Series 63 - Missed Test Qs
An agent unintentionally sells nonexempt securities that have not been registered. Under the Uniform Securities Act, the broker-dealer may write a letter and offer to buy back the security plus interest, minus any income received. The client gives up the right against the firm to bring action in court if he does not respond within how many days of receipt of the letter?
30 days
Under the USA, a registered person has up to ____ days to appeal any disciplinary finding by the state Administrator.
60
The term sales includes
A contract of sale A contract to sell The disposition for value of an interest in a security A warrant (for common stock of the issuer) given with the purchase of a bond
In some instances, rather than use an investment banker to distribute its securities to the public, an issuer will hire a sales force or use its own employees to make the sales. The individuals involved in the selling in this state would NOT be defined as agents under the Uniform Securities Act if selling on behalf of which of the following issuers?
A savings institution organized and supervised under the laws of any state. the savings association is the only issuer where the act grants an exemption from the definition of agent to those individuals selling on its behalf
Under the Uniform Securities Act, which of the following is a federal covered security?
A unit investment trust registered under the Investment Company Act of 1940
Which of the following are defined as securities under the Uniform Securities Act? An investment in a managed pool of rental condominiums Unsecured debentures sold in a private placement only to accredited investors Bills, notes, and bonds issued by the US Treasury A Roth IRA
An investment in a managed pool of rental condominiums Unsecured debentures sold in a private placement only to accredited investors Bills, notes, and bonds issued by the US Treasury
Under industry rules, customers who wish to trade options must receive a copy of the Options Disclosure Document (ODD):
At or before account approval
Which of the following would subject an agent to a denial of registration? An arrest for fraudulent behavior in selling securities to an insurance company 2 years ago Conviction of a securities-related misdemeanor eight years ago Losing a civil lawsuit three years ago that related to the agent's actions as a landlord Failure to pay filing fees
Conviction of a securities-related misdemeanor eight years ago Failure to pay filing fees
It would be considered fraud for an agent to intentionally tell a client that a bond is yielding 10% when the actual yield is 1% tell a client that a subordinated debenture is a prior lien mortgage bond tell a client that you are so sure the client will not lose money that you have placed funds in escrow equal to the amount of the purchase to cover any possible loss share commissions with another agent in your office without disclosing this fact to the client
I, II, III
The term "agent", as defined in the Uniform Securities Act, would not include which of the following individuals? One who represents a registered broker-dealer selling securities listed on the NYSE to individual clients One who represents an issuer in effecting exempt transactions One who represents an issuer of any exempt security One who represents a registered broker-dealer selling unregistered exempt securities
One who represents an issuer in effecting exempt transactions
The Administrator may, by rule or by order, prescribe the filing of financial reports by which of the following persons registered in his state? Agents Broker-dealers Investment Advisers
Only broker-dealers and investment advisers are required to file financial reports.
A sales agent who is only registered in Nebraska works for a broker-dealer that is registered in all 50 states. A customer who is a resident of North Dakota calls the representative in Nebraska and offers to purchase securities. Under the Uniform Securities Act, the agent should
Reject the order because she is not registered in North Dakota
In order to act as a principal (or agent) 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
Which of the following investment adviser compensation arrangements is (are) permitted under the Uniform Securities Act? The value of a client's account at the start of the year is subtracted from the value at the end of the year. The investment adviser's compensation is 5% of the difference. The investment adviser charges an annual fee of $2,000, but the agreement calls for a waiver of the fee if the client's portfolio value has not increased by at least $20,000. The investment adviser charges a fee of 1% of the average value of the account portfolio during the year. The investment adviser charges a flat fee of $1,000 if the client's portfolio assets are $100,000 or more or $2,000 if the client's assets increase to $200,000 or more.
The investment adviser charges a fee of 1% of the average value of the account portfolio during the year. The investment adviser charges a flat fee of $1,000 if the client's portfolio assets are $100,000 or more or $2,000 if the client's assets increase to $200,000 or more. Flat fees and fees based on portfolio value are permitted.
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, requirements of advisory contracts include which of the following? They must be renewed on an annual basis. They must describe the amount of any prepaid fee that will be returned to the client in the event the contract is terminated. They must prohibit the use of discretion without the client's authorization.
