Guaranteed Success in Uniform Securities State Law Series63 Exam Dumps
FINRA Series63 Daily Practice Exam New 2023 Updated 251 Questions
NEW QUESTION # 10
Which of the following scenarios would not be considered a "sale," as defined by the Uniform Securities Act (USA)?
I. Yoshito owned shares of Minnow Corporation and received shares of Whale Corporation from Whale when it merged with Minnow.
II. Olivia's uncle, an agent with SecureMoney Brokers, sold Olivia ten call options on the stock of Microsoft.
III. Hans purchased a bond of Indebted Corporation that had detachable warrants and subsequently sold the warrants.
IV. Tom pledged some shares of stock he owned personally to secure a business loan for his company.
- A. Neither III nor IV would be considered sales.
- B. Neither II nor III would be considered sales.
- C. Neither I nor II would be considered sales.
- D. Neither I nor IV would be considered sales.
Answer: D
Explanation:
Explanation
Neither Scenario I nor Scenario IV describes sales as defined by the USA. When an investor receives securities from Company X when Company X merges with a company in which the investor owns stock, Company X is not considered to have sold those securities to the investor. Likewise, when a person uses securities he owns as collateral for a loan, the USA does not consider this to be a sale of the securities.
NEW QUESTION # 11
You had the misfortune of working as a registered agent for an unscrupulous broker-dealer. You weren't
privy to any of it, but apparently, your broker-dealer was guilty of some fraudulent activities and has had
his license revoked. In this instance,
- A. you must wait until the broker-dealer's day in court before you can work in the securities industry again
because the Administrator will want to be certain that you knew nothing of it. - B. the state Administrator will assign you and any other affected agents to work for other broker-dealers
registered with the state. - C. you can simply find another broker-dealer to hire you and have your license transferred to him.
- D. you are no longer a licensed agent with the state and must reapply for a license in order to work for
another broker-dealer.
Answer: D
Explanation:
If you were employed as an agent for a broker-dealer who has had his license revoked, you
are no longer a licensed agent with the state and you will have to reapply for a license and pay the
requisite filing fees in order to work for another broker-dealer. Your license terminated when your
affiliation with the unscrupulous broker ended, even though it was through no fault of your own. Since you
have done nothing for which to be penalized, however, your registration becomes effective upon your
filing and paying your fees.
NEW QUESTION # 12
The Administrator of a state can deny an application if
- A. the application is missing information.
- B. the Administrator determines the applicant is not financially solvent.
- C. the registrant has been enjoined from engaging in activities involving securities in another state.
- D. any of the above is true.
Answer: D
Explanation:
Explanation
The Administrator of a state can deny an application if the application is missing information, if the registrant has been enjoined from engaging in activities involving securities in another state, or if the Administrator determines the applicant is not financially solvent.
NEW QUESTION # 13
Sam Shade had his agent's license revoked by the state of Washington for repeatedly making misleading claims about various investment to investors. He had had it with all the rain anyway and decided to move to the sunshine state of Florida. His brother-in-law was a computer whiz who made money on the side (more than his day job provided, in fact) by supplying illegal immigrants with official-looking documentation, including social security numbers. Sam Shade became Ian Creed in a few clicks of the mouse. As Ian Creed, Sam was hired by Sunny Investment Advisers, an investment adviser firm located in the Florida Keys, in a clerical role. As such, Sam/Ian had access to the confidential information of the firm's clients, which he and his brother-in-law utilized for the purpose of identity theft. Under the Uniform Securities Act guidelines, when Sam and his brother-in-law are caught in their illegal activities,
- A. Sunny Investment Advisers will be subject to civil penalties for employing an individual whose license had been revoked by the Administrator of another state.
- B. Sunny Investment Advisers will be subject to criminal prosecution for employing an individual whose license had been revoked by the Administrator of another state since it obviously did not use due diligence in hiring Ian Creed, aka Sam Shade.
- C. Sunny Investment Advisers will be subject to both criminal prosecution and civil penalties for employing an individual whose license had been revoked by the Administrator of another state since it obviously did not use due diligence in hiring Ian Creed, aka Sam Shade.
- D. Sunny Investment Advisers will not be held liable if it can prove that there was no way it could have or should have known of the revocation of Sam Shade's (aka Ian Creed) license.
