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A customer suspects his investment advisory representative of fraudulent activity in his account. The customer decides to file a lawsuit related to the matter. In which of the following scenarios would the customer's case be permitted to move forward without the active participation of the customer...

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  • September 5, 2024
  • 34
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • a customer suspects his investment advisory repres

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  • Series 63 (
  • Series 63 (

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Series 63 (Practice Exam Questions) || with Complete
Solutions.
A customer suspects his investment advisory representative of fraudulent activity in his account.
The customer decides to file a lawsuit related to the matter. In which of the following scenarios
would the customer's case be permitted to move forward without the active participation of the
customers?

I. The customer is involved in an automobile accident which puts the customer into a coma.
II. The customer travels to a foreign country where the customer has irregular access to
communications.
III. The customer passes away due to old age.
IV. The customer drops the case after finding out that there was no fraud, but the customer's
adult child, who did not actively participate in the account, wants to move forward due to the
opportunity to make money with a settlement.

A) II only
B) I and II only
C) I, II, and III only
D) I, II, III, and IV correct answers *I, II, and III only*

- Aside from the customer's adult child, all scenarios can still result in a lawsuit moving forward
without the active participation of the customer.
- A customer's adult child would not be permitted to pursue a lawsuit when the child has no
participation in the account.
- Actions against registered persons survive the death of the customer.

[3.2]

Which of the following falls within the definition of "broker-dealer" for purposes of the Uniform
Securities Act?

a) A person who, for compensation, engages in the business of advising others, either directly or
through publications, as to the value of securities and/or the advisability of investing in
securities.
b) An individual who represents an issuer in effecting or attempting to effect purchases and sales
of securities.
c) A person engaged in the business of effecting transactions in securities for the account of
others or for his own account.
d) An individual employed by or associated with an investment adviser who makes
recommendations or renders advice regarding securities. correct answers *A person engaged in
the business of effecting transactions in securities for the account of others or for his own
account*

,- If a person, which includes individuals, is engaged in the business of effecting transactions in
securities for their account or for the accounts of others, that person or individual would fall
under the definition of a broker-dealer under the Uniform Securities Act.

[1.1]

In order to comply with NASAA Statements of Policy, when must the prospectus of a mutual
fund be delivered to a client?

a) Such a prospectus must be delivered on or prior to the due date of the confirmation of the
transaction in the mutual fund.
b) Such a prospectus must be delivered to the client within three days of the client signing the
client agreement.
c) Such a prospectus must be delivered at the time that a client agreement is signed by the client.
d) Such a prospectus must be delivered when solicitations are being made of a client. correct
answers *Such a prospectus must be delivered on or prior to the due date of the confirmation of
the transaction in the mutual fund*

- NASAA Statements of Policy state that the prospectus of a mutual fund must be delivered to
the client no later than the due date of confirmation of the transaction.

[4.3]

All of the following persons are included in the definition of an "investment adviser
representative" under the Uniform Securities Act except:

a) Someone who manages client's accounts and portfolios while employed by an investment
adviser.
b) Someone who provides investment advice to clients while employed by an investment adviser.
c) Someone who receives compensation for transactional business.
d) Someone who is employed by an investment adviser as a clerk or receptionist. correct answers
*Someone who is employed by an investment adviser as a clerk or receptionist*

- The USA defines an IAR as an individual who renders securities advice, manages client's
accounts, or portfolios is employed by an investment adviser.
- Someone who is employed as a clerk/receptionist is excluded from the definition.

[1.1]

All of the following are included in the definition of an "agent" under the Uniform Securities
Act, EXCEPT:

a) An individual representing an issuer in effecting transactions in equity securities.
b) An individual who represents a broker-dealer as the broker-dealer effects sales of the broker-
dealer's securities where commission is paid.

