Series 63 Questions
Investment advisers must disclose any material disciplinary action to all current and prospective clients. The broadest definition of material would include any actions taken against the firm or management persons by a court or regulatory authority within the past 10 years. Fines levied by any SRO required disclosure if they were in excess of
$2,500.
Conviction of a securities-related misdemeanor can lead to statutory disqualification. The look-back period for statutory disqualification is generally a maximum of
10 years.
The Administrator is vested with many powers. Some of those affect securities professionals, some affect securities, and some affect both. Which of the following relates solely to securities professionals?
A cease and desist order
Under the SEC Release IA-1092, which of the following would be considered to be in the business of rendering investment advice?
A financial planner who charges no fee for developing a financial plan but who takes commissions on recommended trades
Which of the following persons is not an associated person of an investment adviser?
A graphic design consultant who prepares a broker-dealer's research publications
Under the Uniform Securities Act, which of the following statements is true regarding civil liability of investment advisers and broker-dealers?
A lawsuit against a broker-dealer or adviser can be avoided if restitution, costs, and interest are paid to a client.
Jon, an agent with Johnson-Bayer Securities, was reacting to peer pressure to use email as a prospecting tool. He decided to highlight the exciting new process for drug delivery, which was covered in the new offering prospectus when explaining why he felt the issuer "found the next Aspirin." He summed up the email by stating potential investors needed to act quickly to get in on the ground floor. His decision to do so fell into the category of which of the following?
A performance guarantee
ABC Corporation, a newly formed company, has filed a registration statement with the SEC under the Securities Act of 1933. If they wish to use coordination to register in this state, which of the following statements is true?
A statement of the maximum and minimum proposed offering prices and maximum underwriting discounts and commissions must be on file with the Administrator for two full business days prior to the date the federal registration statement becomes effective.
Which of the following statements is true?
An Administrator may, at the request of a registrant, hold hearings in private.
As defined in the Uniform Securities Act, which of the following can only be a natural person?
An agent
In which of the following situations did an agent commit fraud?
An agent sold shares in a company to a client by omitting immaterial information during the discussion, so as not to distract the client from making the purchase.
Which of the following would be included in the Uniform Securities Act's definition of an agent?
An individual who solicits securities transactions on behalf of a broker-dealer
As defined in the Uniform Securities Act, which of the following can only be a natural person?
An investment adviser representative
Gladys Gainer, an agent registered in States A, I, and M, has a client move from State I to State P on July 1, 2019. On September 1 of that year, the client buys 100 shares of a nonexempt security in a nonexempt transaction. On August 1, 2020, the client discovered that Gainer's firm never licensed her in State P and, therefore, she is subject to civil liability to the purchaser. The statute of limitations for this sale runs out
August 1, 2022.
When does a customer have to receive the options disclosure document?
Before or at the time the firm approves that customer's account or accepts the customer's order to trade options covered by the ODD
Which of the following actions should be taken by an agent when a client decides to open an options account?
Before the first options trade, review with the client the risks involved when trading options
Chandra has a PhD in economics and has been employed as an agent by Gibraltar Securities for the past 15 years. Missing academic life, she resigns from the broker-dealer and accepts a position as an economics professor at a state university. Which party is required to notify the state securities Administrator of this change?
Both Chandra and Gibraltar
A person registered as an agent for a broker-dealer doing business only in one state decides to voluntarily terminate the registration. Which of the following statements is correct?
Both the agent and the broker-dealer must notify the Administrator.
Recalcitrant Portfolio Advisers (RPA) is a state-registered investment adviser with $97 million in AUM. Which of these employees of RPA would be required to register as an investment adviser representative?
Cheryl, who has no customer accounts but supervises the activity of three IARs
Which of the following persons is defined as an agent by the Uniform Securities Act?
Clerk at a broker-dealer who is authorized to take orders
In October 1987, the SEC promulgated Release IA-1092, which had the effect of broadening the definition of investment adviser. As a result of the release, which of the following would not be included in the definition?
Commercial banks offering a full range of advisory services for their high-net-worth clients
The Beneficial Protected Life Insurance Company (BPLIC) is authorized to do business in this state. Under the Uniform Securities Act (USA), included in the definition of exempt security would be BPLIC's
Common Stock
Providential Monetary Services (PMS) is a new broker-dealer whose registration with the state became effective on September 22, 2020. PMS will receive a renewal notice on
December 31, 2020.
