Series 66 Unit 1 Quizbank 1
Under the USA, each of the following is specifically excluded from definition of broker-dealer EXCEPT
an investment adviser USA excludes agents/issuers and banks/international or domestic, from definition of broker-dealer Its may have to register as broker-dealers if their method of operation requires it
What is common to all agents, investment adviser reps, state-registered investment advisers, and broker-dealers under the USA
all may be required to pass a written exam all must file consent to service of process with application registration renews annually Dec 31st all might be required to post a surety bond
Which of the following individuals would be considered a noninterested person in a mutual fund?
A member of the board of the directors who does not hold another position within the investment company
Which of the following are not specifically excluded from the definition of an investment adviser under the USA?
A person who, on a regular basis for compensation, offers specific investment advice to clients as to the value of securities Clerical and ministerial personnel, full-time or temporary, not included in definition of either investment adviser representatives (supervised persons) or investment advisers. Any person who is a federal covered adviser is exempt
Under the USA which fo the following statements related to registration requirements of investment advisers is TRUE?
A registration becomes effective at noon, 30 days after application has been filed, providing registration is not in the process of denial *30 days if there is no denial or stop order in process If amendment is subsequently filed, registration becomes effective 30 days after amendment is filed; filing the amendment starts the process anew
All of the following actions if performed by a registered agent are prohibited activity under the USA EXCEPT
Accepting an order for a client wishing to purchase a nonexempt security that is not properly registered in the state
Which of the following would not constitute custody of the client's account under the Investment Adviser's Act of 1940?
Client prepayment of $1,000 advisory fees, 6 months in advance "Custody" means possession even temporarily and includes authority over client's bank account for any type of disbursement, but does not include acceptance by the adviser of prepaid advisory fees
Which of the following statements regarding an agent's authority to place orders for a client's account number under NASAA's Statement of Policy on Unethical and Dishonest Business Practices of Broker-Dealer's and Agent's is TRUE?
Client's oral approval is sufficient for a specific order Need to have stated amount of specified security Written authority is necessary for agent to exercise discretion in account
Which of the following financial instruments of XYZ Oil Corporation, whose shares are traded on the NYSE, is NOT exempt from registration with the state
Convertible preferred stock issued by XYZ Oil corporation XYZ's participation as a general partner of an oil and gas limited partnership does not qualify the issue as exempt from registration. XYZ's direct debt and preferred stock are exempt under the USA
A federally chartered credit union is domiciled in Texas. The credit union is making an offering of securities in Nebraska. To comply with the USA exclusion from the definition of agent, any individual offering the security in Nebraska:
Could not sell without being an agent Exclusion from definition of agent only applies to individuals working for issuer
Which of the following statements regarding matched orders is TRUE?
Matched orders violate trading rules because they create the illusion of trading volume where such volume would not occur otherwise occur As price rises, participants who initiated the matched orders sell their securities at a profit
An applicant for registration as an investment adviser discloses Form ADV that it plans to use palm readers to help determine investments most suitable for their clients. Under the USA, the Administrator may:
Deny applications only on the basis of the limitations of the law Required to disclose method of analysis used, but Admin not empowered to pass judgment on them
If a broker-dealer provides investment advice or discretionary portfolio management services to its clients and the firm also recommends or sells products that it or affiliated companies issue
Disclosure of potential conflict of interest must be made
Strategic Capital Asset Managers (SCAM) is an investment adviser that is registered in 5 states. In lieu of preparing a fancy brochure, SCAM is promoted to provide its clients with a copy of its?
Form ADV Part 2A and Part 2B Form ADV Part 2 (both parts) is acceptable to use as the firm's brochure. Part 1 is for registration purposes, and Part 1B is only used by state-registered advisers (as this firm is). Part 2, Appendix 1 is used for investment advisers who offer wrap fee programs. As a state-registered investment adviser, SCAM does not file any forms with the SEC.
John, an investment adviser, employs an investment adviser representative who is found guilty of defrauding many of the firm's clients over a long period of time. Which of the following are true under the Uniform Securities Act?
I. Investment adviser representative is subject to criminal penalties specified in the act and to civil liabilities resulting from clients who sue as a result II. John may be subject to civil liabilities resulting from actions taken by the investment adviser representative III. John is not subject to civil liabilities as a supervisor if he can prove that he had no knowledge of the actions of the rep
What is the appropriate procedure to follow when a customer fails to sign the form provided the investment adviser starting that he has received a copy of the investment adviser's brochure?
IProceed with the account, but make a supervisory person aware of this. No legal requirement for a client to sign acknowledging receipt of the brochure, if it is the adviser's practice, the account may proceed, but only with notice to the appropriate supervisory person
Under the Investment Advisers Act of 1940, which of the following statements is TRUE regarding jurisdiction for offenses?
