Series 63

Which of the following securities is most likely to register by qualification under the Uniform Securities Act? A) An initial public offering of a stock to be offered in 40 states B) A public offering of a stock to be offered exclusively in 1 state C) A subsequent primary offering of stock in a large, established company to be offered in 30 states D) An initial public offering of a corporate bond to be offered in 15 states

A public offering of a stock to be offered exclusively in 1 state. Offerings in a single state are most likely to be made through qualification. Multistate public offerings of stock are generally registered by coordination.

Unless qualifying for an exemption, which of the following advisory fee structures is not allowed under the Uniform Securities Act? A) Fees based on an hourly rate B) Fees based on a percentage of the change in value of funds from quarter to quarter C) Fees based on a percentage of the aggregate value of funds under management D) Fees based on a fixed dollar schedule tied to the value of funds under management

B fees based on a share of capital gains or appreciation in an account are prohibited

The Uniform Securities Act does not contain bonding requirements for A) agents. B) issuers. C) broker-dealers. D) state-registered investment advisers.

B - issuers Securities professionals, other than investment adviser representatives, may be required to post a surety bond. That requirement is not placed upon issuers of securities.

One of the important definitions in the Uniform Securities Act is that of a security. That term would include which of the following? A) U.S. dollars B) Shares of preferred stock C) Term life insurance D) Rare coins

B - preferred stock Key nonsecurity items - term life insurance, collectibles (e.g. rare coins), and currency are not securities.

The term qualified client would include a natural person who has A) a net worth, together with their spouse but excluding the equity in a primary residence, exceeding $1 million. B) had net income of at least $200,000 for each of the two previous years with an expectation of meeting that in the current year. C) a net worth, together with their spouse but excluding the equity in a primary residence, exceeding $2.2 million. D) no less than $2.2 million under the management of the specified investment adviser.

C A qualified client can meet one of two standards. Either the natural person has at least $1.1 million under the investment adviser's management or has a net worth (spouse can be included) of more than $2.2 million exclusive of the equity in a primary residence. It is the accredited investor who has the $200,000 annual income or $1 million net worth requirement. LO 1.a

Which of the following statements best describes the effect of the NSMIA of 1996 on securities regulation? A) Increased the power of state securities Administrators over registration of securities B) Provided for the registration of intrastate securities C) Preempts state registration of covered securities D) Established the need for dual registration of securities

C - preempts the state registration of covered securities The National Securities Markets Improvement Act preempts state registration of covered securities. On the exam, the word federal is sometimes omitted, but covered still means federal covered securities. State Administrators may not impose registration requirements on securities that are subject to federal regulation. This has had the effect of reducing their power, not increasing it. Unlike the NSMIA's effect on investment advisers where there is no longer dual registration, the requirement to register as a securities offering on both the state and federal levels still exists for those securities that are not federal covered. Registration for intrastate securities goes back to the earliest of the blue-sky laws, well before the NSMIA.

An investment adviser is registered in New Jersey and has offices in Georgia, and Arkansas. One of their IARs lives in Georgia, and in addition to his local clients, he has one client who lives in Arkansas. The IAR would be required to register in

D - Georgia Only 1 client in Arkansas applies for the de minimis exemption for an IAR. No clients in New Jersey so no IAR registration needed. The de minimis rule only applies to IAR.

An agent's registration is considered effective A) upon passing the Series 63 Uniform Securities Agent State Law exam. B) when approval has been granted by FINRA. C) once the licensing fee has been paid. D) when approval has been granted by the Administrator.

D - approval by the Administrator Although the Administrator doesn't approve much, it is correct to state that an agent's registration is not effective until approved by the Administrator.

Limited Canadian registration renewal date

Dec 1

The renewal date for limited Canadian registration

Dec 1st vs. securities professionals in the US

Examples of identity theft include 1. taking over an individual's credit card account. 2. applying for new credit cards in the compromised individual's name. 3, lending money in the name of the compromised individual. 4. purchasing lottery tickets in the name of another individual.

1 & 2 common the thief takes over current credit card accounts and also applies for new ones.

Which of the following are not included in the definition of an agent in the Uniform Securities Act? 1. A licensed broker-dealer 2. An officer of an issuer who only represents the issuer in selling shares to a broker-dealer underwriting the company's securities 3. An officer who represents an issuer of non-exempt securities in the sale of those securities to the public without receiving any compensation 4. An employee of a broker-dealer whose only transactions are with institutional clients

1 & 2 -> be careful, it says NOT. an agent is an individual - other than a BD - who represents a BD or ISSUER in SECURITIES TRANSACTIONS. 2) registration of an agent is ALWAYS REQUIRED unless the transaction is EXEMPT. below included in the definition of an agent -> 3 (does not receive compensation) and 4 (employee of a BD)

The Administrator may deny a person's registration as an investment adviser representative if the person meets which of the following criteria? 1. Has a recent securities-related criminal record 2. Has recently been convicted of a felony not related to the securities industry 3. Has lost a civil lawsuit within the last year 4. Was convicted of any misdemeanor within the last year that did not involve securities or money

1 & 2 -> civil liability don't have impact. Administrator may deny a license to individuals who have been convicted of any felony or a securities- or money-related misdemeanor within the last 10 years. Civil lawsuits will rarely have an effect upon securities registration.

As defined in the Uniform Securities Act, an agent is 1. an individual who represents an issuer of nonexempt securities in nonexempt transactions. 2. a registered broker-dealer that deals in registered securities. 3. an individual who sells nonexempt securities as a representative of a registered broker-dealer. 4. an individual who has no place of business in the state and sells securities to an existing client who is not a resident of the state.

1 & 3

As defined in the Uniform Securities Act, an agent is 1. an individual who represents an issuer of nonexempt securities in nonexempt transactions. 2. a registered broker-dealer that deals in registered securities. 3. an individual who sells nonexempt securities as a representative of a registered broker-dealer. 4. an individual who has no place of business in the state and sells securities to an existing client who is not a resident of the state.

1 & 3 Agents work and represent a broker-dealer in conducting securities sales or transactions but are excluded from the definition of an agent if they have no place of business and sell securities to an existing client who is not a resident of the state.

Under NASAA Model Rule on Custody Requirements for Investment Advisers, which of the following are violations of the requirements for advisers who have custody of client securities or funds? 1. An adviser deposits client funds into its own bank account, making a careful record of the amount of funds belonging to each client. 2. An adviser allows a CPA to conduct an unscheduled audit of all client securities and funds in the adviser's custody. 3. Once a year, an adviser sends each client a report on the securities and funds in the adviser's custody.

