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Series 63 Mastery Exam 2| Questions Solved 100% with Verified Correct Answers
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Series 63 Mastery Exam 2| QuestionsSolved 100% with Verified Correct
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An individual meets the Uniform Securities Act's definition of an agent in all of the following
cases except
A)
when acting on behalf of an issuer of a security in transactions with an underwriter.
B)
when receiving commissions for selling shares of his employer's stock to employees.
C)
when acting for a broker-dealer on behalf of a large institutional customer to find a buyer for
a large block of stock to be sold on the NYSE.
D)
when buying shares of a security listed on the Nasdaq Stock Market system for the portfolio
of a client of the broker-dealer. - ANSWER A)
when acting on behalf of an issuer of a security in transactions with an underwriter
Which of the following qualifies under the Section 28(e) safe harbor provisions for soft-dollar
compensation?
A)
Reimbursement for travel expenses incurred to attend a seminar on the latest compliance
trends for registered investment advisers
B)
Rent-free use of unused space in the broker-dealer's office
C)
,Providing access to the broker-dealer's computerized accounting system, allowing
the investment adviser to prepare its financial statements
D)
Clearance and settlement services provided by the broker-dealer - ANSWER D)
Clearance and settlement services provided by the broker-dealer
Under the NASAA Model Rule on financial requirements for investment advisers, state-
registered investment advisers who have custody of customer funds and exercise discretion in
customer accounts are usually required to have a net worth totaling
A)
$10,000.
B)
$5,000.
C)
$35,000.
D)
$45,000. - ANSWER c) $35,000
The NASAA Model Rule on financial requirements for investment advisers, unless an exception
exists, requires an investment adviser with custody of customer funds or securities to have a
minimum net worth of $35,000. If the adviser does not have custody of customer funds or
securities but does have discretionary power over customer accounts, the minimum net worth
amount is reduced to $10,000. However, if the IA does both, the $35,000 is sufficient (the
$10,000 is not added to the $35,000). Alternatively, a surety bond in an amount determined
by the Administrator may be posted, but that amount is unlikely to be testable.
Which of the following criteria would most likely be used to determine if an agent is engaged
in churning or excessive trading in violation of NASAA's Statement of Policy on Dishonest or
Unethical Business Practices of Broker-Dealers and Agents?
A)
,Transactions in a customer's account were excessive in frequency based on the customer's
objectives.
B)
The agent's firm acted in a principal capacity in the transaction.
C)
The agent received commissions on each transaction conducted on behalf of clients.
D)
The customer has not provided the agent written trading authority. - ANSWER A)
Transactions in a customer's account were excessive in frequency based on the
customer's objectives.
Explanation
An agent may be suspected of churning an account if the account's transactions would be
considered at an abnormal level on the basis of the client's financial resources and
objectives and the character of the account.
Which of the following activities could result in an Administrator taking action against a broker-
dealer registered in her state?
A)
Maintaining custody of customer's funds and securities without notifying the Administrator
B)
Charging reasonable fees or commissions for brokerage execution services
C)
Hypothecating a customer's securities in a margin account without written consent from
the customer promptly after the initial transaction
D)
Executing transactions in a customer's margin account before receiving the written
margin account agreement - ANSWER C)
Hypothecating a customer's securities in a margin account without written consent from
the customer promptly after the initial transaction
, Explanation
The signed hypothecation agreement must be received by the broker-dealer promptly after
the initial transaction in a margin account. Because the requirement is after, transactions can
be made without having the margin agreements in hand. Charging reasonable fees is proper
and, unlike investment advisers, broker-dealers do not have to notify the Administrator of their
plan to maintain custody of customer assets.
LO 6.e
After careful analysis of a client's needs and objectives, an agent has determined that the
KAPCO Growth Fund is a suitable investment. However, the fund's prospectus is extremely long
and has many complicated details explaining the investment style used by the portfolio
manager. In an effort to help the client better understand the nature of this investment, the
agent highlights the most important items in the document and suggests to the client that
reading those is all that is necessary. Under the NASAA Statement of Policy on Dishonest or
Unethical Business Practices of Broker-Dealers and Agents, this action would be
A)
permitted because this will help make the client better informed about the
investment decision.
B)
prohibited because no marks may be placed on a prospectus.
C)
permitted because the entire prospectus has been delivered.
D)
prohibited because an agent may never omit material information. - ANSWER B)
prohibited because no marks may be placed on a prospectus.
A registration statement for new issues of securities under the Uniform Securities Act
is effective for more than one year after its effective date
A)
if an offering subscription is oversubscribed, thereby requiring registration of additional shares.
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