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Series 63 > Flashcard 1 > Flashcards

Flashcard 1

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Series 63 flashcards
1
Q

Does SIPC protect separate customers or separate accounts?

A

Separate customers. A customer with both a cash and margin account with a BD would be covered once.

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2
Q

True or False: Jim’s joint account with his wife is considered a separate customer by SIPC.

A

True. E.g. Jim’s cash and margin account are combined for coverage, but Jim’s joint account with his spouse is separate.

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3
Q

If a BD goes bankrupt, what happens to securities registered in the customer’s name?

A

They are returned to the customer without regard to SIPC limitations.

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4
Q

The Securities Act of 1933 regulates _____________.

A

new issues. (The primary market)

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5
Q

What is the primary purpose of the Securities Act of 1933?

A

Provide investors with full and fair disclosure regarding new issues (prospectus)

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6
Q

True or False: The SEC judges an offering’s investment merit and provides approval.

A

False

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7
Q

List the securities that are exempt from registration.

A

Government/municipal bonds, commercial paper, bankers’ acceptances, bank issues, non-profit and small business issues

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8
Q

Though some securities are exempt from registration, nothing is exempt from the ____________ provisions of the Act.

A

anti-fraud

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9
Q

What are the justifiable reasons for denying an individual’s registration?

A

Conviction for any felony or securities-related misdemeanor within the last 10 years

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10
Q

True or False: An American Depositary Receipt (ADR) is a security.

A

True

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11
Q

Is an option on a commodity futures contract a security?

A

Yes. The futures contract is not, but the option is a security. Options could be based on an equity, index, or currency.

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12
Q

Would an interest in a real estate condominium development be considered a security?

A

Yes

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13
Q

True or False: Precious metals are not considered securities.

A

True

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14
Q

Is a voting trust certificate a security?

A

Yes

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15
Q

Is a Keogh plan considered a security?

A

No, but Keogh plan participation is considered a security.

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16
Q

Is an investment interest in livestock considered a security?

A

Yes

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17
Q

Is a certificate of interest in a mining lease a security?

A

Yes

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18
Q

Is a fixed annuity a security?

A

No, but variable contracts (e.g., variable annuities or variable life insurance) are considered securities.

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19
Q

Is an endowment life insurance policy a security?

A

No

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20
Q

Is a variable life insurance policy a security?

A

Yes, but a term or universal life insurance policy is not considered a security

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21
Q

Is a universal life insurance policy considered a security?

A

No

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22
Q

Is Keogh plan participation considered a security?

A

Yes, but the Keogh plan itself is not a security.

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23
Q

Is a 401(k) plan considered a security?

A

No

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24
Q

Is treasury stock considered a security?

A

Yes. Treasury stock is stock that was issued and subsequently repurchased by the company.

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25
Q

Is a debenture considered a security?

A

Yes. A debenture is an unsecured corporate bond.

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26
Q

Is a preemptive right considered a security?

A

Yes

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27
Q

Is a warrant a security?

A

Yes. Warrants are financial instruments that allow investors to acquire stock at a preset price.

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28
Q

Is a preorganization certificate considered a security?

A

Yes

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29
Q

Is an IRA account considered a security?

A

No

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30
Q

Is a futures contract considered a security?

A

No, but an option on a futures contract is a security.

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31
Q

Is a multi-level distributorship considered a security?

A

Yes

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32
Q

Is a limited partnership a security?

A

Yes

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33
Q

Is an interest in oil and gas drilling program considered a security

A

Yes

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34
Q

Is a whiskey warehouse receipt considered a security?

A

Yes

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35
Q

Is a firm that has an office in a state, but only deals with institutional clients in the state, considered a BD?

A

Yes, because the firm established an office in the state.

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36
Q

Is a bank whose trust department occasionally executes securities transactions considered a BD?

A

No. Banks are excluded from the BD definition.

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37
Q

If a corporation raises capital by selling new shares of its stock to the public, is it considered a BD?

A

No. The corporation is an issuer and issuers are excluded from the BD definition.

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38
Q

Is a bank holding company that occasionally executes securities transactions considered a BD?

A

Yes. Bank holding companies are not excluded from the BD definition.

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39
Q

Is a firm with no office in a state that only deals with institutional clients in the state considered a BD?