1 & 3 Client funds must be deposited in separate bank accounts. Each year, accounts must be audited by an independent public accountant in an unannounced examination. Clients must receive statements quarterly (not yearly). Clients must also be notified in writing of the location of their property and any change in that location. Client securities must be properly segregated and identified.

The NASAA Model Brochure Rule for investment advisers states that delivery of the brochure and related brochure supplements need not be made to 1. clients who receive only impersonal advice and who pay less than $500 in fees per year. 2. individual clients meeting the definition of accredited investor. 3. an investment company registered under the Investment Company Act of 1940. 4. an employee benefit plan with assets in excess of $1 million.

1 & 3 exemptions for the brochure rule: 1) impersonal advisory services and annual fee is less than $500. 2) when the advisory contract is with a registered investment co. such as a mutual fund

Under the Uniform Securities Act, an Administrator who believes a violation has occurred or is about to occur may 1. issue a cease and desist order without a prior hearing. 2. bring action to obtain an injunction and have a receiver appointed over the alleged violator's accounts. 3. seek a court order requiring the alleged violator to make restitution to others.

1, 2, & 3

Under the Uniform Securities Act, which of the following is excluded from the definition of investment adviser? 1. A bank 2. An investment adviser representative 3. A lawyer giving suggestions to a client on where to invest the proceeds of a divorce settlement that he helped her obtain 4. An investment adviser with an office in the state whose only client is a closed-end investment company registered under the Investment Company Act of 1940

1, 2, 3 & 4 banks, IARs, federal covered advisers, and lawyers are specifically excluded from IA. Any investment adviser under contract to manage a regulated investment co. must register with the SEC.

Which of the following securities are exempt from registration requirements under the Uniform Securities Act? 1. Issues of U.S.-based insurance companies authorized to conduct business in the state 2. NYSE-traded issues 3. Issues of nonprofit religious organizations 4. Commercial paper meeting certain requirements

1, 2, 3, & 4 securities issued by an insurance co. are exempt from registration. NYSE-listed are federal covered and nonprofit orgs and CPs with maturity of 270 days or less are also exempt.

Which of the following securities are exempt from registration at the state level? 1. Bonds issued by the American Red Cross 2. U.S. Treasury bonds 3. American Advisers Unit Investment Trust 4. Common Stock in AAA Commercial Bank, member of the FDIC

1, 2, 3, & 4 securities offered by nonprofit orgs, the US gov't or investment co. registered under the Investment Co. Act of 1940, as well as securities issued by commercial banks, are exempt from registration with the states under the Uniform Securities Act and the NSMIA.

Which of the following persons are excluded from the definition of, or exempt from registration as, a broker-dealer under the Uniform Securities Act? 1. A broker-dealer with no office in the state that effects trades exclusively with other broker-dealers in the state 2. A trust company with an office in the state that deals with the general public 3. A broker-dealer with no office in the state that has no more than five retail clients resident in the state within the past year 4. A broker-dealer with no office in the state that effects securities trades exclusively with trust companies or other broker-dealers

1, 2, and 4 as long the BD 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 BD confine trading to financial institutions or other BDs. Unlike with investment advisers, there is no de minimis exemption for BDs. Trust companies are excluded from the definition of broker-dealer.

Which of the following are exempt from state registration? 1. A bond issued by the city of San Jose, Costa Rica 2. An isolated nonissuer transaction 3. A transaction by an administrator of an estate 4. A transaction with no commissions, directed by the offeror over the period of one year, to no more than 50 retail investors in the state who buy the security for investment purposes only

2 & 3 isolated nonissuer transaction & transaction by an admin of estate are exempt transactions.

NASAA has created a Model Rule dealing with the creation of and delivery requirements for an investment adviser brochure. Which of the following statements correctly identify those delivery requirements? 1. The brochure must be delivered to prospective and new advisory clients at least 48 hours prior to entering into the advisory contract. 2. The brochure must be delivered to prospective and new advisory clients no later than entering into the advisory contract. 3. Annual delivery of the brochure to existing clients must be made within 90 days of the end of the adviser's fiscal year. 4. Annual delivery of the brochure to existing clients must be made within 120 days of the end of the adviser's fiscal year.

2 & 4 The initial delivery requirement is no later than the date of entry into the advisory contract. THe 48-hour rule deals with an advance delivery to aovid having to honor a five-day penalty-free withdrawal. The annual delivery date is within 120 days of the end of the adviser's year. The 90-day requirement is for the annual updating amnedment to the Administrator.

Under the Uniform Securities Act, the term person would include 1. any natural person who has a valid U.S. passport. 2. political subdivision. 3. an unincorporated association. 4. an inter vivos trust.

2, 3, & 4 The term person has an extremely broad definition. It is best to remember the three things that are not persons: minors, individuals who have been judged incompetent, and deceased individuals. Minors can have passports; any natural person would include them and they are not persons under the act.

Peter Smith, a prominent securities lawyer living in Connecticut, conducts his securities law practice full time in New York state. He must register as an investment adviser in New York state if A) his clients, none of whom are residents of New York, receive investment advice as an integral part of his legal services. B) the clients of his law firm are all residents of Connecticut but conduct their business with him in New York. C) he advises his spouse, who also has an office in New York, that her investment in 15 technology stocks is too high. D) the clients of his law firm are New York residents and seek advice on the construction of trust documents that may be helpful in reducing taxes on the securities in their estates.

A IA must register in the state when or if he is offering investment advice as an INTEGRAL pat of his practice.

Which of the following statements regarding an agent's registration is correct? A) Revocation of the registration of that agent's broker-dealer will result in cancellation of that agent's effective registration. 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) 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. D) Registration of a broker-dealer in a specific state automatically registers all of the firm's agents in that state as well.

A Agent of BD is active only when the BD's registration is in force. Agents must register in each state in which they wish to do business; there is no automatic registration other than for certain officers, directors and partners when the firm first registers in a state.

A customer of a broker-dealer has been trading securities for several years. She recently purchased $10,000 of newly issued U.S. Treasury bonds and asks why she never received a prospectus. The agent would reply, A) "U.S. Treasury securities are exempt from registration on the federal and state level, so there is no prospectus." B) "I will get one for you as soon as possible." C) "U.S. Treasury securities are excluded from the registration requirements of the federal and state regulators, so there is no prospectus." D) "U.S. Treasury securities are excluded from the definition of a security."

A US Treasury securities are part of a group of issues that are exempt from registration on the federal and state levels. They are securities but qualify for an exemption from the registration requirements. That is why there is NO prospectus.

A customer within one year of retirement informs his agent that he wants to use the equity in his house to make enough money within the year to fully fund his retirement. According to the Uniform Securities Act, the agent should A) urge the customer to reconsider his investment strategy. B) construct a growth-oriented portfolio. C) invest in an ultraconservative portfolio of municipal bonds. D) invest the money in high-tech securities because of their unlimited potential.

