Series 63 Registration & Licensing
Which of the following individuals is defined as an "agent" under the Uniform Securities Act? 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 D. An individual who represents a broker-dealer in reporting completed trades to customers and answering customer account inquiries
A. An agent is defined as an individual who represents either a broker-dealer or an issuer in effecting securities transactions with customers. An individual who represents an issuer effecting sales of exempt securities is excluded from the definition - this exclusion is not available to individuals who represent issuers in sales of non-exempt securities. For example, a salesperson hired by Ginnie Mae to market GNMA securities to institutional investors is excluded. A salesperson hired by an oil and gas limited partnership promoter to market the partnership units to broker-dealers is defined as an "agent" (of the issuer in this case). Choice B defines a broker-dealer - a person in the business of effecting securities trades for others or for its own account. Choice C is the definition of a person excluded from the definition of a broker-dealer. This exclusion is available to broker-dealers that are registered in their "home" State that are contacting existing customers who are vacationing in another State where the broker-dealer has no office and is not registered. Choice D is an individual that is only performing clerical duties and thus is not defined as an agent.
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: A. has a few clients in the State with a de minimis exemption B. deals exclusively with issuers of securities C. deals exclusively with other broker-dealers D. deals exclusively with insurance companies
A. Excluded from the definition of a broker-dealer under Uniform State Law are persons with no place of business in the State that effect transactions exclusively with issuers; other broker-dealers; depository institutions; insurance companies; investment companies; and pension trusts. These persons are not dealing with the general public. Note that if the broker-dealer has an office in the State and deals with any of these persons - it would be required to register in that State. Now for the picky part! The "de minimis" exemption for broker-dealers is only offered in a minority of States, and typically applies to out-of-state broker-dealers who only have 3 or fewer clients in that State. Thus. Choice A qualifies for the exemption and does not have to register because it is exempt from registration (as opposed to being excluded from the definition and therefore not being required to register). Thus, Choice A is defined as a broker-dealer, but it is one that is exempt from registration in that State. Yes, this must be known for the exam.
A BD application is received by the State Administrator for a new broker-dealer subsidiary of a Swiss securities firm. The application includes the disclosure that the parent firm was suspended from membership on the Deutsche Bourse 6 years ago because of unauthorized trading by its Hong Kong branch. The State Administrator A. cannot deny registration based on the suspension that was imposed by a foreign regulator B. can deny registration based on the suspension by the foreign regulator C. must grant registration because the U.S. subsidiary is a legally separate entity from the parent company that is based in Switzerland D. can deny registration only if the actions of the parent company were a criminal offense
A. The Uniform Securities Act sets a 10 year statute of limitations for securities related violations as a cause for denial of registration. This is based on violations of U.S. law. It also includes a provision regarding violations of the law of a foreign jurisdiction. In this case, it sets a 5 year statute of limitations. (Why? - Who knows!) In this case, the suspension by the foreign regulator happened 6 years ago, so the State Administrator cannot deny registration based on the action taken by the foreign regulator. The wording includes willfully violating the law of a foreign jurisdiction governing any aspect of the securities or banking business within the past 5 years; or being the subject of an action by a foreign regulator in the past 5 years denying, revoking or suspending the right to engage in the securities business as a broker-dealer, investment adviser or agent.
Annual renewal of registration as an agent or an investment adviser in each State is made by filing: I Form U-4 II Form U-6 III within 30 days of the date that renewal statements are sent out IV within 60 days of the date that renewal statements are sent out A. I and III B. I and IV C. II and III D. II and IV
A. A standard registration form (Form U-4) in used for federal and state registration of agents and state registration of investment adviser representatives. CRD and IARD send out renewal statements for each registered person in mid-November, and these must be filed, amended (if necessary), and paid for, by mid-December. If this does not occur, that person's registration will expire on December 31st.
The term "issuer" applies to a: A. person who proposes to sell a security B. director of a company that is selling new shares to the public C. trader executing trades off an exchange floor D. market maker in a security traded over-the-counter
A. An "issuer" is defined as any person who issues, or proposes to issue, a security. Directors of companies that are selling new issues are not issuers. However they can be defined as "agents" of the issuer. Traders execute trades in the secondary market and have nothing to do with issuers. Market makers also trade stocks for their own accounts in the secondary market and have nothing to do with issuers.
A broker-dealer that is registered in Canada and that is not registered in any State may effect transactions in Canadian securities: A. with any existing customer that is a Canadian citizen who is vacationing in the United States B. with a new customer that is a Canadian citizen who is vacationing in the United States C. with any Canadian citizen located in any part of the United States D. only in the Canadian provinces and not in the United States
A. An exemption from registration is given to Canadian broker-dealers that have no place of business in a State that are dealing with pre-existing customers who are vacationing in that State. This addresses the fact that Canadian citizens often visit the United States and if that Canadian citizen effects a securities transaction with his or her existing Canadian broker-dealer, then the State will not require the Canadian broker-dealer and its agents to register. Note that the exemption does not apply to new customers; only to pre-existing customers.
