(PDF) Uniform Securities State Law Series63 Exam and Certification Test Engine
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NEW QUESTION # 128
Which of the following would fall under the definition of "agent," as defined by the Uniform Securities Act (USA)?
- A. 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.
- B. TrustUs Bank has a subsidiary operation that sells mutual funds to the public.
- C. None of the above would fall under the definition of "agent," as defined by the Uniform Securities Act (USA.)
- D. Freedom broker-dealers executes the purchase and sale of securities for its customers.
Answer: C
Explanation:
Explanation
None of the selections describe an "agent," as defined by the Uniform Securities Act (USA.) Joe is not executing trades for clients of the broker-dealer, and clerical assistants are not classified as agents.
Agents must be individuals, so a firm like Freedom broker-dealers would not be considered an agent. A bank is not an individual, and banks are even excluded from the definition of a broker-dealer.
NEW QUESTION # 129
The current yield on a bond fund refers to
- A. the return that the fund earned because of the capital appreciation of the securities in the fund.
- B. the percentage increase in the fund's net asset value.
- C. the return that the fund earned based only on the interest income it received
- D. the total return that the fund has earned over the most recent 12 month period.
Answer: C
Explanation:
The current yield on a bond fund is the return that the fund earned from interest income only.
The return from interest income plus the return due to the capital appreciation of the securities make up
the total return earned by the fund. The investor's total return is equal to the return on the income received
from the fund plus any change in the net asset value of the fund.
NEW QUESTION # 130
A "notice filing" refers to
- A. notification to the public by the issuer or its underwriters that the issue is being sold on an "all or
nothing" basis. - B. a document that the issuer must file with the SEC informing the SEC that the firm has applied to the
state for registration of its new security. - C. the right of an issuer to run tombstone ads in the newspapers and other publications upon filing a
registration application with the state Administrator. - D. the filing by a federal covered investment adviser of forms already filed with the SEC along with a
consent to service of process with the state Administrator.
Answer: D
Explanation:
A "notice filing" refers to the filing by a federal covered investment adviser of forms filed with
the SEC along with a consent to service of process with the state Administrator. The notice filing must be
accompanied by the requisite state filing fee as well.
NEW QUESTION # 131
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?
- A. Yes. You, your neighbor, and her brother are all guilty of illegal insider trading.
- B. Yes. You are guilty of illegal insider trading because you traded on information that had not yet been
made publicly available. - C. No. You are in no way related to your next-door neighbor's brother, and she could have been lying.
- D. Yes. The agent who executes your purchase order has engaged in illegal insider trading.
Answer: B
Explanation:
Yes. You are guilty of illegal insider trading because you traded on information that was not
yet public. Your neighbor and her brother did not execute any trades based on the information, so they're
innocent, as is the agent who executed your purchase order, who had no way of knowing that you had
insider knowledge when you placed the order.
NEW QUESTION # 132
Mr. Noah Scruples is a registered representative with CanDo Broker-Dealers. A client calls and wants Noah to purchase shares of a mutual fund the client has read about. CanDo is not authorized by this particular fund to effect purchases or sales of the fund shares.
Can Noah execute the order anyway?
- A. No. This is a prohibited practice known as front running.
- B. Yes. Since this is an unsolicited trade, Noah can execute the transaction on behalf of his client.
- C. No. This would be considered money laundering, which is highly illegal.
- D. No. This is a prohibited practice known as selling away.
Answer: D
Explanation:
Explanation
No. If CanDo is not authorized to effect purchases and sales of the fund, Noah would be engaged in the prohibited practice known as selling away if he were to execute the order. If his broker-dealer is not authorized to trade a security, Noah can't either.
NEW QUESTION # 133
Under the 2002 Uniform Securities Act, registration by coordination allows:
- A. federal covered securities to be registered simultaneously with the SEC and with the states in which
the securities will be offered for sale. - B. issuers of federal covered securities to submit only a notice filing with the Administrator of states in
which the securities will be offered for sale. - C. both state-registered and out-of-state investment bankers to participate in the underwriting and
registration of a new security issue. - D. securities that do not fall within the category of federal covered securities to be registered
simultaneously with the SEC and with the states in which the securities will be offered for sale.
Answer: D
Explanation:
Under the 2002 Uniform Securities Act, registration by coordination allows securities that are
not federal covered securities to be registered simultaneously with the SEC and with the states in which
the securities will be offered for sale. Federal covered securities are exempt from state registration and
are required to submit only a notice filing with the Administrator of the state. This is not the same as
registration by coordination.
NEW QUESTION # 134
In which of the following scenarios will the investment adviser be subject to criminal fraud charges?
- A. An adviser owns the stock of TweedleDee Corporation and has issued a report recommending the
stock as a "buy," disclosing the fact that it owns the stock - B. An adviser sells its shares of TweedleDee Corporation after issuing a report recommending the stock
as a "buy." - C. all of the above. It is considered criminal fraud for an investment adviser to make any
recommendations on a security in which it has or plans to have a position. - D. An adviser owns the stock of TweedleDee Corporation and has issued a report recommending the
stock as a "buy" without disclosing the fact that it owns the stock.
