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Q56. Don is a state-registered agent with GetErDone Broker-Dealers. He has three other friends who are
licensed agents-Huey, Dewey, and Louie. Huey is also an agent with GetErDone Broker-Dealers. Dewey
is an agent with a different firm in the same city, CanDo Broker-Dealers. Louie works for a Broker-Dealer
with an office just across the state line. Don can enter a commission-splitting agreement with

Huey only.

either Huey or Dewey or both

Dewey only.

Either Huey, Dewey, or Louie or any combination of the three

Q57. Ms. Connie Fused sent her investment adviser a check, payable to a mutual fund that he had
recommended to her. What must the adviser do in order to avoid being considered the custodian of this
account and, thereby, subject to some strict requirements, including a higher minimum net capital?

He needs to forward the check to the mutual fund within 3 days.

He needs to forward the check to the mutual fund within 24 hours.

He needs to get a written statement from Ms. Fused, addressed to the state Administrator,indicating it
was her mistake.

He needs both to forward the check within 24 hours and to obtain a written statement from Ms. Fused.

Q58. Which of the following would fall under the definition of “agent,” as defined by the Uniform Securities Act (USA)?

Joe works as an administrative assistant for broker-dealer GetErDone, doing data entry, filing client forms that contain confidential information, and directing calls to registered representatives of the firm.

Freedom broker-dealers executes the purchase and sale of securities for its customers.

TrustUs Bank has a subsidiary operation that sells mutual funds to the public.

None of the above would fall under the definition of “agent,” as defined by the Uniform Securities Act (USA.)

Q59. You are an investment adviser representative. Your client, Mr. I. M. Pulse, calls you with what he thinks is exciting news. He just passed a restaurant and saw Microsoft’s Bill Gates having lunch with a local entrepreneur who owns a small firm in the computer software industry that trades on the OTC pink sheets. He is sure that this means Microsoft is negotiating a purchase of the smaller company and instructs you to take the cash balance in his account and buy shares of the local company. You should

tell Mr. I.M. Pulse that this would be an illegal insider trade and that you are unable to fulfill his request.

call your supervisor and alert him immediately of Mr. Pulse’s attempt to have you place an illegal order on his behalf in case Mr. Pulse decides to place the order elsewhere.

advise Mr. Pulse that he may be jumping the gun, but place the order if he insists.

do both A and B.

Q60. While on vacation in Colorado, Massachusetts resident Ms. Jetset meets Mr. Snow, a registered
representative with a Colorado broker-dealer, on a ski lift and accepts a dinner engagement with him later
that evening, during which he obtains her cell phone number. A week later, while she is lounging around
in her Florida beach condo, he calls and interests her in a local software company that is selling its
preferred stock to investors and encourages her to buy it. Ms. Jetset tells Mr. Snow she’ll think about it
and calls him after she returns to her home in Massachusetts to tell him to buy the stock for her and sends
him a check via express mail. Later, Ms. Jetset learns that the preferred stock certificate that she received
is-and always was-a worthless piece of paper, and that, in fact, no such company ever existed. Which
state Administrator has jurisdiction in this instance?
I. the Administrator of the state of Colorado
II. the Administrator of the state of Florida
III. the Administrator of the state of Massachusetts

I only

I and II only

I and III only

I, II, and III

Q61. For how long after the effective date is a security’s registration valid?

three months

six months

one year

two years

Q62. If a person has had its license revoked by the Administrator of the state and has appealed the decision to a court of law, that person

can continue business as usual pending the resolution of the appeal.

must notify the Administrator of the state that it has appealed the decision.

is considered to have a revoked license until the courts rule otherwise.

Both B and C are true statements.

Q63. Your next-door neighbor’s brother works for a large pharmaceutical company and confided in her that one of the company’s chemists has just discovered a compound that will cure baldness and that the firm plans to make the discovery public later in the week. Your next-door neighbor passes this information on to you over a cup of coffee the next morning. You immediately call your broker and place an order to buy shares of the company’s stock.
Has any illegal insider trading taken place?

Yes. The agent who executes your purchase order has engaged in illegal insider trading.

No. You are in no way related to your next-door neighbor’s brother, and she could have been lying.

Yes. You, your neighbor, and her brother are all guilty of illegal insider trading.

Yes. You are guilty of illegal insider trading because you traded on information that had not yet been made publicly available.

Q64. When selling shares in a closed-end investment company, an agent must inform the client of any
I. commissions
II. underwriting fees
III. miscellaneous offering expenses

I, II and III

I only

I and II only

I and III only

Q65. The current yield on a bond fund refers to

the percentage increase in the fund’s net asset value.

the return that the fund earned because of the capital appreciation of the securities in the fund.

the total return that the fund has earned over the most recent 12-month period.

the return that the fund earned based only on the interest income it received

Q66. You have recently discovered that a security you purchased has not been registered with the state, nor is it exempt from registration. You can file a civil claim against the seller as long as you do so within

five years.

three years from discovery or five years from the event, whichever comes first.

two years from discovery or three years from the event, whichever comes first.

one year from discovery.

