Series 63

State "blue sky" laws provide for: I Registration of broker-dealers II Registration of agents III Registration of investment advisers IV Registration of issuers

I II III

Which of the following information is included on an applicant's registration application? I Business history of applicant II Financial condition of applicant III Conviction record of applicant

I II III

An investment adviser is permitted to borrow money from which of the following clients? I An affiliated bank II An unaffiliated bank III An affiliated broker-dealer IV An unaffiliated broker-dealer

I II III IV

Which statements are TRUE regarding the post-registration requirements of the Uniform Securities Act? I Broker-dealers are subject to post-registration requirements II Broker-dealers are not subject to post-registration requirements III Agents of broker-dealers are subject to post-registration requirements IV Agents of broker-dealers are not subject to post-registration requirements

I IV

Under the Uniform Securities Act, all of the following statements about penalties are true EXCEPT: A. Criminal liability may be offset by rescission B. Civil liability may be offset by rescission C. the statute of limitations on criminal actions is 5 years D. the statute of limitations on civil actions is 3 years

a

A company offers a salary reduction defined contribution plan to its employees that adheres to ERISA Rule 404(c). It is administered by the firm's Human Resources (HR) department. The individual in HR who oversees enrollment of employees in the plan receives a bonus for any employees that purchase the company's stock in the plan. This employee is: Correct A. defined as an agent who must register in the State B. defined as an issuer who must register in the State C. not defined as an agent and is not required to register in the State D. not defined as an issuer and is not required to register in the State

a

A customer has a free credit balance at a broker-dealer. The customer makes a verbal request over the phone that the broker-dealer pay the amount of the balance immediately, in check form. Which statement is TRUE? Correct Answer A. The request should be honored as given Incorrect Answer B. The broker-dealer cannot honor the request unless it is in writing C. The broker-dealer cannot honor the request unless the customer makes it in person D. The request cannot be honored since free credit balances are not payable to the customer

a

A Federal Covered Adviser discovers a material error in its Form ADV. When must Form ADV be amended with the State to correct the error? A. Never B. Within 5 business days Correct Answer C. Within 30 calendar days Incorrect Answer D. On the SEC filing anniversary

c

State registration of non-exempt securities is a requirement of the: A. Securities Act of 1933 Incorrect Answer B. Securities Exchange Act of 1934 Correct Answer C. Blue Sky Laws D. Uniform Transfer of Securities Act

c

Which of the following is NOT EXCLUDED from the definition of an "investment adviser"? A. Broker-dealer B. Trust company Correct Answer C. Insurance company Incorrect Answer D. Savings and loan

c

Which of the following is NOT defined as a State under the Uniform Securities Act? A. Guam B. Puerto Rico C. District of Columbia D. Quebec

d

Who administers the Uniform Securities Act? A. SEC B. MSRB C. FINRA Correct D. NASAA

d

NASAA has the power to set record retention rules for a Federal Covered Adviser that cover which of the following records? I Communications to 2 or more persons II E-mails to clients III Trial balances IV General ledger

none

Under the NASAA Statement of Policy, an investment adviser cannot borrow funds from a(n): A. unaffiliated bank B. affiliated broker-dealer C. affiliated investment adviser D. accredited investor

d

Which of the following is NOT defined as correspondence? A. Written letter to a client B. E-mail C. Instant message D. Group e-mail

d

Regarding the NASAA interpretation on splitting of commissions, registered agents may split commissions with: I Registered agents at the same broker-dealer II Unregistered sales assistants at the same broker-dealer III Registered agents at other broker-dealers IV Unregistered sales assistants at other broker-dealers

I

The term "broker-dealer" includes which of the following? I A person in the business of trading securities for his own account or for the account of other persons II Agents who execute trades for broker-dealers III Financial Institutions regulated under federal banking laws IV Issuers of securities

I

Under the Uniform Securities Act, an agent may engage in which of the following transactions? I Performing investment advisory services for customers as long as they are solely incidental to his work as a broker and no fees are charged II Soliciting orders for non-exempt unregistered securities if he is registered in the State III Effecting transactions in a State where he is not registered, but where the broker-dealer is registered IV Effecting transactions in a State where the broker-dealer is not registered, but where he is registered

I

Under the Uniform Securities Act, the omission of material facts when offering or selling a security can result in: I Civil liability II Criminal liability III Criminal penalties

I

Which of the following statements are TRUE regarding Federal Covered Advisers and their registration requirements? Federal covered advisers are: I required to register with the SEC II not required to register with the SEC, but can be required to file notice with the SEC III required to register with the State IV not required to register with the State, but can be required to file notice with the State

I and IV

The Administrator, by order, can deny any exemption from registration for which of the following? I A municipal bond issued by another state, sold in the Administrator's state II An isolated non-issuer transaction III A sale of securities to a bank trust department IV A private placement

II III IV

A person CANNOT transact business as an investment adviser in a State unless that person: I is registered in the State as an Investment Adviser II has no place of business in the State and only handles the accounts of insurance companies in that State III has a place of business in the State and only handles the accounts of insurance companies in that State IV registers in the State as a Broker-Dealer

I II

An agent of a broker-dealer puts up a website that promotes the benefits of dollar cost averaging, including the caveat that it is suitable for investors only if they can maintain their periodic payments regardless of economic conditions and that it requires a long-term investment time horizon. If the website is viewed by an individual in another State where both the broker-dealer and agent are not registered, which of the following disclosures are required on the site in order not to be in violation of the Uniform Securities Act in that State? I "The broker-dealer or agent may only transact business in the State if registered in the State or if exempted or excluded from registration" II "Follow ups or individualized responses to persons in the State that involve either effecting or attempting to effect transactions in securities will not be made absent compliance with State registration requirements or an applicable exemption or exclusion" III "The services being offered do not represent an offer to sell securities or a solicitation of an offer to buy the securities in the State unless the subject securities are registered or are subject to an applicable exclusion" IV "The Securities and Exchange Commission has not approved, nor has it disapproved of offering made in this advertisement"

I II

Exempt securities are NOT subject to which provisions of the Uniform Securities Act? I Advertising filing requirements II Registration requirements III Anti-Fraud requirements

I II

Regarding inspection powers, the State Administrator: I can visit and conduct a walk-in audit of broker-dealer offices intra-State if it is in the public interest or for the protection of investors II can visit and conduct a walk-in audit of broker-dealer offices inter-State if it is in the public interest or for the protection of investors III can neither visit nor conduct a walk-in audit of broker-dealer offices intra-State IV can neither visit nor conduct a walk-in audit of broker-dealer offices inter-State if it is in the public interest or for the protection of investors

I II

Under NASAA rules, the "Brochure" must be: I provided to clients at least 48 hours prior to entering into a written advisory contract II provided to clients at least 48 hours prior to entering into an oral advisory contract III filed with NASAA at least 48 hours prior to entering into a written or oral advisory contract

I II

Under the Uniform Securities Act, an investment adviser is prohibited from taking custody of a client's funds if the: I Administrator prohibits this by rule II firm fails to notify the Administrator that it has custody or may take custody III firm is registered as a broker-dealer as well as an investment adviser

I II

Under the Uniform Securities Act, which of the following are defined as broker-dealers that must register in a State? I Any person who effects securities trades for the account of others II Any person who effects securities trades for his own account III Any person with no place of business in the state that has adopted a de minimis rule who has a single client in the state IV Issuers of securities

I II

Under the Uniform Securities Act, which persons are EXCLUDED from the definition of an investment adviser? A person who gives advice about: I U.S. Government bonds II Agency bonds III Municipal bonds IV Corporate bonds

I II

Which of the following are ALWAYS reasons why an agent would be denied registration in a state? I The agent was convicted of a drug felony 7 years ago II The agent was convicted of a securities misdemeanor 8 years ago III The agent was convicted of drunk driving 5 years ago IV The agent is the subject of a securities litigation that has not yet settled

I II

The State Administrator is empowered to do which of the following relating to the revocation of a registration? I Issue an arrest warrant II File a civil complaint III File a criminal complaint IV Issue a cease and desist order

II III IV

A representative is making a presentation to a married couple, ages 77 and 81, about their need for continuing income as the expected life spans of the general population have increased. The representative is strongly recommending that the couple buy an equity indexed annuity (EIA). Which statements made by the representative would be misleading and fraudulent? I "EIAs guarantee a minimum rate of return that is equal to the Standard and Poor's 500 Index" II "I do not earn any commissions when I sell you an EIA" III "EIAs are tax qualified, allowing you to reduce your taxable income by deducting any contribution that you make" IV "EIAs provide a minimum guaranteed rate of return that is guaranteed by the issuing insurance company"

I II III

As a condition of registration as an agent or principal of a broker-dealer or investment adviser which of the following statements are TRUE? I An examination may have to be taken by the agent II An examination may have to be taken by the principal III Higher passing grades can be required for principals than for agents

I II III

If an agent of a broker-dealer wishes to withdraw his registration, which of the following statements are TRUE? I Both the agent and the broker-dealer must notify the Administrator II Notification to the Administrator of the withdrawal must be made promptly III The withdrawal does not become effective for 30 days IV If there is a customer complaint, the Administrator retains jurisdiction over the agent for a period of 5 years from the withdrawal date

I II III

In connection with the sale of an issue to a customer, the agent of a broker-dealer must disclose any material public facts about the issuer if: I by not disclosing the information, the presentation to the customer would be misleading in any material respect II the customer is not an employee or officer of the issuer and therefore is not in a position to have knowledge of these material public facts III the information was disclosed to the agent by the broker-dealer, regardless of the broker-dealer's policies and procedures covering disclosure of information to customers

I II III

The Administrator, in regards to the registration of securities, may: I impound the proceeds from the sale of the securities until the issuer receives a specified dollar amount II require the filing of original copies of confirmed subscription agreements III require the delivery of a prospectus

I II III

Under the Uniform Securities Act, an Investment Adviser MUST inform a client about: I Change of address II Addition of new partners to the advisory partnership III Change of phone number IV Addition of client accounts from another advisory firm that was "bought out"

I II III

Which of the following must be included in an investment advisory contract under NASAA rules? I The fact that prepaid fees will not be returned if the contract is terminated early II The fact that assignment of the contract is only permitted with customer consent III Whether the contract grants discretionary authority to the adviser IV Disclosure that the fee for managing fixed income securities may be higher than for managing equity securities

I II III

Which of the following securities is/are EXEMPT under the Uniform Securities Act? I Savings and loan association stock II Municipal industrial revenue bonds III Bonds issued by a company listed on the Midwest (Chicago) Stock Exchange

I II III

Which of the following statements are TRUE about Registration by Filing? I The issuer must have minimum earnings levels for the 2 of the past 3 years II Copies of any offering materials must be included in the registration filing III The issuer must not have defaulted on any interest payments within the past year IV Registration becomes effective 10 business days after the filing is complete

I II III

Which of the following with a place of business in the State are required to register in a State? I Investment adviser representative II Federal covered adviser representative III Broker-dealer representative

I II III

During an investigation undertaken under the provisions of the Uniform Securities Act, the Administrator has the power to: I Administer oaths and affirmations II Subpoena witnesses and compel their attendance III Require the production of books and records IV Publish information concerning any violation of a rule or an order

I II III IV

If an agent wishes to withdraw his registration, which statements are TRUE? I The agent must notify the Administrator II The broker-dealer must notify the Administrator III The withdrawal does not become effective for 30 days IV If there is a customer complaint, the Administrator retains jurisdiction over the agent for a period of 1 year from the withdrawal date

I II III IV

If an individual's registration has been revoked by the Administrator within the past 10 years due to a felony conviction resulting from a securities law violation, this individual is prohibited from being registered as a(n): I Agent for another broker-dealer II Principal of another broker-dealer III Representative for an investment adviser IV Principal of an investment adviser

I II III IV

The Administrator, in regards to the registration of securities, may: I impound the proceeds from the sale of the securities until the issuer receives a specified dollar amount II require the filing of original copies of confirmed subscription agreements III require the delivery of a prospectus IV require that the issuer file quarterly reports of sales of the issue

I II III IV

The anti-fraud provisions of the Uniform Securities Act apply to: I the buyer of a security II the seller of a security III exempt securities IV exempt transactions

I II III IV

Under NASAA rules, an: I agent is permitted to share in the gain and loss of a customer account if a joint account is opened with the customer and sharing is proportional to capital contributed II agent is not permitted to share in the gain and loss of a customer account if a joint account is opened with the customer and sharing is proportional to capital contributed III investment adviser representative is permitted to share in the gain and loss of a customer account if a joint account is opened with the customer and sharing is proportional to capital contributed IV investment adviser representative is not permitted to share in the gain and loss of a customer account if a joint account is opened with the customer and sharing is proportional to capital contributed

I IV

Which of the following are requirements for an internet communication (a website) posted by a broker-dealer, agent, investment adviser or investment adviser representative? I The communication must be limited to the dissemination of general information on products or services II The communication must include a firewall or other implemented procedure to ensure that prior to any subsequent communication with prospective clients in the State, that the broker-dealer, agent, investment adviser, or investment adviser representative are registered in the State, or are exempt or excluded from registration III The communication must include a legend that states that: "The broker-dealer, agent, investment adviser or investment adviser representative may only transact business in the State if registered in the State or if exempted or excluded from registration" IV The communication must include a legend that states that: "Follow ups or individualized responses to persons in the State by the broker-dealer agent or investment adviser representative that involve either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made absent compliance with State registration requirements or an applicable exemption or exclusion."

