Series 63 Practice Exam 3 Welcome to your Series 63 Practice Exam 3 This test is designed to prepare you mentally for the actual Series 63 Exam with the same number of (60 questions) and the same time allowed (75 minutes) as the actual exam. The Series 63 Exam is breakdown into Eight (8) Parts. Here are the Eight (8) Domains of the Series 63 Exam with the weightage and number of questions in this practice exam: 1. Regulation of Investment Advisers including state-registered and federal covered advisers [03 Questions] - 05% 2. Regulation of Investment Adviser Representatives [03 Questions] - 05% 3. Regulations of Broker Dealers [09 Questions] - 15% 4. Regulations of Agents Broker-Dealers [09 Questions] - 15% 5. Regulation of Securities and Issuers [03 Questions] - 05% 6. Remedies and Administrative Provisions [06 Questions] - 10% 7. Communications with Customer and Prospects [12 Questions] - 20% 8. Ethical Practices and Obligations [15 Questions] - 25% Please click NEXT to start your Free Series 63 PRACTICE EXAM right away. Best of Luck! 1. One of the distinguishing characteristics of a stock exchange is that A) stock prices are determined by auction. B) it is where unlisted securities trade. C) trading takes place 24 hours per day. D) stock prices are determined by negotiation. None 2. The federal act that essentially eliminated the dual system of state and federal registration of certain securities is A) the Dual Registration Elimination Act of 2001. B) the National Securities Markets Improvement Act of 1996. C) the Securities and Exchange Act of 1934. D) the Uniform Securities Act of 1956. None 3. If the Administrator has summarily suspended an investment adviser representative's registration, the registrant may request a hearing by written request and the hearing will be granted within A) 60 days. B) 15 days. C) 45 days. D) 30 days. None 4. An investment adviser need not register in a state if it has A) a place of business in the state and advises fewer than 5 banks. B) a place of business in the state and only advises employee benefit plans with $1 million or more in assets. C) no place of business in the state and only advises 33 insurance companies located in the state. D) no place of business in the state, does not direct business communications in the state, and advises no more than 10 high-net-worth individuals located in the state. None 5. An investment adviser need not register in a state if it has A) no place of business in the state, does not direct business communications in the state, and advises more than five high-net-worth individuals located in the state. B) a place of business in the state and advises fewer than five banks. C) a place of business in the state and only advises employee benefit plans with more than $1 million. D) no place of business in the state and only advises three insurance companies located in the state. None 6. In which of the following cases would the Uniform Securities Act require registration of an investment adviser who had no place of business in the state? A) Under no circumstances if there is no place of business in the state. B) He had more than five institutional clients domiciled in the state. C) His website was seen by residents of the state. D) He had more than five noninstitutional clients who were residents of the state. None 7. A broker-dealer registered with the SEC has offices in States L, A, and M. The firm has several clients in State G. If the firm does not have a place of business in State G, when would registration as a broker-dealer in that state be required? A) If one of its clients was the CDL Corporation Employee Pension Trust with assets in excess of $9 million B) If the client meets the SEC's annual income standard to qualify as an accredited investor C) If any of its clients are state-chartered banks D) Never, because once a broker-dealer registers with the SEC, state registration is no longer required None 8. A broker-dealer would likely have to register in a state when A) one of the firm's agents sends an email to a resident of that state. B) the firm does not maintain a place of business in the state and only deals with banks. C) individual residents of that state are able to view a listing of the firm's office locations on the firm's website. D) the firm's website provides a list of recommendations based on general criteria such as income or growth. None 9. Under the Uniform Securities Act, which of the following is considered a broker-dealer in a state? A) First Federal Company Trust B) A broker-dealer with no place of business in the state who only does business with other broker-dealers C) An agent effecting transactions for a broker-dealer D) XYZ broker-dealer with an office in the state whose only clients are insurance companies None 10. Which of the following is included in the definition of a broker-dealer under the Uniform Securities Act? A) Out-of-state broker-dealer with no office in this state that services only other broker-dealers located in this state B) Agent C) One who effects securities transactions for his own account or on behalf of others D) Issuer of securities None 11. The Uniform Securities Act provides several exclusions from the definition of broker-dealer. Those include all of the following except A) any person engaged in the business of effecting transactions in commodities for the accounts of others or for his own account. B) any person engaged in the business of effecting transactions in securities