Series 66 Practice
ABC Securities is a broker-dealer registered with the SEC and domiciled in State M. ABC Securities would not be defined as a broker-dealer in State N under the Uniform Securities Act if it had no offices in State N and I. its only clients were insurance companies II. it had contact with fewer than 6 State N residents in any 12-month period III. its only solicitation of State N residents was through radio advertisements originating in State M but received in State N IV. it occasionally engaged in firm commitment underwriting with issuers based in State N A) I and IV B) III and IV C) II and III D) I and II
A
An agent discovers that he has sold a customer an unregistered, nonexempt security that she thought was exempt. The broker-dealer offers to buy it back on behalf of the agent. Under the Uniform Securities Act, A) this is legal and is called rescission B) the offer also cannot include interest C) a customer rejecting the offer within 30 days forfeits the right to sue D) this cannot be done under any circumstances
A
An agent of a broker-dealer is currently doing business in one state and would like to conduct business in another state. When checking with the firm's compliance department, the agent would be told which of the following? A) If the agent is a partner, officer, or director and held that position at the time the broker-dealer was registered in that state, the individual need not register separately. B) Registration is required only if an offer is directed, accepted, and paid for in that state. C) No registration is necessary if no commission or other remuneration is paid or given directly or indirectly. D) No registration is necessary in the other state provided the agent's activities are limited exclusively to effecting transactions in certain exempted securities.
A
An investment adviser representative may share in the profits and losses of a customer's account A) under no conditions B) as long as both the customer and the representative's employer give written consent C) provided a written contract is executed between the investment adviser and the client D) if the investment adviser representative deducts the advisory fee charged the customer from any profits earned
A
When registering a security under the Uniform Securities Act, the registrant must indicate all of the following EXCEPT A) the effective date of the offering B) the amount of securities to be offered in the state C) all other states in which the security is to be registered D) adverse rulings by a court, regulatory authority, or the SEC with respect to the offering
A
Which of the following corporate actions would have an effect on the company's working capital? A) Calling in a portion of a 20-year bond at par B) Declaring a 15% stock dividend C) Paying a utility bill D) Borrowing money from the bank on a 90-date note
A
An agent employed at First XYZ Securities produces his own research reports and provides them to a select group of personal clients. The agent has written permission from his employer to engage in this activity, provided the time spent on the project is conducted after working hours. Under the Investment Advisers Act of 1940, if the agent does not charge fees for the research but receives commissions from his employing broker-dealer for trades executed through the firm, A) the broker-dealer must register as an investment adviser and the agent as an investment adviser representative B) neither the agent nor his employing broker-dealer need register as an investment adviser C) the agent must register as an investment adviser because the research is being done after hours D) the agent must register as an investment adviser representative
B
An investment adviser may borrow from all of the following clients EXCEPT A) a commercial bank in conjunction with a mortgage on the office building from which the advisory operates B) a mortgage broker who helped the adviser negotiate mortgage terms for its office building C) a savings and loan association that has offered to finance new computers for the adviser's office D) a broker-dealer in conjunction with a margin account
B
Federal covered securities, as defined under the Uniform Securities Act, A) would not include securities senior to a common stock listed on the NYSE B) include shares of an investment company registered with the SEC under the Investment Company Act of 1940 C) must be registered in the state before they can be offered within the state D) must be registered with the SEC before they can be offered in the state
B
MT Securities is a broker-dealer registered in 42 states. MT Securities makes a market in over 100 different stocks and participates in the underwriting of approximately 22 IPOs per year. Which of the following actions would be prohibited under NASAA's Statement of Policy on Dishonest and Unethical Business Practices of Broker-Dealers and Agents? A) Purchasing shares of an IPO from the issuer and then reselling those shares to the public at a higher price B) Acquiring shares of an IPO as part of the underwriting syndicate and holding a small portion for the firm's investment account, hoping to gain from market appreciation C) Purchasing shares of a security in which it makes a market from a client at one price and then reselling those shares to another client at a higher price D) Adding to its inventory of a stock in which it makes a market, hoping to gain from market appreciation
B
The Uniform Securities Act requires that broker-dealers and investment advisers maintain certain records relating to their business operations. If the firm wished to upgrade to a modern system, such as disk storage, A) it must keep its records in paper form B) it could do so if the system met certain requirements, including that the information on the disk could not be altered C) it must obtain approval from the Administrator prior to determining its method of record retention D) the most modern form currently permitted is microfilm or microfiche
B
Which of the following statements regarding investment risk is NOT correct? A) Investors expect to earn a higher rate of return for assuming a higher level of risk. B) Systematic risk may be reduced or eliminated by effective portfolio diversification. C) A stock's level of risk is a combination of market risk and diversifiable risk. D) The beta coefficient measures an individual stock's relative volatility to the market.
