TEAS Mathematics: Number and Algebra (Quiz 1) Welcome to your Series 63 Practice Exam 4 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. The term used by the Uniform Securities Act to describe a person applying for registration as a securities professional is A) registrant. B) agent. C) candidate. D) applicant. None 2. The term qualified client would include a natural person who has A) had net income of at least $200,000 for each of the two previous years with an expectation of meeting that in the current year. B) a net worth, together with their spouse but excluding the equity in a primary residence, exceeding $2.2 million. C) a net worth, together with their spouse but excluding the equity in a primary residence, exceeding $1 million. D) no less than $2.2 million under the management of the specified investment adviser. None 3. The term used in legal literature to refer to a number too small to be of significance is A) mikró. B) tabula rasa. C) de minimis. D) insignificant. None 4. A pension fund manager who manages a $35 million dollar account must register with which of the following? A) Either the state or the SEC B) The state C) SEC D) Both the state and the SEC None 5. In response to an evolving marketplace, the SEC, through Release IA-1092, expanded the coverage of the definition of investment adviser to include A) financial planners and pension consultants. B) broker-dealers offering wrap fee programs and financial planners. C) broker-dealers offering wrap fee programs and life insurance agents. D) life insurance agents and pension consultants. None 6. Under the Uniform Securities Act, which of the following are excluded from the definition of an investment adviser when providing investment advice solely incidental to the business? I. Lawyer II. Accountant III. Engineer IV. Teacher A) I and III B) II and IV C) I, II, III, and IV D) I, II, and IV None 7. A broker-dealer with no place of business in the state would not be required to register with the Administrator unless one of its clients was A) a savings institution. B) an employee benefit plan with assets of less than $1 million. C) another broker-dealer. D) a unit investment trust registered under the Investment Company Act of 1940. None 8. Pelf Professional Investment Services (PPIS) is an SEC-registered broker-dealer registered in 13 states. Which of the following customers moving to a state that is not one of those 13 would cause PPIS to need registration with the Administrator of that state? A) An employee benefit plan with $1.5 million in assets B) An insurance company C) A savings association D) An individual meeting the SEC's definition of accredited investor None 9. Which of the following persons is not excluded from the definition of, or exempt from registration as, a broker-dealer under the Uniform Securities Act? A) A broker-dealer with no office in the state that effects trades exclusively with other broker-dealers in the state B) A broker-dealer with no office in the state that has no more than five retail clients resident in the state within a 12-month period C) A broker-dealer with no office in the state that effects securities trades exclusively with trust companies or other broker-dealers D) A trust company with an office in the state that deals with the general public None 10. A broker-dealer with no place of business in the state would not be required to register if their only clients were A) accredited investors. B) banks and insurance companies. C) persons acting in a fiduciary capacity. D) limited to a maximum of five individuals over any 12-month period. None 11. Asset Augmentation Associates (AAA) accepts accounts from individual investors resident in this state who wish to buy and sell a variety of securities. It is likely that the Uniform Securities Act would define AAA as A) an investment company. B) an investment adviser. C) an agent. D) a broker-dealer. None 12. A broker-dealer with no place of business in the state would not be required to register with the Administrator unless one of its clients was A) a trust company. B) another broker-dealer. C) an employee benefit plan with assets of $845,000. D) a closed-end investment company registered under the Investment Company Act of 1940. None 13. Under the Uniform Securities Act, which of the following is not excluded from the definition of broker-dealer? A) A person with an office in this state whose securities business is limited to effecting transactions with institutional investors B) Agents C) A broker-dealer domiciled in another state, having no offices in this state, dealing exclusively with broker-dealers in this state D) Issuers of securities None 14. Which of the following is least likely to be excluded from the Uniform Securities Act's definition of broker-dealer? A) An issuer of stock and bonds to the public B) A business entity that buys and sells securities for its own account or the accounts of others C) A corporate retirement plan that buys and sells securities on behalf of the company's employees D) A bank that buys and sells securities for its own account or the accounts of others None 15. Traditionally, banks have been excluded from the definition of a broker-dealer. However, under recent federal legislation, a bank is included in the definition if it A) refers customers to a