Answer: D
Explanation:
Explanation
When Sam and his brother-in-law are caught, Sunny Investment Advisers will not be held liable if it can prove that there was no way it could have or should have known of Sam Shade/Ian Creed's license revocation. The drafters of the Uniform Securities Act were cognizant of the fact that employees can be remarkably deceptive when applying for a position, and because of this the Act indicates that the investment adviser must either
"have known or should have known" of the Administrator's adverse decision against the employee in order to itself be deemed liable.
NEW QUESTION # 14
Under which of the following scenarios can a client legitimately sue a purported professional in the securities industry and expect an award for damages?
I. The securities were sold by an agent whose registration was not yet effective with the state, but who had already applied for registration.
II. The security was a variable annuity, and the sales representative neglected to reveal the details of the surrender clause to the client.
III. The security was the stock of a company, the stock had recently been registered with the state for sale, had been granted registration, and the selling agent had told his client that the security had been state-approved for sale.
- A. I only
- B. I, II, and III
- C. I and III only
- D. II and III only
Answer: B
Explanation:
Explanation
All of the selections are scenarios describing instances in which a client can legitimately sue a purported professional in the securities industry and expect an award for damages. A client can legitimately sue a purported professional in the securities industry and expect an award for damages if the agent is not yet effectively registered to effect securities transactions in the state; if the professional has neglected-intentionally or otherwise-to inform the investor of all the relevant information involving the security, such as any surrender clause involved; or if the agent has indicated that a state-registered security has in any way been approved by the state.
NEW QUESTION # 15
Mr. Bigwig, CEO of HiGrowth Corporation, meets with the president of BigFee Investment Bankers and arranges for BigFee to underwrite an Initial Public Offering (IPO) for the firm.
When the IPO comes to market, GetErDone Broker-Dealers is part of the selling group, which handles the sale of the stock to the public. In this scenario, which party is the issuer?
- A. Mr. Bigwig
- B. GetErDone Broker-Dealers
- C. BigFee Investment Bankers
- D. HiGrowth Corporation
Answer: D
Explanation:
Explanation
HiGrowth Corporation is the issuer in this instance. Its stock will be sold, and HiGrowth will receive the proceeds from the sale-less BigFee's underwriting spread. Mr. Bigwig is merely HiGrowth's representative in this instance.
NEW QUESTION # 16
Don is a state-registered agent with GetErDone Broker-Dealers. He has three other friends who are
licensed agents-Huey, Dewey, and Louie. Huey is also an agent with GetErDone Broker-Dealers. Dewey
is an agent with a different firm in the same city, CanDo Broker-Dealers. Louie works for a Broker-Dealer
with an office just across the state line. Don can enter a commission-splitting agreement with
- A. Huey only.
- B. Either Huey, Dewey, or Louie or any combination of the three
- C. Dewey only.
- D. either Huey or Dewey or both
Answer: A
Explanation:
Don can enter a commission-splitting agreement with Huey only since he is the only one who
is also working for GetErDone Broker-Dealers. It is considered unethical to split "commissions, profits or
other compensation. . .with any person not also registered as an agent for the same broker-dealer," under
NASAA Model Rules.
NEW QUESTION # 17
Which of the following statements about agents is (are) false?
- A. When an agent has a change of address, both he and his broker-dealer affiliate must inform the
Administrator. - B. All of the above are false statements.
- C. If an agent files for bankruptcy, the Administrator may elect to terminate that agent's registration if the
Administrator believes it is "in the public interest" to do so. - D. An agent must demonstrate a specific minimum level of financial stability for his registration application
to be accepted.
Answer: D
Explanation:
The statement that an agent must demonstrate a specific minimum level of financial stability
for his registration application to be accepted is false. The Administrator may require an agent to post a
bond, but there are no specific minimum financial requisites that must be met. The Administrator also has
the right to terminate an agent's registration if the agent becomes bankrupt. Both the agent and his
broker-dealer affiliate are required to inform the Administrator whenever there is a change in the agent's
personal information, such as a name change or a change of address.
NEW QUESTION # 18
Which of the following statements regarding an open-end investment company is not true?
- A. Its shares are bought and sold on exchange floors.
- B. Its shares are bought and sold through the company.