In most States, an agent may be associated at one time with no more than: A. 1 broker-dealer B. 2 broker-dealers C. 3 broker-dealers D. 4 broker-dealers
A. Most States do not allow dual registration - an agent may only be associated with 1 broker-dealer at any time. However, it is permitted, in all instances, for an agent to be registered with a number of broker-dealers that are under "common control." For example, Prudential may have a separate mutual funds broker-dealer and a separate general securities broker-dealer. Agents of Prudential can be associated with both broker-dealers without violating State law. Finally, a few State Administrators permit multiple registrations with different broker-dealers. If this is the case, the agent must disclose all registrations to each of the broker-dealers with whom he or she is associated.
Which statement is TRUE about registration of broker-dealers, investment advisers and their agents in a State? A. Registration as a broker-dealer or investment adviser expires 1 year from its effective date of January 1st B. A firm that has both broker-dealer and investment adviser entities, when registering one entity, automatically registers the other entity in the State C. When a broker-dealer's registration is renewed in the State, this automatically renews the registration of its agents D. When an agent is terminated by a broker-dealer, only the broker-dealer is obligated to notify the State
A. Registration of broker-dealers, investment advisers and their agents expires on December 31st of each year unless renewed. If a firm has both a broker-dealer entity and an investment adviser entity, each must register separately in the State. Registration renewal by the broker-dealer or adviser does not automatically renew the registration of the firm's agents. A registration renewal is filed by the firm on each agent's behalf at the end of each year. When an agent is terminated, both the agent and the firm (broker-dealer or investment adviser) are obligated to notify the State under the Uniform Securities Act. Note, however, that many States are changing this to only require notice by the firm under a newer version of this Act, but this is still the minority of States, and thus, is not tested.
Two companies, Company A and Company B, are involved in a securities offering. Company B is selling its stock. Company A's employees help sell the shares. Company A receives commissions from Company B and pays the commissions to its staff. Therefore, the employees of Company A are: A. agents of a broker-dealer B. their own broker-dealer C. independent contractors D. agents of an issuer
A. Since Company A's employees are being compensated for selling the shares of Company B, Company A is defined as a "broker-dealer" and Company A's employees are agents of the broker-dealer. Both Company A and its employees would be required to register in the State. Also note that Company B would be defined as an "issuer" in this transaction, but this is not part of the question.
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 A. I and III B. I and IV C. II and III D. II and IV
A. States require registration of investment advisers that are not "federal covered advisers." They require "notice filings" from federal covered advisers doing business in their States. Even though State registration is not required for federal covered advisers, each State can (and does) require the registration of any investment adviser representative - whether they are affiliated with a federal covered adviser or a state registered adviser. This is State law because the SEC only requires the registration of the adviser - not its representatives - at the Federal level. There would be no supervision of investment adviser representatives unless the State filled that role; and the State is happy to be the "local policeman on the beat" doing just that.
A person makes an initial application for State registration on March 1st. The registration expires: A. at such a date as set by the Administrator B. on December 31st of that year C. on March 1st of the following year D. only upon withdrawal by the applicant
B. Registration applications for broker-dealers, investment advisers, and agents expire on December 31st of each year, unless the Administrator changes that date. If a new application is filed in mid-year, it will expire at the end of that year.
Which of the following individuals would be defined as an "agent" under the Uniform Securities Act? A. A secretary who works for an agent taking telephone messages to buy and sell securities B. A sales associate who accepts orders for limited partnership units being offered in a private placement C. An employee of a corporation who processes 401(k) contributions, issuing shares of the company's stock to the company's employees D. A Chief Financial Officer of the issuer that negotiates with an investment banker to set the terms of an additional share offering
B. An "agent" is an individual that represents a broker-dealer or issuer effecting securities transactions. The Act exempts from licensing as an "agent," those individuals who do not deal with the public. Thus, individuals representing issuers who deal solely with underwriters or financial institutions are not defined as "agents" who must be registered, so the CFO negotiating the terms of a share offering with an underwriter is not an agent. The employee who represents the issuer selling securities of that issuer to that issuer's employees (as long as no commissions are paid) is not considered to be an agent, since he or she is not selling to the public. This is the case for the employee that processes 401(k) contributions and distributions. Therefore, we are left with Choices A and B as possibly correct - and arguments can be made for either one! Choice A - the secretary who takes "telephone messages to buy and sell securities" for an agent - sure sounds like a sales assistant that must be registered. Choice B - the sales associate that accepts orders for limited partnership units (which are securities) is clearly an agent. So we must go with Choice B. Note that in the actual exam, you will often be presented with 2 choices that are "close" and you must pick the better one!
