Series 63 Final Exam 1
A company is conducting an IPO. Its shares will be listed on Nasdaq. For how long does a broker-dealer that is part of the selling group need to make the prospectus available to investors?
25 days
The withdrawal of an agent's registration generally becomes effective:
30 days after filing
All of the following people are agents, EXCEPT:
A clerk taking telephone quotes
Which of the following investment advisory practices are permitted?
A client terminates an advisory relationship with an investment adviser halfway through the contract and the advisory firm refunds 50% of all prepaid fees, as called for in the contract
A broker-dealer is participating in an initial public offering of a security that will be listed on Nasdaq. Which of the following documents is the broker-dealer required to deliver to a client who purchases in the after-market immediately after completion of the offering?
A final prospectus
Which of the following individuals would NOT be considered an agent under the Act?
A person representing an issuer who does not receive commissions in effecting transactions with the issuer's existing employees
Which of the following persons would be considered an agent?
A sales assistant authorized to accept or solicit orders from clients
Which of the following persons must be registered as an agent under the Uniform Securities Act?
A sales assistant authorized to take orders from clients.
An agent opens a new account for a client and enters a market order to buy 200 shares of XYZ. At the end of the day, the agent turns in a new account form and a copy of the order ticket for approval by the supervisor. Under the Uniform Securities Act, which of the following statements is TRUE?
Account approval is required prior to executing an order
Which of the following actions would violate the NASAA Statement of Policy on Dishonest and Unethical Business Practices of Broker-Dealers and Agents?
An agent creates a marketing brochure for distribution to clients that includes only the positive facts from the prospectus
Which of the following activities does NOT meet the definition of an exempt transaction under the Uniform Securities Act?
An agent sells units in a Canadian limited partnership to several of her clients
Under the USA, which of the following transactions would NOT be considered exempt?
An unsolicited issuer transaction effected through a registered broker-dealer
What information must be disclosed to a client when she does a trade with a broker-dealer?
Any excessive fees
If an agent violates the Uniform Securities Act, the Administrator may NOT:
Arrest suspects if they refuse to cooperate with an investigation
Offering which of the following goods or services would be a violation of soft-dollar practices if the broker-dealer provides them to the adviser in exchange for executing transactions?
Assistance concerning its compliance responsibilities
An agent's registration package should include the application and the:
Consent to Service of Process and filing fees
When a broker-dealer is acquired by another broker-dealer, when will the agents' registrations expire?
December 31
A customer wishes to liquidate $50,000 from her existing holdings and invest the proceeds in three different mutual fund families. The agent fails to notify the customer that it may be advantageous to invest the entire $50,000 with one fund family. This activity could potentially be:
Engaging in breakpoint sales
Under the Uniform Securities Act, a state Administrator may NOT:
Enjoin an investment adviser from participating in the securities business
The term churning is defined as:
Excessive activity in a client's account
When providing advice according to prudent investor standards, an agent should perform all of the following activities, EXCEPT:
Focus on the avoidance of risk
An agent has just received an unsolicited order from a customer. The customer wants to purchase a large amount of a speculative stock. Although the customer has the financial resources to bear the risks of this investment, the agent does not think it fits the client's investment objectives. The agent may take all of the following actions, EXCEPT:
Hold the customer's order until the agent has the opportunity to confirm the client's understanding of the security
Which TWO forms must an agent obtain from a client in order to purchase securities in a margin account?
I. A signed hypothecation agreement III. A signed credit agreement
An Administrator who requires the posting of a bond may:
I. Accept cash II. Accept securities III. Use discretion as to whether the type of securities and the amount of the deposit are appropriate
The members of NASAA include Administrators from:
I. All 50 states II. The District of Columbia III. Puerto Rico IV. The U.S. Virgin Islands
A client may bring civil action if:
I. An agent is not registered III. Misleading statements are made and the client relies on those statements to make a purchase
According to the Uniform Securities Act, an entity can avoid meeting the definition of a broker-dealer if it:
I. Has no office in the state II. Only deals with institutional clients
XYZ Broker-Dealer is located in State A, where it has its only office. Under the Uniform Securities Act, XYZ would NOT meet the definition of a broker-dealer in State B in which of the following situations?