They must describe the amount of any prepaid fee that will be returned to the client in the event the contract is terminated. They must prohibit the use of discretion without the client's authorization.
Registration of agents
To register, an agent must submit a completed application for registration, a filing fee, and a signed consent to service of process.
A registered investment adviser advertises that it is offering a free 6-month subscription to their advisory newsletter. Which of the following qualifiers is acceptable under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers?
Your free subscription will start once we have received your name and mailing or email address
An offer or a sale example
a gift of stock given as a bonus with a purchase of a parcel of real estate
Covered account
a personal or family account for which the firm must provide data protection
Under the Uniform Securities Act, the term person would include any natural person who has a valid U.S. passport a political subdivision an unincorporated association an inter vivos trust
a political subdivision an unincorporated association an inter vivos trust
An agency cross transaction can be described as
a transaction where a person acts as both an investment adviser and broker-dealer in the same transaction
Under the provisions of the Uniform Securities Act, a securities agent may NOT
accept an unsolicited order for an exempt security from a retail client of the broker-dealer who resides in a state in which the agent is not registered
When an issue is registered by coordination, it is also registered under the provisions of the
act of 1933
An individual is an agent for a broker-dealer. He takes and passes the appropriate examinations and forms a sole proprietorship investment adviser. About a year later, he terminates his registration with the broker-dealer. This action would require
amending the form ADV
IAR commissions:
an IAR may not earn commissions on the sale of securities unless also registered as an agent
Although all new accounts must be approved by a designated supervisory before any trading activity may take place, there is one type of account that must be approved by a specially qualified supervisor. That would be
an options account
The NASAA Model Rule on Agency Cross Transactions requires that an investment adviser send a written disclosure document to affected clients that includes such items as the total number of agency cross transactions during the period for the client, as well as the total amount of all commissions or other remuneration the investment adviser has received in connection with agency cross transactions for the client during the period no less frequently than
annually
Under the Uniform Securities Act, an application for registration as an agent will, in the absence of any order, become effective
at noon of the 30th day after filing
Institutional investors include
banks, insurance and investment companies, and, as long as they have assets not less than $1 million, employee benefit plans.
The Uniform Securities Act mandates that contracts between investment advisers and their clients
be in writing, disclose the method of compensation
In general, a broker-dealer will disclose any changes to its fee schedule
by notifying clients of the change in advance
There are 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are
commissions; markups and markdowns; and advisory fees for those firms that are also registered as investment advisers.
An agent lives in Montana and is registered in Montana and Idaho. His broker-dealer is registered in every state west of the Mississippi River. The agent's client, who lives in Montana, decides to enroll in a 1-year resident MBA program in Philadelphia, Pennsylvania. During the 1-year period, when the client is in Philadelphia, the agent may
conduct business with the client as usual
All of the following actions must be completed by the time customers enter their first option trade:
delivery of the options disclosure document (ODD). completion of the new account form. approval by a designated options supervisor.
Information regarding violations
does not need to be kept confidential by the Administrator
Registration by coordination is
effective concurrent with federal registration
NSMIA's purpose
eliminate dual registration
Minimum net capital
for broker-dealers, not agents
The Uniform Securities Act does not require bonding
for issuers
The administrator, by rule, may
forbid investment advisers registered in that state from taking custody of client funds
Under the USA, which of the following are considered a sale or offer to sell? The gift of assessable common stock The gift of nonassessable stock The sale of a warrant to purchase stock
gift of assessable common stock sale of a warrant to purchase stock
A broker-dealer receives a written complaint from one of its customers. The most appropriate action to take is to
immediately reply to the client in writing
A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclose all of the following fees EXCEPT interest on debit balances in margin accounts the cost of overnight delivery services markups and markdowns on trades done as a principal safekeeping of customer funds and securities
markups and markdowns on trades done as a principal There are 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are commissions; markups and markdowns; and advisory fees for those firms that are also registered as investment advisers.