An individual who represents an issuer selling federally covered investment company securities: A. is not required to register as an agent in the State B. must register as an agent in the State if compensation is being paid for this activity C. must register as an agent in the State if the individual is not federally registered D. must register as an agent in the State
B. If an individual represents an issuer selling a security that must be SEC-registered and compensation is paid for this activity, then the individual must register in the State. Both "nationally traded securities" and investment company securities are "federal covered," but because they are non-exempt and are SEC-registered, this individual must be registered in the State to sell them. If the individual were representing the issuer selling exempt securities, such as Treasuries, Agencies and Municipals, then the individual is not defined as an agent. The exclusion from registration given to an individual who represents an issuer in transactions in specified "covered securities" only applies to private placements and to sales to qualified investors (wealthy investors).
A broker-dealer's agent that is registered in State A, wishes to sell a security in State B. Which of the following may be sold in State B without the agent being registered in State B? I U.S. Government Agency Issues II Commodity Futures III Fixed Annuities IV Limited Partnership interests investing solely in securities of U.S. Government Agencies A. I only B. II and III only C. I and IV only D. I, II, III, IV
B. Since commodity futures and fixed annuities are not defined as securities, they are not regulated by the Uniform Securities Act. If an agent registered in State A, wishes to sell securities in State B, the agent must be registered in State B unless an exemption is available. Individuals (agents) who represent broker-dealers selling either exempt or non-exempt securities must be registered in that State. Thus, the agent selling U.S. Governments (an exempt security) in State B must be registered in State B. The individual selling limited partnership units (a non-exempt security) in State B must be registered in State B. Do not confuse these with the following exemptions: Individuals who represent issuers (not broker-dealers) selling exempt securities are not required to be registered; or Investment advisers who only give advice on U.S. Government securities are not required to be registered.
An individual holding a CFP designation can get a waiver from taking the: A. Series 63 examination B. Series 65 examination C. Series 66 examination D. Either the Series 65 or 66 examination
B. State Administrators will grant a waiver from taking the Series 65 exam to anyone holding a: CFP - Certified Financial Planner (granted by the CFP Board of Standards); CIC - Chartered Investment Counselor (granted by the Investment Adviser Association); ChFC - Chartered Financial Consultant (granted by the American College); PFS - Personal Financial Specialist (granted by the American Institute of Certified Public Accountants); and CFA - Chartered Financial Analyst (granted by the Chartered Financial Analyst Institute). However, that individual must still register in the State and pay annual State registration fees. Note that this waiver does not apply to an individual taking the Series 63 exam, nor to the Series 66 exam.
Under the Uniform Securities Act, a person who renders investment advice solely about U.S. Government Agency securities is defined as a(n): A. investment adviser and must register under the Act B. federal covered adviser, and is not required to register under the Act C. broker-dealer and must register under the Act D. agent and is required to register under the Act
B. A person who gives investment advice relating solely to U.S. Government securities (including Agency securities), is excluded from Federal registration under the Investment Advisers Act of 1940. Any person excluded from registration with the SEC under the Investment Advisers Act of 1940 is a "federal covered adviser" and cannot be required to register in the State.
A person who renders advice on variable annuities for a fee; and who then sells the annuities, charging a commission, MUST: I register as an investment adviser in that State II register as a broker-dealer in that State III register as an agent in that State A. I only B. I and II C. I and III D. None of the above
B. A variable annuity is defined as a non-exempt security under the Uniform Securities Act. If advice is rendered for a fee about variable annuities, then registration as an investment adviser would be required. If a variable annuity is sold for a commission, then the firm must register as a broker-dealer as well.
After successfully completing the Uniform State Law exam, an agent can solicit: I immediately II after registration has been granted by the Administrator III if the individual is affiliated with a broker-dealer IV if the individual has met minimum experience standards A. I and III B. II and III C. I, II, IV D. II, III, IV
B. After passing the Uniform State Law exam, an agent can solicit when the registration becomes effective (not immediately). This occurs 30 days after the date the exam is passed, if no problems arise. To be registered as an agent, an individual must be affiliated with a broker-dealer. There is no experience requirement for an agent to be registered.
Under the Uniform Securities Act, an investment adviser who has no place of business in a State is exempt from registration if the: I firm's clients consist solely of institutional investors in the State II firm has no more than 5 clients other than financial or institutional investors within a 12 month period III firm's advice relates solely to municipal securities A. I only B. I and II C. II and III D. I, II, III
B. An investment adviser with no place of business in a State is exempt from registration if its clients consist solely of institutional investors; or if the firm has no more than 5 clients in a 12 month period other than institutional investors. Under State law, no exemption from registration as an investment adviser is permitted if the firm's advice relates solely to exempt securities, such as municipals. Please note, however, that an adviser that gives advice solely about U.S. government securities is a type of federal covered adviser that is not required to register in the State.