If SEC wished to obtain an injunction or seek civil penalty against an adviser, it would file a case in the federal court having jurisdiction over the place where the violation occurred An adviser that wished to appeal an SEC order would file a motion in the US Court of Appeals
An Administrator may deny or suspend a registration in all of the following situations EXCEPT:
If the applicant is not qualified on the basis of experience May restrict on basis of lack of training and knowledge, but not for lack of experience.
Which of the following is NOT required to be disclosed in a state-registered investment adviser's Firm ADV Part 2A?
Personal financial records for each principal executive officer of the adviser or each person with similar status
Terms "offer," "offer to sell" "sale" and "sell" include which of the following?
Preemptive right is an offer of upcoming issue Does not include bona fide loans, stock dividends, or dividends pursuant to corporate statutes
Which of the following would constitute a violation of the USA?
Purchasing a convertible security and simultaneously selling short the underlying common for profit is another form of arbitrage and is perfectly legal
An IAR has received several referrals from a prominent estate-planning attorney. Under the USA, the IAR would be permitted to:
Refer advisory clients who need estate planning to this attorney We can show appreciation for referrals by referring clients to qualified professionals. A flat fee may be paid to other professionals for their referrals, but must be disclosed to the client
USATrades Securities, a FINRA member broker-dealer, is registered in 10 midwestern states. Regarding financial requirements, USATrade must meet those of
SEC Broker-dealer member of FINRA also registered with the SEC SEC's requirements always trump those of states
Under Section 303 of the USA, in order for an issue to register using coordination, it must simultaneously register under the provisions of the
Securities Exchange Act of 1933 Coordination coordinates state registration of a security with simultaneous federal registration of that security. Registered under federal level under Securities Act of 1933
Which of the following is required to effectuate annual renewal of the registration of an investment adviser representative affiliated with a federal covered adviser?
State licensing fee All IARs are registered with the states, not the SEC. Renewal requires the payment of the annual renewal registration or licensing fee. Consent to service of process is a permanent document submitted with the initial application for registration
Which of the following statements regarding the registration of a successor firm under the USA are TRUE?
Succesor firm's registration will be effective for the unexpired portion of the year Successor firm need not be in existence when the application for registration is filed No filing fee State does not need additional filing fees because the registration must be renewed on Dec 31st as will all professional registrations, at which time next year's fees will be due
An issuer is planning to offer securities for sale in State A and several other states. Which of the following statements regarding registration in Sate A under the USA is NOT true?
The Administrator, may not, as a condition of registration by qualification or coordination, require the security be deposited in escrow and the proceeds by impounded until the issuer receives a specified amount They may require this
Consent of the client before completion of a trade made between the firm and a client must be made when
an investment adviser will be acting in the capacity of the principal Investment adviser acts in capacity of a principal (agent) with an advisory client, consent of the client before compensation of the transaction is required. In the case of broker-dealers, disclosure of capacity on the trade confirmation, but not consent, is needed.
In the securities industry, when a person is acting in agency capacity, the form of comp received is
commission Dealer/principal--> markup/down Investment adviser has fees
Administrator may by rule
forbid investment advisers registered in that state from taking custody of clients funds Can't waive provisions of USA, nor suspend federal law
One of the concerns about social media is the opportunity for affinity fraud. This occurs when
fraudulent offers are aimed at groups of people who share a similar interest Target members of identifiable groups, such as the elderly, or religious or ethnic communities
With regard to state-registered investment adviser using Form ADV Part 2 as its brochure, it would be correct to state that
it is filed through the IARD system electronic filing system that facilitates investment adviser registration, regulatory review, and the public disclosure information of investment adviser firms Used for filing ADV Parts 1 and 2
Under the Securities Exchange Act of 1934, SEC may suspend all trading on an exchange
only with prior notification of the President of the United States SEC may summarily suspend trading in any nonexempt security for up to 10 days without prior notice
All of the following are exempt form registration requirements of USA EXCEPT
stock issued by canadian company that provides actuarial service to insurance companies Canadian corporate issuers not exempt
An IAR with a state-registered adviser would like to employ the services of an individual as a solicitor to help bring in more business. The solicitor will be compensated by receiving a percentage on all AUM. In order to do this, all of the following must be complied with EXCEPT
the client must sign the contract at the same time as he receives the IA brochure and the solicitor disclosure document Brochures delivered at time of sales presentation Signing of contract won't take place until prospective client decides to engage in services of IA
Under the USA registration by coordination becomes effective:
when the registration with the SEC becomes effective at least 10 days before the SEC effective date