[May-2024] Latest FINRA Series63 exam dumps and online Test Engine
FINRA Series63: Selling Uniform Securities State Law Products and Solutions
NEW QUESTION # 92
After passing the necessary exams, you must submit which of the following to the state Administrator when applying for registration as an agent?
- A. a recent photograph of yourself
- B. U-4
- C. Form ADV
- D. proof that you meet the state's minimum net capital requirement
Answer: B
Explanation:
Explanation
When applying for registration as an agent, you will need to submit a U-4. No photograph is necessary. Form ADV is used to register as an investment adviser, and only broker-dealers and investment advisers must meet the state's minimum net capital requirement.
NEW QUESTION # 93
Which of the following funds can an agent indicate is "no load?"
- A. Both A and C can be advertised as "no load" funds.
- B. a fund with no front-end load that has 12b-1 fees equal to 0.10% of the average net assets of the fund
and a rear-end load that varies depending on how long the investor has held the shares. - C. a fund with no front-end or back-end load that has 12b-1 fees equal to 0.25% of the average net assets
of the fund. - D. a fund with no front-end or back-end load that has 12b-1 fees equal to 0.30% of the average net assets
of the fund.
Answer: C
Explanation:
A fund with no front-end or back-end load that has 12b-1 fees equal to 0.25% or less of the
average net assets of the fund is considered a no load fund. In Choice A, the 12b-1 fees exceed 0.25%,
and in Choice B, there is a rear-end load.
NEW QUESTION # 94
Which of the following persons would not be required to register with the state as an agent under the guidelines of the Uniform Securities Act (USA)?
- A. John is employed by TrustUs Corporation to sell shares of the firm's stock to the firm's employees and receives a commission on the shares he sells.
- B. Stefan is a sales representative for SecureMoney Broker-Dealers and sells only mutual fund shares.
- C. Preetham is part-owner of SecureMoney Broker-Dealers and executes the purchase and sale of securities for the firm's customers.
- D. Keith is a salaried employee of Middlesex County in Massachusetts who sells revenue bonds issued by the county to the public.
Answer: D
Explanation:
Explanation
Keith would not have to register as an agent since he is a salaried employee of a county in Massachusetts selling county-issued bonds to the public. He is not representing a broker-dealer; he is not receiving a commission on the bonds he sells; and he is selling exempt (government-issued) securities. John receives a commission on his sales, so he is considered to be an agent. Stefan is a sales representative employed by a broker-dealer, which makes him an agent under USA guidelines. Even though Preetham is part-owner of the broker-dealer for which he is effecting transactions, he is acting as an agent in doing so.
NEW QUESTION # 95
Ari Gaunt is a registered agent employed by Small &Associates Broker-Dealers. He has been notified of a
hearing regarding the revocation of his license for making unauthorized trades on some of his clients'
accounts. Which of the following statements is necessarily true?
- A. If Ari is found guilty and has his license revoked, Small & Associates will have its license revoked as
well and must reapply for reinstatement by filling out an application and paying the requisite filing fees. - B. If Ari is found guilty and has his license revoked, Small & Associates will be subject to a fine.
- C. If Ari is found guilty and has his license revoked, he can appeal the decision in a court of law if he files
the appeal within sixty days. - D. The Administrator of the state can assess Ari with both civil and criminal penalties.
Answer: C
Explanation:
If Ari is found guilty of making unauthorized trades on his clients' accounts and has his
license revoked, he can appeal the decision in a court of law if he files the appeal within sixty days. Small
& Associates license is not in danger as long as the firm has been providing competent supervision of Ari
and its other agents. It will not be required to pay a fine based on Ari's fraudulent activities. Ari may end
up with civil and criminal penalties, but the Administrator cannot assess them. Only a court of law can do
that.
NEW QUESTION # 96
A-2-Z Associates is a full service brokerage and is also in the investment advisory industry, charging its
clients for investment advice for additional remuneration. Which of the following statements is true?
