Series 63 Practice Test – Career Employer Test Prep

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Welcome to your Series 63 Practice Test

This test is designed to prepare you mentally for the actual Series 63 Exam with (100 questions).

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 [05 Questions] - 05%

2. Regulation of Investment Adviser Representatives [05 Questions] - 05%

3. Regulations of Broker Dealers [15 Questions] - 15%

4. Regulations of Agents Broker-Dealers [15 Questions] - 15%

5. Regulation of Securities and Issuers [05 Questions] - 05%

6. Remedies and Administrative Provisions [10 Questions] - 10%

7. Communications with Customers and Prospects [20 Questions] - 20%

8. Ethical Practices and Obligations [25 Questions] - 25%

Please click NEXT to start your Free Series 63 PRACTICE TEST right away.

Best of Luck!

Series 63, Regulation of Investment Advisers including state-registered and federal covered advisers,Series 63

An investment adviser registered with the state who maintains custody of customer funds and securities is generally required to provide the Administrator with a surety bond in the minimum amount of $35,000. The bond provides protection to advisory clients when

A) the Administrator in one of the states where the investment adviser does business determines that the firm is not properly registered in that state.

B) a customer following recommendations made by the investment adviser loses more than the fees charged for the advice.

C) the investment adviser or one of its representatives converts customer funds for personal use.

D) the investment adviser is operating at a loss.

None

1 out of 100

Series 63, Regulation of Investment Advisers including state-registered and federal covered advisers,Series 63

As found in the Uniform Securities Act, which of the following would not be an issuer?

A) A metal refinery whose stock is traded in the OTC market

B) A smelter producing gold bullion for sale to investors

C) A person who has proposed to issue a security but has not yet issued it

D) A finance company offering promissory notes

None

2 out of 100

Series 63, Regulation of Investment Advisers including state-registered and federal covered advisers,Series 63

When a security is sold in a manner that creates an exemption from registration in a state, it is

A) an exempt transaction.

B) an illegal transaction.

C) a federal transaction.

D) an exempt security.

None

3 out of 100

Series 63, Regulation of Investment Advisers including state-registered and federal covered advisers,Series 63

Because the Series 63 is a law exam, it is incumbent on Series 63 students to recognize the difference between several similar terms. For example, in which of these cases would a person not be defined as a broker-dealer?

A) The person is excluded from the definition of a broker-dealer.

B) The person is exempt from registration as a broker-dealer.

C) The person limits its securities business to securities listed on a stock exchange.

D) The person limits its securities business to a single state.

None

4 out of 100

Series 63, Regulation of Investment Advisers including state-registered and federal covered advisers,Series 63

Blue-sky laws pertain to all of the following except

A) the regulation of securities transactions in a state.

B) the regulation of securities trading in foreign countries.

C) the registration of securities within a state.

D) the registration of securities salespeople in a state.

None

5 out of 100

Series 63, Regulation of Investment Adviser Representatives,Series 63

Under the Uniform Securities Act, all of the following are excluded from the definition of an investment adviser except

A) broker-dealers and their agents.

B) a federal covered adviser.

C) banks.

D) a person in the business of providing advice on municipal bonds for compensation.

None

6 out of 100

Series 63, Regulation of Investment Adviser Representatives,Series 63

Registration as an investment adviser or investment adviser representative under the Uniform Securities Act is required of

A) an officer of a trust company handling investments for trust accounts.

B) an agent of a broker-dealer who recommends model portfolios to clients in exchange for them executing their trades through him.

C) a tax attorney who, as an incidental part of his tax practice, recommends that his high tax bracket clients investigate the use of municipal bonds in their portfolios.

D) an economics professor at a local community college who gives lectures in the evenings to public groups about portfolio analysis for which he charges a nominal fee.

None

7 out of 100

Series 63, Regulation of Investment Adviser Representatives,Series 63

Under the Uniform Securities Act, an investment adviser is exempt from registration if it has no place of business in a state and its only clients are any of the following except

A) other investment advisers.

B) broker-dealers.

C) investment companies.

D) accredited investors.

None

8 out of 100

Series 63, Regulation of Investment Adviser Representatives,Series 63

According to the Uniform Securities Act, which of the following statements is true?

A) An investment adviser with only a small branch office in the state, who conducts business exclusively with insurance companies located in the state, need not register in the state.

B) An investment adviser with no place of business in the state, who conducts business exclusively with insurance companies located in the state, need not register in the state.

C) If an agent is hired away from his broker-dealer by another broker-dealer, only the new broker-dealer must notify the Administrator.

D) Only the employing adviser, not the investment adviser representative, must register in the state.

None

9 out of 100

10.

Series 63, Regulation of Investment Adviser Representatives,Series 63

Under the Uniform Securities Act, investment advisers are exempt from registration in a state where they have no office if they direct business communications to fewer than six retail clients within any

A) 12-month period.

B) 2-year period.

C) 6-month period.

D) 30-day period.

None

10 out of 100

11.

Series 63, Regulations of Broker Dealers,Series 63

A broker-dealer with no place of business in the state would not be required to register with the Administrator if its only clients were

A) executors of an estate.

B) limited to five or fewer retail investors over any 12-month period.

C) savings institutions.

D) accredited investors.

None

11 out of 100

12.

Series 63, Regulations of Broker Dealers,Series 63

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 need to register in State C if any of its clients in the state are

A) property and casualty insurance companies.

B) retail investors.

C) trust companies.

D) investment companies.

None

12 out of 100

13.

