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Series 63 > Incorrect Answer Feedback > Flashcards

Incorrect Answer Feedback Flashcards

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Series 63 flashcards
1
Q

The maximum conviction for violating the Uniform Securities Act is a jail sentence of ____ years and a fine of ______

A

3 years and $5000 per violation

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2
Q

In order to give advise to an employee benefits plan outside of your state of registration, the plan must have at least ________ in AUM

A

$1m

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3
Q

Pending lawsuits are required on Form ADV Part 2 T/F

A

False, they are not required

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4
Q

Unsolicited orders are considered ____ transactions

A

Exempt

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5
Q

An administrator, when suspecting that a violation has occurred or is about to occur, can

A
  • issue a cease and desist, with or without a prior hearing
  • bring action to obtain an injunction
  • seek a court order requiring the alleged violator to make restitution with other
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6
Q

Savings and loans associations organized under _____ law can issue exempt securities, while savings and loans under ______ law can only issue exempt securities if authorized to do so in that state

A

federal , state

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7
Q

Does the state administrator ever approve securities?

A

NO

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8
Q

Are customer complaints required to be submitted to the state Administrator?

A

NO, only to principal at firm

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9
Q

An officer of an issuer who sells the issuer’s nonexempt securities to the public is considered an agent and must register. T/F

A

True

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10
Q

An officer of an issuer who sells the issuer’s securities to employees without receiving compensation is considered an agent and must register. T/F

A

False, not if to employees and no comp

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11
Q

There is no time limit associated with a cease and desist order. T/F

A

True, no time limit

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12
Q

An IA is only required to disclose his research sources to a client if they use the research of a _______ as their presentation to the client

A

3rd party research as the presentation to a client

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13
Q

Securities issued by a federal savings and loan are exempt under the USA. T/F

A

True

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14
Q

Securities issue by a bank are exempt under the USA. T/F

A

True

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15
Q

Securities issued by a bank holding company are exempt under the USA. T/F

A

False

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16
Q

A muni is federally covered if sold outside of the state, if sold in the state it is _____ federally covered

A

NOT

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17
Q

You may split commissions as long as you get the proper written approval. T/F

A

True and must also be a registered agent

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18
Q

A BD operating on the premise of a bank would have to make certain disclosures in an advertisement unless it was _________

A

a radio spot of 30 seconds or less

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19
Q

A private placement under the USA is considered exempt when directed at no more than ______ within _______

A

10 non-institutional investors within 12 months

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20
Q

The Administrator may subpoena witnesses or documents. T/F

A

True

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21
Q

A pension fund manager who manages more than _______ is eligible to register with the SEC.

A

$200m AUM

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22
Q

A solicitation is considered to have occurred even if the client ________

A

does not act on the solicitation

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23
Q

Assignment of a majority interest in an IA company’s stock is considered to be the same as assignment of client _____

A

contracts. this is prohibited

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24
Q

Changes in the location of customer assets held in custody must be reported ______

A

promptly

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25
Q

The NSMIA preempts ______ registration of covered securities.

A

State. State admins may not impose registration requirements on securities that are subject to federal regulation

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26
Q

Registration with multiple BDs is permitted if the BDs are _________ or an ________ is made

A

if BDs are affiliated or under indirect common ownership, or an exception is made by the Administrator

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27
Q

The administrator informs the IA/Agent when his/her registration is effective. T/F

A

False. The Admin does not have any contact with an IA or agent, the firm will tell them once effective

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28
Q

Past performance is not required in a client contract. T/F

A

True

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29
Q

An agent can be asked to post a surety bond. T/F

A

True. Agents, BDs and IAs can be asked to post surety bonds. BDs and IAs also have net worth requirements

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30
Q

Some states prohibit registration with multiple ________

A

broker dealers

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31
Q

There are only three non “persons” for the purposes of the exam:

A

people who are dead, incompetent or minors. All other individuals, entities, corporations, etc are considered people. It is a very very broad definition

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32
Q

A BD cannot also be a(n) ________

A

agent

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33
Q

Agents _____ share in the profit/losses of a customer account while IAs __________

A

Agents can share, IAs cannot share

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34
Q

Minimum capital requirements (net worth requirements) can be held for ______ & _________

A

BDs and IAs, but not agents or IARs

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35
Q

An accusation of law violations is ground for suspending an agent’s registration. T/F

A

False. Cannot suspend based solely on an accusation. Can suspend for convictions, injunctions and lack of supervision

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36
Q

A gift of stock (or a security) as a bonus that comes along with a purchase is considered ______

A

an offer or a sale. counts as a purchase if it comes as a bonus to a purchase.

