- The Administrator may be best defined by which of the following?
A. the scholars designated by the state to educate the industry
B. the officials appointed by the state to govern exempt securities
C. the official or agency designated by the state to administer the Uniform Securities Act
D. the state designated grand-master of market ceremonies
2. An agent makes a sale of 500 shares of XYZ common stock at $50 per share to Mr. White. Two weeks later, Mr. White learns that the sale was not legal. What may Mr. White recover by filing a civil suit regarding this matter?
I. $25,000 plus fees or commissions
II. court costs and attorney’s fees
III. punitive damages
IV. interest lost minus income received
A. I only
B. I and IV
C. I, II, III and IV
D. I, II and IV
3. What actions may the Administrator take against a violator of the Act?
I. order a person to cease and desist the activity without a prior hearing
II. have a receiver appointed over the violator’s assets
III. initiate a criminal action against the violator
IV. sentence the violator to a prison term
A. I and III
B. I, II, III, and IV
C. II, III and IV
D. III and IV
4. The Administrator has jurisdiction over all of the following EXCEPT:
A. offers that originated in this state
B. offers directed to this state and received there
C. offers directed to another state and received in this state
D. offers accepted in this state
5. Which of the following writs may be issued by the Administrator?
A. writ of mandamus
B. writ of habeas corpus
C. writ of foetidus corpus
D. none of the above
6. A broker-dealer doing business in this state without proper registration may be subject to all of the following actions EXCEPT:
A. disciplinary action
B. fines
C. be required to refund customer transactions
D. all of these choices
7. Which of the following is true regarding penalties levied by the Administrator?
A. civil liabilities may be offset by rescission
B. the Administrator may not impose criminal penalties
C. only the courts and the SEC can impose criminal penalties
D. the Administrator may impose civil liabilities only
8. Who of the following are subject to license revocation, civil, and criminal liabilities?
A. broker-dealers
B. investment advisers
C. agents and investment adviser representatives
D. all of these choices
9. Let’s Bow or Gun, Inc. wishes to complete an intra-state offering. Which type of registration method will work best for this company?
A. registration by filing
B. registration by coordination
C. registration by qualification
D. registration by omission
10. Who has the authority to issue temporary or permanent injunctions against violators of the USA?
A. civil courts
B. Administrator
C. issuers
D. SEC
11. An Administrator may conduct joint examinations and administrative hearings with other governmental agencies:
A. in any jurisdiction
B. in this state only
C. in other states with approval only
D. not at all
12. Which of the following are illegal in connection to the offer, sale, or purchase of any security, directly or indirectly?
I. to employ any device, scheme, or artifice to defraud
II. to make false statements or omit true statements of material facts which may be
misleading
III. to engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person
IV. to disclose all material facts necessary to make an informed investment decision
A. I, II, and III
B. II and III
C. I and III
D. IV only
13. Creating the impression that a security is actively trading or using false market quotations is considered:
A. marketing
B. market making
C. market manipulation
D. market capitalization
14. A broker-dealer effecting transactions in securities for the benefit of his/her own customers is said to be operating in a/an:
A. broker capacity
B. issuer capacity
C. principal capacity
D. agency capacity
15. Causing or making excessive transactions in order to earn more commissions without regard to the best interests of clients best defines:
A. slurping
B. churning
C. market manipulation
D. selling away
16. Disclosing to a prospective investor that a security is registered and approved by the SEC is:
A. proper disclosure
B. prohibited
C. permissible for federal covered securities only
D. permissible for government securities only
17. Which of the following are accurate descriptions of prohibited investment adviser business practices?
I. representing that the Administrator has approved investment advice orrecommendations
II. charging fees that are excessive or unreasonable
III. not disclosing a client’s identity or investment activity to a third party
IV. disclosing a client’s identity or investment activity to a third party
A. I and III
B. II only
C. II, III, and IV
D. I, II, and IV
18. When may broker-dealers commingle funds with clients?
A. with a signed discretionary account agreement
B. never
C. with the use of an insured account
D. with a signed written agreement
19. A client calls and instructs his representative to buy stock for his wife’s Individual Retirement Account. There is no trading authorization associated with the wife’s IRA. What must the representative do?