Series 63, Regulations of Broker Dealers,Series 63

Broad Street Securities (BSS) is a broker-dealer based in State P with offices in no other state. In addition to its State P clients, BSS has 4 retail customers living in State M. During the winter, if 14 existing customers vacation in State A for up to two months at a time, BSS meets the Uniform Securities Act's definition of a broker-dealer in

A) States M and A.

B) State P only.

C) States P, M, and A.

D) States P and M.

None

13 out of 100

14.

Series 63, Regulations of Broker Dealers,Series 63

Under the Uniform Securities Act, the term broker-dealer would include

A) an issuer distributing its own common stock offering.

B) agents registered under the act who from time to time sell stock from their personal brokerage accounts.

C) a person with no office in the state who effects securities transactions with over 25 different insurance companies domiciled in the state.

D) a person with no office in the state who sells variable life insurance policies to no more than five retail investors residing in the state during any 12-month period.

None

14 out of 100

15.

Series 63, Regulations of Broker Dealers,Series 63

If an incorporated entity sells nonexempt securities to public customers, receives a commission on the sale of the securities, and pays commissions to the employees who sell them, according to the Uniform Securities Act, the corporation is

A) a corporation selling only to sophisticated investors.

B) a corporation selling to an employee pension fund.

C) a broker-dealer engaging in exempt transactions.

D) a broker-dealer that must be registered.

None

15 out of 100

16.

Series 63, Regulations of Broker Dealers,Series 63

An individual recently inherited $100,000 and would like to invest some of that money into stocks and bonds. To purchase those securities, the individual would most likely use the services of

A) a broker-dealer.

B) a mutual fund.

C) an accountant.

D) a bank.

None

16 out of 100

17.

Series 63, Regulations of Broker Dealers,Series 63

Which of the following would meet the Uniform Securities Act's definition of broker-dealer?

A) Rushmore Investments, a person specializing in the sale of mutual funds

B) Strathmore Investments, a person specializing in buying and selling physical gold

C) Cranmore Secured Investments, a person specializing in the sale of foreclosed single-family homes

D) Baltimore Investment Specialists, a person concentrating in buying and selling rare stamps

None

17 out of 100

18.

Series 63, Regulations of Broker Dealers,Series 63

A broker-dealer with no place of business in a state is not defined as a broker-dealer in that state when its only clients in that state are

A) an employee benefit plan with assets of $800,000.

B) registered investment companies.

C) an individual who meets the definition of accredited investor.

D) non-profit organizations.

None

18 out of 100

19.

Series 63, Regulations of Broker Dealers,Series 63

Under the Uniform Securities Act, which of the following is, by definition, a broker-dealer in a state?

A) XYZ broker-dealer without an office in the state whose only clients are insurance companies

B) XYZ broker-dealer with an office in the state whose only clients are banks

C) A broker-dealer with no place of business in the state who only does business with other broker-dealers

D) An agent effecting transactions for a broker-dealer

None

19 out of 100

20.

Series 63, Regulations of Broker Dealers,Series 63

An existing customer of Broker-dealer A is on vacation in State N. Broker-dealer A, who is registered in and maintains offices only in State F, wishes to make the vacationing customer aware of an investment opportunity that has just become available. Which of the following is true?

A) Broker-dealer A must notify the State N Administrator before calling this customer in that state.

B) Broker-dealer A may solicit this customer in State N.

C) Broker-dealer A may not solicit this customer in State N unless Broker-dealer A and the agent making the call are registered in State N.

D) Broker-dealer A may not solicit this customer in State N unless the broker-dealer has a branch office registered in that state.

None

20 out of 100

21.

Series 63, Regulations of Broker Dealers,Series 63

Under the Uniform Securities Act, which of the following are not excluded from the definition of broker-dealer?

A) Issuers of securities

B) Agents

C) Banks

D) Persons who effect securities transactions as part of a regular business solely for their own accounts

None

21 out of 100

22.

Series 63, Regulations of Broker Dealers,Series 63

Under the Uniform Securities Act, each of the following is specifically excluded from the definition of a broker-dealer except

A) an international bank.

B) an agent.

C) an issuer.

D) an investment adviser.

None

22 out of 100

23.

Series 63, Regulations of Broker Dealers,Series 63

The Uniform Securities Act refers to a broker-dealer by using the language any person. Although that is a broad term, it would be unusual to find a broker-dealer structured as

A) a limited liability company (LLC).

B) a corporation.

C) a sole proprietorship.

D) a partnership.

None

23 out of 100

24.

Series 63, Regulations of Broker Dealers,Series 63

Under the Uniform Securities Act, which of the following statements regarding the business structure of a broker-dealer are true? I. It can be a sole proprietorship. II. It can be a corporation. III. It can be a stock exchange. IV. It can be a partnership.

A) II and IV

B) I and III

C) I, II, III, and IV

D) I, II, and IV

None

24 out of 100

25.

Series 63, Regulations of Broker Dealers,Series 63

In our everyday lives, we often come across the term dealer. It might be an automobile dealer, an appliance dealer, or a furniture dealer. In each case, the adjective describes the product handled by that dealer. In the case of a broker-dealer registered with the Administrator, the product is

A) life insurance.

B) securities.

C) investments.

D) brokers.

None

25 out of 100

26.

Series 63, Regulations of Agents Broker-Dealers,Series 63

The registration of a broker-dealer in this state would automatically register as an agent

A) an investment adviser representative of the broker-dealer.

B) an agent who sits on the board of directors of the broker-dealer.

C) a secretary who has been employed by the firm for the past five years.

D) all employees of the broker-dealer.

