Series 63

Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following activities (if performed by an agent) are considered dishonest or unethical? I. Executing a transaction in a margin account without securing an executed written margin agreement from the customer promptly after the initial transaction in the account II. Executing a transaction either with or for a customer at a price not reasonably related to the current market price III. Guaranteeing a customer against loss on securities purchased IV. Personally providing safekeeping and custodial services for clients' cash and securities

I, II, III, and IV

Which of the following are obligated to observe the prudent investor rule? I. A trustee II. An executor III. A custodian IV. A federal covered investment adviser

I, II, III, and IV

Which of the following are unethical business practices of investment advisers? I. Charging a client an unreasonable advisory fee II. Guaranteeing a client that a specific result will be achieved as a result of advice that will be rendered III. Recommending an investment to a client without reasonable grounds to believe the investment is suitable for that client IV. Continuing to exercise discretionary investment authority under an oral agreement with the client

I, II, III, and IV

Which of the following transactions would be included in the Uniform Securities Act's definition of exempt transaction? I. A loan officer at a bank liquidates stock pledged as collateral for a loan that has gone into default ii. A transaction pursuant to an offer to purchase a new stock made to 5 individuals and 15 institutional iii. investors in this state during the past 12 months An isolated nonissuer transaction IV. The sale of preorganization certificates to 10 individuals with no commission being paid

I, II, III, and IV

Which of the following are primary transactions? I. John inherited securities of the XYZ Corporation from his father who, as a founder of the company, received the shares directly from the company as a result of stock options. II. John sold the securities he had inherited from his father to his neighbor Peter at the market price without charging a commission. III. John's father, a founder of XYZ corporation, purchased shares of XYZ directly from the corporation subsequent to its founding without paying a commission. IV. John purchased shares in XYZ Corporation in a third market transaction.

I, II, III, and IV A primary transaction occurs when the issuer of the securities receives the proceeds of the sale. John's father, although a founder of the company, purchased shares directly from the company. This transaction is a primary transaction because the firm received the funds from the sale of the shares. In all the other instances, the firm, the original issuer of the securities, did not receive the proceeds of the transaction. These transactions are called nonissuer transactions.

An Administrator may summarily suspend a registration pending final determination of proceedings under the Uniform Securities Act. However, the Administrator may not enter a final order without I. appropriate prior notice to the registrant. II. an opportunity for a hearing. III. findings of fact and conclusions of law. IV. prior written acknowledgment of the registrant.

I, II, and III

Which of the following meets the definition of churning? I. Encouraging customers to make frequent changes in their holdings in an effort to maximize commissions II. Excessive activity in a customer's discretionary account III. Transactions that are excessively large considering the customer's financial situation

I, II, and III

Which of the following statements concerning an agency cross transaction for an advisory client are true? I. It is a transaction in which a person acts as an investment adviser in relation to a transaction in which the adviser or related person acts as a broker-dealer for both the advisory client and another person on the other side of the transaction. II. An advisory client must provide prior written consent for the adviser to be able to engage in agency cross transactions. III. An adviser must make prior written disclosure to the advisory client that it will act as broker-dealer for, have a potential conflict of interest with, and may collect commissions from both parties. IV. An adviser may recommend the transaction to both parties to the transaction.

I, II, and III

Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, requirements of advisory contracts include which of the following? I. They must be renewed on an annual basis. II. They must describe the amount of any prepaid fees that will be returned to the client in the event the contract is terminated. II. They must prohibit the use of discretion without the client's authorization.

II and III

A security has been registered under qualification. Which of the following statements are correct? I. The registration is valid for one year from the effective date. II. The registration is valid for one year from the effective date, unless the underwriter or issuer still has some unsold shares. III. The registration is valid until the next December 31. IV. The registration statement may be amended to increase the number of shares in the offering as long as the public offering price and the underwriter's compensation are not changed.

II and IV

Differences between static and interactive content on social media include which of these? I. Only static content can be reused by others. II. Only static content needs pre-approval. III. Only static content can be changed by the person who originated it. IV. Only interactive content can be commented on by others.