A

No. The firm is excluded from the BD definition.

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40
Q

Is a firm with no office in Ohio that effects trades in Ohio with 6 clients residing in Iowa considered a BD?

A

No. The firm is excluded from the BD definition in OH (no office in OH and only deals with existing Iowa clients).

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41
Q

Is an individual who represents a BD in the sale of Treasury bonds considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

42
Q

Is a sales assistant for a BD who accepts unsolicited orders from clients considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

43
Q

Is an individual who represents an issuer in the sale of municipal bonds considered an agent?

A

No, since the individual is involved in the sale of exempt securities.

44
Q

Is an individual who represents the issuer of a private placement considered an agent?

A

No, since the individual is involved in an exempt transaction.

45
Q

Is an individual who represents a BD in the sale of municipal bond considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

46
Q

Is an individual who represents the issuer in the sale of Treasury bonds considered an agent?

A

No, since the individual is involved in the sale of exempt securities.

47
Q

Is an individual who represents a BD in the sale of a private placement considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

48
Q

Is an individual who represents a bank in the sale of the bank’s stock considered an agent?

A

No, since the individual is representing the issuer in the sale of exempt securities.

49
Q

Is an individual who represents a BD in the sale of a bank’s stock considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

50
Q

Is an individual who represents a BD in the sale of stock to a bank considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

51
Q

Is an individual who represents an issuer in the sale of stock to a bank considered an agent?

A

No, since the individual is involved in an exempt transaction.

52
Q

Is an individual who represents an issuer in the sale of the issuer’s stock to its underwriter considered an agent?

A

No, since the individual is involved in an exempt transaction.

53
Q

Is Jim an agent if he works in ABC’s retirement dept. and, once a year, places ABC stock in employees’ accounts?

A

No, Jim is representing the issuer in an exempt transaction.

54
Q

Is a certified public accountant who provides tax advice considered an IA under the USA?

A

No, CPAs are excluded from the IA definition.

55
Q

True or False: A publisher of a financial magazine is considered an IA under the USA.

A

False. Publishers of newspapers/magazines are excluded from the IA definition.

56
Q

True or False: A BD making recommendations about investing in various securities is an IA under the USA.

A

False. Since the BD is not charging a fee for the advice, it is excluded from the IA definition.

57
Q

True or False: According to the USA, a BD providing asset allocation plans to its clients for a fee is an IA.

A

True. Since the BD is receiving specific compensation for its advice, it is considered an IA.

58
Q

True or False: The USA defines a bank providing investment recommendations to its clients as an IA.

A

False. Banks are excluded from the IA definition.

59
Q

True or False: A firm producing investment research for BDs to deliver to clients is considered an IA under the USA.

A

True. Since advice is being provided, as a business, and compensation is received, the ABC test is met.

60
Q

True or False: The USA classifies an agent of a BD who also manages wrap accounts as an IA.

A

No. IAs are firms, not individuals.

61
Q

Is an adviser to a mutual fund considered an IA under the USA?

A

No, mutual funds advisers are federally covered and are excluded from the IA definition at the state level.

62
Q

Since ABC Advisers has $32 million under management, it must register with the ______.

A

SEC.

63
Q

True or False: An adviser to a mutual fund would register in the state where the fund is domiciled.

A

False. The IA must be registered with the SEC, not a state.

64
Q

True or False: The CEO of an advisory firm who establishes investment policy for the firm must register as an IA.

A

False. The CEO would be considered an IAR, not an IA.

65
Q

Is an employee of a securities firm who manages accounts for a fee considered an IAR?Is an employee of a securities firm who manages accounts for a fee considered an IAR?

A

Yes

66
Q

Is an employee of a BD who solicits new customers for an IA considered an IAR?

A

Yes. Anyone who solicits investment advisory service is considered an IAR.

67
Q

True or False: An agent for a BD who solicits client trades would not be considered an IAR under the USA.

A

True. There is no indication that the agent is managing accounts and charging a fee

68
Q

Individuals employed by an IA who only perform ____________________ duties are excluded from registration under the USA.

A

clerical/ministerial

69
Q

True or False: The manager of an IA’s human resources department is considered an IAR.

A

No. The manager’s responsibilities do not include providing advice about securities or managing accounts.

