Series 66 Chapter 3 Exam Questions
The antifraud provisions of the Uniform Securities Act do not apply to: [A]A limited partnership selling a designated interest in the partnership [B]An insurance company selling a fixed annuity [C]A revenue bond's sale [D]The sale of a large block of securities to an insurance company
B The Uniform Securities Act provisions apply to securities. Insurance products are not securities if the values are fixed and guaranteed by the insurance company.
A broker-dealer registers in all states where they do business, which constitutes the majority of the US. The firm also is registered with the SEC. Which of the following statements is TRUE according to the Uniform Securities Act? [A]The broker-dealer must abide by federal standards when it comes to financial reporting requirements, and would not be subject to additional requirements by any State Administrator. [B]The broker-dealer must abide by federal standards when it comes to financial reporting requirements, and would also be subject to additional requirements by any State Administrator. [C]The broker-dealer must abide by state standards when it comes to financial reporting requirements, and would not be subject to the requirements of the SEC. [D]The broker-dealer must abide only by the standards of the state in which their main offices are located and would not be subject to the requirements of the SEC.
A According to regulations on financial reporting requirements, broker-dealer firms that are registered with the SEC must abide by the financial reporting requirements of the SEC (federal standards). Administrators in the states where the firm is registered or has filed are permitted to request duplicate copies of the financial reports required by the SEC, but Administrators are not permitted to exceed these requirements when the broker-dealer is registered with the SEC.
An agent of a broker-dealer has executed a transaction on behalf of a client in an unregistered security and is now attempting to rectify the situation by refunding the purchase price plus adding interest for the time that unregistered stock was held. The USA would: [A]find this permissible if the agent rectifies the situation prior to the filing of a lawsuit. [B]not ever find this to be permissible. [C]find this permissible if the agent gets the security registered and back dates the registration to include the transaction. [D]not find this permissible unless the transaction is approved by the Administrator.
A According to the USA any person, investment adviser, broker-dealer, or agent may avoid civil liability by offering to refund the purchase price plus interest if the offer is made prior to the filing of a lawsuit.
When a broker-dealer is handling the distribution of a new issue the employees of the broker-dealers, including agents, are prohibited from purchasing shares of the new issue directly themselves. If an agent of a broker-dealer in such a situation decides to open an account at another firm under using a numbered account so that they can purchase the new issue, this would be considered to be: [A]a fraudulent practice and a violation of the Uniform Securities Act. [B]acceptable if the agent attested to ownership of the numbered account. [C]acceptable if all of the agents wanting to purchase this new issue have orders that have been filled. [D]be unacceptable since the agent does not have the extra cash to purchase the new issue shares.
A Agents are expected to observe high standards of just and equitable principles of trade. In this situation, the agent is creating a numbered account, and the sole purpose of creating this account is so that he can obtain securities via the account that he would normally be prohibited from obtaining because the broker-dealer is required to make a bona fide public offering of a new issue. Anytime that agent attempts to purchase securities in his own account or the account of a family member on this type of issue, it would be a violation of the USA.
Frank is not registered in any capacity under the Uniform Securities Act. Is it possible for Frank to violate the rules of the Uniform Securities Act, despite his not being registered? I. Yes, Frank can violate the Uniform Securities Act by acting in a capacity which requires registration without properly registering, thus violating the Act. II. No, Frank cannot violate the Uniform Securities Act, even if he acts in a capacity which requires registration without properly registering. III. Yes, Frank can make untrue statements of material fact about securities, he can violate the anti-fraud provisions, and he can violate insider trading laws, all of which would be violations under the Uniform Securities Act. IV. No, any untrue statements of material fact, violations of anti-fraud provisions, and/or violations of insider trading laws would not be violations of the Uniform Securities Act, because Frank is not registered in any capacity. [A]I and III only [B]I and IV only [C]II and III only [D]II and IV only
A An individual does not need to be registered in any capacity in order to violate the provisions of the Uniform Securities Act. Violations can come from many different areas of the Act. Those listed are just a small sample, but include acting in a capacity which requires registration without properly registering, making untrue statements of material fact about securities, violation of anti-fraud provisions, and violation of insider trading laws. Frank can be prosecuted for any of these violations, despite the fact that he is not registered under the Uniform Securities Act.