None

26 out of 100

27.

Series 63, Regulations of Agents Broker-Dealers,Series 63

The Administrator may require an applicant for registration as an agent to do all of the following except

A) submit fingerprints.

B) place an advertisement in one or more newspapers circulated in the state.

C) pay a registration fee.

D) pass a qualification examination.

None

27 out of 100

28.

Series 63, Regulations of Agents Broker-Dealers,Series 63

Under the Uniform Securities Act, the registration requirements for agents would never include

A) a consent to service of process.

B) an examination.

C) minimum capital.

D) surety bonding.

None

28 out of 100

29.

Series 63, Regulations of Agents Broker-Dealers,Series 63

A Canadian broker-dealer is registered in the province of Alberta. The firm has clients who vacation in Arizona, New Mexico, and Texas, and they would like to continue to do business with them while on their holidays. Under the Uniform Securities Act,

A) this would only be permitted if the trades were executed through an affiliated domestic broker-dealer who is licensed in those states.

B) this is permissible only if the broker-dealer is registered with the SEC.

C) this is permissible if the broker-dealer is properly registered in Alberta, deals only with existing clients, and registers in each of the states.

D) the broker-dealer may only accept unsolicited orders from their existing clients while they are vacationing in the U.S.

None

29 out of 100

30.

Series 63, Regulations of Agents Broker-Dealers,Series 63

Under the Uniform Securities Act, who automatically becomes registered as an agent when a broker-dealer firm's registration becomes effective?

A) Any individual who has contributed capital to fund the organization

B) Any partner, officer, or director of the firm who is active as an agent in the firm's securities business

C) All individuals for whom an agent's application has been filed

D) Any individual who directly handles securities

None

30 out of 100

31.

Series 63, Regulations of Agents Broker-Dealers,Series 63

An agent's registration is considered effective

A) once the licensing fee has been paid.

B) when approval has been granted by the Administrator.

C) when approval has been granted by FINRA.

D) upon passing the Series 63 Uniform Securities Agent State Law exam.

None

31 out of 100

32.

Series 63, Regulations of Agents Broker-Dealers,Series 63

Jamal is registered as an agent with Dearborn Distinctive Investments (DDI), a broker-dealer registered with the SEC and a number of states. Due to some poor management mishaps, the SEC revokes DDI's registration as a broker-dealer. How does this affect Jamal's registration as an agent?

A) His registration is not affected.

B) His registration is revoked.

C) His registration is no longer active.

D) His registration remains active as long as he registers with an active broker-dealer within 30 days.

None

32 out of 100

33.

Series 63, Regulations of Agents Broker-Dealers,Series 63

Under the Uniform Securities Act, an agent's license is effective for

A) 20 years.

B) 18 months, of which the first 6 months is a probationary period.

C) 1 year initially and then renewing as of the following December 31.

D) the time remaining until December 31 of that year, at which time it must be renewed.

None

33 out of 100

34.

Series 63, Regulations of Agents Broker-Dealers,Series 63

Under the Uniform Securities Act, a person who has passed the appropriate NASAA examination but whose license has not yet been issued can participate in

A) giving a seminar on the benefits of whole life insurance versus term insurance.

B) prospecting for new clients by mail.

C) prospecting for new clients in person.

D) accepting unsolicited orders.

None

34 out of 100

35.

Series 63, Regulations of Agents Broker-Dealers,Series 63

On the basis of information gathered from reliable sources, an Administrator has reason to believe that a broker-dealer located in the state is engaging in practices that might be a violation of the Uniform Securities Act. As a result, the Administrator assembles a task force to conduct a surprise audit of the firm's operations. In doing so, the Administrator's task force would be able to enter the broker-dealer's premises

A) at any time during regular business hours without prior notice.

B) upon 15 days' notice.

C) upon 1 day's notice.

D) upon 1 hour's notice.

None

35 out of 100

36.

Series 63, Regulations of Agents Broker-Dealers,Series 63

Charles Horse is the CEO of Farrier and Nail, a new broker-dealer applying for registration in a number of states. In completing the application, which of the following events in the CEO's life must be disclosed?

A) Any charge, conviction, or guilty plea to a misdemeanor involving investments or an investment-related business or bribery, forgery, extortion, or similar offenses

B) Any charge, conviction, or guilty plea to a misdemeanor involving investments or an investment-related business or bribery, forgery, extortion, or similar offenses, limited to the past 10 years

C) Any charge, conviction, or guilty plea to a misdemeanor involving failure to pay child support or alimony or similar domestic offenses

D) Financial condition and history including a recent credit report

None

36 out of 100

37.

Series 63, Regulations of Agents Broker-Dealers,Series 63

High Performance Securities (HPS) is a broker-dealer registered in States A, B, and E. State E is the location of the HPS principal office. If a customer of HPS files a complaint with the Administrator of State A,

A) the State A Administrator has no jurisdiction and must forward the complaint to the State E Administrator.

B) the State A Administrator can pay a surprise visit to the principal office in State E during normal business hours and demand to see the records relevant to the customer's complaint.

C) the State A Administrator must make an appointment with the designated HPS supervisor and schedule the investigation at a time convenient for both.

D) the State E Administrator will use the consent to service of process filed by HPS to act as the attorney for HPS.

None

37 out of 100

38.

Series 63, Regulations of Agents Broker-Dealers,Series 63

Adrian sells life insurance as an independent licensed insurance producer for several large insurance companies. Selling variable life insurance also requires registration as an agent with a broker-dealer handling that product. Supervisory responsibility over Adrian's sales of variable life is that of

A) the insurance company underwriting the variable life insurance policy.

