Which of the following constitutes a non-punitive order?
Answer : B
Explanation:
Registration cancellation is a non-punitive order. The Administrator issues a cancellation order if a registered person dies, becomes mentally incompetent, is no longer in business, or is unable to be located.
Which of the following is not a security, as defined by the Uniform Securities Act?
I. an option contract -
II. a futures contract on gold -
III. a 401K plan -
IV. a variable annuity -
Answer : C
Explanation:
Only Selections II and III are not securities. Neither retirement plans nor commodity futures contracts are deemed to be securities by the Uniform Securities Act. A 401K plan may be invested in securities, but it is not a security itself. A gold futures contract is a contract between two parties for the delivery of the underlying asset, gold. The profits (or losses) are not dependent on the performance of an outside party, which is a critical element, based on a 1946 U.S. Supreme Court decision, which defines a security as an investment of money. . . with profits to come solely from the efforts of others.
Once you have passed the Series 63 examination, which entity must then approve your application to sell securities?
Answer : D
Explanation:
Once you have passed the Series 63 exam, it is the state administrator who can approve or deny your registration. NASAA developed the Uniform Securities Agent State Law
Examination and FINRA administers it. The SEC is not a party to the state registration process.
Your next-door neighbors brother works for a large pharmaceutical company and confided in her that one of the companys chemists has just discovered a compound that will cure baldness and that the firm plans to make the discovery public later in the week. Your next- door neighbor passes this information on to you over a cup of coffee the next morning. You immediately call your broker and place an order to buy shares of the companys stock.
Has any illegal insider trading taken place?
Answer : D
Explanation:
Yes. You are guilty of illegal insider trading because you traded on information that was not yet public. Your neighbor and her brother did not execute any trades based on the information, so theyre innocent, as is the agent who executed your purchase order, who had no way of knowing that you had insider knowledge when you placed the order.
Mr. and Mrs. Cleaver are nearing retirement and have made an appointment with Mr.
Eddie, an investment adviser representative who works for Haskell Investment Advisers, to get advice on how they can better structure their investments to meet their retirement goals. Their son, Theodore, who has recently graduated college and has a great job as a software writer for a video game company, accompanies them. Mr. Eddie explains that the main goal of any plan is diversification and recommends that Mr. and Mrs. Cleaver spread their investment monies equally among six load mutual funds that Mr. Eddie can sell them.
He suggests that Theodore follow suit and invest any monies he has equally among the same ten funds.
Has Mr. Eddie done anything wrong?
Answer : C
Explanation:
Yes. In recommending that Mr. and Mrs. Cleaver and their son allocate their assets in identical fashions, Mr. Eddie has made an unsuitable recommendation since investors with different investment time horizons have different investment needs. Making unsuitable recommendations is a prohibited practice, and Mr. Eddie could have his license suspended or revoked.
Gazillions is an investment adviser with offices in the state that is registered with the SEC and has $100 billion dollars under management. A client has filed a complaint asserting that the firm has been involved in fraudulent activities. In this case,
Answer : C
Explanation:
If Gazillions is operating as an SEC-registered adviser in a state, it must answer to both the
SEC and the state in which the complaint has been filed, even though there is no requirement that it had to register with the state, given that it was a federal covered investment adviser. Allegations of fraud come under the states authority as well, even if the adviser is a federal covered investment adviser.
When a customer files a complaint with a broker-dealer,
I. the broker-dealer must submit the complaint to the firms compliance department.
II. the broker-dealer must provide a prompt written response to the complainant.
III. the broker-dealer must temporarily suspend the activities of any agent named in the complaint.
Answer : B
Explanation:
Only Selections I and II are true. When a customer files a complaint with a broker-dealer, the broker-dealer is required to submit the complaint to the firms compliance department, if any, and to provide the complainant with a prompt written response. It is not necessary to suspend the activities of an agent named in the complaint.
The Administrator of a state will deny the registration of a security if
I. the mandated filing fee has not been paid.
II. the compensation of the underwriters is excessive.
III. the registration statement is incomplete.
IV. the issuer is registering the security through the registration by coordination process and has not complied with all the stipulated requirements.
