Unit 9.3 Persons Subject to State Registration (Series 65)

Under the Uniform Securities Act, a broker/dealer is defined as any person who: A) is in the business of effecting securities transactions for its own account or for the accounts of others. B) sells securities. C) buys securities. D) is registered with the SEC.

Answer: A A broker/dealer is any person, partner, officer, director, or securities firm engaged in the business of effecting securities transactions for the accounts of others (broker) or for its own account (dealer). Reference: 9.3.1 in the License Exam Manual.

If an agent feels that his secretary is underpaid and decides to split his commissions on an 80%/20% basis, this practice is: A) permitted if the secretary is also registered as an agent and the firm's principal agrees to the arrangement. B) a violation under all circumstances. C) a violation in certain states. D) permitted if the secretary is also registered as an agent.

answer: A If the secretary is a registered agent, then the agent may split commissions, but only if the arrangement is approved by the firm's principal. Reference: 9.3.2.5 in the License Exam Manual.

An agent of a broker/dealer registered in Illinois terminates his employment to accept a new position with broker/dealer who is also registered in Illinois. If his previous employer fails to notify the state Administrator of the termination, the agent must: A) notify the Administrator only if he learns that his previous employer has failed to notify the Illinois securities Administrator. B) not seek employment with another broker/dealer until his registration is renewed. C) notify the Administrator in Illinois of his termination. D) notify his new employer that he has terminated his registration.

Answer: C When an agent begins or terminates a connection with a broker/dealer, the agent as well as the broker/dealer must promptly notify the Administrator. The agent has no responsibility to insure that the previous employer has notified the Administrator. Reference: 9.3.2.3 in the License Exam Manual.

A broker/dealer having no place of business in a state is not required to be registered in that state if the broker/dealer: A) does no business in that state other than with institutional clients. B) is a member of FINRA. C) is a member of the New York Stock Exchange. D) is licensed/registered in its state of residence.

Answer: A A broker/dealer must be registered in every state it sells or offers to sell securities, unless an exemption is available. If a broker/dealer has no office in a particular state and no business is done in that state other than with institutional clients, registration there is not required. Reference: 9.3.1.1.1 in the License Exam Manual.

Under the Uniform Securities Act, which of the following is responsible for notifying the Administrator when an agent changes his place of employment from one broker/dealer to another? A) New broker/dealer. B) The agent, the former employer, and the new employer. C) Agent. D) Former broker/dealer.

Answer: B All three parties must notify the Administrator. Reference: 9.3.2.3 in the License Exam Manual.

Under the Uniform Securities Act, an agent registered in one state may transact business in another state in which he is not registered with which of the following? I. An existing client visiting the state for a 2-week period. II. An existing client who moved to the state 6 months ago. III. An existing client who moved to the state less than 30 days prior. IV. An acquaintance from another state who requests that the agent execute transactions on his behalf A) II and IV. B) I and III. C) I and IV. D) II and III.

Answer: B An agent may conduct business in a state in which he is not registered if an existing client is visiting in that state or if the client has moved to the state within the past 30 days. Reference: 9.3.2.3 in the License Exam Manual.

Broker/dealer A wants to promote and reward teamwork. The firm plans to pay out a small percentage of the firm's profits to the clerical staff as a bonus for their hard work. Under NASAA rules, is this permitted? A) No, this cannot be done. B) Yes, no registration is necessary. C) Yes, if all of the agents agree to it. D) Yes, if the entire clerical staff is registered as agents for the firm.

Answer: B Bonuses based on a broker/dealer's profits may be payable to nonregistered clerical help as long as there is no direct relationship to any specific sales. Reference: 9.3.2.4 in the License Exam Manual.

One of the terms defined in the Uniform Securities Act is "broker/dealer". Which of the following is NOT included in that definition? I. An individual employed by a corporate entity to open new customer accounts for the purpose of trading securities. II. A business entity seeking to raise additional capital using the regulated securities markets. III. A person whose primary function is buying securities for his own account and for the accounts of others. IV. A person whose primary function is providing advice on what assets belong in clients' investment portfolios A) III and IV. B) I, II, III and IV. C) I, II and IV. D) II and III.

Answer: C A broker/dealer is defined as a person in the business of effectuating securities transactions for its own account or the account of others. Those employed to open new accounts are defined as agents. Those seeking to raise new capital are issuers, and a person who provides investment advice is an investment adviser. Reference: 9.3.1 in the License Exam Manual.

USATrade Securities, a FINRA member broker/dealer, is registered in 10 midwestern states. Regarding financial requirements, USATrade must meet those of A) FINRA B) the state with the most stringent financial requirements C) the SEC D) the state in which the principal office of the member is located

Answer: C It may be assumed that a broker/dealer member of FINRA is also registered with the SEC. As such, when it comes to financial requirements, bonding, recordkeeping, and so forth, the SEC's requirements always trump those of the states. Reference: 9.3.1.3 in the License Exam Manual.

An agent with a broker/dealer is suddenly called out of town on a personal family matter. While away, the agent's unregistered sales assistant receives a phone call from an existing client wishing to purchase 200 shares of a listed stock. What would be the most appropriate action for the sales assistant to take? A) Accept and place the order because it is unsolicited. B) Accept the order because it is from an existing customer. C) Explain that the agent is out of town and request the client to call back with the order next week. D) Route the call to a licensed agent in the office.

Answer: D The fact that the order is unsolicited does not preclude the rule that under no circumstances shall an unregistered individual accept and place orders. Reference: 9.3.2.3 in the License Exam Manual.

Which of the following must register as an agent under the Uniform Securities Act? A) A sales assistant who takes orders on behalf of agents in a branch office. B) An administrative assistant who provides securities quotes to clients. C) An individual who sells securities of an issuer to the issuer's employees without earning a commission. D) A broker/dealer with offices in the state.

Answer: A A sales assistant who takes orders on behalf of agents in a branch office is required to register under the Uniform Securities Act. An administrative assistant who provides securities quotes to clients is not functioning as an agent and need not register. An individual who sells securities of an issuer to the issuer's employees without earning a commission need not register under the terms of the USA. Remember, a broker/dealer is excluded from the definition of an agent under the USA. Reference: 9.3.2.1 in the License Exam Manual.

A federally chartered credit union is domiciled in Texas. The credit union is making an offering of securities in Nebraska. To comply with the Uniform Securities Act's exclusion from the definition of agent, any individual offering the security in Nebraska: A) could not sell without being an agent. B) would have to be an employee of a broker/dealer registered in Texas. C) would have to be an employee of a broker/dealer registered in Nebraska. D) would have to receive only nominal commissions.

Answer: A It is unusual to have an answer set up this way, but it does happen sometimes on the exam - "to comply with" and then there is no way to comply. First of all, the USA's exclusions from the definition of agent only apply to individuals working for the issuer, never broker/dealers. Then, the exclusion only applies when selling the following exempt securities in non-exempt transactions: ◾US government and municipal securities; ◾Securities of governments with which the United States has diplomatic relationships; ◾Securities of US commercial banks and savings institutions or trust companies (when not engaged in securities-related broker/dealer activities; ◾Commercial paper rated in the top three categories by the major rating agencies with denominations of $50,000 or more with maturities of nine months or less; and ◾Investment contracts issued in connection with employee's stock purchase, savings, pensions, or profit-sharing plans. Selling other exempt securities, such as those issued by a federal chartered credit union, on behalf of the issuer, requires one to become registered as an agent of the issuer. Don't confuse this with the exemption offered in the case of exempt transactions. In that case, regardless of whether the security is exempt or not, if an individual's only sales activity while representing an issuer is in exempt transactions, then the exclusion from the definition of an agent applies. It is obviously a much broader exemption than when selling exempt securities. Reference: 9.3.2.2.1 in the License Exam Manual.

Under the USA, an individual would not be considered an agent while representing the issuer in any of the following transactions EXCEPT: A) nonexempt, initial public offerings. B) promissory notes, such as commercial paper, with a maturity of nine months or less. C) investment contracts issued in connection with an employee's stock purchases, savings, pension, profit-sharing, or similar employee benefit plan. D) issuers in exempt transactions.

Answer: A Persons who represent nonexempt issuers of new securities, are agents under the USA unless it is stated that the transaction is exempt. Representing issuers in exempt transactions excludes the person from the definition of agent. Reference: 9.3.2.2 in the License Exam Manual.

