Series 63

A broker-dealer's agent that is registered in State A, wishes to sell a security in State B. Which of the following may be sold in State B without the agent being registered in State B?

Commodity FuturesIII Fixed Annuities

All of the following events would result in an advisory contract being considered to have been transferred EXCEPT:

a minority partner in an advisory firm sells his interest to another individual

Michael Michaelson has an MBA in finance and has taught classes at a local college for the past 15 years. He has decided to use his knowledge and acumen in the private sector and registers in the State as an investment adviser. His business will be creating financial plans and implementing them for clients. Michael requests a waiver from the State Administrator from having to pass the Series 65/66 exam based on his educational and teaching background and receives it. He registers as an IA in the State. He wishes to publish an advertisement for his new business. Michael can state which of the following in the advertisement?

"My fee schedule, which is non-negotiable, is comparable to that charged by other advisers that do not have my extensive finance background"

An agent of a broker-dealer puts up a website that promotes the benefits of dollar cost averaging, including the caveat that it is suitable for investors only if they can maintain their periodic payments regardless of economic conditions and that it requires a long-term investment time horizon. If the website is viewed by an individual in another State where both the broker-dealer and agent are not registered, which of the following disclosures are required on the site in order not to be in violation of the Uniform Securities Act in that State?

"The broker-dealer or agent may only transact business in the State if registered in the State or if exempted or excluded from registration"II "Follow ups or individualized responses to persons in the State that involve either effecting or attempting to effect transactions in securities will not be made absent compliance with State registration requirements or an applicable exemption or exclusion"

Registration of securities in a State by Filing becomes effective:

5 business days after the filing with the State is completed

Which of the following persons is required to register as an investment adviser under the Uniform Securities Act?

A broker-dealer that charges an annual flat fee to customers for both investment advice and portfolio trade executions

A written customer complaint is received by mail that the firm resolves to the customer's satisfaction. Which statement is TRUE regarding keeping this record?

A copy of the original complaint along with its resolution must be retained in the file of the agent by the broker-dealer

Under the Uniform Securities Act, an "offer" or "offer to sell" include all of the following EXCEPT:

A sale of a security

Misstatements of material fact in a securities registration are violations of the Act for all of the following persons EXCEPT:

Agents

Which of the following individuals are defined as an agent under the Uniform Securities Act?

An individual who represents an issuer in selling non-exempt securities. An individual who represents a broker-dealer in selling exempt securities. An individual who represents a broker-dealer in selling non-exempt securities

Under the NASAA Statement of Policy on unethical practices, which of the following investment advisers would be able to loan monies where securities are collateral for the loan?

An investment adviser that has a registered broker-dealer that lends money to a customer through the broker-dealer affiliate, An investment adviser that is a subsidiary of a parent bank that lends money to a customer through the bank affiliate and An investment adviser that is a corporation lends money to its officers

To protect against identity theft and theft of funds, client instructions received electronically must be:

Authenticated

An agent of BD "A" receives a job offer from BD "B." If the agent accepts the job at BD "B," his State registration with BD "A" will:

Be terminated by broker A

An agent of a broker-dealer is told by a wealthy, well-connected client that "I just talked to the president of ABCD Corp. (an NYSE listed company) and was told that this quarter's results are going to be lousy." Which statement is TRUE?

Can discuss with branch manager

Investment advisers are prohibited from doing all of the following EXCEPT:

Charging a retainer fee

Which records MUST be retained in a state-registered investment adviser's principal office?

Customer securities positions and records of customer purchases and sales orders

All of the following securities are subject to registration under the Uniform Securities Act EXCEPT:

Equipment trust certificate of a railroad subject to Interstate Commerce Commission regulations

When can an Investment Adviser borrow from a client?

If the client is a BD

Which of the following may be required by the Administrator to be filed by a broker-dealer to maintain registration?

Financial reportsII Registration renewal feesIII Sales literature

If a sole proprietor wishes to register with the State as an Investment Adviser, which of the following documents are required?

Financial statement of the sole proprietor and An affirmation made by the sole proprietor that the document filed is true and current

Under the provisions of the Prudent Investor Act, a Registered Investment Adviser should consider which of the following when investing and managing trust assets?

General economic conditions, Possible effects of inflation or deflation and Investment tax consequences

All of the following individuals are EXCLUDED from the definition of an investment adviser EXCEPT a(n):

Geologist

For initial registration as an agent in a State, all of the following are required EXCEPT:

Gov ID

Surety bonds may be required by the State Administrator for the licensing of:

I AgentsII Broker-DealersIII Investment Advisers

Which of the following are exempt securities, or are excluded from the definition of a security, under the Uniform Securities Act?

I Common stock of a New York Stock Exchange listed issuer III Contracts requiring periodic payments of fixed amounts into fixed annuitiesIV Endowment contracts

Which of the following must be included in an investment advisory contract under NASAA rules?