A. tape record the conversation with his client and then place the order
B. get the approval of his supervisor and place the order
C. refuse the order until he has a written authorization permitting the client to trade for his wife’s account
D. place the order because client has a large individual trading account and is a good guy
20. The father of an agent registered in this state and the agent wish to open a joint account. What is required?
A. the agent’s father and the agent’s broker-dealer must give written permission, and both must share profits equally
B. the agent’s father and the agent’s broker-dealer must give written permission and profits may be shared in whatever way that the parties agree
C. the agent’s father and the agent’s broker-dealer must give written permission and both
must share profits equal to their contribution
D. nothing more than proper account applications
21. Investment advisers may not recommend investments to clients that:
A. associate clients with competing financial institutions
B. are risky
C. are not within the scope of client objectives and risk tolerance
D. are consistent with client needs
22. An investment adviser would not be required to disclose conflicts of interest under which of the following circumstances?
A. the adviser receives a fee for advice, plus a commission for trades
B. the adviser receives soft dollars from third parties
C. the adviser is a party to an agency cross transaction
D. none of the above
23. Which of the following are prohibited in advertisements offered by investment advisers?
A. testimonials
B. disclosures that gains are not guaranteed
C. offering free services with the intention of delivering those services
D. that past performance is no indication of future results
24. Tad Schlough, an investment adviser representative, writes a letter to be sent to his clients summarizing his market forecasts and sell recommendations. This letter is a/an:
A. good idea
B. advertisement
C. prohibited practice
D. testimonial
25. Dabba Investment Advisers, Inc., frequently makes loans to and borrows money from the firm’s best client. The client, Deuw Securities, is a reputable broker-dealer. Dabba has:
A. engaged in prohibited practices
B. engaged in fraud
C. engaged in unethical loan practices
D. not engaged in prohibited practices
26. “Suitability” may be best defined as:
A. making a reasonable inquiry concerning the customer’s investment objectives, financial situation, and any other relevant information before making an investment recommendation
B. charging unreasonable fees for services performed
C. exercising discretion while effecting a transaction for a customer’s account
D. measuring the shoulder width and length of inseam for a client’s suit
27. Suzy Soo has not heard from her investment representative for 9 months. Angered by the drop in her account’s market value, she writes a letter of complaint and mails copies to both her agent and the agent’s broker-dealer. Three months later, Suzy has yet to receive a reply to her complaint. What should she do?
A. nothing
B. notify the Administrator
C. write another complaint
D. transfer her account
28. Agents or investment adviser representatives who transact in securities without processing the transactions through their firm and without their firm’s permission are:
A. hard selling
B. cold selling
C. selling away
D. direct selling
29. Projecting the future investment performance of a security based upon past investment performance of that security is:
A. permitted only with the use of 90-day moving averages
B. permitted only when supplied by the issuer
C. strictly prohibited
D. permitted as an acceptable business practice
30. An investment adviser taking custody of customer funds must meet which of the following requirements in this state?
A. at least $35,000 net worth at all times
B. file a form ADV with the Administrator
C. employ a qualified custodian
D. all of these choices
31. All of the following are required to be retained by investment advisers EXCEPT:
A. records for each customer’s account showing whether orders were discretionary and
who recommended, placed, and executed the order
B. originals of all written correspondence sent to and received from clients
C. copies of documents used in determining the rate of return and performance ofmanaged accounts when directed to 10 or more persons
D. records of all inbound and outbound telephone calls of the adviser
32. A broker-dealer effecting transactions in securities from its own inventory and on its own behalf is said to be operating in a/an:
A. proprietary capacity
B. principal capacity
C. agency capacity
D. private capacity
33. When acting as an investment adviser for a client, the adviser effects a transaction for the client and acts as a broker-dealer for the client and for the party on the other side of the transaction. This is an example of a/an:
