Question 1

Fly-By-Night Investment Advisers has closed its doors. Which of the following statements is true?

Accepted Answer

A) Fly-By-Night is required to shred all documentation of client transactions and communications. 
B) Fly-By-Night must send all records of client transactions and communications to the state Administrator for safekeeping. 
C) Fly-By-Night must preserve and maintain all records, including client transactions and communications, advertising materials, and financial statements of the now-defunct business for five years. 
D) Fly-By-Night must send each of its former clients its records of all that client's transactions and communications with the firm over the past five years.

Question 2

Penny Swyne, an agent employed by Bear Broker-Dealers, has received a written complaint via e-mail from Mr. Wolf regarding her performance as his agent. What are Ms. Swyne's legitimate options?

Accepted Answer

A) Ms. Swyne can call Mr. Wolf and offer to meet him for a romantic dinner and try to convince him to revoke the complaint. 
B) As illegal as it may sound, since the complaint was via e-mail, Ms. Swyne can hit the delete button and make it all go away. 
C) Ms. Swyne must forward the complaint to the state Administrator. 
D) Ms. Swyne must provide Bear Broker-Dealers with a copy of the complaint.

Question 3

Which of the following would not be found in a tombstone advertisement?

Accepted Answer

A) the price at which the security will be offered 
B) the names of the underwriters 
C) the name of the issuer 
D) the interest rate and time to maturity of a bond issue

Question 4

Don is a state-registered agent with GetErDone Broker-Dealers. He has three other friends who are licensed agents-Huey, Dewey, and Louie. Huey is also an agent with GetErDone Broker-Dealers. Dewey is an agent with a different firm in the same city, CanDo Broker-
Dealers. Louie works for a Broker-Dealer with an office just across the state line. Don can enter a commission-splitting agreement with

Accepted Answer

A) Huey only. 
B) either Huey or Dewey or both 
C) Dewey only. 
D) Either Huey, Dewey, or Louie or any combination of the three

Question 5

Rich Writewell wants to begin publishing an independent weekly financial newsletter that will provide investment recommendations as well as other financial news items to the general public. Rich hopes that his newsletter will achieve nationwide circulation within a few months. Which of the following statements is true?

Accepted Answer

A) Rich will have to register as an investment adviser since his publication will include investment recommendations 
B) Rich will have to register as an investment adviser only if he sells this newsletter to the public.If the publication is to be distributed free of charge, he will not have to register. 
C) Rich may be exempt from registering as an investment adviser if he is a lawyer,accountant, engineer, or teacher. Otherwise, he will have to register. 
D) Rich will not have to register as an investment adviser since he is publishing a legitimate financial newsletter for distribution to the general public.

Question 6

Under NASAA Model Rules, it is permissible for the registered representative of a broker-dealer to split his or her commission with
I. a client.
II. the broker-dealer with which the registered representative is affiliated.
III. another registered representative working for the same broker-dealer.
IV. the administrative assistant who directs calls to the registered representative and provides other services for the agent.

Accepted Answer

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

Question 7

Registration by coordination is provided for by which of the following federal securities acts?

Accepted Answer

A) Securities Act of 1933 
B) Securities and Exchange Act of 1934 
C) Investment Advisers Act of 1940 
D) Investment Company Act of 1940

Question 8

A "notice filing" refers to

Accepted Answer

A) the right of an issuer to run tombstone ads in the newspapers and other publications upon filing a registration application with the state Administrator. 
B) the filing by a federal covered investment adviser of forms already filed with the SEC along with a consent to service of process with the state Administrator. 
C) a document that the issuer must file with the SEC informing the SEC that the firm has applied to the state for registration of its new security. 
D) notification to the public by the issuer or its underwriters that the issue is being sold on an "all or nothing" basis.

Question 9

Joe Treader is the owner of a small, state-registered investment advisory firm that is on the verge of becoming insolvent. One of his clients who has become like a mother to him is aware of his financial difficulties and has offered to sell off some of the assets that he manages for her and loan him the money to get him through this period of economic
Uncertainty until he is able to get on his feet again. Can Joe take her up on her offer?

Accepted Answer

A) Yes. Based on the facts presented, it is an unsolicited offer and, as such, Joe can (and should) accept it. 
B) Yes, but only if Joe draws up a formal loan agreement with a fair interest rate, based on the going market rates, stated in the agreement as well as a firm date for principal repayment. 
C) No. As the client's investment adviser, he has a fiduciary relationship with the client. Entering a loan agreement with this client could lead to conflicts of interest. 
D) Both A and B are true.

Question 10

Which of the following is a security as defined by the Uniform Securities Act (USA)?

Accepted Answer

A) a debenture 
B) a futures option contract on wheat 
C) a term life insurance policy 
D) Both A and B are securities as defined by the Uniform Securities Act.

Question 11

George Geek is a computer programmer who tired of working for others and started his own company. He convinced forty investors that he could design software that would rival Microsoft, and sold them each a 10% partnership interest in his firm for $25,000. He designed and printed up the partnership certificates himself. George told the investors that he had a product that was on the verge of being marketable and that when it did-within the next two months-revenues would pour into the company, and he would begin paying dividends. He told them they could expect a 20% return on their money this year, with even higher returns in the years to come. As it turned out, George wasn't quite the programmer he thought he was, and he wasn't able to get all the bugs out of the program to make it marketable within the promised two months. Within a year, George had tired of the project and was too busy picking up chicks in his new Corvette when he wasn't on the island of St. Bart overseeing the construction of his new beach mansion-and picking up chicks. His activities, of course, were financed by the extremely generous "salary" he paid himself from the investors' monies. Under the Uniform Securities Act, do the investors have any civil claims against George?

