Units 1-5 Checkpoint Exams

If an IAR is engaged in criminal activity violating a rule under the USA, but had no knowledge of the rule violated, the maximum penalty that may be imposed is a

$5,000 fine

Under the USA, all of the following are exempt from state registration as IAs EXCEPT

A financial planner who provides fee-based IA services to clients and currently has a total of $18 million AUM

Which of the following persons is NOT an associated person of an IA?

A graphic designer consultant who prepares a BD's research publications

Under the USA, which of the following statements is TRUE regarding civil liability of IAs and BDs?

A lawsuit against a BD or adviser can be avoided if restitution, costs, and interest are paid to a client

ABC Corp, a newly formed company, has filed a registration statement with the SEC under the Securities Act of 1933. If they wish to use coordination to register in this state, which of the following is TRUE?

A statement of maximum and minimum proposed offering prices and maximum and minimum underwriting discounts and commissions must be on file with the Administrator for 2 full business days prior to the date the federal registration statement becomes effective.

Which of the following statements is TRUE?

An Administrator may, at the request of a registrant, hold hearings in private

In which of the following situations did an agent commit fraud?

An agent knowingly sold a nonexempt, nonregistered security to a retail client for whom the security was deemed suitable.

When does a customer have to receive the options disclosure document?

Before or at the time the firm approves that customer's account or accepts the customer's order to trade options covered by the ODD

Which of the following actions should be taken by an agent when a client decides to open an options account?

Before the first options trade, review with the client the risks involved when trading options

A person registered as an agent for a BD doing business in only 1 state decides to voluntarily terminate the registration. Which of the following statements is correct?

Both the agent and the BD must notify the Administrator

Under the USA, the term guaranteed refers to all of these EXCEPT

Capital Gains

Which of the following persons is defined as an agent by the USA?

Clerk at a BD who is authorized to take orders

In Oct. 1987, the SEC promulgated Release IA-1092, which had the effect of broadening the definition of IA. As a result of the Release, which of the following would NOT be included in the definition?

Commercial banks offering a full range of advisory services for their high-net-worth clients

A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclose all of the following fees EXCEPT

Commissions on unsolicited trades

Which of the following circumstance can an Administrator initiate a suspension or revocation proceeding against a BD registered in the state? I. On discovery that the BD's license had been suspended in another state II. On the conviction of a violation of the Securities Exchange Act of 1934 III. Two years after the withdrawal of registration by the BD IV. On the basis of facts known by the Administrator at the time of the BD's initial registration

I and II

The USA provides an exemption from registration for certain securities and for certain transactions. However, the Administrator is not empowered to deny an exemption from state registration to I. US Government Securities II. Private Placement Transactions III. A transaction with an insurance company IV. Municipal bonds issued by another state

I and IV

To comply with the regulations regarding customer identification programs, the minimum identifying information that must be obtained from each customer before opening an account includes I. name II. verbal assurance that the customer is of legal age III. a street address, unless the primary mailing address is a PO Box located in the state of residence IV. a Taxpayer Identification Number (TIN)

I and IV

Under the USA, an individual representing an issuer in the sale of which of the following securities would NOT have to register as an agent? I. Short Term Highly Rated Commercial Paper II. Municipal Bond III. US Bank Issue IV. Investment contract issued in connection with an employee's stock purchase, savings, pension, profit-sharing, or similar benefit plan

I, II, III, and IV

Disclosure to customers of a broker-dealer's control relationships is required in I. agency transactions II. principal transactions III. exempt transactions

I, II, and III

Investment Company Shares. One of the things the Policy does is restrict statements that may be made when referring to a mutual fund as "no-load". Under the Policy, one could claim or imply that a mutual fund is no-load as long as the fund did not have a I. contingent deferred sales load II. 12b-1 fee in excess of .25% of average net fund assets per year III. service fee in excess of .25% of average net fund assets per year IV. front-end load in excess of .25% of the purchase price

I, II, and III

ABS Securities is a BD registered with the SEC and domiciled in State X. ABC Securities would not be defined as a BD in State Y under the USA if it had no offices in State Y and I. its only clients were insurance companies II. It had contact with fewer than 6 State Y residents in any 12 month period III. Its only offer to State Y residents was through radio advertisements originating in State X but received in State Y IV. It occasionally engaged in firm commitment underwriting with issuers based in State Y

I, III, and IV

Under the USA, the Administrator has the power to deny, suspend, or revoke the registration of an issue if it is in the public interest and I. the issuer discloses in the prospectus that there is virtually no chance that the company's business model will be successful II. The Administrator of another state has revoked the issue's registration III. An officer of the registrant has been convicted of a securities related crime IV. The prospectus contains misstatements of nonmaterial information

II and III

Which of the following constitutes an offer or sale of stock? I. Solicitation of a tender offer by a corporation II. Gift of assessable stock III. Purchase of shares through the exercise of a warrant IV. Exchange of shares in a corporate reorganization, such as a merger

