Mixed
D) prohibited unless the client gives written authorization and approval is granted by the broker-dealer There are two requirements that must be met in order for an agent to share in the profits and losses in a client's account. The client must give written permission and the sharing must be approved by the employing broker-dealer. Unless both of these are present, the practice is prohibited. Yes, IARs cannot share, but the question specifically refers to an agent.
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) permitted if the broker-dealer authorizes this activity B) prohibited as investment adviser representatives are not allowed to share in client accounts C) permitted if the client has given verbal authorization to the agent D) prohibited unless the client gives written authorization and approval is granted by the broker-dealer
Under the Uniform Securities Act, which of the following is excluded from the definition of investment adviser? I. A bank II. An investment adviser representative III. A lawyer giving suggestions to a client on where to invest the proceeds of a divorce settlement that he helped her obtain IV. An investment adviser with an office in the state whose only client is a closed-end investment company registered under the Investment Company Act of 1940 A) I, II, III, and IV B) II and III C) II and IV D) I, II, and III
A) I, II, III, and IV Banks, IARs, federal covered advisers, and lawyers are all specifically excluded from the definition of investment adviser. Any investment adviser under contract to manage a regulated investment company must register with the SEC and is, therefore, a federal covered adviser (regardless of where they have an office). Remember that the law makes a distinction between investment advisers and their representatives and that certain professions are excluded from the definition if the investment advice provided is solely incidental to the practice of that profession. Making suggestions as to how to invest proceeds from a legal settlement would certainly appear to be incidental to the practice of law. Banks are given a blanket exclusion.
Securities of a new company's initial public offering have been SEC registered, and the Registration Statement is effective. The securities were not registered in State X before the effective date, and the Administrator has determined that an offering of the securities in State X is not considered to be in connection with the same offering. A broker-dealer in State X wishes to publicly offer the securities in that state. These securities must be registered with the Administrator of State X in which of the following ways? A) Qualification B) The securities need not be registered C) Coordination D) Allocation
A) Qualification If the Administrator determines (perhaps because of a long delay between the effectiveness of the federal registration and the filing with the state) the securities to be registered with the state are not part of the same offering, the securities would not be eligible for filing by coordination; the securities must be registered by qualification.
Simus Fund, a new open-end investment company, is preparing its registration statement with the SEC. Under the provisions of the NSMIA, this company would qualify for sale in a state by A) notice filing B) coordination C) qualification D) securitization
A) notice filing When a new open-end investment company registers with the SEC, it carries the legal status of a federal covered security, and the NSMIA provides that individual states may not impose normal registration requirements. Instead, the procedure used to notify the Administrator that the securities will be offered for sale in the state (along with payment of a fee) is known as notice filing.
If required by the Administrator, a prospectus for securities registered by qualification must be given to each offeree A) prior to the sale B) only upon request of the offeree C) prior to or concurrent with the effective date D) prior to or concurrent with the filing of the registration statement
A) prior to the sale
B) An agent of a broker-dealer exercised discretion in deciding the time that a sale took place during the trading day without expressed written discretionary authority.
According to North American Securities Administrators Association's (NASAA) Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following practices is NOT unethical? A) Within the first ten days of a client's initial transaction, an agent accepted oral discretion and purchased securities on behalf of the client. B) An agent of a broker-dealer exercised discretion in deciding the time that a sale took place during the trading day without expressed written discretionary authority. C) To protect the client in a declining market, an agent sold all shares in the client's account when the client had only authorized the sale of 30% of the shares. D) An agent sold shares at a price less than authorized by a client.
D) Marital status Although most new account forms do ask for marital status, it is not a required item as are the other choices given here.
An individual walks into the office of a broker-dealer wishing to open a new account. Which of the following information would NOT be required on the new account form? A) Name of employer B) Physical address C) Citizenship D) Marital status
A) quarterly An investment adviser in possession of customer assets must send a statement to the customer at least every three months. The statement must list the securities and funds held by the adviser, their location, and must show all transactions in the account since the last statement date.