If an agent representing a broker/dealer located in Utah wishes to solicit business in California, under the Uniform Securities Act, the agent would: A) have to register in California. B) not have to register in California. C) not have to register if the broker/dealer is registered in California. D) be allowed to solicit if the securities are exempt.

Answer: A Typically, an agent, when representing the broker/dealer to solicit securities transactions, must register in every state where business is conducted even if the securities or the transactions are exempt. Reference: 9.3.2.3 in the License Exam Manual.

Under the Uniform Securities Act, which of the following is a broker/dealer? A) A credit union that sells its own stock. B) A corporation that sells interests in an oil and gas limited partnership to investors with the proceeds going to the issuer. C) An agent. D) An issuer.

Answer: B A broker/dealer is any person that buys or sells for the accounts of others or for his own account. In this case, an entity structured as a corporation is selling , on behalf of the issuer, a security in the form of limited partnership units and is therefore a broker/dealer. A broker/dealer is not an issuer or an agent. Reference: 9.3.1 in the License Exam Manual.

Under the NSMIA, state securities Administrators retain authority to: A) impose state registration requirements on all investment advisers. B) enforce antifraud provisions. C) regulate the securities registration and offering process for registered investment companies. D) forward all filing fees received from issuers, broker/dealers, and agents to the SEC.

Answer: B Under the NSMIA, state Administrators are not prohibited from enforcing the antifraud provisions of state and federal securities laws. Investment companies and SEC-registered advisers are exempt from state registration but they may be required to pay state filing fees. Reference: 9.3.1.3 in the License Exam Manual.

If Wallace resigned his position as an agent with Rockland Securities to work for Gibraltar securities, which of the following parties must notify the Administrator of Wallace's move? A) Wallace and Rockland. B) Rockland, Gibraltar, and Wallace. C) Rockland and Gibraltar. D) Gibraltar and Wallace.

Answer: B When an agent with one broker/dealer resigns and affiliates with another, both broker/dealers and the agent must notify the Administrator of the change in registration. Notification is accomplished by filing Forms U-5 and U-4 with FINRA's CRD. Reference: 9.3.2.3 in the License Exam Manual.

Which of the following may be required by the Administrator to post surety bonds? I. An agent who has discretion over client funds and securities. II. A broker/dealer who has custody of, or discretion over, client funds and securities. III. An investment adviser who has custody of, or discretion over, client funds and securities. A) I and III. B) III only. C) I, II and III. D) I only.

Answer: C A broker/dealer, investment adviser, or agent who has discretion over or, in the case of broker/dealers and advisers, custody of funds or securities may be required to post a bond. Reference: 9.3.2.4 in the License Exam Manual.

An agent registered in one state may solicit business in another state provided: A) the agent applies for registration in the other state. B) the agent was previously registered with a different firm in the other state. C) both the agent and the firm are properly registered in the other state. D) the agent's firm is properly registered in the other state.

Answer: C An agent holding registration in one state may solicit and/or transact business in another state only if registered in that state and the employing broker/dealer is also registered in that state, unless an exemption is available. Reference: 9.3.2.3 in the License Exam Manual.

An individual may NOT act as an agent for more than one broker/dealer: A) unless the broker/dealers are unrelated. B) unless the broker/dealers are exchange members. C) unless the Administrator, by rule or order, authorizes such employment. D) under any circumstances.

Answer: C An individual may only act as an agent for multiple broker/dealers that are affiliated with each other. If the broker/dealers are unrelated, an agent may not work for them unless the state securities Administrator, by rule or order, authorizes such employment. Reference: 9.3.2.6 in the License Exam Manual.

Under the Uniform Securities Act, which of the following are elements in the definition of an investment adviser? I. Advice as to investments must be in writing, not given orally. II. Advice must relate to the value of securities or recommendations to purchase or sell securities. III. There must be compensation for services rendered. A) I and III. B) I, II and III. C) II and III. D) I and II.

Answer: C An investment adviser provides advice related to securities for compensation. The advice may be given orally or in writing. Reference: 9.3.3 in the License Exam Manual.

According to the USA, under what circumstances is an employee of a licensed broker/dealer in a state allowed to sell exempt securities as an unregistered agent? A) The transaction is exempt. B) The employee is not paid any commission or salary. C) Under no circumstances is an employee of a licensed broker/dealer in a state allowed to sell exempt securities as an unregistered agent. D) The securities are federal covered securities.

Answer: C It is unlawful for a person to transact business on behalf of a broker/dealer unless that person is registered as an agent in the state. Only individuals selling on behalf of the issuer may qualify to be exempt from registration as an agent. Reference: 9.3.2.3 in the License Exam Manual.

A broker/dealer registered in multiple states must meet the record retention requirements of: A) the state where the b/d is incorporated. B) the state where the principal office of the broker/dealer is located. C) the SEC. D) the state with the most stringent requirement.

Answer: C One of the effects of the NSMIA was to establish the pre-emption of federal law over state law. A broker/dealer registered in multiple states is going to be registered with the SEC as well. NSMIA amended the Securities Exchange Act of 1934 (the 34 Act) to add section 15(h)(1) which reads as follows: "No law, rule, regulation, or order, or other administrative action of any State or political subdivision thereof shall establish capital, custody, margin, financial responsibility, making and keeping records, bonding, or financial or operational reporting requirements for brokers, dealers, municipal securities dealers, government securities brokers, or government securities dealers that differ from, or are in addition to, the requirements in those areas established under this title." However, had this question been dealing with an investment adviser registered on the state level, then it would have been the requirements of the state where the principal office of the adviser is located. Reference: 9.3.1.3 in the License Exam Manual.

Under the National Securities Markets Improvement Act of 1996 (NSMIA), states are prevented from: I. registering securities. II. establishing capital and custody requirements that exceed those provided for in the Securities Exchange Act of 1934. III. establishing recordkeeping requirements for broker/dealers or investment advisers that exceed those required under federal securities law. IV. registering investment advisers. A) I and IV. B) III and IV. C) II and III. D) I and III.

Answer: C The NSMIA streamlined much of federal and state securities law and specifically prevented dual regulation. As a result, states may not impose capital, custody, and recordkeeping requirements that exceed requirements under federal securities law. States can register securities and investment advisers that are not covered by the registration requirements of federal legislation. Reference: 9.3.1.3 in the License Exam Manual.

A Canadian broker/dealer is registered in Province Q. The firm has clients who vacation in several New England states and they would like to continue to do business with them while on their holidays. Under the Uniform Securities Act: A) the broker/dealer may only accept unsolicited orders from their existing clients while they are vacationing in the U.S. B) this would only be permitted if the trades were executed through an affiliated domestic broker/dealer who is licensed in those states. C) this is permissible if the broker/dealer is properly registered in Province Q, deals only with existing clients, and registers in each of the states. D) this is permissible only if the broker/dealer is registered with the SEC.

Answer: C The Uniform Securities Act provides for a form of limited registration for Canadian broker/dealers wishing to do business with their clients who are vacationing or otherwise traveling through the United States. In order to qualify for the limited registration, the B/D must be properly licensed in its home province and their only dealing in the states is with an existing client. Reference: 9.3.2.7 in the License Exam Manual.

Under the Uniform Securities Act, the definition of a broker/dealer includes a(n) A) agent handling principal transactions with major institutional clients B) trust company when executing transactions in accounts in which it does not act in a fiduciary capacity C) authorized representative of the issuer who receives a commission D) person in the business of making trades in his own account or for the accounts of others

Answer: D A broker/dealer is defined as any person in the business of making trades in its own account or for the accounts of others. Reference: 9.3.1 in the License Exam Manual.

An individual has been employed by a broker/dealer to solicit new subscriptions for the firm's free monthly stock market report. The individual is paid a salary plus bonus based on his success rate with signing up subscribers. Under the USA, this person would: A) have to be registered as an agent of the broker/dealer. B) have to be registered as an investment adviser representative. C) only be allowed to contact existing clients of the broker/dealer. D) not have to be registered as an agent of the broker/dealer.

Answer: D Agents of broker/dealers are in the business of securities-related transactions on behalf of clients of the firm. A free market report is not a security, so this individual is not soliciting securities business. Reference: 9.3.2.1 in the License Exam Manual.

Which of the following statements are TRUE? I. An agent may never be simultaneously employed by multiple broker/dealers. II. An agent must submit separate registrations for each broker/dealer with which he is registered. III. Certain states prohibit agents from dual or multiple registration. IV. An agent who sells securities in several states must be registered with different broker/dealers in each state. A) I only. B) II, III and IV. C) IV only. D) II and III.

