Series 63 mock exam questions
An investment adviser plans to sell securities out of its own investment account to an advisory client. In order to do so, which of the following is required?
Consent of the client before completion of the trade Written disclosure of the adviser's capacity before completion of the trade
Which of following legal or disciplinary actions occurring within the past 10 years would NOT have to be disclosed on an investment adviser's brochure?
Conviction of a misdemeanor in a civil action regarding payment of motor vehicle violations
In which of the following cases would the Uniform Securities Act require registration of an investment adviser who had no place of business in the state?
He had more than five non-institutional clients who were residents of the state.
an agent is not
a broker dealer
Typical broker-dealer fees that must be disclosed as part of a fee disclosure document would include
a charge when a client requests that a stock certificate be issued in his name the interest charged by the firm on money owed by customers in their margin accounts
Under the Uniform Securities Act, the Administrator has the power to do all of the followin
administer oaths take evidence subpoena witnesses
Not only the guilty party, but one controlling that person is
also subject to civil liability
A broker-dealer with no place of business in the state would not be required to register with the Administrator unless one of its clients was
an employee benefit plan with assets of less than $1 million
Under the Uniform Securities Act, a person whose business model is selling reports on a subscription basis concerning specific securities to investors based on their individual objectives will be defined as
an investment adviser
A broker-dealer with no place of business in the state would not be required to register if their only clients were
banks and insurance companies
To transact business in a state as an investment adviser representative, a person must
be registered as a representative of an investment adviser and have passed the appropriate NASAA exam for IARs
Under the USA, all of the following statements are true regarding investment advisory contracts
can only allow fees to be performance related under certain limited circumstances must be in writing must disclose the method used for computing the adviser's fee
gifts are not
considered an offer
Interactive content
generally real-time communications, such as the other three choices shown here
advisory contracts do not
have to be renewed annually
No exemption from the USA
is available for corporate securities issued in countries with which the US has diplomatic relations.
an administrator may not
issue an injunction
One of the portions of the USA Patriot Act that affects the opening of an account for a new customer is
the customer identification program
An Administrator has jurisdiction over an offer to sell securities if it is made in a newspaper published out of state
under no circumstances
An investment adviser who has no office in a state is exempt from registration in a state if, during any 12-month period, he has no more than how many retail clients in the state?
5
Which of the following would NOT be considered an agent under the Uniform Securities Act?
A broker-dealer who transacts business with the general public
Under the Uniform Securities Act, which of the following is an investment adviser?
A firm with no office in the state that provides specific investment advice to ten noninstitutional clients within the state
For purposes of safeguarding customer information, which of the following would be considered a covered account?
A margin account in the name of MaryBeth Simmons
Under the USA, which of the following are securities?
A put option on a gold futures contract A warrant to purchase IBM common stock
Under the USA, which of the following are exempt transactions?
A transaction between an issuer and an underwriter An unsolicited customer order to buy an exempt security
Under the Uniform Securities Act, which of the following is an agent?
An individual who effects securities transactions for commissions
An investment adviser with no place of business in the state has 10 clients in the state. For which one of the clients would registration be required?
An individual with net worth in excess of $1 million
As defined in the Uniform Securities Act, which of the following persons is included in the term agent?
An individual, employed by a broker-dealer who sells NYSE-listed securities exclusively to institutional clients
Under the Uniform Securities Act, a consent to service of process must accompany which of the following?
An investment adviser's initial registration application
Under the Uniform Securities Act, certain transactions are exempt from the sales literature and advertising filing requirements. Which of the following would be included in that category?
Any isolated, nonissuer transaction Any sale to a financial institution Any transaction by the executor of an estate Any transaction between an issuer and underwriters
Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following types of authority may NOT be given to an agent by a customer?
Authority to borrow money or securities from a customer's account
Baird, a registered agent, receives an order from Miller, her customer, for an unusually large order of common stock in XYZ Incorporated. He states that he overheard the CFO of XYZ, Inc. telling his golfing partner that XYZ was close to being acquired by Monolith Communications, Incorporated. In light of ethical standards under the Uniform Securities Act, which of the following actions is most acceptable?
Baird tells her immediate supervisor (principal) of Miller's intent to trade based upon nonpublic (inside) information.
A retail customer of broker-dealer A is on vacation in State N. Broker-dealer A, who is registered and maintains an office in State F, wishes to make the customer aware of an investment opportunity that has just become available. Which of the following is TRUE?
