- When is it appropriate for the Administrator to make, amend, and rescind such rules, forms, and orders as are necessary to carry out the provisions of the USA?
A. when in the state’s interest
B. never
C. when in the public interest or to protect investors
D. annually
2. What are the statutes of limitation concerning an investor’s ability to sue violators of the USA?
A. 5 years after discovery
B. 3 years after discovery
C. 2 years after discovery
D. 10 years after discovery
3. An agent sells an unregistered common stock to his client unintentionally. What may his broker/dealer do to remedy this action?
A. inform the Administrator
B. make an offer of rescission to the client and reimburse the investor in full
C. nothing
D. no action is needed because there was no violation
4. What is the maximum penalty for conviction of a criminal offense under theUSA?
A. $3,000 fine and/or 5 years in prison
B. $5,000 fine and/or 3 years in prison
C. $10,000 fine and/or 5 years in prison
D. recovery of the investment cost plus interest and fees, less income
5. The Administrator may do which of the following during investigation of Act violations?
A. administer oaths and affirmations
B. subpoena witnesses and compel their attendance
C. take evidence and require the production of any documents
D. all of these choices
6. The Administrator may require the filing of any form of sales literature or advertising related to a security or transaction and intended for distribution to prospective investors EXCEPT:
A. exempt securities
B. exempt transactions
C. federal covered securities
D. all of these choices
7. A broker-dealer specializing in Canadian government bonds wishes to advertise a new issue to prospective investors. The Administrator may:
A. do nothing
B. request approval of the advertisement from the Canadian government
C. require filing of the advertisement
D. refuse the advertisement
8. What is another term used to describe an “affiliated person”?
A. comptroller
B. insider
C. chairperson
D. associate
9. Which of the following survives the death of a defendant and/or plaintiff?
A. arrest warrants
B. subpoenas
C. civil liabilities
D. criminal liabilities
10. Any security for which a registration statement has been filed under the
Securities Act of 1933 in connection with the same offering may be registered by:
A. unification
B. filing
C. coordination
D. qualification
11. Every registration statement is effective for:
A. 1 year from its effective date
B. 2 years from its effective date
C. 5 years from its effective date
D. 10 years from its effective date
12. All of the following are exempt transactions EXCEPT:
A. isolated non-issuer transactions
B. transactions in corporate bonds
C. transactions by a trustee in bankruptcy
D. transactions effected by a bona-fide pledge
13. Which of the following are non-exempt securities?
I. investment contracts issued in connection with an employee savings plan, profit
sharing, pension, or stock purchase plan, if the Administrator is notified in writing
30 days before the inception of the plan
II. offerings of securities that are not federal covered securities
III.. non-traded securities of a cooperative operated as a non-profit entity
IV. securities issued by a railroad, common carrier, or public utility
A. I and III
B. II only
C. I and IV
D. I, III, and IV
14. Which of the following are issuers of exempt securities?
A. federal savings and loans
B. Canadian government or provinces
C. cooperatives
D. all of these choices
15. Payments made out of production from natural gas titles or leases may best be
described as:
A. non-issuer transactions
B. primary market transactions
C. underwriter transactions
D. issuer transactions
16. Which of the following conditions must be met for the Administrator to revokeor deny exemptions with respect to securities or transactions under the USA?
A. prior notice to all interested parties
B. opportunity for hearing
C. written findings of fact and conclusions of law
D. all of these choices
17. Which of the following are not true concerning private placements?
A. the seller must believe the investments are being received for investment purposesonly
B. other than institutional investors, no more than 10 investors within a 12-month period
C. investors pay commissions or fees
D. commissions or fees are payable only to registered broker-deal
18. Which of the following documents may be used with prospective investors to
gather indications of interest?