I. It sold securities to an investment company located in State B. II. It only does business with financial institutions in State B. III. It entered into a transaction with a resident of State A who was temporarily in State B.
Which of the following business practices would be prohibited?
I. Not identifying a client's objectives II. Borrowing funds and/or securities from a client III. Overstating the value of a client's account IV. Guaranteeing a client against loss
Persons providing investment advice do NOT need to register as investment advisers if they:
I. Only deal with insurance or investment companies and have no place of business in the state II. Are a savings institution, bank, or trust company III. Are in a profession making the performance of this service incidental (an accountant or lawyer) IV. Deal only with broker-dealers or other investment advisers and have no place of business in the state
Under an underwriting agreement, the syndicate will be given warrants as part of its compensation package. The warrants can be exercised at any time in the next two years. Under the Uniform Securities Act, which TWO of the following statements are TRUE regarding the issuer of this stock?
I. The issuer must register the stock or distribute it under an exemption before the warrants can be issued III. The issuer is subject to state reporting requirements until the warrants expire
A broker-dealer is registering a new issue with the Administrator of State A. What information must be sent to the Administrator?
I. The number of shares II. The Articles of Incorporation III. The financials
According to the Uniform Securities Act, which of the following statements is/are NOT TRUE concerning a broker-dealer or investment adviser filing an application for registration as a successor firm?
I. The successor firm must be in existence prior to the filing of the application for registration III. The successor firm must submit a filing fee with the application for registration
An agent inadvertently sold an unregistered, nonexempt security to a client. Under the Uniform Securities Act, which of the following actions may be taken?
II. Buying the security back from the customer III. Paying the customer the maximum legal rate of interest, less dividend or interest income received from the date of purchase
Jeff White and Mary Johnson have formed a corporation to start a new broker-dealer. They are the sole shareholders. Which of the following grounds could the Administrator use as a basis for denying their application?
III. Eight years ago, Jeff pled guilty to one felony count of tax evasion
Which of the following brochure delivery periods applies to investment advisers under the Uniform Securities Act?
If an ADV or brochure is not provided at least 48 hours prior to signing the contract, clients must be given five days to rescind without penalty
An insurance agent works in an office building down the hall from a broker-dealer. They are not affiliated. What compensation may the agent receive from the broker-dealer in exchange for referrals?
Insurance referrals
A client lists capital preservation as his only investment objective. The agent recommends that the client purchase blue-chip stocks and investment-grade bonds. The agent then tells the client to sell some of the shares every two weeks. According to the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, the agent has:
Made unsuitable recommendations
Adam is an insurance agent. His father Ted is an investment adviser. Adam receives 25 basis points for every client he refers to Ted. Under the Uniform Securities Act, Adam:
May need to register as an investment adviser representative
Bruce is an insurance agent. His father John is an investment adviser. Bruce receives 25 basis points for every client he refers to John. Under the Uniform Securities Act, Bruce:
May need to register as an investment adviser representative
An advisory client of your firm has contacted the Administrator of the state of Kentucky about a possible violation of the Uniform Securities Act. The firm has its home office in Illinois and is registered in both states. Which of the following actions would the Administrator of Kentucky be LEAST likely to take regarding the possible violation?
None
An agent who is registered in State A contacts a client in State B. The broker-dealer is registered in State B but not the agent. The agent may:
Not sell the security
A broker-dealer employs several agents who conduct business on the premises of a federally chartered bank. The broker-dealer just fired one of these agents. The broker-dealer also suspects that the agent may have falsified client records. Under the NASAA Model Rules for Sales of Securities at Financial Institutions, the broker-dealer must:
Notify the bank promptly
Which of the following choices is considered a fraudulent act?
Omitting a fact that is relevant to making an investment decision
All of the following statements are TRUE regarding the preparation and maintenance of records by investment advisers and broker-dealers, EXCEPT:
Only an Administrator within the same state may examine the records of an investment adviser or broker-dealer
Peggy is an agent at a broker-dealer. She also spends several days every month conducting business on the premises of a retail bank. According to the NASAA Model Rules for Sales of Securities at Financial Institutions, what precautions must be in place for Peggy to continue to do business at a bank branch?