- A. A-2-Z can charge the client only an advisory fee when it is serving as an investment adviser; no
commissions may be collected. - B. A-2-Z can charge an individual client an advisory fee for its advice or a commission when it executes a
trade that the client makes based on that advice, but not both. - C. A-2-Z can charge the client both an advisory fee for its advice and a commission on any trade the client
makes based on the advice. This is all laid out in the advertising brochures full service brokerage firms
like A-2-Z provide their prospective clients. - D. A-2-Z can charge the client both an advisory fee for its advice and a commission for the execution of a
trade based on that advice, but it must inform the client of its potential conflict of interest in doing so and
get the client's written consent.
Answer: D
Explanation:
A-2-Z can charge a client it advises an advisory fee for its advice and a commission for the
execution of a trade based on that advice, but it must inform the client of the potential conflict of interest
and get the client's written consent. It must also provide an itemized statement of all such agency cross
transactions performed for the client at least annually.
NEW QUESTION # 97
The trade confirmation must be received by the customer no later than
- A. the day after the trade takes place.
- B. the settlement date.
- C. five business days after the settlement date.
- D. one week after the settlement date.
Answer: B
Explanation:
Explanation
Trade confirmations must be received by the customer no later than the settlement date.
NEW QUESTION # 98
The C&S Railroad is in the process of issuing new bonds. Before these bonds can be offered for sale,
- A. None of the above statements is true.
- B. they must be registered with the SEC since railroads are involved in interstate commerce.
- C. they must be registered in every state in which the bonds will be sold to investors.
- D. they must be registered with the SEC and in each state through which the railroad passes.
Answer: A
Explanation:
None of the statements is true because securities issued by highly regulated industries, such
as the railroad industry are exempt from registration with both the SEC and the states.
NEW QUESTION # 99
Mr. Bigwig, CEO of HiGrowth Corporation, meets with the president of BigFee Investment Bankers and arranges for BigFee to underwrite an Initial Public Offering (IPO) for the firm. When the IPO comes to market, GetErDone Broker-Dealers is part of the selling group, which handles the sale of the stock to the public.
In this scenario, which party is the broker?
- A. BigFee Investment Bankers
- B. Mr. Bigwig
- C. GetErDone Broker-Dealers
- D. HiGrowth Corporation
Answer: C
Explanation:
Explanation
GetErDone Broker-Dealers is the broker in this scenario. GetErDone is simply finding buyers for the securities and receives a commission for doing so. GetErDone is not itself purchasing the securities in the scenario described. It would be considered unethical for the broker-dealer to do so since they are required to make a bona fide public offering of all of the securities allotted to them for distribution under NASAA Model Rules.
NEW QUESTION # 100
Under which of the following scenarios can a client legitimately sue a purported professional in the securities industry and expect an award for damages?
I. The securities were sold by an agent whose registration was not yet effective with the state, but who had already applied for registration.
II. The security was a variable annuity, and the sales representative neglected to reveal the details of the surrender clause to the client.
III. The security was the stock of a company, the stock had recently been registered with the state for sale, had been granted registration, and the selling agent had told his client that the security had been state-approved for sale.
- A. I, II, and III
- B. I only
- C. II and III only
- D. I and III only
Answer: A
Explanation:
Explanation
All of the selections are scenarios describing instances in which a client can legitimately sue a purported professional in the securities industry and expect an award for damages. A client can legitimately sue a purported professional in the securities industry and expect an award for damages if the agent is not yet effectively registered to effect securities transactions in the state; if the professional has neglected-intentionally or otherwise-to inform the investor of all the relevant information involving the security, such as any surrender clause involved; or if the agent has indicated that a state-registered security has in any way been approved by the state.
NEW QUESTION # 101
Finn Nance has recently passed his CFP exam and is now a certified financial planner. He has new business cards printed that have the words "Certified Financial Planner" printed under his picture. In doing so,
- A. Finn is not in violation of any laws as long as he has notified the state Administrator of his new designation and his new logo.
