Series 63 || with Error-free Solutions.
According to the Uniform Securities Act, which of the following statements is/are NOT TRUE
concerning a broker-dealer or investment adviser filing an application for registration as a
successor firm?
I. The successor firm must be in existence prior to the filing of the application for registration
II. The successor firm's registration will be effective for the unexpired portion of the year
III. The successor firm must submit a filing fee with the application for registration correct
answers I. The successor firm must be in existence prior to the filing of the application for
registration
AND
III. The successor firm must submit a filing fee with the application for registration
If a registered broker-dealer's or investment adviser's ownership structure is changed (from a
partnership to a corporation, for example), or is bought or sold by another person, it is permitted
to file an application for registration as a successor firm. According to the Act, this can be
accomplished whether or not the successor firm was in existence prior to the filing and is
effective for the unexpired portion of the year. A filing fee is not required when the application is
submitted. (89545)
An Administrator has determined that a broker-dealer has sold private placement securities to 35
retail investors in the Administrator's state. Which of the following statements is TRUE if the
broker-dealer does not comply with the cease-and-desist order issued by the Administrator?
A. The broker-dealer will be required to send the clients a letter of rescission
B. The broker-dealer is required to participate in a hearing
C. The broker-dealer will be required to register the securities
D. The Administrator may bring action in a court to request an injunction correct answers D. The
Administrator may bring action in a court to request an injunction
The Administrator may take more severe action if a broker-dealer does not comply with a cease-
and-desist order to stop selling unregistered securities in the Administrator's state. This would
entail the Administrator going to state court to ask for an injunction. (89612)
When providing advice according to prudent investor standards, an agent should perform all of
the following activities, EXCEPT:
A. Focus on the avoidance of risk
B. Diversify appropriately
C. Develop an investment policy/strategy
D. Pay close attention to the goals of the client correct answers A. Focus on the avoidance of risk
When providing advice according to prudent investor standards, an agent should:
- Pay close attention to the goals of the client
- Develop an investment policy/strategy
- Focus on the management of risk (not the avoidance of risk)
- Determine the risk tolerance of the client
- Diversify appropriately
,An insurance agent works in an office building down the hall from a broker-dealer. They are not
affiliated. What compensation may the agent receive from the broker-dealer in exchange for
referrals?
A. Discounted commissions
B. Insurance referrals
C Commissions
D. 12b-1 fees correct answers B. Insurance referrals
Only individuals who are registered agents may receive monetary compensation from a broker-
dealer based on the sale of a security. In this scenario, the insurance agent is not licensed and
may not receive compensation in the form of commissions or fees, or soft-dollar compensation
(noncash compensation) in the form of discounted commissions. If a broker-dealer wants to refer
its clients to an insurance professional, this is permitted. Only licensed insurance professionals
may be compensated for the sale of life insurance.
A client may bring civil action if:
I. An agent is not registered
II. An offer is made but no sale occurs
III. Misleading statements are made and the client relies on those statements to make a purchase
IV. Client securities are commingled with other client securities correct answers I. An agent is
not registered
AND
III. Misleading statements are made and the client relies on those statements to make a purchase
This question is a detailed one. Any individual may sue in the civil courts, but civil liability is
limited to monetary damages. In choice (II), an offer is made, but no sale occurs, so damages
cannot exist. Therefore, a client could not sue in civil court for damages. An Administrator has
jurisdiction over the offer, and could still act.
Under state securities law, the broker-dealer and the agent must be registered in all the states in
which the agent transacts business. If an agent makes misleading statements and a client
purchases a security, the client could sue for damages on the grounds that he was misled. Broker-
dealers may commingle client securities, but not client and broker-dealer securities.
The withdrawal of an agent's registration generally becomes effective: correct answers 30 days
after filing
The withdrawal of an agent's registration generally becomes effective 30 days after filing. The
Administrator may initiate proceedings against an agent up to one year from the effective date of
the withdrawal.
A broker-dealer located in State A, in business for three years, goes out of business in July. Some
of the principals at the firm start a new broker-dealer in August of that year. Which of the
following statements is TRUE concerning the broker-dealer's registration fee?