An investment adviser with custody of customer funds and securities must send the customer a statement of account activity no less frequently than A) quarterly B) annually C) monthly D) with every transaction
Under the Uniform Securities Act, an offer is made in a state when I. it originates in that state II. it is broadcast by radio or TV from outside the state III. it is contained in a newspaper published outside the state but delivered to an address in that state A) I, II, and III B) I only C) I and III D) II and III
An offer is made when it originates in a state. An offer is also considered to be made in a state when it is directed by the offerer to that state and is received at the place to which it is directed. However, offers received via a TV or radio broadcast that originated out of state or offers contained in a newspaper published out of state are specifically excluded.
For purposes of transactional exemptions, which of the following qualify under the Uniform Securities Act? I. Executor of an estate II. Administrator of a trust III. Custodian for a minor in an UGMA IV. Agent with authority over time and price of execution A) II and IV B) I and II C) III and IV D) I and III
B) I and II Both executors and administrators are fiduciaries. An agent might be considered to be acting as a fiduciary if the agent has discretionary authority over the assets in the account, but time and price authority is not considered discretion. However, in any event, the agent is not included in the list of those fiduciaries qualifying for the transactional exemption. While the custodian does have fiduciary responsibility to the minor, for purposes of the USA's exempt transaction rules, the custodian is not included in the category along with executors, trustees, and sheriffs, etc.
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, markup schedules are dependent upon the type of security, broker-dealer risk, services that the broker-dealer provides, and effort in acquiring the security. B) No, under the circumstances given, it is a prohibited practice to charge a higher than normal markup. C) No, the markup schedule is set and cannot be changed for an individual trade. D) Yes, it is allowable, but proper disclosure is required.
B) No, under the circumstances given, it is a prohibited practice to charge a higher than normal markup. Higher than average markups or commissions are not prohibited if they are justifiable and disclosed. However, in this case, there would appear to be no justification because the customer bought a round lot, the normal trading unit of stock.
According to the Uniform Securities Act, a person representing an issuer in the sale of which of the following securities would have to be registered as an agent? A) Municipal bonds B) Securities issued by a federal credit union C) Securities issued by the Government of Brazil D) Securities of a federally chartered bank
B) Securities issued by a federal credit union An individual is exempt from registering as an agent only when representing the issuer in one of the limited group of five exempt securities, or in any exempt transaction. Oddly enough, a federal credit union is not on that list.
An agent is making a presentation of a mutual fund to a client. In order that the client better understand the risks and expenses involved, the agent takes a yellow highlighter and uses it to mark the most important information in the prospectus. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, this is A) a prohibited practice because by making these marks, the agent is causing the client to ignore other relevant disclosures B) a prohibited practice because no markings may ever be made on a prospectus C) permitted because it is critical that agent's disclose the risks and costs involved in any mutual fund purchase D) permitted because the highlighting permits the investor to still read what it underneath
B) a prohibited practice because no markings may ever be made on a prospectus
Conceptual Financial Solutions (CFS), a broker-dealer registered in States S, B, F and G, has a television commercial broadcast on a station whose studio is located in State S. An individual client who resides in State B, makes an offer to buy based on that advertisement. The State B Administrator would have jurisdiction A) when the client made the offer B) when CFS accepts the buyer's offer C) only if the security or the transaction was not exempt D) at the time the broadcast is received in State B
B) when CFS accepts the buyer's offer The USA provides that a person in State B who makes an offer to buy as a result of an advertisement he sees in a paper published in State S (or a radio or television program originating in State S) may render the statute applicable in a specific state if the seller (CFS) then accepts the offer "in this state" (that is, State B). For our purposes a radio or television program is considered to originate in the state where the microphone or television camera is (State S) and therefore is typically only under the jurisdiction of that state's Administrator. However, when as a result of the advertisement, a resident of another state makes an offer, if it is accepted, then, because a transaction is considered to have taken place in that other state (State B in our question), the Administrator now has jurisdiction.
