Series 63 - QBank Missed Questions

All of the following must register as an agent when representing a broker/dealer EXCEPT: A) An individual selling shares of a credit union chartered in this state. B) An employee who accepts solicited orders. C) An individual who represents an underwriter only in transactions between an issuer and the underwriter. D) A partner in a broker/dealer who has no securities sales functions.

A (3-39)

If information on file with the Administrator changes, a broker/dealer must give notification: A) promptly. B) within 30 calendar days. C) within 10 business days. D) within 20 calendar days.

A (4-50)

In which of the following situations did an agent commit fraud? A) An agent sold an excellent growth company to a client by omitting immaterial information, so as not to distract the client from purchasing a suitable security. B) On review of his files, an agent discovered he had sold a nonexempt, unregistered security. C) An agent knowingly sold a nonexempt, nonregistered security to a client who could well afford the risk involved. D) A client claims an agent sold him unsuitable securities.

C (1-34)

The procedure for entering an order to purchase a security for the account of a customer is to complete an order ticket. Which of the following would be found on an order ticket? A) customer name, execution price, time of order entry, and time of execution or cancellation. B) customer name, customer address, execution price, time of execution or cancellation. C) account number, execution price, time of order entry, time of execution or cancellation, and terms and conditions of the order. D) account number, customer address, time of order entry, and terms and conditions of the order.

C (1-59)

Under the USA, a sales agent's registration may be suspended by the Administrator for all of the following reasons EXCEPT: A) the agent is convicted of willful violations of the USA. B) the agent is enjoined by a court of law from engaging in the securities business. C) the agent is accused of violations of the antifraud provisions of the USA. D) it has been discovered that the agent is not properly supervised.

C (3-53)

Under the Uniform Securities Act, a sale includes all of the following EXCEPT a: A) disposition of a security for value. B) contract to sell. C) contract of sale. D) pledge of securities for the purpose of obtaining a margin loan.

D (1-17)

Under the Uniform Securities Act, which of the following are required for an agent to lawfully share in the profits of a customer's account? I. The customer's written approval. II. The broker/dealer's written approval. III. The agent may share only in proportion to his or her own financial contribution to the account.

I, II (5-8)

Which of the following statements are TRUE? I. When an investment adviser representative begins or terminates employment with an adviser registered under the USA, only the investment adviser must notify the Administrator. II. When an investment adviser representative begins or terminates employment with a federal covered adviser, only the investment adviser representative must notify the Administrator. III. When an agent of a broker/dealer leaves the firm, only the broker/dealer must notify the Administrator. IV. When an investment adviser representative or a registered agent of a broker/dealer terminates employment, notice must be given to the Securities and Exchange Commission.

I, II (Only the employer must notify the administrator in an IA situation. Both a BD and agent must inform) (5-23)

The Uniform Securities Act provides an exemption from registration for certain securities and for certain transactions. However, the Administrator is not empowered to deny an exemption from state registration to: I. U.S. government securities. II. private placement transactions. III. a transaction with an insurance company. IV. municipal bonds issued by another state.

I, IV (5-27)

A pension fund manager who manages a $35 million dollar account must register with which of the following? A) The state. B) SEC. C) Either the state or the SEC. D) Both the state and the SEC.

A (Under the Dodd-Frank Act, pension fund managers who manage $200 million or more are eligible to register with the SEC, so in this case, they would register with the state.) (2-17)

Under the Uniform Securities Act, which of the following statements are TRUE about the authority of an Administrator? I. A cease and desist order may be issued prior to a hearing. II. A cease and desist order may be issued after a hearing. III. A cease and desist order is valid for a maximum of 30 days.

I, II (1-37)

Which of the following regarding the registration of investment advisers and their representatives is TRUE? A) 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. B) An investment adviser representative, terminated his employment with ABC Advisers and, six months later, was employed as an advisory representative by KLM, a federal covered adviser. Each firm is required to notify the Administrator of each event. C) XYZ Advisers, Inc., is a federal covered investment advisory firm registered with the SEC; therefore, its representatives need not be registered with the Administrator. D) ABC Advisers, Inc., is an investment advisory firm registered with the Administrator; therefore, its representatives need not be registered with the Administrator.

A (2-31)

A fraudulent transaction was initiated by an agent in Indiana by contacting a client residing in Iowa. After evaluating the offer, the client agreed to purchase the recommended security while vacationing in Florida. Which Administrator(s) has (have) jurisdiction? I. The Indiana Administrator. II. The Iowa Administrator. III. The Florida Administrator.