Lee has an account at ABC Advisers Inc. His adviser sets his account up so that Lee pays 1.5% of the total amount that he has invested through ABC Advisers Inc over a specified 1-year period. Which of the following are true of this scenario? I. This arrangement is acceptable, because Lee is paying a fixed percentage of the total amount invested at ABC. II. This arrangement is acceptable, because Lee is paying a fixed percentage of the total amount of profit obtained by ABC. III. This arrangement is acceptable, because the time period over which the measurement of the total value of the account has been defined. IV. This arrangement is not acceptable, because regulations require Lee to pay the 1.5% on a monthly basis or more frequently. [A]I and III only [B]I and IV only [C]II and III only [D]II and IV only
A In this scenario, the fees charged to Lee would be acceptable, because they are a fixed percentage of the assets that Lee has under management and are NOT based on a share of capital gains (not performance-based). When charging such a fee, the period of time over which the total value is measured must be defined. Here it is a year. This does not have to be monthly or more frequently.
Which of the following would be grounds for denial, revocation, or suspension of the registration of a broker-dealer? [A]The discovery that the broker-dealer failed to supervise its agents. [B]The discovery that a director of the firm had a pending legal issue. [C]A minor technical infraction was discovered by an outside law firm. [D]A minor sale infraction was discovered by 25 clients of the broker-dealer.
A Minor rule infractions are not grounds for denial, revocation, or suspension of registration.
Which of the following are true concerning cease-and-desist orders: I. They may be issued by an Administrator. II. They may provide for the arrest of a person in violation of the Uniform Securities Act. III. They may provide for the confiscation of the property of a person acting in violation of the Uniform Securities Act. IV. They may direct a person presently violating or about to violate the Uniform Securities Act to stop such actions immediately. [A]I and IV only [B]II and III only [C]I, II, and III only [D]II, III, and IV only
A The Administrator does not have the power to arrest people or to confiscate their assets. Administrators can suspend or halt unlawful trading actions.
Under the Uniform Securities Act regulations, if an investment adviser decides to form a limited partnership between himself and several of his clients, which of the following would be true with regards to this arrangement? I. The IA would not be allowed to assign management of the partnership to anyone else without consent of the clients. II. The IA would be allowed to assign the management of the partnership to someone other than himself since he was the one who established the partnership. III. The IA would be allowed to be compensated on the basis of share of the capital gains in the partnership, since he is one of the partners. IV. The IA would be allowed to be compensated based on the total value of the account, averaged over a one year period. [A]I & IV [B]II & III [C]I & III [D]II & IV
A The management of the partnership could not be assigned without consent of the clients. The IA would only be allowed to accept compensation based on the total value of the account averaged over a defined period. The IA would not be permitted to accept compensation tied to the gains in the partnerships' portfolio.
An Agent of Broker-dealer finds out that a security that he sold to one of his clients was sold based on false information of which the agent was not aware. Under the Uniform Securities Act which of the following statements would be true with regard to this situation? [A]The agent has the burden of proving that he did not know and in the exercise of reasonable care, could not have known of the existence of the untrue facts. [B]The agent has liability with regard to this situation and will automatically be personally responsible any loss incurred by the client with regard to this transaction. [C]The agent's broker-dealer has liability with regard to the agent's activities. [D]The agent and the broker-dealer have liability and will share the client's losses equally.
A Under Section 410 of the Uniform Securities Act, a person selling securities has a defense to liability if the person can sustain the burden of proof that they did not know of the untrue statement and could not have known of the untrue statement in the exercise of reasonable care.