Under the USA, all of the following issues would be exempt from registration EXCEPT A) stock issued by savings and loan association authorized to do business in this state B) bonds issued by the city of New Orleans C) stock issued by an insurance company not offering policies in this state D) an investment contract issued in connection with an employee stock purchase plan
C) stock issued by an insurance company not offering policies in this state Had the insurance company been authorized to do business in this state, its securities offering would be exempt.
An agent working for a brokerage firm and his client both live in Illinois, and the agent makes an offer to the client by phone while the client is vacationing in California, which he accepts. The client travels to Texas before returning home and sends payment for the security from there. He makes his payment by sending a check from a money-market fund based in Ohio. The Administrators of which of the following states have authority over the sale? I. Illinois II. California III. Texas IV. Ohio A) I, II, III, and IV B) II and III C) I and II D) II, III, and IV
C) I and II Because the offer was made from Illinois to a person in California, the state Administrators of both states have jurisdiction. The state from which payment was mailed and the state in which the checking account or money-market fund is based are irrelevant for the purpose of determining an Administrator's jurisdiction.
The Administrator in State T has jurisdiction over an offer made. I. on a radio program originating in State T II. on a radio program originating in State O III. in a newspaper circulated in State T but published in State O A) III only B) I, II, and III C) I only D) I and II
C) I only The Administrator does not have jurisdiction over an offer made in a TV or radio broadcast that originated outside of the state. The same is true for a newspaper published outside the state.
Differences between static and interactive content on social media include I. Only static content can be reused by others II. Only static content needs pre-approval III. Only static content can be changed by the person who originated it IV. Only interactive content can be commented on by others A) I and IV B) II and III C) II and IV D) I and III
C) II and IV Static content requires pre-approval. Interactive content can be reused by others and can be commented on by others. Both static and interactive content can be changed by its originator, but static can only be changed by its originator and interactive by the originator or others.
Which of the following is NOT an exempt transaction as defined in Section 402 of the USA? A) Corporate bond sale to an insurance company B) Sale of common stock by the county sheriff at the request of the state securities Administrator C) Isolated sale of a corporate bond on behalf of the bond's issuer D) Sale of XYZ common stock, traded on the OTC Bulletin Board, to an individual investor by the executor of an estate
C) Isolated sale of a corporate bond on behalf of the bond's issuer Only isolated nonissuer transactions are exempt.
Under the Uniform Securities Act, all of the following are excluded from the definition of an investment adviser EXCEPT A) broker-dealers and their agents B) a federal covered adviser C) a person in the business of providing advice on municipal bonds for compensation D) banks
C) a person in the business of providing advice on municipal bonds for compensation
An investor who resides in New York reads a newspaper ad for advisory services in a newspaper published in New Jersey. More than 80% of the newspaper's circulation is in the state of New York. According to the Uniform Securities Act, an offer has been made in A) New Jersey B) New York C) neither New Jersey nor New York D) New Jersey and New York
C) neither New Jersey nor New York An offer is not made when a newspaper is circulated but not published in the state, or if it is published in the state but has more than two-thirds of its circulation outside of the state.