I II III IV

n agent receives confidential information of a material nature about a registered corporation. Which statements are TRUE? I The information cannot be transmitted to someone who might trade that company's stock based on that information II The information cannot be used as the basis for making trades in that company's stock III The information cannot be used to make recommendations to buy that company's stock IV The information cannot be used to make recommendations to sell that company's stock

I II III IV

An Investment Adviser can give advice on: I NYSE listed securities II Options III Commodity futures IV Variable annuities

I II IV

A broker-dealer is a syndicate member in a best efforts underwriting of ABC Common stock. The issue is oversubscribed. The broker-dealer may allocate sales of the issue to: I employees of the issuer II employees of the broker-dealer III officers of the issuer IV officers of the broker-dealer

I III

An adviser opens a new account for a client. The client gives the adviser $20,000 in cash to open the account. The adviser: I must file a CTR report with FinCEN II must file an SAR report with FinCEN III in 15 days IV in 30 days

I III

An agent is prohibited from: I making an offer of a non-exempt unregistered security to a customer II making an offer of an exempt unregistered security to a customer III soliciting a customer to make an offer to buy a non-exempt unregistered security IV soliciting a customer to make an offer to buy an exempt unregistered security

I III

In order for an agent based in State A to qualify for an exclusion from registration when contacting an individual vacationing in State B: I the agent must be registered in State A II the agent must be registered in State B III the individual must be an existing client IV the individual can be a new client

I III

Investment adviser representatives that have a place of business in the State: I must register with the State if they are affiliated with a federal covered adviser II are not required to register with the State if they are affiliated with a Federal covered adviser III must register with the State if they are affiliated with an investment adviser that is registered with the State IV are not required to register with the State if they are affiliated with an investment adviser that is registered with the State

I III

Which of the following are prohibited under the Uniform Securities Act? I Effecting a public offering of unregistered non-exempt securities II Failing to tell a customer all facts about a securities transaction III Failing to tell a customer that a transaction will incur larger than normal expenses IV Maintaining a discretionary account for a customer

I III

Which statements are TRUE about registration as an agent? I Registration becomes invalid if the agent terminates employment with the broker-dealer II Registration is valid immediately after passing the Uniform Securities Exam III Registration is valid until December 31st of that year

I III

Which statements are TRUE regarding licenses held by broker-dealers and agents? I If a broker-dealer's license is suspended, all of its agents' licenses are suspended II If an agent's license is suspended, the broker-dealer's license is suspended III If the broker-dealer's license is suspended, its agents may become associated with another broker-dealer

I III

Which of the following securities are exempt under Uniform State Law? I Bank stock II Bank holding company stock III NYSE listed stocks IV NASDAQ listed stocks

I III IV

If a sole proprietor wishes to register with the State as an Investment Adviser, which of the following documents are required? I Financial statement of the sole proprietor II Income statement of the sole proprietor III An auditor's opinion that the document filed is true and current IV An affirmation made by the sole proprietor that the document filed is true and current

I IV

The amount of commission charged to a customer to effect a securities transaction: I is not required to be disclosed prior to executing the transaction II must be disclosed prior to executing the transaction III is not required to be disclosed on the trade confirmation IV must be disclosed on the trade confirmation

I IV

Under the Uniform Securities Act, registration as an investment adviser is required for a(n): I broker-dealer who renders advice on securities for a fee II broker-dealer who makes recommendations of securities to customers III investment newsletter of a general circulation IV financial planner who creates an investment plan for a fee

I IV

Which records MUST be retained in a state-registered investment adviser's principal office? I Customer securities positions II Correspondence with customers III Investment adviser's bank statements IV Records of customer purchase and sales orders

I IV

Which statements are TRUE about sharing commissions? I An agent is permitted to share commissions with an agent at another broker-dealer that is under common control of the agent's broker-dealer II An agent is not permitted to share commissions with an agent at another broker-dealer that is under common control of the agent's broker-dealer III An agent is permitted to share commissions with an investment adviser representative at another investment adviser that is under common control of the agent's broker-dealer IV An agent is not permitted to share commissions with an investment adviser representative at another investment adviser that is under common control of the agent's broker-dealer

I IV

Which statements are TRUE regarding the post-registration requirements of the Uniform Securities Act? I Investment advisers are subject to post-registration requirements II Investment advisers are not subject to post-registration requirements III Agents of investment advisers are subject to post-registration requirements IV Agents of investment advisers are not subject to post-registration requirements

I IV

Changes to the terms of advisory contracts must be: I filed with the Administrator on Form ADV within 30 days II filed at year end with the Administrator III approved by the customer IV approved by the Administrator

I and III

Filing of advertising with the Administrator is NOT required for: I U.S. Government securities II Municipal securities III Investment company securities IV NYSE-listed securities

I, II, III, IV

A NASDAQ listed issuer plans on offering 5,000,000 new shares in an "add on" offering that will be sold by its underwriters in all 50 States. Which statements are TRUE? I The security must be registered in each State II A notice filing and filing fee are required in each State III A prospectus must be filed in each State IV A consent to service of process must be filed in each State

II IV

If the Administrator summarily suspends a registration of an agent, which of the following statements are TRUE? I The Administrator must notify the agent promptly that the order has been entered II The Administrator must obtain a court order prior to issuing its own order III An opportunity for a hearing must be given within 15 days of written request IV The individual is prohibited from acting as an agent in that State

I, III and IV

An agent of a broker-dealer wishes to create a website to solicit securities business from customers. Based on each customer's responses to questions asked, appropriate investment recommendations will be made. Which statements are TRUE? I The broker-dealer must review and approve the content of the website II The Administrator must review and approve the content of the website III The broker-dealer must be registered in each State where a customer responds to the website IV The agent must be registered in each State where a customer responds to the website

I, III, IV

Limited partnership shares are sold to a bank. Under the provisions of the Uniform Securities Act of 1956, as amended, this transaction is subject to: I advertising filing requirements with the Administrator II anti-fraud provisions as promulgated in the Act III payment of filing fees with the State

II

Ms. Muffy Vanderbilt is an entrepreneurial socialite who has successfully worked as a fund raiser for a not-for-profit organization for the past 10 years. Because of her success at raising money and her extensive list of social contacts, she is recruited by an investment advisory firm to become a representative. Ms. Vanderbilt would be permitted to: I state to customers that she has 10 years of experience in the industry II use the title "investment adviser representative" on her business card III state to customers that she is registered as a representative with the SEC

II

A sales representative who sells unregistered securities to customers in non-exempt transactions: I has committed a felony II has committed a misleading Act III is subject to fines and imprisonment IV is subject to buying back the security at the purchase price plus interest at the legal rate in that State, less any dividend or interest income received on that security

II IV

If an adviser is suspicious about a customer's account activity and believes that there may be illegal activity, then the adviser: I must file a CTR report with FinCEN II must file an SAR report with FinCEN III in 15 days IV in 30 days

II IV

An investment adviser is opening that day's mail and receives a check from a customer made out to the "Jones Cleaning Service" - the check was mailed in error to the adviser. The same day, the investment adviser mails the check back to Jones Cleaning Service. Under NASAA rules, the investment adviser: I is deemed to have taken custody of the customer's funds II has not taken custody of the customer's funds III must keep a record of the check received IV is not required to keep a record of the check received

II III

The intentional omission of material facts when offering or selling a security can result in: I Civil liability II Criminal liability III Criminal penalties

II III

Under NASAA rules, advertisement by investment advisers: I can contain testimonials II cannot contain testimonials III can show the performance of previous recommendations IV cannot show the performance of previous recommendations

II III

Under NASAA rules, advertisements by investment advisers: I can contain testimonials II cannot contain testimonials III can unconditionally make an offer of free services IV cannot unconditionally make an offer of free services

II III

Which of the following items would be included in the computation of an investment adviser's net capital? I Business reputation II Furniture and fixtures III Automobiles IV Organizational expenses

II III

Which of the following statements are TRUE regarding Federal Covered Advisers and their representatives that have a place of business in a state? I Federal Covered Advisers must register in the State II Federal Covered Advisers are not required to register in the State III Representatives of Federal Covered Advisers must register in the State IV Representatives of Federal Covered Advisers are not required to register in the State

II III

Which statements are TRUE regarding the statute of limitations imposed under the Uniform Securities Act for actions that will cause denial of registration by the Administrator? I The statute of limitations for conviction of securities-related offenses that occurred in the U.S. is 5 years II The statute of limitations for conviction of securities-related offenses that occurred in the U.S. is 10 years III The statute of limitations for conviction of securities-related offenses that occurred in a foreign jurisdiction is 5 years IV The statute of limitations for conviction of securities-related offenses that occurred in a foreign jurisdiction is 10 years

II III

Which of the following statements are TRUE regarding customer funds or securities and broker-dealer's funds or securities? I Broker-dealers are allowed to commingle customer funds or securities with their own funds or securities positions II Broker-dealers are prohibited from commingling customer funds or securities with their own funds or securities positions III An agent can take customer securities into his or her own possession to deliver to the broker-dealer IV An agent cannot take customer securities into his or her possession to deliver to the broker-dealer

II IV

Which records MUST be retained in a state-registered investment adviser's principal office? I Financial reports II Customer securities positions III Investment adviser's bank statements IV Records of customer purchases and sales orders

II IV

If an issuer offers a Federal Covered security in a State, the State Administrator may require the issuer to: I register the issue in the State II pay a filing fee in the State III file documents relating to the issue in the State

II and III

If a registration is found to be incomplete, which of the following statements are TRUE? I The issuer must send the Administrator a complete new filing II The issuer must send the Administrator an amendment to the original filing III A new consent to service of process is required IV A new consent to service of process is not required

II and IV

A sales representative who knowingly misappropriates customer securities for personal use: I has committed a fraudulent and misleading Act II has committed a felony III is subject to civil liability IV is subject to possible fines and/or imprisonment

II and IV only

A broker-dealer is offering an IPO to the public. The broker-dealer is permitted to sell the shares to: I its unregistered employees II its registered employees III prospective customers IV its existing customers

III IV

The term "broker-dealer" EXCLUDES which of the following? I A person in the business of trading securities for his own account II A person in the business of trading securities for the account of others III Financial Institutions IV Issuers of securities

III IV

Under the Uniform Securities Act, which statements are TRUE about an agent's registration? I Once an agent is registered in one State, that agent is registered in all 50 States II Once an agent has filed a registration application in a State, it is effective within 10 days of application III Unless the State adopts another rule, registration expires on December 31st of each year IV If an agent terminates employment with a broker-dealer, the agent's registration is terminated

III IV

Which of the following can an agent choose in a customer transaction without a written power of attorney? I Security II Size III Price IV Time

III IV

Which of the following individuals is EXCLUDED from the definition of an "agent" under the Uniform Securities Act? I An individual who represents a broker-dealer selling exempt securities to the public II An individual who represents a broker-dealer selling securities listed on a national stock exchange III An individual who represents an issuer in an exempt transaction IV An individual who represents an issuer in a transaction with existing employees without accepting a commission

III and IV

The State Administrator is empowered to require the filing of advertising and sales literature relating to offers of which of the following? I U.S. Government securities II Municipal securities III Agency securities IV Equity securities

IV

The registration of a broker-dealer may be revoked for all of the following reasons EXCEPT the firm: Correct Answer A. effects short sales in non-exempt securities B. does not maintain required records C. does not file financial reports with the Administrator Incorrect Answer D. does not file advertising with the Administrator

a

Under NASAA recordkeeping rules for investment advisers, a communication to a client must be retained if it is circulated to MORE than: Correct Answer A. 1 person B. 5 persons Incorrect Answer C. 10 persons D. 35 persons

a

Which of the following is NOT typically required to be included in the State registration application of a broker-dealer or investment adviser? A. Consent to service of process B. Business history of applicant C. Fingerprints of the officers D. Books and records of the broker-dealer used by the applicant

d

A Chartered Financial Analyst (CFA) wishing to register in a State as an investment adviser is exempt from: Correct A. taking a proficiency examination in the State B. filing a registration document Form U-4 in the State C. from paying an annual registration fee to the State D. all of the above

a

A Registered Investment Adviser (RIA) is formed and registers in the State on October 15th. The RIA would be required to re-register in the State by: A. December 31st of the year of registration B. January 1st of the year following the year of registration C. April 1st of the year following the year of registration D. January 1st of the second year following the year of registration

a

A broker-dealer is required to initially register with: Correct Answer A. the SEC Incorrect Answer B. FINRA C. the state administrator D. the Governor of the state

a

A customer that lives in State A is traveling by air to State C. While he is changing planes in State B, he receives a call on his cell phone from his broker, who solicits him to buy a security. He places the order with his broker and boards his connecting flight to State C. When he returns to his home in State A, he finds the trade confirmation in his mailbox. Which State Administrator(s) has (have) jurisdiction over the transaction? Correct Answer A. State A only B. State B only Incorrect Answer C. Both State A and B D. States A, B and C

a

A market maker in ABCD stock is currently quoting the stock at: $42.00 Bid (500 shares); $43.00 Ask (1,000 shares) If the market maker receives a customer order to buy 800 shares of ABCD at $42.50, the market maker: Correct Answer A. must update its quote to: $42.50 Bid (800 shares); $43.00 Ask (1,000 shares) Incorrect Answer B. must update its quote to: $42.00 Bid (500 shares); $42.50 Ask (800 shares) C. must send the order to a stock exchange floor for execution D. is not required to take any action

a

A person with no office in a State would be required to register as an investment adviser in that State if that individual: Correct Answer A. has been qualified as a Chartered Financial Analyst and sells securities analyses to customers in the State Incorrect Answer B. only deals with other investment advisers in that State C. only deals with existing customers that are briefly vacationing in that State D. makes solicitations to no more than 5 clients in that State in any 12 month period

a

A plan trustee is considering making an investment in XYZ stock for a trust that has multiple beneficiaries. Under the provisions of the Uniform Prudent Investor Act, this investment decision must give consideration to the role that this investment plays: Correct Answer A. to the overall portfolio strategy Incorrect Answer B. to the investment strategy desired by each beneficiary C. on its own merits, regardless of its impact on the overall portfolio D. in meeting the financial needs of the trustee

a

A registered broker-dealer has an employee who is not registered as an agent in that State. The employee wishes to sell U.S. Government bonds in that State. Which statement is TRUE? Correct Answer A. The employee is prohibited from selling the U.S. Government bonds unless he is registered as an agent in that State Incorrect Answer B. The employee is permitted to sell U.S. Government bonds because the securities are exempt C. The employee is permitted to sell U.S. Government bonds because the transaction is exempt D. The employee is permitted to sell U.S. Government bonds only if no commissions or other "transaction based" compensation is paid

a

A registered representative would ask a potential client which of the following when doing a suitability determination? Correct A. "With the funds that you have available, is it better for you to buy a new car or put the funds into an IRA?" B. "Do you need to set aside funds to take a vacation this year? If this is the case, you will have less to invest." C. "Do you want me to select the investments in the account? If so, you must sign a power of attorney giving me discretion." D. "Do you own your own home and if so, do you have adequate homeowner's insurance?"

