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Question 1

True or False: The sale of securities to a pension plan is considered an exempt transaction under the USA.

Answer 1

True

Question 2

Registration by Filing (Notification) requires issuers to be in business at least _____ months preceding registration.

Answer 2

36

Question 3

An intra-state offering would use which method of state securities registration?

Answer 3

Qualification

Question 4

What method of state securities registration requires issuers to wait to hear from the Administrator before selling?

Answer 4

Qualification

Question 5

To use Filing (Notification) to register stock, the offering price must be at least $______ per share.

Answer 5

$5.00

Question 6

Registration by Filing (Notification) requires that the underwriting commission be no more than _____%.

Answer 6

10%

Question 7

Registration by Coordination has a minimum cooling-off period of _____ days.

Answer 7

10 days

Question 8

Which method of state securities registration would likely be used for an IPO being offered in several states?

Answer 8

Coordination

Question 9

Registration by Coordination requires issuers to meet requirements of the USA as well as what other Act?

Answer 9

The Securities Act of 1933

Question 10

An electronic system used to register investment advisers is called ____________________

Answer 10

Investment Adviser Registration Depository (IARD).

Question 11

True or False: A Consent to Service of Process is an example of an exculpatory clause.

Answer 11

False. Exculpatory clauses are waivers absolving agents from wrongdoing. The waivers are null and void under the USA.

Question 12

A surety bond may be required if an investment adviser has _____________ or __________ of client assets.

Answer 12

discretion or custody

Question 13

In place of a surety bond, the Administrator will accept a deposit of _______ or _____________.

Answer 13

cash or securities.

Question 14

True or False: A Consent to Service of Process must be filed by BDs, but not their agents.

Answer 14

False. A Consent to Service of Process is required of all registrants.

Question 15

True or False: A successor advisory firm must pay a new filing fee, but need not file a new application.

Answer 15

False. The successor firm must update its application, but not pay a new filing fee.

Question 16

The application for registration of an agent or IAR becomes effective in _____ days.

Answer 16

30

Question 17

The application for withdrawal of registration of an agent or IAR becomes effective in _____ days.

Answer 17

30

Question 18

BD records must be kept for at least ____ years.

Answer 18

3

Question 19

IA records must be kept for at least ____ years.

Answer 19

5 years.

Question 20

True or False: A state may require a registration fee from the issuer of a Nasdaq security.

Answer 20

False. Nasdaq securities are federal covered securities.

Question 21

True or False: A state may require notice filing by an issuer of an NYSE security.

Answer 21

True. Notice filing is the requirement to provide the state with the same information that was filed with the SEC.

Question 22

True or False: An Administrator may not require a sales report from the issuer of an OTC security.

Answer 22

False

Question 23

What form is used to notify Administrators that an IA is maintaining custody of client assets?

Answer 23

Form ADV

Question 24

What document, regularly provided to clients, will IAs use to notify clients of the location of their securities?

Answer 24

The client’s account statement

Question 25

Investment advisers with custody must have an annual audit done by a(n) ____________________.

Answer 25

independent CPA.

Question 26

If a BD's net capital falls below the required minimum, it must notify the Administrator within ___ business day(s).

Answer 26

1

Question 27

A balance sheet is provided with Form ADV if IAs require pre-paid fees of $_____ or more, ___ months or more in advance.

Answer 27

$500 or more, 6

Question 28

If an IA has custody or discretion, it must include a _________________ with their Form ADV and brochure.

Answer 28

balance sheet

Question 29

An IA's Brochure must have the same information that appears in what part of Form ADV?

Answer 29

Part II of Form ADV

Question 30

True or False: An agent whose client moves to a new state may not contact the client until registered in the new state.

Answer 30

False. The agent may engage in transactions with the client for 60 days if registration is pending in the new state.

Question 31

May an agent whose client is visiting another state sell securities to the client without being registered in the state?

Answer 31

Yes, provided the client is in the state temporarily.

Question 32

True or False: Canadian agents are not permitted to effect trades with existing Canadian clients temporarily in the U.S.

Answer 32

False. Provided the relationship with the client existed prior to entering the U.S., trades may be effected.

Question 33

An IAR has an office in State A and has 4 clients who reside in the state. Is the IAR required to register in State A?

Answer 33

Yes, since the IAR has an office in State A. The client number is not relevant because of the office location.

Question 34

An IAR of a federal covered adviser has an office in State B with 4 clients who live in State B. Where must he register?

Answer 34

He must register in State B since he has an office in the state. The number of clients is not relevant.

Question 35

An IAR has no place of business in State A, but has 6 or more individual clients in State A. Where must she register?