II and IV

Which of the following pairs are correctly matched? I. Broker = dealer II. Broker = agency III. Dealer = agency IIIDealer = principal

II and IV

As defined in the Uniform Securities Act, which of the following is not a security?

Participating whole life insurance that pays annual dividends

Peterson Financial Planning is a small personal financial planning partnership in Missouri that has $10 million in assets under management. As a result of the Dodd-Frank Act, which of the following statements best describes the registration requirement for Peterson Financial Planning?

Peterson Financial Planning is required to register as an adviser with the Administrator of the Missouri Department of Securities.

Under the Uniform Securities Act, which of the following is true regarding the registration of securities?

State registration by coordination is only available if a federal registration statement has been filed under the Securities Act of 1933 in connection with the same offering.

Under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, in which of the following circumstances may an investment adviser representative share in profits and losses in a customer's account?

Such sharing is never permissible under the policy.

Which of the following statements regarding registration provisions is not true?

The Administrator may not, as a condition of registration by qualification or coordination, require that the security be deposited in escrow and the proceeds be impounded until the issuer receives a specified amount.

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?

The Second National Bank of Springfield

Where would a prospective customer find disclosure of a broker-dealer's account maintenance fees?

The broker-dealer's fee disclosure document

Under the Uniform Securities Act, which of the following is not a requirement for a preorganization subscription to be an exempt transaction?

The offer of the security may not be advertised.

Transactions meeting certain conditions are exempt from the Uniform Securities Act's registration and advertising filing requirements. Which of the following transactions does not meet those conditions to qualify as an exempt transaction?

The sale of U.S. government securities to a wealthy client's IRA by a registered broker-dealer

Pelf Securities and Investments, Inc., (PSII) has been in business as a registered broker-dealer in State Z since 1932. During that time, control of the company was in the hands of the descendants of the founder. With no one in the current generation interested in continuing the firm's legacy, the board of directors votes to withdraw PSII's registration. Which of the following statements is true?

The withdrawal from registration will normally take place on the 30th day after filing.

Which of the following would be included in the Uniform Securities Act's definition of a sale?

Transfers for value of shares to a nontaxable organization

Under the Uniform Securities Act, which of the following is considered a broker-dealer in a state?

XYZ broker-dealer with an office in the state whose only clients are insurance companies

Under the Uniform Securities Act, each of the following is an exempt transaction except

a Canadian government bond maturing in 10 years.

Walt and Bryan are old friends who are agents with different broker-dealers. Bryan attends one of Walt's investment seminars and, at a prearranged point in the presentation, stands up and exclaims that his rich brother-in-law wisely purchased the same investment. This action is

a deliberate attempt to mislead and deceive investors.

Mammoth Corporation owns a controlling interest in five different corporations in diversified industries. Mammoth is most likely

a holding company.

Under the Uniform Securities Act, the term broker-dealer would include

a person with no office in the state who sells variable life insurance policies to no more than five retail investors residing in the state during any 12-month period.

Under the Uniform Securities Act, a sale includes all of the following except

a pledge of securities for the purpose of obtaining a margin loan.

An investment adviser wishes to advertise a proprietary charting system used to time the market. To be in compliance with the Uniform Securities Act,

a statement reflecting the limitations and difficulties of using the system must be included in the ad.

The only financial requirement that the Administrator may place upon a person applying for registration as an agent is

a surety bond if the agent will be exercising discretion over customer accounts.

A customer of a broker-dealer viewing a trade confirmation notices that there was a commission subtracted from the proceeds of the sale of her stock. This tells the customer that the broker-dealer

acted in an agency capacity.

Under the Uniform Securities Act, all of the following are excluded from the definition of an investment adviser except

an individual providing advice on municipal bonds.

In the Howey decision, the U.S. Supreme Court held that a security must represent

an investment of money in a common enterprise with the expectation of profit from the managerial efforts of others.

The Uniform Securities Act provides several exclusions from the definition of broker-dealer. Those include all of the following except

any person engaged in the business of effecting transactions in securities for the accounts of others or for his own account.

As found in the Uniform Securities Act, the term issuer means

any person who issues or proposes to issue any security.