a

A registered securities agent solicits a customer to buy mutual fund shares. The customer buys 200 shares, sending a check made out to the fund's custodian bank to the agent. The agent does not record the trade on the books of the broker-dealer. Under the Uniform Securities Act, this action is: Correct A. a prohibited business practice B. allowed, since the transaction is recorded on the books of the mutual fund C. allowed, since mutual funds are exempt from the requirement to record all transactions on the books of the broker-dealer D. allowed as long as no commission is taken on the trade

a

A written customer complaint is received by mail that the firm resolves to the customer's satisfaction. Which statement is TRUE regarding keeping this record? Correct Answer A. A copy of the original complaint along with its resolution must be retained in the file of the agent by the broker-dealer Incorrect Answer B. A copy of the original complaint along with its resolution must be retained at the firm's supervisory office C. A copy of the original complaint along with its resolution must be retained by the State Administrator D. There is no requirement to retain a copy of the complaint because it was resolved to the customer's satisfaction

a

Administrators can require minimum Net Capital and Net Worth for: Correct Answer A. Investment Advisers B. Investment Adviser Representatives C. Issuers Incorrect Answer D. Agents

a

All of the following are EXCLUDED from the definition of a broker-dealer under the Uniform Securities Act EXCEPT a firm with no place of business in the State that: Correct Answer A. has a few clients in the State with a de minimis exemption B. deals exclusively with issuers of securities Incorrect Answer C. deals exclusively with other broker-dealers D. deals exclusively with insurance companies

a

All of the following individuals would be allowed to effect transactions in the account of a customer who is mentally incapacitated EXCEPT a(n): Correct Answer A. individual named in the customer's living will B. individual given a durable power of attorney C. conservator appointed by a court of law Incorrect Answer D. joint tenant that owns the account with the customer

a

All of the following information must be included on a customer confirmation EXCEPT: Correct Answer A. whether the transaction was solicited or unsolicited B. whether a payment for order flow was made C. the customer name and account number Incorrect Answer D. the price of execution

a

An agent has received significant information that is not generally known about a publicly traded company. The agent: Correct A. cannot take any action B. can tell his clients to trade the security C. can tell his immediate family to trade the security D. can tell anyone to trade the security

a

An agent of a broker-dealer is told by a wealthy, well-connected client that "I just talked to the president of ABCD Corp. (an NYSE listed company) and was told that this quarter's results are going to be lousy." Which statement is TRUE? Correct Answer A. The agent can discuss this phone conversation with his branch manager B. The agent can discuss the phone conversation with his spouse C. The agent can discuss the phone conversation with anyone who is registered as an agent in that State Incorrect Answer D. The agent cannot discuss this phone conversation with anyone

a

An individual's registration as an agent would be denied under the Uniform Securities Act for all of the following reasons EXCEPT the individual was convicted: Correct Answer A. of a drug misdemeanor 8 years ago B. of a drunk driving felony 8 years ago C. of a securities misdemeanor 8 years ago D. in a lawsuit brought by the Securities and Exchange Commission 8 years ago

a

An investment adviser representative (IAR) has an oral agreement with a customer to provide advisory services and has given the new customer a glossy brochure describing the adviser's services, but has forgotten to give the customer Part 2 of Form ADV. Which statement is TRUE? Correct Answer A. The customer must receive the Form ADV Part 2 and then has 2 days to sign the agreement B. The customer must be given the Form ADV Part 2 at the time of signing the agreement C. The oral agreement is binding because the customer received the glossy brochure Incorrect Answer D. The customer must receive the Form ADV Part 2 and then has 5 days to sign the agreement

a

An investment adviser representative has worked with a client and his spouse for 10 years and has an excellent relationship with the couple. The representative has been notified that the husband is unconscious and is in the hospital. The account has several open orders that have not yet been executed. What can the representative do regarding the disposition of these orders? Correct A. Instructions can be taken from the customer's spouse B. Instructions can be taken from the customer's attorney C. Instructions can be taken from any relative of the customer that has knowledge of the customer's financial dealings D. Instructions regarding these open orders can be accepted from the customer's tax accountant

a

An investment adviser representative is preparing a comprehensive investment plan for a customer. After completing the plan, the representative finds out that, unless precautions are taken, implementation of the plan could have severe tax consequences for the client. The first step that the investment adviser representative should take is to: Correct Answer A. refer the client to a tax consultant for plan review B. refer the client to a new investment adviser Incorrect Answer C. create a new investment plan for the client D. present the plan as created to the client

a

An investment adviser with its principal office in the State of Kentucky has 3 branch offices in Ohio and 4 branch offices in Tennessee. The State of Kentucky has a minimum net worth requirement for Investment Advisers of $30,000. The net worth requirement for the State of Ohio is $40,000 and the net worth requirement for the State of Tennessee is $35,000. Under the Uniform Securities Act, the minimum net worth that must be maintained by the Investment Adviser is: Correct A. $30,000 B. $35,000 C. $40,000 D. $0, since this is a Federal Covered Adviser

a

An issuer hires an agent and registers that individual to distribute an offering of its securities. Which statement is TRUE under NASAA rules? Correct Answer A. If the agent solicits transactions in a State where the agent is not registered, the issuer can be held liable Incorrect Answer B. If the agent finishes distributing this securities offering and there is time left until the agent's registration lapses at year end, he or she can work for another issuer distributing that issuer's securities C. The agent is only permitted to sell the issuer's securities to employees of that issuer D. The agent must also affiliate with a registered broker-dealer in order to distribute the offering of securities

a

If an agent changes his place of employment from one broker-dealer to another, the registration must be transferred: Correct A. promptly B. within 5 days C. within 10 days D. within 30 days

a

In order for the State Administrator to enter an order revoking or suspending a registration, which requirement MUST be present? Correct Answer A. The order must be in the public interest B. The registration must be misleading C. A complaint must have been received by the Administrator Incorrect Answer D. A willful violation of the Act must have occurred

a

In order to register as a broker-dealer in the State, the Administrator can require filing of a: Correct Answer A. Form BD Incorrect Answer B. Form U-4 C. Form U-5 D. Form U-10

a

Information received by the Administrator in a private investigation: Correct Answer A. can be provided to the officers and employees of the Administrator B. can be provided to the general public on request C. cannot be used by the Administrator as the basis for issuing a cease and desist order Incorrect Answer D. are made available to the public upon the conclusion of the investigation

a

Regarding the authority of State Administrators during an investigation, they: Correct Answer A. have the power to subpoena witnesses B. have no jurisdiction beyond the boundary of their State C. may issue an injunction Incorrect Answer D. may suspend or revoke a registration without notification

a

Registration by Qualification can be stopped by the Administrator if it is in the public interest and the: Correct Answer A. applicant cannot show that the registration is not incomplete in any material respect B. applicant can show that the registration is incomplete in any material respect C. Administrator cannot show that the registration is not incomplete in any material respect Incorrect Answer D. Administrator can show that the registration is incomplete in any material respect

a

Registration of a security in a State means that the: Correct A. issue may lawfully be offered in that State B. information in the registration statement is complete, accurate and true C. State Administrator has passed on the merits of the issue D. the terms of the securities are valid and binding on the issuer

a

The Administrator alleges that an agent of an out-of-state broker-dealer solicited the sale of an unregistered security within that State. The broker-dealer must: Correct Answer A. provide evidence that the security was exempt from registration B. prove that the transaction was unsolicited C. terminate the agent Incorrect Answer D. all of the above

a

The State Administrator has the power to do which of the following to a federal covered adviser? Correct Answer A. Increase the number of audits that the Administrator makes of the adviser B. Establish minimum financial requirements that are more stringent than the requirements of the Investment Advisers Act of 1940 Incorrect Answer C. Require the adviser to file financial reports other than those filed under the Investment Advisers Act of 1940 D. Require the adviser to keep records other than those required under the Investment Advisers Act of 1940

a

The registration of a broker-dealer automatically constitutes the registration of any agent who is a(n): Correct A. partner of the firm B. secretary of the firm C. analyst of the firm D. employee of the firm

a

Under NASAA rules, each Registered Investment Adviser must establish, implement and maintain a Business Continuity and Succession Plan that: Correct Answer A. is based on the investment adviser's business model including the size of the firm, types of services provided, and number of business locations Incorrect Answer B. ensures that key management personnel have been familiarized with the policies and procedures to be followed in the event of a significant business interruption C. designates the investment adviser's independent outside accountant as the person to take responsibility in the event of a significant business interruption D. announces to the public in local newspapers and on the internet the fact that a significant business interruption has occurred

a

Under the NASAA Statement of Policy on Dishonest and Unethical Business Practices, all of the following are considered manipulative and prohibited practices EXCEPT: Correct Answer A. Arbitrage B. Churning Incorrect Answer C. Wash trades D. Painting the tape

a

Under the Prudent Investor Rule, investment decisions must be made based primarily on: A. an overall investment strategy that balances risk and return objectives B. maximization of investment return to provide for the future needs of the beneficiary C. avoidance of losses, even at the expense of a lowered investment return D. those securities stipulated by the State's Legal List

a

Under the Uniform Securities Act, copies of order memoranda maintained by investment advisers must contain all of the following information EXCEPT: Correct Answer A. time of execution of the order Incorrect Answer B. person who placed the order C. name of account for which order was entered D. name of broker-dealer to which the order was sent

a

Under the provisions of the Uniform Securities Act, if an investment adviser wishes to take custody of client funds, the RIA must: Correct A. take out a surety bond B. have a minimum net worth of $2 million C. also be registered as a broker-dealer D. file a consent to service of process

a

Unless varied by the Administrator, each registration application expires: Correct A. December 31st of each year B. December 31st of every second year C. December 31st of every third year D. December 31st of every fifth year

a

When a security is being registered in a State by coordination alongside a federal registration for that security being performed under the Securities Act of 1933, what information must be filed in the State? Correct Answer A. A consent to service of process, copies of the prospectus, and a copy of the articles of incorporation and bylaws B. A disclosure document that details the names and background of the company's directors covering the past 5 years, along with their salaries C. A copy of the prospectus in final form Incorrect Answer D. A notice filing

a

Which of the following individuals is defined as an "agent" under the Uniform Securities Act? Correct Answer A. An individual who represents an issuer in sales of non-exempt securities B. A person who effects securities trades for his own account as a regular course of business C. A person who has no place of business in the State who offers a security to an existing customer who is not a resident of that State Incorrect Answer D. An individual who represents a broker-dealer in reporting completed trades to customers and answering customer account inquiries

a

Which of the following would MOST likely be an investment adviser that is State registered? Correct Answer A. Certified Financial Planner Incorrect Answer B. Adviser with assets under management of $100 million C. Investment Company D. Trust Company

a

Which of the following would be defined as an "issuer" transaction? Correct Answer A. An initial public offering of common stock by a corporation B. The sale of closed-end fund shares in the NASDAQ market C. The sale of a security effected on the New York Stock Exchange floor Incorrect Answer D. The resale of limited partnership interests originally offered in a private placement

a

Which one of the following items would be included in the computation of an investment adviser's net capital? Correct Answer A. Sofa in the investment adviser's office B. Business reputation (goodwill) of the investment adviser C. Copyright held by the investment adviser for a finance book Incorrect Answer D. Franchise right held by the investment adviser

a

Which statement is TRUE regarding the State Administrator's authority to establish recordkeeping rules for broker-dealers? Correct Answer A. The Administrator can only establish recordkeeping rules that are the same as those set by the SEC B. The Administrator cannot establish recordkeeping rules for broker-dealers Incorrect Answer C. The Administrator has the power to set recordkeeping rules if it is in the public interest D. The Administrator can neither establish nor enforce recordkeeping requirements for broker-dealers

a

Under NASAA recordkeeping rules, advisers must retain records for no less than: A. 3 years, with the first 2 years kept in the principal office of the adviser Correct B. 5 years, with the first 2 years kept in the principal office of the adviser C. 7 years, with the first 3 years kept in the principal office of the adviser D. 10 years, with the first 5 years kept in the principal office of the adviser

b

A Canadian broker-dealer has some clients who are "snowbirds" who spend their winters in State Z, which is one of the southernmost States. The broker-dealer does not have an office in State Z and it is not registered there. The clients wish to effect securities transactions while they are residing in State Z. Does this broker-dealer have to register in State Z? Incorrect Answer A. No - the broker-dealer can effect securities transactions in State Z without registering there as long as the firm has 5 or fewer clients in the State Correct Answer B. No - the broker-dealer can effect securities transactions in State Z for existing customers who are temporarily residing in the State C. Yes - because the broker-dealer's customers are physically present in State Z D. Yes - because the customers are being solicited by the broker-dealer to effect securities transactions while they are in State Z

b

A Registered Investment Adviser (RIA) puts some of his clients into a limited partnership investment, for which he receives a referral fee. Which statement is TRUE about this practice? A. This is permitted as long as the RIA determines that the investment is suitable for the client Correct Answer B. This is permitted as long as the RIA discloses the potential conflict of interest to the client Incorrect Answer C. This is prohibited because the RIA is not putting all of his clients into the investment D. This is prohibited because RIAs are not allowed to put customers into partnership investments

b

A Registered Investment Adviser has discretionary control over 50 accounts that range in value from $200,000 to $1,500,000. She receives a free due diligence trip from a real estate limited partnership sponsor to inspect a property in Florida. She is enthusiastic about the investment potential and purchases a $50,000 real estate limited partnership unit in the property for each of her accounts. The RIA disclosed the fact that she received the free trip to each of her customers before making the purchases. Which statement is TRUE? Incorrect Answer A. This is unethical because taking the free due diligence trip and then buying the partnership units for her clients is a conflict of interest Correct Answer B. This is unethical because the adviser did not determine the suitability of the investment for each account C. This is unethical because the adviser violated her fiduciary responsibility to her clients D. This is an ethical business practice