A making unsuitable recommendations is prohibited. this investor's time frame is unrealistic. investing in muni bonds will not meet the customer's objective of capital growth.

Which of the following is not included in the definition of a security in the Uniform Securities Act (USA)? A) A $100,000 whole life insurance policy B) A variable annuity C) Commercial paper issued with an eight-month maturity D) A preorganization certificate

A - $100,000 who life insurance policy Life insurance and fixed annuities are not listed as securities under the USA, while their variable counterparts are. It is best to concentrate on learning the few things that are not securities.

When does a customer have to receive the OCC's options disclosure document? A) At or before approval of the account to trade options B) Within 15 days of account approval by the firm's designated options supervisor C) Within 5 business days of the first options trade D) With the confirmation of the first options transaction

A - At or before approval of the account to trade options When opening an account to trade options, the owner must be informed about the risks involved with trading options. By providing the owner with the options disclosure document titled "Understanding the Risks and Uses of Options," the broker-dealer (BD) satisfies the risk disclosure requirements. It may be done before or at the time the BD approves that customer's options account, but not later than that.

An individual is currently registered as an agent with a broker-dealer. If the agent would like to offer wrap fee programs through the firm, all of the following statements are correct except A) the agent would be defined as an investment adviser. B) the agent would be defined as an investment adviser representative. C) the agent would now come under a greater fiduciary responsibility. D) the broker-dealer would have to be registered as an investment adviser.

A - agent would be defined as an investment adviser Not excluded from definition of investment adviser and would become required to register on either the state or federal level. The agent would now become an IAR of the firm and, as such, would carry the additional fiduciary responsibility incurred in the advisory business.

What document must accompany an initial registration application for those natural persons required to register under the Uniform Securities Act? A) Consent to service of process B) State photo identification C) Proof of citizenship D) A birth certificate confirming the registrant is over 18 years of age

A - consent to service of process The USA requires that a consent to service of process accompany an application for registration. Proof of citizenship is unlikely to be requested by a state Administrator because foreign nationals can register. Proof of age is not a requirement.

If a customer is upset with his agent for not servicing his account properly and sends a complaint letter, the agent should A) bring the customer complaint to her employer immediately. B) call the customer and apologize, promising to do a better job. C) tell the customer she is willing to make restitution. D) forward the complaint letter to the Administrator.

A - employer handle complaints, not Administrator. Agents must bring all customer written complaints to their employer immediately.

An individual wishing to register as an agent for a broker-dealer would be required to file an application for registration that includes all of the following except

A - fingerprints Unlike FINRA rules, the Uniform Securities Act does not require fingerprints for natural person applicants.

Under the registration provisions of the Uniform Securities Act, a currently effective registration statement may be amended to A) increase the number of shares in the offering. B) increase the public offering price of the offering. C) change the underwriter's concession. D) change the fee paid to the finder.

A - increase # of shares but not change the offering price. The Uniform Securities Act provides that, once a securities issue has become effective, an amendment may be filed to increase the number of shares in the offering but not the offering price or any form of compensation. LO 4.b

As found in the Uniform Securities Act, which of the following would not be an issuer? A) A smelter producing gold bullion for sale to investors B) A finance company offering promissory notes C) A metal refinery whose stock is traded in the OTC market D) A person who has proposed to issue a security but has not yet issued it

A - smelter producing gold Gold bullion is a commodity; not a security. One of the oddities in the USA's definition is that those who have proposed to issue a security are issuers. Regardless of the nature of the company's business, the fact that there are shares of stock trading publicly means the metal refinery had to issue them. Promissory notes are included in the definition of security (more detail in Unit 4).

The Uniform Securities Act provides for all of the following except A) specific civil penalties for up to three times the amount of money invested for willful violation of the act. B) criminal penalties for violations of the act. C) exemption from registration for federal covered securities. D) subpoena power for the state Administrator.

A - specific civil penalties for up to 3 times the amount of money invested for willful violation of the act The Uniform Securities Act (USA) provides for criminal penalties of up to three years in prison and/or $5,000 in fines. The act describes civil liability, not specific civil penalties. Civil liability includes interest costs, rescission of trade, payment of attorney's fees, and return of principal invested. The act makes no reference to penalties of three times the amount of money invested (treble damages). The USA does provide the state Administrator with the power to issue subpoenas.

Defalcator Dependable Brokers (DDB) has changed its business structure from a general partnership to a corporation. Notification of this change A) must be submitted to the Administrator promptly. B) is made by amending its Form BD when the annual renewal fee is paid. C) must be submitted to the Administrator by noon of the 30th day after the change. D) need not be made because it has no relevance to the way the firm does its securities business.

A - submitted to the Administrator promptly If any material information in the documents relating to the application for registration becomes inaccurate or incomplete, the registrant must promptly file a corrected copy (amend their application) with the Administrator. Because the type of business structure—partnership, corporation, LLC, or sole proprietorship—is disclosed on Form BD, a change requires a prompt update. The USA never defines prompt and the exam never specifies a time—just answer promptly to a question like this.

Under the Uniform Securities Act, any partner, officer, or director of a registered investment adviser is an investment adviser representative if that individual does which of the following? 1. Offers advice concerning securities 2. Manages client accounts or portfolios 3. Determines securities recommendations for representatives to disseminate 4. Supervises personnel engaged in the above activities but does not sell these services to the public

All The Uniform Securities Act defines any individuals associated with an investment adviser as investment adviser representatives if they manage accounts or portfolios, determine securities recommendations, or supervise personnel engaged in the listed activities, including any partner, officer, or director who offers advice concerning securities. Persons who manage client accounts or portfolios, determine securities recommendations, or supervise personnel engaged in the listed activities are IARs.

2Under the Uniform Securities Act, the definition of an investment adviser does not include 1. investment adviser representatives. 2. lawyers and accountants whose investment advisory services are solely incidental to their practices. 3. broker-dealers who offer investment advice on an incidental basis without special compensation for the advice provided. 4. federal covered investment advisers.

All None of these are included in the term investment adviser as used in the Uniform Securities Act. Federal covered advisers are regulated by the Securities Exchange Commission (SEC). The National Securities Markets Improvement Act of 1996 (NSMIA) prohibits dual registration of IAs by federal and state authorities. If federal covered advisers were defined as IAs under the USA, then they would be subject to the same state registration procedures as local or state IAs.