An applicant for registration as an investment adviser discloses on its application to the Administrator that it plans to use palm readers to help determine which investments are most suitable for their clients. Under the Uniform Securities Act, the Administrator
may only justify denial for reason listed in the Uniform Securities Act
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
must register as an agent only if he will receive commissions or remuneration, either directly or indirectly related to the volume of sales
A broker-dealer holds customer securities for safekeeping. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, the broker-dealer
must segregate them
Federal covered securities:
need not be registered with states
PO Box
never acceptable without a physical address
An agent of a broker-dealer registered in Illinois terminates his employment to accept a new position with broker-dealer who is also registered in Illinois. If his previous employer fails to notify the state Administrator of the termination, the agent must
notify the Administrator in Illinois of his termination
SIPC
offers protection for the net account value, up to the SIPC limits, in the event of a broker-dealer's insolvency
An agent may borrow securities from a customer
only if the client is in the business in lending securities
Under the Uniform Securities Act, all of the following must be disclosed in an investment advisory contract EXCEPT a provision prohibiting the investment adviser from being compensated based on a share of capital gains whether or not discretion will be exercised other states in which the investment adviser is registered the manner in which the advisory fee will be computed
other states in which the investment adviser is registered
An agent employed at First Securities, an independent broker-dealer, shares commissions with his uncle, who is employed at ABC Securities, an independent broker-dealer with offices in the same state. This arrangement is
prohibited because the broker-dealers are not under common ownership or control
Broker-dealers may be required by the administrator to:
publish an announcement of the application for registration in a newspaper file various financial reports promptly file a correcting amendment to any document on file with the Administrator which becomes inaccurate or incomplete in any material respect
Under the NSMIA, the term "federal covered adviser" includes a person registered with the SEC under the Investment Advisers Act of 1940 registered as an investment adviser in 2 or more states excluded from the definition of an investment adviser under the Investment Advisers Act of 1940 required to register with the state Administrator
registered with the SEC under the Investment Advisers Act of 1940 excluded from the definition of an investment adviser under the Investment Advisers Act of 1940
Under the Uniform Securities Act, the term agent would include an individual who sells exempt securities on behalf of a broker-dealer in an exempt transaction sells non-exempt securities on behalf of a broker-dealer in an exempt transaction sells securities on behalf of an issuer in an exempt transaction sells revenue bonds as a representative of the city water authority
sells exempt securities on behalf of a broker-dealer in an exempt transaction sells non-exempt securities on behalf of a broker-dealer in an exempt transaction
Under the Uniform Securities Act, Laura Smith must register as an investment adviser representative unless she
sells registered securities solely on a commission basis for a registered broker-dealer
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
shall obtain client consent before completion of the transaction
An agent is discussing an equity index annuity purchase with a client. The agent explains that there are several which she feels are equally suitable for the client, but one of the companies is offering a trip for 2 to Las Vegas for reaching certain sales goals. She continues by stating that this sale will put her over the goal and win her the trip. If the client purchases that annuity, the agent
should pack her bags for the trip; she earned it
State securities law generally limits agents to employment with a single broker-dealer unless
the Administrator, by rule or order, authorizes employment with more than one broker-dealer
An agent has a conservative investor looking for income. The agent recommends a bond of a company the investor has never heard of. To allay the client's fear of loss, the agent states that the payment of interest and principal is guaranteed by a well-known blue chip company. Under the Uniform Securities Act,
the agent is describing a guaranteed security
Consent to service of process
the agreement that the administrator can receive subpoenas on behalf of a registered agent, broker-dealer, or investment adviser involved in any securities sale that violates the USA
Trade confirmations sent by broker-dealers to their customers must always include
the amount of commission charged
A registration statement must include
the amount of securities to be offered in the state, a list of all states that a security will be registered, a copy of the prospectus or offering circular, plus any adverse finding by any court, any Administrator, or the SEC.
The Administrator of State A has just notified Rockland Securities, domiciled in State D, that its application to operate as a broker-dealer in this state is now effective. Which of the following parties would be considered registered in State A? The firm Agents who are officers Agents who are directors Its agents who do business in State A
the firm agents who are officers agents who are directors
In the securities industry, the term contra-party refers to
the person on the other side of the trade
Because, under the USA, many different securities qualify for an exemption from registration, proof of qualification for an exemption is the responsibility of
the person requesting the exemption
All of the following information would be found on a trade ticket EXCEPT the price of the security at the time of the order was the order solicited or unsolicited the customer account number the time of order entry
the price of the security at the time of the order The price at time of order is of no significance, the execution price is.