b

A Registered Investment Adviser is the beneficiary in the liquidation of a partnership investment that it made years ago and in settlement, receives the assets of an existing broker-dealer. As a result of this, the directors of the RIA: A. are required to register in the State as directors of the broker-dealer Correct Answer B. are not required to register in the State as directors of the broker-dealer, nor take qualification exams, as long as they are not involved in overseeing the sales or operations of the broker-dealer Incorrect Answer C. must register in the State as directors of the broker-dealer but are not required to take qualification exams D. are not required to register in the State as directors of the broker-dealer

b

A broker-dealer buys a large block of bonds into its inventory account at a discounted price. After holding the bonds for a period of time, prices for the bonds have risen. The broker-dealer then sells the bonds at the appreciated price to all of its customers that hold discretionary accounts. Which statement is TRUE? A. This action on the part of the broker-dealer is unethical because the broker-dealer made a large profit on the transaction Correct Answer B. This action on the part of the broker-dealer is unethical because it was not determined that the purchase was suitable for each discretionary account customer Incorrect Answer C. This action on the part of the broker-dealer is unethical because prior customer approval was not obtained for the purchase made in each customer account D. This action on the part of the broker-dealer is legal and permitted

b

A broker-dealer is a syndicate member in a negotiated underwriting of revenue bonds issued by the City of Jacksonville, Florida Industrial Development Authority. If the issue is oversubscribed, under NASAA rules, it would be unethical for the bonds to be sold to: A. residents of Florida Correct Answer B. employees of the broker-dealer that are Florida residents C. institutional investors in Florida Incorrect Answer D. investors that are non-residents of Florida

b

Which information is NOT required to be recorded on executed order tickets? Incorrect Answer A. Time of order receipt Correct Answer B. Price of security at time of order receipt C. Time of order execution D. Price at which the order was executed

b

A broker-dealer wishes to charge its customers that engage in options trading a separate account service charge in addition to a commission on each trade. The new service charge will be based on the volume of options trading in the account, with the fee set at 10% of the value of monthly options trades, but no less than $25 per month. The arrangement is disclosed to all of the broker-dealer's options customers. Which statement is TRUE? Incorrect Answer A. Broker-dealers are not permitted to charge accounts service fees, so this arrangement is unethical Correct Answer B. This represents an excessive account fee and is a prohibited practice C. The service fee can be charged because the firm's customers were notified of the new fee D. This service fee can be charged because it is fair and reasonable

b

A federally registered investment adviser makes a subsequent material change to its manner of business operations. This event: A. is not required to be reported to the Administrator of each State where the adviser does business Correct Answer B. must be reported promptly to the Administrator of each State where the adviser does business C. must be reported within 30 days to the Administrator each State in which the adviser does business Incorrect Answer D. must be reported to the Administrator when the adviser files its annual ADV Part 2 update with the State

b

A firm is in the business of assisting in mergers and acquisitions of companies. Although the firm does not structure the transactions and does not receive a set fee, the firm does receive monetary compensation in the form of a percentage of the overall deal. Under these facts, the firm is: A. defined as a broker-dealer regardless of the compensation received Correct Answer B. defined as a broker-dealer as the percentage of the overall deal satisfies the compensation component C. not defined as a broker-dealer because it does not receive a predetermined fee Incorrect Answer D. not defined as a broker-dealer based upon the facts of the situation

b

A firm is retained by a company that wishes to make acquisitions of other companies to act as a finder. The finder can be considered to be a broker-dealer: Incorrect Answer A. under no circumstances Correct Answer B. if it receives compensation contingent on the closing of a deal C. if it receives a flat fee for services rendered D. if it signs a written contract with the company

b

A mutual fund sponsor is holding a seminar at the convention center at a resort hotel near Disney World. The seminar will focus on the features of different bond funds offered by the fund sponsor. Which statement is FALSE about an investment adviser representative (IAR) attending the seminar? A. The fund can pay for the IAR's travel and accommodation expenses Correct Answer B. The fund can pay for the travel and accommodation expenses of the IAR's spouse C. The meeting must be educational and not promotional Incorrect Answer D. The nature of the conflict of interest must be disclosed to clients

b

A person with no place of business in a State, who gives advice on securities to an insurance company, is: A. exempt from the anti-fraud provisions of the Uniform Securities Act Correct Answer B. exempt from registration as an investment adviser in the State C. exempt from the advertising filing requirement even if the Administrator so requires Incorrect Answer D. not defined as an investment adviser under the Uniform Securities Act

b

A registration application in a State filed by an Investment Adviser becomes effective: Incorrect Answer A. on a date so determined by the Administrator Correct Answer B. at noon, the 30th day after the application is filed C. at noon, the 45th day after the application is filed D. at noon, the 60th day after the application is filed

b

All of the following events would result in an advisory contract being considered to have been transferred EXCEPT: Incorrect Answer A. a majority partner in the advisory firm dies Correct Answer B. a minority partner in an advisory firm sells his interest to another individual C. a controlling block of stock in the investment adviser is sold to another individual D. the contract is pledged as collateral for a loan

b

An Investment Adviser Representative has started a blog on the Internet to promote her services to interested parties. The blog discloses that the IAR is associated by DEF Advisers, an RIA registered in the State where the IAR is also registered and conducts business. Which statement is TRUE about this? A. This action is prohibited under NASAA rules because blogs can only be sponsored by RIAs, not IARs Correct Answer B. This action is prohibited because the RIA must approve the content of the blog and authorize its distribution C. This action is prohibited because FINRA has jurisdiction over Internet communications and FINRA approval is required Incorrect Answer D. This action is permitted because both the RIA and IAR are State-registered

b

An Investment Adviser has adopted an external Business Succession Plan. Who is responsible for servicing the IA's client accounts if the managing director of the Investment Adviser suddenly dies? Incorrect Answer A. Another Investment Adviser Representative currently in the firm Correct Answer B. Another Investment Advisory Firm to which investment management has been transferred C. The custodian bank that holds client funds and securities positions D. An immediate family member of the deceased managing director

b

An agent and his customer wish to open a joint account by contributing $10,000 each. All of the following statements are true EXCEPT the: A. account must be approved by the broker-dealer in writing prior to any trading Correct Answer B. agent and his customer can agree to share profits in the account as they see fit C. agent and his customer must share profit and loss on a 50/50 basis Incorrect Answer D. agreement between the agent and his customer must be documented in writing

b

An agent for a broker-dealer, both of which are registered in the State of Illinois, receives a telephone call from an existing customer who is on a layover in the airport in Atlanta, Georgia. The customer directs the agent to buy 1,000 shares of ABCD stock at the market. Which statement is TRUE? A. In order to accept this order, the agent must be registered in the State of Georgia only Correct Answer B. In order to accept this order, the agent must be registered in the State of Illinois only C. In order to accept this order, the agent must be registered in both the State of Georgia and the State of Illinois Incorrect Answer D. The agent can accept this order without needing registration in any jurisdiction because it was unsolicited

b

An agent hears from a friend who works at a publicly traded company that the Chairman is being sent to the Betty Ford Clinic and may be relieved of his responsibilities. The agent calls each of his clients with a position in that company and tells them to sell. Which statement is TRUE? Incorrect Answer A. The agent has used material inside information, which is a violation under the Act Correct Answer B. The agent has used a rumor to induce customer trading, which is a violation under the Act C. If the agent discloses the source of the information to his customers, there is no violation of the Act D. This action is permitted under the Act

b

An agent is aggrieved by an action of the Administrator summarily suspending that person's registration. The agent can: Incorrect Answer A. file a claim in civil court Correct Answer B. request that the matter be set down for a hearing C. make a demand for rescission D. do nothing

b

An agent is contacted by a new client that is moving his account from another broker-dealer because he suffered a large loss. The new customer is 80 years old, has $25,000 of annual income and has $117,000 of equity in his home. The customer's investment portfolio consists of $25,000 in a speculative stock mutual fund. This holding was originally worth $140,000. The BEST recommendation to the customer is to: A. continue to hold the speculative stock fund since it should recover its lost value over time Correct Answer B. sell that fund and buy another fund in the same family of funds C. buy another mutual fund in a different family with better performance Incorrect Answer D. buy a variable annuity to protect the customer from future losses

b

An agent of a broker-dealer is approached by the manager of a local bank, who tells that agent the following: "If you have any customers who want an extremely safe investment, you can sell them CDs issued by our bank and we will pay you a $50 referral fee for each completed sale." Which statement is TRUE about the agent engaging in this activity? A. This is permitted because the CD is an exempt security Correct Answer B. This is an unethical activity known as selling away unless the agent obtains written permission of his or her firm to sell the bank's CDs Incorrect Answer C. This is an illegal activity because agents are prohibited by law from selling away from their employing broker-dealer D. This is permitted because the agent is only receiving nominal compensation for each CD sold

b

An application to register securities may be filed by all of the following EXCEPT a(n): A. Broker-Dealer Correct Answer B. Investment Adviser C. Issuer Incorrect Answer D. Officer of the company who is selling shares that are personally owned

b

An application to register securities may be filed by all of the following EXCEPT a(n): A. Broker-Dealer Correct Answer B. Investment Adviser C. Issuer Incorrect Answer D. Person on whose behalf the offering is to be made

b

An elderly client of a Registered Investment Adviser has gifted securities to his adult son at the end of each year, in an amount equal to the annual gift tax exclusion. The client has a stroke that has affected his ability to communicate and the RIA is approached by the adult son about continuing the annual giving of the gift. The RIA should: A. go ahead and continue giving the annual gift because this is in accordance with the prior practice in the account Correct Answer B. ask the son if he has a durable power of attorney granted by the father and obtain this prior to giving the annual gift Incorrect Answer C. follow the instructions in the client's will D. visit with the client and ask him whether he should give the gift, directing the client to squeeze his hand if the answer is "Yes"

b

An investment adviser has placed a block trade for 100,000 shares of ABCD stock. The trade is filled in 2 separate lots of 50,000 shares each, with one lot filled at $50.01 per share and the other lot filled at $50.03 per share. The adviser has developed a methodology of allocating shares purchased at the lowest price to clients with a history of referring other clients and to clients with more assets under management and has been doing this unknown to staff and clients for many years. The investment adviser is guilty of: A. failure to supervise Correct B. breach of fiduciary duty C. failure to adhere to prudent investor standards D. insider trading

b

An investment adviser is exempted from registering in a State if the firm has no place of business in the State and has no more than: A. 1 client in the State in the preceding 12 month period Correct Answer B. 5 clients in the State in the preceding 12 month period Incorrect Answer C. 10 clients in the State in the preceding 12 month period D. 15 clients in the State in the preceding 12 month period

b

An investment adviser that claims that it is a "fee only" adviser could be compensated based on: Incorrect Answer A. commissions earned by executing recommended trades Correct Answer B. a flat annual or hourly fee for all work performed C. 12b-1 fees paid by mutual funds D. soft dollars paid by broker-dealers

b

An investment adviser wants to charge a monthly fee to customers that engage in frequent options trading, equal to 6% of monthly options transaction volume. The adviser includes the options transaction fee in the brochure filed with the Administrator and discusses the fee with each customer that engages in options transactions. Which statement is TRUE? A. The monthly options transaction fee can be charged to customers because it has been disclosed to both the adviser's customers and to the State Administrator Correct B. The monthly options transaction fee cannot be charged to customers because it is excessive C. The charging of a monthly options transaction fee is permitted without restriction D. The monthly options transaction fee is not permitted because such fees can only be charged quarterly or annually

b

An investment adviser with $11 million under management has its main office in New York and a branch office in Connecticut. Which statement is TRUE? A. The investment adviser must register in the State of New York only Correct B. The investment adviser must register in both the State of New York and the State of Connecticut C. The investment adviser must register with the SEC only D. The investment adviser must register in both the State of New York and State of Connecticut and must register with the SEC

b

Customers must exercise their right of rescission within how many days of written notice by the offerer? A. 10 days Correct B. 30 days C. 90 days D. 1 year

b

Which of the following is prohibited in a margin account? A. Buying stocks without making full payment Correct B. Selling short securities that cannot be borrowed by settlement C. Buying and selling the same security on the same day D. Depositing fully paid securities as collateral to buy other marginable securities

b

If a broker-dealer is registered in a State, the State Administrator would NOT be permitted to: A. require the broker-dealer to post a surety bond with the State Correct Answer B. require the broker-dealer to maintain a greater net capital amount than required under Federal law C. require the broker-dealer to file advertising with the State Administrator Incorrect Answer D. require the officers of the broker-dealer to pass a licensing exam, even if they do not deal with customers

b

If a registered investment adviser that takes custody of client funds or securities wishes to send account statements directly to clients, the investment adviser MUST: A. send account statements monthly Correct Answer B. be audited annually on a surprise basis Incorrect Answer C. receive approval from the Administrator D. be a federal covered adviser with at least $100 million of assets under management

b

In order for a "church" bond issue to be exempt, the Administrator: A. must approve of the issue before it is offered to any resident of that State Correct Answer B. must not disallow the exemption within a stated time period after a Notice Filing is made Incorrect Answer C. can require that the issue only be offered to congregants of that church D. can require that the issue be registered in the State by Coordination

b

Investment advisers may be compensated: A. based on a percentage of capital gains or losses in the account Correct B. based on a percentage of the value of all assets under management C. based on the level of trading activity in the account D. based on any of the above choices

b

Joe Jones, the proprietor of Joe Jones Financial Planning Inc., which is registered as an investment adviser in New York State, has decided that he can expand his business by setting up an Internet website. He includes a questionnaire that solicits individuals to transmit information about their investment objective, financial situation, financial needs, risk tolerance level and investment time horizon, which he will use to create a financial model and plan for a fee. Which statement is TRUE? A. Joe Jones Financial Planning Inc. must register with the SEC as an investment adviser, but is not required to register as an investment adviser in each State where customers complete the questionnaire Correct B. Joe Jones Financial Planning Inc. is not required to register with the SEC as an investment adviser, but the firm is required to register as an investment adviser in each State where customers complete the questionnaire C. Joe Jones Financial Planning Inc. is required to register with the SEC as an investment adviser, and the firm is required to register as an investment adviser in each State where customers complete the questionnaire D. Joe Jones Financial Planning Inc.'s current New York State registration is the only requirement