B) the broker-dealer with whom Adrian is registered.

C) the state insurance commissioner.

D) the Administrator of the state where the policy is sold.

None

38 out of 100

39.

Series 63, Regulations of Agents Broker-Dealers,Series 63

The Administrator wishes to examine the books of a broker-dealer registered in her state. She may do so

A) anytime she wishes.

B) only after an appointment has been made with the broker-dealer.

C) no more frequently than on a quarterly basis.

D) only if the broker-dealer has a place of business in the state.

None

39 out of 100

40.

Series 63, Regulations of Agents Broker-Dealers,Series 63

Registration with the Administrator as a broker-dealer generally requires the filing of

A) Form U4.

B) Form BD.

C) Form Broker-Dealer.

D) Form ADV.

None

40 out of 100

41.

Series 63, Regulation of Securities and Issuers,Series 63

A study of the Uniform Securities Act would reveal that not included in the definition of a security would be

A) preferred stock in the Colonel Corn Processing Corporation.

B) common stock in the Shining Silver Mining Company.

C) whole life insurance policies issued by the Dividend Mutual Life Insurance Association of America.

D) debentures issued by the XYZ Retirement Planning Company.

None

41 out of 100

42.

Series 63, Regulation of Securities and Issuers,Series 63

As defined in the Uniform Securities Act, which of the following is not a security?

A) A preorganization certificate

B) A bond whose interest payments are guaranteed by a state government

C) $10,000 worth of gold ingots

D) Treasury stock

None

42 out of 100

43.

Series 63, Regulation of Securities and Issuers,Series 63

All of the following are correct statements when referring to a nonissuer transaction except

A) it does not benefit the issuer.

B) it is a secondary transaction.

C) it is between two persons on a stock exchange or over the counter.

D) it must take place in the over-the-counter market rather than on the floor of an organized stock exchange.

None

43 out of 100

44.

Series 63, Regulation of Securities and Issuers,Series 63

Which of the following are not classified as securities under the Uniform Securities Act?

A) Options on commodities futures

B) Options on stocks

C) Commodities futures

D) Stocks

None

44 out of 100

45.

Series 63, Regulation of Securities and Issuers,Series 63

As defined in the Uniform Securities Act, which of the following is not a security?

A) A fixed annuity

B) A debenture

C) A transferable share

D) A corporate bond

None

45 out of 100

46.

Series 63, Remedies and Administrative Provisions,Series 63

An investor who resides in New York reads an ad for advisory services in a newspaper published in New Jersey. More than 80% of the newspaper's circulation is in the state of New York. According to the Uniform Securities Act, an offer has been made in

A) New Jersey.

B) New York.

C) New Jersey and New York.

D) neither New Jersey nor New York.

None

46 out of 100

47.

Series 63, Remedies and Administrative Provisions,Series 63

DMF Securities, a registered broker-dealer, is advertising securities through direct mail. Which of the following is considered an offer to sell securities in this state?

A) A client inquires about purchasing securities from a broker-dealer.

B) A prospective client located in a neighboring state receives, at his home address, a direct letter offering securities for sale.

C) A prospective client located in the state receives, at his home address, a direct letter offering securities for sale.

D) A prospective client residing in another state, whose mail has been forwarded to her children's home in this state, receives, at their address, a direct letter offering securities for sale.

None

47 out of 100

48.

Series 63, Remedies and Administrative Provisions,Series 63

Under the Uniform Securities Act, Administrators of all of the following states have jurisdiction except

A) the state in which an offer to sell securities was accepted.

B) the state into which an offer to sell securities was directed.

C) the state from which payment for the purchase of securities was made.

D) the state from which an offer to sell securities originated.

None

48 out of 100

49.

Series 63, Remedies and Administrative Provisions,Series 63

An agent works in Buffalo, New York and is registered in New York and Ohio. If the agent contacts a retail client in Ohio recommending the purchase of an unregistered non-exempt security, jurisdiction over this violation of the Uniform Securities Act would lie with the Administrator(s) of

A) neither state until a transaction takes place.

B) both New York and Ohio.

C) New York.

D) Ohio.

None

49 out of 100

50.

Series 63, Remedies and Administrative Provisions,Series 63

An agent based in Alabama directs a solicitation to a customer who lives in Connecticut while the customer is temporarily in Indiana. The customer does not accept the offer until he arrives back in Connecticut. According to the Uniform Securities Act, the Administrators of which of the following states have jurisdiction?

A) Indiana and Connecticut

B) Alabama and Indiana

C) Alabama and Connecticut

D) Alabama, Connecticut, and Indiana

None

50 out of 100

51.

Series 63, Remedies and Administrative Provisions,Series 63

What is the difference between an offer and a sale?

A) An offer must be approved by a branch manager and a sale needs no approval.

B) An offer can be made only by a customer and a sale can be made only by a broker-dealer.

C) An offer is the attempt to sell and a sale is a binding contract to transfer a security for value.

D) An offer is a binding proposal to sell and a sale is a nonbinding proposal to sell.

None

51 out of 100

52.

Series 63, Remedies and Administrative Provisions,Series 63

Which of the following involves an offer or sale?

A) A stock dividend with no cost to the shareholder

B) A pledge of stock as collateral for a loan

C) An exchange of securities due to a corporate reorganization

D) A gift of an assessable security

None

52 out of 100

53.

Series 63, Remedies and Administrative Provisions,Series 63

As defined in the Uniform Securities Act, which of the following is not an offer or a sale?