Answer: D An agent must submit separate registrations for each broker/dealer with which he is registered, and an agent may be prevented from multiple registration in those states that prohibit dual or multiple registrations. Reference: 9.3.2.6 in the License Exam Manual.

Which of the following statements regarding an agent's registration is CORRECT? A) Agents may be licensed in a state even if their broker/dealer is not. B) If the broker/dealer with which that agent is registered should have its registration revoked, the agent may continue to do business only with existing clients and may not acquire any new ones until registered with an active broker/dealer. C) If the broker/dealer with which that agent is registered should have its registration revoked, the agent's license will be held by the Administrator and the agent will be required to register with an active broker/dealer within 30 days. D) Revocation of the registration of that agent's broker/dealer will result in cancellation of that's agent's effective registration.

Answer: D An agent of a broker/dealer is active only when that broker/dealer's registration is in force. Reference: 9.3.2.3 in the License Exam Manual.

Under the USA, each of the following is specifically excluded from the definition of a broker/dealer EXCEPT an: A) international bank. B) issuer. C) agent. D) investment adviser.

Answer: D The USA specifically excludes agent/issuers and banks, international or domestic, from the definition of a broker/dealer. Investment advisers also may have to register as broker/dealers if their method of operation requires it. Reference: 9.3.1.1 in the License Exam Manual.

Anyone who represents an issuer in effecting transactions between the underwriter and the issuer: A) must be registered as an agent. B) must be registered as an investment adviser. C) must be registered as an administrator. D) is excluded from the definition of agent under the Uniform Securities Act.

Answer: D Under the Uniform Securities Act, a person representing an issuer in securities transactions between an underwriter and an issuer is not deemed an agent and is exempt from the agent registration requirements of the act. Reference: 9.3.2.2.2 in the License Exam Manual.

If Somerville Discount Securities has its principal office in New Jersey and recently registered a branch office in Minnesota, which of the following statements is TRUE? A) Each agent must be registered in the appropriate state before soliciting or taking orders. B) Agents working in the principal office that are licensed only in New Jersey may take unsolicited orders from Minnesota residents. C) Agents working in the branch office that are licensed only in Minnesota may take unsolicited orders from New Jersey residents. D) Each agent is automatically registered in both states.

Answer: A Agents must be registered in every state in which they do business. An agent is not automatically registered in a state just because his employer is registered in that state. Reference: 9.3.2.3 in the License Exam Manual.

Hal owns a successful plumbing business. If he engages in a substantial amount of short-term trading in stocks for his own benefit, he would be considered a(n): A) individual investor. B) dealer. C) institutional investor. D) accredited investor.

Answer: A Hal is not in the business of engaging in securities transactions, he is in the plumbing business. Thus, he is an individual investor rather than a dealer. As the question provides no information as to Hal's annual income or net worth, we have no indication that he is an accredited investor. Hal is a plumber rather than a financial institution similar to a bank or an insurance company. Reference: 9.3.1 in the License Exam Manual.

It has been a great year at Capital Funding, Inc., an SEC-registered broker/dealer that is also registered in 22 states. The company decides to share its good fortune with employees by paying a year-end bonus equal to 31% of annual salary. In order for clerical personnel to receive this bonus: A) they must be employees of the broker/dealer. B) they must be licensed as agents. C) they must be licensed as investment adviser representatives. D) the bonus must be sales related.

Answer: A Unregistered personnel may be paid a bonus as long as it is not directly related to any specific sales activity. Reference: 9.3.2.1 in the License Exam Manual.

The Administrator, with proper notice, may examine the financial records of which of the following persons registered in his state? I.Agents. II.Broker/dealers. III.Investment Advisers. A) I, II and III. B) II and III. C) I and II. D) I and III.

Answer: B Only broker/dealers and investment advisers are required to maintain financial records. Agents must maintain sales records, but there are no financial inspections of agents or investment adviser representatives as there are with broker/dealers and advisers. Reference: 9.3.2.4 in the License Exam Manual.

Joan, who has a PhD in economics, has been employed as an agent by Gibraltar Securities for the past 15 years. Missing academic life, she resigns from the broker/dealer and accepts a position as an economics professor at a state university. Which, if any party, is required to notify the state securities Administrator of this change? A) Only Joan. B) Both Joan and the firm. C) No party, because Joan's termination is voluntary and not for cause. D) Only the securities firm.

Answer: B The license of an agent expires when she ceases to be employed by the broker/dealer or issuer for whom she was previously licensed. Both the agent and the former broker/dealer are required to notify the Administrator promptly. Reference: 9.3.2.3 in the License Exam Manual.

Which of the following is required to register as a broker/dealer? A) A trust company. B) A savings and loan association. C) A person who effects transactions for the accounts of others. D) A bank.

Answer: C A person buying and selling securities for customers' accounts is deemed a broker/dealer under the Uniform Securities Act and must be registered as such. Specifically excluded from the definition of a broker/dealer are banks, trust companies, and savings and loan associations. Reference: 9.3.1 in the License Exam Manual.

Which of the following persons is defined as an agent by the Uniform Securities Act? A) Silent partner of a broker/dealer. B) Secretary of a branch office sales manager. C) Broker/dealer executive who does not solicit or transact business. D) Clerk at a broker/dealer who is authorized to take orders.

Answer: D Anyone who solicits or receives an order while representing a broker/dealer is an agent. Silent partners, administrative personnel, and executives of broker/dealers with no sales responsibilities are not agents under the terms of the USA because they do not solicit or receive orders. Reference: 9.3.2 in the License Exam Manual.

As defined in​ the Uniform Securities Act, which of the following statements is TRUE regarding an agent? A) An agent may be an individual or a firm. B) An agent may be a broker/dealer. C) If someone meets the definition of an agent, that person is exempt from registration requirements. D) An agent represents a broker/dealer or an issuer in effecting or attempting to effect purchases or sales of securities.

Answer: D ​The text in Section 401(b) of the Uniform Securities Act reads, "Agent means any individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.​ There are cases where an individual representing an issuer would not be considered an agent, such as if the transaction is exempt, but that doesn't change the definition. Reference: 9.3.2 in the License Exam Manual.

Which of the following statements are TRUE? I.An agent must register in the state in which he advertises and solicits a security. II.To make sales, an agent need not register in a state in which the broker/dealer is already registered. III.Under no circumstances may an agent register with two unrelated broker/dealers. IV.A secretary for a broker/dealer who, as a courtesy, takes orders for the broker/dealer's clients must be registered. A) I and IV. B) I and II. C) II and III. D) III and IV.

Answer: A An agent must be registered in the state in which a security is advertised and solicited. A secretary who takes orders for the broker/dealer's clients must be registered. If the state Administrator specifically grants an exception, an agent may be registered with two unrelated broker/dealers. The fact that a broker/dealer is registered in a state does not qualify the agent for sales unless he is also properly licensed in that state. Reference: 9.3.2.6 in the License Exam Manual.

Under Section 401 of the Uniform Securities act, the term "agent" does not include an individual who represents an issuer in effecting transactions in a security A) issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution, or trust company organized and supervised under the laws of any state. B) issued by and representing an interest in or a debt of, or guaranteed by, any federal savings and loan association, or any building and loan or similar association organized under the laws of any state and authorized to do business in this state. C) issued or guaranteed by any federal credit union or any credit union, industrial loan association, or similar association organized and supervised under the laws of this state. D) issued by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes, or as a chamber of commerce or trade or professional association.

Answer: A An individual representing an issuer in the sale of that issuer's security is not defined as an agent if the security is ◾issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution, or trust company organized and supervised under the laws of any state; ◾issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency of the foregoing; ◾any security issued or guaranteed by Canada, any Canadian province, any political subdivision of any such province, any agency of the foregoing, or any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; ◾a promissory note, draft, bill of exchange or bankers' acceptance that evidences an obligation to pay cash within 9 months after the date of issuance, is issued in denominations of at least $50,000, and receives a rating in one of the 3 highest rating categories from a nationally recognized statistical rating organization; or ◾any investment contract issued in connection with an employees' stock purchase, savings, pension, profit-sharing, or similar benefit plan if the Administrator is notified in writing thirty days before the inception of the plan It is not just any exempt security that qualifies the individual for the exemption - only the five listed above. A confusing point is that the individual is not an agent when the sales are made in any exemption transaction with no exceptions. Reference: 9.3.2.2 in the License Exam Manual.