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37
Q

Stock splits, bona fide gifts and bona fide pledges or loans made with no purpose of evading the USA are ___________

A

not considered sales or offers. if trying to evade the act then yes, would be considered sale or offer

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38
Q

An agent may determine _______ without discretionary authority, but may not change the ___________

A

price and timing without discretionary authority, but cannot change the amount, type of security, etc that the customer instructed

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39
Q

The term guaranteed can refer to ____, _____ or _____

A

principal, interest or dividends

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40
Q

The Admin can define practices as unethical even if they are not included in the USA. T/F

A

True, they have authority to do so and violating the Admin ethical rules are prohibited under the USA

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41
Q

The consent to service of process is filed with the original application only, and then becomes a permanent part of renewal applications. T/F

A

True, only needs to be filed with original application.

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42
Q

The consent to service of process allows the Admin to ____________

A

exercise the power of attorney on behalf of the registrant

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43
Q

IARs are _____ automatically registered when they become employed by an IA

A

NOT, they have to file for registration, pay the fee and consent to service of process

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44
Q

Can you compare a money market fund to a savings fund?

A

NO, expressly prohibited

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45
Q

Is an IA specifically excluded from the definition of a BD?

A

NO, they could also have to be registered as a BD

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46
Q

Is a firm’s research considered to be insider information or nonpublic information? Could you contact a client about recently published research even if it had not been disclosed to the public yet?

A

Yes you could. Research by the firm is not considered inside or nonpublic information and is fine to share immediately.

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47
Q

For an agent to share in the p&l of a customer account, must have written approval from client and the BD. Is there a requirement for how long the customer has had the account??

A

NO, there is no time limit for the account in order for the agent to share in the p&l

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48
Q

Can an agent have custody over client assets? Can they have discretion?

A

They CANNOT have custody but they CAN have discretion (if have discretion, may be required to post a surety bond)

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49
Q

An Admin may start an investigation before a violation has occurred and can subpoena witnesses living outside the state. T/F

A

True

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50
Q

Advice from an IA or IAR may be given ______ or ______

A

written or orally.

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51
Q

When an agent resigns from one BD and goes to work for another, who must inform the Admin of the change?

A

Both BDs and the Agent

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52
Q

How long does a registered person have to appeal any disciplinary findings by the state Admin?

A

60 days

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53
Q

A consent to service to process (which gives Admin power of attorney) also means that a registrant will be bound by any legal action or subpoena served on the Admin as if ________

A

it had been served on the registrant

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54
Q

A consent to service of process is NOT required for renewal applications. T/F

A

TRUE, exam will try to trip you up on this point by including it in an answer choice where it is not needed

55
Q

Does the Admin approve custodial accounts?

A

NO

56
Q

Unless there is a specific exception, fees for an IA based on a share of _______ in an account are prohibited

A

capital gains or losses

57
Q

An Admin, at the request of a registrant, can hold ________

A

private hearings, but the registrant cannot demand one

58
Q

Registration for a successor firm may be made even if the firm is not ______ when the registration is filed

A

in existence

59
Q

Two agents of a BD work together in soliciting business and agree to split commissions. Is this permitted?

A

Yes, no need to audit their financials

60
Q

Private placements are exempt securities. T/F

A

FALSE, they are exempt TRANSACTIONS. Exam will throw this one in the mix on an exempt securities question

61
Q

Even if all clients are exempt, an IA or IAR (even if federally covered) needs to register in a state where it has any ______

A

place of business

62
Q

A muni is a federally covered security unless sold where only where?

A

In its own state

63
Q

Does the actual sale of a security for value constitute an offer to sell?

A

NO, this constitutes an actual sale (as do contracts of sale, contracts to sell, or any disposition of a security for value)

64
Q

A federally covered security that wants to register in an individual state would do so by what process?

A

Notice filing

65
Q

An Admin from any state where an offer is _____, _____ or _____ has jurisdiction over that offer

A

made, directed or accepted

66
Q

Can an agent effect a transaction not recorded on the BDs books with advance written approval from the BD?

A

Yes. If no approval it is considered selling away

67
Q

An agent cannot borrow money from a client unless that client is in the ___________

A

business of lending money

68
Q

An IA or IAR is not permitted to borrow money from a client unless that client is:

A
  • a BD
  • an affiliate of the IA
  • a lending institution
69
Q

An IA or IAR may not lend money to a client unless:

A
  • the firm is a lending institution

- is an affiliate of the IA

70
Q

Agents may not borrow money or loan money to customers. Only exception to borrow money is if they borrow money from

A
  • a lending institution that is also a client
71
Q

BDs are not prohibited from _____ or ______ to/from clients

A

lending or borrowing, but must comply with margin and lending rules

72
Q

A BD does not receive comp for investment advise but one of their agents does on the side. Who needs to register with the Admin as an investment adviser?