B
The Investment Advisers Act of 1940 requires that investment advisers make certain disclosures to their customers through the delivery of the adviser's brochure. However, there are instances where the act grants an exemption if the client is a broker-dealer an insurance company an investment company a person receiving impersonal advice for which the annual fee is less than $500 A) I and II B) I, II, III and, IV C) III and IV D) I, II, and III
C
An investment adviser structured as a partnership lends money to a customer to buy recommended securities. Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, this activity is A) acceptable, provided the securities are used as collateral for the loan and the loan conforms to the provisions of Regulation T B) acceptable, provided the securities are used as collateral for the loan C) unethical D) acceptable, provided the loan is made under the provisions of Regulation T of the Federal Reserve
C
An investment adviser who has custody of customer funds and securities discovers that its net worth has dropped below the required minimum under the rules of the state Administrator. Under NASAA rules, the adviser must do which of the following? Notify the Administrator by the close of business on the day after discovery File a report of its financial condition with the Administrator no later than the close of business on the day after notification Cease doing business A) I and III B) I, II, and III C) I and II D) II and III
C
Under the NASAA Model Custody Rule, an investment adviser would be permitted to take or have custody of any securities or funds of any client if A) the IA maintained adequate net worth or a surety bond B) customer permission was obtained prior to entering into the contract C) notification was given to the Administrator that he has or may have custody and custody was not prohibited by that state's rules D) permission was obtained from the Administrator and custody was not prohibited by that state's rules
C
A sales agent who is only registered in State A works for a broker-dealer that is registered in all 50 states. A customer who is a resident of State B calls the agent in State A and offers to purchase securities. Under the Uniform Securities Act, the agent should A) accept the order because it is unsolicited B) accept the order because she received it in State A C) accept the order because her broker-dealer is registered in all 50 states D) reject the order because she is not registered in State B
D
Anyone who represents an issuer in effecting transactions between the underwriter and the issuer A) must be registered as an investment adviser B) must be registered as an Administrator C) must be registered as an agent D) is excluded from the definition of agent under the Uniform Securities Act
D
Following the rules of the Uniform Securities Act, an investment adviser ensures that all clients receive a written contract prior to the firm engaging in advisory activities in their accounts. The contract clearly states all of the account details, including the services to be provided, the fees to be charged, and the procedure for handling early terminations. Because the IA has a tendency to pursue some rather unorthodox methods of analysis, the contract provides that the clients waive their right to sue in the event that the IA violates any provision of the USA. Under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives and Federal Covered Advisers, A) the adviser has met the requirements of providing a written contract B) the contract is only enforceable if signed by the client C) the contract is misleading and could lead to action by the Administrator D) waivers of this type are never permitted
D
The Uniform Securities Act permits amendments to a registration statement after its effective date so as to change which of the following? A) The public offering price B) The underwriter's discounts and commissions C) Changes may not be made by amendment; filing of a new registration statement is required. D) The number of shares to be offered
D
When a corporation files for bankruptcy, heading the priority for payment would be A) common stockholders B) employees for their wages C) taxing authorities D) holders of secured debt
D
Which of the following statements are TRUE? When an investment adviser representative begins or terminates employment with an adviser registered under the USA, only the investment adviser must notify the Administrator. When an investment adviser representative begins or terminates employment with a federal covered adviser, only the investment adviser representative must notify the Administrator. When an agent of a broker-dealer leaves the firm, only the broker-dealer must notify the Administrator. 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. A) III and IV B) II and IV C) I and III D) I and II
D