A) A contract of sale for a security

B) An NYSE-listed corporation declares a 2-for-1 stock split

C) A purported gift of assessable stock

D) The sale of a warrant

None

53 out of 100

54.

Series 63, Remedies and Administrative Provisions,Series 63

Under the Uniform Securities Act, a sale includes all of the following except

A) a contract of sale.

B) a disposition of a security for value.

C) a pledge of securities for the purpose of obtaining a margin loan.

D) a contract to sell.

None

54 out of 100

55.

Series 63, Remedies and Administrative Provisions,Series 63

According to the Uniform Securities Act, a sale is

A) a solicitation of an offer to buy.

B) an attempt to transfer ownership of a security.

C) an offer of an equivalent contract.

D) a contract to transfer ownership of a security for value.

None

55 out of 100

56.

Series 63, Communications with Customer and Prospects,Series 63

A prospective client would like information on the post-secondary schools attended by those employees of an investment adviser who will be making advisory decisions. That information can be found by requesting

A) Form ADV Part 1B.

B) Form ADV Part 1A.

C) Form ADV Part 2B.

D) Form ADV Part 2A.

None

56 out of 100

57.

Series 63, Communications with Customer and Prospects,Series 63

A state-registered investment adviser offers wrap fee programs to certain clients. Which of the following statements about wrap fee arrangements is not true?

A) Material changes to wrap fee programs must be filed promptly with the Administrator.

B) Nonmaterial changes to wrap fee programs must be disclosed to the Administrator within 90 days of fiscal year-end.

C) Because this investment adviser offers wrap fee programs, it must make certain annual disclosures to the SEC.

D) Information on Appendix 1 of Form ADV Part 2A must also be contained in client disclosure documents.

None

57 out of 100

58.

Series 63, Communications with Customer and Prospects,Series 63

NASAA has created a Model Rule dealing with the creation of and delivery requirements for an investment adviser brochure. Which of the following statements correctly identify the delivery requirements?

A) The brochure may be delivered to prospective and new advisory clients at the time of entering into any such contract if the advisory client has a right to terminate the contract without penalty within five business days after entering into the contract.

B) Annual delivery of the brochure to prospective clients must be made within 120 days of the end of the adviser’s fiscal year.

C) The brochure may be delivered to prospective and new advisory clients no later than 48 hours after entering into the advisory contract if the advisory client has a right to terminate the contract without penalty within five business days after entering into the contract.

D) The brochure may be delivered to prospective and new advisory clients at least 48 hours prior to entering into the advisory contract if the advisory client has a right to terminate the contract without penalty within five business days after entering into the contract.

None

58 out of 100

59.

Series 63, Communications with Customer and Prospects,Series 63

A broker-dealer publishes a list of securities it approves for inclusion in IRAs. This means

A) the broker-dealer has committed an unethical business practice because use of the word approved is prohibited.

B) the broker-dealer has evaluated these securities and believes they would be suitable for inclusion for retirement planning.

C) an agent for the broker-dealer can place these in clients’ IRAs, knowing that the suitability requirements have been met.

D) the broker-dealer has consulted with the regulatory bodies and has received approval from them to recommend these securities for IRAs.

None

59 out of 100

60.

Series 63, Communications with Customer and Prospects,Series 63

James Douglas, an agent with Government Securities Specialists (GSS), a broker-dealer registered in this state, sells his client 10 U.S. government bonds due to mature in 30 years. According to NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following statements may Douglas legally make?

A) “The U.S. government guarantees that principal and interest payments will keep pace with inflation.”

B) “The bonds are guaranteed as to principal and interest payments by the U.S. government.”

C) “There is no way to lose money on the safest security on earth.”

D) “The full faith and credit backing of the U.S. government means virtually no chance of loss.”

None

60 out of 100

61.

Series 63, Communications with Customer and Prospects,Series 63

Keshawn is registered as an agent with Execrable Investment Returns (EIR), a broker-dealer registered with the SEC and the Administrator. Keshawn just opened an account with a new customer, someone who has never invested in securities. In an effort to curb the customer's anxiety over market fluctuations, Keshawn explains a program he worked out with EIR that provides a cash deposit to a customer's account whenever the price of a stock in that account declines by more than 5%. This program is

A) prohibited because agents and their broker-dealers cannot offer a guarantee against loss.

B) permitted, as long as the customer’s account is approved for margin trading.

C) sure to make this customer less anxious.

D) likely to make this customer recommend Keshawn and EIR.

None

61 out of 100

62.

Series 63, Communications with Customer and Prospects,Series 63

MaryJo Barkley is the CEO of MJB Securities. MJB is distributing an offering of ABC common stock to investors. Barkley has been telling potential investors that the registration of the stock indicates approval by the state. Under the Uniform Securities Act, she is committing misrepresentation of

A) registration.

B) qualification.

C) material information.

D) authorization.

None

62 out of 100

63.

Series 63, Communications with Customer and Prospects,Series 63

As an incentive to encourage clients to invest in a particular stock recommended by the broker-dealer, clients are told that any time within six months after the purchase date, they may sell the stock back to the firm at original cost plus interest at the state's legal rate. This would be

A) a prohibited guarantee against loss.

B) an offer that could only be made to accredited investors.

C) a violation of the antifraud provisions of the Uniform Securities Act.

D) a right of rescission.

None

63 out of 100

64.

Series 63, Communications with Customer and Prospects,Series 63

According to the Uniform Securities Act, the investment adviser brochure must include the business backgrounds of

A) institutional clients.

B) each member of the investment committee or group that determines general investment advice to be given to clients.