Certain securities transactions are considered exempt from the registration and advertising filing requirements of the Uniform Securities Act. Included in that group would be all of the following EXCEPT A) a purchase of stock by an underwriter from the issuer in a firm commitment underwriting B) an offer of preorganization certificates made to 25 persons with 8 of them subscribing, but making no payment C) sale of a security limited in its offering to no more than 10 retail investors in any calendar year D) a sale of stock to a pension trust with assets of $3 million
C) sale of a security limited in its offering to no more than 10 retail investors in any calendar year 12 months NOT calendar year
For purposes of transactional exemptions, which of the following qualify under the Uniform Securities Act? I. Executor of an estate II. Administrator of a trust III. Custodian for a minor in an UGMA IV. Agent with authority over time and price of execution A) III and IV B) I and III C) II and IV D) I and II
D) I and II
Under the Uniform Securities Act, a limited offering transaction would be considered an exempt transaction if I. the offer is directed to no more than 10 individuals during any 12-month period II. the issuer believes that each noninstitutional purchaser is buying the securities for investment purposes III. commissions are not paid to agents of the broker-dealer offering the securities to noninstitutional clients IV. purchases by retail clients are not accompanied by any form of consideration A) III and IV B) II and III C) I, II, III, and IV D) I, II, and III
D) I, II, and III
An IAR is registered in New York and Vermont. While working in his New York office, he places a call to the cell phone of one of his clients who happens to be on vacation in Ohio. After describing the reasons for a particular stock recommendation, the client asks the agent to call back tomorrow. The agent does so and reaches the client in Indiana. The client decides to purchase 100 shares of the stock. When the client arrives home, he notices that he has already received his stock certificate from the transfer agent located in Illinois. In this case, jurisdiction resides with the Administrator of I. New York II. Ohio III. Indiana IV. Illinois A) I, II, III, and IV B) II and III C) I and IV D) I, II, and III
D) I, II, and III The Administrator has jurisdiction from the state in which the offer was made (NY), received (OH), and accepted (IN). Mailing of the certificate is of no consequence.
First Growth Securities, Inc., a member of the Financial Industry Regulatory Authority (FINRA), has its main office in State I and is therefore A) a registered investment adviser licensed to sell securities in State I B) registered by FINRA to sell securities in State I C) automatically registered as a securities agent in State I D) required to register as a broker-dealer in the state of State I
D) required to register as a broker-dealer in the state of State I Securities firms that are members of FINRA are registered with the SEC and must register as broker-dealers in the states in which they maintain a place of business. Under the USA, broker-dealers are firms engaged in the business of effecting security transactions in customer or proprietary accounts. A broker-dealer is not a registered investment adviser, although many broker-dealers own separate legal entities that are investment advisers. FINRA does not license its members to conduct business in the states; the state securities licensing agent is the state securities Administrator. Also, a broker-dealer is not an agent; an agent is a person who is employed by a broker-dealer to conduct securities transactions as a representative of the broker-dealer.
An agent wishes to share commissions with an administrative assistant who provides many useful services. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, A) this is permitted if there is a written agreement between the agent and the administrative assistant that has been signed by the broker-dealer B) this is permitted only if the administrative assistant is employed by the same or affiliated broker-dealer C) administrative personnel may never receive sales related compensation D) this is permitted if the assistant is properly licensed
D) this is permitted if the assistant is properly licensed
A new client is opening a margin account and notices the following wording in the documentation: "You are authorized to lend to yourself or others any securities held by you in my margin account and to carry all securities lent as general loans, and you shall have no obligation to retain under your possession and control a like amount of such securities". When the client asks you what this is about, you would respond that A) if the client does not sign the document, the account cannot be opened B) this is the hypothecation agreement C) this is the credit agreement D) this is the loan consent agreement
D) this is the loan consent agreement No broker-dealer shall lend securities that are held on margin for a customer and that are eligible to be pledged or loaned, unless the broker-dealer shall first have obtained a written authorization from such customer permitting the lending of such securities. That written authorization is known as the loan consent agreement and is the only one of the margin documents that is optional.
B) I, II, and III It is not necessary that there be any relationship between the BD and the institution other than a business one.