II and III

Which of the following pieces of customer information must an agent attempt to obtain when opening a new account? I. Emergency contact person II. Financial condition III. Investment objective IV. Education

II and III

With regard to the registration requirements of the USA, which of the following statements are TRUE? I. Only the issuer itself can file a registration statement with the Administrator II. An application for registration must indicate the amount of securities to be issued in the state III. The Administrator may require registrants to file quarterly reports

II and III

A registered BD offers investment advice as an incidental part of its commission business. One of its agents charges for investment advice as a freelance IA outside the scope of his employment at the firm. Which of the following statements is TRUE? I. The BD must register as an IA II. The agent must register as an IA III. The BD need not register as an IA IV. The agent need not register as an IA

II and IV

One of the unethical practices under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents is market manipulation. Which of the following are examples of a broker-dealer engaging in that practice? !. Arbitrage II. Churning III. Matched orders IV. Wash trades

III and IV

Which of the following statements regarding brokerage and advisory activities under the USA are TRUE? I. It is not unlawful for an investment adviser or broker-dealer to employ any device, scheme, or artifice to defraud in the sales of securities to institutional investors because the USA is designed to protect individual investors. II. Under the USA, it is unlawful for an investment adviser to deceive a person when an advisory relationship does not exist. III. Sanctions for both investment advisers and broker-dealers include administrative proceedings, judicial injunctions, and civil and criminal prosecutions. IV. It is unlawful for any person, whether technically defined as an investment adviser or not, to deceive another person for compensation as to the value of securities.

III and IV

With regard to the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, proscribed actions would include I. accepting an order from a 3rd party after written trading authorization has been received II. forwarding a written complaint from a customer to the appropriate supervisory person III. offering to repurchase a security at its original cost if it does not increase in value IV. borrowing money from a client who was a college roommate

III and IV

An agent of a BD 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?

If the agent is a partner, officer, or director and held that position at the time the BD was registered in that state, the individual need not register separately.

All of the following are nonissuer transactions EXCEPT

Intel sold 10 million shares of its preferred stock in a private placement transaction to a syndicate of five pension funds

The USA holds that persons performing certain activities shall be registered an IARs. That requirement would apply to which of the following?

John, who opens an IA firm where he devotes his time exclusively to management responsibilities as the sole proprietor of the firm

The term "security" includes all of the following EXCEPT

Keogh plan invested exclusively in mutual funds

State securities Administrators may NOT impose which of the following?

Minimum net worth levels on registered IARs

Which of the following is among the items of information that must be entered on a new account form?

Names of all persons who will have access to the account

Which of the following terms pertains to registration with the Administrator of a mutual fund, closed-end investment company, or unit investment trust that is registered under the Securities Act of 1933 and also registered as an investment company under the Investment Company Act of 1940?

Notice Filing

Under the USA, which of the following regarding the registration of securities is TRUE?

Registration by qualification becomes effective on a date ordered by the Administrator

It has long been custom for broker-dealers to provide research and other customer-related services to investment advisers who direct brokerage business to them. Details about what is and what is not allowable are found in

Section 28(e) of the Securities Exchange Act of 1934

Under the Uniform Securities Act, an investment adviser who has custody of client securities or funds must do all of the following EXCEPT

Send clients itemized statements no less frequently than every 6 months detailing the funds and securities in the adviser's custody at the end of the period

Sharon Smith is an agent for Highwater Securities, a BD registered in all 50 states. Sharon receives an unsolicited order form from a bank in State X, a state in which she has no place of business. Under the USA,

Sharon must register in State X in order to accept the order

XYZ Securities Co. is simultaneously registering as a broker-dealer with the SEC and several states. Which of the following statements regarding its registration under the Uniform Securities Act is CORRECT?

State registrations expire annually on December 31

All of the following are exempt from the registration requirements of the USA EXCEPT

Stock issued by a Canadian company that provides actuarial services to insurance companies

Under the Uniform Securities Act, an issuer is any person who issues or proposes to issue a security for sale to the public. According to the USA, which of the following is NOT an issuer?

The Energy Resources Partnership, issues certificates of interest or participation in its oil, gas, and mining titles

Global Investment Strategies (GIS) is a BD registered in 6 states. GIS would have to meet the financial and record keeping requirements of

The Securities and Exchange Commission (SEC)

Under the USA, which of the following statements regarding limited offering exemption is TRUE?

The security that is the subject of the private placement need not be registered

Which of the following documents must an existing customer sign to establish a discretionary account?

Trading Authorization

Jon, an agent with Johnson-Bayer Securities, was reacting to peer pressure to use email as a prospecting tool. He decided to highlight the exciting new process for drug delivery which was covered in the new offering prospectus when explaining why he felt the issuer found the next "aspirin." He summed up the email by stating potential investors needed to act quickly to get in on the ground floor. His decision to do so fell into the category of which of the following?