- B. Finn has violated a securities law. The Uniform Securities Act prohibits anyone from using the word
"certified" on any advertisement for services. - C. Finn has possibly violated a state securities regulation. The Administrator in many states prohibits the use of the word "certified" on any advertisement for services.
- D. Finn has not violated any laws or engaged in any prohibited practices.
Answer: D
Explanation:
Explanation
Finn has not violated any laws or engaged in any prohibited practices in using the words "Certified Financial Planner" on his business cards. Had he indicated he had been certified or approved by the state, he would have been in violation, but he is allowed to indicate a certification with a professional organization in any advertising literature.
NEW QUESTION # 102
An arrangement wherein a terminally ill person sells a second party his life insurance policy at a discount
from its face value, giving the buyer the right to the policy's face value when the seller dies is called a:
- A. viatical settlement.
- B. life straddle.
- C. death warrant.
- D. deceased option.
Answer: A
Explanation:
A viatical settlement is an arrangement under which a terminally ill person sells a second
party his life insurance policy at a discount from its face value. When the terminally ill person dies, the
buyer of the policy receives its face value. Some states consider viatical settlements to be securities, and
they have come under the scrutiny of the NASAA since there is a significant potential for fraud in the
writing of these contracts.
NEW QUESTION # 103
You are employed as an agent with CanDo Broker-Dealers. Your brother is software engineer with VideoMagic. When you were talking to him on the phone the other day, he told you that he overheard a conversation by some of the firm's executives that indicated that VideoMagic was about to take over another software company.
Which of the following would violate insider trading rules?
I. The next day, you get an unsolicited call from a client requesting that you sell his shares in Video Magic, and you execute the trade.
II. You buy stock in Video Magic's target firm in anticipation that its stock price will rise when the information becomes public.
III. You recommend the stock of Video Magic's target firm to investors based on the fact that, on average, the stock price of target firms increases.
- A. I and II only
- B. I, II and III
- C. II and III only
- D. I and III only
Answer: C
Explanation:
Explanation
Only selections II and III are violations of insider trading rules. If you receive an unsolicited call from a client requesting a sale (or purchase) of that firm's stock, it is not considered to be an insider transaction. If you have insider information from you brother about the merger of VideoMagic with another firm, you cannot buy stock yourself in the target firm in anticipation of a rise in price, nor can you recommend the stock to customers based on your expectation of a stock price increase.
NEW QUESTION # 104
Julia Hasty has recently applied with the Administrator to be a registered investment adviser in the state.
Eager to open her new business, she has business cards printed that indicate that she is a
"state-registered" investment adviser and visits some local businesses, asking them for permission to put
some of her cards in their waiting rooms. Has Julia violated any of the provisions of the Uniform Securities
Act by distributing her business cards?
- A. No. Julia has merely put her business cards in waiting rooms. She has not opened her business to
clients yet. - B. Yes. Julia is not permitted to advertise as a "state-registered" investment adviser until she receives
notification of the acceptance of her application by the state Administrator. - C. No. The provisions of the Uniform Securities Act relate to securities, not people.
- D. No. As long as her application has been submitted and is pending acceptance, Julia has not violated
any provisions of the Uniform Securities Act.
Answer: B
Explanation:
Yes. Julia has violated a provision of the Uniform Securities Act by distributing business
cards that indicate she is a "state-registered" investment adviser because she has not yet received
notification of the acceptance of her application by the state Administrator. The filing of an application for
registration is not the same as registration, and the placement of the cards is, at this early point, false
advertising.
NEW QUESTION # 105
In accordance with the Telephone Consumer Protection Act of 1991 (TCPA), if a prospective client
requests to be put on your firm's Do-Not-Call (DNC) list, the client must be kept on that list for
- A. 10 years.
- B. 2 years.
- C. 1 year.
- D. 5 years.
Answer: A
Explanation:
If a prospective client requests being put on your firm's DNC list, you must keep that name
on your list for 10 years, according to the TCPA.