Answer: B
Explanation:
An adviser that sells its shares of TweedleDee Corporation after issuing a report
recommending the stock as a "buy" is subject to criminal fraud charges for willfully deceiving its clients.
The adviser who recommends the stock as a buy without disclosing the fact that it owns the stock is
engaging in a prohibited activity for non-disclosure, but would be unlikely to face criminal fraud charges.
NEW QUESTION # 135
Which of the following statements best explains the difference between an agent and a broker-dealer?
- A. Agents are engaged exclusively in the purchase and sale of stocks whereas broker-dealers also buy
and sell bonds and option contracts. - B. Agents conduct their business exclusively in the secondary market, while broker-dealers also operate
in the primary market. - C. A broker-dealer must be licensed in the state in which he conducts business, but there are no separate
licensing requirements for agents. - D. An agent is an individual who represents a broker-dealer or an issuer and buys and sells securities he
does not own in return for a commission on the transactions he executes. A broker-dealer may also buy
and sell securities for his own portfolio, in which case the broker-dealer enjoys any price appreciation on
those securities.
Answer: D
Explanation:
The main difference between an agent and a broker-dealer is that an agent represents either
a broker-dealer or an issuer and buys and sells securities he doesn't own, receiving a commission for the
trades he executes. A broker-dealer, when functioning as a dealer, is buying and selling for his own
portfolio, thereby profiting from any price appreciation in the assets in his portfolio. Both agents and
broker-dealers must meet state licensing requirements; both engage in the purchase and sale of stocks,
bonds, and option contracts; and both operate in both the primary and secondary markets.
NEW QUESTION # 136
Today's edition of the Wall Street Journal carried a front page story regarding a federal lawsuit that has
been filed against a software manufacturer for monopolistic practices. The CFO of the company called his
broker today and sold some of the shares he owns in the company. Which of the following statements are
true?
I. The CFO is guilty of illegal insider trading.
II. If the agent who effected the transaction for the CFO knew he was CFO of the software company, the
agent is guilty of illegal insider trading.
III. The broker-dealer for whom the agent works may have its license suspended or revoked if its agent
has knowingly executed this illegal insider trade for not having supervised the agent properly.
- A. I, II, and III
- B. None of the statements is true.
- C. I only
- D. I and II only
Answer: B
Explanation:
If the CFO called his broker and sold some of the shares he owns today, none of the
statements is true. Insider trading is only illegal if the insider trades on information that the public does not
yet have. In this case, the information has already been made publicly available, so no one has done
anything illegal. Insiders to the company are allowed to buy and sell shares of their firm's stock as long as
they are not acting on private information.
NEW QUESTION # 137
Barring no irregularities (such as a license revocation by another state last year), after you have filed for
registration as an agent, your license will be granted within
- A. 10 business days.
- B. 45 days.
- C. 30 days.
- D. 14 business days.
Answer: C
Explanation:
Barring no irregularities, after you have filed for registration as an agent, you should receive
your license within 30 days. More specifically, your license will be approved "no later than noon of the
3 0th day after filing."
NEW QUESTION # 138
A-2-Z Associates advertises itself as a full service brokerage firm that will buy and sell securities for its
clients, as well as provide investment advice to them. Its brochure provides a variety of plans to which a
client can subscribe. The basic plan is the cheapest and allows the client a maximum number of trades
per month for a specified fee. Another, slightly more expensive, plan provides the client with the same
maximum number of trades per month, but the client also receives a personalized quarterly review of his
portfolio along with advice for restructuring his portfolio based on such factors as current market
conditions and specific industry or company information. The most expensive plan is one in which the
client is assigned to an individual portfolio manager, who will take total responsibility for the asset
allocation of the client's portfolio and will provide the client with monthly reports. Based on the services
A-2-Z provides, it must register with the state as:
- A. an investment adviser.
- B. a broker-dealer.
- C. both a broker-dealer and an investment adviser.
- D. an investment adviser representative.
Answer: C
Explanation:
Based on the services A-2-Z provides, it must register with the state as both a broker-dealer
and an investment adviser. It is receiving compensation as a broker-dealer for executing purchases and
sales of securities for its clients under its basic plan, but it is receiving additional compensation for acting
as an investment adviser under the two higher level plans.
NEW QUESTION # 139
The settlement date refers to
- A. the date the buyer must pay for the securities purchased.
- B. the date the order to purchase or sell a security is actually executed. This may differ from the date that the order is sent to the market in the cases of limit or stop orders.
- C. the latest date on which broker-dealers can file their quarterly financial statements with the Administrator of the state.
- D. the date the order to purchase or sell the security is sent to the market.
Answer: A
Explanation:
Explanation
The settlement date is the date that the buyer must pay for the securities purchased. For stocks and bonds other than U.S. Treasury securities, this date is the third business day after the trade. For U.S. Treasuries and options that sell on exchanges, the settlement date is the next business day.
NEW QUESTION # 140
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?
- A. Yes. This is permitted since the agreement is between you and a family member.
