Q Bank 1

If an agent has secured a signed statement from a customer that waives the customer's right to sue for a transaction in violation of the USA, the agreement is A) null and void B) legal but only in a criminal case C) legal D) legal but only in a civil case

A The USA explicitly states that no provision of the act may be waived, whether the client consents to the waiver or not.

Which of the following is required to register in a state under the Uniform Securities Act? A)ABC State Bank, which provides investment advice in its branches throughout the state B)A broker-dealer who has no place of business in the state and whose only clients in the state are limited to insurance companies, banks, and broker-dealers C)An investment adviser who has no place of business in the state and communicates with only 5 advisory clients in the state for the year D)An investment adviser who has a place of business in the state and whose only clients in the state are insurance companies, banks, and broker-dealers

Answer = D looking for someone that NEEDS to register A --> Banks are not a part of the definition of BD or IA, therefore they do not need to register B --> BD with no place of bus AND institutional investors are exempt from registration C --> IA No place of bus and communicates with only 5 non institutional are exempt, no reg D--> IA with a place of bus always registers in that state regardless of clients

Which of the following persons must register as an investment adviser under the Uniform Securities Act? A)An accountant who makes no pretense of providing investment advisory services but gives incidental advice to clients as a small part of accounting services provided B)An investment adviser who only serves institutional clients and whose only office is in this state C)An investment adviser representative with no place of business in the state who has dealt with 7 retail clients during the most recent 12 month period D)An investment adviser whose advice is limited to securities issued or guaranteed by the U.S. government and who has 3 places of business in the state

B

The first of the federal securities acts was the Securities Act of 1933. This act requires persons selling a new offering to their clients to: A)be properly registered prior to making the offer B)deliver a preliminary (red herring) prospectus prior to the sale C)deliver an effective (final) prospectus no later than with confirmation of the sale D)deliver a copy of the registration statement no later than with confirmation of the sale

C the securites act of 33 = "paper act" it requires the delivery of a final prospectus of a new offering now later than with the confirmation of the sale

The Affray Compassionate Finance Company (ACFC) is offering $100 million of 150-day commercial paper for sale in State L. The paper is available in minimum denominations of $100,000 and has been rated AA by a leading rating organization. Who of the following would be required to register as an agent in State L in order to legally sell this security in the state? A) An employee of the Affray Compassionate Finance Company who receives a 1% commission on sales. B) An investment adviser who recommends this security to clients. C) Because this security is exempt from registration, offers and sales can be made without registration as an agent. D) An agent of a broker-dealer registered in the state.

D

Which of the following involves an offer or sale? A)An exchange of securities due to a reorganization B)A pledge of stock C)A stock dividend D)A gift of an assessable security

D - recipient may be required (assessed) to put up money, involves both an offer and a sale

When describing exempt transactions under the USA, which of the following are fiduciaries? Executor of an estate Administrator in intestacy Custodian for a minor in an UTMA account An agent with authority over time and price execution

Executor of an estate and Administrator in intestacy

Under the USA, which of the following are considered a sale or an offer to sell? 1. The gift of assessable common stock 2. The gift of nonassessable stock 3. The sale of a warrant to purchase stock

1 + 3

The Administrator may require which of the following from a federal covered adviser? 1. copy of the IA's Form ADV 2. filing of the IA's advertising in the state 3. a listing of the IA's fee schedule 4. a filing fee

1 + 4

Under the Uniform Securities Act, which of the following statements are TRUE about the authority of an Administrator? 1. A cease and desist order may be issued prior to a hearing. 2. A cease and desist order may be issued after a hearing. 3. A cease and desist order is valid for a maximum of 30 days.