François is an agent with Lacolle Investments, a broker-dealer located in Lacolle, PQ, and registered with the Quebec Securities Commission. François has several customers who summer in the White Mountains of New Hampshire and the Green Mountains of Vermont. For François to serve these customers during those months, A) only he must obtain a limited registration in NH and VT. B) both he and Lacolle Investments must obtain a limited registration in NH and VT. C) both he and Lacolle Investments must obtain a limited registration in NH and VT and limit transactions to those in the customers' self-directed retirement accounts (RRSPs). D) he is covered by the snowbird exemption because neither he nor his broker-dealer maintain a place of business in the U.S.

B The snowbird exemption exists for Canadian broker-dealers and agents but is more restrictive. If they have Canadian clients temporarily in the US, both the BD and the agent must obtain a limited license in the appropriate states.

In order for a surety bond to meet the requirements of the Uniform Securities Act, it must provide that A) it is in the form of cash or marketable securities. B) any customer who can prove a violation is entitled to collect against the bond. C) because bonds are transferable, any agent's bond may be used to meet the obligation of another agent. D) the bond must remain in force no less than two years after the withdrawal of registration.

B Under the USA, every bond shall provide for suit thereon by any person who has a cause of action under the provisions of the Act. The Administrator must accept cash or securities in lieu of the surety bond, but cash is not a requirement—the bond will do just fine.

Under the Uniform Securities Act, which of the following persons has to register as an investment adviser? A) An attorney who writes a legal opinion for a municipal bond indenture B) A broker-dealer who gives advice for which he charges a specific fee C) A broker-dealer who gives investment advice that is incidental to the course of its business and for which no special compensation is received D) An agent of a broker-dealer who gives investment advice within the course of his duties with the firm for which a fee is charged

B the BD exclusion is lost when the BD charges a separate fee for providing investment advice.

The NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents states than an agent may share in the profits of an account A) only if the agent also accepts commission compensation from the account. B) if the agent has secured written authorization of the employing broker-dealer and the customer. C) only if the agent's primary source of income is derived from the account. D) under no circumstances.

B Agents must have written authorization from both the client and the employing broker-dealer in order to share in the profits (and losses) in a client account.

In general, the Uniform Securities Act requires broker-dealers to keep most records for A) five years with the first three in an easily accessible location. B) three years with the first two in an easily accessible location. C) three years with the first year in an easily accessible location. D) five years with the first two in an easily accessible location.

B general recordkeeping requirement for broker-dealers is 3 years. The first 2 of those, the records must be in an easily accessible location.

A transactional exemption would be available when a sale is made in all of the following situations except A) to a federally chartered credit union. B) to a lawyer as an incidental part of his legal practice. C) to a broker-dealer by a nonaffiliated broker-dealer. D) by a federal marshal to individual investors.

B - a lawyer as an incidental part of his legal practice Unless we are told the order was unsolicited or effected in some other way to qualify for an exemption, a sale to a lawyer is treated like any other sale to a retail client. Don't confuse this with the lawyer's exclusion from the definition of an investment adviser. Under the USA, any sale made by a marshal or sheriff, as well as a sale to a financial institution such as a credit union, is considered an exempt transaction. Transactions between broker-dealers are included in the list of exempt transactions.

Active Technicians (AT) is a state-registered investment adviser. In its brochure supplement, it would include information relating to each of the following individuals except A) those exercising discretion over assets of clients in this state, even if no direct contact is involved. B) members of AT's board of directors who are active in the firm's business. C) those providing investment advice and having direct contact with retail clients in the state. D) those providing investment advice and having direct contact with institutional clients in the state.

B - active BoD Unless the individual has direct contact with clients (retail or institutional) or exercises discretion, a copy of the Part 2B brochure supplement for each individual is not required. This would include officers and members of the board of directors. Of course, if any of these individuals have direct client contact or exercise discretion, a supplement for them would need to be prepared.

Parlous Professional Investors (PPI) has filed an application to register as a broker-dealer in State X. Under the procedures described in the Uniform Securities Act, PPI's registration is most likely to become effective A) at the same time PPI's registration becomes effective with the SEC as long as the firm used the coordination method of registration. B) at noon of the 30th day after the filing of a completed Form BD subject to possible acceleration by the State X Administrator. C) no later than the end of the 20-day cooling-off period applicable to registrations. D) once the executive officers of PPI have successfully completed the Series 63 examination.

B - at noon of the 30th day after filing of Form BD For any securities professional, registration normally becomes effective at noon on the 30th day after the filing of a completed application. For a broker-dealer, that would be the Form BD. It is important to include the word complete. If the Administrator returns the initial filing because of incomplete information, the 30-day period starts all over again once the application is complete. As with other regulations, the Administrator frequently has the power to speed up the process; a "rush job" as such. The 20-day cooling-off period refers to registering a security with the SEC, as does the term coordination. In a large firm, not all of the executives are required to individually register. Even for those who do, in many cases, they take their exam well before the end of the 30-day period.

Which of the following practices violates the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents? A) Failing to charge a markup B) Failing to follow a customer's instructions C) Failing to state every fact D) Deliberately not charging a commission

B - failing to follow a customer's instructions Deliberate disregard for a customer's instructions is a violation under the policy. Not charging commissions or markups is not a violation. Failing to state a material fact is a violation of the Uniform Securities Act, but stating every fact is not required. That is why the regulators differentiate between material and non-material information.

Compliance with the customer identification program (CIP) requires that all the following information must be obtained from new individual customers except A) physical address. B) name of employer. C) Social Security number. D) date of birth.

B - name of employer A customer's employer's name is not required to open a new account. Under the CIP, each of the other choices is required information. In the case of an account opened in the name of a business, the business address and tax identification number are required.

Pinnacle Asset Management (PAM) is an SEC-registered broker-dealer. PAM is also registered in more than 25 states. The net capital rule of the SEC requires PAM's net capital to be at least $50,000, and at its most recent calculation, it had net capital of $58,000. One of the states where PAM is registered has a bonding requirement of $60,000. To be in compliance, A) PAM would need to post a surety bond of $60,000. B) PAM would not be required to post a surety bond. C) PAM would need to post a surety bond of $50,000. D) PAM would need to post a surety bond of $63,000.

B - no state can require bonding or financial requirements in excess of those of the SEC. A state with a higher bonding requirement can apply that only to broker-dealers who are not SEC registered. The second point is that any SEC-registered BD whose net capital exceeds the SEC's requirement has no obligation to post a surety bond.