Under the Uniform Securities Act, the term agent does not include an individual who represents an issuer in effecting transactions in certain cases. In which case does receipt of compensation make the individual an agent?
Effecting transactions with existing employees, partners, or directors of the issuer
Investment advisers register with the SEC or with the state(s). Which of the following forms is used solely by state-registered investment advisers?
Form ADV Part 1B
With the growth of electronic communications, NASAA has established a policy dealing with the registration requirements or exemption from such. Broker-dealers using the internet to distribute information on available products and services through certain communications made on the internet directed generally to anyone having access to the internet, and transmitted through postings on bulletin boards, displays on home pages, or similar methods, shall not be deemed to be transacting business in this state for purposes of requiring registration in this state if the following conditions are observed: I. Any communication contains a legend in which it is clearly stated that the broker-dealer may only transact business in this state if first registered, excluded or exempted from state registration requirements. II. Any follow-up, individualized responses to persons in this state by such broker-dealer that involve either the effecting or attempting to effect transactions in securities will not be made absent compliance with state registration requirements or an applicable exemption or exclusion. III. The communication does not involve effecting transactions in securities and is limited to the dissemination of specific information on products and services that are suitable for the investor. IV. The communication contains a mechanism, including and without limitation, technical firewalls or other implemented policies and procedures, designed reasonably to ensure that prior to any subsequent, direct communication with prospective customers or clients in this state, said broker-dealer is first registered in this state or qualifies for an exemption or exclusion from such requirement.
I. Any communication contains a legend in which it is clearly stated that the broker-dealer may only transact business in this state if first registered, excluded or exempted from state registration requirements. II. Any follow-up, individualized responses to persons in this state by such broker-dealer that involve either the effecting or attempting to effect transactions in securities will not be made absent compliance with state registration requirements or an applicable exemption or exclusion. IV. The communication contains a mechanism, including and without limitation, technical firewalls or other implemented policies and procedures, designed reasonably to ensure that prior to any subsequent, direct communication with prospective customers or clients in this state, said broker-dealer is first registered in this state or qualifies for an exemption or exclusion from such requirement.
Under which of the following circumstances can an Administrator initiate a suspension or revocation proceeding against a broker-dealer registered in the state? I. On discovery that the broker-dealer's license had been suspended in another state II. On the conviction of a violation of the Securities Exchange Act of 1934 III. Two years after the withdrawal of registration by the broker-dealer IV. On the basis of facts known by the Administrator at the time of the broker-dealer's initial registration
I. On discovery that the broker-dealer's license had been suspended in another state II. On the conviction of a violation of the Securities Exchange Act of 1934
Under the Uniform Securities Act, an individual representing an issuer in the sale of which of the following securities would not have to register as an agent? I. Short term highly rated commercial paper II. Municipal bonds III. U.S. bank issues IV. An investment contract issued in connection with an employee's stock purchase, savings, pension, profit-sharing, or similar benefit plan
I. Short term highly rated commercial paper II. Municipal bonds III. U.S. bank issues IV. An investment contract issued in connection with an employee's stock purchase, savings, pension, profit-sharing, or similar benefit plan
The Uniform Securities Act provides an exemption from registration for certain securities and for certain transactions. However, the Administrator is not empowered to deny an exemption from state registration to I. U.S. government securities II. private placement transactions. III. a transaction with an insurance company. IV. municipal bonds issued by another state.
I. U.S. government securities IV. municipal bonds issued by another state.
ABC Securities is a broker-dealer registered with the SEC and domiciled in State X. ABC Securities would not be defined as a broker-dealer in State Y under the Uniform Securities Act if it had no offices in State Y and I. its only clients were insurance companies. II. it had contact with fewer than six State Y residents in any 12-month period. III. its only offer to State Y residents was through radio advertisements originating in State X but received in State Y. IV. it occasionally engaged in firm commitment underwriting with issuers based in State Y.
I. its only clients were insurance companies. III. its only offer to State Y residents was through radio advertisements originating in State X but received in State Y. IV. it occasionally engaged in firm commitment underwriting with issuers based in State Y.
To comply with the regulations regarding customer identification programs, the minimum identifying information that must be obtained from each customer before opening an account includes I. name. II. verbal assurance that the customer is of legal age. III. a street address, unless the primary mailing address is a PO Box located in the state of residence. IV. a Taxpayer Identification Number (TIN).
