Series 65: Unit 13 Quiz 1 || A+ Guaranteed.
Which of the following situations would present a conflict of interest that an adviser must
disclose to clients to avoid unlawful and deceitful behavior under the Investment Advisers Act of
1940?
A. The adviser receives compensation from the issuer of securities that he recommends to his
clients.
B. The adviser has a non-securities-related loan from a large commercial bank where one of his
clients is a vice president.
C. The adviser owns real estate that is unrelated to his investment advisory business, but it
requires considerable time and attention.
D. A family member of the adviser has been indicted for securities fraud unrelated to the adviser
or the clients' securities. correct answers The adviser receives compensation from the issuer of
securities that he recommends to his clients
Under the USA, when one is referring to a security that is guaranteed, the guarantee applies to
which of these?
1. Capital gains to be expected by holding the specified security
2. Dividends to be paid on the specified stock
3. Interest and principal payment on the specified bond
4. Reimbursement by the firm for any losses suffered while holding that security correct answers
Dividends to be paid on the specified stock and interest and principal payment on the specified
bond
If an investment adviser tells a client that a stock has doubled in the past year and, even though
past performance is no assurance of future results, he is sure it will double, this statement is
A. prohibited because the investment is not suitable for the client.
B. permissible due to the disclaimer of future performance.
C. permissible if the adviser has performed due diligence on the stock.
D. prohibited as a likely exaggeration. correct answers Prohibited as a likely exaggeration
Each of the following would represent a potential conflict of interest except
A. an agent of a broker-dealer making a recommendation of a stock of a company in which the
agent has a financial interest.
B. a broker-dealer writing a favorable research report about a company that was recently the
subject of an IPO managed by another firm.
C. a broker-dealer writing a favorable research report about a company that was recently the
subject of an IPO managed by the firm.
D. an agent limiting recommendations to mutual funds distributed by the agent's broker-dealer.
correct answers A broker-dealer writing a favorable research report about a company that was
recently the subject of an IPO managed by another firm
, Which of the following is a fraudulent or prohibited activity for an agent under the Uniform
Securities Act?
A. Using the dividends paid in the last 12 months to determine the current yield of a common
stock
B. Stating that zero-coupon bonds pay no current interest
C. Implying that registration of a security means approval of the security
D. Selling common stock to a customer with income objectives correct answers Implying that
registration of a security means approval
One way to make money is to buy low and sell high. If an investment adviser has developed a
proprietary charting system that has had a very high degree of success in picking stocks near
their market bottoms, any advertisement about the system must
A. indicate that there are limitations and difficulties to using the system.
B. provide customer testimonials evidencing their satisfaction with the system.
C. indicate the length of time the system has been in play.
D. show performance for at least the past 12 months, including both winners and losers. correct
answers Indicate that there are limitations and difficulties to using the system
Beth is an agent and an IAR for Consolidated Wealth Planning, a FINRA member broker-dealer
and SEC-registered investment adviser. An advisory client purchases 300 shares of RMBN, and
the sale is made from Consolidated's inventory. Under the NASAA Model Rule on Unethical
Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal
Covered Advisers,
A. the amount of commission charged for this transaction must be clearly disclosed.
B. Beth must obtain written consent of any advisory client whenever a sale is made as principal.
C. Beth would be required to obtain consent for this principal transaction if it was the subject of
a recommendation.
D. selling out of inventory to advisory clients would be considered an unethical business practice
correct answers Beth would be required to obtain consent for this principal transaction if it was
the subject of a recommendation
Under NASAA's Agency Cross Transactions of Investment Advisers Model Rule, which of the
following would be a prohibited practice?
A. Failing to obtain written consent from a client to engage in an agency cross transaction
B. Disclosing that the IA will earn commissions on securities transactions in addition to the fees
charged for advice
C. Entering into a written advisory contract
D. An investment adviser organized as a partnership giving written notice to all clients within a
reasonable period of time that tells about the retirement of one of the partners correct answers
Failing to obtain written consent from a client to engage in an agency cross transaction
Which of the following situations would present a conflict of interest that an adviser must
disclose to clients to avoid unlawful and deceitful behavior under the Investment Advisers Act of
1940?