An agent receives inside information concerning an impending merger. Under the Uniform Securities Act, the agent may divulge the information to

anyone after public notice.

Under the National Securities Markets Improvement Act of 1996 (NSMIA), investment companies registered under the Investment Company Act of 1940 are required to register

as securities at the federal level only.

Under industry rules, customers who wish to trade options must receive a copy of the options disclosure document (ODD)

at or before account approval.

If a customer is upset with her agent and sends him a letter of complaint, under the Uniform Securities Act, the agent should

bring the customer complaint to a supervisory person immediately.

On determining that a registrant or applicant for registration is no longer in existence or has ceased doing business as either an agent or a broker-dealer, the Administrator may

cancel the registration or application.

In general, the Administrator would require that a broker-dealer's social media policies be

committed to writing and communicated firmwide.

Any individual who represents an issuer in effecting transactions between the underwriter and the issuer

does not meet the definition of agent as promulgated under the Uniform Securities Act.

Main Street Investors (MSI) is a broker-dealer registered in State T. It has no offices in State O, although it does do business in that state. Under the Uniform Securities Act, registration in State O is required if the client is

employed by an insurance company.

A broker-dealer registered in State A has several clients in State Z. If the firm does not have a place of business in State Z, the firm would avoid the need to register in State Z if its only clients in the state are

employee benefit plans with assets of at least $1 million.

As a general matter, the regulators do not treat posts by customers or other third parties as the firm's communication with the public. Under certain circumstances, however, third-party posts may become attributable to the firm. Whether third-party content is attributable to a firm depends on whether the firm has (1) involved itself in the preparation of the content or (2) explicitly or implicitly endorsed or approved the content. Where the firm has involved itself in the preparation of the content, it is known as

entanglement

Unless renewed, registrations of associated persons of a broker-dealer under the Uniform Securities Act

expire every December 31.

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

his clients, none of whom are residents of New York, receive investment advice as an integral part of his legal services.

Content published on social media that allows for others to comment, reuse, or "like" is considered to be

interactive content.

If, in the opinion of the Administrator, an agent is about to engage in a prohibited activity, the Administrator may

issue a cease and desist order.

All of the following are correct statements when referring to a nonissuer transaction except

it must take place in the over-the-counter market rather than on the floor of an organized stock exchange.

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

may only justify denial for reasons listed in the Uniform Securities Act.

If a nonexempt company has authorized a stock split that will give each shareholder two shares for every one share owned without charge, this transaction

need not be registered because it is an exempt transaction.

An investment adviser need not register in a state if it has

no place of business in the state and only advises three insurance companies located in the state.

An open-end investment company registered under the Investment Company Act of 1940 would most likely use the process known as

notice filing.

The state Administrator may, by rule or order, require issuers of federal covered securities to file records with the state that are part of a registration statement filed with the SEC. This procedure is called

notice filing.

The NASAA Model Rule on investment adviser brochures contains one condition where verification of receipt of a readable copy of the brochure and supplements by the customer is required. That is the case

of an initial delivery to a potential client in electronic form.

Your friend is a licensed life insurance agent whose client wants to purchase a variable annuity. You are a licensed securities and insurance agent, and your friend wants you to sell the policy and split commissions with him. Splitting commissions

on variable annuity sales is allowable only if the agents involved are both licensed in life insurance and maintain their securities licenses at the same or affiliated broker-dealers.

Maplewood Money Managers (MMM), an investment adviser with over $250 million in assets under management, directed a substantial portion of their clients' securities transactions to Columbia Securities Incorporated (CSI), a registered broker-dealer. If, in response to the business generated by those transactions, CSI provided software that enabled MMM's investment adviser representatives to generate comprehensive portfolio reports for their client accounts, this would be

permitted as soft dollar compensation under Section 28(e) of the Securities Exchange Act of 1934.

Under the Uniform Securities Act, broker-dealers may not be required by the Administrator to

post a surety bond if they do not have investment discretion over client accounts or do not maintain custody of customer funds and/or securities.