b

John Jones has an individual account at a broker-dealer. John calls his agent at the broker-dealer and states that he wishes to open an account for his brother Jake in his brother's name and buy 1,000 shares of DEF stock. Which statement is TRUE? A. The agent can open the account Correct B. The agent can open the account only if the brother Jake gives authorization in writing C. The agent can open the account only if the manager approves in writing D. The account cannot be opened unless the brother Jake orally approves

b

Michael Michaelson has an MBA in finance and has taught classes at a local college for the past 15 years. He has decided to use his knowledge and acumen in the private sector and registers in the State as an investment adviser. His business will be creating financial plans and implementing them for clients. Michael requests a waiver from the State Administrator from having to pass the Series 65/66 exam based on his educational and teaching background and receives it. He registers as an IA in the State. He wishes to publish an advertisement for his new business. Michael can state which of the following in the advertisement? A. "Because of my extensive finance background, I have been approved by the State to sell financial plans without having to take the examination required of other advisers" Correct Answer B. "My fee schedule, which is non-negotiable, is comparable to that charged by other advisers that do not have my extensive finance background" Incorrect Answer C. "As a registered investment adviser in the State, I have been certified to create financial plans" D. "I have 15 years of experience as an investment adviser in the State"

b

The Administrator is empowered to amend or rescind any rule of the Uniform Securities Act: Incorrect Answer A. if such change is ratified by majority vote of the state legislature Correct Answer B. as he deems necessary to carry out the provisions of the Act C. if the change is approved by the Securities and Exchange Commission D. if the change is approved by the Governor of that state

b

The Department of the Treasury requires reporting to FinCEN of any deposits or withdrawals of cash in the amount of more than: A. $1,000 Correct B. $10,000 C. $100,000 D. $1,000,000

b

The Uniform Securities Act subjects agents and broker-dealers who violate the Act's provisions to all of the following EXCEPT: A. Civil Liability B. Civil Penalties C. Criminal Liability D. Criminal Penalties

b

The amount of commission charged to a customer to effect a securities transaction must be disclosed: A. prior to executing the transaction B. on the trade confirmation C. on the account statement D. on the Form 1099

b

The sharing of commissions on securities transactions is: A. prohibited without exceptions Correct Answer B. permitted between individuals if both hold securities licenses at the same broker-dealer C. permitted between individuals if one holds a securities license and the other holds a state insurance license D. permitted between individuals who work at the same broker-dealer as long as one of them holds a securities license

b

The statute of limitations for filing a claim alleging a criminal violation of the Uniform Securities Act is: A. 3 years Correct Answer B. 5 years Incorrect Answer C. 10 years D. Unlimited

b

To register a successor firm with the State Administrator for the unexpired portion of the current license year, which statement is NOT true? A. The predecessor firm must have ceased business operations and can only conduct winding down transactions Correct Answer B. The successor firm must continue business operations through the end of that license year C. The successor firm must file a Form BD or ADV amendment with the Administrator Incorrect Answer D. The filing becomes effective on the date designated by the licensee

b

Transactions that violate the Uniform Securities Act are voidable at the option of the: A. Issuer Correct Answer B. Purchaser C. Seller Incorrect Answer D. Administrator

b

Under Uniform State Law, an agent is permitted to sell securities for more than 1 broker-dealer: Incorrect Answer A. only if the types of securities offered by each broker-dealer are mutually exclusive Correct Answer B. only if the agent is separately registered with each broker-dealer C. only if one broker-dealer solely offers exempt securities and the other broker-dealer solely offers non-exempt securities D. under no circumstances

b

Under Uniform State Law, the State Administrator can require an investment adviser to retain certain records and can mandate the form in which these records are to be maintained. Regarding these records, which statement is TRUE? A. The Administrator can require the RIA to keep almost any record that the Administrator wishes Correct B. The Administrator can require any record to be maintained that it believes is in the public's best interest but it cannot require records to be maintained that contravene Federal rules C. The Administrator can only require those records to be kept that relate to the solicitation of customer orders in that State D. The Administrator can require any record to be maintained that it believes is in the public's best interest regardless of any SEC rules that cover the same recordkeeping requirements

b

Under the NASAA Statement of Policy on Dishonest and Unethical Business Practices, all of the following are prohibited practices EXCEPT: A. failing to state important facts about a security to a customer Correct B. splitting commissions with another agent registered through the same broker-dealer C. exercising discretion in a customer account without first obtaining a written power of attorney D. quoting a price to a customer without first determining the market for that security

b

Under the NASAA Statement of Policy, an agent of a broker-dealer that has discretionary authority would NOT be subject to the prohibition on excessive trading of a customer account as long as the: Incorrect Answer A. customer consents in writing to each recommended transaction Correct Answer B. account is a non-managed fee based account C. account has consistently increased in value D. broker-dealer discounts the commissions charged to customers that are active traders

b

Under the Uniform Securities Act, a structured security issued by an investment bank is a(n): Incorrect Answer A. exempt security Correct Answer B. non-exempt security C. federal covered security D. investment company security

b

Under the Uniform Securities Act, all of the following persons with no office in the State are exempt from registration as an investment adviser EXCEPT an individual advising: Incorrect Answer A. to banks Correct Answer B. on municipal securities C. to insurance companies D. other investment advisers

b

Under the Uniform Securities Act, an agent's registration can be denied, suspended or revoked for all of the following reasons EXCEPT the: A. application is incomplete B. applicant was convicted of a securities misdemeanor 15 years ago C. application included misleading statements D. applicant lacks experience, and has not qualified by either training or demonstrating knowledge

b

Under the Uniform Securities Act, which of the following is a non-exempt transaction? A. The sale of common stock to an institutional investor such as an insurance company Correct Answer B. A non-issuer transaction of common stock effected through a broker-dealer C. A sale of common stock by a trustee in bankruptcy Incorrect Answer D. A private placement of common stock

b

Under the Uniform Securities Act, which statement is TRUE about registration as an agent for a broker-dealer? A. An unregistered agent can solicit business in a State once the agent's broker-dealer has been registered in that State Correct B. A registered agent can only sell securities that are registered in that State or that are exempt from registration C. If an agent is not registered in a State, the agent may sell exempt securities in that State D. If a registered agent leaves the broker-dealer, only the broker-dealer is obligated to notify the Administrator of the change

b

Under the provisions of the Prudent Investor Act, all of the following statements are true regarding the management of trust accounts with multiple beneficiaries EXCEPT the fiduciary: A. must manage the trust impartially, taking into account the differing needs of the trust beneficiaries Correct Answer B. is judged based on the performance of each individual investment chosen in the account C. should seek to maximize portfolio performance and can assume extra risk consistent with the beneficiaries' investment objectives and needs Incorrect Answer D. is permitted to delegate investment decisions to qualified agents without needing consent of the beneficiaries

b

Under the provisions of the Uniform Securities Act, required records for broker-dealers must be kept in accordance with the provisions of the: A. Securities Act of 1933 Correct Answer B. Securities Exchange Act of 1934 Incorrect Answer C. Investment Advisers Act of 1940 D. Uniform Securities Act as adopted in that State

b

What is the best way to ensure that customer account information held at a broker-dealer is not stolen due to cyber theft? A. Require that the customer send a text message to the firm from a registered device before allowing access B. Maintain customer information in a secure website in encrypted form C. Purchase an adequate level of insurance to cover the full range of cyber risks D. Retain third party vendor to evaluate the firm's cyber risks

b

What is the maximum dollar fine that can be imposed for criminal liability and criminal violations of the Uniform Securities Act? A. $2,500 Correct Answer B. $5,000 C. $7,500 Incorrect Answer D. $10,000

b

When offering a new issue to an elderly customer, the agent prepares a large-type summary to make it easier for the customer to understand the details of the offering. Which statement is TRUE? A. This action is appropriate because it is in the best interests of the customer Correct Answer B. This action is a violation of the Uniform Securities Act C. This action is only permitted if the changes to the prospectus are approved by the SEC Incorrect Answer D. This action is only permitted if the prospectus is filed with the Administrator

b

Which individual is defined as an agent under the Uniform Securities Act? Incorrect Answer A. An individual representing a broker-dealer who takes phone messages from clients that wish to purchase or sell listed stocks Correct Answer B. An individual representing a broker-dealer who takes unsolicited orders for partnership units C. An individual representing an investment adviser who provides advice to clients about investing in securities D. An individual who works for an issuer selling that issuer's stock to the issuer's employees

b

Which statement is TRUE about the participation of an agent of a broker-dealer in an Internet Chat room about investing? A. The agent is prohibited from participating in the Chat room B. The agent can only make general statements about investing in the Chat room C. The agent can make recommendations of registered securities in the Chat room D. The agent can make recommendations of both registered and unregistered securities in the Chat room

b

Which statement is TRUE regarding Federal Covered Advisers and their registration requirements? A. Federal covered advisers are required to register with FINRA under the Securities Act of 1933 Correct B. Federal covered advisers are required to register with the SEC under the Investment Advisers Act of 1940 C. Federal covered advisers are required to register with the State by the North American Securities Administrators Association D. Federal covered advisers do not have to be registered because they only engage in exempt securities transactions

b

A customer wishes to make an investment in growth mutual funds for an Individual Retirement Account. All of the following statements by an agent are prohibited EXCEPT: A. "The fund has averaged a 20% annual growth rate in the past and is guaranteed to produce the same growth rate in the future" Incorrect Answer B. "Last year, the fund paid out dividends of $1.00 per share and capital gains of $.50 per share, for a total income yield of $1.50" Correct Answer C. "The fund yielded 20% last year and is expected to yield the same this year, though the actual yield may be more or less" D. "The fund is registered with the SEC, which has approved of the fund's shares"

c

When an investment adviser files a registration application in a State, which of the following is automatically registered at the same time? A. Individuals employed by the investment adviser as representatives B. Individuals employed by the adviser to perform clerical or ministerial duties Correct C. Individuals who are officers or partners of the investment adviser that will act as representatives D. Shareholders of the investment adviser that will act as representatives

c

A 62-year old married customer has an individual account with the same broker at the same firm for the last 15 years. This customer suffers a stroke and is mentally incapacitated. Which statement is the BEST choice regarding actions that can be taken by the agent to manage the account? A. Verbal instructions may be taken from the spouse until a guardian is appointed by a court of law B. Written instructions may be taken from the spouse until a guardian is appointed by a court of law Correct C. The agent may follow instructions given in a written letter kept in the account file from the customer when the account was opened 15 years ago D. The agent may take whatever actions are prudent to manage the account, as long as these actions are in the customer's best interest

c

A broker-dealer located in State A has all of its agents registered in State A. The broker-dealer has no office in neighboring State B. The broker-dealer would be required to register in State B if its clients in State B consisted solely of: A. broker-dealers B. investment advisers Correct C. government employees of State B D. deposit taking institutions

c

A broker-dealer that is offering a new issue in a State has obtained a legal opinion from its counsel that the issue is exempt from registration in that State. After the offering is completed, the State Administrator determines that the issue should have been registered. Which statement is TRUE regarding the broker-dealer's liability in this situation? A. The broker-dealer has no liability because it can rely on the legal opinion as its defense B. The broker-dealer has no liability because it acted in good faith in the transaction Correct C. The broker-dealer has civil liability since it offered the securities in contravention of State law D. The broker-dealer has criminal liability because it has shown scienter in this transaction

c

A broker-dealer uses summer interns who answer the telephone, give stock quotes, and take orders from clients. The summer interns: A. are not required to be registered in the State as agents because of their temporary status Incorrect Answer B. are not required to be registered as agents in the State because they are performing clerical functions Correct Answer C. must be registered in the State because they are transacting securities business with the public D. must be registered in the State because they are working for a broker-dealer

c

A clearing broker-dealer that makes markets in most NASDAQ securities has decided that holding its trading securities inventory together with its customer's securities positions would result in a substantial cost savings to the firm. As a result, the firm would be able to reduce the amount that it charges its customers for safekeeping of securities. Which statement is TRUE about this action, if taken? Incorrect Answer A. This action is permitted if the firm can demonstrate that overall costs to customers would be lowered B. This action is called rehypothecation and is prohibited Correct Answer C. This action is called commingling and is prohibited D. This action is permitted without restriction

c

A customer calls an agent to complain about the agent's handling of her account. The customer is not satisfied with the agent's response and calls the branch manager to complain. Under NASAA rules, this is: Incorrect Answer A. defined as a complaint that must be recorded and a resolution attempted because it was directed to a manager B. defined as a complaint that must be recorded and a resolution attempted because it was made verbally Correct Answer C. not defined as a complaint that must be recorded and a resolution attempted because it was made verbally D. not defined as a complaint that must be recorded and a resolution attempted because it was not filed with the State Administrator

c

A customer holds 52% of ABCD Corp. common stock, a thinly traded stock listed in the OTCBB. The customer wishes to sell 1% of her holding and requests that the broker display her offering quote. Which statement is TRUE? A. The quote cannot be shown since only dealer offerings are listed in the OTCBB B. The dealer cannot enter the quote unless the State Administrator approves Correct Answer C. The dealer can enter the quote only if it is bona-fide Incorrect Answer D. The dealer can enter the quote without restriction

c

A customer submits a written complaint to your broker-dealer. Later, he changes his mind and asks that the complaint be returned. You should: A. do nothing unless the customer makes a written request B. return the original written complaint to the client Correct Answer C. return a copy of the complaint to the client and retain the original complaint in the firm's files Incorrect Answer D. return the original complaint to the client and retain a copy of the complaint in the firm's files

c

A new customer wants to open a discretionary account by initially depositing $20,000 in cash. He signs the authorization form and indicates to an agent that his investment objective is long-term growth. He wishes that the agent immediately invest his money to take advantage of market timing. Which statement is TRUE? A. As long as the customer is an American Citizen born in the United States and this is verified, the agent may invest the money in a manner consistent with the customer's objective B. Once the new account form is approved by the State Administrator, the agent can start investing as long as the investment is consistent with the customer's objective C. The agent should contact her branch manager as cash deposits or withdrawals exceeding $10,000 must be reported to the Department of Treasury D. The agent should contact her State Administrator as amounts exceeding $10,000 must be reported to the Secretary of the State