A. The adviser receives compensation from the issuer of securities that he recommends to his
clients.
B. The adviser has a non-securities-related loan from a large commercial bank where one of his
clients is a vice president.
C. The adviser owns real estate that is unrelated to his investment advisory business, but it
requires considerable time and attention.
D. A family member of the adviser has been indicted for securities fraud unrelated to the adviser
or the clients' securities. correct answers The adviser receives compensation from the issuer of
securities that he recommends to his clients
Under the USA, when one is referring to a security that is guaranteed, the guarantee applies to
which of these?
1. Capital gains to be expected by holding the specified security
2. Dividends to be paid on the specified stock
3. Interest and principal payment on the specified bond
4. Reimbursement by the firm for any losses suffered while holding that security correct answers
Dividends to be paid on the specified stock and interest and principal payment on the specified
bond
If an investment adviser tells a client that a stock has doubled in the past year and, even though
past performance is no assurance of future results, he is sure it will double, this statement is
A. prohibited because the investment is not suitable for the client.
B. permissible due to the disclaimer of future performance.
C. permissible if the adviser has performed due diligence on the stock.
D. prohibited as a likely exaggeration. correct answers Prohibited as a likely exaggeration
Each of the following would represent a potential conflict of interest except
A. an agent of a broker-dealer making a recommendation of a stock of a company in which the
agent has a financial interest.
B. a broker-dealer writing a favorable research report about a company that was recently the
subject of an IPO managed by another firm.
C. a broker-dealer writing a favorable research report about a company that was recently the
subject of an IPO managed by the firm.
D. an agent limiting recommendations to mutual funds distributed by the agent's broker-dealer.
correct answers A broker-dealer writing a favorable research report about a company that was
recently the subject of an IPO managed by another firm
, Which of the following is a fraudulent or prohibited activity for an agent under the Uniform
Securities Act?
A. Using the dividends paid in the last 12 months to determine the current yield of a common
stock
B. Stating that zero-coupon bonds pay no current interest
C. Implying that registration of a security means approval of the security
D. Selling common stock to a customer with income objectives correct answers Implying that
registration of a security means approval
One way to make money is to buy low and sell high. If an investment adviser has developed a
proprietary charting system that has had a very high degree of success in picking stocks near
their market bottoms, any advertisement about the system must
A. indicate that there are limitations and difficulties to using the system.
B. provide customer testimonials evidencing their satisfaction with the system.
C. indicate the length of time the system has been in play.
D. show performance for at least the past 12 months, including both winners and losers. correct
answers Indicate that there are limitations and difficulties to using the system
Beth is an agent and an IAR for Consolidated Wealth Planning, a FINRA member broker-dealer
and SEC-registered investment adviser. An advisory client purchases 300 shares of RMBN, and
the sale is made from Consolidated's inventory. Under the NASAA Model Rule on Unethical
Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal
Covered Advisers,
A. the amount of commission charged for this transaction must be clearly disclosed.
B. Beth must obtain written consent of any advisory client whenever a sale is made as principal.
C. Beth would be required to obtain consent for this principal transaction if it was the subject of
a recommendation.
D. selling out of inventory to advisory clients would be considered an unethical business practice
correct answers Beth would be required to obtain consent for this principal transaction if it was
the subject of a recommendation
Under NASAA's Agency Cross Transactions of Investment Advisers Model Rule, which of the
following would be a prohibited practice?
A. Failing to obtain written consent from a client to engage in an agency cross transaction
B. Disclosing that the IA will earn commissions on securities transactions in addition to the fees
charged for advice
C. Entering into a written advisory contract
D. An investment adviser organized as a partnership giving written notice to all clients within a
reasonable period of time that tells about the retirement of one of the partners correct answers
Failing to obtain written consent from a client to engage in an agency cross transaction