- C. Its shares may sell for either net asset value or greater than net asset value, but not below
- D. Its securities are federal covered.
Answer: A
Explanation:
The shares of an open-end investment company are not bought and sold on exchange floors.
An open-end investment company is a mutual fund, and its shares are bought and sold through the
company. The price per share will be either at net asset value as is the case with a no load fund, or above
net asset value, as is the situation with a load fund, when the price is equal to net asset value + the sales
charge (load.) Open-end investment company shares are federal covered and, as such, do not need to be
registered with the state.
NEW QUESTION # 19
In which of the following cases is an investment adviser allowed to be compensated with a share of the capital gains of the client's portfolio?
I. The client is a mutual fund.
II. The client is a credit union.
III. The client is a private client whose minimum net worth is $1 million or more.
IV. The client is a private client who has at least $750,000 invested through the investment adviser.
- A. I, II, and IV only
- B. I and II only
- C. I, II, and III only
- D. none of the above. An investment adviser is never allowed to share in the capital gains earned on
Answer: A
Explanation:
Explanation
Selections I, II, and IV are correct. An investment adviser is permitted to be compensated with a share of the capital gains of the client's portfolio if the client is a mutual fund, a credit union, or a private client with at least $750,000 invested through the investment adviser. More generally, the adviser can charge a fee based on the capital appreciation of the portfolio if the client is an institutional investor, a private client with a net worth of at least $1.5 million, or a private client with at least $750,000 invested with the investment adviser.
NEW QUESTION # 20
Which of the following is not one of the criteria for a security to be eligible for registration by notification?
- A. If the security to be issued is an equity interest in the firm, its offer price has to be at least $5 a
- B. The issuer must have a net worth of $4 million, or its net income before tax for at least two of the
- C. The issuer must have preferred stockholders as well as common stockholders.
- D. The issuer must never have defaulted on any bond or long-term lease obligation.
Answer: C
Explanation:
Explanation
The issuer does not have to have both preferred stockholders and common shareholders in order to be eligible for registration by notification. If, however, the issuer does use preferred stock financing, it must not have missed a preferred stock dividend payment.
NEW QUESTION # 21
Registration by coordination is provided for by which of the following federal securities acts?
- A. Investment Company Act of 1940
- B. Securities and Exchange Act of 1934
- C. Securities Act of 1933
- D. Investment Advisers Act of 1940
Answer: C
Explanation:
The Securities Act of 1933 is the Act that requires that all new securities be registered and
provides for registration by coordination.
NEW QUESTION # 22
Mr. Sailor is cruising through the Bahamas when he learns that a healthcare company in which he owns stock is being sued by former patients, doctors, nurses, and even the federal government. He doesn't have his broker's number handy, and he doesn't have internet access, so he calls his son and tells him to call the broker and instruct the broker to sell his shares. As a registered agent for his broker, you take the call.
Should you execute this transaction?
- A. Yes. This is a legitimate request from a client, and you are required to follow the client's instructions.
- B. No, not unless you and your broker-dealer have a written document that gives Mr. Sailor's son the power-of-attorney to trade on his account.
- C. Yes, as long as the son is at least 21 years old and not a minor child.
- D. Yes, as long as the son presents proper identification that proves his relationship to Mr. Sailor, such as a birth certificate.
Answer: B
Explanation:
Explanation
No, you cannot execute this transaction unless you and your broker-dealer have a written document that gives Mr. Sailor's son the power-of-attorney to trade on his account. Otherwise, you will be executing an order from an unauthorized third party, which is a prohibited practice, and you can lose your license for doing so.
NEW QUESTION # 23
Which of the following practices would be prohibited in connection with the sale of investment company shares?
I. selling a client shares of a load stock fund when a no load stock fund with the same investment objective exists II. selling the client shares of five S&P 500 Index mutual funds, offered by different fund families III. encouraging a client to swap his money between two funds in the same family without informing him that this creates a taxable event
- A. I and II only
- B. I, II, and III
- C. II and III only
- D. I and III only
Answer: C
Explanation:
Explanation
The scenarios described in Selections II and III only would be prohibited. Five S&P 500 Index mutual funds, even if offered by different fund families, all have the same investment objective-duplicating the returns earned on the S&P 500 Index, and they will be invested in very similar stocks. Therefore, the client is getting little or no more diversification of risk by investing in five funds over investing in just one. The agent is just getting richer from more commissions. Encouraging a client to swap his money between two funds in the same family without informing the client that this creates a taxable event is not providing the client with "full and fair disclosure." It may well be in the client's best interest to make the switch, but he needs to be made aware of the tax consequences. It is not necessarily prohibited to sell a client shares of a load stock fund when a no load stock fund with the same investment objective exists as long as the agent believes that the load stock fund is a better investment for his client.
