Question 1

The Administrator may require a firm to supply it with any prospectus, pamphlet, advertisement, or other sales literature intended for prospective investors unless the security
I. will be sold only through an investment advisory firm.
II. is a federal covered security.
III. is issued by a state credit union.

Accepted Answer

A) I, II and III 
B) I only 
C) II only 
D) II and III only

Question 2

Assuming the security is not registered under the Uniform Securities Act, which of the following would not be exempt from state registration?

Accepted Answer

A) a variable annuity contract offered by an insurance company with offices in the state 
B) a stock that is listed on the American Stock Exchange 
C) a stock that is listed on the OTC Bulletin Board 
D) a put option on a stock that sells in the over-the-counter market

Question 3

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:

Accepted Answer

A) death warrant. 
B) viatical settlement. 
C) deceased option. 
D) life straddle.

Question 4

The C&S Railroad is in the process of issuing new bonds. Before these bonds can be offered for sale,

Accepted Answer

A) they must be registered with the SEC since railroads are involved in interstate commerce. 
B) they must be registered in every state in which the bonds will be sold to investors. 
C) they must be registered with the SEC and in each state through which the railroad passes. 
D) None of the above statements is true.

Question 5

The net worth of a broker-dealer has fallen below the minimum net capital requirement specified by the state in which the broker-dealer is registered. This broker-dealer must notify the Administrator of this fact

Accepted Answer

A) before the beginning of the next quarter. 
B) before the end of the month. 
C) by the close of business on the next business day. 
D) within a week's time.

Question 6

To say a security is "exempt," means that
I. it is exempt from the state's anti-fraud laws.
II. it is exempt from state registration requirements.
III. any transaction involving it is considered to be an exempt transaction.

Accepted Answer

A) I, II, and III 
B) I and II only 
C) II and III only 
D) II only

Question 7

Which of the following compensation arrangements between an investment adviser and an individual client with a net worth of $600,000 would be disallowed?

Accepted Answer

A) The client agrees to pay the investment adviser an hourly fee of $60.00. 
B) The investment adviser will receive 0.1% of the total value of the client's assets under management as of the end of each month. 
C) The investment adviser will receive 0.1% of the gross capital gains earned on the portfolio each quarter. 
D) All of the above are legitimate compensation arrangements between and investment adviser and an individual client with a net worth of $600,000.

Question 8

Which of the following would fall under the definition of "agent," as defined by the Uniform Securities Act (USA)?

Accepted Answer

A) Joe works as an administrative assistant for broker-dealer GetErDone, doing data entry, filing client forms that contain confidential information, and directing calls to registered representatives of the firm. 
B) Freedom broker-dealers executes the purchase and sale of securities for its customers. 
C) TrustUs Bank has a subsidiary operation that sells mutual funds to the public. 
D) None of the above would fall under the definition of "agent," as defined by the Uniform Securities Act (USA.)

Question 9

Trevor is currently a registered agent in the state of Connecticut where he has been employed by Connect & Company, a broker-dealer that is registered in Connecticut and has subsidiary operations in Massachusetts, New Jersey, and New York. Trevor has moved to Massachusetts and is now associated with one of Connect's subsidiaries, a broker-dealer registered in the state. Trevor has applied to the Administrator of Massachusetts for registration as an agent. Can Trevor execute purchases and sales for clients while his registration is still pending?

Accepted Answer

A) No. Until he is informed by the Administrator of Massachusetts that his application has been accepted, Trevor may not effect any securities transactions in Massachusetts. 
B) Yes. Because Trevor is a registered agent in another state and is affiliated with a broker-dealer that is registered in the state of Massachusetts, he is not restricted from executing trades. 
C) Yes. Trevor can execute trades for new clients he solicits, but only for sixty days while his registration is pending. 
D) It depends. Trevor can execute some purchases and sales, but only for clients that he already had who may have recently relocated to Massachusetts and only for sixty days while his registration is pending.

Question 10

An individual who represents a broker-dealer in the buying and selling of securities is called a(n):

Accepted Answer

A) underwriter 
B) issuer 
C) agent 
D) administrator

Question 11

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

Accepted Answer

A) 1 year. 
B) 2 years. 
C) 5 years. 
D) 10 years.

Question 12

"T + 3" refers to

Accepted Answer

A) the form, also known as a "trade ticket," that is filled out when an order is entered into the market. 
B) the form that is filled out and sent to the client confirming that the trade has been executed. 
C) 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. 
D) a procedure to minimize the potential for money laundering.

Question 13

When a client has purchased securities on margin, the broker-dealer

Accepted Answer

A) may require that the client leave all his securities, even those not purchased on margin, in street name. 
B) must keep the securities that the client paid cash for separate from the securities that the client purchased on margin. 
C) may use any securities that the client purchased on margin as collateral for a loan from a bank upon receiving a written agreement signed by the client. 
D) Both B and C are correct statements.

Question 14

Kevin has a pair of season tickets to the Boston Red Sox games. He and his wife can't attend all the games themselves, so Kevin has created "packages" of eight games each that he is listing for sale on Craig's List. Do these "packages" meet the definition of securities, and, if so, does Kevin need to register them with the state before offering them for sale?

Accepted Answer

A) If Kevin will be profiting from the sale of the packages, the packages are defined to be securities, but since he's selling the packages to only a few people, he will not have to register them with the state. (Kevin may, however, be guilty of violating ticket scalping laws.) 
B) Only if Kevin will be selling the packages at or below cost are the packages not considered to be securities, in which case Kevin will not have to register them with the state. 
C) The packages are not considered to be securities since each package is merely a purchase and sale agreement between Kevin and another person. There is no third party involved. Because they do not meet the definition of securities, Kevin does not need to register them with the state. 
D) Statements A and B are both true statements.

