices is NOT prohibited under the Uniform Securities Act?
An agent actively soliciting orders in unregistered exempt securities
Which of the following actions is a violation of NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents?
An agent encouraging her clients to purchase an IPO by implying that the firm will repurchase the shares at the POP if they do not increase during the first day of trading
The president of a biotechnology company is selling his corporation's convertible bonds to the public, and is not receiving compensation. In this capacity, he is considered to be:
An agent of the issuer
Under the Uniform Securities Act, which of the following choices is NOT considered a security?
An equity-indexed annuity
Which of the following entities is NOT considered a person according to the Uniform Securities Act?
An individual who has been deemed mentally incompetent
All of the following documents may need to be filed with the Administrator, EXCEPT:
An offering circular for an endowment policy
According to the Uniform Securities Act, a person who is employed by a broker-dealer is NOT considered an agent if she:
Answers and forwards phone calls to registered agents
Antoine is an agent for Cyberspace Securities. One of his clients, Mr. Mole, works for the research department at TransGalaxy, Inc. Until now, Mr. Mole has invested in bond mutual funds and conservative stock funds. Today he calls Antoine and places an order for 10,000 shares of TransGalaxy. Which of the following statements is TRUE?
Antoine should bring this order to the attention of a supervisor immediately, since it may indicate insider trading
Under what circumstances may the Administrator of State X issue a cease-and-desist order on behalf of the Administrator of State Y?
Anytime the Administrator of State X believes that the agent is about to violate the law in State X
Which of the following choices would fall under the definition of an agent?
II and III only
According to the Uniform Securities Act, if a prospective agent has an impaired financial condition, the Administrator may:
Deny registration
Under the Uniform Securities Act, the amount of the bond that a broker-dealer is required to post is:
Determined by the Administrator
An agent sells 1,000 shares of a $75 stock to a new client. Two weeks later, the stock is sold out of the client's account at a loss because the client could not pay for it. In this case, the agent:
Did not make a reasonable inquiry as to the client's financial condition
A person working for a broker-dealer gives information relating to prices and sales of securities but receives no direct compensation related to these activities. This individual:
Does not need to be licensed
A bank president is selling his bank's debentures to banking clients. In this capacity, he is considered to be:
Excluded from the definition of agent
A security issued by a U.S. municipality is considered a(n):
Exempt security
The Administrator has the right to deny, revoke, or suspend the registration statement of an issuer of securities. Under the Uniform Securities Act, which issuer(s) may be subject to this action?
I. A company whose securities are listed on the Canadian National Exchange
An agent holding full discretionary authority over a customer's account may:
I. Buy or sell securities in the account without consulting the customer III. Withdraw money from the account
A client is traveling and would like her investment adviser representative to pay some personal bills while she is away. Under the Uniform Securities Act, such an activity:
I. Should be backed up in writing II. Constitutes custody
An agent for Broker-Dealer A terminates employment and is hired by Broker-Dealer B in the same state. Who must notify the Administrator of these changes?
I. The agent II. Broker-Dealer A III. Broker-Dealer B
Under the Uniform Securities Act, which of the following issuers are NOT required to file a registration statement with the state Administrator?
II. Federal savings and loan associations III. Registered investment companies
An investment adviser is managing a trust that is scheduled to terminate in 50 years. The beneficiaries will receive the income that the trust generates until that time. Once the trust terminates, the corpus will be distributed among the remaining beneficiaries. According to the Uniform Prudent Investor Act, which of the following investment strategies is NOT suitable for this trust?
Investing in Treasuries and money-market securities
Which of the following statements is TRUE regarding custody of client funds and securities by investment advisers?
Investment advisers must notify the Administrator if they have custody of client funds and securities
Which of the following statements about a cease-and-desist order is NOT TRUE?
It must have been issued by the SEC
A broker-dealer is opening securities accounts for retail customers at a bank branch. According to the NASAA Model Rules for Sales of Securities at Financial Institutions, what must the broker-dealer's agents do as part of the account opening process?
Make a reasonable attempt to obtain a written acknowledgement from the client that he has received the disclosures required under this rule
A licensed insurance agent and an investment adviser have offices next door to each other. The insurance agent refers clients to the investment adviser, and the adviser pays the agent a referral fee plus a percentage of the management fee for each client who opens an account with the adviser. The insurance agent:
May be required to register as an investment adviser representative
A client who is interested in buying shares in an IPO asks an agent to underline the most important parts of the preliminary prospectus. The agent:
May not do this without violating the federal securities laws
Roberta Smith has passed the Uniform Securities Agent State Law Examination but has not been granted registration by the Administrator. She may participate in:
None of the activities of an agent
You are the chief financial officer of Colfax Advisers, LLC, a registered investment adviser located in Dallas, Texas. Your firm manages portfolios and has safekeeping services for its clients. The state of Texas requires that all registered advisers who have custody of client assets, maintain a minimum net worth of $35,000. In reviewing the month-end financials for the firm, you calculate the current net worth at $32,875. What would your best course of action be considering these circumstances?
Notify the Administrator within one business day and file a statement of financial condition
Pursuant to the Uniform Securities Act, when do the licenses of broker-dealers expire?
On December 31 of each year
A married couple is only five years away from retirement. They own a home but have not saved anything for their retirement. They consult an agent of a broker-dealer about what they can do to catch up. What should the agent advise them to do?
Open IRA accounts and begin making the maximum possible contributions
The Administrator may require a broker-dealer to take all the following actions, EXCEPT:
Register all its employees as agents
Which of the following business practices is NOT considered unethical for a broker-dealer?
Requiring a client to pay for securities by settlement date
An agent of a broker-dealer is prohibited from engaging in any of the following business, EXCEPT:
Selling a security short on one exchange and buying it back on another exchange for the purpose of making a profit
Which of the following actions by an agent of a broker-dealer is considered an unethical business practice?