If a broker-dealer wishes to conduct operations on the premises of a financial institution, it is required to I. disclose both in writing and orally to customers that the investments being sold are not FDIC insured, may lose value, and are not obligations of the financial institution II. make a reasonable attempt to be in a location physically distinct from that where retail deposits are taken III. attempt to obtain written acknowledgement from customers that they have received and read the disclaimers IV. be under common control with the institution A) I and IV B) I, II, and III C) I, II, III, and IV D) II and III
B) Investment adviser representatives
State laws provide for exclusions from the definition of investment adviser. Which of the following persons is specifically excluded under the Uniform Securities Act? A) A wholly owned subsidiary of a commercial bank that is in the business of offering investment advice B) Investment adviser representatives C) Economists whose advice is strictly incidental to their professional activity D) Broker-dealers receiving special compensation
C) require that the issuer meet minimum financial standards One of the effects of the NSMIA is that a state securities Administrator may not require any financial standards be met by an issuer of federal covered securities. The Administrator, however, may initiate enforcement action, require payment of filing fees to the state, and require submission of a consent to service of process.
The Administrator may do all of the following with respect to federal covered securities EXCEPT A) initiate enforcement action in the case of fraud committed in the Administrator's state B) require submission of a consent to service of process C) require that the issuer meet minimum financial standards D) require the payment of a filing fee to the state
C) do not apply An exempt security or transaction is exempt from the registration requirements and the requirements for filing of advertising and sales literature. It is not exempt from the antifraud provisions of the act.
Under the Uniform Securities Act, the requirements for filing of advertising and sales literature dealing with an exempt security with the Administrator A) apply only to sales literature B) always apply C) do not apply D) apply only to advertising
C) a Canadian corporation
Under the Uniform Securities Law, an individual is not required to register as an agent if he represents any of the following issuers in the sale of their securities EXCEPT A) the Canadian government, a province, or a municipality B) savings institution or trust company C) a Canadian corporation D) any government with which the United States maintains diplomatic relations
C) does not place any assets in the account until it is provided It is proper for fees to be disclosed at the time a customer account is opened. If not presented, clients should ask for the fee schedule and make sure it's up to date. If it is not readily available, clients should not place any assets into the account until it is provided. NASAA believes that clients have the right to know the fees in advance.
When opening an account at a broker-dealer, if the most recent copy of the firm's fee schedule is not available, NASAA recommends that the client A) promptly notifies the Administrator of the firm's failure to comply B) goes ahead with the account opening but refrains from trading until its receipt C) does not place any assets in the account until it is provided D) selects another broker-dealer and opens the account there
A) II and III Isolated nonissuer transactions and transactions by an administrator of an estate are included in the list of exempt transactions. With the exception of Canada, no foreign securities, other than those issued or guaranteed by the sovereign government, are exempt securities.
Which of the following are exempt from state registration? I. A bond issued by the city of San Jose, Costa Rica II. An isolated nonissuer transaction III. A transaction by an administrator of an estate IV. A transaction with no commissions, directed by the offeror over the period of one year, to no more than 50 retail investors in the state who buy the security for investment purposes only A) II and III B) I and II C) III and IV D) I and IV
B) ABC Money Managers, a partnership with $385 million under management It makes no difference what the structure of the adviser is. As long as the assets under management are $110 million or more, SEC registration is required. If the investment company is registered under the Investment Company Act of 1940, the adviser must be registered regardless of size. The Hedge Fund is an unregistered fund so the rule does not apply to it. Under the Dodd-Frank Act, the pension consultant must have $200 million under management to be eligible to be federal covered.
Which of the following firms in the business of rendering investment advice for compensation would be considered a federal covered adviser? A) DEF Fund managers, a corporation managing an unregistered hedge fund with $10 million in assets B) ABC Money Managers, a partnership with $385 million under management C) Retire in Luxury Pension Plan Consultants advising several corporate retirement plans with combined total assets of $145 million D) GHI Consultants, a sole proprietorship, managing $89 million belonging to high net worth individuals
A) Zero-coupon bonds Zero-coupon bonds provide no income, while the other choices do provide income. For someone who needs income, zero-coupon bonds would be the least suitable of the choices shown.
Which of the following is the least suitable recommendation for an elderly widow who needs current income? A) Zero-coupon bonds B) High-quality municipal bonds C) U.S. Treasury bonds D) High-quality preferred stock
