Series 63 final 5
59, To prevent financial exploitation of seniors, FINRA requires that when opening an account for a client, reasonable efforts must be made to obtain the name, phone number, and mailing or e-mail address of: A the client's attorcy B anyone granted a power of attorney by the account owner C trusted contact person D trustee over the account
C = trusted contact person
57, An agent of a broker-dealer is opening a new client account. The agent has completed the new account application and the suitability determination. The customer has an investment objective of safety of principal and income. The agent makes an initial recommendation of a conservative blue chip stock with a track record of paying a consistent cash dividend. The customer accepts the recommendation. When must the commission charged on the transaction be disclosed to the customer? A At the time that the order is placed B At the time when the order is filled C At the time when the account is opening D On the confirmation of the transaction
D = On the confirmation of the transaction
35, The process of excessively trading in a customer's account, usually for the purpose of generating commissions without concern for market or price movement, is considered: A commingling B churning C front running D flipping
B = churning
28, The best definition of a broker/dealer is: A Any agent that charges commissions B Any firm that charges commissions C Any person that is in the business of buying or selling securities for its account or for someone else's account D Any firm that offers investment advice for a fee
C = Any person that is in the business of buying or selling securities for its account or for someone else's account
45, All of the following are "critical" pieces of information that must be collected from a customer to open a new account EXCEPT: A Name B Date of Birth C Telephone Number D Social Security Number
C = Telephone Number
26, Within how many days of a broker-dealer filing an application must the SEC either grant registration or institute proceedings to determine whether registration should be denied? A 10 days B 15 days C 30 days D 45 days
D = 45 days
4, In an advertising brochure, investment adviser representative Keri Paulson includes the following statement: "For the past seven years I have worked closely with my clients to help them maximize their profit. Trained by a firm with an impeccable reputation, designated by FINRA as a certified financial planner, approved by the stote securities administrator, and registered as an investment adviser representative. I am here to help you meet your financial needs." Which of the following statements made by Keri would be considered as unlawful representations of her registration? I. That FINRA has designated her as a certified financial planner Il. That she is approved by the state securities administrator Ill. That she is registered as an IAR A I and Il B l and Ill C Il and III D I II and lll
A = I and Il
17, Which of the following are true regarding posting of bonds to cover the cost of possible legal action arising from violations of the Uniform Securities Act? I An Administrator may choose whether or not to require a broker-dealer to post bond. II. A broker-dealer may post an appropriate amount of cash and securities instead of bond. III. Broker-dealers who have been profitable for the prior 5 calendar years are not required to post bond. A I and ll only B Il and Ill only C l and Ill only D I Il. and IlI
A = I and ll only
54, An issuer hires an agent and registers that individual to distribute an offering of its securities. Which statement is TRUE under NASAA rules? A If the agent solicits transactions in a State where the agent is not registered, the issuer can be held liable B If the agent finishes distributing this securities offering and there is time left until the agent's registration lapses at year end, he or she can work for another issuer distributing that issuer's securities C The agent is only permitted to scll the issucr's securitics to employees of that issuer D The agent must also affiliate with a registered broker dealer in order to distribute the offering of sccurities
A = If the agent solicits transactions in a State where the agent is not registered, the issuer can be held liable
33, Jared and several of his friends recently purchased a large number of shares in Company A. Before making their purchases. they created profiles on a host of different websites devoted to sharing stock tips. Once the shares were purchased, each member of the group took to these sites and made unsubstantiated claims related to the overall value of Company A. They even boasted that many of those claims were based on inside information that was inaccessible to retail investors. The group's collective promotion seemed to work as the value of shares in Company A increased by 25% over a two-week period. Once the 25% benchmark was reached, the group sold all of its shares, realizing a nice gain. The value of Company A stock subsequently dropped. Which of the following is true of the group's actions? A The actions could be described as a "pump and dump" scheme and they are prohibited B The actions could be described as a
A = The actions could be described as a "pump and dump" scheme and they are prohibited
8, Which type of securities registration would be used for when registering a security in multiple states at the same time? A coordination B qualification C classification D filing