The Uniform Securities Act requires which of the following to be registered as agents of a broker/dealer? I.A senior partner of a broker/dealer who actively manages the firm's day-to-day operations. II.A silent partner who has contributed most of the capital of the broker/dealer but takes no part in the firm's activities. III.An associated person of a broker/dealer whose primary function is to take orders from the public. IV.An employee of a broker/dealer who only trades securities for the firm's proprietary account. A) I, III and IV. B) I and II. C) II and IV. D) I, II, III and IV.

Answer: A Employees who take orders from the public and who trade securities for the accounts of broker/dealers must register as agents. The USA requires any person who represents a broker/dealer in effecting securities transactions to register as an agent of their employing broker/dealer. Partners (officers, directors) who play an active role in the securities business of a broker/dealer must register as agents; those who don't, are exempt from registration. Reference: 9.3.2.3 in the License Exam Manual.

Under the USA, which of the following statements regarding the posting of surety bonds is NOT true? A) The Administrator requires all broker/dealers to post bonds even if they maintain net capital in excess of minimum amounts. B) Bonds may be required for agents of broker/dealers. C) The Administrator can accept securities instead of cash if the posting of a bond is required. D) The Administrator requires the posting of bonds primarily to cover the cost of civil liabilities associated with violations of the Uniform Securities Act.

Answer: A Firms that maintain net capital in excess of minimum requirements may be exempted from the requirement of posting surety bonds. Agents exercising discretion over client accounts may be required to post a surety bond. Reference: 9.3.1.3 in the License Exam Manual.

Under the USA, all of the following statements regarding the registration of agents are true EXCEPT: A) if a broker/dealer's registration is revoked by a state, it has no effect on the agent's registration. B) if an agent resigns and affiliates with another broker/dealer, both firms and the agent must notify the Administrator. C) an agent can only sell securities that have been registered in a state or that are exempt from registration. D) a nonresident agent can solicit business in another state only if the agent and the broker/dealer are registered in that state.

Answer: A If a broker/dealer's (or investment adviser's) registration is revoked by a state, the registrations of all of its agents (or IARs) are suspended. That is, those individuals can no longer function in a registered capacity until they register with another active firm. Reference: 9.3.2.3 in the License Exam Manual.

Sharon Smith is an agent for Highwater Securities, a broker/dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act, A) Sharon must be registered in State X in order to accept the order B) because Sharon has no place of business in State X and the client is an institution, Sharon may accept the order without registering in State X C) because Sharon has no place of business in State X and the order is unsolicited, Sharon may accept the order without registering in State X D) because Highwater Securities is registered in all 50 states, Sharon must also be registered in all of them

Answer: A Regardless of whether the security is exempt or the transaction is exempt, an agent must be licensed in any state which is the domicile of a client placing an order (unless the agent is representing a broker/dealer that is exempt from registering in that state). An agent does not have to be registered as an agent in every state the B/D is, only in those where the agent expects clients to reside. Remember, there is no de minimis exemption for B/Ds and agents as there is for IAs and IARs. Reference: 9.3.2.3 in the License Exam Manual.

KAPCO Securities is a broker/dealer registered with the SEC doing business throughout the Midwest. KAPCO must meet the net capital requirements of: A) the SEC even if one or more of the states in which they are registered has a higher net capital standard. B) each state in which they do business. C) the state with highest net capital requirements of the states in which it does business. D) the state in which its principal office is located.

Answer: A SEC rules pre-empt those of the states. As long as the broker/dealer complies with the SEC's net capital rule, all state requirements are satisfied. It is state covered investment advisers who must meet the net worth (or capital) requirements of the state in which their principal office is located. Reference: 9.3.1.3 in the License Exam Manual.

The Uniform Securities Act authorizes the Administrator to make certain demands of broker/dealers. In general, the Administrator would not require a broker/dealer to A) post a surety bond if it does not have investment discretion over client accounts or do not maintain custody of customer funds and/or securities. B) publish an announcement of the application for registration in a newspaper published in the state. C) file various financial reports. D) promptly file a correcting amendment to any document on file with the Administrator which becomes inaccurate or incomplete in any material respect.

Answer: A The question asks for something that cannot be required by the Administrator. The other choices are requirements you should memorize. In general, the Administrator can require a bond only if registrants have custody or discretion. Reference: 9.3.1.3 in the License Exam Manual.

XYZ Securities is a broker/dealer based in Wisconsin with offices in no other state. In addition to its Wisconsin clients, XYZ has 30 retail customers living in Illinois. During the winter, if 10 existing customers vacation in Florida for up to 7 weeks at a time, XYZ Securities is a broker/dealer in: A) Wisconsin and Illinois. B) Wisconsin only. C) Wisconsin, Illinois, and Florida. D) all states having enacted the USA.

Answer: A Under the USA, XYZ Securities is a broker/dealer in Wisconsin because it maintains an office there. XYZ Securities is also a broker/dealer in Illinois because with 30 Illinois retail (non-institutional) customers, registration is required even if there is no physical office in Illinois. Because none of XYZ's clients has taken up residence in Florida, such clients are transients rather than residents. Thus, XYZ Securities is not a broker/dealer in Florida subject to the state's registration requirements. Reference: 9.3.1.1.1 in the License Exam Manual.

Under the Uniform Securities Act, the Administrator may require a broker/dealer to post a surety bond of: A) An amount not in excess of that set by the SEC. B) $10,000.00 C) $25,000.00 D) $50,000.00

Answer: A Unlike investment advisers where the USA specifies posting a surety bond in the amount of $35,000, the Uniform Securities Act does not specify an amount for broker/dealers. However, the NSMIA states that the Administrator may not require a broker/dealer be bonded in an amount above that set by the SEC. Furthermore, bonds will not be required of broker/dealers that maintain a specified net capital. Reference: 9.3.1.3 in the License Exam Manual.

When a broker/dealer registers with the state Administrator, which of the following persons are automatically registered as agents of the broker/dealer in the state? A) Partners, directors, and officers of the broker/dealer. B) Persons employed by the broker/dealer who are residents of the state but employed in a state other than that of the Administrator. C) Agents registered in another state who are employed by the broker/dealer. D) Those persons employed at the broker/dealer prior to its registration in the state.

Answer: A When a broker/dealer registers with the state securities Administrator, those persons who are partners, directors, or officers are automatically considered agents in the state. Reference: 9.3.1.2 in the License Exam Manual.

The Administrator has just notified Rockland Securities that its application to operate as a broker/dealer in this state is now effective. Which of the following parties would be considered registered? I.The firm. II.Its officers. III.Its directors. IV.Its agents A) I, II and III. B) I and II. C) I and III. D) III and IV.

Answer: A When a business registers as a broker/dealer with the Administrator, the firm's officers, and directors are simultaneously registered as agents along with the firm's effective registration as a broker/dealer. Individuals employed for the purpose of representing the firm as agents are considered to be applying for registration after the firm's license is effective. Reference: 9.3.1.2 in the License Exam Manual.

While an application for registration as an agent of a broker/dealer is still pending, that person would be permitted to: A) assist registered employees of the firm by doing research on securities they are following. B) accept unsolicited orders only. C) limit her acceptance of orders to those from the broker/dealer's existing clients. D) engage in no activity at the office other than studying for the exam.

Answer: A While registration as an agent is pending, the applicant can take no active role in the sale or offering of securities. However, performing research on an internal basis does not involve contact with the public in a sales effort and would be permitted. Reference: 9.3.2.3 in the License Exam Manual.

Which of the following statements is NOT true? I.A broker/dealer must be a firm or corporation (legal person) as opposed to a natural person (human being). II.An investment adviser must be a firm or a corporation as opposed to a natural person. III.An investment adviser representative (IAR) cannot, under any circumstances, be employed by a registered broker/dealer. A) II and III. B) I, II and III. C) I and II. D) I and III.

Answer: B A broker/dealer or investment adviser can be either a natural person (i.e., organized as a sole proprietorship) or a legal person (i.e., a corporation or partnership). There is no prohibition against an investment adviser representative also being licensed as an agent with a broker/dealer. Reference: 9.3.3 in the License Exam Manual.

Under the Uniform Securities Act, the term broker/dealer would include: A) a trust company. B) a person with no office in the state who directs offers to no more than 5 individual residents of the state in any 12-month period. C) an agent registered under the act who from time to time sells stock from personal inventory. D) an issuer distributing its own common stock offering.