Answer 35

She must register in any state where she has 6 or more individual clients (even if she has no office in the state).

Question 36

An IAR of a federal covered adviser has no office in NY, but has 6 or more clients living in NY. Must he register in NY?

Answer 36

No. IARs of federal covered advisers are only required to register in states in which they have an office.

Question 37

An IAR of a state-registered IA has no office in NJ, but has 6 or more clients living in NJ. Must she register in NJ?

Answer 37

Yes. IARs of state-regulated IAs register where they have an office and where they have 6 or more individual clients.

Question 38

An agent whose registration has been revoked must be granted a hearing, if requested, within _____ days of the request.

Answer 38

15

Question 39

If an agent has withdrawn registration, the Administrator may still take action for ___ year(s) after the withdrawal.

Answer 39

1

Question 40

Define an investment contract (according to the Howey Test).

Answer 40

An investment of money, in a common enterprise, with expectation of a profit due to efforts of third-party management.

Question 41

A prospectus mailed by an agent in one state to a client in another state is considered an offer in which state(s)?

Answer 41

Both states

Question 42

True or False: A gift of assessable stock is considered both an offer and sale.

Answer 42

True

Question 43

True or False: A gift of non-assessable stock is considered both an offer and sale.

Answer 43

False

Question 44

Is the payment of a stock dividend considered an offer or sale?

Answer 44

No

Question 45

Is the conversion of a bond into stock considered an offer or sale?

Answer 45

No

Question 46

If shares of stock are freely given with the purchase of a bond, is this considered an offer and sale?

Answer 46

Yes

Question 47

True or False: An Administrator may issue a cease-and-desist order before a violation has occurred

Answer 47

True

Question 48

True or False: An Administrator may issue an injunction.

Answer 48

False. An injunction may only by issued by a court. (The administrator may request it)

Question 49

Under the Uniform Securities Act, the statute of limitations for fraud is ____ years.

Answer 49

5

Question 50

The statute of limitations for criminal violations of the Uniform Securities Act is ____ years.

Answer 50

5

Question 51

Statue of limitations for USA civil violations is ____ yrs. of occurrence or ____ yrs. of discovery, whichever is first.

Answer 51

3, 2

Question 52

Maximum criminal penalties under the USA are a $________ fine and/or ____ years in prison

Answer 52

$5,000 fine and/or 3 years in prison.

Question 53

May an Administrator enter other states to investigate potential violations that occurred in his own state?

Answer 53

Yes, the Administrator has broad inspectorial power, which stretches beyond his own state

Question 54

True or False: The Uniform Securities Act is exactly the same law in every state.

Answer 54

False. The USA is a model law, not the actual law of any state.

Question 55

_________________ is an organization consisting of state Administrators.

Answer 55

The North American Securities Administrators Association (NASAA)

Question 56

Define NASAA

Answer 56

The North American Securities Administrators Association

Question 57

True or False: Securities issued by registered investment companies are considered federal covered securities.

Answer 57

True

Question 58

True or False: Issuers of federal covered securities may be required to pay a registration fee to a state Administrator.

Answer 58

True

Question 59

True or False: Securities traded on the NYSE may be required to pay a registration fee to a state Administrator

Answer 59

False

Question 60

Administrative cease-and-desist orders may be appealed in a state court if application is made within _____ days.

Answer 60

60

Question 61

Next week ABC plans to announce its earnings. If ABC's CEO wants to sell some of her shares now, is the sale restricted?

Answer 61

Yes. Insiders are required to wait until an earnings report is released publicly before selling shares.

Question 62

After receiving an effective date, what information may an issuer change by amending its registration statement?

Answer 62

The number of shares being offered. A new registration is required to change offering price or underwriter compensation.

Question 63

The Telephone Consumer Protection Act (TCPA) allows calls from ________ to ________ local time of the called party.

Answer 63

8:00 a.m. to 9:00 p.m

Question 64

A BD located and licensed in Canada may contact what types of individuals in the U.S.?

Answer 64

Existing clients who are temporarily in the U.S.

Question 65

Identify 2 significant creations that are credited to the National Securities Markets Improvement Act (NSMIA).

Answer 65

Federal Covered Advisers and Federal Covered Securities

Question 66

Define NSMIA

Answer 66

National Securities Markets Improvement Act

Question 67

The ________________ is responsible for administering and enforcing the securities laws of a state.

Answer 67

Administrator

Question 68

According to the USA, who is included under the term "person?"

Answer 68

Any legal entity, including individuals (clients/agents/IARs), BDs, IAs, issuers, corporations, and partnerships

Question 69

In state law, individuals representing BDs in effecting securities transactions are referred to as ________.

