Under which of the following scenarios can a client legitimately sue a purported professional in the securities industry and expect an award for damages?
I. The securities were sold by an agent whose registration was not yet effective with the state, but who had already applied for registration.
II. The security was a variable annuity, and the sales representative neglected to reveal the details of the surrender clause to the client.
III. The security was the stock of a company, the stock had recently been registered with the state for sale, had been granted registration, and the selling agent had told his client that the security had been state-approved for sale.

• A. I and III only
• B. II and III only
• C. I, II, and III
• D. I only

A-2-Z Associates is a full service brokerage and is also in the investment advisory industry, charging its clients for investment advice for additional remuneration.
Which of the following statements is true?

• A. A-2-Z can charge the client both an advisory fee for its advice and a commission on any trade the client makes based on the advice. This is all laid out in the advertising brochures full service brokerage firms like A-2-Z provide their prospective clients.
• B. A-2-Z can charge the client only an advisory fee when it is serving as an investment adviser; no commissions may be collected.
• C. A-2-Z can charge the client both an advisory fee for its advice and a commission for the execution of a trade based on that advice, but it must inform the client of its potential conflict of interest in doing so and get the client's written consent.
• D. A-2-Z can charge an individual client an advisory fee for its advice or a commission when it executes a trade that the client makes based on that advice, but not both.

Mr. Sailor is cruising through the Bahamas when he learns that a healthcare company in which he owns stock is being sued by former patients, doctors, nurses, and even the federal government. He doesn't have his broker's number handy, and he doesn't have internet access, so he calls his son and tells him to call the broker and instruct the broker to sell his shares. As a registered agent for his broker, you take the call.
Should you execute this transaction?

• A. Yes. This is a legitimate request from a client, and you are required to follow the client's instructions.
• B. Yes, as long as the son is at least 21 years old and not a minor child.
• C. Yes, as long as the son presents proper identification that proves his relationship to Mr. Sailor, such as a birth certificate.
• D. No, not unless you and your broker-dealer have a written document that gives Mr. Sailor's son the power-of-attorney to trade on his account.

Which of the following would meet the requirements for an "exempt security?"

• A. a $25,000 promissory note that matures in three months
• B. a $500,000 promissory note that matures in two years
• C. commercial paper with a $100,000 face value and a maturity of five months that is rated AA by Standard and Poors
• D. commercial paper with a $200,000 face value and a maturity of three months that is rated BB by Standard and Poors

o: 52
Which of the following statements regarding "registration by qualification" is true?

• A. In its simplest form, registration by qualification requires the issuer to supply voluminous amounts of information about both the firm and its directors, officers, and major shareholders.
• B. Registration by qualification refers to the fact that certain categories of securities are exempt from state registration requirements.
• C. Registration by qualification refers to the fact that the highest quality bonds, i.e., those with a AAA rating, are exempt from registration with the state.
• D. Registration by qualification is the preferred method used by issuers since it requires the least amount of paperwork.