The Administrator of a state receives information from a reliable source pertaining to questionable activities on the part of a federal covered adviser. It seems that instead of taking the necessary actions when receiving customer complaints, the adviser burns the documents in his office fire place, sometimes in front of other employees. With his authority, the Administrator can [A]conduct an investigation of the adviser. [B]impose record-keeping rules on the adviser. [C]require the adviser to register in the state. [D]issue an injunction prohibiting further behavior of this kind.
A Under the USA, an Administrator has the authority and power to conduct investigations and issue stop orders . Although a federal covered adviser is exempt from the registration and record-keeping requirements of the Act, they are not exempt from the anti-fraud provisions of the Act. The Administrator may seek an injunction via the judicial system (court system), but the Administrator cannot issue an injunction directly.
Under the Uniform Securities Act, which of the following statements is true with regard to avoiding civil liability when false or misleading information has been disseminated to the public with regard to a sale? [A]Any person who claims to be unaware of a sale made under false or misleading information has the burden of proving that they did not know and could not have known even with the exercise of care, that the information was false or misleading. [B]When false or misleading information has been disseminated to the public there is no remedy to avoid civil liability. [C]When false or misleading information has been disseminated to the public, all persons involved in the distribution of such information will be held accountable for such dissemination even when it is shown that after exercising care, a reasonable person couldn't have know that the information was false or misleading. [D]When false or misleading information has been disseminated to the public, civil liabilities are not applicable as it becomes a criminal matter.
A Under the Uniform Securities Act, any person who claims to be unaware of a sale made under false or misleading information has the burden of proving that they did not know and could not have known, even with the exercise of care, that the information was false or misleading.
Which of the following statements that relate to Investment Advisers (IAs) is FALSE according to the Uniform Securities Act? [A]The registration of IARs is the responsibility of the IA. [B]SEC registration of an IA provides the IA an exemption of a state's antifraud provisions. [C]The state in which the IA's main place of business is located may have recordkeeping requirements which the IA may be required to follow. [D]It may be a requirement that advertisements for the IA be filed with the Administrator of the state.
B Nobody is exempt from state antifraud provisions! Registering with the SEC does not change this obligation.
An Administrator would have the authority under the Uniform Securities Act to require the filing of advertising and sales literature for all of the following EXCEPT: [A]Shares of a common stock being sold intrastate [B]A federal covered security [C]A bond issue by a corporation which has registered by qualification in the Administrator's state [D]The prospectus of a security currently filed for registration with the Administrator
B A federal covered security would be registered with the SEC, and advertising and sales literature would have to be filed with the SEC if required. The Administrator does not have the authority to require filing of advertising and sales literature of a federal covered security. The Administrator has the authority to require filing of advertising and sales literature for securities that are or should be registered in the Administrator's state and are not subject to SEC regulation at the federal level.
According to the Uniform Securities Act, investment advisory contracts: [A]May be oral. [B]Must be in writing. [C]Must include a clause that says customer statements will be sent periodically. [D]Must give a complete description of the investment adviser's prior performance.
B According to the Uniform Securities Act, all investment advisory contracts must be in WRITING.
Got Caught Advisers Inc. (GCA Inc) has been under investigation by the Administrator of State A. The Administrator has compiled a substantial file on GCA over the years, which includes complaints as well as previous violations and other notes from administrative employees regarding the firm. The Administrator provides appropriate notice to GCA that the Administrator has the intent of revoking their registration in State A after finding egregious violations during the investigation. GCA has the ability to appear at a hearing, where the Administrator will provide facts related to the egregious violations and the Administrator will show how the determination was made to revoke registration. In relation to the matter, GCA's representation wishes to view the entire file that the Administrator has compiled, including previous complaint information, previous violations, and notes, etc. Which of the following can be said in this scenario? [A]During the hearing, GCA is entitled to view all of the Administrator's file on the firm, including information that is not pertinent to the most recent violation. [B]During the hearing, GCA is entitled to view the Administrator's findings related to the current investigation as well as the reasons for concluding that revocation of registration is necessary, but GCA would not be able to view all of the files. [C]During the hearing, GCA is entitled to escalate the matter to a federal court and ask for a federal court to over-ride the authority of the Administrator. [D]During the hearing, GCA is not entitled to view any evidence against them, as the Administrator is the final word and is not required to prove their position in terms of the revocation of registration.
