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NEW QUESTION # 15
Which of the following is not considered to be a person, as defined by the Uniform Securities Act?
- A. a 16-year old cheerleader
- B. a corporation
- C. a school district
- D. a law firm that is organized as a partnership
Answer: A
Explanation:
Explanation
A minor is not considered to be a person, as defined by the Uniform Securities Act. However, partnerships, corporations, and governmental subdivisions, such as school districts, are included in the definition.
NEW QUESTION # 16
Which of the following entities are subject to post-registration provisions?
I. broker-dealers
II. agents
III. investment advisers
IV. investment adviser representatives
- A. II and IV only
- B. I and II only
- C. I and III only
- D. All of the entities are subject to post-registration provisions.
Answer: C
Explanation:
Explanation
Only selections I and III are subject to post-registration provisions. Broker-dealers and investment advisers can be required to file advertising materials and financial reports with the Administrator, as specified by the Administrator. They are also required to keep records to the specifications of the Administrator. These records will include items such as client e-mails, client letters of complaint, and advertising brochures and must be kept for three years.
NEW QUESTION # 17
uestion No: 157
An investment adviser may act as a custodian for a client's securities if
I. the Administrator of the state doesn't have a rule prohibiting custodial arrangements.
II. he informs the state Administrator in writing that he will be acting as a custodian for the client.
III. he arranges to pay an independent certified public accountant to perform an unannounced audit of his books each year so that the accountant can report his findings to the state Administrator.
- A. I and III only
- B. I, II and III
- C. I and II only
- D. I only
Answer: B
Explanation:
Explanation
Selections I, II, and III are true statements. In order for an investment adviser to act as a custodian for a client's securities, he must first make certain that the Administrator of the state in which he's registered does not prohibit it. Then he must inform the Administrator in writing that he will be acting as a custodian for the client, and he has to pay for an independent CPA to audit his books once a year to make certain that everything is copasetic, upon which the CPA reports his findings to the state Administrator. There are also other requirements that must be met.
NEW QUESTION # 18
A variable annuity is:
- A. not a security, but is still required to be registered with the state before it can be offered for sale.
- B. not a security and, therefore, does not have to be registered with the state.
- C. a security, but is exempt from state registration.
- D. a security and, therefore, has to be registered with the state before it can be offered for sale.
Answer: C
Explanation:
A variable annuity is defined as a security, but is exempt from state registration in the opinion
of the North American Securities Administrators Association (NASAA.) The Supreme Court of the U.S.
passed a ruling that deemed a variable annuity to be a security. The National Securities Market
Improvement Act of 1996 (NSMIA) established variable annuities to be federal covered securities,
however, since they are, for all intents and purposes, mutual funds. Federal covered securities are
exempt from state registration.
NEW QUESTION # 19
Gazillions is an investment adviser with offices in the state that is registered with the SEC and has $100
billion dollars under management. A client has filed a complaint asserting that the firm has been involved
in fraudulent activities. In this case,
- A. Gazillions is in trouble for not registering with both the state and the SEC given the amount of money it
has under management. - B. Gazillions only has to answer to the state in which the complaint was filed.
- C. Gazillions has to answer to both the SEC and the state in which the complaint was filed.
- D. Gazillions only has to answer to the SEC regarding the allegations. Since it is a federal covered
investment adviser, it need not respond to any state-issued requests for information.
Answer: C
Explanation:
If Gazillions is operating as an SEC-registered adviser in a state, it must answer to both the
SEC and the state in which the complaint has been filed, even though there is no requirement that it had
to register with the state, given that it was a federal covered investment adviser. Allegations of fraud come
under the state's authority as well, even if the adviser is a federal covered investment adviser.
NEW QUESTION # 20
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 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. - B. 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. - C. A-2-Z can charge the client only an advisory fee when it is serving as an investment adviser; no
commissions may be collected. - D. 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.
Answer: B
Explanation:
A-2-Z can charge a client it advises 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 the potential conflict of interest
and get the client's written consent. It must also provide an itemized statement of all such agency cross
transactions performed for the client at least annually.
NEW QUESTION # 21
Which of the following laws deals with identity theft protection?
- A. Regulation S-P
- B. ERISA
- C. the Bank Secrecy Act (BSA)
- D. the USA Patriot Act
Answer: A
Explanation:
Regulation S-P was enacted by the SEC to deal with identity theft. The law requires financial
institutions to provide their clients with a statement of its privacy policies and practices and prohibits the
disclosure of nonpublic personal information about even a prospective client to a nonaffiliated third party
unless certain conditions are met, including giving the client or prospective client the right to opt out of the
disclosure.
NEW QUESTION # 22
Which of the following persons falls under the definition of "broker-dealer," as defined by the Uniform
Securities Act (USA)?
- A. MyTrades is a sole proprietorship owned by Nathan Newmoney, who has established the firm solely to
make trades on his own account, thereby avoiding the commissions he would have to pay a middleman. - B. Michaela is employed by GetErDone broker-dealers and sells both exempt and non-exempt securities
to GetErDone's clients. - C. Marge is a loan officer at Treadwater Bank and Trust.
- D. Juan is employed by TrustUs Corporation to sell shares of the firm's stock to the firm's employees and
receives a commission on the shares he sells.
Answer: A
Explanation:
MyTrades falls under the definition of "broker-dealer," as defined by the Uniform Securities
Act since Nathan Newmoney is engaged in trading on his own account. The USA defines a broker-dealer
as any person that conducts securities transactions on its own account or for others. Both Juan and
Michaela are "agents" under the USA definition, and agents are specifically excluded from the definition of
a broker-dealer. Marge is also excluded from the definition since she is a loan officer at a bank.
