Regulations: Federal and State Regulations Review Questions
A customer has a margin account at a failed broker-dealer. The securities were purchased for $50,000. As of the date that SIPC filed in court to be the trustee in the bankruptcy, the securities were worth $30,000. The account has a debit balance of $10,000. SIPC coverage will be: A: $20,000 B: $30,000 C: $40,000 D: $50,000
A: $20,000 -30,000 owned - 10,000 debit balance = 20,000
An individual has requested to be placed on your firm's "Do Not Call" list 3 years ago. Under industry rules, for how much longer must the name remain on the list? A: 2 years B: 5 years C: 8 years D: 10 years
A: 2 years
Which of the following callers is NOT subject to the provisions of the Federal Telephone Consumer Protection Act of 1991? A: An Animal Shelter B: Securities Firm C: Telemarketing Firm D: Real Estate Company
A: An Animal Shelter
Which of the following are appointed as trustees under the Trust Indenture Act of 1939? A: Banks and Trust Companies B: Broker-dealers C: Investment Advisers D: Law firms
A: Banks and Trust Companies
An agent who lives and is registered in New York wishes to sell a municipal bond to a customer who lives in New Jersey. Which statement is TRUE about the registering of this agent and his or her broker-dealer in New Jersey? A: Both the agent and the broker-dealer must be registered in New Jersey B: Only the agent must be registered in New Jersey C: Only the broker-dealer must be registered in New Jersey D: Neither the broker-dealer nor the agent is required to be registered in New Jersey
A: Both the agent and the broker-dealer must be registered in New Jersey
When a sales representative wishes to sell an exempt security to an out of state customer, which statement is TRUE? A: Both the broker-dealer and the registered representative must be registered in the state where the sale of the exempt security is going to be made B: The broker-dealer does not have to be registered in the state where the sale is going to be made because the security is exempt but the registered representative is required to register C: Neither the sales representative or the broker dealer is required to be registered in the state where the sale of the exempt security is going to be made D: The registered representative does not have to be registered in the state where the sale is going to be made because the security is exempt but the broker-dealer is required to register
A: Both the broker-dealer and the registered representative must be registered in the state where the sale of the exempt security is going to be made
A lawyer is a partner at a major investment advisory firm and is paid a fee by a customer for investment advice. Which statement is TRUE? A: The lawyer must be registered with the Securities and Exchange Commission (SEC) as an investment adviser B: The lawyer must be registered with FINRA as a representative C: The lawyer must be registered with both the SEC as an investment adviser and with FINRA as a representative D: The lawyer is not required to be registered with the SEC as an investment adviser nor with FINRA as a representative
A: The lawyer must be registered with the Securities and Exchange Commission (SEC) as an investment adviser
A satisfied customer gives his representative a client referral. Which statement is TRUE? A: The representative should check the firm's Do Not Call list prior to acting on the referral B: The representative is not required check the firm's Do Not Call list prior to acting because the client was referred C: The referred client can only be contacted between the hours of 8:00 AM and 9:00 PM in the time zone of the representative D: The representative is not permitted to contact the referred client unless the referred client initiates the contact
A: The representative should check the firm's Do Not Call list prior to acting on the referral
Securities Investor Protection Corporation protects against: A: broker-dealer failure B: credit risk C: fraudulent trading D: loss of principal
A: broker-dealer failure
A customer wishes to place a buy order for a security that has not been registered in the state. The security may be purchased if the security: A: falls under a "Blue Chip" exemption by being listed on a recognized national stock exchange B: files SEC reports C: is traded by at least 2 market makers D: has been trading in the market for at least 1 year
A: falls under a "Blue Chip" exemption by being listed on a recognized national stock exchange
All of the following are "legal persons" under securities law EXCEPT: A: A group of individuals forming a limited partnership B: A group of individuals opening a joint account C: A corporation D: A trust
B: A group of individuals opening a joint account
Which of the following securities are typically subject to state registration requirements? A: U.S. Government issues B: Intrastate offerings C: State chartered bank issues D: Municipal issues
B: Intrastate offerings
