Series 66 Chapter 1 second set
According to the Uniform Securities Act, a corporation would not be an investment advisor if it: [A]was located outside the state in which the advice was rendered and only charged a fee periodically. [B]charges less than $600 per year in advisory fees. [C]gives advice exclusively on fixed annuity contracts.** [D]gives advice exclusively on registered mutual funds.
EXPLANATION Fixed annuity contracts do not fall under the definition of a security according to the USA. The corporation would not be required to be an investment adviser when dealing in fixed annuities only.
An individual working at a broker/dealer firm accepts orders and executes orders for limited partnership interests in oil and gas programs. The Uniform Securities Act states which of the following? [A]This individual must be registered, because all employees at a broker/dealer firm are required to be registered if they have any contact, clerical or otherwise, with clients. [B]This individual need not be registered, because limited partnership interests are not considered "securities" under the Uniform Securities Act. [C]This individual must be registered, because limited partnership interests are considered "securities" under the Uniform Securities Act.** [D]This individual need not be registered, because the individual is only dealing with one type of security and therefore qualifies for an exemption.
EXPLANATION Under the Uniform Securities Act, certificates of interest in an oil and gas program are considered to be "securities". Any time that an individual is accepting orders and executing orders for "securities", such activities will require registration under the Uniform Securities Act. Individuals do not need to be registered if they have clerical contact with clients. There are many scenarios where an assistant to an agent, or a secretary at the firm may be in contact with clients, but do not need to be registered under the Uniform Securities Act. There is no exemption related to the number of products/securities an agent sells. In other words, even if only dealing with one type of security under the Uniform Securities Act, an agent must be registered.
A solicitor receives a call from an Investment Adviser (IA) who wants the non-employee to conduct solicitation activities for the IA. What are the obligations regarding registration according to the Uniform Securities Act? [A]Since the solicitor is not a registered investment adviser and is not qualified to be a investment adviser representative, the solicitor does not need to register. [B]Every state requires the solicitor to register whether or not the solicitor conducts business in that state. [C]The solicitor does not need to register because the solicitor does not work for the investment adviser company. [D]It is required that the solicitor register in the states in which it conducts its business.**
EXPLANATION A person hired by an investment adviser to perform solicitation activities on behalf of the IA must be registered in each state in which it solicits or transacts business.
The term agent, according to the Uniform Securities Act, would include all of the following people EXCEPT [A]one who effects transactions of registered securities with clients who are members of the public. [B]one who works for a broker-dealer involved in selling securities that have been listed on a securities exchange. [C]one who represents a broker-dealer and performs securities transactions where no transaction-based fees are charged or paid.[D]one who represents an issuing body in effecting transactions that are exempt.***
EXPLANATION A person representing an issuer in effecting transactions that are exempt or exempt transactions, is not considered an "agent." All of the other people listed would be considered agents because they either work for a broker-dealer effecting transactions, or because they conduct commissions-based transactions for the public.
According to the USA, which of the following does not fall under the definition of an IAR? [A]A supervisor in charge of overseeing IARs [B]An individual who gives advice about securities [C]Someone who performs securities transactions for other people's accounts** [D]Someone associated with a federal covered adviser in the business of managing the portfolios of clients
EXPLANATION A person who effects securities transactions for the accounts of others is a broker/dealer.
Under the Uniform Securities Act definitions, an Agent is any individual who represents a Broker-Dealer in effecting or attempting to effect purchases or sales of securities. This definition refers to employees of a brokerage firm who execute transactions in the purchase or sale of securities to the investing public. Agents are normally compensated [A]A percentage of the profits earned in the account [B]A management fee which is charged annually [C]A commission per transaction executed** [D]A portion of the underwriting syndicate's spread
EXPLANATION Agents of broker-dealers are normally paid a commission per transaction executed on behalf of the agent's clients.
