Chapter 1 Questions

Which of the following would be considered individual investors? I. A retired public employee, collecting retirement from a pension and managing a Traditional IRA with a broker/dealer firm. II. An individual currently employed by a large corporation who speculates with discretionary funds in a personal account held at an online broker/dealer. III. A broker/dealer firm that places large orders with an affiliate to fulfill orders for unspecified clients. IV. An investment company that offers mutual funds to clients. [A]I and II only [B]I and IV only [C]I, II, and IV only [D]I, II, III, and IV

[A]I and II only

The USA regulates what investment advisers can say to clients. Which of the following may an IA legally state to a client? I. The adviser can state that they are registered II. The adviser can state that the Administrator has verified all information on the IA's registration III. The adviser can state that the Administrator has passed on the competence of the IA [A]I only [B]III only [C]I and II only [D]II and III only

[A]I only An adviser can only state that they have registered, but it cannot imply qualification or endorsement in any way.

If a small company intends to issue securities in State A, which of the following is true? [A]The company must register as an issuer in State A. [B]The company must register as an issuer in State A and would not have to register in any other state, regardless of if securities were sold in that state. [C]The company must register as a broker/dealer with the SEC and with State A. [D]The company must register as a broker/dealer with State A.

[A]The company must register as an issuer in State A. If a company intends to offer/issue securities in a state, the company would be required to register in that state. Here, the company would be required to register as an issuer in State A.If the company was going to sell in any other states, the company would also be required to register in those states. Even with federal registration as an issuer, the issuers would be required to file in each state in which securities were to be sold.

An offer to sell or buy is considered to have been made in State A when a solicitation [A]originates in State A and is made to a client in State A [B]is on a radio program originating in State B but is heard in State A [C]is published in a nationally recognized financial publication [D]is published in a newspaper in State A

[A]originates in State A and is made to a client in State A

According to the Uniform Securities Act, which of the following is NOT an investment advisor representative? [A]An associate in an SEC-registered investment advisory firm who has a place of business in the state and manages the account of a single client [B]A clerk employed by a state-registered investment advisory firm [C]A director in a state-registered investment advisory firm who determines specific recommendations for clients [D]A vice president of a state-registered investment advisory firm who supervises employees who solicit clients for the firm

[B]A clerk employed by a state-registered investment advisory firm

Under the Uniform Securities Act, which of the following would NOT necessarily be considered an Investment Advisor Representative? [A]A person who makes recommendations or gives advice with regard to securities. [B]A person who performs analysis of securities and writes research reports. [C]A person who determines the suitability of recommendations. [D]A person who supervises employees who provide advice with regard to securities.

[B]A person who performs analysis of securities and writes research reports.

According to the Uniform Securities Act, which of the following is not excluded in the definition of an "Investment Advisor"? [A]A publisher of a general circulation newspaper [B]A person who receives compensation to give advice relating only to securities issued by a bank. [C]A bank, savings institution, or trust company. [D]A lawyer whose advice is solely incidental to the practice of his profession.

[B]A person who receives compensation to give advice relating only to securities issued by a bank.

According to the Definitions listed under the Uniform Securities Act, which of the following is a broker-dealer? [A]Any person who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities. [B]Any person engaged in the business of effecting transactions in securities for the account of others or for his own account. [C]Any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities. [D]Any person who issues or proposes to issue any security.

[B]Any person engaged in the business of effecting transactions in securities for the account of others or for his own account.

Joe is employed as an independent Agent for a small broker-dealer in Mississippi. He also has several clients in Texas. According to the regulations of the Uniform Securities Act, which of the following is true? I. Joe, as an agent with clients in Texas, would be required to register in Texas. II. Joe, as an agent of a broker-dealer registered in Mississippi, would not be required to register in Texas. III. Joe's broker-dealer would be required to register in Texas as well as Mississippi. IV. Joe's broker-dealer would not be required to register in Texas. [A]I & II [B]I & III [C]II & III [D]II & IV

[B]I & III

Under the provisions of the Uniform Securities Act, an individual representing an issuer is not an agent if the issuer is I. a government. II. an insurance company. III. a bank. [A]I and II only [B]I and III only [C]II and III only [D]I, II, and III

[B]I and III only Under the Uniform Securities Act's definition of an "agent", an individual is excluded from the definition if they represent an issuer in effecting transactions in U.S. Government securities and securities issued by U.S. banks. Insurance companies are not included in the exclusions.

Under the Uniform Securities Act the definition of a Federal Covered Security would include which of the following? I. Stock listed or authorized for listing on a national stock exchange II. Mutual funds III. Pooled investment fund shares IV. Intrastate offerings [A]I & II only [B]I, II & III only [C]I & IV [D]I, II, III, IV

[B]I, II & III only

Under the Uniform Securities Act, which of the following are NOT included in the definition of a "security"? I. Certificates of Interest II. Fixed annuities III. Real Estate Investment Trusts IV. Endowment policies [A]I & III [B]II & IV [C]I, II, & III [D]I, II, III, IV

[B]II & IV

Under the Uniform Securities Act, which of the following activities would NOT be included in the definition of a person acting as an Investment Adviser Representative? I. Making recommendations or giving advice regarding any securities II. Managing client accounts III. Making recommendations regarding fixed annuity contracts IV. Making recommendations regarding precious metals [A]I & II only [B]III & IV only [C]I, II & IV only [D]I, II, III, IV

[B]III & IV only

Under the Uniform Securities Act a "sell" or "sale" is any contract of sale or contract to sell a security for value and includes all of the following except? [A]Receipt of a security as a bonus when you buy another security [B]Receipt of a stock dividend [C]Receipt of rights [D]Receipt of warrants

[B]Receipt of a stock dividend

The gift of an assessable security can be defined under the Uniform Securities Act as a(n): [A]exempt transaction. [B]sale of a security. [C]unsolicited transaction. [D]issuer transaction.