Accepted Answer

A) Yes. They can sue George for the return of their original investment, plus interest. George would also have to pay their court costs and attorneys' fees and any amounts assessed by the court for "pain and suffering" on the parts of the clients. 
B) No. It wasn't George's fault that he was unable to do what he promised. Even if it wasn't for 
C) Yes. They can sue George for the return of their original investment, plus interest. George would 
D) No. The Uniform Securities Act only involves securities laws and partnership interests are not

Question 12

You are a registered agent with a large brokerage firm. Your client is a very busy woman. She is interested in purchasing 500 shares of Google, but she thinks this morning's opening price is too high. She's going to be in meetings and then on a transatlantic flight. She wants the purchase to take place today because she believes Google's price is just going to keep rising with only the occasional daily ups and downs. She wants you to use your discretion and try to get her the best price for the stock in today's trading session. Which of the following statements are true?

Accepted Answer

A) You have to tell her that you can't do this without a signed discretionary authorization from her, and there's none on file. 
B) You tell her that you can do this for her, but only if you execute it as a margin transaction. 
C) You tell her you can enter it for her as a "market not held" order. 
D) You tell her to have her secretary type up a discretionary authorization for her to sign and drop in the mail before she boards the plane. As long as the written authorization is in the mail, you can place the order.

Question 13

Which of the following is not in itself a reason for the Administrator to deny, suspend, or revoke the license of a person?

Accepted Answer

A) The applicant has never before worked in the securities industry although he has received the requisite training. 
B) Some of the information supplied on the registration application was found to be false. 
C) The person has been convicted of check kiting within the past ten years. 
D) The person is a broker-dealer whose agents have repeatedly been accused of churning and burning, according to written client complaints.

Question 14

A variable annuity is:

Accepted Answer

A) not a security and, therefore, does not have to be registered with the state. 
B) not a security, but is still required to be registered with the state before it can be offered for sale. 
C) a security and, therefore, has to be registered with the state before it can be offered for sale. 
D) a security, but is exempt from state registration.

Question 15

When selling shares of an investment company to a client, an agent must provide the client with
I. the fund's prospectus, which provides information on any loads or other fees as well as historical return information.
II. information about any breakpoints if it is a load fund along with an explanation of a letter of intent
III. information regarding the investment adviser used by the fund
IV. an explanation of the various loads and fees outlined in the fund's prospectus

Accepted Answer

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

Question 16

Sam Shade had his agent's license revoked by the state of Washington for repeatedly making misleading claims about various investment to investors. He had had it with all the rain anyway and decided to move to the sunshine state of Florida. His brother-in-law was a computer whiz who made money on the side (more than his day job provided, in fact) by supplying illegal immigrants with official-looking documentation, including social security numbers. Sam Shade became Ian Creed in a few clicks of the mouse. As Ian Creed, Sam was hired by Sunny Investment Advisers, an investment adviser firm located in the Florida Keys, in a clerical role. As such, Sam/Ian had access to the confidential information of the firm's clients, which he and his brother-in-law utilized for the purpose of identity theft. Under the Uniform Securities Act guidelines, when Sam and his brother-in-law are caught in their illegal activities,

Accepted Answer

A) Sunny Investment Advisers will not be held liable if it can prove that there was no way it could have or should have known of the revocation of Sam Shade's (aka Ian Creed) license. 
B) Sunny Investment Advisers will be subject to criminal prosecution for employing an individual whose license had been revoked by the Administrator of another state since it obviously did not use due diligence in hiring Ian Creed, aka Sam Shade. 
C) Sunny Investment Advisers will be subject to civil penalties for employing an individual whose license had been revoked by the Administrator of another state. 
D) Sunny Investment Advisers will be subject to both criminal prosecution and civil penalties for employing an individual whose license had been revoked by the Administrator of another state since it obviously did not use due diligence in hiring Ian Creed, aka Sam Shade.

Question 17

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?

Accepted Answer

A) HiGrowth Corporation 
B) Mr. Bigwig 
C) BigFee Investment Bankers 
D) GetErDone Broker-Dealers

Question 18

Stable Corporation registered a bond issue that it plans to offer for sale in the state with the Administrator. The bond has a par value of $1,000 and will pay interest of 7% a year, with the principal to be repaid in 5 years. The registration became effective on September 8th. The registration is effective

Accepted Answer

A) until the maturity date on the bond. 
B) for one full year. 
C) until December 31st of the same year 
D) for two full years.

Question 19

Which of the following entities must sign a "consent to service of process," thereby allowing the Administrator to receive legal documents that are meant to be served to the entity in place of that entity?
I. agents
II. investment advisers
III. investment adviser representatives
IV. broker-dealers

Accepted Answer

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

Question 20

A tombstone advertisement is

Accepted Answer

A) an offer to sell a new security. 
B) the announcement of a new security that may become available for purchase. 
C) the only type of advertisement that an investment advisory firm is allowed to use. 
D) an offer to sell a new security that is being issued by an Arizona firm.

Exam 4: Uniform Securities Act USA and State Registration Requirements