I. name. IV. a Taxpayer Identification Number (TIN).
With regard to the registration requirements of the Uniform Securities Act (USA), which of the following statements are true? I. Only the issuer itself can file a registration statement with the Administrator. II. An application for registration must indicate the amount of securities to be issued in the state. III. The Administrator may require registrants to file quarterly reports.
II. An application for registration must indicate the amount of securities to be issued in the state. III. The Administrator may require registrants to file quarterly reports
Which of the following pieces of customer information must an agent attempt to obtain when opening a new account? I. Emergency contact person II. Financial condition III. Investment objective IV. Education
II. Financial condition III. Investment objective
As defined in the Uniform Securities Act, which of the following constitutes an offer or sale of stock? I. Solicitation of a tender offer by a corporation II. Gift of assessable stock III. Purchase of shares through the exercise of a warrant IV. Exchange of shares in a corporate reorganization, such as a merger
II. Gift of assessable stock III. Purchase of shares through the exercise of a warrant
A registered broker-dealer offers investment advice as an incidental part of its commission business. One of its agents charges for investment advice as a freelance investment adviser outside the scope of his employment at the firm. Which of the following statements are true? I. The broker-dealer must register as an investment adviser. II. The agent must register as an investment adviser. III. The agent need not register as an investment adviser. IV. The broker-dealer need not register as an investment adviser.
II. The agent must register as an investment adviser. IV. The broker-dealer need not register as an investment adviser.
Under the Uniform Securities Act, the Administrator has the power to deny, suspend, or revoke the registration of an issue if it is in the public interest and I. the issuer discloses in the prospectus that there is virtually no chance that the company's business model will be successful and investors should anticipate losing their entire investment. II. the Administrator of another state has revoked the issue's registration. III. an officer of the registrant has been convicted of a securities related crime. IV. the prospectus contains misstatements of nonmaterial information.
II. the Administrator of another state has revoked the issue's registration. III. an officer of the registrant has been convicted of a securities related crime. IV. the prospectus contains misstatements of nonmaterial information.
An agent of a broker-dealer is currently doing business in one state and would like to conduct business in another state. When checking with the firm's compliance department, the agent would be told which of the following?
If the agent is a partner, officer, or director and held that position at the time the broker-dealer was registered in that state, the individual need not register separately.
Many of the Uniform Securities Act's regulations apply solely to retail clients. Which of the following are included in that term?
Individuals who are accredited investors
All of the following are nonissuer transactions except
Intel sold 10 million shares of its preferred stock in a private placement transaction to a syndicate of five pension funds.
The Uniform Securities Act holds that persons performing certain activities shall be registered as investment adviser representatives. That requirement would apply to which of the following?
John, who opens an investment advisory firm where he devotes his time exclusively to management responsibilities as the sole proprietor of the firm.
State securities Administrators may not impose which of the following?
Minimum net worth levels on registered investment adviser representatives
Which of the following is among the items of information that must be entered on a new account form?
Names of all persons who will have access to the account
Tom Mix is registered as an investment adviser representative with Destry Digital Advisers (DDA). DDA is registered in States T, O, N, and Y while Mix is registered in State T. If Mix has discretionary authority over several client accounts, what would State T's financial requirements be?
No minimum financial requirements placed upon investment adviser representatives
Which of the following terms pertains to registration with the Administrator of a mutual fund, closed-end investment company, or unit investment trust that is registered under the Securities Act of 1933 and also registered as an investment company under the Investment Company Act of 1940?
Notice filing
Under the Uniform Securities Act, which of the following regarding the registration of securities is true?
Registration by qualification becomes effective on a date ordered by the Administrator.
Sharon Smith is an agent for Highwater Securities, a broker-dealer registered in all 50 states. Smith 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,
Smith must be registered in State X in order to accept the order.
Parsimonious Asset Managers (PAM) has its principal office in State A with branches in States B, C, and D. PAM's last annual updating amendment showed assets under management of $125 million. Latrice is registered as an investment adviser representative with PAM and spends all of her time in the State C branch office advising her retail clients. With three customers in State C, 35 customers in State A, and 14 customers in State D, Latrice must register in
State C.
XYZ Securities Co. is simultaneously registering as a broker-dealer with the SEC and several states. Which of the following statements regarding its registration under the Uniform Securities Act is correct?
State registrations expire annually on December 31.