The issuance of a stop order by a state securities Administrator requires
the subject of a stop order be given the opportunity for a hearing
An agent wishes to share commissions with an administrative assistant who provides many useful services. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents,
this is permitted if the assistant is properly licensed
Following the advice of its portfolio managers, The Rising Tide Hedge Fund executes most of its securities transactions through Momentum Securities, a registered full-service broker-dealer. In order to compensate for the commissions charged, Momentum Securities allows employees of Rising Tide to use furniture and facility at a discounted rate. Under the soft-dollar provisions of Section 28(e)
this would not fall under the safe harbor The use of furniture or office facilities is not included in the list of safe harbor items, regardless of what role the employees of the fund play.
Under the Uniform Securities Act, the Administrator can require a federal covered investment adviser
to file a copy of all of the documents submitted to the SEC
examples of exempt transactions
transactions by executors and estate administrators
An investment adviser representative may share in the profits and losses of a customer's account
under no circumstances
Under the Uniform Securities Act, a client may sue an agent
unless the agent's broker-dealer offers to return the client's purchase price plus interest
An individual who has applied for registration as an agent of a broker-dealer has just passed the Series 63 exam. This individual may begin soliciting brokerage clients
when informed by the broker-dealer that the agent's registration is effective
Which of the following are NOT agents as defined in the USA? A broker-dealer acting on behalf of a properly registered issuer An individual representing the U.S. government in the sale of its securities An individual who, acting on behalf of a broker-dealer, sells exempt securities or engages in an exempt transaction An individual who represents an issuer selling a nonexempt security in a nonexempt transaction
A broker-dealer acting on behalf of a properly registered issuer An individual representing the U.S. government in the sale of its securities
Under the Uniform Securities Act, which of the following is considered a place of business of a registered investment adviser representative? An office from which the representative regularly provides advisory services to clients A location published in a professional directory, indicated on business cards, or telephone book listing that identifies it as a place where the representative will be available to meet or communicate with clients A hotel or auditorium at which the representative has advertised to the public that he will be available to conduct advisory business at that site A hotel meeting room identified only to current clients as a place the representative will be available to conduct advisory business
An office from which the representative regularly provides advisory services to clients A location published in a professional directory, indicated on business cards, or telephone book listing that identifies it as a place where the representative will be available to meet or communicate with clients A hotel or auditorium at which the representative has advertised to the public that he will be available to conduct advisory business at that site
Steven is registered as an agent with Maple Leaf Securities, a Canadian broker-dealer located in Toronto with no offices in the United States. One of Steven's clients has recently made a permanent move to Florida. Which of the following statements with respect to Steven is CORRECT?
As long as the only dealings with this client are with a previously established Canadian tax qualified retirement plan, Steven only has to file an application and a consent to service of process.
Peter Smith, a prominent securities lawyer living in Connecticut, conducts his securities law practice full time in New York state. He must register as an investment adviser in New York state if
Smith's clients, none of whom are residents of New York, receive investment advice as an integral part of Smith's legal services
Which of the following transactions would constitute a violation of the Uniform Securities Act? An individual representing the issuer of a non-exempt security in an exempt transaction without registration as an agent While acting on behalf of an issuer, an individual, who is not registered as an agent, sells shares of an unregistered nonexempt security to fewer than 15 noninstitutional clients The sale of a Canadian government bond to the resident of a state in which the agent is not registered Representing an issuer of municipal bonds without being registered as an agent in the issuer's state
While acting on behalf of an issuer, an individual, who is not registered as an agent, sells shares of an unregistered nonexempt security to fewer than 15 noninstitutional clients The sale of a Canadian government bond to the resident of a state in which the agent is not registered
Under the Uniform Securities Act, the term broker-dealer would include
a person with no office in the state who effects securities transactions with no more than 5 individual residents of the state in any 12-month period
The president of a manufacturing company sells his or her company's common stock to the public and receives a commission substantially lower than others selling that stock. Under the USA, the president is acting
as an agent of the issuer the exclusion from the definition of an agent only applies when the employee of an issuer sells the issuer's securities to employees and does not receive sales related compensation.