1,2

Under the Securities Act of 1933, the definition of prospectus includes 1. an offer of a security made orally 2. a tombstone advertisement for a security 3. an offer of a security made in a personal letter

3 A prospectus is a communication made in writing or by radio or TV that offers a security for sale. - oral offer does not need prospectus - tombstone advertisement is specifically excluded from the definition

With regard to the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, proscribed actions would include 1. accepting an order from a third party after written trading authorization has been received 2. forwarding a written complaint from a customer to the appropriate supervisory person 3. offering to repurchase a security at its original cost if it does not increase in value 4. borrowing money from a client who was the agent's college roommate

3+4 Prohibited actions under the policy would be guaranteeing a client against loss by agreeing to repurchase a security at its cost and borrowing money from a client who is not in the money-lending business.

The Administrator may, by rule, A) forbid investment advisers registered in that state from taking custody of client funds B) suspend federal law if the Administrator believes it to be in the public interest C) allow an agent to waive provisions of the USA D) suspend the registration of a federal covered adviser because the contract did not meet the requirements for a state-sanctioned investment advisory contract

A D --> administrators do not regulate federal covered advisers

A client of an investment adviser needs a bridge loan and approaches the IA to see if the firm is interested. Because the IA is not in the business of lending money, a special agreement is drawn up specifying the terms of the loan. Under NASAA's Model Rule dealing with Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers A)the loan could be made if the client was an institutional investor B)the loan would not be permitted under any circumstances C)the loan could only be made after the advisory contract was terminated D)the loan could be made if the IA was affiliated with a bank

C Loans may never be made to clients unless the firm is in the business of lending money. Because this IA states that it is not their business model, the only way this loan could be made is if there was no adviser/client relationship.

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 nonissuer sales are EXEMPT

What is the appropriate procedure to follow when an advisory client delivers a stock certificate to the office of a broker-dealer? A) Accept the certificate and send the customer a receipt within 24 hours of the delivery. B) Instruct the client to send the certificate to the transfer agent because you cannot accept it. C) File a currency transaction report if the current market value of the stock represented by the certificate exceeds $10,000. D) Accept the certificate and give the customer a receipt.

D

Ways in which offerings under Rule 506(c) of Regulation D of the Securities Act of 1933 differ from those under Rule 506(b) include each of these except A) all purchasers of the Rule 506(c) securities must be accredited investors as defined in Rule 501, whereas Rule 506(b) permits a limited number of sophisticated but not accredited investors B) the issuer must take "reasonable steps" to verify that all purchasers are accredited investors in a 506(c) offering, while no such obligation falls upon issuers in a 506(b) offering C) general solicitation is permitted under Rule 506(c) offerings; no advertising is permitted under Rule 506(b) D) securities issued under Rule 506(c) are federal covered, while those under Rule 506(b) are not

D Under the NSMIA, any security issued under the federal transaction exemption offered under Rule 506, either (b) or (c), is considered a federal covered security.

Life insurance companies offer many different products. Which of the following would NOT be considered a security? Index annuity Modified endowment Variable annuity Variable life

Index annuity and modified endowment - any insurance product that contains the word "variable" in it is a security

There are two instances where an individual employed by the issuer to sell its securities is not considered an agent.

The first is when the issuer is one of 5 specific named cases. That list includes: -savings institutions (banks) -the federal governments of the United States and Canada, as well as any of their political subdivisions. The list does not include insurance companies. The second case is when the securities are being sold in an exempt transaction.

What are the limits for the Play to Pay rule?

The rule allows covered employees to make contributions of up to $350 per official or candidate per election in which they can vote, or $150 for other elections.

There are 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are:

commissions; markups and markdowns; and advisory fees for those firms that are also registered as investment advisers.

What is an investment counsel?

the term "investment counsel" may be used by any adviser that meets two standards: - the adviser performs investment supervisory services - the adviser provides advice as the primary business of the firm

A registered investment adviser has a fiduciary duty to disclose all real and potential conflicts of interests to clients. Which of the following are examples of conflicts that would require disclosure? 1. A registered investment adviser spends about 25% of its time on investment advisory activities and the balance on managing rental real estate projects 2. A registered investment adviser spends about 25% of its time supervising the activities of its investment adviser representatives 3. An investment adviser representative, who is also an insurance agent, may decide to recommend a particular insurance product based on an incentive to sell the product 4. An investment adviser representative, who is also an agent with an unaffiliated broker-dealer, directs transactions to that firm

1,3,4 if an IA is devoting time to nonadvisory pursuits, it needs to be disclosed

According to the Investment Advisers Act of 1940, which of the following statements regarding Part 2 of Form ADV are TRUE? 1. It must be filed with the state Administrator. 2. A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, 6 or more months in advance. 3. Certain minimum business and education qualifications must be met before an investment adviser can file. 4. It may be used to satisfy the brochure requirements of the act.