NEW QUESTION # 24
Which of the following is not a security, as defined by the Uniform Securities Act?
I. an option contract
II. a futures contract on gold
III. a 401K plan
IV. a variable annuity
- A. Only Selection III is not a security.
- B. Selections II, III and IV are not securities.
- C. None of the selections listed are securities.
- D. Only Selections II and III are not securities.
Answer: D
Explanation:
Explanation
Only Selections II and III are not securities. Neither retirement plans nor commodity futures contracts are deemed to be securities by the Uniform Securities Act. A 401K plan may be invested in securities, but it is not a security itself. A gold futures contract is a contract between two parties for the delivery of the underlying asset, gold. The profits (or losses) are not dependent on the performance of an outside party, which is a critical element, based on a 1946 U.S. Supreme Court decision, which defines a security as "an investment of money. .
. with profits to come solely from the efforts of others."
NEW QUESTION # 25
Which of the following scenarios does not meet the definition of "custody" under NASAA Model Rules?
- A. An investment adviser keeps a client's securities in its safety deposit box.
- B. An investment adviser is mistakenly sent a client's securities, but returns them to the sender within
three business days of receipt. - C. An investment adviser receives a check from a client that is written to a mutual fund and forwards the
check to the mutual fund within three business days of receipt. - D. An investment adviser has general power of attorney for a client and is authorized to withdraw client
funds or securities that are on deposit with a registered broker-dealer upon the investment adviser's
request.
Answer: B
Explanation:
If an investment adviser is mistakenly sent a client's securities, but returns them to the
sender within three business days of receipt, he is not deemed to have taken custody of the securities
under NASAA Model Rules. Custody is defined by the NASAA as "holding directly or indirectly, client
funds or securities, or having any authority to obtain possession of them." Therefore, an investment
adviser who has general power of attorney to withdraw a client's funds or securities from a broker-dealer
is acting as a custodian, as is an investment adviser who keeps a client's securities in its safety deposit
box. If an investment adviser receives a check from a client that is written to a third party, such as a
mutual, that check must be forwarded within 24 hours of receipt, or the investment adviser is deemed to
be a custodian.
NEW QUESTION # 26
Barring no irregularities (such as a license revocation by another state last year), after you have filed for registration as an agent, your license will be granted within
- A. 30 days.
- B. 14 business days.
- C. 45 days.
- D. 10 business days.
Answer: A
Explanation:
Explanation
Barring no irregularities, after you have filed for registration as an agent, you should receive your license within 30 days. More specifically, your license will be approved "no later than noon of the 30th day after filing."
NEW QUESTION # 27
Which of the following persons is required to maintain its records in accordance with state dictates and
meet the minimum net capital requirement imposed by the state?
I. federal covered adviser
II. state-registered investment adviser
III. investment adviser representative
- A. II only
- B. I and II only
- C. I, II, and III
- D. II and III only
Answer: A
Explanation:
Only the investment adviser that is required to register with the state must maintain its
records in accordance with state dictates and meet the minimum net capital requirement imposed by the
state. A federal covered adviser is registered with the SEC and need only execute a notice filing with the
state. Its record-keeping rules and net capital requirement are dictated by the SEC. An investment adviser
representative must register with the state, but there are no record-keeping or minimum net capital
requirement dictates for representatives.
NEW QUESTION # 28
Which of the following is not a prohibited practice for broker-dealers under the NASAA Model Rules?
- A. charging commissions that are significantly higher than those charged by other broker-dealers
- B. borrowing money from a client
- C. lending money to clients for them to invest
- D. providing a client with a copy of their most recent balance sheet upon request
Answer: C
Explanation:
Lending money to clients for them to invest is not a prohibited practice. This is otherwise
known as a margin transaction.