A = coordination
53, A company offers a salary reduction defined contribution plan to its employees that adheres to ERISA Rule 404(c). It is administered by the firm's Human Resources (HR) department. The individual in HR who oversees enrollment of employees in the plan receives a bonus for any employees that purchase the company's stock in the plan. This employee is: A defined as an agent who must register in the State B defined as an issuer who must register in the State C not defined as an agent and is not required to register in the State D not defined as an issuer and is not required to register in the State
A = defined as an agent who must register in the State
37, You have an elderly client who telephones you at the office, telling you the following: "I have been notified by certified mail that I have just won $100,000 in the Nigerian Government National Lottery, and in order to claim my prize, I need to wire $1,000 from my account to the Nigerian Lottery Overseas Bank." This client has a small individual account with your firm, where her adult daughter is named as the beneficiary. The action that you should take is: A escalate the request to a supervisor in the firm's compliance department B contact the daughter to see if the transfer should be made C refer the matter to the firm's AML officer D follow the customer's instructions
A = escalate the request to a supervisor in the firm's compliance department
36, A broker-dealer offers 4 summer passes to an amusement park to each of its agents who sell at least $10,000 of bonds during the month of June. This action: A is allowed B is not allowed C may trigger a "pay to play" disclosure to customers D may trigger a "soft dollar" disclosure to customers
A = is allowed
47, A Registered Investment Adviser (RIA) tells his customers that they can analyze his performance by reviewing charts that he has presented. The RIA must: A tell the customers that charts con be difficult to interpret and there may be hazards in viewing only charts B explain that performance charts cannot be used to compare the post performance of one adviser against the performance of other advisers C explain that current fund performance is predicted by prior yeors' performance charts D tell the customers that the use of performance charts to assess prior results is approved by the SEC because the Investment Advisers Act of 1940 dictates the content of these charts
A = tell the customers that charts con be difficult to interpret and there may be hazards in viewing only charts
14, Which of the following forms must a broker-dealer submit when registering, assuming they are registering at least one agent who is not a partner, officer, director, or person occupying a similar status or performing similar functions? I Form BD II. Form ADV III. Form U-4 IV. Consent of service to process A I and III B l and IV C I, Ill. and IV D ll and lII
C = I, Ill. and IV
2, Which of the following are always prohibited activities for an agent? 1. Sharing profits or losses in a customer account Il. Selling securities outside of his firm without prior written approval Ill. Giving inside information to a client V. Sharing commissions with an agent at his firm A I and Il B I and IV C Il and Ill D Ill and IV
C = Il and Ill
1, Which of the following is considered an unacceptable business practice for a securities professional? A Recommending high risk socurities B Purchasing a security for his own account right after placing an order for the same security for a clicni C Making several small transactions for a client in order to reccive increased commissions D All choices represent an unacceptable business practice
C = Making several small transactions for a client in order to reccive increased commissions
58, Securities that are not required to be registered with the SEC are: A Federal covered sccuritics B Exempt sccuritics C Non-cxempt securities D Mutual funds
B = Exempt securities
44, Which form(s) MUST be signed by the customer in order to open a margin account? A New Account Form B Hypothecation Agreement C Loan Consent Agreement D All of the above
B = Hypothecation Agreement
22, Which of the following is defined as an investment adviser representative? I. Camille, who is self-employed running her own investment advisory firm Il. Jason, who works for Prolnvestments, an investment advisory firm, selling their services. IlI. Jake, who works for Prolnvestments, doing clerical work A I and Il only B Il only C Il and Ill only D I II and III
B = Il only
32, A broker-dealer has a place of business in states A and B, has institutional dients in states B and C, and has non-institutional clients in state A. Where must the broker-dealer register? A State A B States A and B C States B and C D States A. B. and C
B = States A and B
27, Which of the following best fits the definition of agent (a.k.a. registered rep)? A Fidelity Investments, which buys and sells securities for itself and its clients B Sue Falls, licensed employee of Fidelity Investments, who recommends. buys and sells securitics for her clients C Dodge & Cox. investment adviser to the Dodge & Cox Stock Fund D none of the listed choices
B = Sue Falls, licensed employee of Fidelity Investments, who recommends. buys and sells securitics for her clients
3, How long must a broker-dealer maintain email correspondence? A indefinitely B Three yeors C Five ycars D Not required
B = Three years
