series 63

when sharing in the profits of a customers account, whise approval is required? A.) the clients B.) the SEC's C.) the administrator's D.) this practice is prohibited and unethical

A.) The client and the broker-dealer carrying the account are required to approve any account in which both the agent and the customer share in the profits and losses. The sharing must be proportionate to the capital at risk. Of the choices given, the client's approval is the only correct choice.

A broker-dealer's registration may be revoked or suspended if the Administrator determines that this action is in the public interest and the: A.) Broker-dealer violated federal commodities laws within the past 10 years B.) Broker-dealer's controlling partner has declared personal bankruptcy C.) Broker-dealer withdrew its registration in another state D.) Broker-dealer has engaged in ethical business practices

A.) Broker-dealer violated federal commodities laws within the past 10 years The Administrator may cancel, revoke, or suspend a broker-dealer's registration if the Administrator determines that this action is in the public interest and the firm has violated the provisions of the Commodity Exchange Act. The insolvency (personal bankruptcy) of one of the broker-dealer's partners, officers, directors, or controlling persons may not be used as a basis for revoking or suspending a broker-dealer's registration. Withdrawal from registration as a broker-dealer is a voluntary procedure and does not imply wrongdoing by the registrant.

Which of the following terms is not pertinent when determining whether a firm meets the investment adviser definition? A.) Commission B.) Compensation C.) Business D.) Advice

A.) Commission To meet the definition of an investment adviser, a firm must be providing advice as a regular part of its business, and receive specific compensation. Commission is a normal charge for a broker in transactions, not for an investment adviser.

Which of the following items must be disclosed on a customer confirmation, but not on an order ticket? A.) Customer name B.) Customer account number C.) Solicited or unsolicited D.) Amount of the transaction

A.) Customer name Agents are allowed to bunch orders—combine several customer orders for the same security; therefore, each separate customer name is not required to appear on the order ticket. However, once a trade is executed, the confirmation is required to be sent to each individual customer, which would need to include the customer's name.

Which TWO of the following attestations would most likely violate the USA's antifraud rules? I. "Our representative's investment acumen has been verified by the state Administrator." II. "To stay current, each of our representatives attends at least five tax planning or investment seminars per year." III. "Each of our investment experts is Series 66-certified." IV. "Our representatives are CFP accredited." A.) I and III B.) I and IV C.) II and III D.) II and IV

A.) I and III Firms and representatives should not make any claims that exaggerate their status as it could mislead investors. State Administrators do not approve or comment on the competency or acumen of agents, IARs, broker-dealers, or investment advisers, nor on the merit of individual securities. Firms should refrain from using the term expert in public communications. Roman numerals (II) and (IV)—choice (d), do not make exaggerated or subjective claims about expertise

A broker-dealer need not obtain written discretionary authority with respect to a customer order if the client has specified: I. The price of execution II. The specific security III. The number of shares IV. Whether to buy or sell A.) II, III and IV only B.) I, II, III, and IV C.) I only D.) II and III only

A.) II, III and IV only The term discretionary authority, as part of an amendment to the Securities Exchange Act of 1934, does not include discretion as to the price or time of the transaction. Discretionary authority would be required for the broker-dealer to determine the action; whether to buy or sell, the security, and the number of shares.

A publicly traded company is due to announce its quarterly earnings. The company's CEO contacts her agent about selling shares of the company's stock. The CEO may sell her shares: A.) Only after the company publicly announces its earnings B.) Only if the Administrator approves the sale C.) Under no circumstances D.) At any time

A.) Only after the company publicly announces its earnings The CEO will need to wait until after the company has publicly announced its earnings and the information has been disseminated to investors. Otherwise, she risks being charged with insider trading. Insider trading is selling or buying securities based on nonpublic, material information in violation of a fiduciary duty or relationship. The CEO has a duty to the company's shareholders. Earnings are material information, which the CEO is likely to be privy to before it is announced to the public. Once the company publicly announces its earnings, and the market has had some time to absorb the information, the CEO may sell her shares. Note that many companies have internal policies forbidding their executives from trading in their company's shares for period beginning a month or so before earnings are announced and ending a few days after the information is released.

The Uniform Securities Act prohibits which of the following? A.) Soliciting orders for unregistered nonexempt securities B.) Maintaining discretionary accounts C.) Charging extraordinary commissions on certain transactions D.) All of the above

A.) Soliciting orders for unregistered nonexempt securities Soliciting orders for unregistered nonexempt securities is prohibited by the Act. The Act allows discretionary accounts and charging for services provided by broker-dealers and their agents.

Under the Investment Advisers Act, all the following statements are TRUE regarding investment adviser solicitors, EXCEPT: A.) Solicitors for federal covered advisers are required to register B.) Solicitors may not function as solicitors if they are under suspension C.) Fees paid to the solicitor that increases the clients' cost must be disclosed D.) Disclosure is required for officers and directors of the adviser acting as solicitors

A.) Solicitors for federal covered advisers are required to register Investment advisers are allowed to hire solicitors and pay them a fee in order to obtain new clients. Under the Investment Advisers Act, the adviser hiring the solicitor must be registered but not the solicitor. The solicitor must not be subject to outstanding SEC orders suspending or barring the solicitor's activities. The adviser must disclose the nature of the relationship between the adviser and the solicitor and any additional compensation paid because of this relationship. If officers, directors, or employees of the adviser are acting as solicitors, this must also be disclosed.

An investment adviser representative advises a client in a low income tax bracket to purchase municipal securities. Which of the following statements best describes this action? A.) The advice by the representative is unethical B.) Advice concerning tax-free securities is excluded from the provisions of the Investment Advisers Act of 1940 C.) The action constitutes fraud D.) The Administrator has no jurisdiction over municipal securities unless the securities are out-of-state bonds

A.) The advice by the representative is unethical The action taken by the representative is unethical rather than fraudulent. Municipal securities provide federally exempt interest income. This is advantageous to individuals in higher tax brackets. Recommending the security to an individual in a lower tax bracket is not suitable. There is no indication that an intent to deceive the client was employed, therefore, an assertion of fraud is inappropriate.

An investment adviser may NOT receive which of the following forms of compensation for directing prokerage commissions? A.) The travel cost of flying to London to attend an economics conference B.) The cost of conducting research used in the development of investment models C.) A fee paid to cover the costs of a seminar on convertible bonds D.) the cost of computer software used for evaluating a clients portfolio

A.) The travel cost of flying to London to attend an economics conference an adviser is permitted to use a broker-dealer to execute transactions in exchange for certain services. The term is referred to as soft-dollars and it is defined as a means of paying brokerage firms for their services through trade commissions. The key here is that the services that the adviser receives as part of a soft-dollar arrangement must benefit its clients. some examples of allowable services would include traditional and third-party research reports and other related publications, discussions with research analysts concerning the securities they cover, portfolio analysis software, attendance at a conference of seminar where corporate executives discuss their company's performance, markey and economic data services, and certain trading software. The permissible uses of soft-dollars do not include compliance or administrative assistance, advertising and marketing, the adviser's travel expenses, meals or entertainment, overhead and administrative expenses, employee salaries, marketing, professional licensing fees, computer terminals, and the correction of trading errors.

An unregistered agent who is an employee of a licensed broker-dealer is allowed to sell exempt securities to the public: A.) Under no circumstances B.) If it is an exempt transaction C.) Because the security is exempt D.) If the employee is not paid a salary or commission

A.) Under no circumstances An individual who sells securities (whether or not the securities are exempt) must be registered as an agent in order to sell such securities to the public for a licensed broker-dealer.

Under the Uniform Securities Act, what is the statute of limitations on taking action to recover damages on transactions made in violation of a state registration provision? A.) Within two years of occurrence or discovery, whichever occurs last B.) Within three years of occurrence or two years of discovery, whichever comes first C.) Within two years of occurrence D.) within two yeas of discovery

B.) If an agent unknowingly (without fraud) sells a security in violation of a state registration provision, her customer must take action for recovery within three years of the occurrence of the violation, or within two years of discovery of the violation, whichever comes first.