NEW QUESTION # 106
Rich Quick is a broker-dealer registered in the state of Massachusetts. He occasionally trades on abnormalities he observes in bond yield spreads for his own account, short selling a bond that appears to be overpriced based on its yield and buying a bond that is identical in almost every respect except for the price, which is less than that of the other bond. He has been able to earn arbitrage profits 95% of the time when he does this. Rich Quick
- A. is skilled if he is able to earn profits 95% of the time using this strategy.
- B. engaged in a fraudulent activity.
- C. is in violation of securities laws. Arbitrage is a prohibited activity.
- D. is trading on insider information, which is a violation of securities laws.
Answer: A
Explanation:
Explanation
If Rich Quick is able to earn profits 95% of the time by trading on abnormalities he observes in bond yield spreads, he is skilled. There is nothing illegal in what he is doing. Arbitrageurs attempt to earn profits when they observe what they believe to be mispriced securities, and this is an accepted activity. Rich is not using insider information; bond yields are publicly available information.
NEW QUESTION # 107
Which of the following scenarios describes activities that are disallowed under the NASAA Model Rules?
I. Broker-dealer Anon observes that a client placed a stop loss order to sell her 1,500 shares of Amazon.com stock for $131 when the stock was selling for $134. Anon sold the stock for $133 when it started to fall during the day and credited the client's account with $131 per share when stock dropped further to $129 a share.
II. Penny is an agent with Broker-dealer Anon. She recently recommended that a client buy a stock that Penny thought would do well. As it turned out, Penny was wrong, and she offers to refund the commission that the client paid her.
III. Broker-dealer Anon is part of the selling group of a hot new IPO. As such, the firm purchases 50% of the shares for its own portfolio and sells the remainder to the public.
- A. I, II, and III
- B. I only
- C. I and II only
- D. I and III only
Answer: A
Explanation:
Explanation
Selections I, II, and III are all disallowed under the NASAA Model Rules. In Selection I, Broker-dealer Anon has made an unauthorized transaction and has also stolen from his client. The stop order indicated that the client's Amazon.com order should be effected only if the stock dropped to $131 a share or less. Anon jumped the gun and sold it for $133, but only gave the client the specified price of $131 a share. In the scenario described in Selection II, Penny's intentions might have been good, but an agent is not allowed to refund commissions. Anon is also in violation in Selection III's scenario. A member of the selling group is expected to make "bona fide" public offerings of the securities allotted him. To purchase some of the securities for itself is prohibited.
NEW QUESTION # 108
"T + 3" refers to
- A. the fact that the settlement date will be three business days after the trade date, which is the "regular way settlement" for transactions involving stocks and corporate and municipal bonds.
- B. the form that is filled out and sent to the client confirming that the trade has been executed.
- C. the form, also known as a "trade ticket," that is filled out when an order is entered into the market.
- D. a procedure to minimize the potential for money laundering.
Answer: A
Explanation:
Explanation
"T + 3" is an abbreviation indicating that the settlement date will be three business days after the trade date, which is the "regular way settlement" for transactions involving stocks and corporate and municipal bonds.
NEW QUESTION # 109
Mr. Bigwig, CEO of HiGrowth Corporation, meets with the president of BigFee Investment Bankers and
arranges for BigFee to underwrite an Initial Public Offering (IPO) for the firm. When the IPO comes to
market, GetErDone Broker-Dealers is part of the selling group, which handles the sale of the stock to the
public. In this scenario, which party is the issuer?
- A. BigFee Investment Bankers
- B. Mr. Bigwig
- C. HiGrowth Corporation
- D. GetErDone Broker-Dealers
Answer: C
Explanation:
HiGrowth Corporation is the issuer in this instance. Its stock will be sold, and HiGrowth will
receive the proceeds from the sale-less BigFee's underwriting spread. Mr. Bigwig is merely HiGrowth's
representative in this instance.
NEW QUESTION # 110
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