According to NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Brokers-Dealers and Agents, all of the following practices are considered unethical for an agent except
A)
determining the quantity of a specific security to purchase once the client has designated that sec...
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According to NASAA's Statement of Policy on Dishonest or Unethical Business Practices of
Brokers-Dealers and Agents, all of the following practices are considered unethical for an agent
except
A)
determining the quantity of a specific security to purchase once the client has designated that
security and the action to be taken.
B)
receiving written discretionary authority from a client within 10 business days of first executing
a discretionary trade with oral authority from the client.
C)
selling 3,000 shares of ABC as directed by a client, at a price that the agent determines, without
oral or written discretionary authority.
D)
selling 3,000 shares of ABC at a price the agent determines is the best the client can get, without
oral or written discretionary authority. correct answers selling 3,000 shares of ABC as directed
by a client, at a price that the agent determines, without oral or written discretionary authority
When a securities professional selects the time or price to execute an order received from a
customer, it is not the exercise of discretion. Therefore, it is not unethical for an agent to choose
the time or price of a trade, as long as the client has determined the asset, the action, and the
amount. Discretionary authority must be received by agents in writing prior to any discretionary
trading taking place in the account. It is investment advisers who may act with oral discretion for
a limited time.
Under the Uniform Securities Act, which of the following is an investment adviser?
A)
An investment adviser representative
B)
An individual who provides financial advice over the internet with no recommendations based
on specific investment situations of individual clients
C)
A firm with no office in the state that provides specific investment advice to 10 noninstitutional
clients within the state
D)
A broker-dealer who receives no compensation for investment recommendations correct answers
C
A firm with no office in the state that provides investment advice is not an investment adviser if
its clients are investment companies or other institutions or if business communications or advice
have been directed to no more than five noninstitutional (individual or "retail") clients within the
state in the past 12 months. A broker-dealer is not required to register as an IA unless it receives
special compensation for providing investment advice. Individuals who publish general advice
,(no specific recommendations to individual clients) in hard copy form, electronic
communications, or otherwise are not required to register as IA.
An agent is using social media to try to build her business. If her Facebook page allows for
followers to "like" her, that would be considered
A)
static content.
B)
illegal content.
C)
misleading content.
D)
interactive content. correct answers Interactive
Difference between static and interactive -> the ability for persons other than the originator of
the content to have access
Under the Uniform Securities Act, who automatically becomes registered as an agent when a
broker-dealer's registration becomes effective?
A) Any individual employed by or associated with the firm who will have sales responsibilities
B) No one
C) Certain partners, officers, or directors of the firm
D) Only one individual designated on the application for registration correct answers C - Certain
partners, officers, or directors of the firm
The Uniform Securities Act provides that when a broker-dealer (or investment adviser) files its
application for initial registration in a state, officers, directors, and partners who are already
agents (or IARs) are automatically registered as agents (or IARs) in the new state.
Compliance with the customer identification program (CIP) requires that all the following
information must be obtained from new individual customers except
A) physical address.
B) name of employer.
C) Social Security number.
D) date of birth. correct answers B - name of employer
A customer's employer's name is not required to open a new account. Under the CIP, each of the
other choices is required information. In the case of an account opened in the name of a business,
the business address and tax identification number are required.
If an investor bought stock on one exchange and sold it at a higher price on another exchange,
this practice constitutes
,A)
a violation of the Uniform Securities Act.
B)
an offense punishable by three years in the county jail.
C)
a perfectly acceptable market arbitrage.
D)
a violation under both the Uniform Securities Act and federal law. correct answers C
This common practice is perfectly acceptable. Arbitrage
is the practice of buying on one exchange and selling on another to take advantage of market
disparities.
Records that must be kept by a broker-dealer include all of the following except
A)
customer ledgers.
B)
customer tax returns.
C)
a daily trade blotter.
D)
a cash receipts journal. correct answers B - tax returns
It is not required that any securities professional maintain copies of customers' tax returns.
SEC Regulation S-ID describes a broker-dealer's or investment adviser's duties regarding the
detection, prevention, and mitigation of identity theft. The rule applies to an investment adviser
when it
A)
receives soft dollar compensation as described in Section 28(e) of the Securities Exchange Act of
1934.
B)
receives performance-based compensation.
C)
has the ability to direct execution of advisory client transactions to favored broker-dealers.
D)
is permitted to direct transfers or payments from accounts belonging to individuals to third
parties upon the individuals' instructions. correct answers D - permitted direct transfers or
payments from accounts belonging to individuals to 3rd parties upon the individuals' instructions
Investment advisers who have the ability to direct transfers or payments from accounts belonging
to individuals to third parties upon the individuals' instructions, or who act as agents on behalf of
the individuals, are susceptible to the same types of risks of fraud as other financial institutions.
Therefore, compliance with Regulation S-ID is required.
, Which of the following choices best represents the definition of agent as stated in the Uniform
Securities Act of 1956?
A)
Agent means any employee who represents a broker-dealer or issuer in any capacity related to
the business.
B)
Agent means any individual other than an officer who represents a broker-dealer in effecting or
attempting to effect purchases or sales of securities.
C)
Agent means any individual other than a broker-dealer who represents a broker-dealer or issuer
in effecting or attempting to effect purchases or sales of securities.
D)
Agent means any person other than a broker-dealer who represents a broker-dealer or issuer in
effecting or attempting to effect purchases or sales of securities. correct answers C
An agent must be an individual. The term, person, includes individuals as well as many entities
that are not individuals. It is only those employees who are involved with securities transactions
who are defined as agents. Broker-dealers—and even more so, issuers—have many employees
who have nothing to do with effecting or attempting to effect securities transactions. Officers of
a BD who are functioning in the capacity of an agent are indeed agents.
NASAA has created a template for registered broker-dealers to disclose their fee schedules to
existing and prospective customers. Which of the following charges would be disclosed?
A)
Advisory fees if the broker-dealer is also an investment adviser
B)
The commission schedule
C)
The way the firm charges markups and markdowns
D)
Account maintenance fees correct answers D - account maintenance fees
Account maintenance fees are one of the many charges disclosed by broker-dealers. The other
three charges are not part of the fee disclosure document and are disclosed elsewhere.
Active Technicians (AT) is a state-registered investment adviser. In its brochure supplement, it
would include information relating to each of the following individuals except
A)
those exercising discretion over assets of clients in this state, even if no direct contact is
involved.
B)
members of AT's board of directors who are active in the firm's business.
C)
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