51, Which of the following is defined as advertising? A Prospectus B Website C Letter to a Client D Internet Chat Room
B = Website
23, The Consent to Service of Process does which of the following? A allows the lA to represent himself or herself during arbitration B appoints the state Administrator as the applicant's attorney to receive service of process against them in any non criminal proceeding C states that the lA will forego the court process and submit to arbitration D none of these choices
B = appoints the state Administrator as the applicant's attorney to receive service of process against them in any non criminal proceeding
52, A registration application in a State filed by an Investment Adviser becomes effective: A on a date so determined by the Administrator B at noon, the 30th day after the application is filed C at noon, the 45th day ufter the application is filed D at noon, the 60th day after the application is filed
B = at noon, the 30th day after the application is filed
12, A bank is only required to register as a broker-dealer under the 1956 Uniform Securities Act if it: 1. Engages in securities transactions that do not meet exemption requirements II. Does not meet the activity-focused exceptions for federal registration under Gramm-Leach-Bliley Ill. Is not exempted by a state administrator IV. Banks are not required to register as broker-dealers A I B I. Il and Ill C I and Il D IV
D = IV
41, Regarding inspection powers, the State Administrator: A can only visit and conduct a walk in audit of broker dealer offices intra-State if it is in the public interest or for the protection of investors B can visit and conduct a walk in audit of broker dealer offices either intra State or inter State if it is in the public interest or for the protection of investors C can only visit and conduct a walk-in audit of broker dealer offices intra State, and cannot do so inter-State, but a referral of the matter can be made to the Administrator in the other State(s) D is not permitted to visit and conduct a walk in audit of broker dealer offices unless the Administrator believes that a violation has occurred or is about to occur
B = can visit and conduct a walk in audit of broker dealer offices either intra State or inter State if it is in the public interest or for the protection of investors
40, A Federal Covered Adviser can be audited by the State Administrator: A any time the Administrator believes it is in the public interest B in the event the Administrator suspects fraud C no more than once per year after the updated Form ADV is filed D only if a complaint is lodged against the Adviser by a customer in the State
B = in the event the Administrator suspects fraud
43, A long-standing customer of a broker-dealer suffered a stroke and is in a coma. Who can place orders in the client's account? A individual named as having a durable power of attorney over the client's account in a video document recorded by the client 15 years ago B individual named as having a durable power of ottorney over the client's account in a signed letter written 15 years ago C document naming an individual as having a durable power of attorney over the client's account that the client has not signed D letter written and signed by the client's spouse, naming the individual who has a durable power of attorney over the account
B = individual named as having a durable power of ottorney over the client's account in a signed letter written 15 years ago
15, Which of the following best describes the options the Administrator has for imposing net capital requirements on broker-dealers? The net capital requirement: A must be exactly equal to the SEC requirement B must be less than or equal to the SEC requirement C must be greater than or equal to the SEC requirement D is in no way limited by the SEC requirement
B = must be less than or equal to the SEC requirement
56, A Canadian Investment Adviser Representative (IAR) has an existing client who goes on vacation to Seattle, Washington. The IAR wishes to contact the customer in Seattle about an investment strategy that he wishes to recommend. The lAR: A is required to register in the State of Washington, as must the employing Investment Adviser B need not register in the State of Washington because the customer is on vacation C is able to do business in the State of Washington as long as the IAR is registered in Canada D is required to register in the State of Washington, but the lA is not required to do so
B = need not register in the State of Washington because the customer is on vacation
29, Disclosing to a prospective investor that a security is registered and approved by the SEC is: A proper disclosure B prohibited C permissible for federal covered sccurities only D permissible for govemment securities only
B = prohibited
63, A broker-dealer is offering an IPO to the public that is "hot." The broker-dealer withholds 15% of the shares to set aside for its future use. This action is: A permitted because broker dealers have discretion over IPO allocations B prohibited because the broker dealer is "free riding and withholding" C permitted because the broker-dealer takes financial liability when performing an underwriting D prohibited because the broker-dealer is not allowed to own stock in companies that go public
B = prohibited because the broker dealer is "free riding and withholding"