In a Securities Investor Protection Corporation (SIPC) liquidation, which statement regarding SIPC coverage limits is correct? A: SIPC covers each customer account for $250,000 in securities plus $250,000 in cash B: SIPC covers each customer account for $500,000 total inclusive of $250,000 in cash C: SIPC covers each customer account for $500,000 in securities plus $250,000 in cash D: SIPC covers each customer account for $750,000 in combined cash and securities
B: SIPC covers each customer account for $500,000 total inclusive of $250,000 in cash
A customer has an account holding $310,000 of securities and $290,000 of cash. If the broker-dealer were to fail, which statement is TRUE regarding the status of the account in an SIPC liquidation? A: The customer will become a general creditor for $40,000 owed B: The customer will become a general creditor for $100,000 owed C: SIPC will provide coverage for $310,000 of securities only D: SIPC will provide coverage for $250,000 of cash only
B: The customer will become a general creditor for $100,000 owed
For any claims that a customer may have against a failed broker-dealer that are in excess of Securities Investor Protection Corporation coverage limits, the customer: A: can deduct the loss from that year's taxes B: becomes an unsecured general creditor with last claim in the liquidation C: becomes a super-secured creditor with first claim in the liquidation D: has no claim against the failed broker-dealer
B: becomes an unsecured general creditor with last claim in the liquidation
The Federal Telephone Consumer Protection Act of 1991 prohibits unsolicited calls from being made: A: before 8:00 AM in the time zone of the caller B: before 8:00 AM in the time zone of the recipient C: before 9:00 AM in the time zone of the caller D: before 9:00 AM in the time zone of the recipient
B: before 8:00 AM in the time zone of the recipient
The Trust Indenture Act of 1939 protects: A: municipal bondholders from being taken advantage of by the issuing municipality B: corporate bondholders from being taken advantage of by the issuing corporation C: government bondholders from being taken advantage of by the issuing governmental unit D: all bondholders from being taken advantage of by the issuing entity
B: corporate bondholders from being taken advantage of by the issuing corporation
The Sarbanes-Oxley Act of 2002 requires: A: registration of new non-exempt issues with the SEC B: chief corporate officers to make quarterly certification of the company's financial disclosures C: research analysts to be separated from investment banking functions at broker-dealers D: exempt issuers to file audited financial statements with the SEC
C: research analysts to be separated from investment banking functions at broker-dealers
A customer has opened the following accounts: Individual cash account Individual margin account Joint cash account with husband Custodial Account for minor child This is treated as how many "covered accounts" in an SIPC liquidation? A: 1 B: 2 C: 3 D: 4
C: 3
A trust indenture is required for a(n): A: Treasury bond B: Agency bond C: Corporate debenture D: General Obligation bond
C: Corporate debenture
Which of the following actions taken by a fiduciary would NOT be consistent with the obligations imposed under the "Prudent Man Rule"? A: Diversifying a fixed income portfolio with securities of varying maturities B: Selecting AA rated corporate convertible bond investments to meet an investment objective of both income and capital gains C: Investing in small capitalization unlisted new issue investments for long term growth D: Writing covered calls against securities positions held in the account to increase income
C: Investing in small capitalization unlisted new issue investments for long term growth
Under the Trust Indenture Act of 1939, which statement is TRUE? A: The trustee will pay the issuer for services rendered B" The bondholders will pay the trustee for services rendered C: The trustee protects the interests of the bondholders D: The issuer protects the interests of the trustee
C: The trustee protects the interests of the bondholders
All of the following must be registered under state blue sky laws EXCEPT: A: Sales Representatives B: Broker-Dealers C: U.S. Government Issues D: Real Estate Investment Trust Issues
C: U.S. Government Issues
New non-exempt debt issues in excess of $50,000,000 are subject to all of the following requirements EXCEPT: A: Prospectus delivery rules under the Securities Act of 1933 B: Anti fraud rules under the Securities Exchange Act of 1934 C: Appointment of an independent trustee to protect the bondholders under the Trust Indenture Act of 1939 D: "Hot Issue" allocation rules
D: "Hot Issue" allocation rules -IN EXCESS of $50 million
Which of the following must be registered with the SEC as an investment adviser under the Investment Advisers Act of 1940? A: Broker-dealer B: Bank C: Senior Editor of an investment magazine D: Accountant who gives investment advice to clients for a fee
D: Accountant who gives investment advice to clients for a fee
A registered representative would be permitted to make a telephone solicitation to which of the following individuals who are all on the Federal Do Not Call list between the hours of 8 AM and 9 PM in the time zone of the call recipient? A: A prospective client who currently does not have an account at the firm B: An ex-client who closed her account at the firm 2 years ago C: A prospective client who inquired about the firm's products a year ago D: An existing client of the firm who does not maintain a margin account
