Series 63 Final Exam 5
Which of the following activities by an agent of a broker-dealer is considered an unethical business practice?
Executing a transaction for a client and not recording it on the books of the broker-dealer
An agent's application includes which of the following choices?
I. A filing fee II. Work history III. A Consent to Service of Process
The maximum civil penalty for insider trading violations is:
Treble damages
All of the following choices are TRUE regarding an agent, EXCEPT:
If an agent leaves a broker-dealer to go to another broker-dealer, it is the sole responsibility of the agent to notify the Administrator
A client purchases 200 shares of XAM stock and pays his broker-dealer the required sum of money. The client requests the securities be shipped directly to his home. Which of the following statements is TRUE regarding this transaction?
The broker-dealer should honor the client's request
The Administrator of State X has declared the registration statement of a company effective. What part of its registration statement may the issuer change by amendment without being required to file a new registration statement with the state?
The number of shares
Which of the following choices is NOT a security under the USA?
A Treasury bond futures contract
At retirement, a client wants to invest a rollover from a 401(k) account into an IRA. Which of the following investments is the most suitable recommendation?
A balanced fund
An investment adviser's compensation could be based on:
A percentage of the value of the fund averaged over a prescribed period
Which of the following choices would be considered an investment adviser?
A teacher who works part-time as a financial planner
IA Incorporated is an investment adviser. BD Securities is a brokerage firm with offices down the hall. IA Incorporated and BD Securities have an agreement under which IA directs brokerage transactions to BD and receives a 15% rebate on the commissions that BD charges. This arrangement is:
Acceptable, provided IA discloses the arrangement to its clients in writing
A high-ranking executive wants to sell his shares of his company's stock. The company is about to announce its quarterly earnings. The executive may sell this stock:
After the company issues a press release stating its earnings
A trustee is managing a trust that has beneficiaries ranging in age from 2 through 17. Under the Uniform Prudent Investor Act (UPIA), how should the assets of the trust be managed?
All beneficiaries' interests should be weighed prior to making any investments
All of the following persons are excluded from the definition of investment adviser, EXCEPT:
An attorney who sets up a financial planning practice
A broker-dealer is located and registered in Canada. Which of the following individuals may it contact in the United States?
An existing client who is temporarily living in the United States.
Which of the following choices is considered a securities offering?
An investor purchased bonds and receives a warrant as a bonus
Decisions settled by arbitration:
Are binding upon all parties to the arbitration
An order ticket must include all of the following information, EXCEPT:
Authorization of a registered principal
An investment adviser is registered in State A, where all of its offices are currently located. One of its representatives lives in State B and is in the process of opening a satellite office there to see if she can attract more clients in State B. Right now, the adviser's only clients in State B are institutions. What must take place before the IAR may commence doing business from her new office?
Both the investment adviser and the investment adviser representative must register in State B
An agent holding limited discretionary authority over a customer's account may:
Buy or sell securities in the account without consulting the customer
According to the Uniform Securities Act, an employee of a broker-dealer who is not registered as an agent may do which of the following?
Clear transactions
Under the Uniform Securities Act, a state Administrator may NOT deny, suspend, or revoke any registration, or bar or censure a person if the applicant was:
Convicted of a misdemeanor eight years ago
A brokerage firm that operates on the premises of a bank must do all of the following, EXCEPT:
Disclose that it is a member of both FINRA and the FDIC
An agent opening a brokerage account on the premises of a bank should:
Disclose that security products are not insured by FDIC
One of your clients has shown great interest in a security you recommended as a suitable investment, but decided to wait awhile and watch it. You notice that the price of this security is rapidly moving up, so you try to call your client but are unable to reach him. You, as an agent, may:
Do nothing
Which of the following transactions would NOT be considered an unethical business practice by a broker-dealer?
Effecting a transaction in a security while acting as an agent for both buyer and seller
An agent conducts a public sales seminar regarding investing in U.S. Treasuries Funds. Which of the following statements would be prohibited under NASAA's Statement of Policy on Dishonest and Unethical Business Practices of Broker-Dealers and Agents?
Everyone should own Treasuries
If the Administrator has summarily suspended an agent's registration, within how many days of the agent's written request must a hearing be scheduled?