Which of the following are not exempt securities under the Uniform Securities Act? A) $50,000 denomination commercial paper that has received a rating in the top three grades, maturing in six months B) Preferred stock traded on the OTC Link of the OTC Markets Group (formerly known as the Pink Sheets) C) Anglican church bonds D) Equipment trust certificates issued by a regulated common carrier

B - preferred stock traded on the OTC Link Trading on the OTC Link of the OTC Markets Group (formerly known as the Pink Sheets) does not qualify a security for treatment as a federal covered security. We can't assume that the issuer's common stock is federal covered (which would make the preferred exempt from registration) unless it is specifically stated. The other answers are specifically exempted from registration under the Uniform Securities Act: nonprofit religious organizations, securities issued or guaranteed by a regulated common carrier, and commercial paper with a maturity of nine months or less and in minimum $50,000 denominations as long as it is rated in the top three grades.

Parlous Professional Investors (PPI) is currently registered in State X. Should the State X Administrator wish to examine PPI's records, A) common courtesy would suggest that she make an appointment well in advance of the proposed examination. B) she may do so during normal business hours anytime she wishes. C) she would be limited to annual inspections only. D) an order from a court of competent jurisdiction would be required.

B - surprise audits are allowed. only consideration is for the BD to visit during normal business hours.

A client sues an agent for selling an unregistered nonexempt security. Shortly before the case comes to trial, the client dies. A) Judgment is immediately rendered in favor of the deceased client. B) The suit survives the death of either party to the suit. C) The suit is canceled. D) The suit will only be continued if acted upon by the beneficiaries of the client.

B - survives the death You can't get out of a suit by dying. To quote the act itself, "Every cause of action under this statute survives the death of any person who might have been a plaintiff or defendant."

Records that must be kept by a broker-dealer include all of the following except A) customer ledgers. B) customer tax returns. C) a daily trade blotter. D) a cash receipts journal.

B - tax returns It is not required that any securities professional maintain copies of customers' tax returns.

Under the Uniform Securities Act, which of the following is an investment adviser? A) An investment adviser representative B) An individual who provides financial advice over the internet with no recommendations based on specific investment situations of individual clients C) A firm with no office in the state that provides specific investment advice to 10 noninstitutional clients within the state D) A broker-dealer who receives no compensation for investment recommendations

C A firm with no office in the state that provides investment advice is not an investment adviser if its clients are investment companies or other institutions or if business communications or advice have been directed to no more than five noninstitutional (individual or "retail") clients within the state in the past 12 months. A broker-dealer is not required to register as an IA unless it receives special compensation for providing investment advice. Individuals who publish general advice (no specific recommendations to individual clients) in hard copy form, electronic communications, or otherwise are not required to register as IA.

Which of the following statements best describes rights of rescission under the Uniform Securities Act? A) An agent who unknowingly violated the Uniform Securities Act may be imprisoned for up to five years. B) Rights of rescission are not generally available to public customers under the Uniform Securities Act, although such rights may be made available to institutional investors. C) An investor who believes he has been wronged in conjunction with a violation of the Uniform Securities Act may be entitled to restore his former financial condition as if the transaction had not occurred. D) Any investor who loses money in a securities transaction can be made financially whole under the rights of rescission.

C An investor exercising rights of rescission entitled to recover the amount of the initial investment, a reasonable rate of interest on that amount, if any, less any income received on the security.

Which of the following statements best describes rights of rescission under the Uniform Securities Act? A) An agent who unknowingly violated the Uniform Securities Act may be imprisoned for up to five years. B) Rights of rescission are not generally available to public customers under the Uniform Securities Act, although such rights may be made available to institutional investors. C) An investor who believes he has been wronged in conjunction with a violation of the Uniform Securities Act may be entitled to restore his former financial condition as if the transaction had not occurred. D) Any investor who loses money in a securities transaction can be made financially whole under the rights of rescission.

C An investor who believes he has been wronged in conjunction with an investment transaction may have recourse under rights of rescission to restore his original financial condition.

Under the Uniform Securities Act, it is not considered unlawful if an agent A) made an untrue statement of a material fact. B) deliberately failed to follow a customer's instructions. C) actively solicited orders in unregistered exempt securities. D) omitted a material fact because she knew she did not have time to cover everything in a short presentation.

C be careful, it says NOT.

Clarissa Daniels is a professional financial planner. She operates her practice under the name of Daniels Financial Planning Services. Her only office is in State T and all of her clients reside there. Daniels is an independent investment adviser representative for WPLJ Advisers, a firm registered with the SEC. The responsibility for supervising her activities belongs to A) the SEC. B) the Administrator of State T. C) WPLJ Advisers. D) Daniels Financial Planning Services.

C financial planners are required to register as an investment adviser representative.

Under the Uniform Securities Act, the Administrator may do all of the following except A) issue a cease and desist order without a prior hearing. B) issue a stop order to revoke the effectiveness of a registration statement. C) issue an injunction to force compliance with an Administrator's rule. D) revoke a previously allowed exemption.

C Administrators cannot issue injunctions, but they may petition a court to issue an injunction against certain activities.

Which of the following choices best represents the definition of agent as stated in the Uniform Securities Act of 1956? A) Agent means any employee who represents a broker-dealer or issuer in any capacity related to the business. B) Agent means any individual other than an officer who represents a broker-dealer in effecting or attempting to effect purchases or sales of securities. C) 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. D) Agent means any person other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.

C An agent must be an individual. The term, person, includes individuals as well as many entities that are not individuals. It is only those employees who are involved with securities transactions who are defined as agents. Broker-dealers—and even more so, issuers—have many employees who have nothing to do with effecting or attempting to effect securities transactions. Officers of a BD who are functioning in the capacity of an agent are indeed agents.

Under the Uniform Securities Act, it is unlawful to sell A) a federal covered security not registered in the state. B) a security of a commercial bank not registered in the state. C) a nonexempt, nonregistered security issued by a foreign corporation from a country with which the U.S. government maintains diplomatic relations. D) a security registered in the state under the Uniform Securities Act but not registered in any other state.

C Nonexempt, nonregistered securities cannot be lawfully sold in a state unless in an exempt transaction (and nothing in the question indicates that is the case). The fact that they are issued by a foreign corporation is irrelevant; nonexempt securities must be registered. A federal covered security need not be registered in a state. Securities issued by banks, not bank holding companies, are always exempt securities.

When it comes to social media, agents need to understand the difference between interactive and static content. Which of the following would be considered static content? A) Emails sent to clients B) Comments on a Facebook posting C) A broker-dealer's profile posted on Facebook D) Tweets

C Static content is content that remains posted until it is changed by the firm or individual who established the account. Interactive content is generally real-time communications, such as the other three choices shown here.

An agent based in Alabama directs a solicitation to a customer who lives in Connecticut while the customer is temporarily in Indiana. The customer does not accept the offer until he arrives back in Connecticut. According to the Uniform Securities Act, the Administrators of which of the following states have jurisdiction? A) Alabama and Indiana B) Indiana and Connecticut C) Alabama, Connecticut, and Indiana D) Alabama and Connecticut

C The Administrator from any state from which an offer is made, directed, or accepted has jurisdiction over the offer.