A. conflict of interest
B. disclosable transaction
C. agency cross transaction
D. all of these choices
34. When may a broker-dealer or investment adviser disclose client information to third parties?
A. after providing clients with its privacy policies initially and annually
B. after disclosing to the client the opportunity and procedure for opting out of such
information-sharing
C. after the client does not opt out of such disclosures
D. all of these choices
35. According to the USA Patriot Act, when must a broker-dealer file a suspicious activity report on transactions of $5,000 or more?
A. if the broker-dealer suspects the funds involved in the transaction originate fromillegal activity
B. if the broker-dealer has reason to believe the transactions are intended to evade the
Bank Secrecy Act
C. if the broker-dealer believes the transactions are conducted to facilitate criminal
activity
D. all of these choices
36. The USA Patriot Act establishes provisions allowing financial institutions to assist the federal government to monitor suspicious activity related to:
A. insider trading
B. communism
C. money laundering
D. patriotism
37. An important client wishes to make cash deposits of $25,000 to his account on a regular basis. What is the broker-dealer required to do?
A. report the transactions to the US Treasury Department
B. maintain records of the transactions for the Federal Reserve Board
C. file a Suspicious Activity Report with the appropriate authorities
D. nothing
38. Jack Jackson is a savvy investor wanting to diversify his portfolio into private equity. What qualifications would make Jack eligible for such investments?
A. net worth in excess of $1 million
B. annual income of $250,000 last year and $185,000 two years ago
C. income requirements before growth
D. all of these choices
39. An accredited investor is defined as any person who comes within which of the following categories?
I. any bank, savings and loan, broker-dealer, or other such financial institution
II. any plan established and maintained by a state for the benefit of its employees
with assets in excess of $5 million
III. any natural person whose individual net worth, or joint net worth with that
person’s spouse, exceeds $500,000
IV. any natural person with an individual income of more than $200,000 in each of
the two most recent years or joint income with that person’s spouse in excess of
$300,000 in each of those years and who has a reasonable expectation of reaching
the same income level in the current year
A. I and III
B. I and IV
C. I, II, and IV
D. I, II, III, and IV
40. Which of the following is a lawful representation to a client regarding a registered security?
A. the Administrator approved the security as superior to unregistered securities
B. the security is registered with the Administrator
C. a registered security has not been reviewed by the Administrator
D. the Administrator believes the registration statement is accurate
41. Which of the following regulations deals with the Federal Reserve requirements regarding securities as collateral?
A. regulation T
B. regulation U
C. regulation G
D. regulation Z
42. Which of the following regulations deals with the Federal Reserve requirements regarding cash accounts and the amount of credit a broker-dealer may extend for the purchase of securities?
A. regulation G
B. regulation Z
C. regulation T
D. regulation U
43. Which of the following is true concerning the SIPC?
A. it is a for-profit institution
B. it is an agency of the U.S. government
C. it guarantees the assets in brokerage accounts
D. it is not funded by the U.S. government
44. What are the limits of SIPC protection per each investor with member firms?
A. $100,000 in securities, and not more than $500,000 in cash per investor
B. $5,000,000 in cash and securities, but not more than $500,000 in cash per customer
C. $500,000 in cash and securities, but not more than $100,000 in cash
D. $500,000 in cash, but not more than $100,000 in securities
45. Which of the following protects investors in the event of the insolvency of a broker-dealer?
A. Securities Investor Protection Act of 1970
B. Investment Advisers Act of 1940
C. Investment Company Act of 1940
D. Federal Deposit Insurance Corporation
46. Which of the following best defines the use of material, non-public information for profitable transactions in securities?