Selling away is allowed if an agent completes which of the following steps? I. Provides oral or written notification to her supervisor II. Provides written notification to her firm III. Receives her firm's written permission IV. Notifies the state securities Administrator or the SEC A.) I B.) II and III C.) I and III D.) I III and IV

B.) A registered representative who wants to sell securities outside of her normal course of employment must first notify her firm in writing about the proposed transactions and must receive her firm's written permission. The notice must describe the proposed private securities transactions in detail. If the firm approves the representative's activities, then it is responsible for supervising the transactions and must record them in its books and records.

Under the Uniform Securities Act, which of the following transactions is considered a sale? A.) an exchange of securities due to a merger B.) a gift of assessable stock C.) a dividend D.) the lending of stock to short-sellers

B.) Gifts of securities are generally not considered sales. However, since assessable stock may require the person who receives the gift to provide additional money or capital, any gift of such stock is considered a sale. Loans and pledges of securities, as well as stock dividends, don't constitute a sale if no other asset of value is given by the shareholder for the dividend.

A married couple would like to invest and begin saving for their 8-year-old son's college education. Which of the following options would be the most suitable investment recommendation? A.) coverdell ESA B.) 529 Plan C.) diversified stock portfolio D.) diversified bond portfolio

B.) The most suitable recommendation for a couple saving for a child's college education would be a college savings plan. The best answer would be a 529 plan since investors may save substantially more money each year than with a Coverdell ESA.

Which of the following persons would be considered an agent according to the Uniform Securities Act? A.) A state official selling investment-grade G.O. bonds to qualified pension plan buyers B.) A CEO selling shares of his company through an IPO to family and friends C.) A CFO structuring a PIPE offering with his company's investment banker D.) All of the above

B.) A CEO selling shares of his company through an IPO to family and friends An agent is any individual other than a broker-dealer who represents a broker-dealer or an issuer in effecting or attempting to effect securities transactions—purchases or sales of securities. A person would not meet the definition of an agent if the person represented an issuer in effecting securities transactions in certain exempt securities or through exempt transactions. Choice (a) refers to a transaction involving a municipal bond which is attempted by an employee of the municipality. This person would not need to register as an agent. In choice (c), the CFO is structuring a Private Investment in Public Equity (PIPE) with an investment banker. This is considered an institutional transaction which is also exempt. The only answer that meets the definition of an agent is choice (b).

Which of the following issuers would be most likely to use registration by qualification in order to register its securities? A.) A local or state government unit B.) A local company whose shares will be sold within the state C.) A national company with outstanding securities listed on the NYSE D.) A registered investment company

B.) A local company whose shares will be sold within the state Choice (b) describes an issuer whose shares will be sold within the confines of one state—an intrastate offering. This issuer would most likely use registration by qualification. Choice (a) describes a municipal issuer, (municipal securities are exempt from state registration). Choice (c) and (d) describe federal covered securities which are also exempt from registration at the state level.

Under the Uniform Securities Act, which of the following is NOT TRUE concerning the state registration of an agent? A.) An agent can only sell securities that have been properly registered in a state or qualify for an exemption from registration B.) An agent's registration to sell securities in a given state expires at the end of the broker-dealer's fiscal year C.) An agent can only solicit business in a state if both the agent and broker-dealer are registered in that state D.) If an agent leaves a broker-dealer to go to another broker-dealer, the agent and both broker-dealers must notify the Administrator of the change

B.) An agent's registration to sell securities in a given state expires at the end of the broker-dealer's fiscal year All agent, broker-dealer, investment adviser, and investment adviser representative licenses expire on December 31st each year and must be renewed in order to be effective. Renewal is accomplished by the payment of a filing fee.

Under the Uniform Securities Act, if an investment adviser receives an advisory fee of $1,000 six months in advance, the adviser must provide: A.) A consent to service of process B.) An audited balance sheet C.) A discretionary agreement D.) A letter of recession

B.) An audited balance sheet An investment adviser must provide an audited balance sheet to a client in two instances: (1) if the adviser has custody of client funds and securities or (2) the adviser receives prepaid fees of more than $500, six months or more in advance. Receipt of prepaid fees does not constitute custody.

A client would like her IAR to use funds in her account to pay her electric bill while she travels. Her IAR would: A.) Refuse such a request B.) Be required to obtain a full power of attorney C.) Be required to obtain a stock power D.) Be permitted to accept the conditions in any discretionary account

B.) Be required to obtain a full power of attorney In order for the IAR to have authority to withdraw funds from a client's account the client must sign a full power of attorney form, choice (b). A stock power, choice (c), is required if the client wanted to substitute the endorsement on the back of a stock certificate, and does not include the authority to withdraw funds from the account. Choice (d), a discretionary account, limits authority to trading only, therefore, funds would not be allowed to be withdrawn from the client's account, even to pay the client's electric bill.

John Donner works for B and B Financial in Summerfield, Massachusetts. John is semiretired and has a second home in southern Florida, where he spends the winter months. John has put his Florida address and phone number on his business cards along with B and B's Summerfield address, because he intends to service his Massachusetts clients while he is in Florida this winter. B and B Financial does not have an office in the state. Which of the following statements is TRUE? A.) Neither John nor B and B Financial need to be registered in Florida because they are only doing business with clients whose residence is in Massachusetts B.) Both John and B and B need to be registered in Florida because John's Florida residence is considered an office since it is listed on his business card C.) John needs to register in Florida, but not B and B Financial D.) B and B Financial needs to register in Florida, but John does not since neither he nor his clients are residents of the state

B.) Both John and B and B need to be registered in Florida because John's Florida residence is considered an office since it is listed on his business card Because John has put his Florida address and phone number on his business cards, his residence would qualify as an office in Florida. Both B and B Financial and John would be required to register in the state of Florida, even though they are only doing business with clients who are not residents of Florida.

Which of the following activities by an agent of a broker-dealer would be unethical according to the Uniform Securities Act? A.) Exercising discretion regarding price and time in a client's account after having been provided with verbal authorization B.) Executing orders to sell securities in your client's personal and joint account based on instructions from your client's spouse C.) Executing an unsolicited order to buy an issue of low-priced stock for an existing client D.) Sending a purchasing client a prospectus for a new issue when that client had not received the preliminary prospectus

B.) Executing orders to sell securities in your client's personal and joint account based on instructions from your client's spouse Unless the client's spouse has authorization to execute transactions in the account(s), executing orders on such authority is unethical. An agent may exercise discretion over price and time, based on verbal authorization. Agents may accept unsolicited orders to buy and sell securities. It is not necessary to send a client a preliminary prospectus, but it is required to send a final prospectus to a client purchasing a nonexempt security.

If an agent of a broker-dealer is granted a durable power of attorney, which of the following statements are TRUE? I. The broker-dealer is considered to have discretion over the client's account II. The broker-dealer is considered to have custody of the client assets III. The client must be an institution IV. The agent has the authority to manage the grantor's finances if that person becomes incapacitated A.) I and IV only B.) I, II, and IV only C.) II and III only D.) I, II, III, and IV

B.) I, II, and IV only The durable power of attorney gives someone else the power to manage the grantor's financial affairs if that individual becomes incapacitated. The agent of the broker-dealer may make financial decisions on behalf of the grantor (discretion) and may withdraw funds from the account for the benefit of the grantor (custody). A regular power of attorney terminates if the grantor becomes incapacitated.

An issuer may amend its registration statement after it has been declared effective in order to: A.) Decrease the offering price B.) Increase the number of shares C.) Change the commission schedule D.) The registration statement may not be amended after it has been declared effective

B.) Increase the number of shares Under the Uniform Securities Act, an issuer may amend its registration statement after it becomes effective to change the number of shares in the offering. The issuer does not need to file a new registration statement. The issuer may not amend its registration statement to change the price of the securities, choice (a), or to change the compensation that the underwriters or the selling brokers will receive, choice (c).

