Series 65 Exam || All Correct.
If an agent of a broker-dealer registers in State F in early November, when will their registration
expire and need to be renewed? correct answers December 31st of that same year. State
registration for all securities professionals expires on December 31st following the date of
registration.
Who is responsible for administering the Investment Advisers Act of 1940? correct answers The
SEC is responsible for administering the IAA of 1940. Since the IAA of 1940 is federal law, it
doesn't come under the jurisdiction of the State Administrator (but the USA does).
Under the Dodd-Frank bill, when does SEC registration become an option for pension fund
managers? correct answers Pension fund managers must register with the state. It only becomes
an option to register with the SEC when they have at least $200 million in AUM at the end of the
year.
What are the threshold requirements for an investment adviser's registration? correct answers If
they have less than $100 million AUM, they have to register with the state (they pretty much
have to do this regardless if they are not exempt from the definition of investment adviser).
If they have more than $100 million in AUM, but less than $110 million, they have the option to
register with the SEC but are not required to.
If they have more than $110 million in AUM, they must register with the SEC.
In the USA, it is unlawful for any person to offer or sell any security in a state unless what three
conditions are met? correct answers 1. The security is registered under the Uniform Securities
Act.
2. The security or transaction is exempted under the USA.
3. The security is a federal-covered security.
What is an exempt security? correct answers Those which are exempt from the USA's
registration and sales literature filing requirements.
What are examples of exempt securities? correct answers 1. U.S. and Canadian gov't municipal
securities
2. Foreign gov't securities with which the U.S. has diplomatic relations.
3. Securities issued or guaranteed by depository institutions
4. Securities issued by an insurance company authorized to do business in the state.
5. Federal covered securities.
What is an exempt transaction? correct answers A transaction of a security that's exempt from
the regulatory control of the State Administrator because of the way the sale is made or who the
sale is made to.
,What are examples of exempt transactions? correct answers 1. Isolated nonissuer transactions,
such as someone selling their stocks to another (the issuer receives nothing).
2. Unsolicited brokerage transactions (client calls agent asking to buy or sell securities).
3. Underwriter transactions between issuers and broker-dealers.
4. Bankruptcy, guardian, or conservator transactions (transactions occurring because of a
bankruptcy, paying out to trustees, etc.).
5. Institutional investor transactions, such as those with financial institutions.
Which four groups are excluded from the definition of investment advisor so long as their advice
is incidental to their profession? correct answers 1. Lawyers
2. Teachers
3. Accountants
4. Engineers
What are the three "prongs" of the definition of an investment adviser? correct answers 1.
Compensation must be received
2. Advice is provided regarding securities
3. The person must be in the business of providing investment advice.
What are the requirements for investment advisers giving "notice and consent" to clients? correct
answers 1. Investment advisers organized as a partnership must notify clients when there is a
change involving a minority of the partners (five partners, one leaves or dies).
2. Investment advisers organized as corporations don't have to notify clients of changes to
shareholders.
Under the Uniform Securities Act, the maximum that a purchaser would be entitled to claim in
the event of illegal agent activity is what? correct answers 1. The original consideration for the
security
2. Interest at the state's legal rate
3. Attorney's fees
4. Court costs.
What are private placements? Are they exempt securities/transactions? correct answers A sale of
stock shares or bonds to pre-selected investors and institutions rather than publicly on an open
market.
Private placements are exempt transactions under Regulation D of the Securities Act of 1933,
and are therefore exempt from registration.
What are the four broad powers of the State Administrator to enforce and administer the USA in
their state? correct answers 1. Make, amend, or rescind rules and orders and require the use of
specific forms.
2. Conduct investigations and issue subpoenas.
3. Issue cease and desist orders and seek injunctions.
4. Deny, suspend, cancel, or revoke registrations/licenses.
,When is the most likely time that a State Administrator would cancel the registration of an IA?
correct answers Termination of an investment adviser's registration by cancellation will generally
occur when the adviser goes out of business or ceases performing the functions of an investment
adviser.
When is the annual renewal requirement of an investment adviser on the state level? correct
answers Renewal is required on December 31st every year, no matter when you register. So if
you register on November 30th, you have to renew your registration on December 31st.
How long does initial registration take until it becomes effective on the federal level? correct
answers Initial registration on the federal level for an investment adviser takes 45 days until it
becomes effective.
What is considered an "offer to sell" under the Uniform Securities Act? correct answers An offer
to sell is any activity in an effort to dispose of a security for value.
Under the Uniform Securities Act, an offer to sell would not include which of the following:
I. Stock acquired through a merger
II. The issuance of warrants or convertible securities
III. The issuance of stock rights to existing shareholders. correct answers The first option only
(stock acquired through a merger).
An offer to sell is any activity in an effort to dispose of a security for value. The issuance of
warrants or convertible securities to anyone or stock rights to existing shareholders is considered
an offer to sell the underlying security because they involve the payment of money to acquire the
stock, thereby making them an offer to sell.
What does "custody" mean when it comes to client funds? What is a qualified custodian? correct
answers Custody means holding, directly or indirectly, client funds or securities, or having any
authority to obtain possession of them.
A qualified custodian is a bank or savings association that has deposits insured under the FDIC,
or a registered BD holding the client assets in customer accounts.
An agent for a broker-dealer member of FINRA may exercise his judgment as to which of the
following without written authorization from the customer?
I. Quantity
II. Time
III. Security
IV. Price correct answers Time and Price (II and IV).
Agents (or any other securities professionals) have the authority to decide the timing and price of
a trade. Under prevailing securities law, time or price does not constitute discretion.
, Decisions involving the quantity and security require written trading authority from the client.
What does it mean for a security to be registered by "coordination"? Who determines the
effective registration date of that security? correct answers A security is registered by
coordination when there is a simultaneous federal and state registration.
Under normal circumstances, once the SEC has declared the registration effective, it is also
effective in those states where the registration was coordinated.
Under the Investment Advisers Act of 1940, for which of the following is an investment adviser
required to disclose to clients the amount of compensation he will receive?
I. Commissions on recommended securities transactions
II. Commissions on insurance sales
III. Incentives from the issuer of a recommended security correct answers All three.
Advisers must disclose compensation received on sales of securities and nonsecurities products
and also compensation received from the issuer of a recommended security.
Linda is applying with State A to become a registered investment adviser. She has never
practiced as an investment adviser before, but she was a municipal bond broker for many years.
Seventy-five months ago, Linda was barred from municipal bond activities by the MSRB. This
would or could
A) Possibly cause her registration to be denied
B) Make the SEC refuse to review her investment adviser application on Form ADV
C) Have no impact on her registration because she had no investment adviser violations
D) Have no impact on her investment adviser registration because municipal bonds are exempt
securities correct answers A.) Possibly cause her registration to be denied.
Generally, disciplinary action in conjunction with any professional securities or commodities
activity resulting in a revocation or bar within the 10-year period preceding application, will
cause the application as an investment adviser to be refused under statutory denial. However, the
Administrator will review the application and the circumstances surrounding the action.
Currency Transaction Reports must be filed for cash transactions exceeding:
A) $10,000.00
B) $25,000.00
C) $50,000.00
D) $100,000.00 correct answers A.) $10,000
The Bank Secrecy Act requires every financial institution to electronically file with the
Department of the Treasury a Currency Transaction Report (CTR) on FinCEN Form 112 for
each cash transaction that exceeds $10,000. This report would include cash transactions used to