A. red herring
B. final prospectus
C. tombstone advertisement
D. summary prospectus
19. When are securities exempt from the anti-fraud provisions of the USA?
A. when it is an exempt security
B. when no sale occurs
C. never
D. when it is a private placement
20. Who has jurisdiction over securities transactions?
A. the Administrator of the state where the transaction took place
B. the Administrator of the state where the client lives
C. the state Administrator of the state where the broker-dealer keeps its place of business
D. all of these choices
21. The sale of a security to an insurer would be considered a/an?
A. insurance transaction
B. permissible transaction
C. non-exempt transaction
D. exempt transactions
22. Which of the following are applicable to both registration by coordination and
by qualification?
A. both may be used for any non-exempt security in any state
B. registration with the SEC must occur before both may be used
C. registration documents for both are filed only with the Administrator
D. both are used in interstate filings
23. What is the most encompassing definition of an exempt transaction under the
USA?
A. any non-issuer transaction of non-exempt securities
B. any non-issuer transaction of corporate bonds
C. any isolated non-issuer transaction, whether effected through a broker/dealer or not
D. any non-issuer transaction of mutual funds
24. Transactions by a broker-dealer effecting transactions in foreign bonds are:
A. exempt
B. non-exempt
C. illegal
D. none of the above
25. Which of the following is considered a sale?
A. disposition of a security for value
B. contract to sell or of a sale
C. warrant given with the purchase of a stock
D. all of these choices
26. Any attempt to buy or sell a security for value is defined as a/an:
A. sale
B. purchase
C. offer
D. bona-fide pledge
27. Under which of the following instances does an offer or sale not occur?
A. the security is being pledged as loan collateral
B. if the security is exchanged as part of a judicially ordered reorganization
C. the security is given as a gift and is non-assessable
D. all of these choices
28. When may the Administrator issue a stop order suspending the offer and sale of
a federal covered security?
I. the order is in the public interest
II. there is a failure to comply with any of the conditions for these securities under
the USA
III. at any point in time
IV. Never
A. I and II
B. I only
C. IV only
D. I and IV
29. George Johnson receives 500 shares of ABC Corporation common stock as a
gift from ABC Corporation. This gift is:
A. taxable
B. non-taxable
C. an offer and sale
D. exempt
30. When the cash values or return is based upon the performance of a separate
account, it would be considered a:
A. variable bond
B. security
C. universal life policy
D. term life policy
31. Mt. Healthy Consulting, Inc, the largest widget consulting enterprise in the
United States, would like to complete an IPO for the first time in their illustrious 70-
year history. They are registering their stock with the SEC. What are the two
methods of registration they may use with this state?
I. registration by filing
II. registration by coordination
III. registration by qualification
IV. registration by clarification
A. I and IV
B. II and IV
C. I and III
D. II and III
32. The Administrator may issue a stop order in denial, suspension, or revocation of
a registration for a multitude of reasons. What would be the best possible reason in
summary of this authority?
A. it is in this state’s interest
B. it is in the public’s interest
C. it is in the issuer’s interest
D. it is in the broker-dealer’s interest
33. Which of the following is considered to be an exempt security?
A. option contracts on bonds or stocks
B. commodity options
C. commodity futures
D. option contracts on commodity futures
34. Regarding registration of securities, documents previously filed under the USA
may be incorporated by reference into the registration statement as long as:
A. the documents were filed within 5 years of the registration statement
B. the documents are still accurate
C. the documents were filed by the issuer
D. all of these choices
35. All registration statements must specify which of the following?
A. the amount of securities to be offered in this state
B. the states in which a registration statement or similar document in connection with theoffering has been or is to be filed
C. any adverse order, judgment, or decree entered in connection with the offering by the
regulatory authorities in each state or by any court or the Securities and Exchange
Commission
D. all of these choices
36. How frequently may the Administrator require updates to a registration
statement and disclosures about the progress of an offering?
A. annually
B. semi-annually
C. quarterly
D. never
37. Fraudulent actions by a broker-dealer or investment adviser may occur:
A. in connection with a sale
B. in connection with an offer
C. in connection with a purchase
D. all of these choices
38. Which of the following must an investment adviser provide in writing to clients
before signing an advisory contract?