A. A fee is not required until the next year
B. The appropriate registration fee must be paid
,C. A prorated fee must be paid
D. A fee is not required since the broker-dealer and not the agent is seeking registration correct
answers The appropriate registration fee must be paid
Every applicant whether an agent, broker-dealer, investment adviser, or investment adviser
representative must pay a registration fee. This fee is paid when an applicant files the initial
application as well as when the license expires each year on December 31. If a registration fee is
paid in the middle of the year, the fee is usually not prorated.
Which of the following statements is TRUE regarding the sharing of profits and losses in a
client's account by an agent?
A. The client's consent is not required
B. The consent of the agent's employer is not required
C. The sharing is strictly prohibited
D. The agent's profits and losses must be in proportion to the percentage of his contributions
correct answers D. The agent's profits and losses must be in proportion to the percentage of his
contributions
If an agent opens a joint account with a client, the agent may share in the profits proportionate to
his investment, provided employer and client approval was obtained.
The members of NASAA include Administrators from:
I. All 50 states
II. The District of Columbia
III. Puerto Rico
IV. The U.S. Virgin Islands correct answers I, II, III, and IV
The members of the North American Securities Administrators Association (NASAA) include
Administrators from all 50 states, the District of Columbia, Puerto Rico, Canada, Mexico, and
the U.S. Virgin Islands.
A customer wishes to liquidate $50,000 from her existing holdings and invest the proceeds in
three different mutual fund families. The agent fails to notify the customer that it may be
advantageous to invest the entire $50,000 with one fund family. This activity could potentially
be:
A. Churning
B. Switching
C. Selling dividends
D. Engaging in breakpoint sales correct answers D. Engaging in breakpoint sales
The registered representative should advise the client that she could save money because of the
quantity discount option on large purchases available through purchases at sales charge
breakpoints. Failure to notify a client that they would be eligible for a breakpoint could be
considered a breakpoint sale.
, XYZ Broker-Dealer is located in State A, where it has its only office. Under the Uniform
Securities Act, XYZ would NOT meet the definition of a broker-dealer in State B in which of the
following situations?
I. It sold securities to an investment company located in State B.
II. It only does business with financial institutions in State B.
III. It entered into a transaction with a resident of State A who was temporarily in State B.
correct answers I, II, and III
Among those who are not considered broker-dealers in a particular state are the following
persons.
A person who has no place of business in the state and who effects transactions only with
institutional investors
A person who has no place of business in the state (but is licensed as a broker-dealer where the
person maintains an office), and offers and sells securities to persons who are not residents of the
state
A broker-dealer is participating in an initial public offering of a security that will be listed on
Nasdaq. Which of the following documents is the broker-dealer required to deliver to a client
who purchases in the after-market immediately after completion of the offering?
A,. There is no requirement for additional documentation
B. A research report
C. A final prospectus
D. A list of all of the broker-dealers involved in the offering correct answers C. A final
prospectus
A client purchasing securities as part of an offering must receive either a final prospectus or a
preliminary prospectus along with an additional document from the broker-dealer executing the
transaction. The final prospectus must be provided for a certain period after the completion of the
offering. For an IPO, if it is listed on the NYSE or Nasdaq, after-market prospectus delivery is 25
days. If the security will be quoted in the OTCBB or Pink Market, the period is 90 days for an
IPO, and 40 days for a subsequent (follow-on) offering. (89604)
Which TWO forms must an agent obtain from a client in order to purchase securities in a margin
account?
I. A signed hypothecation agreement
II. A signed loan consent agreement
III. A signed credit agreement
IV. A signed new account form correct answers I. A signed hypothecation agreement
AND
III. A signed credit agreement
An agent of a broker-dealer must obtain from a client written authorization to open a margin
account at a broker-dealer. It is considered an unethical business practice for an agent to allow a
client to execute transactions in a margin account without the client's written authorization. The
client would sign a document referred to as a margin agreement, which would include an