Under the Uniform Securities Act, an Offer or Offer for Sale is any attempt to solicit a purchase or sale of a security for value and is considered to have been made in a State when: It originates in the State It is directed to the State It is accepted in the State [A]I only[B]I & II only [C]I & III only[D]I, II, III**
EXPLANATION All choices offered represent situations where an offer or offer to sell would have been made in a State.
Under the provisions of the Uniform Securities Act, an "investment advisor" could be which of the following: a corporation an association a partnership an individual [A]I, II[B]II, III[C]I, III, IV[D]All**
EXPLANATION All four choices represent persons which could become registered as an Investment Advisor.
Which of the following entities would be required to register as an Investment Adviser under the Uniform Securities Act? [A]An individual who is registered with the Administrator as an investment adviser representative. [B]A person who, for compensation, provides investment advice solely on investment companies such as mutual funds.*** [C]Lawyers, accountants, engineers, or teachers whose financial advice relates to the practice of their profession and is incidental.[D]A bank, savings institution, or trust company that charges a fee for financial advice.
EXPLANATION All of the entities listed qualify for exemption from the definition of an investment advisor under the Uniform Securities Act except for the person who charges a fee to provide financial advice on investment companies such as mutual funds. This person would be providing advice on securities for a fee and would therefore fall under the definition of an investment advisor unless the person qualified for some other exemption.
An agent is hired by a company for the upcoming issuance of securities to the public. The company has registered the issue in States A, B, and C. The agent is currently registered in State A only. Which of the following is true of this situation? [A]The agent would be best served to register in States A, B, and C, in order to offer the securities to the largest number of potential buyers.** [B]The agent would be permitted to sell the securities in States A, B, and C under the registration of the issuer. [C]The agent would need to be dually registered with the issuer and with a broker/dealer firm. [D]The agent would need to register as an issuer in order to issue these securities.
EXPLANATION An agent must be registered in all states where they act within the scope of an agent. If an agent is working for an issuer on an upcoming new issue of securities, the agent would be best served to register in all states where the issuer intends to offer securities. This would provide the most opportunity to sell the new issue.Agents are not permitted to sell under the registration of the issuer. As well, dual registration or registration as an issuer would not be required for the agent.
According to the Uniform Securities Act, of the following items listed which could be registered under the qualification registration process? [A]Commodity Futures Contracts [B]Fixed annuities [C]Corporate equities* [D]Contracts dealing in insurance
EXPLANATION Any security may be registered by qualification. In this question, the answers pertaining to commodity futures, insurance contracts and annuity products would not be correct since they are not "securities". Corporate equities are generally common and preferred stock which would be considered to be securities and would be registered by "qualification" with the State..
According to the Uniform Securities Act, an advisory firm that re-organizes mid-year may file an application to register a successor firm [A]only if that successor firm has existed for over one year.[B]only if the successor firm will have been in existence for the year to date.[C]whether or not the successor firm has existed for a full year.**[D]only if the successor firm exists for the remaining portion of the year and a three full years following.
EXPLANATION Application for a successor firm can be made regardless of whether or not the successor firm has been established. The successor firm does NOT have to already be in existence when applying for the unused portion of the year of the reorganized firm.
Under the Uniform Securities Act, which of the following activities would NOT be included in the definition of a person acting as an Investment Adviser Representative? Making recommendations or giving advice regarding any securities Managing client accounts Making recommendations regarding fixed annuity contracts Making recommendations regarding precious metals [A]I & II only[B]III & IV only** [C]I, II & IV only [D]I, II, III, IV
EXPLANATION Be careful with regards to the question. Here, we are asking which would NOT be an IAR. The statutory definition of an "investment adviser representative" includes rendering advice or giving recommendations with regard to securities. Fixed Annuity contracts, precious metals, and commodities are not considered "Securities". Therefore a person would NOT have to be registered as an IAR to make recommendations, on those products.
Which one of the following must be registered as an investment adviser under the Uniform Securities Act? [A]Accountants who provide incidental investment advice to clients without compensation. [B]The trust department of a bank which receives compensation for investment advice. [C]Any given federal covered adviser [D]A financial journal's publisher who responds to reader's mail with financial planning advice.**
EXPLANATION Because the publisher responds to reader's mail and gives advice, they would have to register as an Investment Adviser.