A. immoral trading
B. insider trading
C. omniscient trading
D. none of the above
47. It is unlawful for a broker-dealer or issuer to employ an agent who is not:
A. knowledgeable
B. registered
C. experienced
D. flexible
48. Who must notify the Administrator when an agent begins or terminates employment with a broker-dealer or issuer?
A. the agent only
B. the broker-dealer or issuer only
C. both the agent and the broker-dealer or issuer
D. neither the agent nor the broker-dealer or issuer
49. How quickly must agents as well as broker-dealers or issuers notify the Administrator when agents begin or terminate employment?
A. promptly
B. within 5 business days
C. within 10 business days
D. within 14 business days
50. An investment adviser without an office in this state may be exempt from registration and manage an employee benefit plan with what minimum amount of assets?
A. $5 million
B. $10 million
C. $1 million
D. $2.5 million
51. Which of the following is true concerning the dual registration of an agent?
A. separate registration must be filed by both broker-dealers
B. strictly not permitted
C. separate offices must be maintained for each registration
D. only the primary broker-dealer must file registration
52. When a broker-dealer withdraws its registration, what happens to the registrations of agents with the broker-dealer?
A. the agents’ registrations are lost until they register with another broker-dealer
B. the agents’ registrations are null and void and they must repeat all necessary licensing
examinations
C. the agents’ registrations remain active as long as they register with another broker dealer within 30 days
D. the agents’ registrations remain active
53. Registration for both agents and investment adviser representatives expires:
A. every time they change firms
B. annually on December 31st
C. every 5 years
D. upon termination only
54. Gene and Jean Jensen have a permanent residence in another state and own a time-share in this state. While on vacation at their time-share, they meet with an agent from the Edward Schyzter Company, a nationally registered broker-dealer. Gene and Jean like what they hear and purchase securities from the agent that are registered in all 50 states. Which of the following is true?
A. the agent and broker-dealer must be registered in the client’s state of residence
B. the agent and broker-dealer must be registered in the client’s time-share state
C. the agent and broker-dealer must be registered in both states
D. neither the agent nor the broker-dealer needs registration in either state because thebroker-dealer is nationally registered and the security is registered in all 50 states
55. Partners, officers and directors of a registered broker-dealer or investment adviser who will perform the same duties as an agent or investment adviser representative are:
A. registered by proxy
B. to be registered promptly
C. not required to be registered
D. registered automatically
56. Nationally recognized statistical ratings organizations and pension consultants for pension plans in excess of $25 million may register:
A. with the SEC instead of the state
B. with the Administrator instead of the SEC
C. with the state instead of the SEC
D. with the NASD instead of the SEC
57. All of the following are true concerning registration with the Administrator EXCEPT
A. submission of updated information may be required quarterly after the registrationbecomes effective
B. registration remains effective for 1 year from the effective date
C. registration of a broker-dealer automatically constitutes registration of any agent whois a partner, officer, or director
D. there is no filing fee for registration of a successor during the unexpired portion of thecurrent registration year.
58. Which of the following would cause the Administrator to deny a registration resulting from the non-payment of the filing fee?
A. if not paid at the time of original application
B. if not paid by December 31 in the year of application
C. if not paid within 30 days of application
D. if paid by money order
59. The effective date of an agent’s or investment adviser representative’s registration is:
A. noon of the day received by the Administrator
B. noon on the 30th day after application was filed
C. 5 days following the submission by the applicant
D. midnight on the 30th day after application was filed
60. The Administrator may deny an agent’s registration due to past convictions of misdemeanors related to securities or any felony offenses occurring within the past:
A. 10 years
B. 20 years
C. 15 years
D. 5 years
61. An interstate broker-dealer must register with:
A. NASAA
B. SIPC
C. SEC
D. NASD
62. Which of the following are required for both the original and renewal applications for registration of agent?
A. U-4
B. U-16
C. U-5
D. U-2
63. Which of the following must be filed with the Administrator when a person registers?
I. application form
II. registration fee
III. consent to service of process
IV. consent to review of trading history
A. I only
B. I and II
C. I, II, and III
D. I, II, and IV
64. The Administrator may require the filing of form letters, correspondence, brochures, pamphlets, prospectuses, and any other sales literature or advertising communication EXCEPT:
A. when intended for distribution to prospects
B. when intended for distribution to clients
C. when addressed to clients of investment advisers
D. when relating to federal covered or exempt securities or transactions
65. Which of the following records would an investment adviser be required to preserve?
A. account statements
B. transaction confirmations
C. correspondence
D. all of these choices
66. When may the Administrator audit the records maintained by a broker-dealer?
A. at any time
B. quarterly
C. semi-annually
D. annually
67. By order, the Administrator may deny, suspend, or revoke any registration, or bar or censure any registrant or any officer, director, or partner, if:
A. a willful violation or failure to comply with any provision of the USA occurred
B. an application for registration contained statements which were later to be found false
or misleading with respect to material facts
C. dishonest or unethical practices in the securities business have been discovered
D. all of these choices
68. A broker-dealer that is resident in Canada with no office in this state and properly registered under the USA may effect transactions in securities with which of the following?
I. a person from Canada who is temporarily resident in this state and with whom
the Canadian broker-dealer had a client relationship previous to the person
entering the United States
II. a person from Canada who is resident in this state, and whose transactions are in
a self-directed tax advantaged retirement plan in Canada
III. US citizens resident in this state buying Canadian securities
IV. any Canadian who is a temporary resident of this state
A. I and II
B. I and III
C. I, II, and III
D. I, II, III, and IV
69. Canadian broker-dealers may register under the USA provided that it:
I. files an application in the form required by the jurisdiction in which it has itshead office
II. files a consent to service of process
III. is registered as a broker or dealer in good standing in the jurisdiction fromwhich it is effecting transactions into this state and files evidence thereof
IV. is a member of a self-regulatory organization or stock exchange in Canada
A. I and II
B. I and III
C. I, II, and III
D. I, II, III, and IV
70. If no denial order is in effect and no proceeding is pending, when do registrations for Canadian broker-dealers become effective?
A. immediately upon receipt
B. on the 14th day after filing
C. on the 30th day after filing
D. on the 60th day after filing
71. A Canadian broker-dealer or agent with proper registration and acting in accordance with the USA may only have its registration denied, suspended, or revoked for:
A. fraud
B. churning
C. selling away
D. late fee payment
72. What must a federal covered adviser file with the Administrator?
A. Form U-2
B. SEC registration documents
C. Form U-5
D. Form U-4
73. Which of the following must pay registration fees for initial and renewal registration with the Administrator of this state?
I. broker-dealers
II. agents
III. investment advisers
IV. investment adviser representatives
A. I and II
B. I and III
C. I, II, and III
D. I, II, III, and IV
74. Federal covered advisers must pay to the state Administrator:
A. filing fees
B. registration fees
C. filing and registration fees
D. no fee
75. The Administrator may not enter an order solely on the basis of:
A. lack of experience if qualified by training or knowledge
B. lack of sufficient resources
C. lack of clients
D. lack of sufficient office space
76. After the Administrator enters an order suspending the final determination of a registrant, how may days may pass without a hearing?
A. 15 days
B. 30 days
C. 45 days
D. until the Administrator vacates or modifies the order
77. All of the following are considered to be securities EXCEPT:
A. whole life insurance
B. a home mortgage
C. debentures
D. treasury bonds
78. Which of the following is not considered a sale?
A. ordinary gift of stock
B. stock rights offering
C. any bona fide pledge or loan
D. a contract to sell an interest in a security for value
79. Which of the following best defines a transaction that is exempt from state regulatory control because of the manner in which it is sold or because of the person(s) to whom it is sold?