I. that the investment adviser shall not be compensated by sharing in the capital
gains or capital appreciation of the funds or any portion of the funds of the client
II. that no assignment of the contract may be made by the investment adviser
without the consent of the client
III. if the investment adviser is a partnership, that the client will be notified within a
reasonable time-frame of any changes to the partnership
IV. that the investment adviser shall not be compensated by fees based upon the net
value of the client’s funds
A. I and III
B. I and IV
C. I, II, and III
D. I, II, III, and IV
39. Before taking custody of client securities or funds, investment advisers must
notify:
A. the client
B. the Administrator
C. the NYSE
D. the SEC
40. SIPC coverage is not extended to which of the following?
A. stocks and bonds
B. exchange-traded funds
C. commodities
D. cash
41. When making investment recommendations, no person may make security salesor purchases based upon the use of:
A. material information
B. fundamental analysis
C. credible sources of information
D. material inside information
42. agent advises a client that a registered security is soon to be listed on an
exchange without having any knowledge of the factuality of such an event. The
agent has:
A. committed a violation o the Act
B. used effective sales techniques
C. given enough advanced notice to effect a sale
D. exercised prudent judgment
43. An investment adviser may effect transactions with discretionary authority:
A. when clients are on vacation out of the country
B. when clients are nervous about under-performing assets
C. when the adviser needs to meet monthly sales production goals
D. upon receipt of client’s signed written permission
44. What does the term “guaranteed” mean when used in reference to securities?
A. guaranteed as to payment of principal, interest, or dividends
B. backed by FDIC
C. backed by the full faith and credit of the government
D. backed by SIPC
45. Which of the following persons may not trade securities in their own accounts
while serving?
A. SEC commissioner
B. CFO of a publicly traded corporation
C. CEO of a publicly traded corporation
D. WTO commissioner
46. Which of the following are governed by the SEC?
I. regulation of insider transactions
II. regulations for individual investor protection
III. trading activity in client accounts, including short sales
IV. net capital requirements for broker-dealers
A. I and II
B. I and III
C. I and IV
D. I, II, III, and IV
47. It is unlawful for an investment adviser to take custody of a client’s funds or
securities unless:
A. a qualified custodian maintains the funds
B. proper notice is given to clients pertinent to the qualified custodian
C. account statements are sent to clients at least quarterly
D. all of these choices
48. Which of the following best defines an “affiliated person”?
A. any person directly or indirectly owning 5% or more of the outstanding voting
securities
B. any officer, director, partner, co-partner, or employee
C. any individual who possesses enough influence and control in a corporation as to be
able to alter the actions of the corporation
D. all of these choices
49. When an investment adviser wishes to effect agency cross transactions with
clients, the clients must:
A. provide written consent
B. pay commissions
C. pay lower bid prices
D. receive higher ask prices
50. Which of the following may act as a qualified custodian?
I. an FDIC insured bank
II. a broker-dealer
III. a foreign financial institution
IV. an investment adviser
A. I and II
B. I and III
C. I, II, and III
D. I, II, III, and IV
51. In respect to the shares of open-ended mutual funds, how may an investment
adviser take custody of client funds?
A. use the fund company’s bank in lieu of a qualified custodian
B. use the fund company’s transfer agent in lieu of a qualified custodian
C. use a qualified trustee in lieu of a qualified custodian
D. use a qualified title company in lieu of a qualified custodian
52. Investment advisers are required to provide to clients written disclosure of the
information contained in Part II of its form ADV:
A. not less than 48 hours prior to entering into any written or oral investment advisory
contract
B. at the time of entering into any investment advisory contract, if the client has a right to
terminate the contract without penalty within five business days after entering into the