I The fact that prepaid fees will not be returned if the contract is terminated early, The fact that assignment of the contract is only permitted with customer consent and Whether the contract grants discretionary authority to the adviser

If a representative that transacts business in a State terminates employment with an investment adviser, notice must be given to the Administrator by the:

IA

The State Administrator has the power to do which of the following to a federal covered adviser?

Increase the number of audits that the Administrator makes of the adviser

Which of the following is NOT EXCLUDED from the definition of an "investment adviser"?

Insurance company

Which of the following is NOT a qualified custodian under NASAA rules?

National Securities Clearing Corporation

Under the Uniform Securities Act, an investment adviser with no place of business in a State only does 1 trade in a non-exempt security in the State within a 12 month period. Which statements are TRUE?

No registration of the security is required because the transaction is exempt and The investment adviser is not required to register in the State because it qualifies for a "de minimis" exemption

Under NASAA rules, which of the following records must be retained for 5 years by a Federal Covered Adviser?

None because NASAA does not set rules for federal covered advisers - only the Investment Advisers Act of 1940 applies! NASAA rules for IAs only apply to State-registered advisers (those advisers with less than $100 million of assets under management).

Under NASAA rules, which of following are unethical practices when recommending a mutual fund to a customer?

Not disclosing to a customer the sales charge discount if a purchase is made at the breakpoint level and Recommending the purchase of shares which results in the customer simultaneously holding shares in different investment company portfolios with similar investment objectives

Which statements regarding registration of a security in a State are FALSE?

Once registration is declared effective in a State, it is effective in any other State in which a registration statement is filed and To maintain registration in a State quarterly and annual financial statements must be filed with the Administrator

An investment adviser representative quits her employment with a State-registered adviser so that she can attend graduate school. After completing her MBA, she intends to reassociate with the same advisory firm in a management capacity. Which statement is TRUE about notifying the State Administrator of the IAR's termination?

Only the Investment Adviser is required to notify the Administrator, but if the IAR learns that the adviser has not given notice, the representative must do so

Under the Uniform Securities Act, an agent may engage in which of the following transactions?

Performing investment advisory services for customers as long as they are solely incidental to his work as a broker and no fees are charged

Which statement is TRUE about registration of broker-dealers, investment advisers and their agents in a State?

Registration as a broker-dealer or investment adviser expires 1 year from its effective date of January 1st

All of the following are federal covered securities EXCEPT:

SEC Reg.

An investment adviser agrees to direct its portfolio trades to a specific broker-dealer at full commission rates in return for the broker-dealer providing the adviser with a leased new car paid by the broker-dealer. This is:

Soft $, not allowed b/c it doesnt improve business

An agent and her customer reside in State A, where the agent is registered. The agent is vacationing in State B, where her client also happens to be vacationing. While in State B, the agent makes an offer of securities to the client. Who has jurisdiction over the transaction?

State B only

All of the following orders must be retained as a record by broker-dealers EXCEPT:

Subscription orders

To register an agent in a State, the Administrator can require which of the following?

Surety Bond and Exams

Two individuals sponsor golf tournaments to which they invite venture capitalists that seek to be matched with wealthy potential investors. The individuals sponsoring the event intend to collect a finder's fee paid by the venture capitalist if he or she receives funds from an investor that attended the golf tournament. Which statement is TRUE based on these facts?

The 2 individuals are defined as broker-dealers because they will receive compensation if an investor is matched to a venture capitalist

A broker-dealer and agent located and registered in State A have a client that resides in State A. State B is just across the river from State A, and the agent and customer meet at a restaurant in State B to discuss the customer's portfolio. The agent frequently recommends this restaurant to his clients because it has excellent food and reasonably priced drinks. Neither the broker-dealer nor the agent are registered in State B. At the meeting, the agent recommends that the customer buy XYZ stock. The client is not interested in the recommendation, but he has heard about DEF stock from a wealthy friend and tells his agent to buy 1,000 shares of DEF. The agent telephones the order to his assistant in the office in State A. The order is immediately executed and confirmed verbally over the telephone by the assistant to the agent, who informs the client while at the table in the restaurant in State B that the trade is done. The client writes a check to the agent, thanks him, and leaves. Which statement is TRUE?

The Administrators of both State A and State B have jurisdiction over this transaction

The CEO of a publicly traded company is a large client of an investment adviser representative. The CEO, who is a member of the prestigious River Rocks Country Club, tells the IAR that he will refer other club members to the IAR if the IAR will give the referred clients a discount, and will give the CEO the same discounted rate. Which statement is TRUE about this situation

The IAR can offer the discount as long as the fact that non-club members pay a higher fee is disclosed in the Form ADV Part 2A

Under the Uniform Securities Act, which statements are TRUE regarding investment advisers that take custody of customer funds?