All. (5-7)

Registration by coordination automatically becomes effective with federal registration if all the following conditions are satisfied EXCEPT: A) no stop order is in effect. B) a consent to service of process is filed no later than 5 days after the effective date. C) maximum and minimum proposed offering prices and maximum underwriting discounts and commissions have been on file for 2 full business days. D) the registration has been on file with the Administrator for at least 10 days, or some other period designated by the Administrator..

B (1-52)

Under the Uniform Securities Act, which of the following activities is an example of churning? A) A client engaging in day trading. B) Bond swap. C) Following a practice of purchasing Class A shares of a mutual fund for a client, holding them for no more than one month, and liquidating and using the proceeds to purchase Class A shares of another mutual fund offered by a different underwriter. D) Frequent purchases one day and sales of the same stock the next day to make changes in a client's portfolio in order to align with a customer's investment objectives.

C (1-56)

Under the Uniform Securities Act, which of the following is NOT an exempt transaction? A) The sale of a non-Nasdaq over the counter stock to a closed-end investment company. B) A sale of securities by the executor of an estate. C) A sale of stock through a rights offering to existing shareholders of the issuing corporation if no commission is paid. D) The sale of U.S. government securities to an individual with a net worth in excess of $2 million by a registered broker/dealer.

D (7-15)

Under the Uniform Securities Act, an investment advisory contract must contain (in writing) all of the following provisions EXCEPT: A) the adviser, if a partnership, must notify the client of any change in the partnership's membership. B) on the departure or death of a majority shareholder of an investment advisory corporation, the advisory agreement must be renewed to prevent an unlawful assignment of the account. C) no assignment of the investment advisory contract may be made without the client's consent. D) the investment adviser's compensation shall not be based on capital gains in client accounts.

B (a caorporation does not have to inform clients of changes in shareholders. a partnership informs clients of a change in majority partners) (1-47)

The Administrator of a state securities department conducted a hearing regarding misconduct by an investment adviser registered at the state level. The Administrator required the adviser, as well as several clients who had lodged complaints against the adviser, to take a sworn oath that their testimony was true. Does the Administrator have the power to require sworn oaths? A) No, the Administrator was merely attempting to emphasize the seriousness of the hearing, but he holds no such power. B) Yes, the Administrator has the power to require witness oaths because an Administrative hearing is functionally a legal proceeding. C) Yes, because the Administrator is empowered to administer oaths as provided in the Uniform Securities Act, as enacted in the Administrator's state of jurisdiction. D) Yes, the Administrator may require witness oaths because the Administrator is appointed as a judge.

C (2-44)

A new agent is having a hard time making sales. In order to be more productive, he offers to share in any losses with clients. And, on the other hand, he will share in their profits as well. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker/Dealers and Agents, this is: A) prohibited unless the client gives written authorization and approval is granted by the broker/dealer. B) permitted if the client has given verbal authorization to the agent. C) prohibited as investment adviser representatives are not allowed to share in client accounts. D) permitted if the broker/dealer authorizes this activity.

A (1-23)

All of the following are exempt securities under the Uniform Securities Act EXCEPT: A) securities issued by a bank holding company. B) securities issued by a federal savings and loan association. C) securities issued by the Canadian government. D) securities issued by a Canadian province.

A (1-6)

Under the USA, a person who has passed the appropriate NASAA examination but whose license has not yet been issued can participate in: A) giving a seminar on the benefits of whole life insurance versus term insurance. B) accepting unsolicited orders. C) prospecting for new clients by mail. D) prospecting for new clients in person.

A (A person who has passed the NASAA exam cannot transact securities business until the Administrator notifies the employer that the registration is effective. Insurance, unless variable, is not a security.) (1-21)

All of the following information would be found on a trade ticket EXCEPT: A) the price of the security at the time of the order. B) the customer account number. C) the time of order entry. D) was the order solicited or unsolicited.

A (The price at the time of the order is of no significance. The execution price, of course, is.) (4-47)

Which of the following practices violate(s) NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker/Dealers and Agents? I. Recommending the purchase of a security solely on the basis of the issuer's properly published press release regarding a likely increase in earnings per a new product branding strategy. II. Placing customer's fully paid securities into an account with the broker/dealer's own securities. III. Effecting a transaction with no change in beneficial ownership. IV. Conducting securities transactions in a private capacity with clients, in properly registered securities, not reflected on the books of the broker/dealer and without the knowledge and supervision of the employing broker/dealer.