Answer: B Although a person has no office in the state, offers are directed to residents of the state. Under the USA, this person is defined as a broker/dealer. There is no de minimis exemption for broker/dealers. A person is exempt from the definition of broker/dealer if there is no office in the state and offers are directed to institutional clients or existing individual clients not residents of that state. The agent is merely selling his own stock as would any other individual; that does not make one a broker/dealer. Reference: 9.3.1.1.1 in the License Exam Manual.

Which of the following must register as an agent when representing a broker/dealer? A) The telephone switchboard operator who directs orders to the appropriate extension. B) An employee who accepts unsolicited orders from institutional clients. C) A partner in a of broker/dealer who has no securities sales functions. D) An individual who represents an underwriter only in transactions between an issuer and the underwriter.

Answer: B An employee of a broker/dealer who accepts orders must register as an agent. The fact that it is unsolicited and/or from an institution (making them exempt transactions) has no bearing on the requirement for the individual to register as an agent. A partner of a broker/dealer with no securities sales functions and an individual who represents an underwriter only in transactions between an issuer and the underwriter need not register. Individuals whose function is strictly clerical do not register as agents. Reference: 9.3.2.3 in the License Exam Manual.

Which of the following must register as an agent? A) An individual who is paid a commission to sell certificates of deposit for ABC National Bank. B) An individual representing a broker/dealer who sells commercial paper. C) An individual who sells commercial paper for ABC National Bank. D) An employee of the Fed whose job is selling Treasury bonds to the public.

Answer: B An individual who represents a broker/dealer selling commercial paper must register under the USA. Though the securities (commercial paper) are exempt, the representative must be registered as an agent of the broker/dealer. The only exceptions from the definition of "agent" apply to those who sell on behalf of issuers either of exempt securities or in exempt transactions. The commercial paper and Treasury bonds are exempt securities and the bank CDs here referred to are not of the negotiable, jumbo variety sold in the money market and are not securities so no registration is required. Reference: 9.3.2.3 in the License Exam Manual.

Which of the following persons are excluded from the definition of, or exempt from registration as, a broker/dealer under the Uniform Securities Act? I. A broker/dealer with no office in the state that effects trades exclusively with other broker/dealers in the state. II. A trust company with an office in the state that deals with the general public. III. A broker/dealer with no office in the state that has no more than 5 retail clients resident in the state within the past year. IV. A broker/dealer with no office in the state that effects securities trades exclusively with trust companies or other broker/dealers A) I, II, III and IV. B) I, II and IV. C) I and II. D) III and IV.

Answer: B As long as a broker/dealer does not have an office in the state, it is possible to qualify for exclusion from the definition. The primary requirement for the exclusion is that the broker/dealer confines trading to financial institutions or other broker/dealers. Unlike with investment advisers, there is no de minimis exemption for broker/dealers. Trust companies are excluded from the definition of broker/dealer. Reference: 9.3.1.1.1 in the License Exam Manual.

A sales agent who is only registered in Nebraska works for a broker/dealer that is registered in all 50 states. A customer who is a resident of North Dakota calls the representative in Nebraska and offers to purchase securities. Under the Uniform Securities Act, the agent should: A) accept the order because it is unsolicited. B) reject the order because she is not registered in North Dakota. C) accept the order because her broker/dealer is registered in all 50 states. D) accept the order because she received it in Nebraska.

Answer: B Both the broker/dealer and the agent must be registered in each state where they plan to do business. Although the broker/dealer is properly registered, in order for the agent to accept the order, she must be registered in North Dakota. Even though the order is unsolicited, making this an exempt transaction, agents must still be licensed in the state where the client is a resident. Reference: 9.3.2.3 in the License Exam Manual.

An agent of a broker/dealer is currently doing business in one state and would like to conduct business in another state. When checking with the firm's compliance department, the agent would be told which of the following? A) Registration is required only if an offer is directed, accepted, and paid for in that state. B) If the agent is a partner, officer, or director and held that position at the time the broker/dealer was registered in that state, the individual need not register separately. C) No registration is necessary in the other state provided the agent's activities are limited exclusively to effecting transactions in certain exempted securities. D) No registration is necessary if no commission or other remuneration is paid or given directly or indirectly.

Answer: B Both the broker/dealer and the agent must be registered in the state where business is to be transacted, unless they both qualify for an exemption from registration in that state (e.g. they have no place of business in the state and their only clients are institutions). At the time the broker/dealer is registered, officers, directors, or partners of the firm who act as agents will be automatically registered as agents. Reference: 9.3.1.2 in the License Exam Manual.

The First Fidelity Building and Loan association, organized in State A and authorized to do business in State B, has an offering of common stock being made in State B. In order for an individual selling the offering to be excluded from the definition of agent in State B, the individual A) would have to be employed by First Fidelity B) could not sell without being an agent C) would have to be employed by a broker/dealer registered in the other state D) would have to be employed by a broker/dealer registered in this state

Answer: B Included in the USA's list of exempt securities are those issued by any building and loan or similar association organized under the laws of any state and authorized to do business in this state. However, they are not included in the short list of exempt securities under which individuals selling on behalf of the issuer are excluded from the definition of an agent. Had this been a bank, savings institution, or trust company, then, as long as the individual was an employee of the institution, no registration would be necessary. Reference: 9.3.2.2.1 in the License Exam Manual.

Which of the following statements regarding financial requirements that may be imposed by the Administrator are TRUE? I.Agents may be required to be bonded. II.Investment adviser representatives may have to meet certain net worth standards. III.Broker/dealers may have to meet certain net capital levels. IV.Investment advisers may post a bond instead of meeting certain net worth levels. A) I, II, III and IV. B) I, III and IV. C) I, II and III. D) III and IV.

Answer: B Individuals registered as agents may be required to be bonded, but these individuals, as well as those registered as investment adviser representatives, never have to meet net worth or net capital standards; those are for broker/dealers and investment advisers only. The USA does allow a broker/dealer or investment adviser to post a bond instead of demonstrating a certain net capital or net worth. Reference: 9.3.1.3; 9.3.2.4 in the License Exam Manual.

It would not be considered an unethical and dishonest business practice for an agent registered with a broker/dealer to divide or otherwise split the agent's commissions, profits or other compensation from the purchase or sale of securities I. with any person also registered as an agent for the same broker/dealer. II. with any person also registered as an agent for a broker/dealer under direct or indirect common control. III. as long as the arrangement is in writing. IV. as long as the client has approved of the sharing arrangement A) I, II, III and IV. B) I and II. C) I, II and III. D) III and IV.

Answer: B NASAA's Statement of Policy on Unethical and Dishonest Business Practices of Broker/Dealers and Agents permits commission sharing as long as the agents are properly registered with the same broker/dealer or one under common control. There is no requirement for the arrangement to be in writing and the customer has no say so in this matter. Reference: 9.3.2.5 in the License Exam Manual.

Under the Uniform Securities Act, a person whose business model is selling reports concerning specific securities to investors on a subscription basis will be defined as: A) a journalist. B) an investment adviser. C) an agent. D) a broker/dealer.

Answer: B The definition of investment adviser includes any person who for compensation engages in the business of advising others as to the value of securities or the advisability of buying, selling, or investing in securities or who, as a part of a regular business, publishes securities analyses or securities reports for individual investors on a paid subscription basis. Reference: 9.3.3 in the License Exam Manual.

Which of the following statements regarding licensing and registration under the Uniform Securities Act are TRUE? I.When an agent's license is suspended, the broker/dealer's license is also suspended. II.When a broker/dealer's license is suspended, all of their agent's registrations are placed into suspense. III.When an investment adviser's license is suspended, all of their investment adviser representative's registrations are placed into suspense. IV.When an IAR's license is suspended, the IA's license is also suspended. A) III and IV. B) II and III. C) I and II. D) II and IV.

Answer: B The suspension of a broker/dealer's or investment adviser's registration causes the registration of all agents and/or investment adviser representatives to be placed into suspense. It is almost unheard of that the suspension of an agent or IAR would lead to a suspension of the firm's license. Reference: 9.3.2.3 in the License Exam Manual.

A publicly traded corporation offers its employees an opportunity to purchase shares of the company's common stock directly from the issuer. A specific employee of the company is designated to process any orders for that stock. Under the USA, the employee: A) may receive commissions without registration. B) must register as an agent only if he will receive commissions or remuneration, either directly or indirectly related to the volume of sales. C) must register as an agent of the issuer. D) need not register as an agent of the issuer under any circumstances.