A broker-dealer agent enters an order ticket for a customer. The order ticket must contain all of the following information, EXCEPT the: A.) Time of entry B.) Price of the security at the time of receipt C.) Price of the security at the time of execution D.) Agent's identifying information

B.) Price of the security at the time of receipt An order ticket does not need to include the price of the security at the time the order was received. It does need the price at the time it was executed as well as the time of execution (or cancellation). The ticket should also identify the personnel (if any) responsible for the account and the specific individual who entered the order on the client's behalf.

A broker-dealer is registered in State X, but not in State Y. The firm does not have an office in State Y, but does have some institutional clients in that state. The agent who handles these accounts has developed several contacts in State Y and wants to begin soliciting retail clients in State Y. The agent consults the Compliance Department. A new employee in that department tells the agent that he may solicit retail clients in State Y since he is exempt from registration in that state. What should the agent do? A.) Begin contacting clients in State Y immediately since the agent has the approval of the broker-dealer B.) Refrain from soliciting retail clients in State Y until the agent and the broker-dealer are registered in State Y C.) Tell the registration department to begin the application process since the agent and the broker-dealer will need to register in State Y once the agent has five retail clients there D.) Begin soliciting retail clients in State Y immediately since the agent is exempt from registration in that state as long as he does not maintain an office there

B.) Refrain from soliciting retail clients in State Y until the agent and the broker-dealer are registered in State Y Generally, both the broker-dealer and its agent must be registered in a state before they may do business there, which includes soliciting clients. There is an exception for broker-dealers and their agents who do not have an office in the state and do business only with certain institutional clients, such as other broker-dealers, banks, savings institutions, trust companies, insurance companies, investment companies, or pension plans.

A Canadian agent has many clients who visit the United States for extended periods. In order to continue to service these accounts while these clients are in the United States, the agent must: A.) Register with the SEC under NAFTA B.) Register with the relevant states C.) Become associated with a U.S. registered broker-dealer D.) Open an office in the states in which these clients are temporarily residing

B.) Register with the relevant states A Canadian agent, who wishes to continue to service the accounts of clients who are visiting the United States, must register with the states where these clients are staying. The agent's broker-dealer must also register. Both broker-dealers and agents who are registered properly in Canada may take advantage of the limited registration provisions available to Canadian broker-dealers and agents under the Uniform Securities Act.

The members of the North American Securities Administrators Association (NASAA) include Administrators from all of the following jurisdictions, EXCEPT: A.) Puerto Rico B.) The British Virgin Islands C.) Mexico D.) All the Canadian Provinces

B.) The British Virgin Islands The members of the North American Securities Administrators Association (NASAA) include Administrators from all 50 U.S. states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, the Canadian Provinces (states), and Mexico. The Administrator of the British Virgin Islands is not a member.

An investment adviser representative and a client have similar financial resources, investment goals, and risk tolerance. However, although the IAR recommends penny stocks as a small part of her client's portfolio, she would never consider investing in such securities herself. Which of the following statements is TRUE? A.) As long as the recommendations to her clients are suitable for them, it does not matter what the IAR chooses to include in her portfolio B.) The IAR should tell her client that the recommendation is inconsistent with her own investment policy C.) An IAR is not allowed to reveal to a client what is in her personal portfolio D.) Penny stocks are never suitable investments

B.) The IAR should tell her client that the recommendation is inconsistent with her own investment policy An investment adviser whose personal investing is inconsistent with recommendations made to clients generally has an obligation to disclose this to them.

The limited registration provision available to Canadian broker-dealers conducting business in a state permits which of the following actions? A.) The broker-dealer solicits all residents of a state B.) The broker-dealer transacts business with existing clients who are temporarily in a state C.) The broker-dealer transacts business with institutional clients of a state D.) The broker-dealer opens an office in a state

B.) The broker-dealer transacts business with existing clients who are temporarily in a state The provisions allowing Canadian broker-dealers to transact business in a state are limited. A broker-dealer may effect transactions with a person from Canada who is temporarily in the state if there was an existing broker-dealer-client relationship before the person entered the United States.

Under the Uniform Securities Act, which of the following sale would be considered a nonissuer transaction? A.) The sale of a security executed by an agent of the issuer B.) The sale of an outstanding security on the New York Stock Exchange C.) The sale of a new issue in a private placement D.) A primary offering sold by a broker-dealer

B.) The sale of an outstanding security on the New York Stock Exchange A nonissuer transaction is a purchase or sale of a security whereby the issuer does not benefit, directly or indirectly. A trade between two investors for IBM stock on the New York Stock Exchange (a secondary market trade) would be an example of a nonissuer transaction.

All of the following items should be included on a customer's order ticket, EXCEPT: A.) The terms and conditions of the order B.) The identity of the registered principal who preapproved the order C.) The identity of the registered representative assigned to the account D.) The time the order was entered

B.) he identity of the registered principal who preapproved the order An order ticket must include the terms and conditions under which the order is submitted—is it a limit order or a market order? It must also state the identity of the registered representative assigned to the account (if any) and the time the order was entered.

under the uniform Securities act, which of the following statements is NOT TRUE regarding an agent sharing in the profits and losses in the client's account? A.) sharing is permissible if the client has approved of it in writing B.) sharing is permissible if the broker-dealer employing the agent has approved of it. C.) sharing is permissible if the client and the agent have a mutual agreement as to the porportion of profits and losses the agent will share. D.) the agent may share only in the direct proportion to the ammount the agent has contributed to the client's account.

C.) An agent is permitted to share in the profits and losses of a client's account if the client has approved the arrangement in writing (both signing joint account papers), the broker-dealer employing the agent approved the arrangement in writing, and the gains and losses are shared in direct proportion to the funds contributed.

according to the uniform securities act, which of the following statements is true? A.) When an agent's registration is suspended in a state, the broker-dealer would no longer be able to conduct business in that state B.) when an investment adviser representative's registration is suspended, the investment adviser's registration is no longer in effect C.) when a broker dealer is suspended, the agent's registration is no longer in effect D.) no of the above

C.) If an agent's registration is suspended, the broker-dealer's registration remains intact. However, an agent's registration is only effective when the broker-dealer's registration remains in effect. If an investment adviser representative's registration is suspended, the investment adviser's registration is not affected.

According to the Investment Advisers Act, a notice offering advisory services that appears in a publication, on radio, or on TV is considered an advertisement if offered to more than: A.) 10 persons B.) 35 persons C.) 1 person D.) 5 persons

C.) 1 person Communications through the public media offering investment advisory services, including analyses or reports, are considered advertising if addressed to more than one person.

A broker-dealer is participating in the distribution of an IPO for a local company, which will not be listed on an exchange. It is making the prospectus available electronically to all purchasers. How long is the broker-dealer required to make the prospectus available? A.) 25 days B.) 40 days C.) 90 days D.) 120 days

C.) 90 days All investors who purchase new issues must receive prospectuses, which may be made available electronically. A firm that sells a new issue in the aftermarket shortly after it begins trading may also be required to give prospectuses to its customers. This obligation to provide a prospectus continues for 25 days after the effective date for securities that will be listed on a national exchange or Nasdaq. For secondary offerings of securities that will trade over-the-counter (securities that are not eligible to be listed on Nasdaq), this obligation lasts for 40 days. In this question, the offering is an IPO that will not be listed, which means the prospectus must be available for 90 days.

An investment adviser has an office next door to a broker-dealer. The adviser directs client transactions to the broker-dealer for execution. In exchange, the broker-dealer rebates 10% of the commissions that it receives to the adviser. This practice is: A.) Prohibited under the Uniform Securities Act B.) An irreconcilable conflict of interest C.) A conflict of interest that must be disclosed to clients in writing D.) An acceptable practice, provided that the broker-dealer is registered as a solicitor

C.) A conflict of interest that must be disclosed to clients in writing The NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives and Federal Covered Advisers states that an investment adviser must disclose all conflicts of interests to clients in writing. These conflicts include the scenario described in this question where the investment adviser is receiving compensation (rebates) for the execution of client transactions. Note, however, that this arrangement would also need to comply with the federal securities laws and the FINRA rules pertaining to directed brokerage arrangement, which may require more than mere disclosure.

