First Series 63 Test (80%)
One way that a financial institution participates in the fight against money laundering is through the filing of
FinCEN Form 112 for large cash transactions NOT FinCEN Form 104 for large deposits The form filed with the Financial Crimes Enforcement Network (FinCEN) is the Form 112. It replaced the Form 104 years ago and there is no IRS form 1040ML. FBI Form FD-772 is a foreign travel request form for FBI agents. SO FORM 112 it is
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, requirements of advisory contracts include which of the following? They must be renewed on an annual basis. They must describe the amount of any prepaid fee that will be returned to the client in the event the contract is terminated. They must prohibit the use of discretion without the client's authorization.
II and III NOT I, II and III There is no requirement that advisory contracts be renewed on an annual basis. Contracts can be written for any length agreed upon. Advisory contracts must describe the amount of any prepaid fee that will be returned to the client if the contract is terminated and must prohibit discretion without the client's consent.
Under the Uniform Securities Act, the term person would include any natural person who has a valid U.S. passport a political subdivision an unincorporated association an inter vivos trust
II, III and IV NOT I, II, III, and IV The term person has an extremely broad definition. It is best to remember the three things that are not persons: minors, individuals who have been judged incompetent, and deceased individuals. Minors can have passports; any natural person would include them and they are not persons under the act.
An individual would NOT be considered an agent under the USA if he engaged in which of the following? An unsolicited transaction with an institutional client for a stock listed on the NYSE Transactions between an issuer and ordinary investors in a non-exempt security A transaction between an issuer and the underwriters Transactions between an issuer and savings institutions or trust companies
III and IV A person is excluded from the definition of an agent when representing an issuer in exempt transactions, transactions between issuers and underwriters, and transactions with existing employees in which no commissions are paid. An unsolicited transaction is exempt, but because it is a nonissuer transaction, regardless of who the client is, the agent must be registered.
Peter Smith, a prominent securities lawyer living in Connecticut, conducts his securities law practice full time in New York state. He must register as an investment adviser in New York state if
Smith's clients, none of whom are residents of New York, receive investment advice as an integral part of Smith's legal services NOT the clients of Smith's law firm are all residents of Connecticut but conduct their business with Smith in New York Smith must register as an investment adviser in New York when or if he is offering investment advice as an integral part of his practice. Since his place of business is in New York, he must register in New York as an investment adviser, even though his clients are not themselves residents of the state. If Mr. Smith advises his wife, who also has an office in New York, that her investment in 15 technology stocks is too high, he need not register in New York because he is not charging his wife a fee for investment advice. Mr. Smith, as a securities lawyer, need not register in New York as an investment adviser when he advises clients on the construction of trust documents.
Which of the following is NOT required to be disclosed in an investment advisory contract under the Uniform Securities Act?
The adviser's past performance over a period of no less than the previous 12 months NO The termination date of the contract The Uniform Securities Act does not require an investment advisory contract to disclose the IA's past performance.
Under which of the following circumstances can an agent conduct customer transactions without the activity being recorded on the books and records of his broker-dealer employer?
The transactions are authorized in writing by the broker-dealer before execution of the transactions. NOT The securities are exempt under the Uniform Securities Act. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, it would be considered contrary to the standards imposed for an agent to effect securities transactions not recorded on the regular books or records of the broker-dealer which the agent represents, unless the transactions are authorized in writing by the broker-dealer before execution of the transaction.
A broker-dealer would NOT be acting unethically if the firm was
acting as agent for both buyer and seller on a transaction NOT engaging in transactions that do not result in the transfer of ownership between buyers and sellers A broker-dealer may act as agent for both buyer and seller in a transaction. All the other activities represent market manipulation and are, therefore, unethical practices. NOTE: THOUGHT BROKER DEALERS WERE NOT ALLOWED TO ACT AS BUYERS AND SELLERS FOR THE SAME TRANSACTION
As appropriate to the scale and complexity of a firm's business, elements of an effective practice framework for managing conflicts of interest include all of the following EXCEPT
ensuring that the firm remains solvent for protection of customers and employees alike NOT avoiding severe conflicts, even if that avoidance means foregoing an otherwise attractive business opportunity Managing conflicts of interest does not take into consideration making enough money to remain solvent. SO FIRMS SHOULD AVOID EXTREME CONFLICTS OF INTEREST EVEN IF IT MEANS PASSING UP ON BUSINESS
Among the powers granted to the Administrator under the Uniform Securities Act is the power to
subpoena witnesses or documents NOT appoint a SIPC Trustee When conducting an investigation, the Administrator may gather evidence by issuing a subpoena to witnesses. Documents may also be the subject of a subpoena. Lack of experience in itself is not a justification for denial of registration. Although the Administrator will generally refer a case to the proper legal authorities for criminal action, many states do permit the Administrator to initiate criminal proceedings. This is an example of a test question where you have to pick the universally correct question. The USA specifically states that the Administrator has the power to issue subpoenas - it is silent on the issue of the Administrator's power to take criminal action.
A broker-dealer publishes a list of securities it approves for inclusion in IRAs. This means
the broker-dealer has evaluated these securities and believes they would be suitable for inclusion for retirement planning NOT the broker-dealer has committed an unethical business practice because use of the word approved is prohibited Approved is an odd word in this industry. It can never be used with reference to any regulator commenting on the status of a security or an individual. However, a broker-dealer creating an approved list of securities is not unethical or prohibited as long as it is clear that it is the BD and not any regulator granting the approval. Even though the firm has listed these securities as suitable for IRAs, that does not relieve the individual agent of verifying the suitability for each clients for whom they are recommended. YOU WERE CONFUSED ON THIS ONE
According to the NASAA investor advisory regarding fees charged by broker-dealer firms for services and maintenance of investment accounts,
the schedule should be made available on the broker-dealer's public website without requiring any login or password NOT as long as the schedule is available in electronic form, it is not necessary to provide a paper version to retail customers Transparency requires that obtaining the fee schedule should be a simple process for retail customers and prospects. That means access without logging in to the broker-dealer's website or needing a password. Paper copies should always be available and cyber security is not a threat because there is no confidential information included.