B Administrators are required to provide appropriate prior notice related to denials, suspensions, and revocations of registration. The violating party must then receive an opportunity for a hearing, at which the findings of facts must be presented. The Administrator is not required to provide their whole file, complaint information, or information on previous violations that would not affect the investigation and revocation of the firm's registration.
If an intentional omission of a fact is made in a securities transaction, it would constitute fraud: [A]only when the information is disseminated to less than 25 persons. [B]if a reasonable person would attach decision-making importance to the omitted information. [C]only when the security offered is a new issue. [D]only if the information was known to be factual beyond a reasonable doubt.
B Fraud would have occurred if the information was needed in making a decision as to whether or not the investment was appropriate for the client.
Anyone who violates any provision of the Uniform Securities Act may be subject to which of the following? I. liability to the purchase for the amount paid plus interest II. a fine of $10,000 III. imprisonment for not more than three years [A]I only [B]I, III [C]II, III [D]I, II, III
B II is incorrect because the fine under the Uniform Securities Act is $5,000. I and III are correct as stated.
A firm is a Broker-Dealer and Investment Adviser. The firm would like to act as a principal for their own account in the sale of security to a client as a broker-dealer. Which of the following is true with regard to this transaction? [A]Since the firm is both a broker-dealer and an investment adviser, the written disclosure would not be required to the client. [B]Since the firm is acting only on behalf of a broker-dealer client written disclosure would not be required to the client. [C]Since the firm is both a broker-dealer and an investment adviser, proper written disclosure would be required to the client prior to the completion of all transactions. [D]Since the firm is both a broker-dealer and an investment adviser, principal transaction are prohibited.
B If the firm is acting as an IA, then proper written disclosure would be required to the client prior to completion of the transaction. If the firm is acting as a broker-dealer, acting as a principal would be part of the broker-dealer's normal business functions and written disclosure would not be required to the client.
You work for XYZ Advisers which is an investment advisory firm. The firm is registered in Maine, New Hampshire, and Vermont. Printed on the firm's brochures, business cards, and letterhead is the following statement: "XYZ Advisers is a fee-only adviser. Registration procedures, review, and approval has been performed in the state of Maine." Which of the following is the BEST description as to why this statement is unacceptable? [A]The firm is required to mention registration in all states, including Maine, New Hampshire, and Vermont, not just Maine. [B]The firm has made the implication that Maine has, in some way, approved of the advisory firm. [C]The firm has failed to make full disclosure related to the manner in which they are compensated. [D]The firm must charge and receive compensation in other forms aside from fees only.
B In no way is it acceptable for the firm to discuss completion of the registration procedures as "approval" by the state in which the firm is registered. The firm is not required to list all states in which it is registered on such forms. Disclosure as a fee-only adviser is acceptable if that is the case and other forms of compensation need not be disclosed or charged if the firm does not use other forms of compensation.
It is lawful to make which of the following representations in connection with the sale of a security? [A]That the administrator has found the registration statement to be true and complete. [B]That the administrator has registered the security. [C]That the administrator has passed upon the accuracy or adequacy of the prospectus. [D]That the administrator has approved the offering.
B It is lawful to state that registration has occurred but it may not be implied that the registration means any type of approval or endorsement.
Under the Uniform Securities Act, all of the following statements are true except [A]Lack of proper disclosure is a violation of the antifraud provisions. [B]Because banks are excluded from the definition of the investment adviser, they are exempt from the antifraud provisions. [C]Investment advisory contracts must be in writing. [D]An investment adviser selling a recommended security to a client out of the adviser's own inventory must disclose this fact and obtain the client's consent prior to the transaction.