A

Just the agent, the BD does not have to do this unless the firm receives comp for advise

73
Q

If an IAR leaves a state registered IA, does the IA need to notify the Admin? What is the IA is federally covered, who informs Admin in that case?

A

In the case of a state registered, IA, the IA informs the Admin. If federally covered, it is responsibility of the IAR to inform the Admin

74
Q

If an IA has custody over client assets, they must arrange for a _______ annually by an __________

A

must arrange for a surprise audit annually by an independent advisor

75
Q

As long as there are no more than _____ subscribers to a pre-organization certificate, the transaction is _____

A

as long as no more than 10 subscribers, the transaction is exempt. Also requires that no subscribers can pay any consideration and no commission was paid.

76
Q

Are the solicitation of tender offers by corporations or exchange of shares in corporate reorgs considered sales?

A

NO

77
Q

Gifts, whether legal or not, are not considered an offer. T/F

A

True

78
Q

An IAR cannot earn commissions on the sales of recommended securities unless registered as a(n) ______

A

agent

79
Q

The three requirements for a preorganization subscription to qualify as exempt are:

A
  • no commission may be paid for soliciting potential subscribers
  • there may be no more than 10 subscribers
  • no payment may be made by any subscriber
80
Q

An offer is NOT made when a newspaper is circulated but not _______ in the state, or if it is published in the state but has more than _______ of its circulation outside of the state

A

published, more than 2/3 of its circulation outside the state

81
Q

Intrastate offerings would have to register using ________ filing

A

qualification

82
Q

Open-end investment company shares would be filed using ________ filing

A

notice

83
Q

Insolvency is a cause to _______ an agent’s license

A

revoke

84
Q

Agents must be registered in every state where they _____ or _____ securities

A

offer or sell

85
Q

A transaction between a corporation and its shareholders is considered exempt if no _________

A

consideration is paid

86
Q

An Admin may delegate an officer to _______

A

serve subpoenas

87
Q

If a client goes off to college for a year (and doesn’t have to change his state of residence), an agent may conduct business with that person __________

A

as normal

88
Q

Does the Admin have the power to impose fines for violations of the USA?

A

NO, the courts do

89
Q

Injunctions can only be issued by ________

A

a court, not the Admin

90
Q

The Admin cannot revoke exemptions for ________

A

federally covered securities

91
Q

“Sale” (interchangeable with “sell”) is any ________

A
  • contract to sell or contract of sale
  • any disposition of a security or interest in a security
  • any exchange of a security for value
92
Q

A state Admin _____ has jurisdiction over a securities offering made in a bona fide newspaper published out of state.

A

NEVER. Only has jurisdiction if paper is published in his state, EXCEPT when 2/3 or more of paper’s circulation is out of state

93
Q

Is an investment contract a security?

A

YES

94
Q

When employed by a federally registered IA, an IAR only needs to register in states where ________

A

they have a place of business.

- NO DE MINIMIS RULE for federally covered advisers - only when have a place of business in that state

95
Q

When employed by a state registered IA, an IAR only needs to register in states where they ________

A
  • have a place of business

- are not covered by the de minimis rule

96
Q

When a radio or TV broadcast originates in one state and is received in another state, it is only considered to be an offer in _______

A

the state of origination

97
Q

In general, the application for registration can require information about ________, requirement to ________, pass _____________, or place ____________

A

past disciplinary actions, required to pay a fee, pass an exam, and could be required to place an ad in the local newspaper

98
Q

A “trustee” in an exempt transaction is limited to a trustee of what?

A

the USA limits it to a trustee of a bankruptcy to be considered exempt. A trustee of an irrevocable trust (or anything else for that matter) would not be an exempt transactor

99
Q

The Admin may enforce subpoenas in another state if the alleged violation would also be __________

A

a violation in their state as well

100
Q

An individual who, while acting on behalf of an issuer, sells certain exempt securities (such as US gov’t securities) is _____________

A

not required to register as an agent

101
Q

Under the USA, once a registration statement has become effective it can be amended to ____________,, but cannot be amended to ____________

A

increase the number of shares in the offering, but cannot amend the offering price or any form of compensation

102
Q

Do the advertising and sales literature filing requirements for the Admin apply to an exempt security?