Alice Worthington is a registered agent with a broker-dealer. She is highly successful at bringing new clients to the firm. Although some of her techniques tend to be in conflict with the firm's compliance policies, the revenue generated by these new clients is considered to be worth taking the risk. One of Worthington's customers complains to the Administrator that she believes trades have been made without her authorization and conversion of the proceeds has taken place. After an investigation, Worthington is found guilty and her registration is revoked. This would most likely

result in a disciplinary action against the broker-dealer for failure to supervise Worthington.

LinkedIn is a popular social media tool for business people. The nature of the information posted poses risks for investment advisers because of the specific requirements for testimonials. A step that advisers should consider taking to minimize the risk of an improper endorsement appearing on their page is to

select "No" for the "I want to be endorsed" feature under the "Skills and Expertise" section on their LinkedIn profile.

According to NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, all of the following practices are considered unethical for an agent except

selling 3,000 shares of ABC as directed by a client, at a price that the agent determines, without oral or written discretionary authority.

The SEC rule designed to safeguard customer securities and funds held by a broker-dealer and to prevent investor loss or harm in the event of a broker-dealer's failure is

the Customer Protection Rule.

Because, under the Uniform Securities Act, many different securities qualify for an exemption from registration, proof of qualification for an exemption is the responsibility of

the person requesting the exemption.

Magnum Manufacturing Company (MMC) wishes to raise capital through a public offering of its common stock. When filing the required paperwork with the Administrator, MMC is legally referred to as

the registrant.

According to the NASAA investor advisory regarding fees charged by broker-dealer firms for services and maintenance of investment accounts,

the schedule should be made available on the broker-dealer's public website without requiring any login or password.

The issuance of a stop order by a state securities Administrator requires

the subject of the stop order to be given an opportunity for a hearing.

All of the following must be specified in a security's state registration statement except

the total amount of the security that will be offered in other states.

Under the Uniform Securities Act, all of the following statements are true regarding private placements except

they are offered to no more than 10 persons in a state in a 12-month period.

A Canadian broker-dealer is registered in the province of Alberta. The firm has clients who vacation in Arizona, New Mexico, and Texas, and they would like to continue to do business with them while on their holidays. Under the Uniform Securities Act,

this is permissible if the broker-dealer is properly registered in Alberta, deals only with existing clients, and registers in each of the states where the clients are vacationing.

If an agent chooses to appeal an Administrator's order, the agent must file for review of the order with the appropriate court

within 60 days of order entry.

Delivery of the brochure and related brochure supplements required by subsections of the NASAA Model Rule on investment adviser brochures need not be made to clients who receive only impersonal advice and who pay less than

$500 per year in fees.

If the Administrator has summarily suspended an investment adviser representative's registration, the registrant may request a hearing by written request and the hearing will be granted within

15 days.

Under the SEC Release IA-1092, who of the following would be considered to be in the business of rendering investment advice?

A financial planner who charges no fee for developing a financial plan but takes commissions on recommended trades

Which of the following persons does not meet the definition of providing investment advice as a business outlined in SEC Release IA-1092?

A management consultant whose only investment advice is suggesting to a couple of small business clients who had invested their surpluses in speculative securities that they should find something less risky

Which of the following regarding the registration of investment advisers and their representatives is true?

ABC Advisers, Inc., registered with the Administrator, employs an investment adviser representative who left the employment of another investment advisory firm six months ago. ABC must notify the Administrator of this association promptly.

Under the Uniform Securities Act, which of the following concerning the withdrawal of an agent's registration is not true?

Absent any disciplinary proceedings, withdrawal is effective 60 days after application.

Which of the following choices best represents the definition of agent as stated in the Uniform Securities Act of 1956?

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.

Which of the following statements is true?

An Administrator can summarily suspend a pending registration.

Which of the following is a prohibited practice under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents?

An agent sharing in a ​​customer account with the oral authorization of both the client and the broker-dealer where the account is maintained

Which of the following securities is most likely to register by qualification in the state of Virginia?

An offering of common stock by a Virginia-based corporation to Virginia residents only

Under the Uniform Securities Act, who automatically becomes registered as an agent when a broker-dealer's registration becomes effective?