According to the Uniform Securities Act, which of the following actions are permitted by persons NOT located in a state, or registered in a state? A.) person who represents a broker-dealer receives commissions for the sale of exempt securities to customers who are residents of a state B.) A person represents a broker-dealer and offers nonexempt securities to noncustomers located in a state in which the person is not registered C.) A person sells unlisted securities to an institution that is located in a state in which that person is not registered D.) A person who represents an issuer receives compensation for the sale of the issuer's securities to nonemployees of the issuer

C.) A person sells unlisted securities to an institution that is located in a state in which that person is not registered A person who effects securities transactions for institutions and is not located in the state is not defined as a broker-dealer within the state. Registration is not required within the state under these conditions.

Which of the following securities offerings would use registration by coordination? A.) An IPO that will be listed on the New York Stock Exchange B.) An offering of preferred stock by an issuer whose stock currently trades on the Nasdaq Global Market C.) An IPO that will be distributed in 12 states and not listed on any of the national exchanges D.) An IPO that will be distributed to the residents of one state only

C.) An IPO that will be distributed in 12 states and not listed on any of the national exchanges Registration by coordination is typically used by an issuer that is conducting an IPO of securities that will not be listed on an exchange and that needs to register its securities at both the state and federal level (the two registrations are coordinated). Securities that are listed or authorized for listing on a national stock exchange (e.g., the NYSE or Nasdaq) are examples of federal covered securities and are generally exempt from state registration and notice filing. An issuer of securities that are being distributed to residents of one state will typically use registration by qualification

According to the Uniform Securities Act, which of the following investment advisers would be exempt from registration? A.) An adviser with no place of business in the state, with 10 clients, all of whom are accredited investors B.) An adviser with no place of business in the state and only six clients who have a net worth of at least $1 million each C.) An adviser with no place of business in the state and fewer than six retail clients D.) An adviser with an office in the state, with five or fewer retail clients

C.) An adviser with no place of business in the state and fewer than six retail clients There is no investment adviser exemption based on net worth in the Uniform Securities Act. (In federal securities law, there is a securities registration exemption for private placements to accredited investors.) If an adviser does not have a place of business in a particular state and limits clientele to institutional investors (or no more than five retail investors), the adviser is exempt from registration.

according to the USA, which of the following choices is not considered a security? A.) A certificate of interest in an oil and gas program B.) Whiskey warehouse receipts C.) An endowment policy D.) A variable life insurance contract

C.) An endowment policy Under the USA, endowment policies are not securities.

The Manning Dual Growth Fund has specifically directed its investment adviser to direct all transactions through Ole Miss Brokerage, a firm with which the fund's board of directors has had a long and successful relationship. The commission schedule of Ole Miss Brokerage is significantly higher than that of Low Cost Trading, the firm that the fund typically uses for trade executions. What action should the investment adviser take? A.) Conduct the trades through Low Cost, since it's in the best interest of its client. B.) Conduct the larger trades through Low Cost, but inform the client in writing of the switch. C.) Conduct the fund's executions through Ole Miss Brokerage. D.) Attempt to obtain a rate reduction by allocating the trades between the two brokerage firms.

C.) Conduct the fund's executions through Ole Miss Brokerage. Since an IA is required to follow its customer's instructions, it must conduct the fund's transactions through Old Miss Brokerage. As a fiduciary, if the IA were given the option to choose where to direct its client's transactions, it would be obligated to direct them to the broker-dealer that provides the best execution, regardless of the cost.

An investment adviser representative has discretionary authority over a client's portfolio. The client's objective is conservative growth. According to the UPIA, which of the following statements is TRUE regarding the use of equity derivatives in his portfolio? A.) Equity derivatives are not appropriate in a conservative portfolio B.) Equity derivatives would be acceptable if the investor provided prior written authorization for the strategy C.) Equity derivatives strategies may be appropriate as part of a conservative portfolio D.) Equity derivatives strategies may be appropriate for conservative portfolios, provided the strategy is used exclusively to reduce the overall level of risk in the portfolio

C.) Equity derivatives strategies may be appropriate as part of a conservative portfolio The UPIA does not make any categorical restrictions of specific investments when creating a portfolio. This would include investments in equity derivatives. The act requires that fiduciaries recognize the difference between risk and reward and that the portfolio be appropriately diversified in order to manage the risk.

Under the Uniform Securities Act, amendments to an investment adviser's Form ADV must be filed promptly. On August 31, your firm closes one of its branch offices and, therefore, you must file an amendment. What would constitute a prompt filing with the IARD? A.) Filing the notice by December 31 of the current year B.) Filing the notice by October 31 of the current year C.) Filing the notice by September 30 of the current year D.) Filing the notice by the end of your firm's fiscal year

C.) Filing the notice by September 30 of the current year Amendments to Form ADV are required to be filed promptly with the Investment Adviser Registration Depository, and will be considered filed promptly if filed within 30 days of the event that caused the filing requirement.

The term agent includes a person who represents an issuer in transactions involving: A.) Exchange-listed securities B.) Investment company shares C.) Foreign stock D.) Qualified purchasers

C.) Foreign stock In general, individuals who represent and issuer are only considered agents and required to register as such if the securities they're selling need to be registered. In other words, individuals who represent issuers of exempt securities or those distributing securities through exempt transactions are not considered agents. Exchange-listed securities and investment company shares are exempt as federal covered securities, while securities sold to qualified purchasers are exempt from registration under the Uniform Securities Act (USA) as an exempt transaction. However, there's no specific exemption for an issuer of foreign stock. An individual who represents the issuer of foreign stock is required to register as an agent in any state(s) in which the securities are being sold.

Under the Uniform Securities Act, which of the following activities of an investment adviser would constitute impersonal advisory services? A.) Telling a client to buy municipal bonds in order to reduce her tax liability B.) Providing clients with a recommended list of mutual funds for their retirement accounts C.) Giving a client a list of mutual funds with the lowest expense ratios for the past five years D.) Telling a client that investment XYZ will meet her investment objectives

C.) Giving a client a list of mutual funds with the lowest expense ratios for the past five years Impersonal advisory services are those activities of an investment adviser that do not meet the specific needs or objectives of a client, or which do not render an opinion of the investment merits of a particular security.

Under the Uniform Securities Act, which of the following responsibilities may the Administrator NOT designate to another officer? I. The issuance of a cease-and-desist order II. Bringing an action in state court to enjoin parties III. Serving a subpoena on a witnesses and compelling their attendance A.) II and III only B.) I, II, and III C.) I and II only D.) I and III only

C.) I and II only The Uniform Securities Act specifically permits the Administrator to designate an officer to subpoena witnesses and compel their attendance, administer oaths and affirmations, and require that books and records be furnished. Issuing a cease-and-desist order and brining an action in state court to enjoin parties must be executed by the Administrator.

Which of the following statements are TRUE concerning certain federal covered securities? I. The Administrator may require the issuer to pay a filing fee II. The Administrator may bring enforcement action if fraud is involved III. The Administrator may require the issuer to file a consent to service of process IV. The Administrator will grant the registration after a final review of the filing A.) I and II only B.) I and III only C.) I, II, and III only D.) I, II, III, and IV

C.) I, II, and III only The National Securities Markets Improvement Act (NSMIA) places limits on states' power to regulate federal covered securities. Federal covered securities are exempt from registration at the state level therefore the state Administrator will not grant registration of a federal covered security, choice (IV). State securities Administrators may require certain issuers to Notice File which includes paying a filing fee, choice (I) and filing a Consent to Service of Process, choice (III). State Administrators also retain the right to investigate all issuers and bring enforcement actions against any violators that sell securities within their state choice (II).