All of the following would be defined as exempt transactions except A) Amalgamated National Bank sells its publicly traded bond portfolio to ABC Insurance Company. B) First National Bank sells its entire publicly traded bond portfolio to Amalgamated National Bank. C) Joe Smith, an employee in the consumer lending department of Amalgamated National Bank, buys securities from ABC Securities, a broker-dealer registered in the state. D) ABC Securities, a registered broker-dealer functioning as an underwriter, purchases securities from XYZ corporation.

C The purchase of securities from a broker-dealer by an employee of a bank is a nonexempt transaction because it is a sale of a security by a BD to a member of the public. Transactions between BDs and issuers, between banks, and between banks and insurance companies are exempt because they occur between financial institutions. An exempt transaction is most often identified by the transaction's parties, rather than the type of security involved.

If an investor bought stock on one exchange and sold it at a higher price on another exchange, this practice constitutes A) a violation of the Uniform Securities Act. B) an offense punishable by three years in the county jail. C) a perfectly acceptable market arbitrage. D) a violation under both the Uniform Securities Act and federal law.

C This common practice is perfectly acceptable. Arbitrage is the practice of buying on one exchange and selling on another to take advantage of market disparities.

If a broker-dealer whose principal office is in Iowa addresses five solicitations to potential customers in the nearby Nebraska town of Middleton and the return address on the mailings is that of the broker-dealer's satellite office in Middleton, which of the following statements is true? A) If the broker-dealer is registered with the SEC, it is not required to register in any state. B) The broker-dealer must register in Nebraska only. C) The broker-dealer must register in Iowa and Nebraska. D) The broker-dealer must register in Iowa only.

C - BD register in Iowa and Nebraska. Under the USA, a broker-dealer must register in any state in which it has an office or conducts business with noninstitutional (retail) clients. Soliciting by mail constitutes making an offer in the state. Remember, there is no de minimis rule for broker-dealers. Unlike investment advisers, who register with the state or the SEC, never both, SEC-registered broker-dealers also must meet state registration requirements.

Under the Uniform Securities Act, who automatically becomes registered as an agent when a broker-dealer's registration becomes effective? A) Any individual employed by or associated with the firm who will have sales responsibilities B) No one C) Certain partners, officers, or directors of the firm D) Only one individual designated on the application for registration

C - Certain partners, officers, or directors of the firm The Uniform Securities Act provides that when a broker-dealer (or investment adviser) files its application for initial registration in a state, officers, directors, and partners who are already agents (or IARs) are automatically registered as agents (or IARs) in the new state.

The Uniform Securities Act excludes from the definition of agent individuals who represent certain issuers in the sale of their securities. An individual representing which of the following issuers qualifies for that exclusion? A) The Eastern Pacific Railroad issuing equipment trust certificates for the purpose of upgrading its fleet of locomotives B) The Midwest Farmers Cooperative, a nonprofit membership cooperative issuing securities solely to members of that cooperative C) GEMCO Finance Corporation that issues AAA-rated 30-day commercial paper in $100,000 minimum denominations D) FINCO Finance Corporation that issues AAA-rated 330-day commercial paper in $25,000 minimum denominations

C - GECO Finance Corporation that issues AAA-rated 30-day CP in $100k min denominations Among the cases where an individual representing the issuer of an exempt security is excluded from the definition of an agent is commercial paper in the three highest rating grades (AAA is the highest) with no more than a 270-day maturity and a minimum denomination of $50,000. Although railroad equipment trust certificates and membership-only sales of securities issued by cooperatives are exempt securities, they are not included in the list of those eligible for the agent's exclusion. Please check you LEM for that list.

Which of the following statements regarding unsolicited, nonissuer transactions is true? A) An agent may not accept unsolicited orders unless the transaction directly benefits the issuer. B) An agent may only accept unsolicited orders with prior approval of a principal. C) An Administrator may require representatives to obtain customer signatures acknowledging that orders were unsolicited. D) An agent can only accept unsolicited orders in exempt securities.

C - an Administrator may require representatives to obtain customer signatures acknowledging that orders were unsolicited. Administrators are authorized by the USA to require agents to obtain written client acknowledgment of unsolicited transactions. An agent may accept unsolicited orders in secondary transactions in either exempt or nonexempt securities. An agent may accept unsolicited orders without prior approval of a principal; approval is necessary after the trade.

The Uniform Securities Act's definition of an agent excludes all of the following except A) a broker-dealer that charges a commission as a regular part of its business. B) an individual who is in the business of providing investment advice on behalf of his employer. C) an individual who supervises those who effect securities transactions for customers. D) a clerical person who files trade reports for the broker-dealer.

C - an individual who supervises those who effect securities transactions for customers The Uniform Securities Act defines an agent as any individual (other than a broker-dealer) who represents a BD (or an issuer in certain cases) in effecting securities transactions. That would include those who supervise agents (remember, there is no principal-level designation like there is with FINRA). Those who provide investment advice on behalf of their employers are investment adviser representatives of an investment adviser. Can an individual be both an agent and an IAR? Yes, but those are two different "hats" and meet two different definitions requiring two different examinations.

All of the following actions must be completed prior to customers entering their first option trade except A) approval by a designated options supervisor. B) delivery of the options disclosure document (ODD). C) receipt of a completed options agreement. D) completion of the new account form.

C - be careful. question says PRIOR. options agreement can be delivered PRIOR OR AFTER the options trade. Customers do not have to complete (sign) the options agreement prior to entering an order. Under current rules, the agreement must be signed and returned by the customer within 15 days of account approval.

A state-registered investment adviser informs a client that it does not intend to abide by all the provisions of the Uniform Securities Act. It has the client sign a waiver that specifically prohibits the client from entering a suit against the firm. The client's signature is properly witnessed and notarized. It would be correct to state A) because the client signed the agreement, a suit against the firm will have no legal standing. B) the client will only be able to sue in the case of fraud. C) clients cannot waive their legal rights. D) this waiver is only effective if a copy is filed and registered with the Administrator.

C - clients cannot waive their legal rights NO CASE on the exam where customers can waive their rights.