70
Q

An individual employed by an IA to manage the research dept. would be required to register as an ______ under the USA.

A

IAR

71
Q

Is an employee of an IA who answers the telephone and does clerical work considered an IAR?

A

no

72
Q

True or False: Securities issued by provinces and municipalities of Canada are subject to state registration.

A

False. Securities issued by Canadian provinces or municipalities are exempt from registration.

73
Q

Are bonds issued by the City of New York exempt from state registration?

A

Yes

74
Q

True or False: Securities issued by the states and municipalities of Mexico are exempt from registration under the USA.

A

True. An exemption is provided to securities issued by foreign governments with whom the U.S. has diplomatic relations.

75
Q

Securities issued by any government with whom the U.S. has _____________ relations are exempt from state registration.

A

diplomatic

76
Q

True or False: Securities issued by the U.S. Treasury and U.S. agencies are deemed exempt securities under the USA.

A

True

77
Q

________ issued by insurance companies are exempt from state registration.

A

Bonds

78
Q

List some securities that are considered federal covered and exempt from registration.

A

Those listed on national exchanges (NYSE, AMEX, NASDAQ) and investment company securities (e.g., mutual fund shares)

79
Q

True or False: Securities listed on the AMEX are exempt from state registration

A

True

80
Q

True or False: Securities of a Canadian company, but listed on the NYSE, are exempt from state registration.

A

True

81
Q

Are bonds issued by a charitable organization subject to state registration?

A

No. Securities issued by non-profit organizations are exempt from registration.

82
Q

What criteria must be met for commercial paper to be exempt from registration?

A

A 270-day maximum life, minimum denomination of $50,000, rated in one of the top-three categories according to an NRSRO

83
Q

An executor of an estate sells a block of securities that are not registered. Is this a violation?

A

No. This is an example of an exempt transaction.

84
Q

Would securities that are traded on the Toronto Stock Exchange be subject to state registration requirements?

A

No. These secondary market transactions are considered exempt from registration according to the USA.

85
Q

True or False: Bankers’ Acceptances rated AAA, maturing in 6-months, and issued in $25,000 denominations are exempt.

A

False. Because the BAs were not issued in at least $50,000 denominations, registration is required.

86
Q

Is a private placement defined as an exempt transaction or as an exempt security under the USA?

A

Exempt transaction

87
Q

Under the USA, private placements are exempt if securities are offered to ____ or fewer retail clients over ____ months.

A

10, 12 months

88
Q

What does the USA consider a security issued by an investment company that is registered under the Inv. Co. Act of 1940?

A

The securities are considered federal covered.

89
Q

True or False: Agents selling unregistered, non-exempt securities to banks and trust companies are violating the USA.

A

False. Transactions with banks and trust companies are considered exempt transactions.

90
Q

If an NYSE stock trades in the secondary market, does the USA consider it an exempt security or exempt transaction?

A

Exempt security

91
Q

If a Nasdaq stock trades in the secondary market, does the USA consider it an exempt security or exempt transaction?

A

Exempt security

92
Q

Are securities traded on the OTCBB or the Pink Sheets exempt?

A

No

93
Q

True or False: Bonds issued by a railroad are exempt from state registration.

A

True. Securities issued by a railroad, common carrier, or public utility are exempt at the state level.

94
Q

Under the USA, is stock issued by a telephone company an exempt security or an exempt transaction?

A

Securities issued by public utilities are considered exempt securities.

95
Q

Are securities issued by a software company exempt from state registration?

A

No

96
Q

True or False: According to the USA, debt issued by a fraternal organization would NOT be considered exempt.

A

False. Securities issued by non-profit organizations are exempt from state registration.

97
Q

Non-issuer trading of securities subject to reporting requirements of the Act of 1934 are _________ transactions.

A

exempt

98
Q

True or False: Occasional, secondary market transactions in an OTCBB stock are considered exempt transactions.

A

False. Only non-recurring secondary market transactions are considered exempt transactions.

99
Q

Is an isolated, non-recurring, non-issuer transaction in OTCBB or Pink Sheets stock subject to registration?

A

No. It is considered an exempt transaction.

100
Q

Is an unsolicited, non-issuer transaction in an OTC stock exempt from state registration?

A

Yes, because it is unsolicited.

Series 63 (4 decks)

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