According to the Uniform Securities Act, which of the following statements is/are TRUE concerning private placements? I. The offer may not be made to more than 10 persons in that state during any 12-month period II. The offer may not be made to more than 35 persons in that state during any 12-month period III. The offer may be made to any number of institutional investors during any 12-month period IV. Commissions may not be paid if the buyers are noninstitutional customers A.) I only B.) III and IV only C.) I, III, and IV only D.) II, III, and IV only

C.) I, III, and IV only Under the Uniform Securities Act, any transaction involving no more than 10 persons (there is no limit on institutional accounts) is considered an exempt transaction, known as a private placement, if the following conditions are met. The seller believes that all the noninstitutional buyers are purchasing for investment purposes only. No commission or other remuneration is paid for soliciting noninstitutional buyers.

A no-load mutual fund has no: I. 12b-1 fees II. Front-end sales charges III. Contingent deferred sales charges A.) I only B.) I and II only C.) II and III only D.) I, II, and III

C.) II and III only A no-load mutual fund may not have any front-end sales charges (loads) or any contingent deferred sales charges (back-end loads). It may have a 12b-1 fee as long as this fee does not total more than .25% of the fund's average annual net assets.

The maximum criminal penalties for violations of the Uniform Securities Act are: I. Five years in prison II. Three years in prison III. A $5,000 fine IV. A $10,000 fine A.) I and III only B.) I and IV only C.) II and III only D.) II and IV only

C.) II and III only Under the Uniform Securities Act, the maximum criminal penalty is three years in prison and/or a $5,000 fine. Under federal law the prison sentence and fines are increased.

Which of the following situations would constitute an assignment of an investment advisory contract requiring client approval? I. The investment adviser is a partnership with three partners, one of whom dies II. The investment adviser is a partnership with seven partners, three of whom retire, while another dies III. The investment adviser changes from a sole proprietorship to a LLC IV. A corporation acquires 60% of the assets of the broker-dealer parent of an investment adviser A.) I and IV only B.) II and III only C.) II, III, and IV only D.) I, II, III, and IV

C.) II, III, and IV only An investment advisory contract may not be assigned without a client's consent. Any action that causes a change in the adviser's management, organizational structure, or control is considered an assignment, such as the acquisition of 60% of a partnership's assets by a corporation. If the adviser is organized as a partnership, the death, resignation or retirement of a minority of the partners does not constitute a change of control or management—roman numeral (I). However, the investment adviser does need to notify its clients if the composition of the partnership changes.

Oscar is a new compliance officer for Mayer & Meyer Financial, Inc., a registered investment adviser. Which of the following activities listed below represents the highest priority when determining if there are conflicts of interest between the firm and its clients? A.) The firm has a minimum size of client accounts of $250,000 B.) Clients are permitted to choose the broker-dealer that will execute the client's trades C.) Investment adviser representatives are allowed to own the same securities that the firm recommends to its clients D.) Investment adviser representatives may not recommend commodities or futures contracts to clients

C.) Investment adviser representatives are allowed to own the same securities that the firm recommends to its clients The client may feel that the firm is recommending the securities because the IARs also own the securities. This could be viewed as a conflict of interest. This information should be disclosed to the client so that the client can make an informed decision.

The term supervised person is BEST represented by an investment adviser representative who: A.) Holds himself out as an investment adviser representative B.) Manages an investment adviser's accounting department C.) Is a partner of an investment adviser that manages investments in several discretionary accounts D.) Is an employee of an issuer that offers registered securities to residents of only one state

C.) Is a partner of an investment adviser that manages investments in several discretionary accounts The term supervised person is used in SEC regulations related to investment advisers (IAs) and includes the IA's partners, officers, directors, and employees who provide investment advice.

customer's sole investment objective is income. The agent, who has discretionary authority over the account, buys large-cap stocks and sells some of the shares every two weeks, which generates income for the client and commissions for the agent. What is the main issue with the agent's actions? A.) buse of discretion B.) Churning C.) Making unsuitable recommendations D.) Front-running

C.) Making unsuitable recommendations This is a difficult question, since at first glance there seems to be more than one correct answer. Choices (a), (b), and (c) all look plausible but you can choose only one answer. The agent has written discretionary authority over the account. This means that he has permission to buy and sell securities on the client's behalf without asking the client to approve these transactions. By purchasing and later selling stocks, the agent has not necessarily abused this authority, choice (a). If he had taken securities or money out of the account, this would be a clear abuse of discretion.

An accountant regularly refers clients to an investment adviser, who pays the accountant a referral fee for each client who opens an account with the investment adviser. The accountant: A.) Is acting unethically and could be disciplined by the Administrator B.) Would be considered an agent and required to register as such C.) May be required to register as an investment adviser representative or solicitor D.) Is exempt from registration under the Uniform Securities Act

C.) May be required to register as an investment adviser representative or solicitor Under the Uniform Securities Act, an investment adviser representative includes anyone who "solicits, offers, or negotiates for the sale of or sells investment advisory services." Generally speaking, a solicitor is someone who receives compensation for referring prospective clients to an investment adviser, but is not directly employed by the investment adviser. Some states require investors to register as IARs. Other states, however, have special registration provisions for solicitors.

According to the Uniform Securities Act, which of the following actions accomplishes renewal of an agent's license? A.) Participation in Continuing Education B.) Passing an examination C.) Paying a fee D.) Making an announcement in a publication distributed in that state

C.) Paying a fee An agent renews his license by paying a fee designated by the Administrator. Passing an examination is generally only required for an agent's initial registration. (FINRA does impose a mandatory Continuing Education on all registered personnel, but this is not a state requirement.

Which of the following investors may be charged performance fees by investment advisers? A.) Accredited investors under Regulation D B.) Exempt investors C.) Qualified clients D.) None, since investment advisers are prohibited from charging performance fees

C.) Qualified clients Under the Investment Advisers Act of 1940 and the NASAA Model Rules, advisers are prohibited from charging performance fees that are tied to gains in the account. However, an exception is made for qualified clients. A qualified client is an institutional or retail client with at least $1.1 million under management with the adviser or one with a net worth in excess of $2.2 million. If the client is an individual, then the net worth calculation CANNOT include the value of the client's primary residence. An accredited investor, as defined under Regulation D, is not the same as a qualified client. For example, an individual who has a total net worth of $1 million (excluding her home) is considered an accredited investor according to Regulation D, but is not a qualified client.

Under the Uniform Securities Act, all the following transactions are classified as exempt, EXCEPT: A.) Transactions in equity securities between an issuer and an underwriter B.) The pledge of securities to collateralize a loan C.) The sale of U.S. government securities to a public customer D.) Unsolicited transactions in nonexempt securities

C.) The sale of U.S. government securities to a public customer The question asks which transaction is nonexempt. Choices (a), (b), and (d) are examples of exempt transactions. However, though the security referenced in choice (c) is exempt, there is no specific exemption for transactions involving a public customer, and therefore choice (c) is considered a nonexempt transaction.

An order ticket does NOT need to include which of the following pieces of information when it is created? A.) The account number B.) The time of receipt C.) The time of execution D.) Whether the order was solicited or unsolicited

C.) The time of execution An order ticket must include the number of the account for which the order was taken, choice (a). It must also include the time the order was received from the client, choice (b), and whether the order was solicited or unsolicited, choice (d). The ticket does not need to include the time of execution when it is first created. (That information will be added later unless the order is not executed for some reason.)