[B]sale of a security. Assessable stock is a class of stock in which the issuing company can impose levies on stockholders for more funds. Historically, there were no restrictions on how much additional money a company could demand or on how frequently a company could impose a levy on its stocks. Since levies can be imposed on stockholders a gift of assessable stock would be considered to be a "sale".

According to the Uniform Securities Act, how would a firm that engages in performing securities transactions for others or for its own accounts be classified? [A]A Banking Institution [B]An Investment Adviser (IA) [C]A Broker-Dealer [D]The Agent of a Broker-Dealer

[C]A Broker-Dealer

Under the Uniform Securities Act, which of the following definitions best describes a Broker-dealer? [A]Any legal entity [B]Any individual who represents a firm or issuer in effecting or attempting to effect purchases and sales of securities. [C]Any person engaged in the business of effecting transactions in securities for the accounts of others or for the firm's own account [D]Any person who, for compensation, engages in the business of advising others as to the value of securities or the advisability of investing in, purchasing, or selling securities.

[C]Any person engaged in the business of effecting transactions in securities for the accounts of others or for the firm's own account.

An individual would be considered an "investment adviser" according to Uniform Securities Act regulation if they were compensated for advice relating to which securities? I. Advice on fixed annuities II. Advice on Government Securities such as T-Bonds III. Advice on bank-issued securities IV. Advice on Open End Investment Companies (Mutual Funds) [A]I only [B]I and II only [C]II, III, and IV only [D]I, II, III, and IV

[C]II, III, and IV only

The definition of an "agent" in the Uniform Securities Act includes persons who are in the business of: I. Advising clients about securities for compensation II. Selling securities listed on a major stock exchange III. Representing an insurance company during the issue of securities IV. Effecting commission-free securities transactions [A]I and II only [B]II and III only [C]II, III, and IV only [D]I, II, III, and IV

[C]II, III, and IV only Agent is defined as any person who represents a broker/dealer or issuer in effecting or attempting to effect purchases or sales of securities.

Which of the following is true under the Uniform Securities Act? [A]Any broker/dealer who gives investment advice is considered an investment advisor even though such advice is incidental to the conduct of his business and he receives no special consideration [B]A publisher of a financial magazine with a paid circulation is considered to be an investment advisor. [C]Lawyers, teachers, engineers and accountants who perform advisory services incidental to the practice of their profession is not considered to come within the definition of investment advisor [D]The term investment advisor includes banks.

[C]Lawyers, teachers, engineers and accountants who perform advisory services incidental to the practice of their profession is not considered to come within the definition of investment advisor

Under the Uniform Securities Act, a registered agent of a broker-dealer wants to remain affiliated with the broker-dealer she is now registered with and also wants to become affiliated with another broker-dealer since her original firm does not offer all of the securities she would like to sell to her clients. Which of the following is true with regard to this situation? [A]The agent would not be allowed to become dually registered under any circumstances. [B]The agent would be required to get approval from the SEC in order to carry dual registration. [C]The agent would be required to become registered with both broker-dealers, disclose this to both broker-dealers and be supervised by both broker-dealers. [D]The agent would be required to form a partnership with another registered person at the other broker-dealer and split commissions with the other registered representative.

[C]The agent would be required to become registered with both broker-dealers, disclose this to both broker-dealers and be supervised by both broker-dealers.

According to the Uniform Securities Act, which of the following is excluded from the definition of an "Investment Advisor"? [A]An individual whose reports relate only to municipal securities [B]A broker/dealer who is a member of the NASD [C]A person whose investment analysis relates only to securities [D]A teacher whose investment advice is solely incidental to the practice of his/her profession

[D]A teacher whose investment advice is solely incidental to the practice of his/her profession

Under the Uniform Securities Act, the definition of investment adviser representative includes all of the following except [A]Sales representatives [B]Managers of sales representatives [C]Directors who determine which securities recommendations will be made to clients [D]Clerks

[D]Clerks

Of the following list, which would be considered to be a State under the Uniform Securities Act? I. Puerto Rico II. Oregon III. District of Columbia IV. Texas [A]I & III [B]II & IV [C]II, III, IV [D]I, II, III, IV

[D]I, II, III, IV

All of the following persons are included in the definition of an "investment adviser representative" under the Uniform Securities Act except: [A]Someone who manages client's accounts and portfolios while employed by an investment adviser [B]Someone who provides investment advice to clients while employed by an investment adviser [C]Someone who receives compensation for transactional business [D]Someone who is employed by an investment adviser as a clerk or receptionist

[D]Someone who is employed by an investment adviser as a clerk or receptionist