c

A person makes an initial application for State registration on March 31st. Which statement is TRUE regarding the filing fee? A. The fee will be pro-rated and only 3/12ths of the annual fee must be paid B. The fee will be pro-rated and only 9/12ths of the annual fee must be paid Correct C. The annual fee is not pro-rated and the full year filing fee must be paid D. No filing fee is due until the annual December 31st renewal

c

A trainee that has not yet been registered as an agent of a broker-dealer would: A. be permitted to accept unsolicited orders from customers B. be permitted to make "cold calls" to prospective customers Correct Answer C. be permitted to report completed trades to customers Incorrect Answer D. not be permitted to have any contact with either existing or prospective customers

c

ADAP Advisers is offered a large block of ACME stock (a NYSE-listed issue) by an institutional investor at a 20% discount to the current market price, if ADAP Advisers is willing to buy the block that day. Which statement is TRUE if ADAP purchases the block for its own account rather than for its customers? A. This action is prohibited without exception, since ADAP Advisers is benefiting at the expense of its customers Incorrect Answer B. This action is permitted if ADAP Advisers rebates any profit that it earns to its customers when it sells the block Correct Answer C. This action is permitted if the purchased stock is not a suitable investment for ADAP's customers D. This action is permitted if the block is purchased in the Third Market during the hours that the NYSE is closed

c

Acme Securities Inc. is registered as a broker-dealer in the State of Utah under the Uniform Securities Act. Acme wishes to begin charging customers a fee for managing accounts on a discretionary basis. Which statement is TRUE? Incorrect Answer A. Acme Securities Inc. is prohibited from charging fees for managing customer accounts under the Uniform Securities Act B. Acme Securities Inc. may charge a management fee as long as it does not discriminate among customers that have discretionary accounts and the charges are fair and reasonable Correct Answer C. Acme Securities Inc. may charge a management fee if it registers in the State as an investment adviser and the charges are fair and reasonable D. Acme Securities Inc. may charge a management fee in its legal capacity as a registered broker-dealer in the State as long as it remains in compliance with the provisions of the Uniform Securities Act

c

All of the following are defined as investment adviser representatives under the Uniform Securities Act EXCEPT a(n): A. majority partner in an advisory partnership Incorrect Answer B. minority partner in an advisory partnership Correct Answer C. employee of an advisory firm who performs ministerial functions relating to portfolio selection D. employee of an advisory firm who performs managerial functions relating to portfolio selection

c

All of the following are defined as securities under the Uniform Securities Act EXCEPT: A. Warehouse receipts B. Preorganization certificates Correct C. Whole life insurance policies D. Mortgage backed certificates

c

All of the following are federal covered securities EXCEPT: A. NYSE listed issues B. NASDAQ listed issues Correct Answer C. SEC registered issues Incorrect Answer D. Registered investment company issues

c

All of the following are synonymous EXCEPT: A. salesman - agent B. broker - agent Correct C. dealer - agent D. salesman - broker

c

All of the following individuals are defined as "sales representatives" under the Uniform Securities Act EXCEPT an individual employed by a broker-dealer who: A. effects securities transactions only in non-exempt securities Incorrect Answer B. effects securities transactions only in exempt securities Correct Answer C. performs the function of giving securities quotations over the phone D. performs the function of accepting orders from customers of the firm

c

All of the following persons are defined as federal covered advisers EXCEPT: A. advisers with $100,000,000 or more of assets under management B. advisers to investment companies Correct C. advisers to sophisticated investors D. advisers not subject to State regulation

c

An Investment Adviser Representative is employed by IZZI Advisers, a Federal Covered adviser. IZZI Advisers has its only office in State Y, and has made a notice filing with State Y's Administrator. The IAR gives a seminar to potential clients in State Z. The IAR is: A. is required to be registered in State Y only B. required to be registered in State Z only Correct Answer C. required to be registered in State Y and also in State Z if an offer is made to more than 5 non-institutional clients Incorrect Answer D. not required to be registered in either State Z or State Y

c

An Investment Adviser Representative writes a blog published on the Internet about how to achieve the best returns for clients, while minimizing risk. Which statement is TRUE about this? A. This can only be done if the Investment Advisory firm that employs the IAR approves of the content B. This can only be done if the Investment Advisory firm that employs the IAR authorizes the distribution of the communication Correct Answer C. This can only be done if the Investment Advisory firm that employs the IAR both approves the content and authorizes the distribution of the communication Incorrect Answer D. This action is prohibited

c

Which State-registered adviser is considered to have taken custody of client funds? A. An adviser that accepts $300 of advisory fees as a prepayment covering the upcoming 5 months B. An adviser that accepts $400 of advisory fees as a prepayment covering the upcoming 4 months Correct Answer C. An adviser that accepts $500 of advisory fees as a prepayment covering the upcoming 6 months Incorrect Answer D. All of the above

c

An Investment Adviser is set up as a sole proprietorship. The owner has hired an Investment Adviser Representative (IAR) to market the firm to potential clients. The most important consideration in the firm's Business Continuity and Succession Plan would be: Incorrect Answer A. the identification of the business model of the Investment Adviser including size of the firm, types of services provided, and the number of locations B. making provision for the Investment Adviser Representative to notify the clients of the Investment Adviser in the event of business interruption caused by the owner's death or unexpected permanent incapacitation Correct Answer C. making provision for the IAR to contact clients to get their permission to assign advisory contracts to a 3rd party in the event that the owner dies or is unexpectedly unavailable D. providing for an appropriate emergency contact person when the investment adviser representative is away on vacation

c

An adviser with $133,000,000 of assets under management has its main offices in Illinois and branch offices in Wisconsin, Indiana, and Missouri. Which statement is TRUE regarding registration of the adviser? A. The adviser must register only in Illinois B. The adviser must register in Illinois, Wisconsin, Indiana, and Missouri Correct Answer C. The adviser must register with the SEC Incorrect Answer D. The adviser must register with the SEC and the States of Illinois, Wisconsin, Indiana, and Missouri

c

An agent of a broker-dealer is told, in confidence, by the President of a publicly held corporation, that this quarter's sales have fallen drastically. Which action should the agent take? A. The agent should immediately disclose this information to the financial news media B. The agent should immediately disclose this information to the firm's proprietary trading desk Correct Answer C. The agent should consider the information to be "confidential" and not disclose it to anyone Incorrect Answer D. The agent should execute solicited customer orders to sell based on the information disclosed

c

An applicant's registration can be denied by the Administrator if that individual was convicted of a misdemeanor in the securities business; or any felony; within the past: A. 2 years B. 5 years Correct C. 10 years D. 15 years

c

An elderly client is visiting an Investment Adviser Representative (IAR) in the IA's office. He tells the IAR that he is going to have major surgery and is concerned about the safety of his stock certificates that he keeps at home in a small fireproof box. The Investment Adviser Representative wishes to help the client out. Which of the following should the IAR NOT do? A. Drive the client to his house to retrieve the stock certificates and then take him to the bank used by the Investment Adviser where the client rents a safe deposit box in the client's name and deposits the securities B. Ask the client for the name of his attorney and then call him to ask for his opinion of what should be done in this situation Correct C. Drive the client to his house to retrieve the stock certificates and then take him to the Investment Adviser's bank and place the certificates in the Investment Adviser's safety deposit box, making sure to write down all of the certificate numbers and other pertinent information D. Drive the client to his house to retrieve the stock certificates and then take him to his bank where the client rents an existing safe deposit box and deposit the securities

c

An institutional buyer is defined under the Uniform Securities Act as: A. an institution with at least $100 million of assets available for investment Incorrect Answer B. an accredited investor as defined under Rule 506 of Regulation D of the Securities Act of 1933 Correct Answer C. any person defined by the Administrator by rule or order D. any institution that is regulated by the Federal Reserve, SEC, or State Insurance or Banking Commissioners

c

An investment adviser buys 1,000 shares of ABC stock for his personal account. Shortly afterwards, the adviser buys 100,000 shares of ABC stock and allocates them to the customer accounts that he manages. This investment adviser has acted: Incorrect Answer A. ethically B. ethically as long as he discloses his ownership position to his customers Correct Answer C. unethically because he is front running his customers' accounts D. unethically because he is trading against his customers' accounts

c

An investment adviser has 3 managing partners and 3 investment adviser representatives. All of the partners have completed the Certified Financial Planner (CFP) program and received the designation. The 3 IARs have been enrolled in a CFP preparation course and are scheduled to take the next CFP exam. The IA publishes an advertisement that states: "All of our partners are Certified Financial Planners." This advertisement is: A. fraudulent and misleading B. unethical because an advertisement cannot include the qualifications of the firm's principals Correct Answer C. permitted since it is true Incorrect Answer D. permitted only after the IARs pass their CFP exams

c

An investment adviser has a fee structure that states: Assets Under Management Annual Fee 0 - $1,000,000 2.00% >$1,000,000 - $5,000,000 1.50% >$5,000,000 - $10,000,000 1.00% >$10,000,000 Negotiable With Client Which statement is TRUE about such an arrangement? A. This is prohibited under NASAA rules because it favors customers with more assets under management Incorrect Answer B. This is prohibited because advisers cannot have negotiable fees Correct Answer C. This is permitted as long as the negotiated fee is less than 1% D. This is permitted without restriction

c

An investment adviser in State A has an investment adviser representative who gives advice to his client, a bank, in State B. When would the investment adviser representative (IAR) be required to be registered in State B? A. The investment adviser representative would never be required to register in State B because the investment adviser representative is already registered in State A Incorrect Answer B. The investment adviser representative would have to register in State B when the firm has 3 other clients in State B Correct Answer C. The investment adviser representative would have to register in State B when the investment adviser opens an office in State B D. The investment adviser representative would have to register in State B if he or she has 3 clients in State A and 3 clients in State B

c

An investment adviser may NOT be compensated with which of the following? A. Wrap fees charged to customers for all services rendered by the adviser B. Soft dollars paid by an executing broker to the adviser in return for trades sent to the broker by the adviser Correct Answer C. Bid-Ask spreads earned when position trades are executed Incorrect Answer D. Commissions paid to an affiliated broker-dealer on trades recommended by the adviser

c

An investment adviser personally owns 10,000 shares of ABC stock. The investment adviser believes that ABC Corp. would be a good investment for one of his customers and transfers his ABC Corp. stock to that customer at the current market price. This action is: A. an exempt transaction under the Uniform Securities Act B. permitted since the adviser believes that it is in the best interests of the client Correct C. an unethical business practice unless the conflict of interest was disclosed in advance to the client and the client gave written permission D. an unethical business practice because all securities sold to customers must be purchased in the public market

c

An investment adviser representative gives a new client who has agreed to buy advisory services the "brochure," but did not obtain the client's signature attesting to this fact at that time. In the brochure is a paragraph stating that the client has the "2 day right of rescission." Which statement is TRUE about this under NASAA rules? A. The IA and IAR have failed to comply with NASAA rules because the customer signature must be obtained at, or prior to, entering into an oral or written advisory contract B. The IA and IAR have complied with NASAA rules because the client has been given the "2 day right of rescission" Correct Answer C. The IA and IAR have failed to comply with NASAA rules because the customer must be given 5 business days after signing the contract to rescind without penalty Incorrect Answer D. The IA and IAR have complied with NASAA rules because the customer was provided with the brochure, at or prior to, entering into the advisory contract

c

Attaching any of the following to a prospectus delivered to a customer in connection with the purchase of a new non-exempt securities offering would be a violation of the Uniform Securities Act EXCEPT a(n): A. summary of the important points in the prospectus prepared by the broker-dealer offering the securities Incorrect Answer B. copy of the most recent advertisement published by the issuer in the mass media Correct Answer C. supplement that presents the issuer's most recent audited financial statements D. internal report prepared by the issuer that shows the next 12 months' sales projections

c

For an investment advisory contract, which of the following is true or possible? Incorrect Answer A. Guaranteeing a client specific investment results B. Assigning a contract without client consent Correct Answer C. Sharing in the investment gains in a client account D. Signing a waiver that the client is not required to be notified of any future investment adviser conflicts of interest

c

If a customer wishes to purchase an initial public offering of a non-exempt security, then the customer must receive a: A. preliminary prospectus at, or prior to, confirmation of sale B. preliminary prospectus at, or prior to, settlement of the transaction Correct Answer C. final prospectus at, or prior to, confirmation of sale Incorrect Answer D. final prospectus at, or prior to, settlement of the transaction

c

If any information filed with the State Administrator is discovered to be incomplete or inaccurate in any material respect, the registrant MUST: A. withdraw from registration and re-file with the State Administrator B. cease business operations until an amended registration has been filed with the State Administrator Correct Answer C. file a correcting amendment promptly with the State Administrator Incorrect Answer D. file an updating amendment with the State Administrator no later than 30 days from discovery

c

In an initial public offering, a member who acted as manager or co-manager CANNOT issue a research report on that company within how many days following the effective date? A. 2 calendar days Incorrect Answer B. 5 calendar days Correct Answer C. 10 calendar days D. 15 calendar days

c

Lincoln Investments is registered as a broker-dealer and as an investment adviser. When opening an account for a customer, the firm has the customer sign a statement that discloses that transactions recommended by Lincoln Advisers are effected through Lincoln Brokerage, which earns commissions on those trades. Obtaining the signed statement would NOT be required if: Incorrect Answer A. Lincoln Advisers recommends the purchase of a security and Lincoln Brokerage sells the customer that security out of its inventory B. Lincoln Advisers recommends the sale of a security and Lincoln Brokerage executes the sale acting as agent in the OTC market Correct Answer C. the customer effects a trade through Lincoln Brokerage that was not recommended by Lincoln Advisers D. the customer signs a waiver covering all disclosures that are legally required

c

NASAA Model Rule 502 (c) applies to: A. State registered advisers only to the extent that the conduct is fraudulent or deceptive B. Federal Covered advisers only to the extent that the conduct is fraudulent or deceptive Correct Answer C. State registered advisers and Federal Covered advisers only to the extent that the conduct is fraudulent or deceptive Incorrect Answer D. Federal covered advisers and State registered advisers only to the extent that the conduct is fraudulent or deceptive