Andrew is an agent employed by Mayberry Securities. His client would like to sell some of his shares of XYZ to his daughter at a price far below the market value of the stock. Andrew agrees to handle the transaction for a small fee. Which of the following statements is TRUE? A.) The transaction does not need to be recorded on the books of the broker-dealer, since the price does not relate to the fair market value of the securities B.) The transaction does not need to be recorded on the books of the broker-dealer, since the contract was between family members C.) The transaction would need to be recorded on the books of the broker-dealer, since Andrew is receiving compensation D.) The transaction is an example of a private securities transaction and is allowed as long as the clients agree

C.) The transaction would need to be recorded on the books of the broker-dealer, since Andrew is receiving compensation This transaction is considered a private securities transaction and in order for the transaction to be compliant with regulations it must be recorded on the books of the broker-dealer.

Which of the following choices are NOT securities? A.) Variable annuities B.) Variable universal life insurance policies C.) Universal life insurance policies D.) Investment contracts

C.) Universal life insurance policies A universal life insurance policy is a type of whole life insurance policy. Unlike a variable universal life insurance policy, choice (b), or a variable annuity, choice (a), whole life insurance policies are not classified as securities. Whole life insurance policies do accumulate a cash value, but the rate of return that the policy owner receives is fixed by the insurance company. In contrast, in a variable life insurance policy or annuity, the return will vary according to the investment options that the client selects.

Which of the following choices is a broker in state B? A.) an agent in state A who contacts clients in state B. B.) a corporation that sells commerical paper every other week in state B. C.) a broker-dealer registered in state A, where its offive is located, which has three individual clients in state B. D.) a bank trust department that buys and sells securities for its customers

C.) a broker-dealer registered in state A, where its offive is located, which has three individual clients in state B. Agents, issuers, and banks are not broker-dealers. Also, a person with no place of businessin a state, who deals only with institutional investors, is not a broker-dealer. If a firm deals with individuals, it would be considered a broker-dealer, even if it did not have an office in the state.

all of the following persons are defined in the the uniform securities act, except: A.) Issuer B.) Broker-dealer C.) Registered representative D.) Investment adviser representative

C.) registered representatives the term Registered representative is not defined in the uniform securities act, although it is used in federal law. According to the uniform securities act, an issuer is a person who offers securities, of plans to offer them. a Broker-dealer is in the business of buying and/or selling securities either for customerrs or on its own behalf. An investment adviser who gives advice to clients, sells these services, or supervises people who do. remember, the term person in the uniform securities act applies both to entities, such as companies, and individuals.

ABC adviseres is a small investment adviser with $19 million AUM. The firm is the adviser for a start-up, micro-cap mutual fund. in this case, ABC: A.) is considered an exempt adviser and is not required to register until its assets exceed $100 million B.) Must register with both the SEC and esach state in which it does business until its AUM exceed $130 million. C.) may register as either a state or federal covered adviser. D.) must register with the SEC as a federal covered adviser

D the federal governemtn and the states have a division of responsibility when regulating investment advisers. In general, an adviser must be registered with either the SEC or with one or more states. there's no requirement to register at both the federal and state levels. the federal/state divisions is typically based on the amount of assets under management (AUM). Advisers with assets of $110 million or more must register with the federal government, while those with fewer assets fall under state jurisdiction.

Under the Uniform Securities Act, which of the following securities is/are exempt? I. Bonds issued by a Canadian province II. Illinois General Obligation bonds III. An insurance company's common stock IV. Securities issued by a not-for-profit educational association A.) II only B.) II and IV only C.) I, II, and IV only D.) I, II, III, and IV

D.) All of the items listed are exempt securities according to the USA.

An offer to sell a security was directed by an agent in Nebraska to a client who lives in Kansas, but who is visiting a relative in Oklahoma. The customer accepts the offer and agrees to make payment upon their return to Kansas. Under the Uniform Securities Act, which Administrator(s) have jurisdiction over the transaction? A.) Nebraska only B.) Kansas and Oklahoma C.) Nebraska and Kansas D.) Nebraska and Oklahoma

D.) An Administrator has jurisdiction over any offer that originates from their state, or is directed into and received in the state it was directed into, or was accepted in their state. It does not matter where payment is made. The offer originated in Nebraska, so its Administrator has jurisdiction. The offer was directed into Kansas but was not received there, so its Administrator has no jurisdiction. The offer was accepted in Oklahoma, so its Administrator would have jurisdiction over the offer as well.

Any person who willfully violates SEC rules and regulations is subject to a fine and imprisonment of up to: A.) $5000 and three years B.) $5000 and five years C.) $10000 and three years D.) $10000 and five years

D.) Any person who willfully violates the Securities Act of 1933 or SEC rules and regulations is subject to a fine of up to $10,000, imprisonment for up to five years, or both.

Which of the following actions may be taken by the Administrator? I. Limit or restrict the functions or activities of the registrant II.Administer an oath III. Cancel registration if the registrant cannot be located after a reasonable search A.) I and II B.) I and III C.) II and III D.) I II and III

D.) The Administrator is given the authority to take all these actions.

Mandy is an employee of the Indiana toll authority. her boss, a high ranking official with the municipality, asks her to help sell the municipality's revenue bonds to some instiutional clients as welll as a few retail investors. how is this situation viewed by the USA? A.) mandy avoids meeting the definition of an agent if she sells the securities only to institional investors B.) mandy meets the definition of an agent if she sells the securities to any retail investors C.) Mandy meets the definition of an agent since she is selling the municipal securities to individual retail investors D.) many does not meet the definition of an agent under any circumstances

D.) Under the USA, an agent is any individual (other than a broker-dealer) who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sale of securities. Excluded from the definition is an individual who represents an issuer in effecting transactions in certain exempt securities or who represents an issuer in exempt transactions. since Mandy is representing an issuer and selling a certain type of exempt security she would not meet the definition of an agent under any circumstances.

under the USA, an employee of a municipal issuer selling securities to the public is considered: A.) an agent of the issuer and is subject to registration B.) an agent of the issuer and is not subject to registration C.) an agent of a broker-dealer D.) not an agent

D.) a person representing a municipal issuer is not considered an agent and would not be subject to registration. if the securities were not exempt, the employee would be subject to registration.

A firm acting in the capacity of a dealer/market maker will: A.)Collect a sales charge on all transactions B.) Assist clients by locating the other side of the transaction C.) Add commissions to all client trades D.) Add markups or markdowns to all client trades

D.) When acting as a dealer/market maker, a broker-dealer does not charge a commission. A dealer/market maker either buys into inventory or sells out of inventory and charges a markup or a markdown. The dealer/market maker will mark up from the offer price (asked) when selling and will mark down from the bid when buying.

Which of the following choices is not considered a security? A.) A variable annuity set up as a retirement plan B.) Call options on a gold futures contract C.) American Depositary Receipts D.) A Treasury bond futures contract

D.) A Treasury bond futures contract Under the Act, futures contracts are not securities. However, options on commodity futures contracts are considered securities. Variable products (annuities, life insurance policies) and ADRs are also defined as securities.

Which of the following statements is NOT TRUE concerning agency cross trades? A.) A client must provide written authorization for such activities B.) Such trades should be unsolicited for at least one side of the trade C.) The trades are summarized annually to clients D.) A client may provide verbal authorization for up to 10 days

D.) A client may provide verbal authorization for up to 10 days An agency cross transaction is one in which the adviser acts as broker for both sides of the trade. Advisory clients must provide written consent before an adviser may affect the first agency cross transaction. This is a blanket consent and covers future agency cross transactions until the client revokes consent, which can be done at any time.

Which of the following would be considered a prohibited business practice? A.) Giving a quote for a security that is not the current market price B.) Soliciting orders for unregistered nonexempt securities C.) Creating transactions that give a misleading appearance of active trading in a security D.) All of the above

D.) All of the above All of the choices listed would be considered prohibited business practices

A state Administrator has suspended a broker-dealer. Which of the following statements concerning the broker-dealer is TRUE? A.) The firm is allowed to accept unsolicited orders B.) The only activity the firm may not participate in is new issue distributions C.) The firm may continue business as usual during the appeal process D.) The firm may apply to the state court for a review of the order

D.) Although the firm may apply to the state court to review the Administrator's order, there is no stay of the order. The firm is still suspended during the appeal process and may not participate in any securities-related activities in that state.