Q67. Which of the following are examples of the prohibited practice of manipulation in the securities markets?
I. Broker-Dealer Joker is unhappy with its investment in the stock of a speculative firm and engages another broker-dealer to purchase a large number of shares from it, with the unofficial agreement to buy back those shares, offer more shares which the second broker-dealer will purchase, and so on.
II. Broker-Dealer Joker has a large short position in the stock of a certain corporation. Joker offers a bonus to its agents who effect sale transactions in the stock.
III. A client calls Broker-Dealer Joker with a request to purchase 20 bonds issued by Massachusetts Institute of Technology (MIT.) The bonds are currently selling for their par value of $1,000. Knowing this, Joker offers to sells the client the bonds for $120 per $100 of par, or $1,200 per $1,000 bond.

I, II, and III

I and II only

I and III only

I only

Q68. Which of the following securities would be exempt from state registration requirements, according to the Uniform Securities Act?
I. a municipal bond issued by the Canadian province of Nova Scotia
II. a bond issued by the county of Cork, Ireland
III. a bond issued by Nationwide Insurance Company

All of the selections would be exempt from state registration requirements under the Uniform

Selection I only

Selection I and III only

Selection III only

Q69. Which of the following would not fall under the classification of “institutional investor”?

Prudential Insurance

Chase Bank

Neuring Investment Advisers

Franklin Templeton Mutual Funds

Q70. An agent working for a broker-dealer mistakenly sends an investment adviser some bonds that the
adviser purchased on behalf of his client instead of directing the bonds to the financial institution that is
serving as the qualified custodian of the client’s funds. If the investment adviser wants to avoid being
considered custodian of this client’s account, what must the adviser do?

Record what securities were sent, when he received them, and when he forwarded them–which

Record what securities were sent, when he received them, and when he forwarded them–which must
be within three business days-to his client.

Record what securities were sent, when he received them, and when he forwarded them–which must
be within twenty-four hours-to his client.

Record what securities were sent, when he received them, and when he forwarded them–which must
be within twenty-four hours-to the qualified custodian of the client’s funds.

Q71. Treadwater Bank and Trust is selling a portfolio of municipal bonds it owns to the SafeRisk Insurance
Corporation. Under the Uniform Securities Act (USA), in this transaction Treadwater is defined as a

broker-dealer.

agent.

issuer.

none of the above.

Q72. Ms. Connie Fused sent her investment adviser a check, payable to a mutual fund that he had recommended to her.
What must the adviser do in order to avoid being considered the custodian of this account and, thereby, subject to some strict requirements, including a higher minimum net capital?

He needs to forward the check to the mutual fund within 3 days.

He needs to forward the check to the mutual fund within 24 hours.

He needs to get a written statement from Ms. Fused, addressed to the state Administrator, indicating it was her mistake.

He needs both to forward the check within 24 hours and to obtain a written statement from Ms. Fused.

Q73. The 2003 NASAA Model Rule requires that investment advisers that are not federal covered maintain their records for at least

three years.

five years.

seven years.

Investment advisers must maintain their records for as long as they remain registered with the state.

Q74. Price pegging refers to

the practice of buying large amounts of a security to drive its price up artificially.

the illegal activity of a group of investors who buy and sell a security among themselves to create an
artificially high volume of trading in hopes of luring investors to buy the security.

the prohibited practice of excessively trading on a client’s account that is used by some broker-dealers
and/or their agents to generate more commissions for themselves.

the unethical practice of investment advisers who issue “buy” recommendations for stocks that they
own themselves without disclosing the fact.

Q75. The Administrator of a state will deny the registration of a security if
I. the mandated filing fee has not been paid.
II. the compensation of the underwriters is excessive.
III. the registration statement is incomplete.
IV. the issuer is registering the security through the registration by coordination process and has not complied with all the stipulated requirements.

I, II, III, or IV

I or III only

III or IV only

I, III or IV only

Q76. You are an agent with a broker-dealer and have learned of limited partnership interests being sold by a
small company that is planning to come out with a product that you think is going to “wow” the market.
You would like to get in on the action, but the minimum investment needed is $10,000, and you don’t have
that kind of dough lying around. You talk to your brother, who is also one of your clients, and get him
interested in investing in the firm, too. The two of you decide to pull your money together, each putting in
$ 5,000, and you agree to split any profits or losses. Is this permitted?

No. Under no circumstances can an agent enter a joint investment with a client under the guidelines of
the Uniform Securities Act.

Yes. This is permitted since the agreement is between you and a family member.

Maybe. But it will require written consent from both your brother and your firm.

Yes, as long as your brother provides your firm with his written consent.

Q77. Harry Lange manages the investment portfolio for the Fidelity Magellan Mutual Fund. Mr. Lange is a(n)

broker-dealer.

agent.

investment adviser.

investment company.

Q78. Price pegging refers to

the practice of buying large amounts of a security to drive its price up artificially.

the illegal activity of a group of investors who buy and sell a security among themselves to create an artificially high volume of trading in hopes of luring investors to buy the security.

the prohibited practice of excessively trading on a client’s account that is used by some broker-dealers and/or their agents to generate more commissions for themselves.

the unethical practice of investment advisers who issue “buy” recommendations for stocks that they own themselves without disclosing the fact.

Category FINRA

[Nov 09, 2024] Fully Updated Uniform Securities State Law (Series63) Certification Sample Questions [Q56-Q78]