Series 63 Chapter 3 || with 100% Error-free Answers.
If a car dealer offers $1,000 bonds as a bonus for the purchase of cars, the car dealer is correct
answers engaging in the offering for sale of a security
According to the Uniform Securities Act, offering securities as a bonus on the purchase of
another thing for value, such as a car, constitutes an offer of securities. For the purposes of the
Uniform Securities Act, the dealers are offering securities and are subject to the provisions of the
act. The practice is not fraudulent, but registration as a broker-dealer would be required.
Which of the following is considered a sale of securities under the Uniform Securities Act?
Redemption of mutual funds shares worth $10,000
Dividends of common stock for which no consideration was given for the dividends
With the approval of the board of directors, an exchange of common stock for the stock in
another company under a merger
Disposition of stock for which cash consideration is received correct answers I and IV
Redemption of mutual fund shares is always treated as a sale by the redeeming shareholder. The
exchange of securities in a merger is not considered a sale under the act. Any disposition
(liquidation) of securities that involves cash consideration, or in which the shareholder has a
choice of cash or securities, is a sale.
As defined in the Uniform Securities Act, the term sale or sell would include correct answers an
investor using a cash dividend to automatically purchase additional shares of the issuer
NOT a gift of nonassessable stock
Sale or sell includes every contract to sell or dispose of a security for value. When the cash from
a dividend is used to purchase additional shares, value is being exchanged. This is unlike the
pledge of stock, where ownership does not change hands, or the receipt of a stock dividend,
where no consideration is exchanged.
When the Administrator issues a cease and desist order, correct answers the subject of the order
must promptly put a halt to the specified activity
When you receive a cease and desist order from the Administrator, it means just what it says—
you are to cease doing whatever it is that is the subject of the order and desist from doing it in the
future. Cease and desist orders may be issued with or without a prior hearing against the person
or persons engaged in the prohibited activities, directing them to cease and desist from further
illegal activity.
It is a violation of the Uniform Securities Act if an agent correct answers files a fraudulent
application
It is a violation of the Uniform Securities Act to file a fraudulent or misleading application for
registration as a securities industry professional (agent, broker-dealer, or investment adviser). An
,agent may always make material representation in the sale of a security; it is a material
misrepresentation that is not permitted. An unregistered security may be sold in an exempt
transaction and an exempt security does not need registration.
Under the Uniform Securities Act, all of the following could be cause for disciplinary review
action by the state securities Administrator EXCEPT correct answers the ABC Advisory Group,
a registered investment adviser, employs several investment adviser representatives as
independent contractors
NOT Ed is suspended from conducting business in the securities industry for a period of 6
months by FINRA
Investment advisers may employ investment adviser representatives as independent contractors.
Even though the Administrator's power to deny a registration is limited to convictions within the
past 10 years, being charged with, or any conviction of a felony or securities-related
misdemeanor must be disclosed. Similarly, failing to disclose a bankruptcy filing is cause for
disciplinary action on the part of the Administrator. Administrators are sensitive to actions by
other industry regulators so a suspension by FINRA (may say NASD on your exam) could also
lead to taking action.
Under the Uniform Securities Act, a client may sue an agent correct answers unless the agent's
broker-dealer offers to return the client's purchase price plus interest
NOT for up to 5 years from the date of the violation
If the agent's broker-dealer offers rescission to the client, the client generally will not initiate a
suit because there is nothing to be gained beyond what will be received through rescission. Five
years is the statute of limitations for criminal activity and this is civil.
Which of the following would subject an agent to a denial of registration?
An arrest for fraudulent behavior in selling securities to an insurance company 2 years ago
Conviction of a securities-related misdemeanor eight years ago
Losing a civil lawsuit three years ago that related to the agent's actions as a landlord
Failure to pay filing fees correct answers II and IV
Conviction, not merely an arrest, for a misdemeanor involving securities within the past ten
years, and failure to pay filing fees are grounds for denial. Loss of a civil suit not related to the
securities industry is not a cause for denial to an agent or IAR.
Under the Uniform Securities Act, which of the following statements regarding investigations
conducted by the Administrator is TRUE?
Information regarding violations must be kept confidential.
Investigations may be conducted across state lines.
The Administrator may obtain a court order to have a receiver appointed over a violator's assets.
correct answers II and III
, The Administrator is not restricted to his state's boundaries. If appropriate, the Administrator
may apply to a court of competent jurisdiction to have a receiver appointed over the assets of a
suspected violator. The Administrator is empowered to publish information regarding violations.
A customer determines that he has been sold unregistered, nonexempt securities in a prohibited
transaction. In accordance with the USA, he can exercise the right to sue within correct answers
2 years from discovery or 3 years from occurrence, whichever is sooner
The civil liabilities provisions of the Uniform Securities Act provide for a statute of limitations
equal to the sooner of 2 years from the date of discovery or 3 years from the date of the violation.
If an agent unknowingly sells an unregistered, nonexempt security and discovers the error
afterward, what action is most appropriate? correct answers The agent should notify the
appropriate supervisor who then, on behalf of the firm, will offer (in writing) to repurchase the
security and pay a reasonable rate of interest minus any income derived from the security.
The broker-dealer may offer to rescind the trade by offering (in writing) to repurchase the
security and pay a reasonable rate of interest minus any income derived from the security. An
agent may not suspend provisions of the USA whether the client agrees or not.
Criminal penalties for violations of the Uniform Securities Act include correct answers fines of
up to $5,000 and/or imprisonment for up to 3 years
Under the Uniform Securities Act, criminal penalties can include fines for up to $5,000 or
imprisonment for up to 3 years, or both. No person, however, may be imprisoned for violation if
he proves that he had no knowledge of the rule or order, and no indictment can be returned later
than 5 years after the alleged violation. Remember the distinction between criminal penalties and
civil liability.
An agent mistakenly sold an unregistered, nonexempt security to a customer. Which of the
following actions should the broker-dealer take?
Offer to buy the security back from the customer
Ask the customer to sign a customer agreement
Register the stock by qualification
Offer to pay interest at an annual rate determined by the Administrator, less income paid, from
the date the security was purchased correct answers I and IV
In the case of an agent who mistakenly sells an unregistered, nonexempt security, the broker-
dealer should offer to buy back the security from the customer and pay the customer interest on
the amount invested in the security for the period from the original purchase to the resale back to
the firm, minus any income or profit realized by the client on the security. This is known as the
right of rescission.
An Administrator may deny or suspend a registration in all of the following situations EXCEPT
correct answers if the applicant is not qualified on the basis of experience