for the accounts of others or for his own account. C) any person engaged in the business of effecting transactions in rare coins for the accounts of others or for his own account. D) any person engaged in the business of effecting transactions in real estate for the accounts of others or for his own account. None 12. In compliance with the Uniform Securities Act, a broker-dealer without a place of business in a state meets the definition of a broker-dealer when A) it limits its clientele in that state to registered investment companies. B) it has fewer than six retail clients who reside in the state. C) it confines its business in the state to dealing to other broker-dealers. D) the only clients of the firm in the state are employee benefits plans with assets in excess of $3 million. None 13. The Uniform Securities Act would not consider which of the following to be broker-dealers? A) Individual investors actively trading their own accounts B) Persons in the business of buying or selling securities for their own account C) Persons in the business of underwriting new securities issues D) Persons in the business of buying or selling securities on behalf of others None 14. A broker-dealer registered in States P, S, and U has several clients in State C. If the firm does not have a place of business in State C, the firm would avoid the need to register in State C if its only clients in the state are A) savings and loan associations. B) registered as investment advisers in State C. C) individuals registered as agents with other broker-dealers. D) high-net-worth individuals. None 15. Rachel passed her life insurance license exam six months ago and is now studying the Kaplan material for the Series 63 exam. During this period, Rachel would be permitted to sell A) mutual funds. B) whole life insurance. C) NYSE-listed stocks. D) variable life insurance. None 16. Under the Uniform Securities Act, when must a consent to service of process be filed with the Administrator? A) With the original application and renewal B) With the original application only C) Only when requested by the Administrator D) When a case is pending None 17. Under the Uniform Securities Act, which of the following statements is true regarding registration of a broker-dealer if the application has not been amended? A) Unless specified earlier, registration becomes effective no later than 90 days after the application is filed. B) Unless specified earlier, registration becomes effective no sooner than 15 days after the application is filed. C) Unless specified earlier by the Administrator, the registration becomes effective no later than noon on the 30th day after application. D) Unless specified earlier by the Administrator, the registration becomes effective at noon on the 60th day after application. None 18. Pinnacle Asset Management (PAM) is an SEC-registered broker-dealer. PAM is also registered in more than 25 states. The net capital rule of the SEC requires PAM's net capital to be at least $50,000, and at its most recent calculation, it had net capital of $58,000. One of the states where PAM is registered has a bonding requirement of $60,000. To be in compliance, A) PAM would not be required to post a surety bond. B) PAM would need to post a surety bond of $63,000. C) PAM would need to post a surety bond of $50,000. D) PAM would need to post a surety bond of $60,000. None 19. USATrade Securities, a FINRA member broker-dealer, is registered in 10 Midwestern states. Regarding financial requirements, USATrade must meet those of A) the state with the most stringent financial requirements. B) the SEC. C) FINRA. D) the state in which the principal office of the member is located. None 20. When filing the consent to service of process, which of the following is true? A) It is supplied with the initial registration and remains on file permanently. B) It must be filed annually on the dates specified by the Administrator. C) It expires simultaneously with the registration on December 31. D) It is not required of investment adviser representatives, only investment advisers. None 21. Gamma Delta LLC (GDL) is a broker-dealer registered with the Administrator. The nature of Gamma Delta's business is such that the Administrator requires a $30,000 surety bond. In lieu of the bond, GDL could A) submit a personal guarantee from the LLC's members. B) deposit $30,000 of nonmarketable securities. C) supply a surety bond in the amount of $30,000. D) deposit $30,000 cash. None 22. Which of the following can be substituted for a surety bond? A) Real estate B) Cash or commodities C) Cash or marketable securities D) Commodities, cash, or securities None 23. If the Administrator wishes to conduct an examination of a broker-dealer's books and records, how much advance notice must be given? A) 15 days B) 60 days C) 30 days D) None None 24. A consent to service of process allows the Administrator to A) exercise the power of attorney on behalf of the registrant. B) verify the accuracy and completeness of registration without obtaining the registrant's prior approval. C) terminate a registrant's application. D) ensure that the legal appeal process is expedited as a result of the Administrator's access to information. None 25. Which of the following is not a security? A) Treasury stock B) Commercial paper with less than 270 days to maturity C) Limited partnership in a cattle breeding program D) A condominium purchased as a primary residence None 26. In the Howey decision, the