contract
C. at no time when entering into an investment company contract
D. all of these choices
53. Unethical solicitation of investment company shares to clients may include whichof the following?
I. stating that mutual funds with 12b-1 fees of .25% but no sales charge are “noload”
II. disclosing all of the fees associated with the funds sale and management
III. not disclosing all breakpoints or manners of reduced sales charges
IV. not disclosing the qualifications of fund managers
A. I and II
B. I and III
C. I, II, and III
D. I, II, and IV
54. When must an agent furnish a final prospectus to a client in the purchase of anoffering?
A. at the time of the offering
B. at the time of the sale
C. before the sale
D. no later than the confirmation date of the sale
55. Investment advisers are required to maintain and enforce a written:
A code of ethics
B. code of business
C. code of transactions
D. code of principals
56. Jimmy Natbright is an investment adviser representative with signed
discretionary authority for his client, Alberto Gordo. Mr. Gordo is primarily an
income investor with a moderate risk tolerance. Jimmy notices price volatility on
dividend-paying REITs and decides to day-trade these REITs for Mr. Gordo. What
may the Administrator determine regarding Jimmy’s conduct?
A. excessive trading occurred
B. profitable trading occurred
C. churning occurred
D. nothing unethical occurred
57. Who is responsible for determining what information is material and should be
given to the client on a timely basis?
A. the agent
B. the broker-dealer
C. the issuer
D. the SEC
58. Fraudulent actions may occur:
A. only if a purchase occurs
B. only if a sale occurs
C. only with registered transactions
D. whether a purchase or sale occurs or not
59. How may clients of broker-dealers and investment advisers ensure that their
personal information will not be shared with non-affiliated third parties?
A. by opting out
B. by opting in
C. by signing off
D. by doing nothing
60. Which of the following material facts is not of consideration concerninginvestment decisions?
A. gossip on internet chat rooms
B. government regulations or industry changes
C. tax law or changes in competition
D. changes in ownership or management of an issue
61. Agents may borrow funds from or loan funds to clients under which of the
following conditions?
I. the agent’s broker-dealer has written procedures allowing the borrowing and
lending
II. the lending or borrowing is with a member of the agent’s immediate family
III. the client is a financial institution regularly engaged in the business of providing
credit, financing, or loans
IV. the lending arrangement is based on a business relationship outside of the
broker-customer relationship
A. I and III
B. II and III
C. I, II, and III
D. I, II, III, and IV
62. If an agent fails to sufficiently describe the risks associated with and the material
facts regarding securities sold to his clients, then he is:
A. selling away
B. giving the best advice possible
C. committing fraud
D. using discretionary authority
63. When is it permissible for agents to share in the gains or losses of clientaccounts?
A. with prior written approval by the client and the agent’s broker/dealer
B. with prior written approval by the client
C. never
D. with prior written approval by the agent’s supervisor
64. An individual investor with over $5 million available for investment purposes is
considered to be a:
A. registered investor
B. qualified investor
C. qualified investor
D. qualified purchaser
65. An agent obtains a written letter of authorization from a respected research
institute stating that certain securities have been approved by the SEC, and then
distributes the letter to clients. This action is a:
A. permitted action if allowed by the SEC Disclaimer Clause
B. violation of Regulation T of the Federal Reserve Board
C. criminal offense
D. permitted action only if the securities attorney is an SEC member
66. Who is responsible for determining what information is material and should be
disclosed to a client in order to make an informed investment decision?
A Securities Exchange Act of 1934
B. Insider Trading and Securities Fraud Enforcement Act of 1988
C. Investment Advisers Act of 1940
D. U.S. Senate
67. What are the criminal penalties associated with insider trading?
A. maximum of 10 years in prison
B. maximum personal fine of $1 million
C. maximum institutional fine of $2.5 million
D. all of these choices
68. Investment advisers must have procedures that expressly prohibit the use of
non-public inside information by all persons affiliated with the investment adviser.
Those procedures must be:
A. filed with the Administrator
B. filed with the SEC
C. written
D. filed with FINRA
69. Who is responsible for determining what information is material and should be
disclosed to a client in order to make an informed investment decision?
A. the Administrator
B. the SEC
C. FINRA
D. the agent
70. Which of the following actions would be exempt from the anti-fraud provisions
for investment advisers?