Under the provisions of the Uniform Securities Act, which of the following is NOT an exempt security? [A]A bond issued by a state credit union [B]A stock issued by a local profit-making manufacturing corporation not listed on any exchange* [C]A bond guaranteed by the city of Ottawa, Canada [D]A stock issued by a railroad regulated by the Interstate Commerce Commission
EXPLANATION By definition under the Uniform Securities Act, 'A', 'C', and 'D' are exempt securities and choice 'B', stock issued by local profit making manufacturing corporation not listed on an exchange is not listed as an exempt security.
According to the Uniform Securities Act, which of the following are included in the definition of a broker/dealer? [A]Agents [B]Issuers of securities [C]Out-of-state broker/dealers servicing only other broker/dealers [D]One who effects transactions in securities for the accounts of others or solely for the firm's own account**
EXPLANATION Choice 'A', 'B', and 'C' are specifically excluded from the definition of broker/dealer, but choice 'D' defines a firm acting in the capacity of a broker (accounts of others) and a dealer (the firm's own account) and would therefore be considered a broker/dealer by definition.
An Investment Advisor Representative has a duty to do all of the following except: [A]Ensure that client accounts appreciate in value** [B]Make suitable recommendations to clients [C]Place the client's interest before the advisor's interests [D]Disclose any and all conflicts of interest
EXPLANATION Choices 'B', 'C', and 'D' represent duties required by an Investment Advisor Representative. Investment Advisor Representatives cannot ensure clients that their account will appreciate in value.
Chris and Mark are childhood friends who were born and raised in California. Chris is registered as an agent only in California but he works at a broker/dealer firm that is registered in all 50 states. Mark has had a brokerage account with Chris for 8 years. Several of Mark's family members decide to move to Arizona to pursue a new business venture, and Mark decides to go as well. If Mark wants to continue to have Chris as his agent, which of the following would be TRUE? I. Chris can continue to handle the account, because he and Mark are friends and the business relationship has existed for more than 5 years. II. Chris would have to register in the state of Arizona if he wishes to continue handling Mark's account. III. Chris can get around registering in Arizona if Mark puts down a California mailing address, even though Mark has now moved to Arizona. IV. Chris would not have to register in the state of Arizona, because he currently handles 5 or fewer clients in that state and qualifies for an exemption. [A]II only** [B]II and IV only[C]III and IV only[D]I, II, III, and IV
EXPLANATION If Chris and Mark want to continue the agent/client relationship, it will be necessary for Chris to register in the state of Arizona. Their friendship and the length of time the account have been open would not exempt Chris from registration procedures. Having Mark put down a false mailing address is an unethical practice, and Chris would be required to register in Arizona regardless, because orders would be originating from that state. Remember that the 5-client exemption applies only to investment advisory firms. Chris would not be exempt from registration as an agent because he only has one client in Arizona.
An individual employed with an insurance company is looking to expand their offerings by becoming an agent under the Uniform Securities Act. Currently the individual sells fixed insurance products and fixed annuity products. Which of the following is TRUE in this scenario? [A]In order to perform transactions in fixed products such as those already being sold, the individual would have to be registered as an agent under the Uniform Securities Act. [B]Once registered as an agent, the individual will be permitted to provide investment advice to clients for a fee. [C]Currently the individual does not need to be registered as an agent, but if the individual were to effect securities transactions such as effecting unsolicited orders for customers, the individual would have to be registered as an agent.*** [D]As long as the individual does not service more than 5 clients, this individual can sell shares of mutual funds and certificates of interest in oil and gas programs without being registered as an agent.
EXPLANATION In order to effect securities transactions for customers, an individual would have to be registered as an agent under the Uniform Securities Act. Agents are permitted to effect or attempt to effect transactions in items defined as "securities" under the Uniform Securities Act. Individuals selling fixed insurance products and fixed annuities would not be dealing with "securities" under the Uniform Securities Act definition and would be NOT be required to be registered. Providing advice to clients for a fee would require registration as an investment advisor representative, and there is no 5-client exemption for agents of broker/dealers working with securities.