U.S. Supreme Court held that a security must represent A) personal interest in a business. B) debt in a publicly traded corporation whose managers are engaged in commercial activity. C) an investment of money in a common enterprise with the expectation of profit from the efforts of the investor. D) an investment of money in a common enterprise with the expectation of profit from the managerial efforts of others. None 27. A primary issue is A) a secondary market transaction in a security recently offered to the public. B) the first transaction between two parties in the over-the-counter market. C) a sale between investors of securities traded on the New York Stock Exchange. D) a new offering of an issuer sold to investors. None 28. An Administrator has jurisdiction over an offer to sell securities if it is made in a newspaper published out of his state A) with at least a third of its circulation in the state. B) with at least two-thirds of its circulation in the state. C) under no circumstances. D) with at least half of its circulation in the state. None 29. There is a stock that you believe is perfect for your customer's portfolio. However, the stock is not registered for sale in the customer's state of residence, nor is it exempt from registration. You suggest that the customer should enter an unsolicited order for the stock because you will be able to accept that. This is A) an offer to sell only if it is accepted. B) an unsolicited trade. C) an offer to purchase. D) an offer to sell. None 30. Under the Uniform Securities Act, which of the following fits the definition of a sale? A) Issuing a prospectus B) An attempt to dispose of a security for value C) A contract to dispose of a security for value D) A solicitation of an offer to buy a security for value None 31. As defined in the Uniform Securities Act, a sale or an offer to sell would not include A) a sale or an offer of a warrant or right to purchase or subscribe to another security of the same or another issuer. B) any security given or delivered with, or as a bonus on account of, any purchase of securities. C) a purported gift of nonassessable stock. D) a stock dividend that requires only a nominal payment by the shareholder. None 32. An automobile dealer advertises that anyone purchasing a new car this month will receive a $1,000 U.S. Treasury bond as a bonus. Under the Uniform Securities Act, the dealer is A) engaging in the offering for sale of a security. B) committing fraud. C) offering a warrant to buy securities. D) engaging in an unlawful competitive marketing practice. None 33. Under the Uniform Securities Act, which of the following is an offer or a sale? A) The use of securities as collateral for a car loan at a bank B) A gift of stock from a mother to a son C) A 10-for-1 stock split paid to shareholders D) A gift of stock given as a bonus with a purchase of a parcel of real estate None 34. A customer of a broker-dealer viewing a trade confirmation notices that there was a commission subtracted from the proceeds of the sale of her stock. This tells the customer that the broker-dealer A) probably purchased the stock for its own account. B) acted in an agency capacity. C) acted in a principal capacity. D) acted in an unethical manner. None 35. Associated Wealth Managers (AWM) is registered with the Administrator as a registered investment adviser. Therefore, if there have been any material changes, AWM must send a copy of its brochure or a summary of the changes A) to all nonexempt clients within 120 days of the end of its fiscal year. B) to all nonexempt clients within 60 days of the end of its fiscal year. C) to all nonexempt clients within 90 days of the end of its fiscal year. D) within 7 days of receiving a request from a client. None 36. The NASAA Model Brochure Rule for investment advisers requires delivery of a brochure containing information about the adviser's background and business practices in all of the following situations except I. when the service provided is an individual supervisory service. II. when the client is an investment company. III. when the contract is for an impersonal advisory service requiring payment of less than $500. IV. when the client is an individual with a net worth of more than $1 million. A) I, III, and IV B) I and II C) II and III D) II, III, and IV None 37. Toby is registered as an agent with Execrable Investment Returns (EIR), a broker-dealer registered with the SEC and the Administrator. Toby has a customer who is concerned about the possible decline in the value of her invested capital. Toby has suggested a U.S. Treasury bond maturing in 15 years, telling the client that you cannot lose money on a Treasury security. Toby has A) misstated the facts because Treasury bonds do fluctuate in value. B) made an unsuitable recommendation because she will have to wait 15 years to receive the return of her invested capital. C) made a highly suitable recommendations because the repayment of principal is guaranteed by the Treasury. D) made an unsuitable recommendation because an investment in common stock will likely provide a greater return. None 38. Which of the following statements regarding Form ADV Part 2 is true? A) It must be delivered no later than 48 hours prior to entering into an investment advisory contract. B) Unless there are no material changes, it must be delivered to clients annually. C) It must always accompany the investment adviser’s brochure. D) It must be delivered no later