B Under the Uniform Securities Act nothing is exempt from anti-fraud provisions.
Nancy is an investment adviser and for the previous year she has charged her clients a performance-based fee, based on the appreciated value of each of her client's accounts. Under the Uniform Securities Act, this practice is: [A]allowed since it was based on a defined period. [B]not allowed since it was based on the appreciated value of the securities under management. [C]not allowed since some of Nancy's clients did not have appreciation in value. [D]allowed since Nancy's clients agreed to the arrangement in writing.
B Under the Uniform Securities Act, compensation based on a share of capital gains or capital appreciation (performance-based fees) is not allowed. The rule permits compensation based on the total value of funds under management for a defined period but this question only lists performance-based fees.
The Uniform Securities Act has provisions that apply to promotional materials and sales literature. ZZZ Broker-Dealer Incorporated is planning on putting out an advertisement related to the services that they offer. Which of the following is TRUE of requirements of ZZZ? [A]The firm is required to ensure that the advertisement is only seen by a specific audience. [B]The firm is required to maintain a copy of the advertisement with its books and records and may be required to file the advertisement with the Administrator. [C]The firm is required to maintain a list which includes every person who sees the advertisement. [D]The firm is required to state in the advertisement that the broker-dealer is "registered with and approved by" the Administrator of the state.
B Uniform Securities Act rules on books and records require the broker-dealer to maintain a copy of the advertisement with its books and records and may also require the filing of the advertisement with the Administrator, depending on the nature of the advertisement. It is unrealistic to expect that a published advertisement will only be seen by a specific audience. It is also unrealistic to maintain a list which includes all persons who see or receive promotional materials, sales literature, and/or advertising. Firms may never imply that they are "approved" by an Administrator or State.
According to the Uniform Securities Act and the Securities Exchange Act of 1934, which of the following would not cause statutory disqualification from association with a FINRA member: [A]expulsion from a commodities exchange [B]association with another person who is subject to statutory disqualification [C]having less than 6 months' experience in the securities business [D]be prohibited by a state court injunction from acting as an investment adviser
C A person cannot be stopped from entering the business simply because they do not have business experience. If they have knowledge of the business or have been trained, they may enter the business. Expulsion, becoming associated with a disqualified person, or being prohibited from doing business by court order would all be cause for statutory disqualification.
According to the Uniform Securities Act, all of the following statements regarding rules issued by the administrator are true except? [A]All rules must be found to be in the public's interest or for the protection of investors. [B]The administrator may cooperate with the SEC on issuing rules. [C]Rules must be continuously reviewed for appropriateness at a minimum interval of every 3 years. [D]All rules must be published.
C According to the Uniform Securities Act rules are not reviewed every three years to determine appropriateness.
Under the Uniform Securities Act, "fraud" is intentional misrepresentation, concealment, or omission of the truth for purposes of deception. Which of the following would not be considered to be fraudulent according to this definition? [A]Deliberately failing to follow the instructions of a non- discretionary customer, e.g. buying 500 shares of a stock in a client's account when the client wanted to buy only 300 shares. [B]Churning a client's account. [C]Disclosing the current market price of a stock even though the market value of the stock is expected to go down. [D]Selling shares of a new issue without delivering a prospectus for the issue.
C All of the choices except for "C" would be considered fraudulent. Disclosing the current market price of a security is the right thing to do, even if the value is expected to decline.
According to the Uniform Securities Act, the powers of the Administrator in dealing with violations of the Act include: I. Arresting suspects where there is probable cause. II. Publishing information concerning violations. III. Requiring persons to testify. [A]I, II [B]I, III [C]II, III [D]I, II, III
C An Administrator may publish information concerning violations and may require persons to testify but may not arrest suspects. An administrator may request a law enforcement agency arrest a suspect but they could not do so themselves.