Under the Uniform Securities Act, which of the following are NOT included in the definition of a "security"? Stock Options Fixed annuities Pre-organization certificates Endowment policies [A]I & III[B]II & IV** [C]I, II, & III[D]I, II, III, IV
EXPLANATION In the USA, Stock Options and Pre-organization certificates ARE included in the definition of a security. Endowment Policies and Fixed Annuities are NOT included in the definition of a security. Endowment Policy is a specialized insurance product that acts like a savings plan and can be used to meet specific goals like a child's college education.
Under the Uniform Securities Act, are endowment policies included in the definition of a security? [A]Yes, they are defined as a security because they can act like a savings plan. [B]No, they are not defined as a security because they are a specialized insurance product.** [C]Yes, they are defined as a security because they can be used to meet specific needs financial needs of clients.[D]They may or may not be defined as a security, depending on the decision of the State Administrator.
EXPLANATION In the USA, the definition of a "security" does not include endowment policies. An Endowment policy is a specialized insurance product that acts like a savings plan and can be used to meet specific goals like a child's educations.
All of the following would be considered to be excluded from the definition of an Investment Adviser under the Uniform Securities Act except? [A]An IA who gives advice about bank securities for an advisory fee** [B]Accountants whose advice is incidental to the practice of their profession as an accountant [C]A college professor who teaches courses on finance and discusses specific securities during class [D]A bank which charges a fee for advice provided to clients
EXPLANATION Lawyers, accountants, teachers, and engineers whose advice is incidental to the practice of their profession would be excluded from the definition of Investment Advisor. As well, banks, savings institutions, trust companies, and investment companies would also be exempt, even when charging fees. Publishers of general advice in a newspaper would also be exempt. An IA who received compensation for giving advice related to securities would have to be registered as an Investment Advisor.
According to the Uniform Securities Act, the definition of "Investment Advisor" applies to which of the following? [A]a publisher of a newsletter containing general stock market analysis [B]a savings institution which advises customers regarding the value of securities [C]an attorney who, for additional compensation, engages in the business of advising others regarding the value of securities*** [D]a broker/dealer firm which advises customers on buying and selling securities without receiving compensation beyond its commissions
EXPLANATION Of the choices offered, the attorney would be considered an investment advisor since they receive additional compensation for giving advice to clients with regard to securities. The broker/dealer would be acting as a broker/dealer and not have to be registered as an investment advisor since they would be paid based on transactions, not paid based on giving advice. Banks are excluded from the definition of an investment advisor.
According to the Uniform Securities Act when a corporation is the successor broker-dealer to a partnership, which of these choices is correct with regard to registration of its directors as agents of the broker-dealer? [A]The directors cannot be registered as agents of the broker-dealer.[B]When the broker-dealer is registered, it automatically constitutes registration of the directors as agents of the broker-dealer.** [C]Each director must register independently of the broker-dealer.[D]Directors are not allowed to be agents of the broker-dealer.
EXPLANATION Registration of the broker-dealer automatically constitutes registration of any agent who is a partner, officer, or director for new and successor firms. This is due to the fact that the information required for such persons is similar to the information required for an agent. Qualification exams may be required if the individual intends to function as an agent.
According to the Uniform Securities Act, the definition of "a person" would include: an individual an unincorporated organization a political sub-division of a government [A]I[B]I, III[C]II, III[D]I, II, III**
EXPLANATION Since the Uniform Securities Act uses a very broad definition of "person", all choices offered are included in their definition.
An individual receives commissions from both a broker/dealer and an issuer. He would be considered an agent of: [A]The broker/dealer[B]The issuer[C]Neither[D]Both**
EXPLANATION Since the individual is receiving compensation from an issuer and a Broker/Dealer, they would be acting as an agent for both.