Under the Uniform Securities Act, an issuer is any person who issues or proposes to issue a security for sale to the public. According to the USA, which of the following is not an issuer?
The Energy Resources Partnership, which issues certificates of interest or participation in its oil, gas, and mining titles
Under the Uniform Securities Act, which of the following statements regarding the limited offering exemption is true?
The security that is the subject of the private placement need not be registered.
Enterprise Asset Research (EAR) is an investment adviser whose most recent annual updating amendment showed assets under management of $900 million. EAR's principal office is in State O and there are branches in State P and State I. Which of the following statements about the registration requirements of EAR's investment adviser representatives (IARs) is true?
Those investment adviser representatives with a place of business in State I register in State I only.
The Uniform Securities Act has a rather lengthy list of exempt transactions. Included in that list would be all of the following except
U.S. government Treasury bonds.
Karly Wilson CFP® is the owner of KW Advisors, an LLC specializing in comprehensive financial planning solutions for middle-income families. Wilson is registered as an investment adviser representative with Megatrends Money Multipliers (MMM), an SEC-registered investment adviser. Which of the following statements is true?
Wilson's business card must indicate registration as an investment adviser representative with MMM.
If an investment adviser representative is engaged in criminal activity while violating a rule under the Uniform Securities Act, but had no knowledge of the rule violated, the maximum penalty that may be imposed is a
a $5,000 fine.
The Podunk Bank Corporation (PBC) has a controlling interest in the First Bank of Podunk. PBC also controls the Podunk Savings Bank and PBC Securities, a registered broker-dealer. Based on this information, it is logical to conclude that PBC is
a bank holding company.
All of the following activities and communications would fall outside the definition of a recommendation except
a broker-dealer sends an email to its more conservative clients stating this would be an excellent time to invest in public utility stocks, and includes a list of those paying the highest dividends.
Unless qualifying for an exemption or excluded from the definition, broker-dealers are required to register in each state in which they have customers. An example of a case where the broker-dealer would not have to register is
a broker-dealer with no office in the state whose only transactions in the state were with large employee benefit plans.
Vervet Investments is a business whose primary activity is execution of transactions for customers. Vervet Investments is most likely
a broker-dealer.
Under the Uniform Securities Act, all of the following are exempt from state registration as investment advisers except
a financial planner who provides fee-based investment advisory services to clients and currently has a total of $18 million in assets under management.
As defined in the Uniform Securities Act, the term offer or offer to sell includes all of the following except
a loan with a stated interest rate payable upon demand.
Under the Uniform Securities Act, the term issuer refers to
a partnership that proposes to raise capital by selling partnership interests in a private placement.
Under the Uniform Securities Act, the definition of a broker-dealer includes
a person in the business of effecting securities transactions in its own account or for the accounts of others.
As described in Section 401(c) of the Uniform Securities Act, the term broker-dealer does not exclude
a person who has a place of business in this state if he effects transactions in this state exclusively with other broker-dealers.
When a brokerage firm sells stock from its own inventory, it is acting in the capacity of
a principal, and charges a markup.
In some cases, the Uniform Securities Act requires a broker-dealer to provide a form of insurance protecting customers from crimes like embezzlement or theft. The broker-dealer provides this insurance in the form of
a surety bond.
The Uniform Securities Act provides certain exemptions from registration as an agent. One of those would be when the individual represents
a trust company organized and supervised under the laws of any state.
An account at a broker-dealer where the full package of services, including execution and portfolio management, is provided for an all-encompassing charge is called
a wrap fee account.
All of the following would be prohibited practices under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers except
accepting an order from a client's spouse shortly after receiving a written trading authorization.
Title IV of the Dodd-Frank Act of 2010, known as the Private Fund Investment Advisers Registration Act of 2010, contains a comprehensive overhaul of the registration process for investment advisers. The bill provided for new exemptions from registration under the Investment Advisers Act of 1940 for all of the following except
advisers solely to unit investment trusts (UITs) registered under the Investment Company Act of 1940 (the UIT adviser exemption).
When registering a security under the Uniform Securities Act, the registrant must indicate all of the following except
all other states in which the security is to be registered.
A consent to service of process required by an Administrator is
an agreement whereby a registrant will be bound by any legal action or subpoena served on the Administrator as if it had been served on the registrant.
Under the Uniform Securities Act, the term guaranteed security refers to a guarantee of all of these except
capital gains.