Which of the following statements is (are) TRUE about registration as an agent for a broker-dealer? I An unregistered agent can solicit business in a State once the agent's broker-dealer has been registered in that State II A registered agent can only sell securities that are registered in that State or that are exempt from registration III If an agent is not registered in a State, the agent may sell exempt securities in that State A. I only B. II only C. II and III D. I, II, III
B. As an agent, one cannot solicit business in a State unless both the agent and the broker-dealer are registered in the State. This is true, even if the agent wishes to sell exempt securities - the agent must still be registered, though the security is not. Thus, Choices I and III are incorrect. Choice II is true - an agent is only permitted to sell securities that are registered in a State; or that are exempt from registration. It is prohibited for an agent to sell unregistered non-exempt securities.
A fee payment is NOT required to be made when a(n): A. agent of a broker-dealer registers in a State for the first time B. new broker-dealer files as a successor to a firm that has ceased operations C. renewal registration is filed by an investment adviser by December 31st of that year D. notice filing is made in the State by a Federal Covered Adviser
B. If a new broker-dealer is created as a successor firm to an existing registered broker-dealer that has ceased business operations at some point during the year, then the State does not require a new filing fee to be paid. The fee is paid at the initial registration and for every annual (on December 31st) renewal registration thereafter. When the successor firm files its year-end registration renewal, the full fee for the next year must be paid.
If an agent fails to renew his or her license at the end of the year, the: A. registrant must retake the Series 63 or 66 examination B. registration expires with no action by the Administrator C. registration is automatically renewed and a late fee is assessed D. registration is revoked
B. If an agent fails to renew his license after the 1 year registration period, the license expires with no action on the part of the Administrator. The renewal is handled by the registration department of the broker-dealer with whom the agent is affiliated.
Under the Uniform Securities Act, if an Investment Adviser limits its clientele to insurance companies, which statement is TRUE? A. The investment adviser must register with the State of residence of the insurance company B. The investment adviser is exempt from registration in the state of residence of the insurance company as long as it is not physically located in that State C. An investment adviser dealing with insurance companies is never required to register within a State D. None of the above
B. Investment advisers with no place of business in a State that limit their clientele to insurance companies and investment companies are exempt from registration because they are dealing with professionals - not the general public. Note that if an adviser is physically located in a State, then it still must register. Investment advisers must register in the state unless an exemption is available.
An agent who has passed his or her examination, but whose registration is not yet effective in the State, may sell: A. mutual funds for which no commission is paid B. fixed annuity investments C. exempt securities D. corporate bonds
B. Passing the Series 63 or 66 does not automatically register an agent in a State. Registration is typically effective 30 days after filing the application, given that the conditions of registration have been met (such as passing the Series 63 or 66 test.) If registration is not yet effective, the agent cannot sell securities. Since fixed annuities are NOT securities, the agent could sell these - if he or she had a State insurance license.
An Administrator is allowed to start a suspension or revocation action against a registered broker-dealer: I on the basis of facts known at the time of the initial registration II after one year has elapsed from the time a broker-dealer withdraws from registration III on the basis of a conviction for violating the Securities Exchange Act of 1934 IV on the basis of a suspension order being entered by the Administrator of another State A. I and II B. III and IV C. I, III, IV D. I, II, III, IV
B. The Administrator cannot suspend or revoke a broker-dealer's registration on the basis of facts known at the time of the initial registration. If there was a problem with the initial registration based on those facts, then registration would have been denied. If a broker-dealer withdraws from registration, after 1 year elapses, legal proceedings cannot begin against the broker-dealer to suspend or revoke the registration. The Administrator can start a suspension or revocation action if another State suspends the firm or if the firm is convicted of violating the Securities Exchange Act of 1934.
Under Uniform State Law, an agent is permitted to sell securities for more than 1 broker-dealer: A. only if the types of securities offered by each broker-dealer are mutually exclusive 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. The typical arrangement is that an agent is only registered with one broker-dealer, both at the Federal and State level. However, in rare cases, an agent may be "dual registered." This occurs most often if one broker-dealer sells a very limited product range (say limited partnerships only) and the individual wants to be licensed to sell another type of product (say mutual funds) to his customers. He or she can associate with another broker-dealer that only sells mutual funds. To do so, the dual affiliation is disclosed on both the Federal and State registration applications submitted by each of the broker-dealers to register that agent.
A registration application in a State filed by an Investment Adviser becomes effective: A. on a date so determined by the Administrator 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. The wording in the Uniform Securities Act is that: "If no denial order is in effect and no proceeding is pending, registration becomes effective at noon of the thirtieth day after an application is filed." It then goes on to say that: "The Administrator may by rule or order specify an earlier effective date and may by order defer the effective date until noon of the thirtieth day after the filing of any amendment."