2 + 4 An investment adviser required to register with the SEC under the Investment Advisers Act of 1940 must submit its Form ADVs to the SEC. In some cases, the Form ADV will also be filed with the state Administrator, but that is state law, not a federal requirement.

An individual has been hired by a person to assist in the selling of securities it is issuing to residents of State A. The individual would be defined as an agent under the Uniform Securities Act if the issuer is A)a credit union organized and supervised under the laws of State A B)issuing commercial paper in minimum denominations of $100,000 with an AA rating and a 6month maturity. C)a trust company organized and supervised under the laws of State B. D)the city of Saskatoon, Saskatchewan (Canada). Explanation

A

If having discretion over $100 million or more in 13(f) securities, which of the following would be exempt from filing a Form 13F? A) An investment adviser that manages mutual fund assets B) A natural person who exercises investment discretion over her own account C) A natural person who exercises investment discretion over the account of any other natural person or entity D) A trustee

B An institutional investment manager is also a natural person or an entity that exercises investment discretion over the account of any other natural person or entity. For example, an investment adviser that manages private accounts, mutual fund assets, or pension plan assets is an institutional investment manager; so is the trust department of a bank. A trustee is an institutional investment manager, but a natural person who exercises investment discretion over her own account is not an institutional investment manager.

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: A)a misdemeanor B)no violation C)a criminal violation punishable by up to three years in prison D)a civil violation punishable by a fine up to $5,000

B No violation occurs because the Uniform Securities Act requires the disclosure of only material facts. Material facts are those that could influence the price of a security. Changing investment managers on a pension plan would not affect the price of a stock and is not material to the investment decision.

When an agent recommends a proprietary mutual fund to a client, it is considered A) an unethical business practice B) a potential conflict of interest C) an obvious attempt to maximize personal compensation D) a violation of the agent's fiduciary responsibility

B agents act under a BEST INTEREST standard IAs and IARs act under fiduciary responsibility

Under the Uniform Securities Act, the Administrator has the power to deny, suspend, or revoke the registration of an issue if it is in the public interest and: A. the issuer discloses in the prospectus that there is virtually no chance that the company's business model will be successful and investors should anticipate losing their entire investment B. the Administrator of another state has revoked the issue's registration C. an officer of the registrant has been convicted of a securities-related crime D. the prospectus contains misstatements of nonmaterial information

B + C non material information does not impact an investor's decision making process

In which of the following instances would an investment adviser representative be exempt from the antifraud rules of the Uniform Securities Act? A)Because the IAR understands how nervous a particular client is, he never admits a loss in the account to that client. B)In an effort to avoid possible conflicts of interest, the IAR only does personal trades through an account set up with a fictitious name. C)The IAR is also an agent of a broker-dealer and, in that capacity, makes a recommendation to a nonadvisory client. D)The IAR makes a presentation at a seminar where the only topic discussed is fixed annuities.

D Because fixed annuities are not securities, a presentation dealing solely with that topic is not covered under the antifraud statutes of the USA.

Which of the following statements regarding unsolicited orders is TRUE? A)The state Administrator may not require the client to sign an acknowledgment that the order was unsolicited. B)Unsolicited orders are nonexempt transactions under the USA. C)The state Administrator may not prohibit the solicitation of specific securities in the state. D)A client may purchase, at his own initiative, securities trading in the secondary market through an agent who otherwise is prohibited from soliciting the order.

D If a client requests the purchase of a security that an agent is prohibited from soliciting, the agent can accept the order and mark the order unsolicited. This is the most common of the exempt transactions.