There are conditions under which a broker-dealer must post a surety bond. In lieu of the bond, the Administrator is empowered to accept
cash or securities.
A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclose all of the following fees except
commissions on unsolicited trades.
The customer identification program (CIP) requires that certain information relating to new customers be obtained. Included in that requirement for individual clients who are citizens of the United States are all of the following except
current employment status.
The broad term that defines a person in whom another has placed the utmost trust and confidence to manage and protect property or money is
fiduciary.
One way in which registering as an investment adviser on the state level differs from registering with the SEC is that state-registered investment advisers
file the Form ADV Part 1B while those registering with the SEC do not.
The Uniform Securities Act's definition of a security would not include
fixed index annuities.
A state-registered broker-dealer must keep business records available for examination by the Administrator
for three years.
Under the Uniform Securities Act, an accountant who charges hourly fees for securities recommendations in the regular course of his accounting practice is
included in the definition of an investment adviser because he is compensated for giving investment advice in the regular course of business.
A client of a broker-dealer files a civil suit claiming damages for sale of an unregistered security. During the proceedings, the client suffers a fatal stroke. The suit
is continued by the deceased's executor.
Section 401(c) of the Uniform Securities Act contains the definition of a broker-dealer. The section also lists exclusions from the broker-dealer definition for a person with no place of business in the state whose only clients in the state are all of the following except
issuers of securities.
A customer opens a margin account with a broker-dealer and signs a loan consent agreement. The loan consent agreement allows the firm to
loan out the customer's margin securities.
Under the Uniform Securities Act, the Administrator may
make rules, orders, and forms the Administrator considers necessary to carry out the provisions of the act.
The common stock of Alternative Energy Resources Organization (AERO), previously trading on the OTC Pink Market has just become listed on the New York Stock Exchange. If AERO wishes to make its securities available for sale in several states where the common stock is not registered, the process used would most likely be
notice filing.
The regulatory authorities are concerned about proper disclosure of potential conflicts of interest. That disclosure would be necessary in all of the following cases except
recommending a limited partnership offering (DPP) where the sponsor is located in the same city as the broker-dealer.
On the Series 63 exam, the term that is synonymous with noninstitutional client is
retail client
The term security includes all of the following except
right or warrant to subscribe to any security.
All of the following are exempt from the registration requirements of the Uniform Securities Act (USA) except
stock issued by a Canadian company that provides actuarial services to insurance companies.
In an agency cross transaction, the investment adviser acts as agent for both its advisory client and the party on the other side of the trade. The Uniform Securities Act will permit an investment adviser to engage in these transactions provided the adviser obtains prior written consent for these types of transactions from the client that discloses
that no transaction is effected in which the same investment adviser or an investment adviser and any person controlling, controlled by, or under common control with that investment adviser recommended the transaction to both any seller and any purchaser.
When a security is registered by qualification, the registration statement may be filed by all of the following except
the Administrator.
Among the filings made by a registered investment adviser is the brochure supplement. That would be
the Form ADV Part 2B.
All of the following are self-regulatory organizations (SROs) except
the SEC.
Global Investment Strategies (GIS) is a broker-dealer registered in six states. GIS would have to meet the financial and recordkeeping requirements of
the Securities and Exchange Commission (SEC).
Broker-dealers are usually registered in more than one state. Indeed, some are registered in every state. This can present a problem when a customer in a state geographically far removed from the broker-dealer's principal office files a complaint with the Administrator of that state. If the investigation determines that a hearing is to be held in the customer's state, it can be difficult to get legal representation of the broker-dealer to travel extensively. A legal agreement permitting the Administrator to act as the defendant's attorney in fact for the receipt of legal documents is
the consent to service of process.
Unless qualifying for an exemption, any person who meets the definition of broker-dealer must register with the state. To register with the state securities Administrator, such persons must submit an application containing all of the following except
the hours the business will be open.
An individual representing the issuer in the sale of that issuer's securities to the public would have to register in this state if
the issuer is a federal savings and loan association authorized to do business in this state.
In addition to the annual updating amendment, an investment adviser must amend the Form ADV by filing additional amendments promptly if information relating to certain items becomes inaccurate in any way. Prompt amendment would not be required when there is a change to
the number of shareholders if the firm is organized as a corporation.
A securities professional would be exercising discretion in a customer's account when determining any one of the following except
the time at which the order will be presented.
All of the following statements regarding broker-dealers are true except
they employ only registered investment adviser representatives.