than receipt of the client’s funds. None 39. Which of following legal or disciplinary actions occurring within the past 10 years would not have to be disclosed on an investment adviser's brochure? A) Conviction of a misdemeanor involving an investment-related business B) SEC or other federal regulatory agency proceedings in which the person was found in violation of an investment-related statute C) Conviction of a misdemeanor in a civil action regarding payment of motor vehicle violations D) A proceeding before FINRA in which the person was barred or suspended from membership None 40. Caelan is registered as an agent with Execrable Investment Returns (EIR), a broker-dealer registered with the SEC and the Administrator. Caelan is excited about the prospects of a specific stock. For those customers for whom this stock is suitable, Caelan assures them that this stock will double within the year. To back up this claim, Caelan provides a lawyer's letter stating that, for each investor, there will be a cash deposit made to the lawyer's escrow account sufficient to equal the promised return should it not actualize. In this case, Caelan A) has committed the prohibited act of guaranteeing a result. B) is doing a great service for these investors by protecting their investment with the escrow deposit. C) must obtain the approval of a designated supervisor in order to make this claim. D) has committed the prohibited act of introducing an unregistered lawyer to customers. None 41. Under the Uniform Securities Act, a guaranteed security is protected by someone other than the issuer against loss of all of these except A) dividends on equity securities. B) principal on equity issues. C) principal repayment at maturity on debt securities. D) interest on debt securities. None 42. A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclose all of the following except A) account inactivity fees. B) charges for late payments. C) advisory fees. D) fees for issuance of a stock certificate. None 43. With regard to an investment adviser's brochure, disclosure must be made to all current clients and to prospective clients regarding material disciplinary action. Which of the following would not have to be disclosed? A) A court of competent jurisdiction levied a civil fine of $100,000 against the firm resulting from a lawsuit filed by a newsletter publisher claiming the adviser used the publisher’s intellectual property without permission B) Court proceedings, such as a permanent or temporary injunction, against the firm or management person pertaining to an investment-related activity or any felony C) State or regulatory proceedings in which the adviser or a management person was found to have violated rules or statutes that led to the denial, suspension, or revocation of the firm’s or the individual management person’s registration D) Self-regulatory organization proceedings in which the adviser or management person caused the business to lose its registration; the firm or individual was barred, suspended, or expelled; or a fine in excess of $2,500 or a limitation was placed on the adviser or management person’s activities None 44. A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclose all of the following fees except A) markups and markdowns on trades done as a principal. B) interest on debit balances in margin accounts. C) the cost of overnight delivery services. D) safekeeping of customer funds and securities. None 45. An agent tells a customer that by investing in U.S. Treasury bonds, he is guaranteed to be able to sell them at a higher price in the future. Which of the following statements is true? A) This is prohibited if the customer loses money but not if he at least breaks even. B) This is ethical if the Treasury bonds mature in less than one year. C) This is prohibited because it constitutes a guarantee of making a profit. D) This is ethical because U.S. Treasury bonds carry no risk. None 46. Under the Uniform Securities Act, an agent who has inside information that ABC Company stock is about to fall A) may recommend that customers sell ABC but may not tell them why. B) must pass this information on to customers or face charges of withholding information. C) may not trade for his own account or base recommendations to customers on the information. D) may trade on the information for his own account but may not pass on the information. None 47. This morning's financial section of your newspaper has an article discussing several significant material facts relating to a stock held in the portfolio of several of your clients. You would be able to share these facts with your clients A) only if the statement without this fact would make your previous statements misleading. B) only if the customer did not work for the issuer and did not know this information. C) under no circumstances until the clients have had a chance to read the article themselves. D) with or without the issuer’s permission. None 48. An agent implies to his customers that he has inside information that will have a dramatic effect upon the price of the company's stock. In truth, he does not have this kind of information and no trades result. Under the antifraud provisions of the Uniform Securities Act, this is A) fraudulent because he is giving misleading information to his clients. B) not fraudulent because the policy does not deal with braggarts. C) not fraudulent because no sale based on inside information actually took place. D) fraudulent because