C) affiliated broker-dealers.

D) all employees of the adviser.

None

64 out of 100

65.

Series 63, Communications with Customer and Prospects,Series 63

As an agent of a registered broker-dealer, one of the benefits of selling a security registered with the Administrator is

A) being able to deliver a prospectus containing the information an investor needs to make the investment decision.

B) the protection it gives the agent against a civil suit by a customer.

C) removal of the need for the agent to register in that Administrator’s state.

"D) the confidence it gives the investor that a regulatory body has approved of the sale of the issue.

None

65 out of 100

66.

Series 63, Communications with Customer and Prospects,Series 63

Stephanie Whitworth, an agent with a nationally known broker-dealer, has uncovered an unusual investment opportunity that she believes is perfect for one of her clients. When presenting the recommendation to the client, it becomes clear that the client is concerned about the potential of loss. To alleviate that concern, Whitworth tells the client that she agrees to repurchase the security from the client anytime within the next 60 days at the original purchase price. In so doing, Whitworth

A) has acted ethically because she has not guaranteed a profit to the client.

B) has committed the unethical business practice of guaranteeing against loss.

C) has acted ethically because her actions are in the client’s best interest, not her own.

D) has committed the unethical business practice of recommending a wash sale.

None

66 out of 100

67.

Series 63, Communications with Customer and Prospects,Series 63

An agent is discussing a guaranteed security with a customer. That means

A) there is absolutely no way the customer can lose money.

B) a profit on the security is guaranteed by a third party other than the issuer.

C) the broker-dealer will make up any loss suffered by the client.

D) the security has a guarantee from a third party other than the issuer covering the payment of principal and interest or dividends.

None

67 out of 100

68.

Series 63, Communications with Customer and Prospects,Series 63

All of the following statements regarding the disclosure investment adviser brochure rule of the Uniform Securities Act are true except

A) the disclosure brochure must be delivered no later than 48 hours before entering into an advisory contract for there to be no requirement to offer a five-day refund right.

B) the disclosure brochure must contain essentially the same information as is contained in Form ADV Part 2A and, if applicable, Part 2B.

C) the disclosure brochure must be signed by an officer or partner of the firm.

D) the brochure rule permits advisers to deliver the disclosure brochure when the client enters the contract, provided the client is allowed to cancel the contract without penalty within five business days.

None

68 out of 100

69.

Series 63, Communications with Customer and Prospects,Series 63

Typical broker-dealer fees that must be disclosed as part of a fee disclosure document would include I. a charge when a client requests proceeds of a sale be wired to her bank account. II. a commission charge when a client sells an exchange-listed security. III. the fee charged by the firm when customers transfer their accounts to another broker-dealer. IV. fees for providing advisory services when acting in the capacity of an investment adviser.

A) II and III

B) III and IV

C) I and IV

D) I and III

None

69 out of 100

70.

Series 63, Communications with Customer and Prospects,Series 63

Jim contracts with XYZ Advisory Services for the design of a financial plan and investment advice. He pays an up-front fee when the contract is signed and receives XYZ's disclosure brochure at that time. After three days, Jim decides to cancel the investment advisory service with XYZ. According to the Uniform Securities Act, which of the following statements is true?

A) The advisory firm must cancel the contract but may keep all fees collected.

B) The advisory firm must cancel the contract and return all fees collected.

C) The advisory firm must cancel the contract but can keep a proportionate amount of the fee as compensation for services performed by the cancellation date.

D) The contract is binding, and XYZ has no obligation to return any fees collected.

None

70 out of 100

71.

Series 63, Communications with Customer and Prospects,Series 63

Under the Uniform Securities Act, it is legal for an agent to tell a customer that

A) a registered security has been approved for sale in the state by the Administrator.

B) an exempt security is not required to be registered because it is generally regarded as being safer than nonexempt securities.

C) her qualifications have been found satisfactory by the Administrator.

D) a registered security may lawfully be sold in the state.

None

71 out of 100

72.

Series 63, Communications with Customer and Prospects,Series 63

In the securities industry, the term contra party refers to

A) a securities regulator who begins an investigation against a securities professional.

B) the person identified on the trade confirmation as a broker.

C) the person on the other side of a civil suit.

D) the person on the other side of the trade.

None

72 out of 100

73.

Series 63, Communications with Customer and Prospects,Series 63

An agent has a conservative investor looking for income. The agent recommends a bond of a company the investor has never heard of. To allay the client's fear of loss, the agent states that the payment of interest and principal is guaranteed by a well-known blue-chip company. Under the Uniform Securities Act,

A) agents should always recommend securities that are familiar to the investor.

B) the agent is possibly committing fraud.

C) a guaranteed security only guarantees payment of interest or dividends.

D) the agent is describing a guaranteed security.

None

73 out of 100

74.

Series 63, Communications with Customer and Prospects,Series 63

When an agent has competing interests or loyalties between his customers and an issuer of securities, it is considered

A) a potential conflict of interest.

B) an unethical and dishonest act.

C) a normal business practice.

D) an obligation to recuse himself from the transaction.

None

74 out of 100

75.

Series 63, Communications with Customer and Prospects,Series 63

Broker-dealers are required to disclose the capacity in which they acted on any transaction with a retail customer. That disclosure is always made

A) on the new account form.

B) on the trade confirmation.

C) as part of the broker-dealer’s fee disclosure statement.

D) at or before the time of the transaction.

None

75 out of 100

76.

Series 63, Ethical Practices and Obligations,Series 63

Under the Uniform Securities Act, an agent may not make which of the following statements to a customer?