Family Investment Advisers Inc. is required to maintain certain registration requirements after their initial registration requirements are satisfied. All of the following are included in those requirements except? [A]The Administrator may require by rule or order the filing of any prospectus which will be distributed to prospective investors of Family Investment Advisers Inc. [B]The Administrator may require by rule or order the form and content of financial statements of Family Investment Advisers Inc. [C]The Administrator may require by rule or order that the IA contact the Administrator to set up an examination of the Family Investments Advisers Inc. books and records. [D]The Administrator may require by rule or order that if there are material changes in the firm's registration that the firm performs updates related to these changes and file them with the Administrator.
C An Administrator's examination is not scheduled or "set up". The Administrator would perform an unannounced visit and can do so at any time.
Which of the following are true regarding investigations conducted by the Administrator under the Uniform Securities Act? I. Information regarding violations must be kept confidential. II. Investigations may be conducted across state lines. III. The Administrator may obtain a court order to have a receiver appointed over a violator's assets. [A]I and II only [B]I and III only [C]II and III only [D]I, II, and III
C Choices II and III are correct. Choice I is incorrect because information regarding violations may be made public by the administrator.
ABC Advisory is dually-registered as an investment adviser and a broker-dealer. Frank, who is an IAR at the firm, recommends the purchase of 200 shares of XYZ common stock to one of his advisory clients. The client also uses ABC for its broker-dealer services. The firm has XYZ shares in its inventory, so the sale is facilitated in a principal capacity. Frank gets a mark-up on the sale in addition to his advisory fees for assets under management. Which of the following is TRUE of this scenario according to the Uniform Securities Act? [A]ABC Advisory violated the Act because it performed services in an advisory and broker-dealer capacity in the same customer transaction. [B]The Act requires written permission from the client before proceeding with the execution. [C]Disclosure is required of the IAR's compensation on this trade and of the firm's principal capacity in the execution. [D]Frank can give the recommendation, charge the mark-up, and not provide disclosure under the rules of the Uniform Securities Act if best execution practices were followed.
C If a client will be charged for advice as well as commissions or a mark-up/mark-down, this must be fully disclosed to the client. As well, the client must be informed via disclosure of scenarios when the firm is acting in a principal capacity (selling into/out of its own account). Frank can perform the trade as listed if proper disclosure is given related to charging both a fee and a mark-up, as well as the firm acting in a principal capacity. If such disclosures are not offered, Frank would be acting in violation of the Uniform Securities Act and could be civilly liable. Prior written consent is not required.
According to the Uniform Securities Act, all of the following statements are true concerning rules issued by the Administrator EXCEPT: [A]All rules must be found to be in the public interest. [B]The Administrator may cooperate with the SEC when issuing rules. [C]All rules must be amended every three years. [D]All rules must be published.
C Rules only have to be amended when they are changed. They do NOT have to be amended every three years.
Does the Administrator of a state have the power to arrest those who have been proven to have violated the Uniform Securities Act? [A]Yes, the Administrator has unlimited authority to arrest. [B]Yes, the Administrator has limited authority to arrest those who have been proven in violation of the Uniform Securities Act. [C]No, the Administrator must rely on law enforcement to arrest those who have been found guilty of criminal actions and violations. [D]No, the Administrator and other law enforcement may not arrest due to violations of the Uniform Securities Act.
C The Administrator is responsible for ensuring that the securities laws of a state are upheld. However, the Administrator does NOT have the ability to directly arrest those in violation of the Uniform Securities Act. The power to arrest rests with law enforcement and the judicial branch of government. Those in violation who have been found guilty of criminal actions and violations may be arrest pursuant to the investigation by the Administrator, but must be arrested by law enforcement, NOT the Administrator.