16, Kathy completes her securities licensing in January of this year, and her co-worker Jake completes his licensing in November of this year. Which of the following is true? A Kathy pays more in registration fees than jake for this year B Jake pays more in registration fees than Kathy for this year C Kathy and jake pay the same amount in registration fees for this year D Neither Kathy nor Jake owe any registration fecs until next year
C = Kathy and jake pay the same amount in registration fees for this year
6, Art is a state-registered lA who wants to start using social media to market his business. He sets up a Twitter account and tweets invitations to prospects to visit his firm's website and receive a free investment evaluation. His friend and former client. Rodney, sees Art's tweet and sends his own tureet about how happy he was as Art's client, indicating that Art's investment expertise enabled Rodney to start his own business with the startup funds he needed. Art then tweets a link to Rodney's tweet Analyze this scenario: A Since Rodney is not a current chent of Art's. linking to his twect is allowable B Linking to Rodney's tweet is elloweble undor the Uniform Securities Act C Linking to Rodncy's tweet is NOT allowable under the Unifom Securities Act D Linking to Rodney's tweet is NOT allowable under the Investment Advisors Act
C = Linking to Rodncy's tweet is NOT allowable under the Unifom Securities Act
7, Which of the following must an investment adviser provide in writing to clients before signing an advisory contract with an average investor? I. that the investment adviser shall not be compensated on the basis of a share of capital gains or a capital appreciation Il. that no assignment of the contract may be made by the investment adviser without the consent of the client Ill. if the investment adviser is a partnership, that the client will be notified within a reasonable time-frame of any changes to the partnership IV. that the investment adviser shall not be compensated by fees based upon a percentage of the net value of the client's funds A I and III B l and IV C I Il. and III D I II Ill. and IV
C = I Il. and III
55, 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? A The 2 individuals are not defined as broker dealers since they are in the business of hosting golf tournaments B The 2 individuals are not defined as broker dealers because they do not reccive compensation from investors C The 2 individuals are defined as broker dealers because they will reccive compensation if an investor is matched to a venture capitalist D The 2 individuals are defined as broker dealers because they are matching a buyer and seller of securities
C = The 2 individuals are defined as broker dealers because they will reccive compensation if an investor is matched to a venture capitalist
50, A Certified Public Accountant offers clients financial planning services, for which a separate fee is charged. Which statement is TRUE? A The accountant is not required to register us an investment adviser in the State because he has an independently conferred professional accreditation B The accountant is not required to register as an investment adviser because he is already registered with the State as a CPA C The accountant must register in the State as an Investment Adviser D The accountant must register in the State as an Investment Adviser Representative
C = The accountant must register in the State as an Investment Adviser
34, Investment advisors are exempt from registering in states in which they do not have an office if: A Their total assets are less than $25 million B They have 2 or fewer employees in that state C They have had 5 or fewer clients in that state during the previous twelve months D They offer advice mostly related to Treasury scurities to retail investors
C = They have had 5 or fewer clients in that state during the previous twelve months
5, Trust Limited is a broker-deoler that has a large inventory of securities from which it mokes sales to clients. The firm is hoping to sell a large amount of a specific security whose morket value has been dropping for the lost several months. In hopes of generating interest in that security, the firm's director. Les Moral, calls on associate at a leading online financial site. offering to pay him a fee for mentioning the security on his site. Moral's associate tells him the he will mention the security in an objective manner, expecting that it has been dropping in value while also mentioning what he sees as the potential benefits to purchasing the security at its lowered price. Which of the following stotements is most accurate regarding this situation? A Such an arrangement is always unethicol and represents a securities violation B As long as the financial site does not offer misleading information about the sec
C = This will not represent a securitics violation as long as Trust Limited properly discloses its relationship and compensation
42, Under the provisions of the Prudent Investor Act, a Registered Investment Adviser should consider all of the following when investing and managing trust assets EXCEPT: A General economic conditions B Possible effect of inflation C Trading patterns of plan beneficiaries D Investment tax consequences
C = Trading patterns of plan beneficiaries
60, A broker-dealer registration application CANNOT be denied in a State if the broker-dealer has: A filed an application that is incomplete in any material respect B hired an individual as an agent who has committed a felony C a lack of experience trading securities for its own account or for the account of others D willfully violated a provision of the Uniform Securities Act