Administrators can require minimum Net Capital and Net Worth for: A. Agents B. Broker-Dealers C. Investment Adviser Representatives D. Issuers
B. Under the Act, minimum Net Capital and Net Worth requirements can be set by the Administrator to register broker-dealers and investment advisers. There is no such requirement for agents or investment adviser representatives. Issuers do not register under the Act; only the non-exempt securities that they issue must be registered. Registration of non-exempt securities is covered in the following section.
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 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 D. The filing becomes effective on the date designated by the licensee
B. Uniform State law does not require the filing of a new registration application for a successor firm. The successor firm files a registration amendment with the State, that takes its registration through the end of that year, without having to pay a new filing fee. The effective date of the successor firm's registration is the date indicated on the amendment. The "old" firm must have ceased business operations for the "new" firm to be registered in the State. Whether or not the successor firm continues in operation through the rest of that year is irrelevant.
Each sole proprietor that applies for initial registration in a State as either a broker-dealer or investment adviser must file: A. an annual personal income statement B. copies of federal tax returns for the prior 3 years C. a statement of financial condition D. proof of the sole proprietor's identity
C. A sole proprietorship is an unincorporated business that consists of 1 person. Sole proprietors can register in a State as a broker-dealer or as an investment adviser. Each applicant for initial registration that is a sole proprietor must file an original statement of financial condition (a balance sheet) with the Administrator, along with an oath or affirmation made by the sole proprietor that the financial statement is true and current. Note that there is no requirement for an income statement or copies of the applicant's tax returns.
You are an agent registered in a State where you have a customer. The customer will be going to college in another State. May the agent still do business with the customer, even though the agent is not registered in the State where the student is going to college? A. Only if the student signs a statement authorizing the agent to contact him or her while at school B. Only if the agent files notice in the state where the student is going to college C. Yes, because the student is not considered to be a resident of the state where he or she is attending college D. No, because the agent must be registered in the state where the student is going to college
C. College students are considered to be residents of the State where their home is; not the State where they are going to college. Furthermore, this is an existing customer of the agent - the agent is not soliciting new business in State B. The agent does not have to register in State B to do business with the student who is at college in State B because this is an existing customer who resides in State A, a State where the agent is registered.
Under NASAA, investment advisers must update their ADV filing made with the State: I yearly, within 90 days of calendar year end II yearly, within 90 days of fiscal year end III within 30 days of any significant material change IV within 90 days of any significant material change A. I and III B. I and IV C. II and III D. II and IV
C. Under NASAA rules, investment advisers must update their Form ADV (State registration form) annually, within 90 days of fiscal year end, to reflect current and accurate information and must send the updated Form ADV to its clients within 120 days of year end if there is a material change. In addition, if there is a significant material change in the ADV information that occurs during the year, the filing must be amended within 30 days. The Form ADV is stored in the IARD (Investment Adviser Registration Depository) system. It is used to register both State registered advisers and Federal covered advisers, and to send notice filings to States by Federal covered advisers. Also note that while the annual updating amendment required for both Federal covered and State registered advisers must be filed within 90 days of fiscal year end for either; the filing rule for an "other-then-year" end material change notification is "promptly" under SEC rules for Federal covered advisers; while NASAA requires that it be filed within 30 days for State registered advisers.
A "consent to service of process" must accompany which of the following? I Agent's initial registration application II Agent's renewal registration application III Investment Adviser's initial registration application IV Civil complaint filed against a broker-dealer A. I and II only B. III and IV only C. I and III only D. I, II, III
C. "Consent to service of process," which appoints the Administrator as attorney for that person to receive legal documents, is required on each initial registration application. This is true for registration of agents, broker-dealers, investment advisers and investment adviser representatives. For example, if a civil complaint is filed against a broker-dealer, the court papers will be served to the Administrator, who will forward them to the broker-dealer - since that firm must have filed a "consent to service of process" with the Administrator. Therefore, no "consent" is filed with the civil complaint. Once a consent to service of process is filed with the initial application, there is no requirement to file another consent with each renewal application.
A Registered Investment Adviser is one that is registered with (the): A. FINRA B. NASAA C. SEC D. MSRB
C. An investment adviser must either register with the SEC as a Federal Covered Adviser (one with at least $100 million of AUM); or if it has less than $100 million of AUM, it registers with the State. There is no investment adviser registration with FINRA - only broker-dealers register with, and are regulated by FINRA. NASAA (North American Securities Administrators Association) is the regulator torturing you with this test, but it has no registration or enforcement capability.
Which statement is TRUE about re-registration of broker-dealers in the State? A. Broker-dealers are not required to re-register in the State IB. Broker-dealers must re-register in the State annually, based upon their fiscal year end C. Broker-dealers must re-register in the State annually at calendar year end D. Broker-dealers must re-register in the State bi-annually at calendar year end
C. Annual registration renewal in each State is required for broker-dealers, investment advisers, and their agents. This occurs at December 31st of each year, so it is based on calendar year end - not a registrant's fiscal year end.
