Series 63 - Unit 5

What is found on an order ticket?

Account number, execution price, time of order entry, time of execution or cancellation, and terms and conditions of the order

When does a deliberate omission of a fact in a securities sale constitute fraud?

If a reasonable person would base an investment decision on the omitted information

When discussing cybersecurity, the term "covered account" refers to:

a personal or family account for which the firm must provide data protection

The NASAA Model Rule on Agency Cross Transactions requires that an investment adviser send a written disclosure document to affected clients that includes such items as the total number of agency cross transactions during the period for the client, as well as the total amount of all commissions or other remuneration the investment adviser has received in connection with agency cross transactions for the client during the period no less frequently than

annually

A broker-dealer offering a security for sale must:

be prepared to sell the security at the quoted price

Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, it would be prohibited for an agent to:

describe a mutual fund as being "no-load" if it had a conditional deferred sales load

If a licensed agent believed that interest rates were about to fall and contacts all of her clients and suggests they purchase high quality debt securities with long-term maturities, this action:

has probably violated the Uniform Securities Act's suitability standards

An agent wants to sell a highly valuable unregistered, nonexempt security to a customer. The agent has the client sign a waiver indicating that the security is not registered so the security may be sold legally per the Uniform Securities Act. This sale of the security is:

illegal because provisions of the Uniform Securities Act cannot be waived

If an agent receives a written complaint letter from a customer and believes the complaint is entirely unfounded, the agent should:

immediately present the complaint letter to a principal of the broker-dealer

The price at the time of the order:

is not significant, the execution price is

A broker-dealer holds customer securities for safekeeping. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, the broker-dealer:

must segregate them

An investment adviser representative may share in the profits and losses of a customer's account

never

Under what conditions would a waiver signed by a client protect an agent against civil or criminal liability?

never

If an agent fails to inform a client that a company whose security he is selling is changing the investment managers of its employee's pension plan, under the Uniform Securities Act, this omission constitutes:

no violation because the USA requires the disclosure of only material facts

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

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

An agent may borrow securities from a customer:

only if the client is in the business of lending securities

A broker-dealer will be underwriting an IPO. From all appearances it seems that this will be a hot issue. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents:

shares must be allocated to clients based on their indications of willingness to purchase the shares

According to the Uniform Securities Act, a state-registered investment adviser may have custody of a customer's funds and securities if:

the Administrator has been informed of the custody

An investment adviser representative borrows $10,000 from his mother-in-law, who is also a client. He signs an agreement to pay back the loan in 5 years at below market interest. This arrangement is:

unacceptable because it is considered an unethical business practice to borrow from a client not in the lending business

Mrs. Smith is an agent's lifelong friend and best customer. Due to a substantial stock market drop, the agent receives a maintenance margin call in his personal account that cannot be satisfied without liquidating securities in the account. Mrs. Smith offers to transfer cash and securities from her own account into the agent's account. Because this offer could be misunderstood, the agent borrows $10,000 from Mrs. Smith under a legal and binding loan agreement specifying the rate of interest the agent will pay on the loan. In the above situation, the agent has acted:

unlawfully, because borrowing money or securities from a customer is prohibited

An income-oriented customer has a discretionary account with an agent. If the agent purchases speculative growth stock on behalf of the customer, under the Uniform Securities Act, this is considered a(n):

unsuitable transaction

To share in a customer's account:

written consent of both the client and the broker-dealer need to be obtained