Question 15

Registered agent Ina Scent has had her license suspended by the state Administrator prior to an administrative hearing on the order. Which of the following statements is true regarding Ina's situation?

Accepted Answer

A) Ina can sue the Administrator because she was not afforded a hearing before the suspension took place. 
B) Ina can make a written request that a hearing on the issue be scheduled within ten business days of her request and may continue working with clients while waiting for her day in court. 
C) Ina can make a written request that a hearing on the issue be scheduled within fifteen business days of her request and may not continue working with clients unless the Administrator vacates the order until final determination. 
D) Ina can immediately file an appeal of the suspension in a court of law.

Question 16

Under the guidelines of the Bank Secrecy Act (BSA), the Treasury Department now requires broker-dealers to obtain and keep certain information relating to clients that make or receive funds transfers that involve

Accepted Answer

A) $3,000 or more. 
B) $10,000 or more. 
C) $5,000 or more. 
D) $100,000 or more.

Question 17

Which of the following are examples of the prohibited practice of manipulation in the securities markets?
I. Broker-Dealer Joker is unhappy with its investment in the stock of a speculative firm and engages another broker-dealer to purchase a large number of shares from it, with the unofficial agreement to buy back those shares, offer more shares which the second broker-dealer will purchase, and so on.
II. Broker-Dealer Joker has a large short position in the stock of a certain corporation. Joker offers a bonus to its agents who effect sale transactions in the stock.
III. A client calls Broker-Dealer Joker with a request to purchase 20 bonds issued by Massachusetts Institute of Technology (MIT.) The bonds are currently selling for their par value of $1,000. Knowing this, Joker offers to sells the client the bonds for $120 per $100 of par, or $1,200 per $1,000 bond.

Accepted Answer

A) I, II, and III 
B) I and II only 
C) I and III only 
D) I only

Question 18

You are an investment adviser representative. Your client, Mr. I. M. Pulse, calls you with what he thinks is exciting news. He just passed a restaurant and saw Microsoft's Bill Gates having lunch with a local entrepreneur who owns a small firm in the computer software industry that trades on the OTC pink sheets. He is sure that this means Microsoft is negotiating a purchase of the smaller company and instructs you to take the cash balance in his account and buy shares of the local company. You should

Accepted Answer

A) tell Mr. I.M. Pulse that this would be an illegal insider trade and that you are unable to fulfill his request. 
B) call your supervisor and alert him immediately of Mr. Pulse's attempt to have you place an illegal order on his behalf in case Mr. Pulse decides to place the order elsewhere. 
C) advise Mr. Pulse that he may be jumping the gun, but place the order if he insists. 
D) do both A and B.

Question 19

Naiveté gave Mr. Smooth, owner of Smooth Construction, $40,000 in return for a promissory note that promised to pay interest at the rate of 8% a quarter, with a repayment of principal at the end of two years. The money would be used by Mr. Smooth to rehab a few beach condo units that had been severely hurricane-damaged and that Mr. Smooth had been able to purchase for "pennies on the dollar," or so he said. The first units would be completed within a month, and the rents would be used to make the interest payments. The investment was almost as risk-free as U.S. government bonds, Mr. Smooth claimed. By the end of the second year, Ms. Naiveté had received a lot of fast talk and only one of the promised interest payments. Have there been any violation of securities laws in this instance?

Accepted Answer

A) No. This was simply a loan transacted between two parties. 
B) Yes. Mr. Smooth was required to register the promissory note before he offered it for sale. 
C) Yes. Ms. Naiveté has been defrauded by Mr. Smooth. 
D) Both B and C are true statements.

Question 20

You are a registered agent with a broker-dealer. One of your clients visits you and wants you to sell some of the U.S. government bonds she owns and purchase shares of a specific aggressive growth mutual fund for her with the proceeds. Your client is a mentally-
Competent, 84-year-old woman but, based on your other knowledge of her situation, you believe it to be an unwise move. You should

Accepted Answer

A) advise her that you don't believe this is in her best interest, but execute the required transactions if she insists. 
B) call the mutual fund and tell them that they must convince this client that an investment in their fund is not in her best interest, under penalty of law. 
C) nod politely, but not execute the transactions since they are not in her best interest. 
D) turn the matter over to your supervisor.

Exam 4: Uniform Securities Act USA and State Registration Requirements

Assuming the security is not registered under the Uniform Securities Act, which of the following would not be exempt from state registration?

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:

The C&S Railroad is in the process of issuing new bonds. Before these bonds can be offered for sale,

The net worth of a broker-dealer has fallen below the minimum net capital requirement specified by the state in which the broker-dealer is registered. This broker-dealer must notify the Administrator of this fact

To say a security is "exempt," means that I. it is exempt from the state's anti-fraud laws. II. it is exempt from state registration requirements. III. any transaction involving it is considered to be an exempt transaction.

Which of the following compensation arrangements between an investment adviser and an individual client with a net worth of $600,000 would be disallowed?

Which of the following would fall under the definition of "agent," as defined by the Uniform Securities Act (USA) ?

An individual who represents a broker-dealer in the buying and selling of securities is called a(n) :

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

"T + 3" refers to

When a client has purchased securities on margin, the broker-dealer

Registered agent Ina Scent has had her license suspended by the state Administrator prior to an administrative hearing on the order. Which of the following statements is true regarding Ina's situation?

Under the guidelines of the Bank Secrecy Act (BSA) , the Treasury Department now requires broker-dealers to obtain and keep certain information relating to clients that make or receive funds transfers that involve