Uniform Securities Act Business Practices Quiz Flashcards
An agent has an individual account for a husband the husband called the agent and states that he wishes to open an account in his wife’s name and buy 500 shares of PDQ stock. Which statement is true?
A. The agent can open the account
B. The agent can open the account only if the husband gives authorization
C. The agent can open the account only if the wife gives written authorization
D. The account cannot be opened unless the wife orally approves
C
In order for an agent to share in the gains and losses of a customers account all of the following statements are true except the:
A. Client must approve in writing
B. Agent must approve in writing
C. Broker-dealer must approve in writing
D. Agent cannot invest any of his own funds into the account
D.
Agents are prohibited from sharing in the gains and losses of a customers account unless there is a written agreement between the customer and the agent which is been approved by the broker-dealer. And the agreement specifies that sharing in gain and loss is proportionate to the capital contributed of each participant in the account
To protect against identity theft of funds, client instructions received electronically must be:
A. Monitored
B. Encrypted
C. Authenticated
D. Refused
C.
A customer wishes to make an investment in growth mutual funds for an individual retirement account. All of the following statements by an agent are prohibited except:
A. The fund has averaged a 20% growth rate in the past and is guaranteed to produce the same growth rate in the future
B. Last year the fund paid out dividends of one dollar per share and capital gains of $.50 per share, for a total income yield of $1.50
C. The fund yielded 20% last year and is expected to yield the same this year, though the actual yield may be more or less
D. The fund is registered with the SEC. This means they have approved the funds shares
C.
Investment advisors may be compensated:
A. Based on a percentage of capital gains or losses in the account
B. Based on a percentage of the value of all assets under management
C. Based on the level of trading activity in the account
D. Based on any of the above choices
B.
The best answer is B investment advisors cannot be compensated based solely on capitol gains achieved. The fee arrangement can be based on a percentage of all assets under management
Joe Jones, the proprietor of Joe Jones financial planning Inc., Which is registered as an investment advisor in New York State, has decided that he can expand his business by setting up an Internet website. He includes a questionnaire that solicits individuals to transmit information about their investment objective, financial situation, financial needs, risk tolerance level and investment time horizon. Which he will use to create a financial model and plan for a fee. Which statement is true?
A. Joe Jones financial planning Inc. must register with the S EC as an investment advisor but is not required to register as an investment advisor in each state where customers complete the questionnaire
B. Joe Jones financial planning Inc. is not required to register with the SEC as an investment advisor, but the firm is required to register as an investment advisor in each state where customers complete the questionnaire
C. Joe Jones financial planning Inc. is required to register with the SEC as an investment advisor, and the firm is required to register as an investment advisor in each state where customers complete the questionnaire
B. Because Joe Jones financial planning ain’t is not a large enough firm to be required to register at the federal level they do not need to register with the SEC however they do need to be registered in every state where they are soliciting individual responses for investment advice
Which statement is true about the retention of Internet advertising by broker dealers?
A. There is no requirement to retain copies of Internet advertising
B. Only the current webpages must be retained by the broker-dealer
C. All webpages created and displayed within the past two years must be archived
D. All webpages that have ever been created and displayed must be archived
D.
Agents of investment advisors are prohibited from:
A. Soliciting business from customers in Internet chat rooms about investing
B. Making blanket emails of personalized advisory services to prospective customers
C. Making blanket email that recommend specific securities to prospective customers.
D. All of the above
D.
An investment advisor personally owns 10,000 shares of ABC stock. The investment advisor believes that aBC Corp. would be a good investment for one of his customers and transfers his ABC Corp. stock to that customer at the current market price. This action is:
A. An exempt transaction under the uniform securities act
B. Permitted since the advisor believes that it is in the best interest of the client
C. An unethical business practices unless the conflict of interest was disclosed in advance to the client and the client gave written permission
D. An unethical business practices because all security sold to customers must be purchased in the public market
C.
And investment advisory firm with $300 million under management that is registered with the SEC as a federal covered advisor uses an unaffiliated broker-dealer to execute its customers trades. In return for directing the trades to the broker-dealer, the broker-dealer provides the advisor with “free” research, but charges a higher commission rate than a discount broker. Which statement is true?
A. This is a prohibited and unethical practice
B. The investment advisor is prohibited from paying commission rates to the executing broker-dealer that are higher than the commission rates charged by average of the three lowest-priced brokers used by the advisor
C. The investment advisor is permitted to pay the higher commission rate as long as it is disclosed to the customer that the value of research received is considered when choosing the executing broker
D. The investment advisor is permitted to choose any broker dealer to execute it’s customer transactions as long as the broker dealer is completely independent of the investment advisor
C.
And investment advisor representative who prepares financial plans for customers is also a registered life insurance agent in that state. If the agent recommends that the customer sell a mutual fund holdings and use the proceeds to buy life insurance, all of the following should be disclosed to the customer except the fact that the:
A. Recommendation to purchase life insurance is in no way connected to the services offered by the advisory firm
B. Agent will earn a commission on the life insurance purchased by the customer
C. Sale of the mutual fund mayor is alt in a taxable event to the customer
D. Recommendation to buy life insurance does not make the investment advice any less objective
D.
A Chinese wall must be maintained by a broker-dealer between investment banking and which of the following departments? A. Research B. Trading C. Retail sales D. Mergers and acquisition's
A B and C
The mergers and acquisition’s department and the underwriting department are usually one and the same at investment banking firm’s there are no barriers required between these two groups
Under the provisions of the prudent investor act, all of the following statements are true regarding the management of trust accounts with multiple beneficiaries except the fiduciary:
A. Must manage the trust impartially, taking into account the differing needs of all the trust beneficiaries
B. Is judged based on the performance of each individual investment chosen in the account
C. Should seek to maximize portfolio performance and can assume extra Rask consistent with the beneficiaries investment objectives and needs
D. Is permitted to delegate investment decisions to qualified agents without meeting consent of a beneficiary
B
An order ticket for the purchase of stock does not contain
A. Quantity
B. Time that the order is placed
C. Fill price
D. Market price at the time the order is placed
D.
An investment advisor representative is permitted to borrow money from
A. Close relative
B. A customer as long as the loan is disclosed to the investment advisor
C. A customer that is defined as an accredited investor
D. No one
A. Investment advisor Representative cannot borrow money personally from customers no if’s and’s or butts. However there is nothing stopping an investment advisor representative from borrowing money from a relative that is not a customer for example the representative gets a loan from his or her parents who are not customers.