Answer: B Under the USA, an individual is an agent when effecting transactions with an issuer's existing employees if commissions or other remuneration related to the sale are paid. Therefore, there are cases where the employee would have to register as an agent. When the individual is paid a straight salary for this work, no registration is required. Reference: 9.3.2.2.1 in the License Exam Manual.

Which of the following would be an agent under the terms of the Uniform Securities Act? I. A sales representative of a licensed broker/dealer who sells secondary securities to the general public. II. An assistant to the president of a broker/dealer who, for administrative purposes, accepts orders on behalf of senior partners. III. A subsidiary of a major commercial bank registered as a broker/dealer that sells securities to the public. IV. An issuer of nonexempt securities that are registered in the state and sold to the general public A) II and IV. B) I and II. C) I and IV. D) II and III.

Answer: B Under the USA, only an individual can be an agent (a person who sells securities for a broker/dealer). An administrative person, such as the assistant to the president of a broker/dealer, is considered an agent if that individual takes securities orders from the public. Corporate entities, broker/dealers, and issuers are all excluded from the definition of an agent. Reference: 9.3.2 in the License Exam Manual.

If XYZ is a registered broker/dealer with its lone office located in Texas, under which of the following circumstances must it also register in Louisiana? I. XYZ's only dealings in Louisiana are directly with issuers of securities in Louisiana. II. XYZ engages in extensive transactions with the largest insurance company in Louisiana. III. XYZ routinely sells nonexempt securities to extremely high net-worth residents of Louisiana. IV. XYZ purchases exempt securities from extremely high net-worth residents of Louisiana for resale to residents of Texas. A) II, III and IV. B) III and IV. C) I only. D) I and II.

Answer: B Under the Uniform Securities Act, broker/dealers must register in any state that they engage in securities transactions with individual investors. The net worth of the individual is irrelevant. Broker/dealers with no offices in the state who engage in transactions in the state with certain institutional investors, such as insurance companies or investment companies, need not register in that state. Transactions between the issuer and a broker/dealer are exempt transactions. Reference: 9.3.1.1.1 in the License Exam Manual.

Agent A with Firm Y and Agent B with Firm Z conduct a joint seminar. They agree to share the commissions on any resulting business. Under the Uniform Securities Act, which of the following statements regarding sharing commissions is CORRECT? A) Sharing commissions that are a result of a joint seminar is never permitted. B) Sharing of commissions by agents of two unrelated firms is prohibited. C) Only an agent who makes a sale is eligible to earn a commission. D) In this instance, sharing of commissions could only be done with the approval of both firms.

Answer: B Unless an exception is granted by the Administrator, it is prohibited for an agent to share commissions with any person not also registered as an agent for the same or affiliated broker/dealer. Reference: 9.3.2.5 in the License Exam Manual.

When an agent transfers employment from a broker/dealer registered with the SEC to a broker/dealer registered solely in this state: A) only the agent and the state registered broker/dealer must notify the Administrator. B) the agent, the former broker/dealer, and the current broker/dealer must all notify the Administrator. C) only the agent must notify the Administrator promptly. D) only the agent and the SEC-registered broker/dealer must notify the Administrator promptly.

Answer: B When an agent transfers employment from any broker/dealer to any other broker/dealer, both the agent and the broker/dealers must notify the state securities Administrator. Reference: 9.3.2.3 in the License Exam Manual.

Your friend is a licensed life insurance agent whose client wants to purchase a variable annuity. You are a licensed securities and insurance agent, and your friend wants you to sell the policy and split commissions with him. Splitting commissions: A) would be allowable if the securities representative receives at least 60% of the commission and the insurance agent receives no more than 40%. B) in variable annuities is allowable only if the agents involved are both licensed to sell life insurance and maintain their securities licenses at the same or affiliated broker/dealers. C) in variable annuities is allowable only if the agents involved are both licensed to sell life insurance and maintain securities licenses with broker/dealers registered with the Administrator. D) is an unethical trade practice.

Answer: B You must be licensed in both insurance and securities to sell variable annuities or to split commissions. Commissions on securities transactions may only be split with registered agents of the same or affiliated broker/dealers. Reference: 9.3.2.5 in the License Exam Manual.

Under NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker/Dealers and Agents, a securities agent may NOT: A) be registered with two broker/dealers under common control. B) be registered with a licensed real estate broker as well as with a licensed securities broker/dealer. C) simultaneously represent two different unrelated broker/dealers in the same transaction. D) be licensed by both an independent insurance company and a securities broker/dealer.

Answer: C A registered agent may not simultaneously represent two different, unrelated broker/dealers in the same transaction. Under current regulations, only a few states allow agents to have dual registrations with more than one broker/dealer, unless those broker/dealers are under common management. In those cases, the agent may only represent one of the broker/dealers in any single transaction. Agents of broker/dealers may be simultaneously registered with real estate agencies, insurance companies, and with two broker/dealers, provided the broker/dealers are under common ownership or control or the arrangement has been authorized by the Administrator. Reference: 9.3.2.6 in the License Exam Manual.

If you are registered as an agent for a broker-dealer in State Y and you conduct business as an agent of theirs in State Z, a state in which you are not registered as their agent, you: I.expose yourself and your employer to disciplinary action by State Z II.expose yourself to a possible fine III.may obligate your broker-dealer to offer your client the right to rescind the sale IV.may have your registration in State Y revoked A) II and III B) II, III and IV C) I, II, III and IV D) I, II and III

Answer: C Agents must be registered in each state where selling or offering to sell securities unless an exemption is available. Failure to do so exposes the agent and the broker-dealer to fines and possible disciplinary action. In addition, the individual could have his registration revoked where he is registered, and the broker-dealer could be required to offer customers the right to rescind any securities transactions. Reference: 9.3.2.3 in the License Exam Manual.

Which of the following actions by an agent would be an unethical practice under the Uniform Securities Act? A) An agent with discretionary authority enters a buy order for a security when its price is rising. B) Telling a customer that the investment being recommended will be sold from the inventory of the agent's firm. C) Splitting commissions with a customer service representative who is not registered but works for the same firm. D) Recommending securities that result in losses in the customer's account.

Answer: C Commissions can be received only by those with the appropriate registrations. A nonregistered person cannot participate in transaction-based compensation. We can never guarantee that our recommendations will be successful and sometimes they do result in losses. Reference: 9.3.2.5 in the License Exam Manual.

Which of the following must register as a broker/dealer under the USA? A) A broker/dealer with no place of business in the state that deals exclusively with broker/dealers with offices in that state. B) A broker/dealer with no place of business in the state that effects transactions exclusively with issuers of securities in that state. C) A broker/dealer with a place of business in the state that effects transactions exclusively with broker/dealers registered in other states. D) A broker/dealer with no place of business in the state that has directed offers to clients who have more than 30 days' temporary residency in the state.

Answer: C If a broker/dealer has an office in the state, it must register with the state, regardless of what types of clientele it serves. The term "broker/dealer" excludes anyone without a place of business in the state who effects transactions exclusively with issuers, other broker/dealers, or institutions, or who directs an offer in the state to an existing customer who temporarily resides in the state where the offer is received, regardless of the length of time. As long as the broker/dealer is properly registered in the vacationer's state of permanent residence and does not maintain an office in the state being visited, it is not defined as a broker/dealer. Reference: 9.3.1 in the License Exam Manual.

Andrew voluntarily leaves his position as an agent with Gibraltar Securities. Which of the following best describes the reporting requirements relative to this termination? A) Only Andrew must notify the Administrator, and must do so within 30 days of his resignation. B) Notification to the Administrator is not required, presuming that Andrew was not terminated for cause. C) Both Andrew and the firm must notify the Administrator of Andrew's resignation promptly. D) Only the firm must notify the Administrator, and must do so within 30 days of Andrew's resignation.

Answer: C On termination of an agent from a firm with which he is registered, both the agent and the firm must notify the Administrator of such termination promptly. Reference: 9.3.2.3 in the License Exam Manual.

Under the Uniform Securities Act, which of the following must be registered with the Administrator? I. Persons in the business of buying or selling securities for their own account or on behalf of others. II. Persons in the business of advising others regarding securities. III. Individual investors acting for their own accounts A) III only. B) I, II and III. C) I and II. D) II only.

Answer: C Persons in the business of buying or selling securities for their own account or on behalf of others and persons in the business of advising others regarding securities must be registered with the Administrator of each state in which they are in business. "In the business" generally means persons compensated by others for securities activities and ordinarily excludes individual investors acting for their own accounts. Reference: 9.3 in the License Exam Manual.