I. a newsletter advising subscribers when to buy or to sell volatile technology stocks
II. the receptionist of a mutual fund company gives a co-worker her stock picks
III. a broker-dealer advises a customer for a fee
IV. an investment adviser gives recommendations to clients for the purchase of
titanium and uranium
A. I only
B. III only
C. II and III
D. II and IV
71. Under what circumstances may an investment adviser share in the profits of anaccount subject to an investment advisory contract?
A. if the contract specifies that the compensation is based upon the total value of the account averaged over a specified period of time, or as of a definite date
B. if an adviser shares in the capital appreciation or gains of the client’s account in
proportion to each investment
C. if the contract specifies that gains shall be shared equally
D. if the contract is non-severable and specifies that all gains are shared equally
72. A “broker-dealer” is defined as:
A. any person engaged in the business of effecting transaction in securities for the account of others or for his own account
B. every business that buys and sells stocks and bonds
C. the middleman between agents and issuers
D. all investors who make a profit transacting securities
73. All of the following are not included in the definition of “broker-dealer”EXCEPT:
A. agent
B. issuer
C. bank
D. national discount stock brokerage company
74. A broker-dealer with an office outside of this state is not required to register inthis state when effecting transactions in this state exclusively with or through whichof the following?
I. the issuers of the securities involved in the transactions
II. other broker-dealers
III. banks, savings institutions, trust, or insurance or investment companies
IV. local investment club accounts
A. IV
B. I, II, and III
C. II and IV
D. I and III
75. An “agent” is defined as:
A. any individual other than a broker/dealer who represents a broker/dealer or issuer in effecting or attempting to effect purchase or sales of securities
B. any individual other than an issuer who represents a financial institution or bank in
attempting to sell its own securities
C. a financial adviser acting in a principal capacity as a dealer
D. a representative wearing a navy blue suit, fedora, and aviator glasses, wanting to
purchase or sell securities
76. All of the following would be considered “agents” EXCEPT:
A. representative of a broker-dealer specializing in initial public offerings (IPOs)
B. director of sales of an issuer
C. receptionist of a broker/dealer
D. trading desk operator of a broker-dealer
77. Which of the following are not considered “agents”?
I. an individual who represents an issuer in effecting a transaction in an exemptsecurity
II. an individual who represents an issuer in exempt transactions
III. an individual who represents a broker-dealer in non-exempt transactions
IV. an individual who represents a broker-dealer in effecting transactions in a nonexempt
security
A. I and II
B. II and IV
C. III and IV
D. I, II, III, and IV
78. Who of the following defines an “investment adviser”?
I. any person who is paid while engaging in the business of advising others, in anyform, as to the value of securities or as to the advisability of investing in securities
II. any person who is paid as part of a regular business for distributing orpublishing analyses or reports concerning securities
III. any other person who is paid for providing to others as an integral componentof other financially related services or who holds himself out as providing theforegoing investment advisory services to others for compensation
IV. any person who is paid for promoting himself as providing investment advisoryservices
A. II
B. I and IV
C. I and III
D. I, II, III, and IV
79. None of the following is an “investment adviser ” EXCEPT:
A. investment adviser representative
B. bank, savings institution, or trust company
C. publisher of any bona-fide media that does not recommend or give advice on the basisof the specific investment situation of each client
D. financial planner
80. As explained in the USA, any person that is a federal covered adviser is:
A. an investment adviser
B. a broker-dealer
C. an agent
D. NOT an investment adviser
81. All of the following define “investment adviser representative” under the
Uniform Securities Act EXCEPT:
A. any employee or associate of an investment adviser who makes investment
recommendations
B. any employee or associate of an investment adviser who manages client accounts or
portfolios
C. any employee or associate of an investment adviser who acts as a mail room clerk or janitor
D. any employee or associate of an investment adviser who solicits, offers, or negotiates
for the sale of investment advisory services
82. Chuck Lynch has an office in this state and manages client accounts for a federal
covered adviser. Chuck must register in this state as a/an:
A. agent
B. investment adviser representative
C. investment adviser
D. broker-dealer
83. Both investment advisers and investment adviser representatives must register
in this state according to which of the following Acts?
