Chapter 4 Part 3

Question 1

selling away

Answer 1

If an agent wishes to sell securities (or other types of financial instruments) outside the normal course of his employment

Question 2

selling away The agent must first obtain

Answer 2

“his firm’s
written permission. If the firm approves of the arrangement, the agent’s activities must then be recorded on the books and records of the firm, and the firm then becomes responsible for
supervising the transactions”

Question 3

The only person allowed to compensate an agent of a broker-dealer for a securities transaction is the

Answer 3

agent’s employer

Question 4

Securities professionals arc required to follow all

Answer 4

lawful client requests in servicing their accounts

Question 5

When a client indicates a desire to purchase, sell, transfer, or close an account, the agent has an obligation to

Answer 5

execute the client’s instructions properly in a timely manner

Question 6

When an agent solicits a customer, the agent and his broker-dealer have the responsibility to recommend securities that are both

Answer 6

suitable and in cmnpliance with the provisions of the Uniform Securities Act

Question 7

in cmnpliance with the provisions of the Uniform Securities Act would include

Answer 7

confirming that the security is registered properly in the state, if the security is nonexempt

Question 8

An agent would commit a prohibited sales practice if she

Answer 8

solicited a sale of an unregistered, nonexempt security-Le., if she solicited the sale of a security that is required to be registered but is not

Question 9

if a client places an unsolicited order for unregistered, nonexempt securities, the transaction may be

Answer 9

completed. The Administrator may require a signed acknowledgement from the client that the order was unsolicited

Question 10

Every customer purchasing a new issue must receive a copy of the final prospectus by the date the

Answer 10

“transaction is confirmed. This requirement may also be fulfilled by giving the client a written or
electronic copy of the preliminary prospectus and an additional docun1ent that, together, contain all the information found in the final prospectus. The broker-dealer that sells the security to the client is responsible for making sure that the client receives all necessary documents”

Question 11

When involved in an initial public offering, a broker-dealer must always make a

Answer 11

“genuine (bona fide)
public offering of all securities that were allotted to it as an underwriter or member of a selling group. When presented with a customer order, it is considered an unethical sales practice to withhold the sale of these securities”

Question 12

A broker-dealer that is affiliated with or controlled by the issuer of any security must disclose this

Answer 12

relationship to the client before the client agrees to buy or sell the security. The initial disclosure of this relationship may be done verbally, provided the firm supplies written disclosure no later than the date on which the transaction is completed

Question 13

Broker-dealers may require customers to pay for their securities purchases by the

Answer 13

settlement date (T + 3). Customers are entitled to the same prompt treatment by their broker-dealer. Therefore, firms are not allowed to delay delivery of securities purchased by a client, delay payment to a client for securities sold in their account, or delay payment of funds that a client has available in his account (free credit balance)

Question 14

When quoting prices in the marketplace, brnker-dealers have an obligation to honor

Answer 14

their quotes

Question 15

Transactions must be executed at

Answer 15

“contemporaneous prices or at prices that are reasonably related
to the current market price. Quoting prices that are better than the market, and then adding an
unreasonable commission or markup, is considered a violation. Remember, if a firm states that a security is being offered at its current market price, it must have reasonable grounds for making this statement”

Question 16

When a client gives instructions for a securities transaction, he must state whether to

Answer 16

“buy or sell,
name the specific security to buy or sell, and specify the quantity he would like to buy or sell. If the client provides these three important components an order may be accepted without requiring written authorization from the customer”

Question 17

If a broker-dealer or agent is required to determine whether to buy or sell, or chooses the specific security, or the amount to be bought or sold, the broker-dealer or agent must have

Answer 17

written discretionary authority over a client’s account. Without written authmity from the client, executing the transaction is prohibited

Question 18

If a broker-dealer or agent does not have discretionary authorization in writing, the broker-dealer or agent may exercise judgment only as

Answer 18

to the time and price of the order

Question 19

This verbal permission is called a

Answer 19

not-held order and may only be exercised for the day