A margin account is a type of brokerage account in which the broker-dealer lends the investor cash to purchase securities using marginable securities in the account as collateral. Which of the account documents authorizes the use of those securities as collateral for that loan? A) The hypothecation agreement B) The loan consent agreement C) The credit agreement D) The secured agreement

C - credit agreement (also referred as margin agreement)

Under the Uniform Securities Act, which of the following is an offer or a sale? A) The use of securities as collateral for a car loan at a bank B) A gift of stock from a mother to a son C) A gift of stock given as a bonus with a purchase of a parcel of real estate D) A 10-for-1 stock split paid to shareholders

C - gift of stock given as a bonus with a purchase of a parcel of real estate A gift of securities given as a bonus for any purchase is considered part of the purchase. Stock splits, bona fide gifts, and bona fide pledges or loans made with no purpose of evading the act are not considered sales.

Which of the following is defined as a security under the Uniform Securities Act? A) Fixed, guaranteed payments made for life or for a specified period B) A modified endowment policy C) An investment contract D) Commodities futures contracts

C - investment contracts As a result of Howey decision, investment contracts are defined as a SECURITY under the UNIFORM SECURITIES ACT. Fixed, guaranteed payments for life, investments contracts, and commodities are NOT classified as a security.

Under the Uniform Securities Act, which of the following is true regarding civil liability of agents? A) An agent may be sued up to five years after a sale is made. B) The maximum amount a customer may recover is limited to the amount paid for the security plus interest. C) Persons who control a civilly liable person may also be sued to recover losses. D) A plaintiff who immediately refuses to accept an offer of rescission loses the right to sue.

C - persons who control a civilly liable person may be sued to recover losses The guilty party and the one controlling that person are subject to civil liability. That means if a broker-dealer failed to properly supervise the agent, the firm, and possibly the agent's manager, may also be named in the suit. Persons may be sued only up to three years following the sale of a security. As long as the plaintiff rejects the offer of rescission within 30 days, he retains the right to file a civil suit. A purchaser may recover costs and attorney's fees, in addition to the amount paid for the security plus interest, minus any income received while the security was held.

An agent is discussing a guaranteed security with a customer. That means A) there is absolutely no way the customer can lose money. B) a profit on the security is guaranteed by a third party other than the issuer. C) the broker-dealer will make up any loss suffered by the client. D) the security has a guarantee from a third party other than the issuer covering the payment of principal and interest or dividends.

D

Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, it is permissible for an agent to do all of the following except A) solicit transactions in unregistered exempt securities. B) explain that the firm charges higher commissions because of a larger array of services the agent's firm offers. C) split commissions with another agent at an affiliated broker-dealer. D) open a joint account with a customer with written consent solely of the employing broker-dealer.

D Written consent from the client and the broker-dealer are required to open a joint account

Under the Uniform Securities Act, an agent may tell a customer that the registration of a particular security indicates approval by the Administrator A) as long as the issuer is solvent. B) as long as the Administrator has, in fact, approved the security. C) as long as the security has been registered by qualification. D) under no circumstances.

D unlawful to state or imply that registration indicates approval or qualification of a security or a person or that information has been verified as true/accurate by the Administrator.

Each of the following statements about post-registration provisions is true except A) a registered investment adviser may be required to file advertisements. B) a correcting amendment to the Form ADV must be filed with the Administrator if any information filed becomes inaccurate or incomplete. C) investment advisers must comply with recordkeeping rules. D) the securities Administrator does not have the authority to conduct an onsite examination of an investment adviser registered in his state if the adviser does not have an office in that state.

D Administrators have authority to conduct an onside examination of a registered investment adviser, even if there is no place of business maintained in the Adminstrator's state.

Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, it is prohibited for an agent to A) recommend that a client add a few more dollars to a purchase to reach a breakpoint. B) disclose nonmaterial information relating to a security being recommended. C) explain that a mutual fund with a CDSC cannot be referred to as no load. D) fail to disclose that the broker-dealer has a position in the securities being recommended.

D disclosure of any potential conflict of interest MUST ALWAYS BE MADE.

An investment adviser is registered in New Jersey and has offices in Georgia, and Arkansas. One of their IARs lives in Georgia, and in addition to his local clients, he has one client who lives in Arkansas. The IAR would be required to register in A) Georgia and New Jersey. B) Georgia and Arkansas. C) Georgia, Arkansas and New Jersey. D) Georgia.

D - Georgia IAR only register if have client.

An agent meets with a semiretired, 75-year-old customer with $100,000 to invest for income. The agent recommends an XYZ Corporation bond with a AAA rating and discusses the various features and benefits with the client. Interest rates have been declining and are expected to continue downward. While the customer is away, the agent decides it will be in his customer's best interest to lock in the current rates and buys 100 bonds for the client. This action A) is allowable because the customer may reverse the transaction within a five-day free-look window. B) is allowable if it is approved in writing by the agent's sales supervisor. C) is allowable because it is in the customer's interest to lock in the current high fixed rate. D) violates securities industry rules prohibiting unauthorized transactions.

D - In the absence of written discretionary authority, purchasing securities for a customer without specific instructions is a prohibited practice.

Under the Uniform Securities Act, all of the following are exempt transactions except A) isolated nonissuer transactions. B) a transaction executed by a trustee in bankruptcy. C) unsolicited customer orders. D) a sale of a primary offering registered with the SEC.

D - a sale of a primary offering registered with the SEC In almost every instance, an issuer transaction—that is, one for the benefit of the issuer—will not be considered an exempt transaction. Exempt transactions include isolated nonissuer transactions; transactions between an issuer and an underwriter; transactions by an executor, administrator, sheriff, marshal, trustee in bankruptcy, guardian, or conservator; any sale or offer to a bank, savings institution, investment company, or other financial institution; and private placements.

NASAA has created a template for registered broker-dealers to disclose their fee schedules to existing and prospective customers. Which of the following charges would be disclosed? A) Advisory fees if the broker-dealer is also an investment adviser B) The commission schedule C) The way the firm charges markups and markdowns D) Account maintenance fees

D - account maintenance fees Account maintenance fees are one of the many charges disclosed by broker-dealers. The other three charges are not part of the fee disclosure document and are disclosed elsewhere.

Each of the following statements about post-registration provisions is true except A) a registered investment adviser may be required to file advertisements. B) a correcting amendment to the Form ADV must be filed with the Administrator if any information filed becomes inaccurate or incomplete. C) investment advisers must comply with recordkeeping rules. D) the securities Administrator does not have the authority to conduct an onsite examination of an investment adviser registered in his state if the adviser does not have an office in that state.

D - admin do not have authority to conduct an onsite examination in a state that they are not registered. THIS IS FALSE. Administrators have the authority to conduct an onsite examination of a registered investment adviser, even if there is no place of business maintained in the Administrator's state.