An agent is soliciting investors for a private placement of securities issued under Regulation D. Which of the following choices are accredited investors according to Regulation D? A.) A couple with a net worth of $1 million, inclusive of their primary residence B.) A 55-year-old investor who has just taken early retirement, whose annual income was $250,000 during the last two years C.) A corporation with $500,000 in assets D.) An insurance company

D.) An insurance company Under Regulation D accredited investors include: Individuals with an annual income of at least $200,000 during the last two years who reasonably expect to continue to earn that much in the future A married couple with a joint annual income of at least $300,000 during the last two years who expect that income to continue at that level An individual or a couple with a net worth of at least $1 million, not including the value of their primary residence Banks, insurance companies, and registered investment companies under IA '40 Certain employment benefit plans, nonprofits and corporations with total assets in excess of $5 million The investors described in choice (a) meet the net worth requirement when their home is included. The net worth requirement for accredited investors must be calculated without their home equity. The investor in choice (b) meets the income requirement, but he has just retired, which means his income is likely to drop in the coming years. The corporation in choice (c) has only $500,000 in assets. It needs $5 million to qualify as an accredited investor. Thus, choice (d) is the only correct answer.

All the following activities by an investment adviser representative are considered unethical, EXCEPT: A.) Lending money to a client who has sustained an investment loss B.) Informing a client that the price of a stock will increase after the release of a positive research report on a company C.) Executing trades of frequency and size that exceed a client's risk tolerance, but result in a higher return than the client expected D.) Arranging a loan for a client conducted through an affiliated broker-dealer of the investment adviser for the purpose of paying for stock recommended by the investment adviser representative

D.) Arranging a loan for a client conducted through an affiliated broker-dealer of the investment adviser for the purpose of paying for stock recommended by the investment adviser representative A broker-dealer is permitted to lend money. The situation described in choice (d), is a margin account. It is prohibited for an investment adviser representative to loan money to a client who sustained investment losses—choice (a). Telling a client that the price of a stock will increase is a promissory statement and is prohibited—choice (b). Trades of excessive size or frequency that disregard a client's objectives or risk tolerance are not permitted regardless of the returns—choice (c).

A "sale" or "offer to sell" under the Uniform Securities Act would NOT include a(n): A.) Unsuccessful solicitation to sell a security of assessable value B.) Gift of assessable stock C.) Warrant attached to the purchase of a bond D.) Bona fide pledge or loan

D.) Bona fide pledge or loan A bona fide pledge or loan does not involve an offer or sale. A gift of assessable stock is considered to involve an offer and a sale. An unsuccessful solicitation would constitute an offer. Any security given or delivered with a purchase is considered to have been offered and sold for value.

During the course of an investigation, the Administrator finds that an investment adviser representative has engaged in fraudulent activities. The representative says that he is unaware of any fraud and was only following the directions of his firm. He produces a written recommendation list issued by his firm upon which he based his recommendations. Under the Uniform Securities Act, what action would the Administrator most likely take in this situation? A.) Impose a fine and prison sentence B.) Impose a fine but not a prison sentence C.) Bring an action in court to impose a fine and prison sentence D.) Bring an action in court to impose a fine but not a prison sentence

D.) Bring an action in court to impose a fine but not a prison sentence Any person who willfully violates the Uniform Securities Act may be fined up to $5,000 and/or imprisoned for up to three years. However, if the person proves that he had no knowledge of the fraudulent activities, or that he was not aware or could not have been reasonably aware of what was going on, then a prison sentence may not be imposed.

The Administrator in State B has conducted an investigation into the activities of an investment adviser representative who is registered in State A and State B. The Administrator believes that the IAR has engaged in fraudulent activities in State B. The IAR claims no knowledge of any wrongdoing and documents his recommendations by cross-referencing a list of recommended securities provided by a third-party research firm. What action would the Administrator most likely take in this situation? A.) Do nothing because the IAR is registered in State A and State B B.) Do nothing in State B but alert the state Administrator in State A C.) Bring an action in court to impose a fine and prison sentence in State A and State B D.) Bring an action in court to impose a fine but not a prison sentence in State B

D.) Bring an action in court to impose a fine but not a prison sentence in State B Any person who willfully violates the Uniform Securities Act may be fined up to $5,000 and/or imprisoned for up to three years. Administrators may investigate in or outside of their state and bring action. However, if the person proves that he had no knowledge of the fraudulent activities, or that he was not aware or could not have been reasonably aware of what was going on, then a prison sentence may not be imposed.

An agent for a broker-dealer fled the country after embezzling funds from a client. The client was able to initiate a civil suit against the agent by sending legal papers to the Administrator because the agent had signed a(n): A.) Indemnity agreement B.) Liability agreement C.) Show cause agreement D.) Consent to service of process

D.) Consent to service of process A consent to service of process is an agreement whereby actions arising from violations of the Uniform Securities Act may be initiated against the individual executing the consent. The actions may be initiated by serving legal papers upon the Administrator. This is considered to be legally equivalent to serving them to the defendant. Individuals registering as agents under the USA must sign a consent to service of process as a registration requirement.

Chris is a customer who has very little understanding of financial markets. Chris has custodial power over his children's accounts and is concerned that his lack of investment experience could hurt his children's investment returns. He is considering allowing a third party to assume control of the accounts through a limited power of attorney. Under the UPIA, which of the following statements is TRUE? A.) This practice is prohibited in all cases B.) This practice is prohibited unless the custodian obtains the written consent of each child C.) Custodians may delegate discretion only to licensed advisers and/or attorneys D.) Custodians may delegate discretion to any competent person

D.) Custodians may delegate discretion to any competent person Under the UPIA, a custodian is permitted to delegate investment functions to any competent third party. Minors have no say in this decision. Note: In the past, the UPIA specifically prohibited a custodian from delegating discretion to a third party. This is no longer the case.

XYZ broker-dealer is located in State A, where it maintains its corporate headquarters. Under the Uniform Securities Act, XYZ would not meet the definition of a broker-dealer in State B if it: A.) Has no office in State B and conducts business with high net worth clients that are residents of State B B.) Has an office in State B and conducts business with insurance companies C.) Has an office in State B and conducts business only with other broker-dealers D.) Has no office in State B and only sells securities to an investment company located in State B

D.) Has no office in State B and only sells securities to an investment company located in State B Under the USA, the term broker-dealer does NOT include a person that has no place of business in the state AND only transacts business with issuers, other broker-dealers, financial institutions, or institutional buyers. If a firm has an office in State B, it would meet the definition of a broker-dealer in State B regardless of the clients it sells securities to or conducts business with. There is no exclusion from the definition of broker-dealer in a state if you sell securities to high net worth individual investors since they are not considered institutional buyers.

Which TWO of the following choices describe an unethical business practice? I. An agent tells clients that the broker-dealer will rebate their commissions if an IPO does not increase by 10% during its first month of trading II. An agent tells clients to purchase shares in a company based on the research report the broker-dealer just issued III. An agent who has insider information about a stock executes a client's unsolicited order for that stock IV. An agent highlights the important parts of a prospectus at the client's request A.) I and II B.) II and III C.) III and IV D.) I and IV

D.) I and IV The agent in choice (I) would be guaranteeing the client against losses, which is an unethical practice according to Statement of Policy Statement on Dishonest or Unethical Business Practices of Broker-Dealers and Agents. The agent in choice (IV) should not have highlighted the prospectus even if his only intent was to help the client. An agent should never mark up or alter a prospectus for a client.

Which of the following choices would be considered a person under the USA? I. A customer II. A broker-dealer III. An estate IV. An issuer A.) I and II only B.) I and III only C.) I, II, and III only D.) I, II, III, and IV

D.) I, II, III, and IV Under the USA, a person is defined as a legal entity, which would include individuals (natural persons) and business entities such as corporations, broker-dealers, partnerships, and investment advisers.