Answer 69

agents.

Question 70

True or False: In state law, individuals representing issuers in effecting securities trades are ALWAYS deemed agents.

Answer 70

False. Individuals are not deemed agents if representing issuers of exempt securities or effecting exempt transactions.

Question 71

What restrictions exist in describing a fund as no-load?

Answer 71

It may have no front-end or deferred sales charge, and a 12b-1 fee may not exceed .25%.

Question 72

List some of the exclusions from the definition of a BD.

Answer 72

Agent, issuer, bank, or a BD with no office in the state that only deals with institutions or its existing clients

Question 73

What type of advice may lawyers, accountants, teachers and engineers provide and not be considered an IA?

Answer 73

Advice that is incidental to their profession. If a separate fee is charged for the advice, the exclusion is lost.

Question 74

List the 4 categories of professionals who are excluded from the IA definition.

Answer 74

Lawyers, accountants, teachers, and engineers (remember L A T E)

Question 75

An ________ is any attempt or solicitation to acquire or dispose of a security for value.

Answer 75

offer

Question 76

A _______ is any agreement or contract to dispose of a security for value.

Answer 76

sale

Question 77

Regarding federal covered securities, may an Administrator cancel a registration?

Answer 77

No

Question 78

Regarding federal covered securities, may an Administrator prohibit the sale of the security in his state?

Answer 78

No

Question 79

Regarding federal covered securities, may an Administrator require the issuer to complete the notice filing?

Answer 79

Yes. Notice filing is the process by which information filed with the SEC is also filed/shared with the Administrator.

Question 80

True or False: Registration may be denied due to ANY misdemeanor convictions.

Answer 80

False. Registration may be denied for ANY felony conviction or securities-related misdemeanor conviction.

Question 81

How may the failure to pay the proper filing fee be corrected?

Answer 81

By paying the appropriate amount

Question 82

May the Administrator set minimum net capital requirements for BDs?

Answer 82

Yes, but the requirement on BDs may not exceed the federal (SEC) requirement.

Question 83

Is there a limit to the amount of net capital the Administrator may require of a BD?

Answer 83

Yes. The Administrator may not set a requirement that exceeds the federal (SEC) requirement.

Question 84

May the Administrator set minimum net worth requirements for IAs?

Answer 84

Yes, but no state may impose a requirement that exceeds the requirement of the IA's home state.

Question 85

May federal covered adviser's books and records be subject to inspection by an Administrator?

Answer 85

Yes

Question 86

True or False: An administrator may cancel a registration without the opportunity for a hearing.

Answer 86

True. Cancellation may be due to the death of an agent, or a firm no longer being in business.

Question 87

If a cease-and-desist order is issued against an agent, the agent must file an appeal within _____ days.

Answer 87

60

Question 88

If an appeal has been filed by an agent, does the appeal lift (suspend) the order?

Answer 88

No

Question 89

True or False: A client who receives a letter of rescission after selling the security may still initiate civil action.

Answer 89

True

Question 90

If an offer is made using television or radio, where is the offer considered to have been made?

Answer 90

In the state in which the broadcast or telecast originated

Question 91

If an offer is made using the mail, where is the offer considered to have been made?

Answer 91

In the state from which it originated and the state to which it is directed

Question 92

True or False: Offers made in a newspaper are deemed to have been made in any state in which the paper is circulated.

Answer 92

False. With newspapers, the offer is only considered to be made in the state in which it is published.

Question 93

With newspaper offers, no offer is made if more than __________ of the circulation is outside of the publishing state.

Answer 93

two-thirds

Question 94

As it applies to persons and securities, what does the term "exemption" mean in the USA?

Answer 94

Exemption signifies that a person or security is not subject to registration under the USA.

Question 95

As it applies to a BD or IA, what does the term "exclusion" mean in the USA?

Answer 95

Exclusion signifies that a person does not meet the definition of a BD or IA in the state.

Question 96

A securities firm that executes trades for its own account or the accounts of others is deemed a _______________.

Answer 96

broker-dealer (BD).

Question 97

Who manages accounts, solicits services, or makes recommendations on behalf of a registered investment adviser?

Answer 97

An investment adviser representative (IAR)

Question 98

What are the 3 components that must be met for a firm to be defined as an IA?

Answer 98

1) Provide advice regarding securities, 2) Do so as a business 3) Receive specific compensation (the ABC test)

Question 99

A _________ bond is posted to cover the potential costs of legal action taken against certain persons.

Answer 99

surety

Question 100

An individual who represents an issuer in selling registered, non-exempt securities for compensation is an ________.

Answer 100

agent.