All (1-44)

A state Administrator may require an applicant for registration to do which of the following? I. Furnish information about any SEC adjudications within the past 10 years. II. Pay a registration fee. III. Pass a qualification examination. IV. Place an advertisement in one or more newspapers circulated in the state.

All. (2-8)

Under the Uniform Securities Act, which of the following is TRUE regarding the registration of securities? A) The Administrator may require that a prospectus be delivered to every purchaser of a registered security no sooner than the time at which the security is delivered. B) 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. C) Registration by coordination becomes effective on a date ordered by the Administrator. D) The effectiveness of a registration statement assures the completeness of the information contained in the statement.

B (2-35)

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

B (4-39)

An agent is currently registered with a broker/dealer and would like to register with another one. Under the Uniform Securities Act, A) the agent would have to sell different types of securities for each broker/dealer. B) registration would be required with each broker/dealer. C) one can never be registered with more than one broker/dealer at the same time. D) permission would have to be granted by FINRA.

B (4-52)

An Administrator has jurisdiction over an offer to sell securities if it is made in a newspaper published out of state: A) with at least two-thirds of its circulation in the state. B) under no circumstances. C) with at least one-third of its circulation in the state. D) with at least one-half of its circulation in the state.

B (7-31)

Which of the following is not an exempt transaction? A) A transaction executed by a trustee appointed by a bankruptcy court. B) A nonissuer unsolicited transaction. C) A 90-day U.S. Treasury bill. D) A sale of stock to a bank.

C (2-9)

What does the term "guaranteed" mean when used to describe a security? A) The broker/dealer will buy the security back at the same price or higher. B) The security has been cleared and is backed by the SEC. C) The security has a third party other than the issuer that guarantees the payment of principal and interest or dividends. D) The security is an annuity product that guarantees a retirement income.

C (7-10)

An agent submits a list of recommendations to a customer that includes 5 different securities. The customer chooses to buy a round lot of 1 of the 5 securities recommended (a stock in which the agent's broker/dealer makes a market). The firm, in completing the trade, charges a markup that is larger than normal for a stock transaction. Is this allowable under the Uniform Securities Act? A) Yes, it is allowable, but proper disclosure is required. B) Yes, markup schedules are dependent upon the type of security, broker/dealer risk, services that the broker/dealer provides, and effort in acquiring the security. C) No, under the circumstances given, it is a prohibited practice to charge a higher than normal markup. D) No, the markup schedule is set and cannot be changed for an individual trade.

C (7-13)

Under the USA, all of the following issues would be exempt from registration EXCEPT: A) bonds issued by the city of New Orleans. B) stock issued by savings and loan association authorized to do business in this state. C) an investment contract issued in connection with an employee stock purchase plan. D) stock issued by an insurance company not offering policies in this state.

D (Note that the insurance company is not authorized to do business in the state.) (2-6)

Adell, a retiring social worker, has some money to invest. An agent suggests she look into investing in a private placement security that is raising money to build apartment buildings in Puerto Rico. According to the Uniform Securities Act: I. building projects are not appropriate for retirees who typically need immediate income. II. private placements are not usually appropriate for retiring individuals because they are not liquid. III. no rule has been violated because the customer has only been offered the product. IV. if the customer lives in Puerto Rico, the proposed investment may be suitable because there may be a ready market.

I, II (2-32)

Which of the following are NOT agents as defined in the USA? 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 exempt securities or engages in an exempt transaction. IV. An individual who represents an issuer selling a nonexempt security in a nonexempt transaction.

I, II (7-42)

Under the Uniform Securities Act, an investment adviser who has custody of client securities or funds must do which of the following? I. Notify the Administrator in writing. II. Have client funds and securities examined at least once a year by an independent public accountant on a surprise basis. III. If not held by a qualified custodian, deposit client funds into one or more bank accounts, not commingled with adviser funds, and notify the clients in writing of where and in what manner the funds are held. IV. Send clients semiannual, itemized statements detailing the funds and securities in the adviser's custody at the end of the period and all transactions during the period.

