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Series 66 Final Exam 100% Correct
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Series 66 Final Exam 100% CorrectWhich of the following statements are TRUE regarding certain federal covered security?
I. The Administrator may require the issuer to pay a filing fee.
II. The Administrator may bring enforcement action if fraud is involved.
III. The Administrator may require the issuer to file a consent to service of process.
IV. The Administrator will grant the registration after a final review of the filing. -
ANSWER I, II, & III
The Uniform Securities Act limits the Administrator's powers with respect to federal
covered securities. The Administrator may: require a filing fee; require a filing of
consent to service of process; and require filing with the administrator of the same
documents filed with the SEC. The Administrator may institute enforcement action if
fraud or deceit is used in selling a security. The Administrator shall not subject the
issuer to a state review. This happens when a state is authorized to permit or prohibit a
security to be offered in a state and is sometime known as a merit review.
Uniform Securities Act Which of the following statements is/are TRUE with respect to
private placements?
I. The offering is not made to more than 10 persons in that state during any period of 12
consecutive months.
II. The offering is not made to more than 35 persons in that state during any period of 12
consecutive months.
III. An offering may be made in that state to any number of institutional investors in any
period of 12 consecutive months.
IV. Commissions cannot be paid if the buyers are noninstitutional customers. - ANSWER
I, III & IV
Under the Uniform Securities Act, any transaction involving no more than 10 persons,
there is no limitation on the number of institutional accounts involved in the sale is an
,exempt transaction, called a private placement, if the following are met.
• The seller has reasonable grounds to believe that all the noninstitutional buyers are
purchasing for investment only.
• No commission or other remuneration is paid for soliciting noninstitutional buyers.
Choice (II) is a requirement of private placements under Regulation D of the Securities
Act of 1933, the federal act.
The following questions relate to State B's blue sky laws. Which of the following is a
broker-dealer in State B?
a. An agent in State A who contacts a customer in State B
b. A corporation that sells commercial paper every other week in State B
c. A broker-dealer registered in State A, whose only office is located in that state, has
three individual customers who reside in State B
d. A bank trust department that buys and sells securities of its customers - ANSWER c.
Agents, issuers and banks are not broker-dealers. Also a person having no place of
business in a state, who deals only with institutional investors is not a broker-dealer. A
firm would be considered a broker-dealer if it deals with individuals even if it has no
office in the state.
Under the Uniform Securities Act, an employee of a municipal issuer selling securities to
the public is:
a. An agent of the issuer and is subject to registration
b. An agent of the issuer and is not subject to registration
c. An agent of a broker-dealer
d. Not an agent - ANSWER d. A person representing a municipal issuer is not considered
an agent and, therefore would not be subject to registration. If the securities were not
exempt, the employee would be subject to registration.
,William is a broker-dealer agent and is currently registered in three states. One of
William's customers informs him that he will be moving to a state in which William or his
firm is not currently registered. Which one of the following statements is CORRECT with
regard to William's new state registration?
a. William would be permitted to transact business in the new state with immediate
effect.
b. William must register in the new state and receive notice from the state Administrator
that the registration is effective prior to undertaking any new business with the client.
c. William must file a Consent to Service of Process with the state.
d. William cannot register in the new state until his broker-dealer is registered in that
state. - ANSWER d. An agent may transact business in a state in which he is not
currently registered under certain circumstances. The employing broker-dealer must
be registered in the state, and the individual must be registered in at least one other
state. Since his broker-dealer is not registered, William is not eligible for registration.
A company, headquartered in State Y, has been retained to evaluate the investment
manager of a pension plan whose principal office is located in State Z. The company is
engaged to advise the pension plan whether to retain the current investment manager
or hire a new one. For purposes of the Uniform Securities Act, is the company an
investment adviser?
a. Yes, because a fee is being charged for the firm's services as a consultant
b. No, because the firm is not making investment recommendations regarding a
portfolios
c. Yes, because the firm advising the pension plan owner and not the participants
d. No, because the firm is servicing an institutional investor - ANSWER d. Under the
Uniform Securities Act, an adviser who has no place of business in a state and whose
clients are only institutional investors, (e.g., pension plans), are exempt from the
registration requirements.
Uniform Securities Act: For how long a period of time must broker-dealers and
investment advisers maintain their books and records under the Uniform Securities
Act?
a. Three years for broker-dealers and five for investment advisers
, b. Five years for broker-dealers and three for investment advisers
c. Two years for broker-dealers and five for investment advisers
d. Two years for each ANSWER a. The Uniform Securities Act requires books and
records to be retained at investment advisory firms for a minimum of five years, and
three years at broker-dealer firms.
William is an IA Rep His firm has provided a brochure that includes the same information
as his firm's Form ADV Part 2. William provides the brochure to one of his new clients
who have verbally agreed to the contract. He has not provided her with any other
documents before. Which of the following statements is TRUE for the actions of William?
a. William's firm has met the Brochure Rule of the Investment Advisers Act.
b. William's firm has not met the full disclosure of the Investment Advisers Act.
c. William must have a copy of the firm's Form ADV Part 2 delivered to his client within
48 hours after a contract is signed by the client.
d. If William's client is a registered investment company, he will have to give him a
brochure after the contract was signed. - ANSWER a. The Brochure Rule permits
advisers to give a disclosure brochure to clients at the time they enter into contracts.
For federal covered advisers, the brochure must be given to clients even if the advisory
contract with the client is oral. This brochure is not required for registered investment
companies and for clients whose contracts are for limited impersonal advisory services
for which the client pays less than $500 per year. Under the USA, clients may be given
the brochure at the time the contract is signed, provided they have five business days to
cancel the contract without penalty. Otherwise, the brochure must be delivered to a
client 48 hours in advance of contract execution.
H M Advisers, HMA, is a small investment adviser with $19 million under management.
The firm is the adviser for a start-up, Micro Cap Mutual Fund. HMA:
a. Is an exempt adviser and need not register until its assets exceed $10 million
b. Must register with both the SEC and each state in which it does business until its
assets under management exceed $130 million
c. May register as either a state or federal adviser
d. Must register as a federal adviser - ANSWER d. The federal government and the
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