Series 63 Chapter 4 || A+ Guaranteed.
A banner on a broker-dealer's website is considered correct answers static content
In most cases, a broker-dealer's website is static. That is, only the firm can make changes and
those changes are infrequent. Certainly a banner ad on the website fits that description.
Entanglement and adoption are terms applying to a securities professional making use of third-
party information on social media.
One of the risks of investing on margin is that a severe decline in the market price of one of the
securities in the account can trigger a call for additional funds. If this happens and the investor
does not supply the money when demanded, the broker-dealer can correct answers liquidate its
choice of securities in the account to bring the account back to the needed level
Leverage works two ways. It is great when the stock's price is rising, but can be painful when
going the other way. When it drops below a certain point, the firm will need more money. In the
risk disclosure document, it is made clear that the client is not entitled to choose which securities
can be sold if a call for additional funds is not met.
One way to reduce the potential for conflicts of interest arising from offering agents the incentive
of different compensation for different products is to create product agnostic compensation grids.
These grids provide correct answers a flat percentage of the revenue an agent generates,
regardless of product recommended
An agnostic compensation grid is sometimes referred to as a neutral grid. That is, regardless of
the product being sold, the compensation level is the same.
If a broker-dealer provides investment advice or discretionary portfolio management services to
its clients and the firm also recommends or sells products that it or affiliated companies issue,
correct answers disclosure of the potential conflict of interest must be made
A classic example of a potential conflict of interest is when a broker-dealer has discretion over a
client's account and purchases securities for that account that are issued by the firm or an
affiliated company. There is nothing wrong with this as long as disclosure is made and, in some
cases (not tested), the client must give consent. What about disclosing capacity in the trade? Isn't
that always required? Yes it is, but this is an example of a question where there could be 2
correct answers and you must choose the one that is closest to dealing with the point being made
in the question.
Unless qualifying for an exemption, which of the following advisory fee structures is NOT
allowed under the USA? correct answers Fees based on a percentage of the change in value of
funds from quarter to quarter
NOT Fees based on an hourly rate
,Unless a specific exception is referred to in the question, fees based on a share of capital gains or
appreciation in an account are prohibited. The other choices are acceptable fee structures.
If persons other than the original person entering the post can comment on social media, the
content is considered correct answers interactive
One of the characteristics of interactive content, as opposed to static content, is that persons other
than the original author may make comments.
According to the U.S.A PATRIOT Act, account identification and verification procedures should
be applied to which of the following? I.New individual accounts.
II.New business accounts.
III.Existing individual accounts.
IV.Existing business accounts. correct answers I and II
The procedures required by the U.S.A PATRIOT Act for the verification and identification of
customer accounts should be applied to all new customers-whether individuals or businesses.
Under the Uniform Securities Act, investment advisory contracts correct answers must contain a
description of fees
Under the USA, all advisory contracts must be in writing and contain descriptions of how fees
are determined. Contracts are valid upon signing, need not list all states in which an adviser is
registered, and cannot be assigned without the client's approval. Administrator approval is not
required.
Nifty Advisers Group made an announcement on its website that the firm was going to create a
Facebook account to keep all its clients and prospective clients updated on the market. To get the
word out, Nifty sent an email notice to its current clients and asked them to please refrain from
airing complaints through that account; any negative comments would be addressed through the
normal channels. Also, contained in the email was an announcement that all "likes" would
receive a one-time 5% decrease in the client's quarterly fees. For this campaign, which of the
following are NOT true? correct answers This would not be considered a testimonial and
therefore permitted under the regulations.
Please note that this question is looking for the statement that is NOT true - in other words, find
the false statement. In March 2014, the SEC, but not NASAA, published an interpretive release
dealing with testimonials for investment advisers using social media.
Included in that release is the statement that third-party use of the "like" feature on an
investment adviser's social media site could be deemed to be a testimonial if it is an explicit or
implicit statement of a client's experience with the adviser.
If AAA Investment Advisers has entered into a written advisory contract with a client that
contains a discretionary power, all of the following information must be stated in the contract
, EXCEPT correct answers AAA Investment Advisers shall be the only party eligible to make
investment decisions in the account
The discretionary power authorizes the investment adviser to make the investment decisions
without prior approval of the client. However, nothing in that power prohibits the client from
personally making the decision to buy or sell any assets in the account.
Differences between static and interactive content on social media include I.Only static content
can be reused by others
II.Only static content needs pre-approval
III.Only static content can be changed by the person who originated it
IV.Only interactive content can be commented on by others correct answers II and IV
Static content requires pre-approval. Interactive content can be reused by others and can be
commented on by others. Both static and interactive content can be changed by its originator, but
static can only be changed by its originator and interactive by the originator or others.
According to the Uniform Securities Act, the investment adviser brochure must include the
business backgrounds of correct answers each member of the investment committee or group
that determines general investment advice to be given to clients
The business background of these key individuals must be included in Part 2 of Form ADV and
in the disclosure brochure. The business background of other employees, affiliated broker-
dealers, and institutional clients need not be included in the brochure.
As fiduciaries, investment adviser representatives owe their clients an affirmative duty of utmost
good faith and full disclosure of all material facts. This affirmative duty of disclosure is required
by the investment adviser representative in all of the following situations EXCEPT correct
answers when donating funds to a nonprofit medical research institute that owns securities the
IAR has recommended
Securities regulators have taken a strong position on the need for registered broker-dealers to
disclose the fees they charge. Among the most common ways for making this disclosure are
I.presenting a chart with all of the fees
II.preparing a list of all of the fees
III.displaying the fees in tabular form correct answers I, II and III
Whether using a table, a chart, or a list, broker-dealers must make sure that it is easy for
customers to determine what the fees and charges are and how they are computed.
Under the Uniform Securities Act, which of the following is (are) prohibited practices? I.Failing
to disclose that one is acting as a principal for one's own account in a securities transaction for
which one has received a fee for investment advice
II.Selling unregistered, nonexempt securities that are not federal covered securities in
transactions that are not exempt