Selling shares in a friend's business, outside the agent's normal course of employment
An agent has a client who is in his late 20s. The client's investment profile indicates that his primary objective is capital appreciation and that he has a moderate risk tolerance. The customer also told the agent that he is concerned about inflation and taxes, and wants to keep his portfolio liquid. Which of the following investments should the agent recommend?
Stock index funds
Which of the following statements is TRUE concerning a federal covered security?
The Administrator may require the issuer to pay a filing fee
An investment adviser representative was the subject of a customer complaint two years ago in the state of Idaho and resigned his position as a result. The Administrator conducted an investigation, the results of which were not made public. He is currently applying for a mortgage for a new home in Boise. The bank where he is applying requests his employment history and contacts the investment adviser for verification. The personnel manager at the firm is reluctant to give the bank any information about its former employee and directs the bank to contact the state Administrator. When the bank calls the Administrator, what information can it expect to receive?
The Administrator will not release any details of the complaint
An agent receives a letter from an irate client. The letter is the fifth in the last six months and the language is abusive. The agent forwards it to his supervisor. The supervisor decides against a reply and discards the letter. In this instance, which of the following statements is TRUE?
The Uniform Securities Act requires that a response be made to all written complaints
An agent contacts a client and provides seven valid reasons why Dolphin Corporation shares represent an attractive purchase. He neglects to mention that the Chief Financial Officer has just resigned and that Dolphin is under investigation by a number of regulatory authorities. The client makes a purchase of Dolphin shares. Which of the following statements is NOT TRUE?
The agent faces no civil liabilities since he gave valid reasons why the client should purchase Dolphin stock
An agent handling a client's account may share in the profits or losses as long as all of the following conditions are met, EXCEPT:
The client and agent have a mutual agreement as to the proportion of profits and losses the agent will share
Paul is the CEO of a publicly traded company and has a sizeable position in his company's stock. He is NOT permitted to sell a portion of his shares if:
The company is scheduled to announce its earnings next week
An employee of XYZ Corporation is selling common stock to the public but is not being paid a commission. Under the Uniform Securities Act, which of the following statements is TRUE?
The employee would be considered an agent of the issuer and would need to register
A person is applying for registration as an agent. The applicant filed for bankruptcy nine years ago. The person's home is currently in foreclosure, and there is a tax lien on the property. As if that's not enough, he also has an unsatisfied judgement against him. Which of these issues is the agent NOT required to disclose?
The foreclosure
A Canadian broker-dealer could contact someone in the United States under which of the following circumstances?
The person has had an account with the firm for some time and is on vacation in Arizona
Which of the following choices warrants the denial of registration by the Administrator?
The registrant was convicted of a drug-related felony
Under the Uniform Securities Act, which of the following choices would be considered a nonissuer transaction?
The sale of an NYSE-listed security
A client purchases $15,000 worth of a thinly traded stock. Three weeks later the stock is worth $5,000 and the client sells the stock at a loss. The agent tells the client that he will be allowed to purchase shares of a new issue that is oversubscribed to make up for the $10,000 loss. Which of the following statements is TRUE concerning the action taken by the agent?
This is considered an unethical business practice
A client and an agent are close personal friends. The client places an order for a new issue of stock that the agent's firm is underwriting. The client does not have enough money to pay for the stock on the settlement date. The agent deposits enough of her own funds in the client's account to cover the shortfall, which the client pays back within five business days following settlement. Which of the following statements is TRUE?
This is not an acceptable practice
Michael is dually registered as both an agent and an investment adviser representative. Michael receives fees for giving investment advice and a commission for each investment product that the client agrees to purchase as a result of his advice. Which of the following statements is TRUE?
This practice is not prohibited as long as it is fully disclosed in the adviser's brochure
An IA would like to change the method it uses to calculate the fees it charges for certain clients. The new fee would be performance-based and would be calculated over a specified period. According to the NASAA Model Rule, which of the following statements is TRUE?
This type of fee arrangement is permitted for qualified clients
Rules created based on interpretations of the Uniform Securities Act may be rescinded or amended by the Administrator:
To carry out any of the provisions of the Act at any time the Administrator feels it necessary
According to the Uniform Securities Act, is an agent of a broker-dealer required to provide its clients with disclosure of a material public fact about an issuer?
Yes, if the agent's other comments to the customer could be considered misleading without the additional public information
You are employed by a bank with the title financial adviser. In your capacity at the bank, you are required to hold a general securities registration in order to provide information on securities and to process orders. Your sponsoring broker-dealer is an affiliated firm owned by the bank holding company that also owns the bank you work for. A client comes to the bank seeking advice on certificates of deposit offered by the bank as well as mutual fund investments. Under the Uniform Securities Act, which of the following choices BEST describes what you are allowed to do when giving advice to the client?
You may give the client advice since the broker-dealer and the bank are excluded from the definition of an investment adviser
The Administrator of State X has begun an investigation of your investment adviser firm. You work at the home office in State Y and are registered as an investment adviser representative in State Y. You have received a subpoena to testify at a hearing in State X. Your supervisor states that you cannot be compelled to appear since you are not registered in State X. Which of the following statements is TRUE of this situation?
You must comply with the subpoena and testify
Zweispiel Company is registered as both a broker-dealer and an investment adviser. As a broker-dealer, the firm makes a market in WXYZ stock. Zweispiel believes that this stock would be a very good investment for one of its advisory clients and would like to sell the client some stock from its market-maker account. Which of the following statements is TRUE?
Zweispiel may sell the stock to the client as long as it discloses, prior to the completion of the transaction, that it is acting as a principal and it obtains the client's written consent