A. Unified Securities Act
B. Unanimous Securities Act
C. Ubiquitous Securities Act
D. Uniform Securities Act
84. Any broker-dealer who charges contractual annual fees for investment advice
would be considered a/an:
A. financial planner
B. investment adviser
C. financial consultant
D. investment consultant
85. It is not lawful for any person to transact business in this state as an investment
adviser or investment adviser representative unless:
I. he is registered in this state
II. he has no place of business in this state and his only clients in this state are
institutional investors and governmental agencies or instrumentalities
III. he has paid a sum of money to the proper officials
IV. he had no more than 5 non-institutional clients during the preceding 12-month
period
A. III only
B. I and IV
C. I only
D. I, II, and IV
86. Which of the following exemptions would allow an investment adviser to legallyoperate in this state with no place of business in this state and with only 2 noninstitutionalclients in this state during any 12 consecutive months?
A. de-maximus
B. statutory
C. de-minimus
D. personal
87. The minimum capital and bonding requirements by the Administrator for
broker-dealers are subject to the limitations of:
A. Uniform Securities Act
B. Securities Act of 1933
C. Securities Exchange Act of 1934
D. all of these choices
88. The minimum capital and bonding requirements by the Administrator for
investment advisers are subject to the limitations of:
A. Investment Company Act of 1940
B. Investment Advisers Act of 1940
C. federal government
D. Uniform Securities Act
89. The Administrator requires the posting of bonds by a broker-dealer or
investment adviser who:
I. has custody of client funds or securities
II. has discretionary authority over client funds or securities
III. has personal records of client funds or securities
IV. has an interest in the performance of client funds or securities
A. I and II
B. I and III
C. II and III
D. II and IV
90. Every registered broker-dealer and investment adviser must make and keep
records of all of the following records EXCEPT:
A. accounts
B. correspondence
C. memoranda
D. conversations
91. Investment advisers are required to maintain all records required by the
Administrator for period of at least:
A. 2 years
B. 5 years
C. 10 years
D. 15 years
92. Records required to be kept by investment advisers may be stored on all of thefollowing:
A. paper or hard copy
B. micrographic media
C. digital storage medium or system
D. all of these choices
93. Who must file financial reports with the Administrator?
A. broker/dealers
B. agents
C. issuers
D. non-issuers
94. How much time does a broker-dealer or investment adviser have to remedy late
payment of fees to the Administrator?
A. 5 days after receipt of the notice
B. 10 days after receipt of the notice
C. 21 days after receipt of the notice
D. 30 days after receipt of the notice
95. The Administrator may enter an order restricting a broker-dealer from
registering as an investment adviser based upon:
A. the broker/dealer’s lack of qualification as an investment adviser
B. the broker-dealer’s experience as a broker-dealer
C. the broker-dealer’s lack of knowledge
D. the broker-dealer’s lack of clients
96. The Administrator may not enter an order against a broker-dealer on the basisof the lack of qualification of any person other than:
I. the broker-dealer himself if he is an individual
II. affiliates of the broker-dealer
III. an agent of the broker-dealer
IV. administrative staff of the broker-dealer
A. I and II
B. I and III
C. I, II, and III
D. I, II, III, and IV
97. The Administrator may by order cancel a registration or application forregistration due to which of the following?
A. legal mental incompetence
B. death of the applicant
C. disappearance of the applicant
D. all of these choices
98. The Administrator must publish:
A. all rules and forms
B. all registration documents
C. all registered securities
D. all registered advisers
99. Every hearing in an administrative proceeding shall be public unless theAdministrator:
A. requests a private hearing with the SEC
B. receives an SEC order for a private hearing
C. grants a request joined in by all the respondents that the hearing be conducted privately
D. requests a private hearing with the US attorney general
100. Documents are considered filed with the Administrator:
A. upon receipt
B. 5 business days after receipt
C. 10 business days after receipt
D. 14 business days after receipt