A fraudulent transaction was initiated by an agent in State Y with a customer who lives in State X. The transaction took place in State Z, where the customer was visiting a relative. Under the Uniform Securities Act, which Administrators have authority over the transaction? I. The State X Administrator II. The State Y Administrator III. The State Z Administrator A.) I and II only B.) I and III only C.) II and III only D.) I, II, and III

D.) I, II, and III All of the Administrators could have authority over the transaction since each state's jurisdiction was crossed.

Under the Uniform Securities Act, which of the following would NOT be considered an offer? I. Pledging securities to collateralize a loan II. A tombstone advertisement II. A sale of securities for value A.) I and II only B.) I and III only C.) II and III only D.) I, II, and III

D.) I, II, and III An offer is defined as an attempt to dispose of securities for consideration or value. Pledging stock is not a permanent disposition of shares. A tombstone does not constitute an offer, which can be made only by a prospectus. A sale is the culmination of the offer and completes the transaction.

All the following descriptions would meet the definition of agent under the Uniform Securities Act, EXCEPT: I. A sales representative of a broker-dealer who sells only securities covered under a federal exemption II. An assistant to a sales agent who takes orders when the agent is not available III. A subsidiary of a bank, registered as a broker-dealer that sells nonexempt securities to the public IV. A broker-dealer that sells only exempt securities within the state A.) I and II only B.) I and IV only C.) II and IV only D.) III and IV only

D.) III and IV only By definition, an agent is an individual and not a firm. Choices(III) and (IV) are both firms, not individuals. A sales agent of a broker-dealer is, by definition, an agent. It does not matter whether the securities are covered under a federal exemption or not. If administrative personnel are authorized to take orders, they are agents.

The retention requirements for the maintenance of books and records of investment advisers and broker-dealers are: I. Five years for a broker-dealer with the most recent two years easily accessible II. Three years for investment advisers with the most recent two years in the appropriate office III. Three years for a broker-dealer with the most recent two years easily accessible IV. Five years for an investment adviser with the most recent two years in the appropriate office A.) I and II only B.) I and IV only C.) II and III only D.) III and IV only

D.) III and IV only The requirements for maintaining books and records specify three years for a broker-dealer and five years for investment advisers—from the end of the fiscal year during which the last entry was made. In each case, broker-dealers and investment advisers must maintain the most recent two years of records in an easily accessible location and in the appropriate office, respectively. All records must be in their original condition.

Which of the following choices describe accredited investors under SEC Regulation D? A.) Individuals with a net worth of $250,000, exclusive of their primary residence B.) Individuals with a net worth of $1 million, inclusive of their primary residence C.) Individuals with an annual income of at least $100,000 and net worth of at least $150,000 D.) Individuals with an annual income of $200,000, regardless of net worth

D.) Individuals with an annual income of $200,000, regardless of net worth Accredited investors fall into three categories. Institutions—banks, brokerage firms, insurance companies, investment companies, certain pension plans, businesses, and nonprofits with at least $5 million in assets, and venture capital firms Key employees of the issuer—directors, executive officers, and general partners Wealthy individuals with at least $1 million in assets, excluding the value of their primary residence, or an annual income of $200,000 (or $300,000 together with a spouse). The investor's income must have been this high for at least the past two years and must be expected to continue at this level. Choices (a) and (c) describe the minimum financial standards for investing in viaticals. Choice (b) is not correct since the individual's net worth calculation includes a primary residence (home). The value of someone's house may not be included as an asset in order for someone to qualify as an accredited investor based on her net worth.

An investment adviser (IA) is dually registered as a broker-dealer in State A. The IA is also registered in State B, but it's not registered as a broker-dealer there. If the investment adviser only has advisory clients in State B, is it required to register as a broker-dealer in State B? A.) Yes, if the firm has a place of business in State B. B.) Yes, since broker-dealers must register in every state. C.) No, because the firm is already registered as an IA in State B. D.) No, since the firm does not have any brokerage clients in State B.

D.) No, since the firm does not have any brokerage clients in State B. If an investment adviser is providing advisory service in State B, and is not effecting securities transactions, it's only required to register as an IA in State B. However, if the firm decided to begin effecting securities transactions with individual residents of State B, it would need to become dually registered as an IA and B/D in State B.

Which of the following designations are acceptable on a business card? I. RIA for an investment adviser that is registered with the SEC II. RIA for an investment adviser that is registered with a state Administrator III. IAR who has passed the Series 63 and is employed by a federal covered adviser IV. Registered IA representative registered with the state Administrator A.) I and II only B.) II and III only C.) II and IV only D.) None of the choices are correct

D.) None of the choices are correct None of the abbreviations are allowable designations for investment advisory firms or investment adviser representatives. However, using the full term (e.g., Registered Investment Advisor) is permissible for a firm. The rule is designed to ensure that investors don't confuse a mandatory registration with a professional certification (e.g., CFA, CPA).

According to the Uniform Securities Act, the application process for an investment adviser may include: A.) Meeting a capital requirement equal to at least 2% of the assets managed B.) Filing contracts with the Administrator C.) Making a daily determination of the value of each account D.) Posting a notice in a newspaper that the adviser is an applicant for registration

D.) Posting a notice in a newspaper that the adviser is an applicant for registration An applicant may be required to give public notice that it is seeking registration as an investment adviser.

Betty owns and operates Right Choice Advisers, a small investment advisory firm registered with the states of Oregon, Washington, and California. Betty decides to sell 60% of her shares to another investment adviser and retire. This transaction would require the approval of: A.) The SEC B.) FINRA C.) The state securities Administrator D.) Right Choice's clients

D.) Right Choice's clients An investment adviser may not assign a client's contract to another investment adviser without the client's consent. An assignment includes the acquisition of the majority of the adviser's stock by another entity.

Which of the following statements is TRUE regarding surety bonds? A.) It is always required of broker-dealers that are registering under the USA. B.) It is always required of investment advisers that are registering under the USA. C.) It may only be obtained from a bonding company. D.) The Administrator may allow a deposit of cash or securities

D.) The Administrator may allow a deposit of cash or securities The surety bond is posted by a registrant to cover the cost of possible legal actions arising from violating the USA. Some broker-dealers and investment advisers may be granted a waiver for the surety bond. A deposit of cash or securities may be accepted in lieu of the bond, but the amount and type of securities will be determined by the Administrator. A surety bond can either be obtained directly from a bonding company or through a bond agency.

Registration by coordination is used together with which of the following federal acts? A.) The National Securities Markets Improvement Act (NSMIA) B.) The North American Free Trade Agreement (NAFTA) C.) The Investment Advisers Act of 1940 D.) The Securities Act of 1933

D.) The Securities Act of 1933 An issuer who uses registration by coordination must also register that same issue with the SEC under the Securities Act of 1933.

William is an agent with a broker-dealer and is registered presently in three states. One of William's clients informs him that he is moving to a state where neither William nor his firm is registered. Which of the following statements is TRUE regarding William's registration in the new state? A.) William would be permitted to transact business in the new state immediately B.) William must register in the new state and receive verification from the state Administrator that the registration is effective before conducting any new business with the client C.) William must file a Consent to Service of Process with the state D.) William is not eligible to register in the new state until his broker-dealer is registered in that state

D.) William is not eligible to register in the new state until his broker-dealer is registered in that state An agent may transact business in a state in which he is not currently registered under certain circumstances. The employing broker-dealer must be registered in the state, and the individual must be registered in at least one other state. Since his broker-dealer is not registered, William is not eligible for registration.

according to the national securities markets improvement act (NSMIA), state administrators are allowed to set: A.) Net capital requirements for issuers B.) Net capital requirements for agents of broker-dealers C.) Minimum financial requirements for investment adviser representatives D.) Minimum financial requirements not to exceed those set by the SEC

Minimum financial requirements not to exceed those set by the SEC Under NSMIA, state securities administrators are not allowed to impose requirements that are more stringent than SEC regulations.