Which of the following would be defined as a broker-dealer in State A? A. The municipal bond department of a bank located in State A B. A person who gives advice about investing in securities in State A C. A broker-dealer located in State B who has an existing active customer who moves to State A D. An agent of a broker-dealer who effects trades in securities in State A
C. Banks are excluded from the definition of a broker-dealer, making Choice A incorrect. Choice B defines an investment adviser; not a broker-dealer. Choice D defines an agent of a broker-dealer; not the broker-dealer itself. Choice C gets at an interesting point. Because the customer has moved and is now located in another State (State A), and the customer is "active" -meaning the customer is trading securities, then the firm must be registered as a broker-dealer in State A (and the agent servicing the customer account must be registered in State A as well).
A surety bond requirement for registration of a broker-dealer: A. protects each customer against loss of principal in the event of the failure of the broker-dealer B. can be met by using the broker-dealer's existing fidelity bond coverage C. can be used by any person who has an enforceable legal claim against the broker-dealer D. can be met by giving the State a lien on the broker-dealer's real property in lieu of posting cash, securities, or an indemnity policy
C. Broker-dealers, as a condition of registration in a State, can be required to post a surety bond. This must be posted as either cash, securities, or an indemnity policy issued by an insurance company. In the event that there is a legal action taken against the broker-dealer in the State, the bond can be used to pay any claims against the broker-dealer that are affirmed by a court of law.
All of the following are EXCLUDED from the definition of an investment adviser under the Uniform Securities Act EXCEPT a(n): A. federal covered adviser B. broker-dealer C. adviser with no place of business in the State whose only clients are broker-dealers D. investment adviser representative
C. Excluded from the definition of an investment adviser are investment adviser representatives; depository institutions; broker-dealers; professionals who only give incidental advice; publishers of general circulation periodicals that do not give investment advice about specific client situations; and federal covered advisers. In contrast, an adviser with no place of business in the State whose only clients are broker-dealers is included in the definition of an investment adviser, but is exempt from registration in the State. This is an extremely picky question!
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 C. Within 30 calendar days D. On the SEC filing anniversary
C. Form ADV is filed through the IARD Investment Adviser Registration Depository) system run by FINRA - this is used by both Federal Covered and State-registered advisers. In IARD, the adviser details whether this is a Federal or State registration and IARD reports to the correct regulator. In addition, for Federal Covered Advisers, the adviser details which States get "notice" filings. When a Form ADV is filed or updated by a Federal covered adviser, this is reported to the SEC, and at the same time, this is also reported to the designated States that get notice filings. The annual updating amendment to Form ADV must be filed within 90 calendar days of the adviser's fiscal year end - note that this is the same rule for both NASAA (State registered advisers) and the SEC (Federal Covered Advisers). For material changes that occur during the year, an "other than annual amendment" must be filed via IARD. Here, the SEC states that it must be filed "promptly" for Federal Covered Advisers, while NASAA requires that it be filed within 30 days of the change for State registered advisers and for notice filings made by Federal Covered Advisers. (Yes, it would be nice if NASAA and the SEC "got together" on their rule writing, but they don't!)
Under the NASAA Model Rule covering Investment Adviser records, the adviser's articles of incorporation must be retained for: A. 3 years B. 5 years C. for the life of the firm plus an additional 3 years D. for the life of the firm plus an additional 5 years
C. NASAA's recordkeeping rule for investment advisers requires that "partnership articles and any amendments, articles of incorporation, charters, minute books and stock certificate books of any investment adviser be preserved for at least 3 years after termination of the enterprise."
Apart from the filing of a registration for a broker-dealer, separate registration is required for each individual that is a(n): A. partner of the broker-dealer B. director of the broker-dealer C. agent of the broker-dealer D. all of the above
C. Named in the registration statement for a broker-dealer are the partners, officers, and directors of the broker-dealer. These persons do not have to make a separate agent filing in the State. However, any person who sells or solicits for the broker-dealer must register as an agent.
Which of the following are generally required to be included in the State registration application of a broker-dealer or investment adviser? I Consent to service of process II Business history of applicant III Fingerprints of the officers IV Books and records of the broker-dealer used by the applicant A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV
C. State registration applications for a broker-dealer or investment adviser must include: The applicant's form and place of organization; The applicant's proposed method of business; The qualifications and business history of the applicant and each of its officers or partners; Any injunction, administrative order or conviction of a misdemeanor involving a security or any aspect of the securities business and any conviction of a felony; The applicant's financial condition and history; and Any information to be furnished to a client (the "brochure") if the applicant is an investment adviser. Also note that the initial application must be accompanied by a consent to service of process, which appoints the Administrator as attorney for the applicant. Any lawsuits filed in court against a broker-dealer or investment adviser will result in a subpoena sent to the Administrator; who will then forward it to the registrant (broker-dealer or investment adviser) that is being sued. As part of the registration application, fingerprints are required by most states (Choice III). However, if the applicant already has fingerprints on file with FINRA as part of a U-4 filing, then the State will not require an additional fingerprint filing. Note that there is no requirement for filing of the books and records of the broker-dealer as part of the application, making Choice IV incorrect. (Note, however, that the Administrator has the power to inspect books and records of a BD or IA at will.)