D: An existing client of the firm who does not maintain a margin account
All of the following information must be disclosed when making unsolicited phone calls to potential customers EXCEPT: A: Caller's name B: Firm's name C: Address or phone number from which the caller is dialing D: CRD number of the Registered Representative placing the call
D: CRD number of the Registered Representative placing the call
What license is required under the "Blue Sky" state registration laws for an individual to be licensed as an Investment Adviser Representative? A: Series 63 B: Series 65 C: Series 66 D: Either Series 65 or Series 66
D: Either Series 65 or Series 66
A customer has an account with a brokerage firm that is in receivership. The account holds $90,000 of securities and has a $50,000 debit. Which statement is TRUE regarding SIPC coverage? A: The account is covered for $90,000 B: The customer must deposit $50,000 to receive the $90,000 of securities C: The account is covered for $50,000 D: The account is covered for $40,000
D: The account is covered for $40,000 -SIPC covers equity in customers' accounts
Which statement is TRUE about SIPC coverage for customer accounts at banks that solely handle exempt securities? A: The bank must be registered as a broker-dealer under the Securities Exchange Act of 1934 B: The bank only needs to obtain supplemental SIPC coverage because all securities losses would primarily be covered by FDIC. C: The bank must be a member of the Securities Investor Protection Corporation unless it obtains a waiver from the FRB D: The bank does not need to be a member of the Securities Investor Protection Corporation
D: The bank does not need to be a member of the Securities Investor Protection Corporation -banks that deal only us gov't or municipal securities aren't covered by SIPC
A customer who lives in New York has an account with a broker-dealer and sales representative that are both registered in State of New York. The customer moves to the State of Georgia, a state where the broker-dealer and sales representative are not registered. Which statement is TRUE? A: The sales representative and broker dealer may solicit business from this customer B: The sales representative and broker dealer may only do unsolicited business this customer C: Unsolicited orders can be accepted from this customer provided the sales representative obtains written permission from the State of New York D: The sales representative and broker dealer may not do business with the customer
D: The sales representative and broker dealer may not do business with the customer
An agent is who resides in State A, and whose customers are in State A, is registered in State A under the Uniform Securities Act. Which statement is TRUE if this individual wishes to do business with retail clients in State B? A: Because this individual is registered in State A, he or she does not have to be registered in State B to do business with retail clients who reside in State B B: This individual only has to be registered in State B if he or she contacts more than 5 retail clients in that State C: This individual only has to be registered in State B if he or she visits the client in State B D: This individual must be registered in State B
D: This individual must be registered in State B
All of the following communications fall under the Federal Telephone Consumer Protection Act of 1991 EXCEPT: A: Telephonic via live human voice B: Telephonic via pre-recorded message C: Facsimile transmission D: U.S. mail
D: U.S. mail
A customer has a cash account and a margin account at a brokerage firm. In a liquidation under SIPC: A: only the equity in the margin account is covered B: only the cash account value is covered C: each account is covered separately up to $500,000 total coverage per account D: both accounts are treated as one account with coverage limited to $500,000
D: both accounts are treated as one account with coverage limited to $500,000
State XYZ's registration (Blue Sky) requirements would apply to: A: resident salespersons soliciting in State XYZ only B: non-resident salespersons soliciting in State XYZ only C: firms selling in State XYZ only since salespersons are already registered at the federal level D: both resident and non-resident salespersons and firms soliciting in State XYZ
D: both resident and non-resident salespersons and firms soliciting in State XYZ
In most states, uniform state law requires that individuals representing broker-dealers that sell managed accounts: A: register as agents in the state but no licensing exam is needed B: register as investment adviser representatives in the state but no licensing exam is needed C: register as agents in the state and pass the Series 63 exam D: register as investment adviser representatives in the state and pass the Series 65 exam
D: register as investment adviser representatives in the state and pass the Series 65 exam
