The Uniform Securities Act (USA) is
B
Explanation:
The Uniform Securities Act (USA) provides a model for states to follow when formulating their own
securities laws. It does not, itself, contain any laws.
Once you have passed the Series 63 examination, which entity must then approve your application to
sell securities?
D
Explanation:
Once you have passed the Series 63 exam, it is the state administrator who can approve or deny your
registration. NASAA developed the Uniform Securities Agent State Law Examination and FINRA
administers it. The SEC is not a party to the state registration process.
Which of the following securities would not necessarily be exempt from state registration?
A
Explanation:
Stocks listed on the Tokyo Stock Exchange would not necessarily be exempt from state registration.
Stocks that are registered with the SEC, such as NASDAQ National Market Issue stocks, securities
issued or guaranteed by the Canadian government, and securities issued or guaranteed by banks or
credit unions are all exempt.
Moe is a registered investment adviser doing business under the name of MoeMoney Investment
Advisers, LLC. Larry, Curly, and Mary all hold positions with the firm. Larry is on the board of
directors; Mary is a sales representative for the firm; and Curly is an administrative assistant, who
performs clerical duties.
Given that Moe is already a registered investment adviser, which of the other three are automatically
registered as investment adviser representatives?
A
Explanation:
As a director of the firm, Larry would automatically be registered as an investment adviser
representative of MoeMoney Investment Advisers. Although directors and officers of the firm are
automatically registered as investment adviser representatives, Mary, as a sales representative,
would have to apply for her own registration. Curly does not need to be registered since he performs
only clerical duties.
Jack is employed by NewCorp, which is engaging in an initial public offering (IPO). Jack will need to
register as a sales representative if he:
C
Explanation:
Jack will need to register as a sales representative if he participates in the sale of new stock to
individual investors. Those who deal directly with the public need to register as sales representatives
under the Uniform Securities Act. If Jack limits his involvement to transactions with the underwriters
or financial institutions, he need not register.
Blue Sky Laws are designed to:
A
Explanation:
The main purpose of Blue Sky Laws is to protect individual investors from fraud in their securities
market transactions. Requiring the registration of new security issues and the registration of those
persons who advise individual investors as well as those involved in the purchase and sale of
securities to the public are just some of the regulations designed to do this. There are no provisions
designed to protect agents, broker-dealers, or investment advisers and their representatives in any
regard.
An individual who represents a broker-dealer in the buying and selling of securities is called a(n):
C
Explanation:
An individual who represents a broker-dealer in buying and selling securities is called an agent or a
registered representative. An agent may also work for an issuer, which refers to the entity that is
selling securities to raise money for itself. An underwriter is the entity that aids the issuer in bringing
the new securities to market. Administrator is the title many states use to refer to the official in
charge of enforcing the state’s securities regulations.
Which of the following statements best explains the difference between an agent and a broker-
dealer?
A
Explanation:
The main difference between an agent and a broker-dealer is that an agent represents either a
broker-dealer or an issuer and buys and sells securities he doesn’t own, receiving a commission for
the trades he executes. A broker-dealer, when functioning as a dealer, is buying and selling for his
own portfolio, thereby profiting from any price appreciation in the assets in his portfolio. Both agents
and broker-dealers must meet state licensing requirements; both engage in the purchase and sale of
stocks, bonds, and option contracts; and both operate in both the primary and secondary markets.
on No: 9
Rich Writewell wants to begin publishing an independent weekly financial newsletter that will
provide investment recommendations as well as other financial news items to the general public.
Rich hopes that his newsletter will achieve nationwide circulation within a few months.
Which of the following statements is true?
D
Explanation:
Rich will not have to register as an investment adviser since he is publishing a legitimate financial
newsletter that will be distributed to the general public. The definition of the term “investment
adviser” excludes publishers of bona fide business or financial publications that are published
regularly and have general circulation.
Erin is a registered agent who works for SecureMoney Brokers-dealers. One of her clients, Mrs.
McTurk, is a recently-widowed woman who relies on Erin for advice about her investment portfolio.
Mrs. McTurk reminds Erin of her own grandmother, and she is happy to provide guidance within the
sphere of her own knowledge.
Based on these facts, which of the following statements is true?
D
Explanation:
Neither SecureMoney Broker-dealers nor Erin must register as an investment adviser based on the
facts provided since neither the broker-dealer nor Erin is receiving any compensation for the advice
Erin is giving Mrs. McTurk. In this instance, the advice provided is considered incidental to the broker-
dealer business.
Which of the following would not fall under the classification of “institutional investor”?
C
Explanation:
Nuering Investment Advisers would not fall under the classification of “institutional investor.”
Institutional investors are defined as banks, insurance companies, mutual funds, some pension plans,
and broker-dealers registered under the Securities Exchange Act of 1934. Investment advisers are not
part of this group.
Which of the following is an example of a non-issuer transaction?
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.
Which of the following is not considered to be a security, as defined by the Uniform Securities Act
(USA)?
D
Explanation:
The Uniform Securities Act excludes annuity contracts wherein an insurance company promises
either to pay a fixed sum, either in a lump amount or through periodic payments, from its definition
of a security. Debentures, CDs, and option contracts are all classified as securities under the USA.
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.
C
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.
Jeremy Sly considered himself somewhat of an inventor. The only problem was that his day job
interfered with his opportunity to exercise his creativity. He came up with a plan to get outside
investors to support his inventive activities. To this end, he produced and distributed a brochure
advertising partnership interests with a guaranteed return on investment of at least 15% after the
first 12 months, based on what he had allegedly generated from his other (non-existent) inventions.
Given these facts, is Jeremy guilty of any security violations under the Uniform Securities Act (USA)?
D
Explanation:
Yes. Jeremy is guilty of security violations under the Uniform Securities Act when he provides
misleading information when offering securities for sale, even if no securities are actually sold.
Partnership interests fall under the definition of securities, and Jeremy’s claim to have generated a
return of at least 15% on other inventions that he never created is an absolute falsehood.