The Administrator would revoke the license of an agent for all of the following reasons EXCEPT the Administrator: A. has attempted to locate the agent at his or her last known address and has determined that the agent is no longer at that location B. finds that the agent has willfully violated a provision of the Uniform Securities Act C. determines that the agent does not have the required experience to act as an agent in that State D. finds that the agent has unknowingly violated a provision of the Uniform Securities Act
C. The Administrator cannot revoke the registration of an agent based solely on lack of experience. Registration can be revoked if the Administrator cannot locate the agent (e.g., the agent has moved, but has not notified the Administrator of his or her new address). Of course, registration can be revoked if the agent violates the Uniform Securities Act - it makes no difference if the violation was willful or not.
At the initial registration of a broker-dealer, which of the following individuals would automatically be registered as an agent of that broker-dealer? A. officer of the broker-dealer B. director of the broker-dealer C. both of the above D. none of the above
C. The registration of a broker-dealer automatically constitutes the registration of that firm's officers, partners, and directors as agents since all of these individuals are named in the registration document.
Which statement is TRUE? A. All securities sold through a broker-dealer in a State must be registered in the state B. An agent may maintain his registration without being affiliated with a broker-dealer C. An agent's registration can never be revoked without an opportunity for a hearing D. A broker-dealer cannot also be registered as an investment adviser at the same time
C. The true statement is that a registration can never be revoked without the opportunity for a hearing. It is not true that all securities sold in a State must be registered - no registration is required if the securities are exempt, federal covered, or if they are sold in an exempt transaction. An agent must be affiliated with a broker-dealer to maintain his registration. If he leaves the broker-dealer and does not affiliate with another broker-dealer, the registration is terminated. A firm is permitted to register as both a broker-dealer and an investment adviser.
Which of the following is (are) defined as a "broker-dealer" under the Uniform Securities Act? I A person who effects securities transactions for its own account II A person who effects securities transactions for the account(s) of others III An agent of a broker-dealer who effects securities transactions IV An agent of a broker-dealer who effects securities transactions that are not recorded on the books of the broker-dealer A. II only B. I and II only C. I, II and IV only D. I, II, III, IV
C. Under the Uniform Securities Act, a "broker-dealer" is defined as a person that engages in the business of effecting securities transactions for the account of others; or a person that engages in the trading of securities for its own account. Thus, Choice I and Choice II are correct. An "agent" of a broker-dealer (Choice III), is an individual associated with a broker-dealer, who represents the broker-dealer in effecting securities transactions. An agent is not a broker-dealer, making Choice III wrong. If an agent of a broker-dealer engages in so-called "private securities transactions." a prohibited practice has occurred. All securities transactions effected by agents must be known to the broker-dealer; must be recorded on the books of the broker-dealer; and must be supervised by the broker-dealer. If the agent performs a "private securities transaction" that is not known to the broker-dealer, then that agent has, himself, become a broker-dealer under this definition (a so-called "statutory" broker-dealer). As such, he would have to register in the State as a broker-dealer before effecting such a transaction. Thus, Choice IV is correct.
A director of a broker-dealer that is registering for the first time in a State: A. is not permitted to register as an agent in that State B. must apply separately for registration as an agent C. must request that the broker-dealer file a registration for the individual to be agent D. will be automatically registered as an agent at the time that the broker-dealer is registered
D. Included in a State registration application are the names, addresses and background of the officers of the broker-dealer, and these individuals become automatically registered when the broker-dealer entity becomes registered in the State. This is part of State law because the qualifications and business history of the officers and directors is disclosed in the application for the BD registration, so there is no need to have the same information filed twice with a separate registration for these persons to be agents of the BD. The way that most States handle this is when the registration application for the BD is processed, the officers are automatically registered as agents at the same time in CRD (Central Registration Depository); the fees for registration as an agent in the State are automatically deducted; and a window is opened for them to take the appropriate exams as needed (e.g., #63 or #66). Thus, the State gets its money up front! If the officer or director will not be acting as an agent of the BD (e.g., that person has no sales responsibility), he or she can "opt out" of automatic registration (which happens after the fact) and the BD will be refunded the fee.