Certain partners, officers, or directors of the firm

Under the Uniform Securities Act, which of the following is considered churning?

Excessive activity in a customer's account

Which of the following persons meets the Uniform Securities Act's definition of an agent?

Henri, who has been hired by the local public utility to solicit purchases of the company's bonds from existing customers

According to the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following conditions must be met for an agent to share in the profits or losses of the customer's account? I. The agent has the employer's written authorization. II. The agent has the customer's written authorization. III. The agent has a capital stake invested in the account. IV. The percentage of the profits or losses shared is proportionate to the agent's personal investment in the account.

I and II

For purposes of transactional exemptions, which of the following qualify under the Uniform Securities Act? I. Executor of an estate II. Administrator of a trust III. Custodian for a minor in an UGMA Agent with authority over time and price of execution

I and II

Which of the following are not agents as defined in the Uniform Securities Act? I. A broker-dealer acting on behalf of a properly registered issuer II. An individual representing the U.S. government in the sale of its securities III. An individual who, acting on behalf of a broker-dealer, sells any exempt security or engages in an exempt transaction An individual who represents an issuer selling a nonexempt security in a nonexempt transaction

I and II

As defined in the Uniform Securities Act, an agent is I. an individual who represents an issuer of nonexempt securities in nonexempt transactions. II. a registered broker-dealer that deals in registered securities. III. an individual who sells nonexempt securities as a representative of a registered broker-dealer. IV. 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.

I and III

Typical broker-dealer fees that must be disclosed as part of a fee disclosure document would include I. a charge when a client requests proceeds of a sale be wired to her bank account. II. a commission charge when a client sells an exchange-listed security. III. the fee charged by the firm when customers transfer their accounts to another broker-dealer. IV. fees for providing advisory services when acting in the capacity of an investment adviser.

I and III

Typical broker-dealer fees that must be disclosed as part of a fee disclosure document would include I. a charge when a client requests that a stock certificate be issued in his name. II. a commission charge when a client buys a security on a listed exchange. III. the interest charged by the firm on money owed by customers in their margin accounts. IV. fees for providing advisory services to high-net-worth individuals.

I and III

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? I. An adviser deposits client funds into its own bank account, making a careful record of the amount of funds belonging to each client. II. An adviser allows a CPA to conduct an unscheduled audit of all client securities and funds in the adviser's custody. III. Once a year, an adviser sends each client a report on the securities and funds in the adviser's custody.

I and III

Under the Uniform Securities Act, which of the following are defined as sales? I. A gift of an assessable stock II. A gift of a nonassessable stock III. A security given as a bonus for purchasing a bond IV. An offer of securities

I and III

Which of the following statements describe the powers of the Administrator over the issuance of orders? I.A final order may be appealed in the appropriate court within 60 days of the order being issued. II. Appeal of a final order will act as a stay of the order, unless a court of competent jurisdiction rules to the contrary. III. No final order may be issued without the opportunity for a hearing. IV. Final orders must receive approval from the state legislature.

I and III

Your manager is reviewing the activity in your customer accounts to detect trading irregularities. Among the factors the manager will look for to determine if churning is occurring are I. the financial resources of the account. II. the number of winning trades versus losing trades. III. the objectives of the account. IV. the marital status of the customer.

I and III

According to the Uniform Securities Act, a person must register as a broker-dealer in a state if he had which of the following? I. No place of business in the state, but clients who relocated their official residence to that state more than 30 days ago II. No place of business in the state but dealt exclusively with broker-dealers in that state III. No place of business in the state but effected transactions exclusively with issuers of securities in that state IV. A place of business in the state

I and IV

Which of the following statements regarding agent registration under the Uniform Securities Act are true? I. In the absence of any action by the Administrator, the effective date of a registration is noon of the 30th day after the filing of a completed application. II. The Administrator may initiate a disciplinary action within two years of an agent's withdrawal of registration. III. The Administrator may request the agent furnish a statement of assets and liabilities. IV. If, before the effective date of the registration, the Administrator requires amendments to the application, the registration will be considered to have first been filed upon filing of those amendments.

I and IV