Unethical business practices

All of the following activities and communications would fall outside the definition of a recommendation EXCEPT

a broker-dealer sends an email to its more conservative clients stating this would be an excellent time to invest in public utility stocks, and includes a list of those paying the highest dividends

The Seeking Alpha Growth Fund directs a sizeable portion of its portfolio executions to your broker-dealer. If the firm has this fund on its highly recommended list, this would be

a conflict of interest that would have to be disclosed

As defined in the USA, the term "offer" or "offer to sell" includes all of the following EXCEPT

a loan with a stated interest rate payable upon demand

Under the USA, the definition of a BD includes

a person in the business of effecting securities transactions in its own account or for the accounts of others

When a brokerage firm sells stock from its own inventory, it is acting in the capacity of

a principal, and charges a markup

A broker-dealer operating on the premises of a bank would have to make certain disclosures in an advertisement unless it was

a radio spot of 30 seconds or less

When it comes to identity theft, one of the red flags is suspicious documents. Documents that can offer hints of identity theft would include all of the following EXCEPT

a valid passport with stamps showing visits to North Korea and Iran

An investment adviser representative lends $10,000 to her brother-in-law who is her client and works in the firm's IT department. He signs an agreement to pay her back in 5 years at below market interest. This arrangement is

acceptable because she made the loan to a fellow employee of the firm

All of the following would be prohibited practices under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers EXCEPT

accepting an order from a client's spouse shortly after receiving a written trading authorization

At a charity ball, you are introduced to someone who, upon hearing your name, exclaims that he has heard that you are doing a magnificent job managing his best friend's investment portfolio. Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, it would NOT be a violation for you to

acknowledge the fact that the friend is a client

A consent to service of process required by an Administrator is

an agreement whereby a registrant will be bound by any legal action or subpoena served on the Administrator as if it had been served on the registrant

The customer identification program (CIP) requires that certain information relating to new customers be obtained. Included in that requirement for individual clients who are citizens of the United States are all of the following EXCEPT

current employment status

A client purchased a security per an agent's recommendation, and soon after, it declined by more than 50%. To compensate for the loss, the agent promised the client 1,000 shares in an oversubscribed IPO. In this situation, the agent has

engaged in an unethical business practice as outlined in NASAA's Statement of Policy on Dishonest and Unethical Business Practices of Broker-Dealers and Agents

All of the following practices are unethical under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents EXCEPT

executing transactions in a margin account when receiving a properly executed written margin agreement promptly after the initial transaction

Under the Uniform Prudent Investor Act of 1994, trustees are required to

exercise reasonable care, skill, and caution over the assets they manage

According to the Uniform Securities Act, all of the following are violations of suitability requirements EXCEPT

failing to know the terms and conditions of the customer's will

A person who is vested with legal rights and powers to be exercised for the benefit of another is known as

fiduciary

A state-registered BD must keep business records available for examination by the Administrator

for 3 years

Under the USA, an accountant who charges hourly fees for securities recommendations in the regular course of his accounting practice is

included in the definition of an IA because he is compensated for giving investment advice in the regular course of business

A client of a BD files a civil suit claiming damages for sale of an unregistered security. During the proceedings, the client suffers a fatal stroke. The suit

is continued by the deceased's executor

An agent has a part time job as an usher at an NFL football team's stadium. His primary function is to provide assistance to those who are seated in the luxury boxes. While serving drinks, he overhears a discussion about a planned hostile takeover bid that will be made during the coming week. What should an agent do when he comes across material, non-public information like this?

keep it confidential

A customer opens a margin account with a broker-dealer and signs a loan consent agreement. The loan consent agreement allows the firm to

loan out the customer's margin securities

Under the USA, the Administrator may

make rules, orders, and forms the Administrator considers necessary to carry out the provisions of the act

An agent discussed the fact that her broker-dealer uses some unorthodox systems for security selection. As a result, to avoid being the subject of a law suit, the firm requires that all clients entering into this unique program sign a waiver promising not to sue. The client brings the waiver form to his attorney, who tells him

the Uniform Securities Act provides that clients cannot waive their legal rights

When registering a security under the USA, the registrant must indicate all of the following EXCEPT

the effective date of the offering

An individual representing the issuer in the sale of that issuer's securities to the public would have to register in this state if

the issuer is a federal savings and loan association authorized to do business in this state

With cyber security presenting such enormous threats to the safety of firm and customer information, NASAA recommends that broker-dealers should

use encryption on their files and devices

A customer placed an order with an agent to sell 100 shares of ABC and he instructed the agent to limit any losses. The agent did not have written discretionary authority over the account and waited to sell the shares, hoping to get a better price for the customer. Several hours later, the price of the shares went down, so the agent sold 50 ABC shares to limit the customer's losses. According to the Uniform Securities Act, this is a

violation because the agent exceeded his authority