Broker-dealer A may solicit this customer in State N.
prohibited activities
Conflicts of interest, must always be disclosed. There is never a case when backdating of confirmations is permitted. No discretionary activity may take place until the written authorization is actually received by the firm.
Which of the following securities is (are) NOT subject to state registration under the Uniform Securities Act?
Equipment trust certificates issued by a railroad subject to federal regulation Preferred stock of a bank holding company listed on the New York Stock Exchange Subordinated convertible debentures issued by the Dominion Electric Company of Canada, a public utility regulated by the Canadian federal government Shares of a savings and loan institution authorized to do business in the state
One way that a financial institution participates in the fight against money laundering is through the filing of
FinCEN Form 112 for large cash transactions
When, if ever, would a broker-dealer be required to register as an investment adviser?
If it charges distinct fees for investment advice or management
When may an individual sell securities as a registered agent for more than one broker-dealer?
If the broker-dealers are under common control
Which of the following statements regarding agent registration under the Uniform Securities Act are TRUE?
In the absence of any action by the Administrator, the effective date of a registration is noon of the 30th day after the filing of a completed application. If, before the effective date of the registration, the Administrator requires amendments to the application, the registration will be considered to have first been filed upon filing of those amendments.
With regard to the Uniform Securities Act, which of the following statements regarding the omission of a material fact by an agent is true?
It is a violation even if the client failed to make a transaction. It is a violation because it is a unethical or fraudulent practice. It is a violation even if material facts were unknowingly omitted.
According to the USA, which of the following is NOT considered a person?
Minor
Under the Uniform Securities Act, which of the following is an agent?
Mr. Blodgett, an employee of XYZ Manufacturing Corporation, receives commissions when he represents XYZ in the issuance of securities exclusively to existing employees, partners, and directors of the corporation.
Which of the following statements regarding an agent's registration is CORRECT?
Revocation of the registration of that agent's broker-dealer will result in cancellation of that agent's effective registration.
Under the Uniform Securities Act, the Administrator has the power to deny or revoke exemptions for which of the following types of securities?
Securities of nonprofit organizations Investment contracts issued by employee benefit plans
Sharon Smith is an agent for Highwater Securities, a broker-dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act,
Sharon must be registered in State X in order to accept the order
Which of the following statements regarding broker-dealer registration under the Uniform Securities Act are TRUE?
The Administrator may request that the broker-dealer furnish a statement of assets and liabilities. If, before the effective date of the registration, the Administrator requires amendments to the application, the registration will be considered to have first been filed upon filing of those amendments.
Under the Uniform Securities Act, which of the following is a reason for canceling an agent's registration?
The agent has ceased to do business as an agent The agent cannot be located after a reasonable search The agent has been found by a court to be mentally incompetent
Under the Uniform Securities Act, which of the following is required to be in writing in an advisory contract?
The amount of prepaid fee to be returned in the event of contract termination The terms of the advisory contract The method used for computing the adviser's compensation
As an incentive to encourage clients to invest in a particular stock recommended by the broker-dealer, clients are told that any time within 6 months after the purchase date, they may sell the stock back to the firm at original cost plus interest at the state's legal rate. This would be
a prohibited guarantee against loss
you inform a customer that you are not allowed to solicit an order for a stock but will accept that customer's buy order if placed. This is
an offer to sell
Federal covered securities
are exempt from registration under the USA can be required to pay state filing fees
Under industry rules, customers who wish to trade options must receive a copy of the Options Disclosure Document (ODD):
at or before account approval.