c

The Administrator has the authority to do all of the following EXCEPT: A. subpoena persons and records for investigations B. seek injunctions against persons suspected of violating the Act Correct Answer C. suspend or revoke registration of persons solely if it is "in the public good" Incorrect Answer D. issue a stop order halting sale of an issue if another State halts sale of the issue

c

The Administrator will revoke the registration of an investment adviser if: A. a representative of the adviser becomes insolvent, meaning that he cannot pay his bills as they come due B. an officer of the adviser becomes insolvent, meaning that he cannot pay his bills as they come due Correct C. the adviser becomes insolvent, meaning that the firm cannot pay its bills as they come due D. any of the above

c

The Administrator: A. is empowered to issue stop orders retroactively and can vacate them retroactively Incorrect Answer B. is empowered to issue stop orders retroactively and cannot vacate them retroactively Correct Answer C. cannot issue stop orders retroactively but can vacate them retroactively D. cannot issue stop orders retroactively and cannot vacate them retroactively

c

When must a Registered Investment Adviser (RIA) send a notice of change in ownership? Incorrect Answer A. To each client, when the RIA changes its business form from a sole proprietorship to a partnership B. To the State Administrator, when the RIA changes its business form from a sole proprietorship to a partnership Correct Answer C. To each client, when the RIA changes its business form from a partnership to a sole proprietorship D. To the State Administrator, when the RIA changes its business form from a partnership to a sole proprietorship

c

The President of an investment advisory firm is also a registered representative of a broker-dealer. This fact is disclosed in the adviser's disclosure document. The President buys 50 partnership units for his clients who are suitable. The President does not disclose to the clients that he receives a commission on each partnership unit purchased by his clients. Under NASAA Rules on Unethical Business Practices for Investment Advisers and Federal Covered Advisers, is this permitted? A. Yes, because the President is properly registered as an agent of a broker-dealer and this fact is disclosed in the adviser's disclosure document B. Yes, because the adviser determined the suitability of the investment for each of his clients C. No, because the adviser should have specifically informed each client that he would earn a commission on each limited partnership unit sold D. No, because officers of investment advisers are not permitted to receive commissions on recommended transactions in addition to collecting an advisory fee

c

The Prudent Investor Act requires that fiduciaries manage the assets of their beneficiaries based upon: A. legal list requirements Incorrect Answer B. efficient market theory Correct Answer C. modern portfolio theory D. value investing theory

c

The amount of commission charged to a customer to effect a securities transaction: A. is not required to be disclosed Incorrect Answer B. must be disclosed prior to executing the transaction Correct Answer C. must be disclosed on the trade confirmation D. must be disclosed on the account statement

c

The fiduciary engaged in the administration of a trust finds that, under the directions of the trust document, there is a conflict of interest relating to a proposed investment. Under the provisions of the Prudent Investor Act, the fiduciary: A. should do nothing and permit the investment to be made B. is permitted to allow the investment as long as it is made in accordance with the Prudent Investor rule Correct Answer C. should ask the settlor of the trust to amend the trust document by express provision, expanding or restricting the provisions of the trust document for this investment Incorrect Answer D. should not permit the investment, otherwise the fiduciary is subject to liability for breach of fiduciary responsibility

c

The statute of limitations for criminal violations of the Uniform Securities Act is: A. 1 year B. 3 years Correct C. 5 years D. 6 years

c

The statute of limitations on criminal suits from alleged fraudulent violations of the Uniform Securities Act is: A. 1 year B. 3 years Correct Answer C. 5 years Incorrect Answer D. 10 years

c

Two individuals sponsor golf tournaments to which they invite venture capitalists that seek to be matched with wealthy potential investors. The individuals sponsoring the event intend to collect a finder's fee paid by the venture capitalist if he or she receives funds from an investor that attended the golf tournament. Which statement is TRUE based on these facts? A. The 2 individuals are not defined as broker-dealers since they are in the business of hosting golf tournaments B. The 2 individuals are not defined as broker-dealers because they do not receive compensation from investors Correct Answer C. The 2 individuals are defined as broker-dealers because they will receive compensation if an investor is matched to a venture capitalist Incorrect Answer D. The 2 individuals are defined as broker-dealers because they are matching a buyer and seller of securities

c

Under NASAA rules for State-registered advisers, transactions must be recorded in customer account records no later than: Incorrect Answer A. 10 business days following the end of the month in which the transaction was effected B. 20 business days following the end of the month in which the transaction was effected Correct Answer C. 10 business days following the end of the quarter in which the transaction was effected D. 20 business days following the end of the quarter in which the transaction was effected

c

Under Uniform State Law, advisory contracts: A. can be executed orally B. can be executed electronically Correct Answer C. can be executed in writing Incorrect Answer D. any of the above

c

Under the NASAA Model Rule covering Investment Adviser records, the adviser's articles of incorporation must be retained for how long after the adviser ceases business operations? A. 1 year B. 2 years Correct Answer C. 3 years Incorrect Answer D. 5 years

c

Under the Prudent Investor Act, a fiduciary is: A. not permitted to delegate investment authority over trust assets Incorrect Answer B. obligated to make investments in securities that are rated "BBB" or better Correct Answer C. obligated to maximize overall portfolio return consistent with the level of risk assumed D. required to register with the Administrator in the State where the trust is formed

c

Under the Uniform Securities Act, a person is excluded from the definition of an investment adviser if he or she gives advice solely about: A. stocks Incorrect Answer B. municipal bonds Correct Answer C. fixed annuity contracts D. variable annuity contracts

c

Under the Uniform Securities Act, all of the following are defined as investment adviser representatives EXCEPT a(n): A. employee who sells advisory services B. officer of the advisory firm overseeing client portfolios Correct C. clerical employee of the advisory firm D. employee of the advisory firm who performs research on securities

c

Under the Uniform Securities Act, if an agent withdraws his or her registration, the withdrawal becomes effective: A. immediately Incorrect Answer B. after 10 days Correct Answer C. after 30 days D. only when the Administrator so allows

c

Under the Uniform Securities Act, the annual renewal of an agent's registration must occur: Incorrect Answer A. within 15 days after the agent's initial 12-month registration date B. within 15 days of January 1st Correct Answer C. no later than December 31st D. on January 1st

c

Under the provisions of the Prudent Investor Act, a Registered Investment Adviser should consider all of the following when investing and managing trust assets EXCEPT: A. General economic conditions B. Possible effect of inflation Correct Answer C. Trading patterns of plan beneficiaries Incorrect Answer D. Investment tax consequences

c

Which action by a fiduciary is a probable violation of the "Prudent Man" rule? Incorrect Answer A. Writing call options against stocks that represent 60% of a portfolio's assets B. Allocating 10% of a portfolio's assets to foreign securities investments Correct Answer C. Allocating 60% of a portfolio's assets to Initial Public Offerings D. Allocating 10% of a portfolio's assets to each of 10 differing asset classes

c

Which of the following actions is a violation of the Uniform Securities Act? A. Failing to charge a mark-up to a customer in a principal transaction B. Failing to charge a commission to a customer in an agency transaction Correct Answer C. Improperly using inside information Incorrect Answer D. Failing to state every fact to a customer

c

Which of the following is an unethical business practice? A. Publication of a tombstone announcement by a broker-dealer in the local newspaper on the effective date of a registered new issue offering managed by that broker-dealer B. Publication of a research report by a broker-dealer that shows the performance of prior recommendations made by that broker-dealer during the prior 12 months Correct C. Publication of a report by an agent detailing the performance of transactions recommended by that agent over the prior 12 months D. Publication of a report by a broker-dealer written by an agent detailing the performance of transactions recommended by that agent over the prior 12 months

c

Which of the following is considered to be "churning"? Incorrect Answer A. Buying ABC stock on the NYSE and simultaneously selling ABC stock short on the Midwest Stock Exchange B. Day trading by an agent with discretionary authority in a customer margin account where the customer has a speculative investment objective C. Swapping a municipal bond for another municipal bond to obtain a capital loss deduction Correct Answer D. Buying and selling ABC stock on the same day in a discretionary account that has a long term growth objective

d

Which of the following securities can be registered by qualification in a State? A. Direct Participation Program B. Fractional Interest in an Oil and Gas Program C. Voting Trust Certificates Correct D. All of the above

d

A Registered Investment Adviser that trades securities on the behalf of customers is required to keep a record of the transaction that includes all of the following information EXCEPT the name of the: A. Investment Adviser Representative (IAR) who placed the order B. broker-dealer to which the order was sent for execution Incorrect Answer C. person at the Investment Adviser who recommended the transaction Correct Answer D. agent at the broker-dealer who executed the transaction

d

A broker-dealer has a website that is continuously updated. Under NASAA rules, the broker-dealer is: A. not required to maintain copies of the superseded web pages B. not required to maintain copies of any of the web pages because record retention rules only apply to printed advertising C. required to maintain the current web pages only Correct D. required to retain both the current and superseded web pages

d

A broker-dealer is offering an IPO to the public. The broker-dealer is: A. permitted to withhold shares from sale to the public for its unregistered employees B. permitted to withhold shares from sale to the public for its registered employees C. permitted to withhold shares from sale to the public for its proprietary trading account D. not permitted to withhold shares from sale to the general public

d

A broker-dealer receives a court order directing it to turn over the customer account records of Joe Jones, a customer with a substantial account. Which statement is TRUE? A. The broker-dealer is not obligated to comply with the order if Joe Jones directs it not to do so Incorrect Answer B. The broker-dealer is obligated to comply with the order only if it has been issued by the Administrator C. The broker-dealer is not obligated to comply with the order at its discretion D. The broker-dealer is obligated to comply with the order and must disclose the information

d

A customer buys shares of a stock that had its initial public offering 5 years ago. Which statement is TRUE regarding prospectus delivery? A. The prospectus must be delivered to the customer within 24 hours of confirmation Incorrect Answer B. The prospectus must be delivered to the customer within 3 business days of the transaction C. The prospectus must be delivered to the customer no later than settlement of the transaction Correct Answer D. A prospectus is not required because the initial public offering happened 5 years ago

d

A firm's market making desk, aware that the firm is about to publish a bullish research report on ABCD stock, purposefully increases its long position in order to satisfy anticipated retail demand. This action is: A. permitted without restriction B. permitted as long as the research report is released within 48 hours of the first trade made to increase the firm's position C. permitted as long as the market listing the stock is notified, in writing, of the impending research report Correct D. prohibited

d

An investment adviser representative has a customer that has been telling all of his friends that "My adviser has been great - for each of the last 3 years, my portfolio grew by 20%." Which statement is TRUE? A. The customer has committed an unethical practice under NASAA rules because giving testimonials is prohibited Correct Answer B. The investment adviser representative can ask the customer for the names of those friends and solicit their business C. The investment adviser representative can use the customer statement in an advertisement to solicit new business Incorrect Answer D. The investment adviser representative cannot make use of this statement because of the restrictions imposed by the "tipper-tippee" doctrine

d

A lawyer, representing one of your clients who has an individual account, calls and tells you that he has just been given trading authorization to effect securities transactions for the customer. He places an order to buy $10,000 worth of a stock which trades on the NYSE. Which statement is TRUE? A. You can submit the order as given as long as the branch manager approves of the transaction B. You can submit the order as long as you mark the order ticket "unsolicited" Incorrect Answer C. You can call the customer and, upon verbal confirmation that the lawyer has been given trading authorization, you can submit the order Correct Answer D. You can call the customer and ask him if he wants to buy the $10,000 worth of stock and, upon his verbal authorization, you can submit the order

d

A registered representative recommends a stock that is not registered in the State that should have been registered in the State. The representative has told his clients that it is a good investment that should be profitable in the near term. The representative: A. has not willfully violated the Uniform Securities Act but the action is still fraudulent and subjects the registered representative to criminal prosecution B. is subject to imprisonment and a fine Incorrect Answer C. has willfully violated the Uniform Securities Act and is guilty of a fraudulent act Correct Answer D. has not committed a felony or a fraudulent act because he did not know the security should have been registered

d

All of the following are EXCLUDED from the definition of an agent EXCEPT an individual who represents the issuer in the: Incorrect Answer A. sale of municipal securities to the public B. private placement of common stock C. sale of common stock to the issuer's employees Correct Answer D. sale of federal covered common stock to the public

d

All of the following are unlawful activities under the Uniform Securities Act EXCEPT: Incorrect Answer A. making an untrue statement of material fact to a customer B. deliberately failing to follow a customer's instructions C. omitting to state material facts about a security or transaction to a customer Correct Answer D. soliciting customer orders for unregistered exempt securities

d

All of the following information is required on an order ticket EXCEPT: Incorrect Answer A. time of order receipt B. time of order execution C. whether the trade was solicited or unsolicited Correct Answer D. whether the order was placed verbally or in writing

d

All of the following information must be recorded on an order ticket EXCEPT: Incorrect Answer A. time of order receipt B. customer account name/number C. name of person entering the order Correct Answer D. time and date of execution

d

All of the following may be required to be filed with the Administrator EXCEPT: A. Advertising Incorrect Answer B. Sales Literature C. Circulars Correct Answer D. Customer Complaints

d

All of the following statements are true about an offer of rescission EXCEPT: A. the offer can only be made prior to the institution of a lawsuit alleging a securities violation B. an offer must be made to buy back the security at the original purchase price Incorrect Answer C. the customer must be paid interest at the legal rate in the State, less any dividend or interest income received from that security Correct Answer D. the customer must sign a waiver of non-compliance to accept the offer

d

All of the following transactions are exempt under the provisions of the Uniform Securities Act EXCEPT: A. isolated non-issuer transactions B. transactions effected between an issuer and an underwriter C. unsolicited non-issuer transactions effected by a broker-dealer D. transactions effected between broker-dealers and the public

d

An Investment Adviser and an Investment Adviser Representative file for initial registration in a State on October 31st. When do the registrations lapse, unless they are renewed? Incorrect Answer A. The Investment Adviser registration lapses on December 31st of that year and the Investment Adviser Representative's registration lapses on April 30th of the next year B. The Investment Adviser registration lapses on April 30th of the next year and the Investment Adviser Representative's registration lapses on December 31st of that year C. The Investment Adviser registration lapses on April 30th of the next year and the Investment Adviser Representative's registration lapses on April 30th of the next year Correct Answer D. The Investment Adviser registration lapses on December 31st of that year and the Investment Adviser Representative's registration lapses on December 31st of that year