James Douglas, an agent with Government Securities Specialists (GSS), a broker-dealer registered in this state, sells his client 10 U.S. government bonds due to mature in 30 years. According to NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following statements may Douglas legally make? A) "The full faith and credit backing of the U.S. government means virtually no chance of loss." B) "The U.S. government guarantees that principal and interest payments will keep pace with inflation." C) "There is no way to lose money on the safest security on earth." D) "The bonds are guaranteed as to principal and interest payments by the U.S. government." .

D - bonds are guaranteed as to principal and interest payments by the US gov't

In response to an evolving marketplace, the SEC, through Release IA-1092, expanded the coverage of the definition of investment adviser to include A) life insurance agents and pension consultants. B) broker-dealers offering wrap fee programs and financial planners. C) broker-dealers offering wrap fee programs and life insurance agents. D) financial planners and pension consultants.

D - financial planners and pension consultants SEC Release IA-1092 added financial planners, pension consultants, and sports and entertainment representatives to the list of potential IAs. Unless the life insurance agent is offering investment advice, the agent does not meet the definition of investment adviser. The release did not address wrap fee programs because the exclusion for broker-dealers is part of the Investment Advisers Act of 1940; once special compensation in the form of wrap fees is received, the exclusion is lost.

An applicant for registration as an investment adviser discloses on its application to the Administrator that it plans to use palm readers to help determine which investments are most suitable for their clients. Under the Uniform Securities Act, the Administrator A) will probably turn to the SEC for guidance. B) will request that the applicant furnish past performance records to determine whether this method of investment analysis has merit. C) is empowered to deny this application for just cause. D) may only justify denial for reasons listed in the Uniform Securities Act.

D - may only justify denial for reasons listed in the Uniform Securities Act A denial of registration must be based on the concept of law. There are stated reasons for denial, such as felony convictions, outstanding injunctions, and insolvency. Where in the USA does it say an adviser can't use palm readers, a Ouija board, or a Magic 8 Ball? Although disclosure of methods of analysis is required, the Administrator is not empowered to pass judgment on the merits of those methods. The USA does state that the Administrator is empowered to "condition a particular applicant's registration as a broker-dealer upon his not transacting business as an investment adviser if the Administrator finds that he is not qualified as an investment adviser." But nowhere in this question does it indicate that the applicant is, or is applying for, registration as a broker-dealer.

First Securities Advisers, Inc., a subsidiary of First Securities Broker-Dealers, Inc., requires customers to have a minimum of $250,000 under management and charges them 1% in advisory fees based on the amount of assets in their accounts. Clients also pay commissions for securities transactions in their accounts at First Securities Broker-Dealers, Inc. First Securities Advisers, Inc., has A) violated the prohibition against charging performance fees. B) violated the Uniform Securities Act by charging commissions in addition to advisory fees. C) violated the Uniform Securities Act by charging excessive advisory fees. D) not violated the prohibition against performance fees.

D - not violated against performance fees Because it did not base its fees on a share of capital gains or losses in their clients' accounts. The client would have to pay commissions wherever the transactions were executed. (not revelant)

SEC Regulation S-ID describes a broker-dealer's or investment adviser's duties regarding the detection, prevention, and mitigation of identity theft. The rule applies to an investment adviser when it A) receives soft dollar compensation as described in Section 28(e) of the Securities Exchange Act of 1934. B) receives performance-based compensation. C) has the ability to direct execution of advisory client transactions to favored broker-dealers. D) is permitted to direct transfers or payments from accounts belonging to individuals to third parties upon the individuals' instructions.

D - permitted direct transfers or payments from accounts belonging to individuals to 3rd parties upon the individuals' instructions Investment advisers who have the ability to direct transfers or payments from accounts belonging to individuals to third parties upon the individuals' instructions, or who act as agents on behalf of the individuals, are susceptible to the same types of risks of fraud as other financial institutions. Therefore, compliance with Regulation S-ID is required.

While making a sales presentation of a mutual fund, the registered agent states to a customer that reinvesting the dividends will ensure selling shares at a profit. Making such a statement is A) allowed if the agent explains to the customer that reinvested dividends are still subject to federal income tax. B) allowed if the agent does not put the statement in writing. C) allowed if the agent does not use the word guarantee in the presentation. D) prohibited and may result in proceedings against the agent.

D - prohibited regardless.

An individual is currently registered as an agent with a broker-dealer. If the agent would like to offer wrap fee programs through the firm, all of the following statements are correct except A) the agent would be defined as an investment adviser representative. B) the broker-dealer would have to be registered as an investment adviser. C) the agent would now come under a greater fiduciary responsibility. D) the agent would be defined as an investment adviser.

D - the agent would be defined as an investment adviser If BD/agent offers wrap-fee programs, then they have to register as an IA. The agent would now become an IAR and carry the additional fiduciary responsibility incurred in the advisory business.

For larger accounts, a broker-dealer is least likely to waive its normal fee for A) safekeeping of funds or securities in the account. B) wiring funds to the client's bank. C) the annual account maintenance charge. D) transferring the account to another broker-dealer.

D - transferring the account to another broker-dealer Although there is no official standard, larger accounts tend to have many of the smaller fees waived. However, if the client is moving the account to another firm, it is likely that the transfer fee will be charged.

An agent is using social media to try to build her business. If her Facebook page allows for followers to "like" her, that would be considered A) static content. B) illegal content. C) misleading content. D) interactive content.

Interactive Difference between static and interactive -> the ability for persons other than the originator of the content to have access

Which of the following actions by an investment adviser representative would be an unethical practice under the Uniform Securities Act? A) Not entering a sell order for a security when its price is falling and the representative has discretionary authority B) Splitting commissions with a sales assistant who is registered and works for the same firm C) Failing to tell a customer that the recommended investment will be sold from the inventory of the investment adviser representative's firm D) Recommending securities that result in major losses in the customer's account

disclosure - major for Uniform Securities Act C

According to NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Brokers-Dealers and Agents, all of the following practices are considered unethical for an agent except A) determining the quantity of a specific security to purchase once the client has designated that security and the action to be taken. B) receiving written discretionary authority from a client within 10 business days of first executing a discretionary trade with oral authority from the client. C) selling 3,000 shares of ABC as directed by a client, at a price that the agent determines, without oral or written discretionary authority. D) selling 3,000 shares of ABC at a price the agent determines is the best the client can get, without oral or written discretionary authority.

selling 3,000 shares of ABC as directed by a client, at a price that the agent determines, without oral or written discretionary authority When a securities professional selects the time or price to execute an order received from a customer, it is not the exercise of discretion. Therefore, it is not unethical for an agent to choose the time or price of a trade, as long as the client has determined the asset, the action, and the amount. Discretionary authority must be received by agents in writing prior to any discretionary trading taking place in the account. It is investment advisers who may act with oral discretion for a limited time.