John has hired an Investment Adviser and really appreciated the good advice that he has received from the IA. John tells the investment adviser that he wants to split profits and losses 60/40 with the IA. When would it be acceptable for an Investment Adviser to share in the profits and losses of John's account? [A]It is only allowed if John was the one who requested the sharing agreement [B]It is only allowed if John and the IA share in profits and losses after John has recovered his initial investment [C]It is only allowed, if John and the IA have a written contract which specifies the sharing arrangement [D]It is only allowed if it is approved by the State Securities Administrator
C When an investment adviser shares in the profits and losses in client accounts such agreements must be in writing.
According to the Uniform Securities Act, when is it not allowable to make assurances to a prospective customer that income from a mutual fund will always exceed interest earned in a savings account? I. if the past history of the fund supports such a claim II. if the agent recognizes the ability of the fund to do so III. if the yield of the fund includes dividends and capital gains distributions IV. if the prospectus makes a similar representation [A]I, IV [B]II, IV [C]I, II, III [D]I, II, III, IV
D Agents and advisers can never guarantee or assure performance on any security.
If an agent obtains a written agreement from a customer that he will not sue even though the sale of securities is in violation of securities laws, this agreement is: [A]Legal. [B]Legal, but only in a civil case. [C]Legal, but only in a criminal case. [D]Null and void.
D Agents may not act unlawfully even if they somehow get a client to agree to the unlawful transaction.
Any investment adviser that violates any provisions of the Uniform Securities Act may be subject to which of the following: I. imprisonment for not more than three years II. appointment of a receiver over the adviser's assets III. revocation of the adviser's registration IV. permanent injunction [A]I, III [B]II, IV [C]I, II, III [D]I, II, III, IV
D All choices are provisions which could be imposed on Investment Advisers that violate the Uniform Securities Act.
Under the Uniform Securities Act, which of the following statements is true with regard to investment contracts and compensation arrangements between an investment adviser and a client? I. Compensation cannot be based on a share of capital gains or capital appreciation. II. Compensation may be based on the total value of a fund averaged over a defined period. III. Advisory contracts cannot be assigned to any other person without the clients consent. IV. Advisory contracts cannot employ any device or scheme to defraud the client. [A]I & II [B]III & IV [C]I, II & IV [D]I, II, III, IV
D All choices are true with regard to the investment contracts and compensation arrangements between an investment adviser and a client.
Which of the following are unethical business practices for an agent to engage in? I. Commingling customer funds with the agent's funds. II. Misrepresenting to a customer the status of his account. III. Giving inaccurate market quotations to a customer. IV. Guaranteeing a profit in a customer's account. [A]I and II [B]III and IV [C]I, II and IV [D]All
D All choices offered represent unethical business practices for Agents.
Which of the following are prohibited business practices for an agent to engage in under the State Laws? I. Borrowing money or securities from a customer. II. Failing to bring customer's written complaints to the attention of the agent's employing broker-dealer. III. Failing to inform a customer that certain transactions will involve larger than ordinary commissions, tax, or transaction costs. IV. Deliberately failing to follow a customer's instructions. [A]I and II [B]III and IV [C]I, III and IV [D]All
D All choices represent prohibited business practices under the USA and NASAA regulations.
Under the Uniform State Securities Act, an agent is prohibited from which of the following: I. Guaranteeing a customer against loss. II. Borrowing money or securities from a customer. III. Backdating order tickets. IV. Misrepresenting a return on a security. [A]I and II [B]III and IV [C]I, III and IV [D]All
D All four choices represent activities which are prohibited by an agent.
Under the provisions of the Uniform Securities Act, disciplinary proceedings generally require the Administrator to provide which of the following? I. Appropriate prior notice II. Opportunity for a hearing III. Written findings of fact and conclusions of law [A]III only [B]I and II only [C]I and III only [D]I, II, and III
D All these choices represent things that an administrator must do with regard to disciplinary proceedings.
Under the Uniform Securities Act, investment advisory fees may be based on a percentage of all of the following EXCEPT: [A]Client's funds deposited with the IA. [B]Total value of the client's managed accounts at a specified point in time. [C]Average total value of the client's managed account over a period of time. [D]Appreciation in the value of the client's managed account over a period of time.