A. exempt
B. special issuer
C. non-exempt
D. barter
80. A non-issuer transaction of common stock sold by a broker-dealer is considered what type of transaction?
A. exempt
B. registered
C. non-exempt
D. unregistered
81. Which of the following is defined as a “security”?
A. real estate
B. closed-end investment company shares
C. gold
D. fixed annuity
82. Which of the following transactions is a direct negotiation between issuer and investor?
A. initial public offering
B. private placement
C. bond offering
D. corporate placement
83. Which type of securities registration would be used for registration in multiple states?
A. coordination
B. qualification
C. classification
D. filing
84. Mutual funds and unit investment trusts may register by filing as long as the following conditions are satisfied:
I. a registration statement has been filed under the Securities Act of 1933 inconnection with the offering
II. registration has occurred with the Administrator within previous 24 months withno subsequent material changes
III. compliance with the material terms of prior registrations has not changed
IV. a registration circular has been filed with FINRA
A. I and III
B. II an III
C. I, II, and III
D. IV only
85. An issuer must disclose any past or present legal proceedings in the:
A. offering circular
B. blue herring
C. conviction statement
D. registration statement
86. Prospective purchasers of which of the following would not receive a prospectus?
A. new issue of a corporate bond
B. new house used as primary place of residence
C. mutual fund
D. exchange traded fund
87. What document provides information contained in the registration statement of a security and must be provided to prospective investors of that security ?
A. pickled herring
B. tombstone advertisement
C. red herring
D. prospectus
88. What will the SEC send to the issuer if there are questions or concerns regarding the contents of a registration statement?
A. deficiency letter
B. notification letter
C. blue sky letter
D. scarlet letter
89. A “non-issuer” is:
A. a broker-dealer
B. an investment adviser
C. any person who is not acting directly or indirectly for the benefit of the issuer
D. any person who issues non-exempt securities
90. Securities that are not required to be registered with the SEC are:
A. federal covered securities
B. exempt securities
C. non-exempt securities
D. state securities
91. All the following are exempt securities EXCEPT:
A. collective trusts
B. municipal bonds
C. bank stocks
D. corporate bonds
92. What type of securities are required to file a registration statement with the SEC?
A. non-exempt securities
B. government securities
C. municipal securities
D. foreign securities
93. Which of the following are securities?
A. real estate investment trusts (REITs)
B. variable annuities
C. variable universal life insurance policies
D. all of these choices
94. Which of the following are required with registration by filing?
I. a consent to service of process
II. a statement as to the company’s eligibility
III. a copy of the offering circular and prospectus filed with the SEC
IV. the names and addresses of all family members of the issuer
A. IV only
B. II only
C. I, II, and III
D. II and IV
95. What type of issuer usually registers by filing?
A. large publicly traded corporations
B. new companies with no previous registrations
C. small regional credit unions
D. Canadian provincialities
96. An issuer must have all of the following in order to qualify for registration by filing EXCEPT
A. a public offering price of at least $5 per share, and not having failed to pay a dividendon preferred stock within the previous 12 months
B. at least 2 market makers
C. a net worth of at least $4 million and before-tax income of at least $2 million for atleast 2 of the preceding 3 years
D. at least 36 consecutive calendar months of operation immediately before the filing ofthe federal registration statement
97. Which of the following may be registered by coordination?
A. initial public offering
B. pension plan
C. railroad bonds
D. school bonds
98. Which of the following conditions must be met in order for a registration by coordination to become effective automatically?
A. a registration statement must have been on file with the Administrator for at least 10days
B. the Administrator or SEC must not have issued a stop order
C. a statement of the maximum and minimum proposed offering prices and the maximum
underwriting discounts and commissions has been on file for 2 full business days
D. all of these choices
99. Which of the following are necessary disclosures with a registration by qualification?
I. any litigation, existing or threatened
II. legal opinion of counsel
III. statement of the issuer’s competitiveness
IV. capitalization and long-term debt of the issuer
A. I and II
B. II, III, and IV
C. I, II, and IV
D. I, II, III, and IV
100. When a security registration is completed by filing all of the required documents with the Administrator of this state only, it is:
A. registration by qualification
B. registration by filing
C. registration by coordination
D. none of the above