I, II, III (statements must be quarterly at minimum) (5-19)

Which of the following are prohibited practices? I. An investment advisory firm organized as a partnership failed to inform its clients of the departure of a partner with a very small interest in the partnership. II. An investment advisory firm charges an annual fee equal to 2% of the first $250,000 in assets under management; 1% of the next $500,000; and .5% for everything in excess of $750,000. III. Without client consent, the majority stockholder of a registered investment adviser pledges his stock as collateral for a loan taken out by the firm to expand its services. IV. Engaging in agency cross transactions.

I, III (2-16)

While the Administrator has great power, the USA does place some limitations on the office. Which of the following statements regarding those powers are TRUE? I. In conducting an investigation, an Administrator can compel the testimony of witnesses. II. Investigations of serious violations must be open to the public. III. An Administrator in Illinois may only enforce subpoenas from South Carolina if the alleged violation would be a violation of the Illinois statutes. IV. An Administrator may deny the registration of a securities professional who has been convicted of any felony within the past 10 years, but must provide a hearing within 15 days if requested in writing.

I, III (2-58)

Investment advisers, as fiduciaries, have ethical obligations to act in their client's best interests and in an ethical manner. Engaging in which of the following practices would be unethical, although not fraudulent, for an investment adviser? I. Lending money to a client with full and fair disclosure. II. Recommending securities transactions based on research supplied to him by a third party without disclosing this fact to his clients. III. Supplying to his clients research reports prepared by a third-party firm without disclosing the source of the reports. IV. Charging significantly higher fees for the identical services offered by other advisers. 0

I, III, IV (5-17)

A transactional exemption would be offered when a sale is made: I. by a federal marshal. II. by a broker/dealer. III. to a lawyer as an incidental part of his legal practice. IV. to a federally chartered credit union.

I, IV (3-60)

Which of the following securities must be registered by qualification under the Uniform Securities Act? I. ABC, Inc., formed 2 years ago, previously made an offering of its stock in several states. An agent feels that ABC is suitable for several clients and wishes to offer it to them out of the broker/dealer's inventory, even though ABC's stock has never been registered in this state. II. XYZ, Inc., plans to make an offering of its stock in only one state and so will not file a federal registration statement. III. AAA, Inc., is 1 year old and an initial offering of its stock will be offered in several states at once.

II (1-35)

To protect the public, the Administrator may: I. deny the registration of an agent with insufficient net capital. II. require an applicant for registration as both a broker/dealer and an investment adviser to limit activities to those of a broker/dealer due to lack of qualifications to render investment advice. III. require an applicant for registration to submit to an oral examination.

II, III (1-58)

Which of the following are exempt securities under the Uniform Securities Act? I. Common stock, not listed on any regulated exchange, purchased by an open-end investment company. II. Preferred stock issued by an insurance company authorized to do business in this state. III. Municipal bonds issued by Toronto, ON. IV. Private placements.

II, III (3-46)

In October 1987, the SEC promulgated Release IA-1092, which had the effect of broadening the definition of investment adviser. As a result of the Release, which of the following would be included in the definition? I. Commercial banks offering comprehensive financial planning for their high-net-worth clients. II. Entertainment agents earning a fee for negotiating contracts for their clients and then placing a portion of the client's royalties into investment grade bonds or large-cap stocks as market conditions dictate. III. Persons who receive a nominal fee for assisting employee benefit plan administrators select investment managers for the plan's assets. IV. Lawyers who prepare trust agreements for clients with large securities holding with a goal of minimizing estate taxes.

II, III (4-10)

Under NASAA's Statement of Policy on Unethical Business Practices of Investment 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 fee that will be returned to the client in the event the contract is terminated. III. They must prohibit assignment of the contract without the client's consent.

II, III (7-41)

Under the National Securities Markets Improvement Act of 1996, certain securities are designated as federal covered. This means that the Administrator may require all of the following of a federal covered security EXCEPT: I. paying a filing fee. II. providing a consent to service of process. III. submitting copies of any information filed with the SEC. IV. using a state sanctioned legend on the offering documents.

IV (1-51)

Which of the following are not specifically excluded from the definition of an investment adviser under the Uniform Securities Act? I. An investment adviser representative of an advisory firm who makes securities recommendations on a regular basis for compensation. II. A temporary employee hired to assist in administrative responsibilities of an advisory firm. III. Any person who is a federal covered investment adviser. IV. A person who, on a regular basis for compensation, offers specific investment advice to clients as to the value of securities.

IV (7-35)