NEW QUESTION # 23
A margin transaction refers to a transaction
- A. Both A and C are true statements.
- B. in which the client borrows some of the money that he is investing.
- C. in which a registered agent makes trades on a customer's account without that customer's knowledge.
- D. that is illegal under the guidelines of the Uniform Securities Act.
Answer: B
Explanation:
Explanation
A margin transaction refers to a transaction in which the client borrows some of the money that he is investing.
It is a recognized practice.
NEW QUESTION # 24
Price pegging refers to
- A. 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.
- B. the unethical practice of investment advisers who issue "buy" recommendations for stocks that they own themselves without disclosing the fact.
- C. the practice of buying large amounts of a security to drive its price up artificially.
- D. 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.
Answer: C
Explanation:
Explanation
Price pegging refers to the practice of buying large amounts of a security to drive its price up artificially. This is a form of illegal price manipulation.
NEW QUESTION # 25
Which of the following is a security as defined by the Uniform Securities Act (USA)?
- A. Both A and B are securities as defined by the Uniform Securities Act.
- B. a term life insurance policy
- C. a debenture
- D. a futures option contract on wheat
Answer: A
Explanation:
Explanation
Both a debenture and a futures option contract on wheat are securities as defined by the USA. A debenture is a long-term, unsecured debt instrument and is specifically listed as a security in the Act. Although commodity futures contracts are not considered to be securities as defined by the Act, options on commodity futures contracts are.
NEW QUESTION # 26
The state of Massachusetts has issued a general obligation (G.O.) bond that pays 3% interest. As an agent selling this bond, you can legitimately tell the investor that
- A. the interest income the investor receives from the bond will be free from federal taxation.
- B. all of the above statements are true.
- C. all state general obligation bonds are also guaranteed by the federal government.
- D. the bond is guaranteed by the state of Massachusetts and is, therefore, a risk-free investment.
Answer: A
Explanation:
Explanation
An agent selling a Massachusetts general obligation bond can legitimately tell the investor that the interest income he receives from the bond will be free from federal taxation. It is not, however, a risk-free investment.
States may default on their bond issues, and bonds issued by states are not guaranteed by the federal government.
NEW QUESTION # 27
Most individual state securities laws today are based on:
- A. the Gramm-Leach-Bliley Act of 1999.
- B. the Uniform Securities Act of 1956.
- C. the National Securities Markets Improvement Act of 1996.
- D. the Uniform Securities Act of 2002.
Answer: B
Explanation:
Explanation
Most individual state securities laws continue to be based on the 1956 Uniform Securities Act. Although the Uniform Securities Act was revised in 1985, 1988, and 2002, none of these revisions have been widely incorporated by the individual states. The National Securities Markets Improvement Act of 1996 dealt mainly with the definition of federal covered securities and more efficient management of mutual funds. The focus of the Gramm-Leach-Bliley Act of 1999 was on financial institutions.
NEW QUESTION # 28
Which of the following is an example of a non-issuer transaction?
- A. IBM sells a new issue of bonds to an insurance company.
- B. Jose purchases a 10-year bond issued by Progress Energy when it has 6 years remaining to maturity.
- C. NewCorp, which has been a privately held company, is engaging in an initial public offering (IPO) of its
stock. - D. Google offers more shares of its stock for sale to the public.
Answer: B
Explanation:
When Jose buys a 10-year bond that has 6 years remaining to maturity, it is a non-issuer
transaction since he is buying it in the secondary market from another investor, and Progress Energy
does not benefit from the transaction. If a firm receives money when its securities are sold, it is considered
an issuer transaction; otherwise it is a non-issuer transaction. When Progress Energy originally issued the
bond, it had ten years to maturity, and Progress Energy received the proceeds from the bond issue; that
was an issuer transaction. When Jose buys the bond, another investor is receiving the proceeds. When
IBM sells new bonds, regardless of whether it is to the general public or to an institutional investor, IBM
receives the proceeds from the transaction, so it is an issuer transaction. Similarly, when a firm that is
already publicly held, like Google, sells more shares, the firm receives money from the sale, just as when
a firm that is going public for the first time, like NewCorp, receives the proceeds generated through the
IPO. Those are examples of issuer transactions.
NEW QUESTION # 29
Which of the following scenarios would not be considered a "sale," as defined by the Uniform Securities
Act (USA)?
I. Yoshito owned shares of Minnow Corporation and received shares of Whale Corporation from Whale
when it merged with Minnow.
II. Olivia's uncle, an agent with SecureMoney Brokers, sold Olivia ten call options on the stock of
Microsoft.
III. Hans purchased a bond of Indebted Corporation that had detachable warrants and subsequently sold
the warrants.
IV. Tom pledged some shares of stock he owned personally to secure a business loan for his company.
- A. Neither I nor II would be considered sales.
- B. Neither I nor IV would be considered sales.
- C. Neither III nor IV would be considered sales.
- D. Neither II nor III would be considered sales.
Answer: B
Explanation:
Neither Scenario I nor Scenario IV describes sales as defined by the USA. When an investor
receives securities from Company X when Company X merges with a company in which the investor
owns stock, Company X is not considered to have sold those securities to the investor. Likewise, when a
person uses securities he owns as collateral for a loan, the USA does not consider this to be a sale of the
securities.
NEW QUESTION # 30
The state official who has regulatory authority over the securities industry within the state is known as the
- A. attorney-general.
- B. investor-protection officer.
- C. administrator.
- D. secretary of state.
Answer: C
Explanation:
Explanation
The state official who has regulatory authority over the securities industry within the state is the administrator.
NEW QUESTION # 31
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