,c) An individual who is a partner of a broker-dealer who effects purchases and sales of the
broker-dealer's securities to existing employees where no commission is paid.
d) An individual representing an issuer who effects sales of limited partnership interests. correct
answers *An individual who is a partner of a broker-dealer who effects purchases and sales of
the broker-dealer's securities to existing employees where no commission is paid*

- There are specific exclusions which permit commission-free transactions to employees of a
firm without registration of the individual who distributes the securities (these are put into place
for situations such as employee stock option plans, where no commissions are paid and the
person likely is part of the HR department).

[1.1]

According to the Uniform Securities Act, the definition of "Investment Adviser" applies to which
of the following?

A) a publisher of a newsletter containing general stock market analysis.
B) a savings institution which advises customers regarding the value of securities.
C) an attorney who, for additional compensation, engages in the business of advising others
regarding the value of securities.
D) a broker-dealer firm which advises customer on buying and selling securities without
receiving compensation beyond its commissions. correct answers *an attorney who, for
additional compensation, engages in the business of advising others regarding the value of
securities*

- Of the choices offered, the attorney would be considered an investment adviser since they
receive additional compensation for giving advice to clients with regard to securities.
- Banks are excluded from the definition of an investment adviser.
- The broker-dealer would be acting as a broker-dealer and not have to be registered as an
investment adviser since they would be paid based on transactions, not paid based on giving
advice.

[1.1]

Brett is an officer of a firm applying for IA registration. Which is true regarding Brett's
registration?

a) It requires separate documentation and approval by the State.
b) Filing by the firm automatically constitutes registration of Brett since he is an officer of the
firm.
c) Brett would have to be approved by the Administrator.
d) Brett would not be required to be registered at all. correct answers *Filing by the firm
automatically constitutes registration of Brett since he is an officer of the firm*

- Under the USA registration of an Investment Advisory Firm automatically constitutes
registration of any investment adviser representative who is also a partner, officer, or director.

, - The rule does not cover all equity owners of the firm.
- Those automatically registered may still have to take qualification examinations.
- Automatic registration is more a matter of avoiding duplication of paperwork.

[2.1]

An unregistered agent's assistant is instrumental to an agent in securing a wealthy client who
immediately makes several trades through the registered agent. The agent decides that to reward
the unregistered assistant, he will direct 50% of his commissions from this account to the
assistant who is scheduled to take his Series 7 exam before month's end. Is this permissible under
the Uniform Securities Act?

a) Yes, since the assistant provided a valuable service to the agent.
b) Yes, but only because the assistant is scheduled to take the Series 7 exam.
c) No, because the assistant is unregistered.
d) No, because the assistant did not disclose the commission split with the client previous to the
trades in writing. correct answers *No, because the assistant is unregistered*

- To share commissions, all parties involved must be registered agents with the same broker-
dealer.

[4.4]

Which of the following actions, according to the Uniform Securities Act, must be taken by a
State Administrator prior to the revocation of an investment adviser's registration?

a) The Administrator must provide appropriate prior notice to the IA and have the revocation
reviewed by a disciplinary panel which agrees with the Administrator and recommends the
revocation of registration.
b) The Administrator must first warn the IA, then place the IA on a probationary period, and
finally can revoke the IA's registration if the violations by the IA continue.
c) The Administrator must provide appropriate prior notice to the IA, after which the IA is
entitled to the opportunity of a hearing, and finally the IA must be allowed to view the written
conclusions of the laws and written findings of the Administrator.
d) The Administrator must take the IA to a court of law, where evidence must be presented and
the IA must be allowe correct answers *The Administrator must provide appropriate prior notice
to the IA, after which the IA is entitled to the opportunity of a hearing, and finally the IA must be
allowed to view the written conclusions of the laws and written findings of the Administrator*

- The Administrator may revoke an IA's registration but must provide appropriate notice,
opportunity for a hearing, and written finding of facts and conclusions.
- There is no such thing as a disciplinary panel that is required to agree with the Administrator's
decision.

[3.2]

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