A) “This security is approved for sale by the Administrator.”

B) “This security is registered with the state.”

C) “This security is exempt from registration.”

D) “This security has been registered with the Administrator.”

None

76 out of 100

77.

Series 63, Ethical Practices and Obligations,Series 63

The procedure for entering an order to purchase a security for the account of a customer is to complete an order ticket. Which of the following would be found on an order ticket?

A) Customer name, execution price, time of order entry, and time of execution or cancellation

B) Account number, execution price, time of order entry, time of execution or cancellation, and terms and conditions of the order

C) Account number, customer address, time of order entry, and terms and conditions of the order

D) Customer name, customer address, execution price, and time of execution or cancellation

None

77 out of 100

78.

Series 63, Ethical Practices and Obligations,Series 63

The head of research for your firm has just prepared a very positive report on DEF Industries, Inc. The report will be placed on the firm's website later today, and copies will be mailed to clients for whom the security is deemed appropriate. Tonight, this analyst will be appearing on CNBC and will be describing why he has issued this strong buy recommendation. As an agent, you would

A) never be permitted to contact your clients with this recommendation.

B) be permitted to contact your clients with this recommendation right now.

C) be required to send your clients to the firm’s website before making any comments regarding this security.

D) not be permitted to contact your clients until it is determined that the report was officially released to the public.

None

78 out of 100

79.

Series 63, Ethical Practices and Obligations,Series 63

Which of the following practices could be considered fraudulent under the Uniform Securities Act?

A) Altering the customer’s order at the request of a customer, which subsequently results in a substantial loss

B) Failing to inform the firm’s principal of frequent verbal customer complaints

C) Promising services that an agent cannot realistically perform because of his broker-dealer’s limitations

D) Participating in active trading of a security in which an unusually high trading volume has occurred

None

79 out of 100

80.

Series 63, Ethical Practices and Obligations,Series 63

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

80 out of 100

81.

Series 63, Ethical Practices and Obligations,Series 63

An agent at a broker-dealer firm is excited about new earnings projections he received from TechEd, which sells at a market value of $10; it paid a $1 dividend this past year, and its earnings projections for the next year amount to an increase of 30%. The agent calls his clients to solicit purchases of TechEd stock and says if they buy now at $10 per share, they will realize a profit of 30%. The agent should

A) practice due diligence and call TechEd to verify that these earnings predictions are still current.

B) refrain from making this statement because it is a misrepresentation.

C) show his clients how he came to his calculations, sending them charts that have been approved by his principal.

D) not say anything yet because this is inside information.

None

81 out of 100

82.

Series 63, Ethical Practices and Obligations,Series 63

An agent has inside information on a public corporation that will probably cause the price of the stock to fall when it becomes generally known. A good customer calls with an order to buy a large amount of that stock. The agent should

A) discuss the matter with the broker-dealer’s compliance officer.

B) ignore the order.

C) tell the customer the inside information and let him decide what to do.

D) enter a sell order on the customer’s behalf along with the buy order in order to cover the customer’s losses.

None

82 out of 100

83.

Series 63, Ethical Practices and Obligations,Series 63

Which of the following is defined as fraud under the Uniform Securities Act?

A) An agent unknowingly offers for sale a security that enhances the wealth of his clients in a transaction prohibited by the state Administrator.

B) An agent unknowingly sells an unregistered nonexempt security in which the client loses a large portion of his net worth.

C) An agent sold securities that were discovered to be fraudulent four years after the sale.

D) An agent engages in transactions that his state legislature has declared fraudulent, but no judicial body or case law has found such transactions to be fraudulent.

None

83 out of 100

84.

Series 63, Ethical Practices and Obligations,Series 63

Deliberately failing to disclose sufficient information pertinent and relevant to a client making an informed investment decision is

A) churning an account without discretion.

B) effecting transactions without specific authority.

C) a fraudulent business practice because a client must have sufficient information to make a rational decision.

D) an example of guaranteeing returns.

None

84 out of 100

85.

Series 63, Ethical Practices and Obligations,Series 63

Under the Uniform Securities Act, an agent may use material nonpublic inside information as a basis for recommendations only

A) after the information is released to the public.

B) if the securities are exempt from registration.

C) if the agent reports the information as rumor and not fact.

D) until the information is released to the public.

None

85 out of 100

86.

Series 63, Ethical Practices and Obligations,Series 63

Which of the following practices is fraudulent?

A) Marking up a security by 10% more than industry standards with the customer’s knowledge and consent

B) Marking up a security by 5% but indicating to the client that the markup is only 2%

C) Failing to state all the facts related to a security

"D) Selling a security to a customer with a commission that exceeds industry standards"

None

86 out of 100

87.

Series 63, Ethical Practices and Obligations,Series 63

If an agent recommends the purchase of a technology company with an impressive growth record but fails to inform the client that the company's technology will become obsolete pending the approval of a competitor's patent, the agent has

A) not committed a prohibited business practice.

B) not violated the Uniform Securities Act because no untrue statements were made.

C) failed to disclose material information.

D) committed a prohibited business practice by selling an unsuitable investment.

None

87 out of 100

88.

Series 63, Ethical Practices and Obligations,Series 63

While having lunch at his club, an agent overhears a conversation that Technotalk (a publicly traded company) has just lost its biggest account to a competitor. Upon returning to the office, the only person the agent informs of the conversation is his supervisor. In this situation, the agent has acted

A) ethically because he did not profit from selling Technotalk common stock short in his own account.

B) unlawfully because he failed to report nonpublic information to the SEC.