d

An agent can promise a customer that he will resell a security at a price higher than that paid by the customer: A. only for exempt securities B. only for non-exempt securities C. only for exempt transactions D. under no circumstances

d

An agent is employed by First Patriot Bank and Trust Company of Connecticut as a banking representative. The agent is registered in the State with a general securities license through First Patriot Securities, a separate operating subsidiary of First Patriot Holdings - the parent company of the bank. A retired couple that is making their monthly visit to the bank to deposit their social security checks asks the agent about the appropriateness of investing in either mutual funds or certificates of deposit. Which statement is TRUE regarding the actions that the agent may take when giving a response to these customers? A. In order to respond to these customers about either the suitability of investing in mutual funds or certificates of deposit, the agent must be registered in the State as an adviser representative B. The agent can give advice to the couple about investing in mutual funds since he or she has a general securities registration, but cannot give advice about investing in certificates of deposit Incorrect Answer C. The agent can give advice to the couple about investing in certificates of deposit, but cannot give advice about investing in mutual funds without being registered as an adviser representative in the State Correct Answer D. The agent may give advice to the couple about the suitability of investing in either mutual funds or certificates of deposit

d

Under NASAA rules, the Form ADV filed with the State must be updated: A. quarterly within 30 days of quarter end B. quarterly within 90 days of quarter end C. annually within 30 days of fiscal year end Correct D. annually within 90 days of fiscal year end

d

Which of the following is (are) prohibited in a margin account? A. A customer buying a security without the intention to pay on settlement B. A customer selling a security without the intention to deliver on settlement C. A customer selling short a security that cannot be borrowed and delivered on settlement D. All of the above

d

An agent of a broker-dealer has her office in State A and has customers in States B and C, in which she is also registered. She has a group of customers who are dual citizens of the U.S. and Chile and has been referred business in Chile by some of these clients. To sell securities to these clients in Chile, she files a registration application with the Chilean securities regulator, who denies the application. Which statement is TRUE? Incorrect Answer A. The action of the Chilean securities regulator has no bearing on this individual's State agent registrations B. The action of the Chilean regulator can cause the Administrator of State A only to revoke her registration C. The action of the Chilean regulator can cause the Administrators of States B and C only to revoke her registration Correct Answer D. The action of the Chilean regulator can cause the Administrators of States A, B and C only to revoke her registration

d

An agent of a broker-dealer is opening a new client account. The agent has completed the new account application and the suitability determination. The customer has an investment objective of safety of principal and income. The agent makes an initial recommendation of a conservative blue chip stock with a track record of paying a consistent cash dividend. The customer accepts the recommendation. When must the commission charged on the transaction be disclosed to the customer? A. At the time that the order is placed B. At the time when the order is filled Incorrect Answer C. At the time when the account is opening Correct Answer D. On the confirmation of the transaction

d

An agent of a broker-dealer recommends a security to a customer. The customer buys 1,000 shares, paying the firm a commission. The stock reaches a new market high in two weeks. Under the Uniform Securities Act, which statement is TRUE? A. The firm can charge the customer a separate amount for investment advice B. The firm can increase the commission charged to the customer based on the excellent performance of the investment C. The agent can accept a large gift from the client for the advice Correct D. The only compensation that can be accepted by the broker-dealer is the original commission charged

d

An agent of a broker-dealer, both of whom are located in State A, accepts an order from a customer located in State B where they have no offices. Who must register in State B? A. The broker-dealer B. The agent C. Neither the broker-dealer nor the agent Correct D. Both the broker-dealer and the agent

d

An agent receives a strongly worded complaint letter from a customer. The agent discards the letter, deciding to handle the situation only if the customer shows up in person. Which statement is TRUE? A. This is acceptable, since it is up to the agent to decide the best method for handling customer complaints B. This is permitted, since written customer complaints must be sent by the customer to the State Administrator for resolution C. This is prohibited, since all written customer complaints must be forwarded by the agent or broker-dealer to the State Administrator for resolution Correct D. This is prohibited, since all written customer complaints must be forwarded to the manager or principal of the firm for resolution

d

An agent registered under the Uniform Securities Act has his registration revoked by the Administrator. The Administrator may NOT revoke any future applications of the person to be a(n): A. Broker-Dealer B. Agent C. Investment Adviser D. Financial and Operations Principal

d

An attorney that has been appointed executor of a deceased customer's estate contacts an investment adviser in a State to invest and manage the estate's financial assets until they are distributed to the heirs. The attorney offers to pay an advisory fee that is based on a percentage of assets under management. Which statement is TRUE regarding this arrangement? A. The advisory contract must be approved by the probate court judge prior to the adviser taking control of the financial assets Incorrect Answer B. The advisory contract must be approved by the heirs prior to the adviser taking control of the financial assets C. The contract is null and void because executors are not permitted to delegate investment and management functions over estate assets Correct Answer D. The contract is valid as long as the adviser exercises reasonable care to comply with the terms of the delegation

d

An established customer has an individual account. The customer discusses a specific NASDAQ stock with a sales representative and wants to buy shares of that stock when it declines to $60 a share lower. The customer leaves for a 3-week vacation traveling to a third world country where he cannot be contacted. During this time, the stock declines to the level at which the customer wanted to buy the shares. What is an appropriate action to take? A. Buy the stock in the customer's account since he wanted to buy the shares at that price Incorrect Answer B. Buy the stock in the customer's account as long as the branch manager or compliance officer approves of the transaction C. Attempt to contact one of the customer's immediate relatives, and if this is possible, obtain authorization from the relative to buy the shares Correct Answer D. Do nothing until the customer can be contacted

d

An investment adviser has been experiencing a business decline due to a weak local economy and a weak investment outlook. To rebuild her business base, the investment adviser puts an advertisement in the local newspaper that says: "Because times are tough for all of us, we are offering, for a limited time only, a free investment consultation and free year-end tax preparation to anyone who signs a 1-year advisory contract for an introductory rate of only $25 per month." This is permitted: Incorrect Answer A. under no circumstances B. as long as the duration of the limited time offer is included in the advertisement C. as long as the adviser accepts all potential clients that respond to the offer made in the advertisement Correct Answer D. only if the word "free" is removed twice from the advertisement

d

An investment adviser has placed a block trade for 100,000 shares of ABCD stock. The trade is filled in 2 separate lots of 50,000 shares each, with one lot filled at $50.01 per share and the other lot filled at $50.03 per share. How should the investment adviser allocate the shares among clients that participated in the trade? A. The investment adviser's smaller accounts should be allocated the ABCD stock purchased at $50.03 per share and the larger accounts should be allocated the ABCD stock purchased at $50.01 per share B. The investment adviser's larger accounts should be allocated the ABCD stock purchased at $50.03 per share and the smaller accounts should be allocated the ABCD stock purchased at $50.01 per share C. The investment adviser should allocate the shares among clients participating in the trade using a random, non-preferential method, at either the $50.01 or $50.03 per share price Correct D. The investment adviser should allocate the shares at an average price of $50.02 per share and distribute them equally among clients participating in the trade on a pro rata basis

d

An investment adviser representative manages a large portfolio for a wealthy customer, age 65. The portfolio contains a large holding of British securities and the adviser is worried that the British Pound may appreciate against the U.S. dollar. Which statement is TRUE regarding the use of currency futures to hedge against this risk? Incorrect Answer A. The Prudent Man Rule prohibits the use of futures contracts as investments B. Because futures contracts are inherently risky, their use would be in contravention of the Prudent Man Rule C. The Prudent Man Rule only applies to securities and not to futures, so the adviser cannot use them Correct Answer D. The Prudent Man Rule does not specify the types of investments that can be used, so futures could be suitable as a hedging instrument

d

An investment adviser representative of a Federal Covered adviser with no office in the state only has insurance companies as clients. Where must the adviser representative register? Incorrect Answer A. SEC B. State C. Both the SEC and the State Correct Answer D. Neither the SEC nor the State

d

E-mail required to be retained by an investment adviser under the Uniform Securities Act: A. must be kept in printed form in a readily accessible location B. only applies to e-mail sent to customers, but does not apply to e-mail received from customers Incorrect Answer C. applies to e-mails sent or received from customers, relating to the offer, sale, trading, and custody of securities and funds Correct Answer D. applies to any electronic communication sent from, or received by, the investment adviser, regardless of whether the e-mail is personal in nature or business related

d

For initial registration as an agent in a State, all of the following are required EXCEPT: A. Consent to Service of Process B. Filing Fee C. Registration Application D. Government Issued Photo I.D.

d

If a broker-dealer's net capital falls below the minimum requirement for registration in a State, the Administrator has the power to: A. liquidate the assets of the firm and distribute the proceeds to the firm's customers B. petition a court of law to appoint SIPC as the trustee managing the distribution of the firm's assets Incorrect Answer C. freeze the assets of the firm Correct Answer D. make a proper showing to a court of law to appoint a receiver over the firm's assets

d

If an agent withdraws from employment from a broker-dealer, the withdrawal takes effect: A. promptly B. within 5 days Incorrect Answer C. within 10 days Correct Answer D. within 30 days

d

In order for an investment adviser to be compensated with a performance fee, all of the following must be disclosed in writing EXCEPT: A. that the fee arrangement may create an incentive for the adviser to make investments that are riskier B. that the fee arrangement is based on both unrealized appreciation and realized capital gains C. the nature and significance of any index used as a comparative measure and the reason why the adviser believes that any comparative index used is appropriate Correct D. that the fee computation can be based on periods ending no earlier than the last day of each calendar quarter

d

Regarding the Administrator's ability to inspect the books and records of a broker-dealer doing business in its State, which statement is TRUE? A. The Administrator can only inspect the books and records of a broker-dealer on a surprise basis with 1 day written notice to the broker-dealer B. The Administrator can only inspect the books and records of a broker-dealer on a surprise basis with a court order C. The Administrator can only inspect the books and records of an out-of-State broker dealer if it is concurrently inspecting the books and records of that broker-dealer in its State Correct D. The Administrator can conduct an inspection of a broker-dealer's books and records in any State and at any time

d

Suits alleging criminal violations of the Uniform Securities Act must be brought within how many years of the occurrence of the alleged violation? A. 1 year B. 2 years Incorrect Answer C. 3 years Correct Answer D. 5 years

d

Surety bond coverage can be required by the Administrator as a condition of registration for all of the following EXCEPT: A. broker-dealers B. investment advisers C. agents Correct D. issuers

d

The Administrator can require which of the following regarding federal covered securities offered in a State? Incorrect Answer A. Notice filing for the issue in the State B. Filing of documents relating to the issue in the State C. Payment of a filing fee in the State Correct Answer D. All of the above

d

The Administrator may issue a stop order, denying effectiveness to registration of a new issue, for all of the following reasons EXCEPT: Incorrect Answer A. the offering is made with unreasonable amounts of underwriter's compensation B. the offering is being made on terms that are inequitable to investors C. the offering is subject to a stop order in another State Correct Answer D. a fact known to the Administrator when the registration became effective causes the Administrator to issue a stop order 60 days later

d

Transactions made by all of the following persons are exempt under the Uniform Securities Act EXCEPT: A. Guardian Incorrect Answer B. Conservator C. Trustee in bankruptcy Correct Answer D. Custodian for a minor

d

Under NASAA rules, Investment Advisers must retain copies of all advertising for: A. 3 years in an easily accessible place with the first year's records kept in the principal office of the adviser Incorrect Answer B. 3 years in an easily accessible place with the first 2 years' records kept in the principal office of the adviser C. 5 years in an easily accessible place with the first year's records kept in the principal office of the adviser Correct Answer D. 5 years in an easily accessible place with the first 2 years' records kept in the principal office of the adviser

d

Under NASAA rules, each Registered Investment Adviser must establish, implement and maintain a Business Continuity and Succession Plan that covers all of the following items EXCEPT: A. the protection, backup, and recovery of books and records Incorrect Answer B. alternate means of communicating with customers, key personnel, employees, vendors, service providers and regulators, including providing notice to these persons of significant business interruption, cessation of business activities or death or unavailability of key personnel C. minimization of service disruptions and client harm that could result from a significant business disruption Correct Answer D. announcement to the public in local newspapers and on the internet the fact that a significant business interruption has occurred

d

Which of the following statements may be made by an agent about a new securities issue that is being registered by coordination? A. "Because these securities are being registered with the Securities and Exchange Commission, you are guaranteed that the issue is safe" B. "Once registration is effective, this means that both the Administrator and the Securities and Exchange Commission have approved of the offering" C. "The issue is selling out fast to institutional investors" Correct D. "The security is being registered in the State and with the Securities and Exchange Commission"

d

Which records MUST be retained in a state-registered investment adviser's principal office? A. Financial reports Incorrect Answer B. Client advisory contracts C. Investment adviser's bank statements Correct Answer D. Records of customer purchases and sales orders

d

Which statement is TRUE? A. Both password-protected and non-password protected websites are defined as advertising B. Both password-protected and non-password protected websites are defined as sales literature C. Password-protected websites are defined as advertising and non-password protected websites are defined as sales literature D. Password-protected websites are defined as sales literature and non-password protected websites are defined as advertising

d

Who can make a loan to a Registered Investment Adviser? A. A customer with a net worth of $2 million B. A customer that is another registered investment adviser C. A customer that is an accredited investor Correct D. A customer that is a broker-dealer

d

Your customer, whose current investment objective is income, will retire in 3 years. She wishes to withdraw money from her bank account to buy a speculative stock quoted in the OTC Bulletin Board. You tell her that the stock is not a prudent investment given her imminent retirement. The customer insists upon buying the stock. What is an appropriate action to take? A. Ignore the customer's order as buying speculative stocks is not consistent with her investment objective B. Tell your manager of your conversation with the customer and, with the manager's approval, ignore the customer's request to buy the shares C. Contact NASAA with the customer's request and have the order approved before buying the speculative stocks for the customer's account Correct D. Note your dissent on the appropriate documents, mark the order ticket as "unsolicited," and execute the order as directed

d