Which one of the following items would be included in the computation of an investment adviser's net capital? A. Copyright owned by the adviser B. Franchise right owned by the adviser C. Advance to an officer of the adviser D. Sofa and chair owned by the adviser
D. Net capital is really a firm's "liquid net worth." It is liquid assets minus all liabilities. Excluded from assets that count in net capital are any intangible assets, including deferred charges, goodwill, franchise rights, organizational expenses, patents, copyrights, and marketing rights. Also excluded are advances or loans to officers or owners of the adviser, since it is unlikely that these would be repaid if the adviser were liquidated. Believe it or not, an automobile used in the business or office buildings or furnishings used in the business ARE included in the computation if the adviser is NOT an individual. The question does not state whether the adviser is an individual, so we cannot assume this. All intangibles are automatically excluded, so goodwill, marketing rights and copyrights are all deducted, However, conference room furniture is included for an adviser that is a corporation or a partnership, so this is the best choice. Finally, note that if the adviser were an individual, any "personal" assets that are not readily marketable such as home, home furnishings and automobiles, ARE excluded.
Under the provisions of the Uniform Securities Act, a "person" includes: I A parent that is acting as custodian II An adult couple III Municipality IV Corporation A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV
D. A "person," as defined under the Act, can be just about anyone who has legal authority to issue or trade securities. A custodian account opened for a minor is a person (note that a minor acting on his or her own is not a "person" since a minor has no legal authority to trade securities). An adult couple is a "person" (when they open a joint account). A municipality is a person. Finally, a corporation is a person.
Under NASAA rules, which record is NOT required to be retained by an investment adviser? A. Written customer complaint received 4 years ago B. Advertising copy distributed to the public 2 years ago C. Trial balance of the investment adviser prepared 1 year ago D. Customer account statements prepared 6 years ago
D. Advisers must retain records for 5 years under NASAA rules (note that this differs from SEC rules for broker-dealer records, most of which must be retained for 3 years). The first 2 years' worth of records must be kept at the adviser's principal office, where it is available for inspection.
Which of the following are EXCLUDED from the definition of an investment adviser under the Uniform Securities Act? I An employee of an investment adviser II A federal covered adviser III A savings and loan institution IV A broker-dealer A. I only B. I and II C. III and IV D. I, II, III, IV
D. If a person is excluded from the definition of an investment adviser, then that person will not have to register in the State as such. Excluded from the definition of an investment adviser are: employees of investment advisers (they must register separately as agents of the adviser in the State); depository institutions and broker-dealers (who are regulated at both the State and Federal level under other laws); Federal covered advisers (who are regulated by the SEC; or who are excluded from the federal definition of an investment adviser - so the State can't require their registration as well); professionals who give incidental advice; and publishers of general content investment advice not based upon the specific situation of each client. Note that Investment Companies and Insurance Companies are NOT excluded from the definition under State law.
Under the Uniform Securities Act, all of the following measures must be taken to ensure the integrity of data stored electronically EXCEPT: A. the records must be preserved in a non-rewritable format B. the records must be preserved in a non-erasable format C. a separate copy of the records must be stored in a different location from the original records D. the records must be encrypted using an algorithm approved by FIPS
D. In order to ensure the integrity of electronically stored data, the storage medium must be non-rewritable and non-erasable. A separate duplicate copy must be retained in another location. There is no requirement for the record to be encrypted - this makes no sense since the records being stored are "old" and are not being viewed by anyone who would improperly use the data.
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 A. III only B. I and III only C. II and III only D. I, II, III
D. Investment adviser representatives with a place of business in the state must register in the State; as must their investment adviser firms. Federal covered adviser representatives with a place of business in the State must also register in their State; however their federal covered investment adviser firms are not required to register in the State - they need only register with the SEC. However, the federal covered adviser firm is still required to file notice in the State. Broker-dealer representatives with a place of business in the State must register in the State; as must their broker-dealer firms.
A person who renders advice on fixed annuities for a fee; and who then sells the annuities, charging a commission: A. must register as an investment adviser in that State B. must register as a broker-dealer in that State C. must register as an agent in that State D. is not required to register as a broker-dealer, investment adviser or agent
D. Since a fixed annuity is not defined as a security (instead it is defined as an insurance product), State securities law does not apply! (However, State insurance laws do apply, but they are outside of the scope of this examination.) There is no requirement for this person to be registered as an investment adviser since no advice is being rendered on securities. There is no requirement for this person to register as a broker-dealer or agent, since no securities transactions are occurring. Please note that if this were a variable annuity, then it is defined as a security. To take a fee for recommending a variable annuity product, registration as an investment adviser would be required. To charge a commission when selling this product, registration as a broker-dealer would be required as well.
A State Administrator can require that a new investment adviser who files a registration application in the State file: I Proposed advertising II An announcement of the application in 1 or more newspapers III Standardized form letters to be used for prospecting A. I only B. I and II only C. II and III only D. I, II, III
D. Under the Uniform Securities Act, the Administrator can require the filing of any prospectus, pamphlet, circular, form letter, advertisement or other sales literature or advertising communication addressed or intended for distribution to prospective investors. As part of the initial registration process, the Administrator can require that the applicant "publish an announcement of the application in one or more specified newspapers published in the state."