Fifteen days
Under the Uniform Securities Act, the statute of limitations for criminal violations of the Act is:
Five years
H&H Securities is a broker-dealer registered in State B. Several material pieces of information contained in the documents it filed with the Administrator have recently become inaccurate as the result of a merger. What must H&H do in order to comply with the USA?
H&H must file an amendment promptly with the Administrator of State B
Agents may use their own judgment when effecting transactions by deciding which of the following choices without obtaining the client's written consent?
I. Price III. Time
According to the Uniform Securities Act, which of the following persons has authority over a securities transaction?
I. The Administrator in the customer's home state II. The Administrator in the broker-dealer's home state III. The Administrator in the state where the transaction occurred
A broker-dealer is registered in State A. Which TWO of the following statements are TRUE regarding the examination of that broker-dealer's records by the Administrator of State A?
I. The Administrator may examine the broker-dealer's records even if they are located in State B IV. The Administrator may examine the broker-dealer's records with good reason
The Uniform Securities Act requires that an investment adviser deliver a written disclosure document to an advisory client or prospective advisory client. In which TWO of the following situations is the adviser NOT required to send this document to clients?
I. The firm advises only investment companies but does not send its brochure to them II. The firm sends a newsletter to subscription clients who pay an annual fee of $120
Under the National Securities Markets Improvement Act (NSMIA) investment advisers are required to register at the state level or the federal level, unless exempt. Which TWO of the following statements are TRUE regarding investment advisers with $95 million of assets under management?
I. They generally must register in any states in which they will conduct business. III. They must register with the SEC if the state in which they conduct business has no requirement for registration of investment advisers.
According to the Uniform Securities Act, a security is said to be guaranteed as to:
II. Interest III. Dividends IV. Principal
Under the Uniform Securities Act, which TWO of the following practices are prohibited?
II. Recommending securities without regard for the client's financial resources IV. Crediting a portion of mutual fund's sales load back to a client's account
Which TWO of the following reasons would allow the Administrator to deny an agent's registration?
II. The applicant neglected to disclose a bankruptcy filing six years prior IV. The applicant failed to disclose he was formerly employed at another broker-dealer in the last four years
Under the Uniform Securities Act, a person's registration may be revoked or denied for which of the following reasons?
II. The person was convicted of a drug-related felony seven years ago IV. The person was convicted of a securities-related misdemeanor six years ago
Under the Uniform Securities Act, which of the following issuers must file a registration statement with the state Administrator?
IV. For-profit corporations
According to the Uniform Securities Act, if an advisory firm concentrates its advice on New York Stock Exchange securities, the firm:
Is not engaging in a violative practice
Under the Uniform Securities Act, which of the following statements is NOT TRUE regarding a cease-and-desist order?
It must have come from the SEC
Mark W. is an agent of Broker-Dealer X. Unknown to his firm, Mark spends his evenings trading the stock of a small, unlisted company through Internet bulletin boards. He dominates and controls the trading in this stock. Under the Uniform Securities Act, which of the following statements is TRUE of Mark's activities?
Mark W. may have to register as a broker-dealer
Under the Uniform Securities Act, which of the following persons automatically becomes registered as an investment adviser representative when the investment adviser's registration becomes effective?
Only those officers, directors, and partners with management responsibilities
An agent of a broker-dealer is also employed as an investment adviser representative. A client asks the agent for assistance in placing the shares of his start-up company's initial public offering (IPO). Under what conditions may the agent accept the client's offer of commissions for completing the offering?
Only with the written permission and supervision of the broker-dealer
A purchaser wishes to take action against a seller to recover money paid for securities issued in violation of blue-sky laws. Under the Uniform Securities Act, the burden to prove that the stock was sold in violation is on the:
Purchaser
Which of the following investments by a fiduciary MOST likely violates prudent investor standards?
Recommending that 100% of a client's retirement assets be invested in employer stock
An agent, who is registered in State A, receives a call from a prospective client in State B. The client wants to place an order to buy some stock, but the agent is not registered in State B. The prospective client's mother, however, lives in State A. The agent should:
Refuse the order
An agent unknowingly misrepresents the risk associated with a security. Under the Uniform Securities Act, which of the following statements is correct?