C = a lack of experience trading securities for its own account or for the account of others
13, Andrew Star, an agent for broker-dealer Galactic Traders, has decided that he is done working as an agent. Whom should he inform of this decision? A only Galactic Traders B only the Administrator C both Galactic Traders and the Administrator D neither Galactic Traders nor the Administrator
C = both Galactic Traders and the Administrator
30, Which of the following represents a major difference between a broker and a dealer? A broker makes money mainly by recciving a markup on the selling price of its socurities: a dealer makes moncy by recciving commissions for services rendered B broker reccives commissions for transactions effected: a dealer receives fees based on a percentage of client assets under management C broker reccives commissions for transactions effected: o dealer makes money on the markup or markdown on the price of the securities bought or sold D broker receives money solely for providing investment advice, a dealer does not provide investment advice
C = broker reccives commissions for transactions effected: o dealer makes money on the markup or markdown on the price of the securities bought or sold
64, A registered Investment adviser that has been growing rapidly would like to borrow funds for the expansion of its corporate offices and to add staff. The adviser would be permitted to borrow from a(n): A client who has the financial capability of making the loan, as long as the loan is documented in writing and the existence of the loon is disclosed in writing to the adviser's other clients B client that meets the definition of an accredited investor under Regulation D C financial institution that is in the business of making this type of loon D bank that is also a client of the registered investment adviser
C = financial institution that is in the business of making this type of loan
38, A Registered Investment Adviser and a Broker-Dealer are owned by the same parent company. The RIA has received information from the BD's research department that it is about to change its rating of DEF Corporation from Neutral to Negative. The RIA sells its holding of DEF Corporation and then has its IARs call its list of clients to advise them that they may want to consider selling the security. The RIA has engaged in: A selling away B backing away C front running D shadowing
C = front running
49, An investment adviser charges a 1% annual management fee to all clients. The adviser also says that if he does not produce a 20% annual return on the client's investment, he will refund the management fee. This action is: A permitted because it has been offered to all clients B permitted because the clients are not being charged an incentive fee C prohibited because the adviser cannot make fee charges contingent on performance D prohibited because the adviser cannot share in portfolio gains and losses
C = prohibited because the adviser cannot make fee charges contingent on performance
31, A firm that sells out of its own inventory is acting in which capacity? A Broker B Mutual Fund C Portfolio Munager D Dealer
D = Dealer
18, A Canadian broker-dealer who is registered in State ABC under Section 201-A of the Uniform Securities Act must do which of the following? I. Maintain provincial or territorial registration in good standing II. Disclose to its clients in State ABC that it and its agents are not subject to the full regulatory requirements under the Act Ill. Share its books and records with the Administrator of State ABC upon request A I only B I and Il only C Il and Ill only D I II and III
D = I II and III
24, It is not lawful for any person to transact business in a state as an investment adviser or investment adviser representative unless: I he is registered in the state Il. he has no place of business in the state and his only clients in this state are institutional investors and governmental agencies or instrumentalities Ill. he has paid a sum of money to the proper officials IV. he has no place of business in this state and had no more than 5 non-institutional clients during the preceding 12-month period A Ill only B I and IV C I only D I Il. and IV
D = I Il. and IV
19, Which of the following are part of claiming an exemption from registration for Canadian broker-dealers? I. disclose to clients in the state that Canadian broker-dealers are not subject to the state's full regulatory requirements. Il. file a consent to service of process IlI. file a copy of the broker-dealer's current registration as required by the Canadian province where the broker-dealer resides. IV. file proof of membership in a self-regulatory organization or stock exchange in Canada. A I and Il B I and Ill C I. Il, and III D I, Il. Ill. and IV
D = I, Il. Ill. and IV
48, Which of the following securities can be registered by qualification in a State? A Limited Partnership B Fractional Interest in an Oil and Gas Program C Certificate of Deposit for a security D All of the above
D = All of the above