A

NO, but it is not exempt from the antifraud provisions of the act

103
Q

A registration under Qualification is effective for ________, unless ___________

A

valid for 1 year unless issuer has some unsold shares (in which case it can be extended until shares are sold)

104
Q

Foreign gov’t issued securities are not __________

A

federally covered securities

105
Q

A face amount certificate registered under the Investment Company Act of 1940 is a ___________

A

federally covered security

106
Q

No person may be imprisoned for a violation of the USA if they can prove they ____________

A

had no knowledge of the rule or order

107
Q

No indictment can be returned on a violation of the USA later than _____________ after the alleged violation

A

5 years

108
Q

Registration by qualification is effective _____________

A

when the Admin says so

109
Q

Section 15 of the Securities Exchange Act of 1934 sets out the minimum __________

A

capital requirements for BDs

110
Q

Performance-based fees are not allowed with an IA or IAR unless the client meets certain financials standards, which are:

A
  • at least $2mm net worth

- or a minimum of at least $1mm in AUM with the adviser

111
Q

The Admin has a maximum of ______ after termination/withdrawal to initiate any disciplinary actions

A

1 year

112
Q

Is an unsolicited transaction involving a nonexempt security required to file advertising and sales literature with the Admin?

A

NO, because the transaction is exempt. However, a solicited transaction with a nonexempt security WOULD have to file.

113
Q

Does an Admin have jurisdiction over a TV or Radio ad coming from another state?

A

NO, does if coming from their state

114
Q

The Admin is legally endowed with the power to administer _______

A

oaths

115
Q

A rights offering is an exempt transaction only if no ______________

A

compensation was paid to solicit orders

116
Q

A letter or mass mailing that offers a security for sale from another state falls under the jurisdiction of the Admin ____________

A

in the state where the offer is made (and I’m sure the Admin from the state where offer was sent from also has jurisdiction)

117
Q

A violation of any state or federal securities law within the last ________ years is grounds for denial, suspension, or revocation of registration by order

A

10 years

118
Q

Are there limits (upper or lower) on the size of institutional orders?

A

NO, although they typically trade in big blocks

119
Q

Securities issued by or guaranteed by an insurance company are exempt from _________, except for __________ products

A

state registration, except for variable annuities which are nonexempt

120
Q

If someone was convicted of a non-security related misdemeanor 9 years ago but is registering in a state where that same act would have been a felony, can the registration be denied?

A

NO, the offense does not show up as a felony on his background check and it doesn’t matter that the state he is registering in has a different penalty for the same offense.

121
Q

What exemptions does the Admin have the power to revoke?

A
  • may deny or revoke the exemption granted to a nonprofit organization or investment contracts issued by an employee benefits plan
  • may revoke any transactions exemption
122
Q

What exemptions may the Admin NOT revoke?

A
  • securities issued or guaranteed by any bank organized under the laws of any state
123
Q

Transactions by certain fiduciaries are considered exempt from registration. The fiduciaries mentioned are:

A
  • executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator
124
Q

Transactions by a bona fide ___________ are considered exempt

A

pledgee

125
Q

If someone in State A makes an offer to buy based on an ad made by radio/TV broadcast from State B, the Admin from State A only has jurisdiction once _________

A

the firm from State B accepts the offer to buy from the person in State A

126
Q

Under registration by coordination, the Admin may require than the security be deposited in ________ and the proceeds impounded until the issuer receives _________

A

in escrow, impounded until issuer receives a specified amount

127
Q

The Admin may by order permit ___________ of certain items of information or documents from a registration statement.

A

omission

128
Q

Offers by mail directed to persons in other states are considered to have been made in the other state, if received where originally ________

A

addressed. Can’t be forwarded from original address

129
Q

“Securities” include:

A
  • stocks, bonds, notes, certificates of interest in any profit-sharing agreement or participation plan, preorganization certificates or subscription agreements, certificates of deposit for a security, evidence of indebtedness, warrants, rights, options, variable annuities, commodity options multi-level distributorships
130
Q

“Securities” DOES NOT include:

A
  • insurance contracts, endowments with fixed benefits, fixed annuities, Keogh or IRA plans, written confirmations of sale, futures contracts, real estate held as a personal residence, currencies, precious metals, collectibles
131
Q

If 3 out of 5 partners leave a partnership during the year, does the firm need to notify clients to the change in ownership or ask permission to have client contracts assigned to a surviving entity?

A

Need to ask for permission to reassign contracts to a surviving entity. If majority of partners leave the entity is dissolved and a new one needs to be created

132
Q

Form ADV Part 2 (the brochure) must be delivered to clients _______

A

annually

133
Q

Substantial prepayment of fees is considered to be more than $_______, _____ or more months in advance

A

more than $500, 6 or more months in advance

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