Since the agent unknowingly made misrepresentations regarding a security, the agent is not subject to disciplinary action
An agent is employed by a broker-dealer that is registered in State A. The agent may NOT take which of the following actions?
Solicit orders for a corporation's preferred stock that is not registered in State A
An investment adviser is in charge of managing the assets of a large charitable trust. The income generated by the portfolio is used to support schools for disadvantaged children. Given the nature of the trust and the Uniform Prudent Investor Act (UPIA), which of the following investments should the adviser NOT recommend for the trust's portfolio?
Tax-exempt municipal securities
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. Which of the following statements is TRUE?
The agent needed approval for the new account prior to the execution of the first order
Which of the following documents must be filed with the state Administrator for registration of all broker-dealers, investment advisers, agents, and investment adviser representatives?
The Consent to Service of Process
Steve Taylor, a client of ABC Brokerage, is told by his agent that the price of a security he owns is higher than it actually is. The client sells the security based on this information and incurs a loss. Under the Uniform Securities Act, which of the following statements is TRUE?
The agent is subject to action taken by the Administrator, as well as civil and criminal action
An agent of a broker-dealer recommends that a client purchase stock worth $10,000. The client agrees and the trade is executed. Two days later, the client tells the agent that he cannot pay for the stock. Which of the following statements is TRUE?
The agent may have violated antifraud provisions of the Uniform Securities Act by recommending transactions beyond the client's ability to pay
A firm that is expecting to take its shares public has recently hired a new employee to assist in selling shares to investors. According to the Uniform Securities Act, which of the following statements is TRUE?
The employee would be required to register in any state in which he solicits investors
In which of the following situations does the registration of a broker-dealer result in an Administrator automatically registering an individual of the firm as an agent?
The individual is a director of the broker-dealer and is actively engaged in the business of the firm
Advertising and sales-related materials would need to be filed with the Administrator in which of the following circumstances?
The securities are listed on a foreign exchange
Which of the following statements is NOT TRUE concerning the limited registration status of Canadian broker-dealers?
They are exempt from the antifraud provisions of the Uniform Securities Act
Avery is an agent who has sold Company Q stock short. Hoping to lower the price of Q, he later Tweets a message stating that the Food and Drug Administration is about to revoke its approval of one of Company Q's most important products. He has no basis for this statement. None of his followers act on the information and the price of the stock rises. Avery closes out his short position at a loss. According to the Uniform Securities Act, which of the following statements is TRUE?
This is fraudulent because Avery floated a rumor in an attempt to manipulate the price of the stock
An agent's recommendations have made a client a lot of money over the last two years. The client is so pleased that he tells the agent that she can keep 5% of any gains in his account from now on. Which of the following statements is TRUE?
This is not acceptable since it is considered to be sharing in the client's profits
Rick and his brother Dave both work as agents for Broker-Dealer N, which is located in State J. Rick has been called by an old college buddy in the next state (State H) who wants to set up an account and buy some stock. However, Rick is not registered in that state, although Dave and Broker-Dealer N are. Rick proposes that Dave set up the account and split the customers' commissions. Which of the following statements is TRUE?
This is not permissible since Rick is not registered in State H
Nick is an agent for Broker-Dealer S. He works primarily with institutional clients. Today he has taken a large number of orders from his clients for ABCD stock. The stock's price was very volatile during the day, resulting in many different execution prices on the orders. Nick was so busy that he did not have time to write the account names or numbers on the tickets before they were entered for execution. At the end of the day, he must decide which account numbers to write on the various tickets. He chooses to allocate the most advantageous prices to his best customers. Which of the following statements is TRUE?
This procedure is not acceptable since Nick should have completely filled out the ticket before entering each order
An agent for a broker-dealer is registered in State A. The agent has a prospective client who lives in State B and wants to open an account, but neither the agent nor the broker-dealer is registered in State B. The agent suggests that the client use her parents' address to open the account since they reside in State A and she is currently visiting them. May the broker-dealer open the account?
Under no circumstances
Under the Uniform Securities Act, the Administrator may waive the requirement that a broker-dealer maintain a bond:
When the registrant's net capital exceeds a certain amount