Peggy's work areas should be segregated from the areas where retail deposits are taken whenever possible
An agent has been executing transactions that are not reflected on the books of the broker-dealer. This type of activity requires:
Registration by the agent as a broker-dealer
Which of the following activities require a CPA to register as an investment adviser representative under the Uniform Securities Act?
Soliciting advisory services on behalf of an investment adviser for a fee
An Administrator has determined that a broker-dealer has sold private placement securities to 35 retail investors in the Administrator's state. Which of the following statements is TRUE if the broker-dealer does not comply with the cease-and-desist order issued by the Administrator?
The Administrator may bring action in a court to request an injunction
Registration by coordination is used in conjunction with which of the following Acts?
The Securities Act of 1933
Under the Uniform Securities Act, which of the following statements BEST describes the term inspectorial powers?
The State Administrator's power to subpoena records within and outside the state
An agent recommends that a client purchase a particular security. The agent believes the client has the resources to pay for the transaction. Three days after the trade is executed the client indicates that he cannot meet his financial obligation to the brokerage firm. If the agent lends personal funds to the client:
The agent will be acting in an unethical manner
Which of the following statements is TRUE regarding the sharing of profits and losses in a client's account by an agent?
The agent's profits and losses must be in proportion to the percentage of his contributions
A broker-dealer located in State A, in business for three years, goes out of business in July. Some of the principals at the firm start a new broker-dealer in August of that year. Which of the following statements is TRUE concerning the broker-dealer's registration fee?
The appropriate registration fee must be paid
An agent is asked by a client to open an account and buy stock for the client's spouse. Which of the following statements is TRUE?
The spouse must sign a trading authorization or else these actions are prohibited.
An agent tells his supervisor that 12 years ago, a company that the agent founded had to declare bankruptcy. The agent just discovered that the county has recently imposed a tax lien on rental property that he is refinancing. The agent is disputing the assessment. Which of the following issues is the agent required to disclose?
The tax lien
An investment adviser representative was just appointed by a trustee to manage the assets of a small trust. The IAR has analyzed the trust's current portfolio and is recommending that the assets be reallocated. According to the Uniform Prudent Investor Act, the IAR's main focus when investing the trust's assets should be:
The trade-off between risk and reward
Which of the following statements is TRUE concerning the posting of bonds by a broker-dealer?
There is no bond requirement if the broker-dealer does not have custody or discretionary authority
An agent overhears that the chairman of a large manufacturing firm may be removed because of erratic social behavior. The agent decides to call all of her clients who own shares of the manufacturing corporation and tell them to liquidate their position. Which of the following statements is TRUE?
This action constitutes a prohibited use of a rumor to induce a purchase or sale.
An agent of a broker-dealer has a business relationship with an agent of another broker-dealer. They both own a large quantity of LRR stock. Which of the following statements is TRUE if both agents buy and sell large amounts of LRR stock to increase its trading volume?
This action may be considered market manipulation
Under what circumstances are agents permitted to sell securities to clients in transactions that are not recorded on the books and records of their employing broker-dealer?
This is generally not permitted under any circumstances
Trading in WXYZ has been particularly heavy and the stock's price has been fluctuating wildly. A customer calls her agent and asks what the current price of the stock is, since she is considering selling her position in WXYZ. The agent has been extremely busy and last saw a price of 22 on the stock 20 minutes ago. The agent tells the customer, "Last price I have for it is 22." The agent then takes another phone call. The investor enters an order online to sell the stock and receives an execution at 19. Which of the following statements is TRUE regarding the price given by the agent for the stock?
This statement is misleading since the agent did not indicate how old the price was
According to the Uniform Securities Act, a person is not considered an investment adviser if the advice provided covers only:
Universal life insurance
All of the following products are securities, EXCEPT a(n):
Universal life insurance policy with a substantial cash value
A customer's investment objectives are capital preservation and current income. The agent recommends that the client purchase an S&P 500 Index fund. The agent then advises the client to sell shares in the fund every two weeks to generate income. According to NASAA's Statement of Policy on Dishonest and Unethical Business Practices of Broker-Dealers and Agents, the agent's recommendations represent:
Unsuitability