Under the Uniform Securities Act, the Administrator can require which of the following from broker/dealers and investment advisers? I. Filing of sales literature. II. Maintaining of records. III. Filing of financial statements. IV. Filing of amendments to registrations. A) II and III. B) II, III and IV. C) I, II, III and IV. D) I and II.

Answer: C The act requires the filing of sales literature and advertising (as well as a prospectus) addressed or intended for clients or prospective clients, unless exempt under the act. In addition, it requires that books and records be kept for a minimum of three years for broker/dealers and five years for investment advisers and provides that an Administrator may require the filing of financial reports regarding the net worth of the firm. The act also requires broker/dealers and investment advisers to update any information filed with the state regarding any material change that takes place. Even federal covered investment advisers may be required to file copies of their SEC registration and amendments with state Administrators, along with filing fees. Reference: 9.3.1 in the License Exam Manual.

All of the following statements about an agent's need to be registered in a state are correct EXCEPT: A) registration is required if they solicit the sale of securities by telephone to fewer than 6 individuals residing in that state. B) registration is not required in a state where the agent has no place of business and only deals with existing clients who are vacationing in that state. C) registration is required in each state in which the employing broker/dealer has a place of business. D) registration is required when they limit their activity to the sale of exempt securities.

Answer: C The fact that the broker/dealer does business in a state has nothing to do with a specific agent. Many broker/dealers are registered in all states; very few agents are. Agents must register in each state where they are selling or offering securities, even if the security or the transaction is exempt. That exemption only applies to the need for the security to be registered, not the agent. Soliciting the sale of securities by telephone is considered making an offer and there is no de minimis exemption available. Finally, registration is not required when making use of the "snowbird" exemption. Reference: 9.3.2.3 in the License Exam Manual.

Which of the following statements regarding an agent's registration is most accurate? A) If the broker/dealer with which that agent is registered should have its registration revoked, the agent may continue to do business only with existing clients and may not acquire any new ones until registered with an active broker/dealer. B) If the broker/dealer with which that agent is registered should have its registration revoked, the agent's license will be held by the Administrator and the agent will be required to register with an active broker/dealer within 30 days. C) Revocation of the registration of that agent's broker/dealer will result in cancellation of that agent's effective registration. D) Registration of a broker/dealer in a specific state automatically registers all of the firm's agents in that state as well.

Answer: C The registration of an agent is not effective during any period when he is not associated with a particular broker/dealer registered under the Uniform Securities Act. Therefore, when the broker/dealer's registration is revoked, the agent's license is no longer in effect. The Administrator does not "hold" licenses. Agents must register in each state in which they wish to do business; there is no automatic registration other than for certain officers and partners when the firm first registers. Reference: 9.3.2.3 in the License Exam Manual.

If two agents of a broker/dealer agree to work together as a partnership in soliciting business and they agree to split commissions, this practice is: A) permitted only if a principal of the firm audits the partnership's financial performance. B) permitted, but only with the prior written consent of the affected clients. C) permitted. D) in violation of the Uniform Securities Act's prohibition against sharing in the profits of an account.

Answer: C There is nothing in the USA that prohibits agents registered with the same broker/dealer from forming a partnership to conduct business or solicit clients. Under the USA, a principal of the firm need not audit the financial performance of such an arrangement. It is considered an unethical business practice for agents who are not licensed with the same or affiliated broker/dealers to share commissions. Reference: 9.3.2.5 in the License Exam Manual.

A local customer of broker/dealer A is on vacation in Nevada. Broker/dealer A, who is registered in and maintains offices only in Florida, wishes to make the customer aware of an investment opportunity that has just become available. Which of the following is TRUE? A) Broker/dealer A may not solicit this customer in Nevada unless the broker/dealer has a branch office registered in Nevada. B) Broker/dealer A may not solicit this customer in Nevada unless broker/dealer A and the agent making the call are registered in Nevada. C) Broker/dealer A may solicit this customer in Nevada. D) Broker/dealer A must notify the Nevada Administrator before calling this customer in Nevada.

Answer: C This is an example of the Uniform Securities Act's position that, in certain situations, a broker/dealer is not a broker/dealer. If a broker/dealer registered in one state contacts an existing customer in another state and that customer is not a resident of the other state, the broker/dealer is not defined as a broker/dealer in the state in which the contact is made and is therefore not subject to the laws of that state. Of course, this is only true when the broker/dealer does not have an office in that state. Reference: 9.3.1.1.1 in the License Exam Manual.

It would not be a violation of the Uniform Securities Act for an applicant for registration as an agent to do which of the following while the application is pending? A) Limit his sales activity to immediate family members only. B) Conduct seminars on asset allocation. C) Sell fixed annuities. D) Use a preliminary prospectus to obtain indications of interest for a new issue, but wait until he is registered before accepting any orders.

Answer: C While registration as an agent is pending, the applicant can take no active role in the sale or offering of securities. However, because fixed annuities are not securities, registration as an agent is not required. Yes, I know that an insurance license would be required, but, apparently, NASAA doesn't care about that. Reference: 9.3.2.3 in the License Exam Manual.

Broker/dealers, investment advisers, agents, and investment adviser representatives who use the internet, the World Wide Web, and similar proprietary or common carrier electronic systems to distribute information on available products and services through certain communications made on the internet, directed generally to anyone having access to the internet and transmitted through postings on bulletin boards, displays on home pages, or similar methods, are not deemed to be transacting business in this state for purposes of the Uniform Securities the Act solely on the basis of that fact if which of the following conditions are observed? I.The internet communication contains a legend in which it is clearly stated that the broker/dealer, investment adviser, agent, or IAR in question may transact business in this state only if first registered, excluded, or exempted from state broker/dealer, investment adviser, agent, or IAR registration requirements, as may be the case. II.The internet communication contains a legend in which it is clearly stated that follow-up; individualized responses to persons in this state by the broker/dealer, investment adviser, agent, or IAR that involve either the effecting or attempting to effect transactions in securities; or the rendering of personalized investment advice for compensation, as may be, will not be made absent compliance with state broker/dealer, investment adviser, agent, or IAR registration requirements, or an applicable exemption or exclusion. III.The internet communication contains a mechanism, including and without limitation, technical firewalls or other implemented policies and procedures, designed reasonably to ensure that before any subsequent, direct communication with prospective customers or clients in this state, the broker/dealer, investment adviser, agent, or IAR is first registered in this state or qualifies for an exemption or exclusion from such requirement. IV.The internet communication does not involve either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, as may be, in this state over the internet, but is limited to the dissemination of general information on products and services being offered. A) I, II and III. B) III and IV. C) I, II, III and IV. D) I and II.

Answer: C With the growth of the internet, NASAA developed an interpretive order concerning broker/dealers, investment advisers, agents, and investment adviser representatives using the internet for general dissemination of information on products and services. The primary focus of this order was to set the parameters under which securities professionals could communicate on the internet or use their Websites in states in which they were not registered. Meeting all of the requirements stated in the answer is necessary. Reference: 9.3.1.1.2 in the License Exam Manual.

All of the following statements regarding securities brokerage firms are true EXCEPT: A) they act as agents in executing orders to buy and sell securities on the various stock exchanges in the secondary market. B) they may act as dealers who buy and sell securities for their own account. C) they are regulated by the SEC as well as individual stock exchanges. D) they employ only registered investment adviser representatives.

Answer: D Agents work for broker/dealers, while investment adviser representatives work for investment advisers. Reference: 9.3.3.1 in the License Exam Manual.

Under the Uniform Securities Act, which of the following statements is (are) TRUE regarding registration of broker/dealers and agents? I. Those defined as broker/dealers must be registered with the state before transacting any securities business. II. An agent of a broker/dealer must become registered with the state before transacting business. III. Agents of a broker/dealer are not required to be registered. A) I only. B) I and III. C) III only. D) I and II.

Answer: D All persons defined as broker/dealers or agents under the act must register as such before transacting any securities business. It is unlawful for a broker/dealer to employ an agent unless the agent is registered. Reference: 9.3 in the License Exam Manual.

If ABC Brokers, Inc. has its license canceled, an agent for ABC may: A) continue to conduct business because ABC's license was canceled, not hers. B) continue to conduct business until employed by another broker/dealer, who will then renew her license. C) continue to sell only exempt securities until employed by a properly registered broker/dealer. D) not sell any securities because her license is automatically canceled with that of her broker/dealer.