C) ethically because he did not make use of material nonpublic information.

D) unlawfully because he failed to inform his customers of the negative news immediately.

None

88 out of 100

89.

Series 63, Ethical Practices and Obligations,Series 63

An agent was soliciting sales in XYZ stock six months ago when the market value was $16 per share. One of the agent's more aggressive clients did not purchase the stock at the time. The agent has read that there is a class action lawsuit pending against XYZ, and the market value has dropped to $5 per share. If the client were to contact the agent now and ask to purchase XYZ stock, what should he say or do in accordance with the Uniform Securities Act?

A) Enter the order.

B) Point out that the company has the lawsuit pending.

C) Refuse the order.

D) Point out that the price has dropped and that the client can purchase almost three times the number of shares as on the original date he was first contacted.

None

89 out of 100

90.

Series 63, Ethical Practices and Obligations,Series 63

An agent's customer says that ABC Corporation is about to be bought out. The customer wishes to place an order to buy ABC common stock based upon this yet-unreleased information, which he claims he learned from an officer in the company. How should the agent respond in this situation?

A) Discuss the matter with other more experienced agents of the firm to evaluate the validity of the information.

B) Bring the information to the attention of the state securities Administrator.

C) Bring the information to the attention of the firm’s supervisory individual named to handle such matters in the Supervisory Procedures Manual.

D) Accept the customer’s order and mark it solicited.

None

90 out of 100

91.

Series 63, Ethical Practices and Obligations,Series 63

An agent omits certain details about an issue during a sales presentation. These omissions would be fraudulent if

A) this were a solicited transaction.

B) the information was material and was necessary to make other statements not misleading.

C) made to an individual client, but not to an institution.

D) the information was not available in the prospectus.

None

91 out of 100

92.

Series 63, Ethical Practices and Obligations,Series 63

Which of the following would not be considered a fraudulent practice under the Uniform Securities Act?

A) An investment adviser omits a material fact to a client during the sales presentation, but the client ends up making money.

B) An investment adviser correctly advises a client, but the client ends up losing money.

C) An investment adviser tells a client that registered securities are approved by the SEC.

D) An investment adviser omits a material fact, but the investor makes the purchase anyway.

None

92 out of 100

93.

Series 63, Ethical Practices and Obligations,Series 63

According to the Uniform Securities Act, market manipulation includes all of the following except

A) buying and selling intentionally to show market activity.

B) giving a false quote.

C) buying on one exchange and selling on another.

D) pegging.

None

93 out of 100

94.

Series 63, Ethical Practices and Obligations,Series 63

If a person who is not an agent or broker-dealer makes a false statement of material fact in connection with the sale of a security, that person

A) is probably an investment adviser or investment adviser representative.

B) is not covered by the Uniform Securities Act.

C) has not violated the Uniform Securities Act if the sale was made to an institutional account.

D) has committed fraud in violation of the Uniform Securities Act.

None

94 out of 100

95.

Series 63, Ethical Practices and Obligations,Series 63

You are an agent for a fully licensed broker-dealer and one of your clients is the chairman of a drug company who tells you that the government will shortly disapprove a patent for a new drug. According to the Uniform Securities Act, you should

A) contact the SEC because you have inside information.

B) tell your best customers to sell their holdings of the corporation immediately.

C) promptly inform your supervisor.

D) sell the company’s shares short for your discretionary customer accounts.

None

95 out of 100

96.

Series 63, Ethical Practices and Obligations,Series 63

Which of the following statements regarding an agent is true?

A) The agent is not subject to the antifraud provisions of the Uniform Securities Act when engaged in securities sales activities.

B) The agent is exempt from the Uniform Securities Act’s antifraud provisions if her broker-dealer has fewer than three clients residing in the state.

C) It is unlawful under the Uniform Securities Act for an agent to deceive another person when engaged in securities-related sales activities.

D) It is unlawful under the Uniform Securities Act for an agent to deceive another person when engaged in non-securities-related activities.

None

96 out of 100

97.

Series 63, Ethical Practices and Obligations,Series 63

If an investor bought stock on one exchange and sold it at a higher price on another exchange, this practice constitutes

A) a violation under both the Uniform Securities Act and federal law.

B) an offense punishable by three years in the county jail.

C) a violation of the Uniform Securities Act.

D) a perfectly acceptable market arbitrage.

None

97 out of 100

98.

Series 63, Ethical Practices and Obligations,Series 63

An agent learns of material nonpublic information (MNPI) regarding a company that is publicly held. Which of the following, with respect to the information, would not violate the Uniform Securities Act?

A) Discussing the information at a seminar but not making an investment recommendation

B) Soliciting orders based on this information

C) Discussing the situation with a superior or compliance officer in the agent’s firm

D) Trading for the agent’s personal account based on this information

None

98 out of 100

99.

Series 63, Ethical Practices and Obligations,Series 63

With regard to the Uniform Securities Act, which of the following statements regarding the omission of a material fact by an agent is not true?

A) It is a violation even if material facts were unknowingly omitted.

B) It is not a violation if the security is exempt from registration under the Uniform Securities Act.

C) It is a violation even if the client failed to make a transaction.

D) It is a violation because it is an unethical or fraudulent practice.

None

99 out of 100

100.

Series 63, Ethical Practices and Obligations,Series 63

The antifraud provisions of the Uniform Securities Act apply to I. registered securities. II. exempt securities. III. federal covered securities. IV. exempt transactions.

A) I, II, III, and IV

B) II only

C) I only

D) I, III, and IV

None

100 out of 100

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