The administrator can require a higher surety bond for advisers that take custody of customer fundsIII Statements of account must be sent to customers whose assets are held in custody at least quarterly

A customer buys 500 shares of ABCD stock in a cash account and pays for the securities in full on settlement date. The customer requests that the broker-dealer transfer the securities into the customer's name and ship them to his home address. Which statement is TRUE?

This request should be honored as given

A 62-year old married customer has an individual account with the same broker at the same firm for the last 15 years. This customer suffers a stroke and is mentally incapacitated. Which statement is the BEST choice regarding actions that can be taken by the agent to manage the account?

The agent may follow instructions given in a written letter kept in the account file from the customer when the account was opened 15 years ago

An older customer with failing eyesight requests that his mail be delivered to the agent's brokerage firm branch office rather than to his home. He also requests that his agent be the one to read, on at least a monthly basis, his statements to him. If the agent cannot commit to this, the customer wishes that the agent's secretary be the one to read the mail. Which of the following actions may be taken?

The agent must refuse the customer's request because all mail must be sent to the customer's address or P.O. box

Which of the following are ALWAYS reasons why an agent would be denied registration in a state?

The agent was convicted of a drug felony 7 years agoII The agent was convicted of a securities misdemeanor 8 years ago

Which of the following information MUST be included on a customer confirmation?

The customer name and account numberIV The price of execution

Which of the following private information about a client can be disclosed?

The customer's account holdings when directed under a court order subpoenaing the information as part of a court hearing

A customer has a free credit balance at a broker-dealer. The customer makes a verbal request over the phone that the broker-dealer pay the amount of the balance immediately, in check form. Which statement is TRUE?

The request should be honored as given

A customer contacts her IAR (Investment Adviser Representative) and tells her to: "Sell my 1,000 share XYZZ stock position if the price falls to $35 per share." After receiving this customer's order, the IAR stumbles across an XYZZ company press release that has not yet been distributed stating that the company has lost an extremely large government contract. The press release occurs 3 days later, at which point the stock's price dives and becomes worthless. The IAR was able to sell the customer's stock at $35 when the price was falling. Which statement is TRUE about this?

This is not an insider trading violation because the customer placed the order before the IAR knew of the non-public information

Which statement is TRUE about such a fee structure arrangement?

This is permitted as long as the negotiated fee is less than 1%

Which of the following information MUST be included on a customer confirmation?

Whether a payment for order flow was made, The customer name and account number and The price of execution

Securities traded on the Midwest (Chicago) Stock Exchange are NOT exempt from which requirement of the Uniform Securities Act?

anti fraud

A Registered Investment Adviser is the beneficiary in the liquidation of a partnership investment that it made years ago and in settlement, receives the assets of an existing broker-dealer. As a result of this, the directors of the RIA:

are not required to register in the State as directors of the broker-dealer, nor take qualification exams, as long as they are not involved in overseeing the sales or operations of the broker-dealer

Under the Uniform Securities Act, the registration of a broker-dealer may be revoked for all of the following reasons EXCEPT the firm does not:

file customer complaints with the Administrator

If a customer wishes to purchase an initial public offering of a non-exempt security, then the customer must receive a:

final prospectus at, or prior to, confirmation of sale

If an investment adviser is "federal covered," this means that the adviser:

has at least $115,000,000 of assets under management

A sales representative who fails to register as an agent of a broker-dealer:

has committed a misleading ActIII is subject to civil liability

Under NASAA rules, each Registered Investment Adviser must establish, implement and maintain a Business Continuity and Succession Plan that

is based on the investment adviser's business model including the size of the firm, types of services provided, and number of business locations

Customer privacy rules allow the disclosure of a specific customer's account information:

to a third party as necessary to complete a transaction requested by that customer

In order to make an offer of a non-exempt security, an agent of a broker-dealer:

must be registered in the State in which he or she resides and the broker-dealer is located and must be registered in the State where he or she is offering the security

Under NASAA recordkeeping rules for investment advisers, any advertisement, circular or other communication:

must be retained if it is circulated to 2 or more persons and can recommend the purchase or sale of a specific security and if it does not state the reasons for the recommendation, a memo must be retained indicating the reasons for the recommendation

Under the Prudent Investor Act, a fiduciary is:

obligated to maximize overall portfolio return consistent with the level of risk assumed

The Administrator may deny or revoke a securities registration by:

order

Sending out a blanket e-mail that makes recommendations of securities to a list of web addresses by a broker-dealer or agent is:

prohibited

To get a customer to open an account, an agent tells a client that she will have the manager of any mutual fund that the customer purchases call each month to explain the fund's performance. This statement is:

prohibited

All of the following information would be found in a registration statement for a security that is going to be registered by qualification in a State EXCEPT:

projections of future earnings of issuer

The Administrator has the authority to do all of the following EXCEPT:

suspend or revoke registration of persons solely if it is "in the public good"