Uniform Securities Agent State Law Examination (Series63) Free Practice Test

Question 1

Treadwater Bank and Trust is selling a portfolio of municipal bonds it owns to the SafeRisk Insurance Corporation. Under the Uniform Securities Act (USA), in this transaction Treadwater is defined as a

A. none of the above.

B. agent.

C. broker-dealer.

D. issuer.

Correct Answer: A

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Question 2

Alter Advisers & Associates is a small investment adviser partnership registered only in a single state. One of the partners has died, and the surviving spouse has sold that partnership interest to the surviving partners.
Which of the following statements are true?
I. Alter Advisers must inform the state Administrator of this event.
II. Alter Advisers must inform the SEC of this event.
III. Alter Advisers must notify the firm's clients of this event.

A. I and II only

B. I and III only

C. I only

D. I, II, and III

Correct Answer: B

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Question 3

Which of the following would be considered an "issuer" transaction?

A. Maria purchases 500 shares of Dodge and Cox's International Fund, a mutual fund investing in foreign securities.

B. Jacob calls his broker and places an order to purchase 100 shares of Hasbro, Inc. on the open market.

C. None of the above is an "issuer" transaction.

D. Kim sells an AT&T bond she holds that still has three years remaining to maturity.

Correct Answer: A

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Question 4

Noah Aull is an investment adviser representative with Canto Investment Advisers. A client has called and told Noah that he heard about a firm that had recently completed an IPO at a party he had attended that weekend and instructed Noah to purchase shares of the company, which was now trading on the OTC Bulletin Board. Noah did some research and felt the company was far too risky an investment for this client, so he did not execute the trade. This turned out to be fortunate for his client since the firm became insolvent within six months of its IPO.
Has Noah done anything wrong?

A. Yes. Noah is guilty of not following a client's instructions and could have his license revoked.

B. No. Noah did what he is hired to do-manage his clients' accounts to the best of his ability.

C. Yes. Noah is guilty of misappropriation and could have his license revoked.

D. Yes. Noah is guilty of making an unauthorized transaction and could have his license revoked.

Correct Answer: A

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Question 5

Today's edition of the Wall Street Journal carried a front page story regarding a federal lawsuit that has been filed against a software manufacturer for monopolistic practices. The CFO of the company called his broker today and sold some of the shares he owns in the company.
Which of the following statements are true?
I. The CFO is guilty of illegal insider trading.
II. If the agent who effected the transaction for the CFO knew he was CFO of the software company, the agent is guilty of illegal insider trading.
III. The broker-dealer for whom the agent works may have its license suspended or revoked if its agent has knowingly executed this illegal insider trade for not having supervised the agent properly.

A. None of the statements is true.

B. I and II only

C. I only

D. I, II, and III

Correct Answer: A

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Question 6

The current yield on a bond fund refers to

A. the return that the fund earned based only on the interest income it received

B. the percentage increase in the fund's net asset value.

C. the total return that the fund has earned over the most recent 12-month period.

D. the return that the fund earned because of the capital appreciation of the securities in the fund.

Correct Answer: A

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Question 7

Which of the following persons is required to maintain its records in accordance with state dictates and meet the minimum net capital requirement imposed by the state?
I. federal covered adviser
II. state-registered investment adviser III. investment adviser representative

A. I and II only

B. II and III only

C. II only

D. I, II, and III

Correct Answer: C

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Question 8

In order to maintain its registration with a state, a broker-dealer may be required to:
I. take a written or oral exam.
II. pay an annual filing fee.
III. maintain a minimum net capital.
IV. file all advertising material with the Administrator.

A. I and II only

B. II and III only

C. I, II, III, and IV

D. II, III, and IV only

Correct Answer: C

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Question 9

If a person has had its license revoked by the Administrator of the state and has appealed the decision to a court of law, that person

A. Both B and C are true statements.

B. must notify the Administrator of the state that it has appealed the decision.

C. can continue business as usual pending the resolution of the appeal.

D. is considered to have a revoked license until the courts rule otherwise.

Correct Answer: A

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Question 10

Ms. Naivete gave Mr. Smooth, owner of Smooth Construction, $40,000 in return for a promissory note that promised to pay interest at the rate of 8% a quarter, with a repayment of principal at the end of two years. The money would be used by Mr. Smooth to rehab a few beach condo units that had been severely hurricane-damaged and that Mr. Smooth had been able to purchase for "pennies on the dollar," or so he said.
The first units would be completed within a month, and the rents would be used to make the interest payments.
The investment was almost as risk-free as U.S. government bonds, Mr. Smooth claimed. By the end of the second year, Ms. Naivete had received a lot of fast talk and only one of the promised interest payments.
Have there been any violation of securities laws in this instance?

A. Both B and C are true statements.

B. Yes. Mr. Smooth was required to register the promissory note before he offered it for sale.

C. Yes. Ms. Naivete has been defrauded by Mr. Smooth.

D. No. This was simply a loan transacted between two parties.

Correct Answer: A

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Question 11

Shady Corporation's executives are concerned over the firm's steadily declining stock price and decide to do something about it. They each decide to make significantly large purchases of their firm's stock in order to stabilize and hopefully even to drive up its price, reasoning that they can sell the stock for the higher price down the road and profit from the transaction. You are a broker-dealer for the firm's executives.
Are Shady's executives planning to do anything illegal?

A. No. As long as they follow the rules and report their purchases to the SEC, it is not illegal for them to purchase shares of their firm's stock.

B. No. It's a win-win. They are using their own money to buy stock of their firm, and this can help drive the stock price up and put profits in their pockets.

C. Yes. Although it is not illegal for them to purchase shares of their firm's stock, they cannot do so in order to try to manipulate the price of the stock.

D. Yes. To purchase shares of their own company is considered to be illegal insider trading.

Correct Answer: C

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Question 12

What criminal penalties are specified for "willful violations" of the Uniform Securities Act?

A. up to 3 years in prison or a $5,000 fine, or both.

B. license suspension.

C. up to 5 years in prison or a $10,000 fine, or both.

Correct Answer: C

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Question 13

In which of the following scenarios is an investment adviser representative required to disclose the fact that someone other than the representative performed the research on which his advice to the client is based?
I. The investment adviser representative recommends the same asset allocation for his client that a buddy of his did after his buddy had done some research for a client with similar characteristics.
II. The investment adviser representative provides a recommendation for his client based on research provided by a broker-dealer that provides the investment adviser with its analysts' recommendations in return for trades that the investment adviser executes using the services of the broker-dealer, as well as a couple of other research sources he finds on the internet.
III. The investment adviser representative submitted his client's information to a data base that provided a recommendation for the asset allocation of the client's investment monies that the adviser deemed was sound and, therefore, recommended it to his client.

A. III only

B. II only

C. I and III only

D. I only

Correct Answer: C

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Question 14

Once a broker-dealer has applied for and been granted state registration, the registration remains valid

A. until December 31st.

B. for three years.

C. for twelve months.

D. for five years.

Correct Answer: A

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Question 15

Registration by coordination is provided for by which of the following federal securities acts?

A. Investment Advisers Act of 1940

B. Securities and Exchange Act of 1934

C. Investment Company Act of 1940

D. Securities Act of 1933

Correct Answer: D

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FINRA Uniform Securities Agent State Law Examination (Series63) Free Practice Test