- B. Maybe. But it will require written consent from both your brother and your firm.
- C. Yes, as long as your brother provides your firm with his written consent.
- D. No. Under no circumstances can an agent enter a joint investment with a client under the guidelines of
the Uniform Securities Act.
Answer: B
Explanation:
It may be permissible for you and your brother to open a joint account to invest in this
partnership since he is a family member, but it will require the written consent of both your brother and
your firm, and your firm is under no obligation to give its consent.
NEW QUESTION # 141
In an arrangement between MoeMoney Investment Advisers and one of the firm's clients, the YourMoney mutual fund, part of MoeMoney's compensation is based how the fund performs compared to the S&P 500 Index. If the return on the fund exceeds the return on the index, MoeMoney gets a bonus. The S&P 500 had a return of negative 8% this year, and the fund returned a negative 2%, so MoeMoney invoiced the client for the bonus.
Has MoeMoney violated any securities laws?
- A. Yes. Under no circumstances can a bonus be part of an investment adviser's compensation package according to the Uniform Securities Act.
- B. Yes. An investment adviser's compensation cannot be based on the capital appreciation of the portfolio.
- C. No. The fund beat the return on the S&P 500 Index, so MoeMoney is entitled to the bonus, based on its agreement with YourMoney.
- D. Yes. It is a violation of the Uniform Securities Act for an investment adviser to earn a bonus if a portfolio it manages loses money.
Answer: C
Explanation:
Explanation
No. MoeMoney has not violated any securities laws. Even though the fund's return was negative, it still beat the return on the S&P 500 Index, and MoeMoney is entitled to the bonus. The Uniform Securities Act does not prohibit compensation agreements like this one as long as the client is a sophisticated investor, such as a mutual fund. This would not be permitted if the client were your average individual investor.
NEW QUESTION # 142
Which of the following would meet the requirements for an "exempt security?"
- A. a $500,000 promissory note that matures in two years
- B. commercial paper with a $200,000 face value and a maturity of three months that is rated BB by Standard and Poors
- C. commercial paper with a $100,000 face value and a maturity of five months that is rated AA by Standard and Poors
- D. a $25,000 promissory note that matures in three months
Answer: C
Explanation:
Explanation
An issue of commercial paper with a $100,000 denomination and a maturity of five months with an AA rating from Standard and Poors meets the requirements for an "exempt security." A short-term security, with no more than 270 days to maturity, that has a denomination of at least $50,000, and has a rating of AAA, AA, or A from a recognized rating agency is exempt from registration with the state Administrator.
NEW QUESTION # 143
Which of the following statements would not be in violation of NASAA rules regarding the sale of
investment company shares?
I. "Investing your money in shares of this money market mutual fund is identical to putting your money in a
savings account at a bank, except the money market fund provides a higher return."
II. "Our U.S. government bond fund is invested only in government bonds issued by the U.S. government
and is, therefore, a risk-free investment."
III. "You are investing $22,000 in this fund today. The fund has a 5% load at this investment level, but if
you sign a letter of intent to invest another $3,000 within the next 13 months, your load will be reduced to
4 %. If something comes up and you can't invest the extra $3,000 within 13 months, you will only need to
pay the difference in the two loads."
- A. I, II, and III
- B. III only
- C. I only
- D. I and II only
Answer: B
Explanation:
Only Selection III would not violate NASAA rules regarding the sale of investment company
shares because it is the only true statement. If a fund has a breakpoint at $25,000 that triggers a reduced
front-end load and allows an investor to receive the reduced load charge if the investor signs a letter of
intent stipulating that the additional investment will be made within 13 months, the only penalty to the
investor who doesn't meet the breakpoint is payment of the difference in the two loads. Investing in shares
of a money market mutual fund is not identical to putting money in a savings account at a bank. The bank
account is insured by the FDIC in most cases; the money market mutual fund is not insured by the FDIC,
and the investor can lose money (although, to date, money market mutual funds have covered any losses
that they've experienced and not passed those losses onto their investors.) A U.S. government bond fund
that is invested only in U.S. government bonds is free from default-risk, but it is still subject to interest rate
risk. If interest rates increase, the value of the bonds in these funds-and therefore the fund itself-will
decrease.
NEW QUESTION # 144
Which of the following funds can an agent indicate is "no load?"
- A. a fund with no front-end load that has 12b-1 fees equal to 0.10% of the average net assets of the fund
and a rear-end load that varies depending on how long the investor has held the shares. - B. Both A and C can be advertised as "no load" funds.
- C. a fund with no front-end or back-end load that has 12b-1 fees equal to 0.25% of the average net assets
of the fund. - D. a fund with no front-end or back-end load that has 12b-1 fees equal to 0.30% of the average net assets
of the fund.
Answer: C
Explanation:
A fund with no front-end or back-end load that has 12b-1 fees equal to 0.25% or less of the
average net assets of the fund is considered a no load fund. In Choice A, the 12b-1 fees exceed 0.25%,
and in Choice B, there is a rear-end load.
NEW QUESTION # 145
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