Answer : A
Explanation:
The Administrator of a state will deny the registration of a security under any of the situations described in Selections I, II, III, and IV-if the mandated filing fee has not been paid; if the compensation of the underwriters is excessive; if the registration statement is incomplete; or if the issuer is attempting to use registration by coordination and has not complied with all the stipulated requirements of that process.
For how long after the effective date is a security’s registration valid?
Answer : C
Explanation:
A securitys registration is valid for one year after the effective date, which is the date the
Administrator approves the registration. If the entire issue has not been sold in this time frame, the offering may be renewed.
Broker-Dealer Wheeler has no offices in the state. Wheeler does, however, sell corporate bonds from his portfolio to banks and insurance companies located in the state that purchase the bonds for their investment portfolios. He executes about twelve of these transactions a year. Wheeler profits from the price appreciation of the bonds during the time he held them, but receives no other form of compensation. Based on these facts,
Answer : B
Explanation:
Since Wheeler has no offices in the state and is selling bonds from his portfolio to institutional investors, Wheeler need not register in the state, and the securities are exempt from registration. Broker-dealers with no physical location in a state that are doing business with other broker-dealers or with institutional investors such as banks and insurance companies that do have offices in that state are exempted from registering in the state.
Securities sales to institutional investors are exempt transactions, and securities sold in exempt transactions are themselves exempt from state registration requirements.
Ms. Connie Fused sent her investment adviser a check, payable to a mutual fund that he had recommended to her.
What must the adviser do in order to avoid being considered the custodian of this account and, thereby, subject to some strict requirements, including a higher minimum net capital?
Answer : B
Explanation:
As long as the adviser forwards the check to the mutual fund within 24 hours, he will not be deemed to have taken custody of Ms. Fused funds. This assumes the mutual fund is in no way affiliated with the investment adviser.
An investment adviser representative with Capital Investment Advisors, Inc. advised his client to invest $5,000 in bonds of a firm that the adviser claimed was an investment almost as risk-free as investing in U.S. government bonds; maybe even more so, given the magnitude of the government deficit these days. The client paid a total of $200 for this advice. The bonds paid interest at the rate of 6%, with semiannual payments, and the client received $300 in interest payments before the firm went belly-up at the end of a year, and its bonds were deemed worthless. The client has filed suit, and its attorneys fees and court costs are expected to be $1,000. When the investment is a bond, the state has recently been assessing an interest rate equal to the interest rate paid by the security as an equitable interest payment guideline in civil penalties.
The maximum the client can expect in civil penalties is
Answer : B
Explanation:
The maximum amount the client can expect in civil penalties in this case is $6,200. In civil court, the client is awarded the cost of the investment plus any attorneys fees and court costs, plus any interest that the state deems appropriate, less any income earned on the investment. In this instance, the only income is the interest that the client earned, which is identical to the interest that the Administrator mandates the investment adviser pay, so that is a wash. The investment advisory fee is included as part of the investors cost, so the client can sue for the recovery of his original investment of $5,000 plus the $200 he paid for the investment advice plus the court costs and attorneys fees of $1,000, or $6,200 total.
The trade confirmation must be received by the customer no later than
Answer : B
Explanation:
Trade confirmations must be received by the customer no later than the settlement date.
Under the Uniform Securities Act (USA), which of the following statements would be disallowed?
Answer : B
Explanation:
A sales representative (aka an agent) of a broker-dealer may not make any guarantees.
Only three entities are allowed to make guarantees under the Act: Parent companies, which may guarantee the securities of one of its subsidiaries, the U.S. government, and insurance companies.
Fly-By-Night Investment Advisers has closed its doors.
Which of the following statements is true?
Answer : C
Explanation:
Even after Fly-By-Night has closed its doors, it is required to preserve and maintain all records, including client transactions and communications, advertising materials, and the financial statements of the business for five years, under the guidelines of the Uniform
Securities Act.