he is acting on inside information. None 49. Which of the following persons are subject to the antifraud provisions of the Uniform Securities Act? I. An investment adviser who receives a fee directly from clients II. An agent who receives no compensation directly from customers but is paid by a broker-dealer III. A broker-dealer who advises customers on the value of securities but is compensated only in the form of commissions on sales A) I and III B) I and II C) I, II, and III D) I only None 50. One of your clients has called you to discuss an interesting investment opportunity discovered on one of the LinkedIn groups she participates in. Which of the following factors might increase the likelihood that this is a scam? I. A registration statement with the SEC is available on the website of the proposed investment. II. The purchase money must be wired to an offshore account. III. One of the members of the group is a principal in the company being offered. IV. Bonus shares are offered for recruiting friends into the deal. A) I and III B) I, II, III, and IV C) II and IV D) II, III, and IV None 51. If an agent fails to inform a client that a company whose security he is selling is changing the investment managers of its employees' pension plan, under the Uniform Securities Act, this omission constitutes A) no violation. B) a misdemeanor. C) a civil violation punishable by a fine up to $5,000. D) a criminal violation punishable by up to three years in prison. None 52. Which of the following sales would be exempt from the antifraud provisions of the Uniform Securities Act? A) Sale of an exempt security B) Sale of an exempt security in an exempt transaction C) Sale of a nonexempt security D) Sale of a term life insurance policy None 53. An agent has a client who works in the legal department of ABC Manufacturing Corp. The client informs the agent that the company is going to be taken over by a competitor at a sizeable premium to the current market price. If the agent uses this information to solicit buy orders from clients and prospects, this is an example of A) a violation of the prohibition against using inside information. B) doing a good job in finding undervalued companies like ABC. C) being a well-informed agent. D) using all the resources an agent has available in developing good investment ideas. None 54. Under the antifraud provisions of the Uniform Securities Act, agents are prohibited from all of the following except A) engaging in any fraudulent or deceitful practice in the normal course of business. B) employing any device, scheme, or artifice to defraud. C) omitting nonmaterial information from a sales presentation. D) engaging in any practice that the Administrator defines by rule as unethical. None 55. An agent receives inside information concerning an impending merger. Under the Uniform Securities Act, the agent may divulge the information to A) anyone after public notice. B) no one other than the Administrator until there is a public announcement. C) her best customers three days before a public announcement. D) anyone three days before a public announcement. None 56. An agent has been recommending that customers buy common stock in XYZ Company. If on a visit to XYZ he overhears unreleased news that XYZ has just lost its biggest account, the agent should I. discuss the situation with his supervisory principal. II. continue to recommend the security to customers and prospects. III. stop recommending the security to customers and prospects. IV. sell the stock short in his brother's account. A) I only B) III only C) I and III D) I, III, and IV None 57. Under the Uniform Securities Act, all of the following are improper actions except A) an agreement by the agent to repurchase the security from the customer for the same price at a future date. B) excessive transaction costs. C) a statement by the agent that the security will be listed on an exchange once the company announces its intention to do so. D) a two-month delay in delivering the security to the customer. None 58. In cases of fraudulent sales practices or advice with respect to securities, state securities Administrators may I. not take enforcement action against federal covered investment advisers. II. take enforcement action against federal covered investment advisers. III. not take enforcement action against state-registered investment advisers. IV. take enforcement action against state-registered investment advisers. A) III and IV B) I and II C) II and IV D) III only None 59. If an agent misrepresents the price of a customer's stock by $10 per share to encourage the client to sell, this activity is A) a misrepresentation and a fraudulent act. B) allowed if the customer ultimately makes a profit in the account. C) allowed if the agent views the difference as a service charge. D) a misrepresentation but not a fraudulent act. None 60. Which of the following is not a fraudulent practice? A) Entering a buy order for a stock at the same time another agent enters a sale order for the purpose of creating the appearance of market activity in the stock B) Protecting a nervous client by inflating the value of her account C) Buying shares of stock on one exchange and simultaneously selling the same shares on another exchange to take advantage of a price differential D) Quoting a lower-than-market price to get an order, then telling the customer that the price jumped after the order was taken None 1 out of 60 Time is Up! Time's upTime is Up!