In general, a broker-dealer will disclose its fee schedule
at the time of the account opening
A client is interested in purchasing a thinly traded equity security where, due to the extra effort involved in obtaining the issue, the commission charged will be somewhat higher than normal. The compensation to the broker-dealer must be disclosed
before the order is placed on the trade confirmation
The National Securities Markets Improvement Act of 1996 (NSMIA)
defined the term "federal covered adviser"
Under the USA, when one is referring to a security that is guaranteed, the guarantee applies to
dividends to be paid on the specified stock interest and principal payment on the specified bond
The Administrator
does not have the power to invoke criminal penalties (three years in jail and/or a $5,000 fine under the Uniform Securities Act); that power is reserved for the courts
Any individual who represents an issuer in effecting transactions between the underwriter and the issuer
does not meet the definition of "agent" as promulgated under the Uniform Securities Act
Under the National Securities Markets Improvement Act of 1996 (NSMIA), states are prevented from
establishing capital and custody requirements that exceed those provided for in the Securities Exchange Act of 1934 establishing record keeping requirements for broker-dealers or investment advisers that exceed those required under federal securities law
A customer representing an institution calls the securities agent to complain that a security bought 1 year ago is showing a loss. The customer's job will be lost unless he is able to get out of the security at breakeven or a small loss. The market is 78-81 in the security and the customer's cost is 85. The agent can legally
execute the sale at the current market price
tp sell securities, an agent must be registered as an agent in
his state of residence where he sells securities each state in which he actually sells securities each state where he offers the sale of securities to retail clients
the securities Administrator does not have the authority to conduct an on-site examination of an investment adviser registered in his state
if the adviser does not have an office in that state
Under the USA, the term "offer"
includes an attempt to dispose of securities for value, or a solicitation of an offer to buy a security
Under the Uniform Securities Act, an agent is a(n)
individual representing a broker-dealer who sells federal covered securities
An agent is described in the Uniform Securities Act as an
individual, other than a broker-dealer or issuer, who represents a broker-dealer or issuer in effecting transactions in securities
An agent for a broker-dealer advising customers for a fixed fee, stated as a percentage of the customer's assets under management, and an individual who sells advisory services for AAA Advisers, Inc.,
is acting as an investment adviser representative.
Static content
is content that remains posted until it is changed by the firm or individual who established the account.
Borrowing money or securities from a customer
is prohibited
The Administrator of a state's securities department strongly believes that the registration statement for a security contains a substantial amount of misleading information and that investing in the security is likely to cause immediate and egregious harm to its investors. Under the following circumstances, the Administrator may
issue a stop order to deny or revoke the registration statement, but must provide the applicant with the opportunity for a hearing
An investment adviser maintains custody of customer's funds and securities. In order to comply with the Uniform Securities Act, the adviser must, at least quarterly, send written notice to each custodial client stating the
location of the assets under custody value of the assets under custody
Emmet opened an investment advisory service 3 years ago and raised $50 million in capital from family, friends, and contacts and then closed to new investors. If Emmet's stock picks expanded assets under management to $110 million, Emmet
must register with the SEC
An agent may borrow securities from a customer
only if the client is in the business of lending securities
cording to the Uniform Securities Act, the Administrator has the power to require persons wishing to register as an agent to
post a surety bond, pay filing fees, and pass an exam
A new agent is having a hard time making sales. In order to be more productive, he offers to share in any losses with clients. And, on the other hand, he will share in their profits as well. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, this is
prohibited unless the client gives written authorization and approval is granted by the broker-dealer
If a state-registered investment adviser moves to another location, the Administrator must be notified
promptly
A sales agent who is only registered in Nebraska works for a broker-dealer that is registered in all 50 states. A customer who is a resident of North Dakota calls the representative in Nebraska and offers to purchase securities. Under the Uniform Securities Act, the agent should
reject the order because she is not registered in North Dakota
Client portfolio management software, registration fees for conferences, and research provided by a broker-dealer to an investment adviser are all examples of
soft-dollar compensation
It is the credit agreement
that discloses the terms of the credit extended by the broker-dealer, including the method of interest computation and situations under which interest rates may change.
In order for the Administrator to suspend an agent's registration, compliance with the requirements of the Uniform Securities Act would require that
the agent is presented with an opportunity for a hearing notification is given to the employing broker-dealer of the final order notice is given of the proposed action and hearing
Trade confirmations sent by broker-dealers to their customers must always include
the amount of commission charged
In a margin account, broker-dealers lend money to clients to enable them to leverage their investments. The account document that is evidence of the debtor-creditor relationship is
the credit agreement
Under the Uniform Securities Act, all of the following statements are TRUE regarding private placements
they may be offered to an unlimited number of institutional investors no commissions or other remuneration is paid for soliciting noninstitutional investors the seller reasonably believes that all of the noninstitutional buyers are purchasing for investment purposes only
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, requirements of advisory contracts include which of the following?
they must describe the amount of any prepaid fee that will be returned to the client in the event the contract is terminated. They must prohibit the use of discretion without the client's authorization.
The Uniform Securities Act provides for criminal penalties of up
to three years in prison and/or $5,000 in fines
An investment adviser is any person
who is in the business of selling investment advice and is paid a fee for doing so.
A new issue is being sold by a registered broker-dealer. An agent for the firm prepares a sales brochure that contains only positive information gleaned from the prospectus. The sales brochure is handed out along with a copy of the effective prospectus. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, this
would be prohibited because material information is being omitted