D As a general rule, performance-based fees are prohibited. Therefore, fees based on appreciation or capital gains are prohibited.
Which of the following is/are prohibited by the antifraud provisions of the Uniform Securities Act? I. A misstatement of a material fact II. An omission of a fact important to understanding other statements that are made III. A deceptive sales presentation which does not result in a sale [A]I only [B]I and II only [C]I and III only [D]I, II, and III
D Nothing is exempt from the anti-fraud registrations.
If an agent perform actions that violate the rules of the Uniform Securities Act, which of the following are true regarding the Administrators' authority to take disciplinary actions? I. The Administrator can immediately revoke the agent's registration without notice. II. The Administrator can begin proceeding against the agent including issuing a cease and desist, opening an investigation, presenting finding of facts, and allowing for a hearing to revoke the agent's registration. III. The Administrator can immediately revoke the broker-dealer's registration without notice. IV. The Administrator can begin proceeding against the broker-dealer if the Administrator suspects that failure to oversee and supervise the agent played a role or prolonged the illegal activity. [A]I & III [B]I & IV [C]II & III [D]II & IV
D The Administrator can take action not only against the agent, but also the broker-dealer, if failure to supervise played a role. Regardless, the Administrator cannot revoke registration without notice, finding of fact, and a hearing for the agent and the broker-dealer.
According to the Uniform Securities Act, whenever it appears that someone has violated the act, the administrator may: I. issue a cease and desist order after conducting a hearing on the matter. II. issue a cease and desist order before conducting a hearing on the matter. III. seek a court order requiring the violator to make restitution to clients. [A]I, II [B]I, III [C]II, III [D]I, II, III
D The Administrator of a state has the power to do any or all three of the choices offered if a violation of the Uniform Securities Act has occurred in their state.
According to the Uniform Securities Act, an administrator has the power to do which of the following in conducting investigations? I. administer oaths II. take evidence III. subpoena witnesses [A]I [B]I, III [C]II, III [D]I, II, III
D The administrator has the power to do all three choices which are offered. Generally, the administrator can do whatever is necessary in conducting an investigation except arrest people.
The antifraud provisions of the Uniform Securities Act apply to which of the circumstances below: I. The sale of exempt securities by a registered broker-dealer. II. A broker-dealer makes an offer on a security with no sale resulting. III. Securities are sold by a non-registered person who is not required to be registered under the Uniform Securities Act. [A]I [B]I and II [C]II and III [D]I, II, and III
D The antifraud provisions of the Uniform Securities Act apply to all offers and sales of securities, whether the person selling them is exempt from the Act or not.
In any proceeding under the Uniform Securities Act, the burden of proving an exemption or exception from the definition is placed upon which of the following? [A]the seller of any securities [B]the buyer of any securities [C]the administrator who reads the proceedings [D]the person claiming the exemption or exception from definition
D The burden of proving that a person qualifies for exemption or exception is always placed on the person claiming it.
A customer calls his IAR to discuss the investment merits of Gandalf Inc. The investment advisory firm owns 200,000 shares in its firm account. After a brief discussion, the customer states she wants to buy 10,000 shares. Before the order is placed, the IAR discloses to the customer that her investment advisory firm owns Gandalf shares, and she will sell them to him from this account. The customer has no concern with this, and the order is placed. Given this scenario, has the IAR violated the Uniform Securities Act? [A]The IAR disclosed that she is selling shares from the adviser's account before the order was placed so there is no issue. [B]The disclosure was made and the customer consented so there is no violation. [C]The IAR committed a violation because she did not get the customer's consent in writing. [D]A violation occurred because the disclosure was not provided in writing before the order was placed.
D The investment adviser is selling shares from its own account to the customer. It is acting as principal in this transaction. According to the Uniform Securities Act, the disclosure regarding the sale of the shares from the firm's account (a principal transaction) must be made in writing. The customer's consent does not have to be in writing.