Answer: D An agent for ABC may not sell any securities because her license is automatically canceled with that of ABC Brokers, Inc. Agents cannot sell securities unless they are associated with a licensed broker/dealer. Reference: 9.3.2.3 in the License Exam Manual.

An agent lives in Montana and is registered in Montana and Idaho. His broker/dealer is registered in every state west of the Mississippi River. The agent's client, who lives in Montana, decides to enroll in a 1-year resident MBA program in Philadelphia, Pennsylvania. During the 1-year period, when the client is in Philadelphia, the agent may: A) only accept unsolicited orders. B) not conduct any business with the client. C) not deal with the client until the broker/dealer registers in Pennsylvania. D) conduct business with the client as usual.

Answer: D Even though the college program is referred to as a resident program, that does not mean that the client has changed his state of residence. Although neither the firm nor the agent is registered in Pennsylvania, the agent may continue to conduct business with the client. This is because both the agent and his firm are properly registered in the client's state of permanent residence. Reference: 9.3.2.3 in the License Exam Manual.

Mary, who is licensed as an agent in State A, got a promotion and will turn her clients over to Julie, who is licensed only in State B. Before Julie can take over the accounts, she must: A) register with FINRA. B) register with the NYSE. C) receive permission from each of those clients. D) register with State A.

Answer: D For an individual to sell securities in a particular state, she must be licensed in that state unless an exemption applies. There is nothing in the USA that requires client consent when the agent of record on the account changes. Reference: 9.3.2.3 in the License Exam Manual.

Agents A and B work for the same firm and wish to share commissions. Agent A is licensed in states X, Y, and Z. Agent B is licensed in states X, Y, and C. Which of the following statements is TRUE in regard to their sharing commissions? A) Only the commissions from states Z and C could be shared. B) Commissions cannot be shared. C) All commissions from agents A and B can be shared. D) Only the commissions from states X and Y could be shared.

Answer: D In order to share commissions, agents must be registered as an agent for the same broker/dealer or for an affiliated broker/dealer. Additionally, in order to receive a commission, an agent must be registered in the state where the transaction is made. Reference: 9.3.2.5 in the License Exam Manual.

Under the Uniform Securities Act, which of the following is (are) investment advisers? I. Jane advises customers regarding the value of gold and silver coins. II. The Trust Department of ABC Bank provides investment advice to its clients. III. Tom writes a newspaper column that analyzes and recommends securities. IV. Jill is an attorney specializing in estate planning who, as a side job, structures portfolios for the beneficiaries of her deceased clients at a reduced fee. A) I and III. B) I and IV. C) II, III and IV. D) IV only.

Answer: D Jane's advice does not concern securities; banks are exempt from the definition; Tom's advice is not specific on the basis of the situation of each client (impersonal advice). While an attorney is generally excluded, Jill is giving investment advice for a fee in a manner that is not incidental to her legal practice. Reference: 9.3.3 in the License Exam Manual.

Sarah has passed her Series 6 qualification exam but not the Series 63. As Jack's assistant, Sarah has frequent telephone contact with Jack's customers to whom she provides account information and current stock quotes. In this situation Sarah is: A) in violation of the Securities Act of 1933. B) in violation of the Securities Exchange Act of 1934. C) in violation of the Uniform Securities Act. D) not in violation of any applicable statutes.

Answer: D Provided Sarah does not solicit business, offer advice to customers, or accept orders, she has not committed a violation of any act. Reference: 9.3.2.1 in the License Exam Manual.

Sharon Smith is an agent for Highwater Securities, a broker/dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act, A) because Sharon has no place of business in State X and the client is an institution, Sharon may accept the order without registering in State X. B) because Sharon has no place of business in State X and the order is unsolicited, Sharon may accept the order without registering in State X. C) because Highwater Securities is registered in all 50 states, Sharon must also be registered in all of them. D) Sharon must be registered in State X in order to accept the order.

Answer: D Regardless of whether the security is exempt or the transaction is exempt, one must be licensed in any state which is the domicile of a client placing an order. One does not have to be registered as an agent in every state the B/D is, only in those where she expects clients to reside. Reference: 9.3.2.3 in the License Exam Manual.

First Growth Securities, Inc., a member of the Financial Industry Regulatory Authority (FINRA), has its main office in Illinois and is therefore: A) a registered investment adviser licensed to sell securities in Illinois. B) registered by FINRA to sell securities in Illinois. C) automatically registered as a securities agent in Illinois. D) required to register as a broker/dealer in the state of Illinois.

Answer: D Securities firms that are members of FINRA must register as broker/dealers in the states in which they conduct business. Under the USA, broker/dealers are firms engaged in the business of effecting security transactions in customer or proprietary accounts. A broker/dealer is not a registered investment adviser, although many broker/dealers own separate legal subsidiaries that are investment advisers. FINRA does not license its members to conduct business in the states; the state securities licensing agent is the state securities Administrator. Also, a broker/dealer is not an agent; an agent is a person who is employed by a broker/dealer to conduct securities transactions as a representative of the broker/dealer. Reference: 9.3.1.2 in the License Exam Manual.

An agent employed at First Securities, an independent broker/dealer, shares commissions with his uncle, who is employed at ABC Securities, an independent broker/dealer with offices in the same state. This arrangement is: A) prohibited because the broker/dealers must be in separate states to justify sharing commissions. B) prohibited because the broker/dealers are not private partnerships. C) not prohibited if the agents have written permission from their respective clients. D) prohibited because the broker/dealers are not under common ownership or control.

Answer: D Sharing commissions is generally prohibited unless the broker/dealers with which the agents are associated are under common ownership or control. Reference: 9.3.2.5 in the License Exam Manual.

An agent is registered in Illinois and Ohio. One of her substantial clients has just moved from Ohio to Arizona, and the agent would like to continue to do business with her. Under the Uniform Securities Act, which of the following statements is TRUE? I. The agent's broker/dealer must already be registered in Arizona or complete the Arizona registration process within a time period specified by the act. II. The agent must complete the Arizona registration process within a time period specified by the act. III. The agent must ask the Ohio Administrator to request reciprocal registration from the Arizona Administrator. IV. The agent must suggest that the client maintain a mailing address, such as a post office box, in Ohio. A) I and IV. B) II and III. C) III and IV. D) I and II.

Answer: D The USA permits broker/dealers and their agents to continue to do business with existing customers who change their state of residence, as long as registration in the new state takes place within a reasonable period of time. This time period varies from state to state but is generally 30 days. Since an agent's registration is not valid without a broker/dealer, the agent and the agent's broker/dealer must be registered in Arizona for the relationship with this customer to continue. There is no such thing as reciprocal registration. Reference: 9.3.1.1.1 in the License Exam Manual.

Under the Uniform Securities Act, which of the following is an agent? A) A clerical person who files trades for the firm. B) An individual who is in the business of providing investment advice on behalf of his employer. C) A broker/dealer that charges a commission as a regular part of its business. D) An individual who effects securities transactions for commissions.

Answer: D The Uniform Securities Act defines an agent as any individual (other than a broker/dealer) who represents a broker/dealer in effecting securities transactions. Reference: 9.3.2 in the License Exam Manual.

A woman wants to buy from an agent who is not registered in her state. She decides to use a friend's address in the state in which the agent is licensed. This action is: A) acceptable because the agent can do business only with those who have a residence address in those states in which he is registered. B) acceptable as long as she has her friend's permission to use the address. C) not acceptable because the other party does not know you are using the address. D) not acceptable because there are no circumstances under which you are permitted to use someone else's address as yours.

Answer: D Under the USA PATRIOT ACT, one of the required disclosures is residence address. Reference: 9.3.2.3 in the License Exam Manual.

Which of the following persons are included in the definition of an agent under the Uniform Securities Act? I.An individual who represents First Securities Brokers, Inc., in selling shares of XYZ Corporation, a New York Stock Exchange listed company. II.An individual who, as part of the job description, represents the City of Chicago in selling its bonds to the public. III.An individual who represents a corporation traded on the New York Stock Exchange in selling securities to the public. IV.An individual who is employed by the Federal Reserve Board to sell Treasury Bills to retail investors A) I and II. B) II and IV. C) III and IV. D) I and III.

Answer: D Under the USA, an agent is defined as an individual who represents a broker/dealer selling any type of security, whether that security is exempt or nonexempt. Individuals who represent issuers in trading exempt securities or exempt transactions are not defined as agents. An individual who represents an issuer selling nonexempt securities is an agent and must be registered. Reference: 9.3.2 in the License Exam Manual.