Under the Uniform Securities Act, which of the following would be included in the definition of a broker-dealer? A firm, who for compensation, directly engages in the business of advising others as to the value of securities. A firm who engages in the business of effecting transactions in securities for the accounts of others. A firm who engages in the business of effecting transactions in securities for the firm's own account. A firm, who for compensation, engages in the business of advising others as to the value of securities through publications or writings. [A]I & IV[B]II & III[C]I & III[D]II & IV
EXPLANATION The USA's definition of Broker-dealer states that a broker-dealer is any person in the business of effecting transactions in securities for the accounts of others or for its own account.
A veteran agent and a new agent at a registered broker/dealer firm are having a conversation about exempt securities and transactions under the Uniform Securities Act. The veteran agent tells the new agent that all transactions that are effected through a registered broker/dealer qualify for exemption. Which of the following is correct with regard to the veteran agent's statement? [A]The veteran agent is correct, because there is an exemption for transactions through a registered broker/dealer that applies to all transactions. [B]The veteran agent is correct, because as long as the agents and the broker/dealer are registered, all transactions that the agents and firm perform will be exempt. [C]The veteran agent is incorrect, because in order to qualify for the stated broker/dealer exemption, transactions must be non-issuer and must be unsolicited.** [D]The veteran agent is incorrect, because no exemption exists in any form for transactions through registered broker/dealers.
EXPLANATION The Uniform Securities Act provides exemptions for certain transactions. One of these exemptions is in relation to non-issuer transactions effected by or through registered broker/dealers pursuant to unsolicited orders or offers to buy. Without the "non-issuer" and the "unsolicited", the veteran agent's statement is incorrect and would mislead the new agent.
Under the Uniform Securities Act, if an investor has received warrants to purchase additional shares of common stock, the receipt of those warrants by the investor would: [A]be considered a gift. [B]be considered a sale.** [C]be considered a loan. [D]be considered unethical.
EXPLANATION Under the USA's definition of "sell" or "sale," when an investor receives warrants from the issuer after they purchase another security, receipt of the warrants would be considered a sell or sale, because the only way the investor got them was first buying the other security. Receipt of warrants when the investor purchased another security, such as a debenture, would NOT be defined as a bona fide gift.
Which of the following statements would be true with regard to the registration of an Agent of a Broker-Dealer under the Uniform Securities Act? I. The Administrator may deny or revoke an application for registration or an existing registration if the Administrator finds that it is in the public's interest. II. The Administrator may not deny any registrant from registration until they have violated a rule while registered. III. The Agent's registration must be renewed by December 31st each year. IV. The Agent's registration would only require renewal if the Agent changes Broker-Dealer affiliation. [A]I & III only** [B]II & IV only[C]I & IV only[D]II & III only
EXPLANATION Under the Uniform Securities Act, an Administrator may deny an Agent's registration if the Administrator finds that it would be in the best interest of the public. An Agent's registration must be renewed by December 31st each year.
Under the Uniform Securities Act, all of the following would be included in the definition of a State except: [A]The State of California [B]Hawaii[C]Canada** [D]Puerto Rico
EXPLANATION Under the Uniform Securities Act, the definition of a State means any state, territory, or possession of the United States, including the District of Columbia and Puerto Rico. Therefore all choices except Canada would be correct.
According to the Uniform Securities Act under which of the following circumstances would an Investment Advisor be exempt from the anti-fraud provisions of securities law? [A]An investment adviser would be exempt from the anti-fraud provisions provided that the Investment Adviser only has institutional clients.[B]An investment adviser would be exempt from the anti-fraud provisions provided that the Investment Adviser only has clients which are investment companies.[C]An investment adviser would be exempt from the anti-fraud provisions provided that the Investment Advisor was exempt from registration within the State.[D]There are no circumstances where an investment adviser would be exempt from the anti-fraud provisions of securities law.**
EXPLANATION When dealing with securities, no one is exempt from the anti-fraud provisions of Federal Securities Law.