There are several ways that a securities professional's registration can be terminated. Nonpunitive termination of a securities professional's registration could be done through
cancellation and withdrawal suspension, revocation, and denial are considered forms of punishment
Under the USA, all of the following statements are true regarding investment advisory contracts EXCEPT that they - cannot allow for prepaid advisory fees - can only allow fees to be performance related under certain limited circumstances - must be in writing
cannot allow for prepaid advisory fees
Under the Uniform Securities Act, persons providing investment advice do not have to register as investment advisers if they have no place of business in the state and they
deal only with institutional investors have five or fewer noninstitutional clients in the state during any 12-month period deal only with other registered investment advisers
The statute of limitations for civil liability
is the earlier of three years after the date of the sale or two years after discovery of the violation
An applicant for registration as an investment adviser discloses on its application to the Administrator that it plans to use palm readers to help determine which investments are most suitable for their clients. Under the Uniform Securities Act, the Administrator
may only justify denial for reasons listed in the Uniform Securities Act
An individual with a place of business in State A manages client assets on behalf of a covered investment adviser. This individual wishes to expand his client base by working one day per week out of the firm's office in State B. Which of the following actions must the person take to practice within that particular state?
pay state registration fees if required by the Administrator
Maplewood Money Managers (MMM), an investment adviser with over $250 million in assets under management, directs a substantial portion of their client's securities transactions to Columbia Securities Incorporated (CSI), a registered broker-dealer. If, in response to the business generated by those transactions, CSI provided software that enabled MMM's investment adviser representatives to generate comprehensive portfolio reports for their client accounts, this would be
permitted as soft-dollar compensation under Section 28(e) of the Securities Exchange Act of 1934
According to the Uniform Securities Act, the Administrator has the power to require persons wishing to register as an agent to
post a surety bond, pay filing fees, and pass an exam.
An investment adviser representative is assuring clients of steady returns on an investment. Under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives and Federal Covered Advisers, this activity is
prohibited because the IAR is guaranteeing a profit
Securities of a nonexempt corporate issuer that are not registered with the SEC may only be registered with the Administrator in which of the following ways?
qualification
All of the following actions must be completed by the time customers enter their first option trade EXCEPT: delivery of the options disclosure document (ODD). receipt of a completed options agreement. approval by a designated options supervisor. completion of the new account form.
receipt of a completed options agreement
federal covered adviser
registered with the SEC under the Investment Advisers Act of 1940 excluded from the definition of an investment adviser under the Investment Advisers Act of 1940
An investment adviser has its home office in State C. Their only business is with registered investment companies, large employee benefit plans, and broker-dealers. They have no place of business in State D, but provide investment advice to several registered investment companies in that state. State D has recently adopted the Uniform Securities Act and the Administrator feels that the IA should be required to register there. Under the USA
the firm does not have to register because they have no place of business in the state and their only clients in that state are registered investment companies
An issuer employs its officers and directors to sell newly issued shares of the company to the public. To comply with the USA, the officers and directors would have to be registered as agents of
the issuer
A new client is opening a margin account and notices the following wording in the documentation: "You are authorized to lend to yourself or others any securities held by you in my margin account and to carry all securities lent as general loans, and you shall have no obligation to retain under your possession and control a like amount of such securities". When the client asks you what this is about, you would respond that
this is the loan consent agreement
A customer buys $20,000 worth of stock with a required 50% initial margin deposit of $10,000 cash. When he places the order, the customer tells the agent he cannot risk more than $4,000 in the stock market. Following a highly unfavorable news release causing a significant price drop, regulators halt trading in the stock. When the stock is permitted to reopen, the stock's price is half the client's purchase price and the client receives a maintenance margin call for $3,000. The customer is outraged that he has a (unrealized) loss of $10,000 and must deposit $3,000 more to maintain the position. In the above situation, the agent has acted
unlawfully, because the agent failed to warn the customer of the true risk of margin trading.