25, Ron Restless, a general securities representative in North Carolina, is in the process of changing his broker-dealer affiliation. Ron's former broker-dealer, ABC Securitites, filed a Form U-5 for Ron on June 3. Ron's new broker-dealer, XYZ Securities, received his fingerprints and paperwork on June 6. XYZ Securities performed a background check on Ron and approved his affilation on June 14. XYZ Securities then submitted his application for affiliation to FINRA on June 15 and is awaiting approval from the state of North Carolina. Which of the following statements BEST describes Ron's permissible activities? A During his transition, Ron can discuss securities-related matters with prospective clients: however, he cannot contact existing clients until this transition to XYZ is approved. B Ron cannot discuss securities related matters with existing or prospective clients until June 14, the date XYZ approves his affili
D = Ron cannot discuss socurities related matters with existing or prospective clients until his affiliation with XYZ becomes effective with FINRA and the state of North Carolina
62, A customer wishes to open a margin account at a broker-dealer. The customer provides all of the necessary information to open the account, but refuses to sign the margin agreement when the agent gives it to the customer. Which statement is the correct course of action to be taken? A The firm should approve the opening of the account since the customer provided all of the necessary information B The agent should have the customer sign a waiver, obviating the need for the customer to sign a margin agreement C The agent should sign the customer's name to the margin agreement, since all of the necessary information has been provided by the customer D The occount cannot be opened because the customer did not sign the margin agreement
D = The occount cannot be opened because the customer did not sign the margin agreement
9, The Administrator may require the filing of form letters, correspondence, brochures, pamphlets, prospectuses, and any other sales literature or advertising communication EXCEPT: A When intended for distribution to prospects B When intended for distribution to clients C When addressed to clients of investment advisers D When relating to federal covered or exempt securities or transactions
D = When relating to federal covered or exempt securities or transactions
11, Under the Uniform Securities Act, how frequently may a representative of the state's administrator audit a broker-dealer? A No more than annually B No more than once per quarter C Every other ycar D Whenever necessary and appropriate
D = Whenever necessary and appropriate
21, Platinum Opportunities Investments is an investment advisory firm with several employees. Yvonne runs computer models to determine appropriate investment recommendations for clients. She shares her results with Vinny, who presents her recommendations to the firm's clients. Lori is fresh out of college and accompanies Vinny to client meetings. On occasion Lori presents recommendations to clients, but only when Vinny is present. Mark is a long-term employee who does clerical work for Platinum. Recently he has taken on responsibility for supervising Lori, while she learns the ropes. Vinny is registered as an investment adviser representative (IAR). Which of Vinny's colleagues must also register as an IAR? A Yvonnc and Lori only B Lorionly C Yvonne and Mark only D Yvonne. Lori, and Mark
D = Yvonne. Lori, and Mark
61, Which of the following is NOT a "Red Flag" for securities fraud operated through social media? A e mail received promoting a stock from an unknown sender B claim made on Twitter that a stock's price is about to "go through the roof" C website promoting an investment with no risk offering 30% monthly returns D banner advertisement placed by a broker dcaler on a "stock pick" chat room
D = banner advertisement placed by a broker dcaler on a "stock pick" chat room
10, Which of the following would need to register as a broker-dealer in State A? A agent who sells sccuritics in State A B bank that sells securitics in State A C broker dealer that is registered in State B that sells securities to only institutional clients in Stote A D broker-dealer that is registered in State B that sells securities to fewer than five non-institutional clients in State A
D = broker-dealer that is registered in State B that sells securities to fewer than five non-institutional clients in State A
46, Who can make a loan to a Registered Investment Adviser? A customer with a net worth of S2 million B customer that is another registered investment adviser C customer thot is an accredited investor D customer that is a broker-dealer
D = customer that is a broker-dealer
39, A registered representative recommends a stock that is not registered in the State that should have been registered in the State. The representative has told his clients that it is a good investment that should be profitable in the near term. The representative: A has not willfully violated the Uniform Securities Act but the action is still fraudulent and subjects the registered representative to criminal prosccution B is subjcct to imprisonment and a finc C has willfully violated the Uniform Sccuritics Act and is guilty of a fraudulent act D has not committed a felony or a fraudulent act because he did not know the security should have been registered
D = has not committed a felony or a fraudulent act because he did not know the security should have been registered
20, Partners, officers and directors of a registered broker-dealer or investment adviser who will perform the same duties as an agent or investment adviser representative are: A registered by proxy B to be registered promptly C not required to be registered D registered automatically
D = registered automatically