NEW QUESTION # 29
Needy Investment Advisers, LLC needs a loan. One of its wealthier clients has offered to lend the firm the money at the prime rate of interest. A promissory note is drawn up stipulating the terms of the loan. Based on these facts,
- A. Needy is not in danger of violating any securities laws since the loan was unsolicited and has been properly executed via a promissory note.
- B. Needy is in violation of securities laws by acting as an issuer of securities.
- C. Needy is in violation of securities laws only if the face value of the note is for $50,000 or more.
- D. Needy will be in violation of securities laws unless a waiver of compliance form is signed by the client and submitted to the administrator.
Answer: B
Explanation:
Explanation
In accepting a loan from a wealthy client, Needy is in violation of securities laws by acting as an issuer of securities. Under NASAA Model Rules, investment advisers may not borrow money from clients unless the client is in the business of lending money, as would be the case if the client were a financial institution. It doesn't matter if the client is in agreement with the loan; waiver of compliance agreements is prohibited by both the NASAA Model Rules and the Investment Advisers Act of 1940. Nor does it matter that the loan was unsolicited and formalized with a promissory note.
NEW QUESTION # 30
Ari Gaunt is a registered agent employed by Small &Associates Broker-Dealers. He has been notified of a hearing regarding the revocation of his license for making unauthorized trades on some of his clients' accounts.
Which of the following statements is necessarily true?
- A. The Administrator of the state can assess Ari with both civil and criminal penalties.
- B. If Ari is found guilty and has his license revoked, Small & Associates will be subject to a fine.
- C. If Ari is found guilty and has his license revoked, Small & Associates will have its license revoked as well and must reapply for reinstatement by filling out an application and paying the requisite filing fees.
- D. If Ari is found guilty and has his license revoked, he can appeal the decision in a court of law if he files the appeal within sixty days.
Answer: D
Explanation:
Explanation
If Ari is found guilty of making unauthorized trades on his clients' accounts and has his license revoked, he can appeal the decision in a court of law if he files the appeal within sixty days. Small & Associates license is not in danger as long as the firm has been providing competent supervision of Ari and its other agents. It will not be required to pay a fine based on Ari's fraudulent activities. Ari may end up with civil and criminal penalties, but the Administrator cannot assess them. Only a court of law can do that.
NEW QUESTION # 31
Under NASAA Model Rules, it is permissible for the registered representative of a broker-dealer to split his or her commission with
I. a client.
II. the broker-dealer with which the registered representative is affiliated.
III. another registered representative working for the same broker-dealer.
IV. the administrative assistant who directs calls to the registered representative and provides other services for the agent.
- A. II, III, and IV only
- B. I, II, and III only
- C. II and III only
- D. I, II, III, and IV
Answer: C
Explanation:
Explanation
Only Selections II and III are correct. Under NASAA Model Rules, a registered representative of a broker-dealer is entitled to split his or her commission only with his or her broker-dealer or with another registered representative of that broker-dealer. He is not permitted to share commissions with a client or with anyone who works for the broker-dealer, but is not a registered agent.
NEW QUESTION # 32
AllTime Investment Advisers advertises that its phones are manned 24/7, so that a client "doesn't have to
lie awake all night worrying about a financial problem." In fact, AllTime does have a answering service that
answers calls in the evenings and on the weekends when its offices are closed. The service informs the
caller of the firm's business hours, which will be the earliest opportunity the caller will have to talk to an
investment adviser representative. Is this a violation of any securities laws?
- A. It depends. If, before a client signs a contract with the firm, it is made clear that investment adviser
representatives are not, in fact, available to him 24/7, then AllTime is in the clear. - B. No. The firm's phones are manned 24/7, so it hasn't lied.
- C. Yes. The Uniform Securities Act prohibits investment advisers from making deceptive statements in the
solicitation of clients as well as in advising clients. - D. No. It's not a violation of any securities laws, but the firm probably won't retain many clients this way.
Answer: C
Explanation:
Yes. The Uniform Securities Act prohibits investment advisers from making deceptive
statements in the solicitation of its clients, so when AllTime suggests in its advertisements that a client will
be able to talk to someone who can relieve his worries, AllTime has violated the law and is guilty of fraud.
NEW QUESTION # 33
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