clearly identified third-party brokerage house not under the control of the bank. B) bought and sold securities on behalf of customers in a wholly owned brokerage subsidiary. C) conducts personal trust activities. D) conducts securities custodial activities. None 16. The Administrator may require registered broker-dealers to comply with all of the following except A) keeping records for three years. B) filing financial information periodically. C) filing of advertisements and sales literature. D) renewal of registration semiannually. None 17. Under the Uniform Securities Act, which of the following are true regarding the registration of a successor firm? I. The successor firm need not be in existence when the application for registration is filed. II. A filing fee is required with the application. III. The successor firm's registration will be effective for the unexpired portion of the year. A) I and II B) II and III C) I and III D) I, II, and III None 18. Under the National Securities Markets Improvement Act of 1996 (NSMIA), states are prevented from all of the following except A) registering investment advisers. B) establishing capital and custody requirements that exceed those provided for in the Securities Exchange Act of 1934. C) establishing recordkeeping requirements for broker-dealers exceeding those required under federal law. D) Requiring federal covered securities to register on the state level. None 19. Under the Uniform Securities Act, if the Administrator does not deny an application for registration as a broker-dealer and no disciplinary proceeding is underway in regard to it, how many days after filing the application does registration generally become effective? A) 7 days B) 30 days C) 5 days D) 10 days None 20. Michal is an agent registered with a broker-dealer in State W. The responsibility for ensuring that Michal's activity as an agent is properly supervised is that of A) the chief compliance officer of that broker-dealer. B) the Administrator of State W. C) an agent of that broker-dealer who was employed by that broker-dealer before Michal. D) the designated supervisory individual with that broker-dealer. None 21. Parlous Professional Investors (PPI) has filed an application to register as a broker-dealer in State X. Under the procedures described in the Uniform Securities Act, PPI's registration is most likely to become effective A) at the same time PPI's registration becomes effective with the SEC as long as the firm used the coordination method of registration. B) at noon of the 30th day after the filing of a completed Form BD subject to possible acceleration by the State X Administrator. C) no later than the end of the 20-day cooling-off period applicable to registrations. D) once the executive officers of PPI have successfully completed the Series 63 examination. None 22. Under the Uniform Securities Act, those persons carrying out a broker-dealer's supervisory regimen over agents A) must be registered as principals. B) are not required to register unless they are directly involved with sales of securities. C) must pass the registered supervisor's exam. D) must be registered as agents. None 23. Defalcator Dependable Brokers (DDB) has changed its business structure from a general partnership to a corporation. Notification of this change A) need not be made because it has no relevance to the way the firm does its securities business. B) is made by amending its Form BD when the annual renewal fee is paid. C) must be submitted to the Administrator promptly. D) must be submitted to the Administrator by noon of the 30th day after the change. None 24. In general, the Uniform Securities Act requires broker-dealers to keep most records for A) five years with the first two in an easily accessible location. B) three years with the first year in an easily accessible location. C) three years with the first two in an easily accessible location. D) five years with the first three in an easily accessible location. None 25. As defined in the Uniform Securities Act, which of the following items is not a security? A) A voting trust certificate B) An interest in a cattle feeding program organized as a limited partnership C) An American depositary receipt (ADR) D) A whole life insurance contract issued by an incorporated life insurance company having its shares trade on the New York Stock Exchange (NYSE) None 26. As defined in the Uniform Securities Act, which of the following is not a security? A) A listed stock option B) A fixed annuity C) A bond whose interest payments are guaranteed by the federal government D) A debenture None 27. Which of the following are defined as securities under the Uniform Securities Act? I. An investment in a managed pool of rental condominiums II. Unsecured debentures sold in a private placement only to accredited investors III. Bills, notes, and bonds issued by the US Treasury IV. A Roth IRA A) I and II B) II and IV C) I and III D) I, II, and III None 28. Which of the following would be included in the Uniform Securities Act's definition of a sale? A) Transfers for value of shares to a nontaxable organization B) Conveying for value precious metals to a jewelry distributor C) Sale of a large fixed annuity contract to a taxable institution "D) Donation of interests in rights, warrants, or options on a nonexempt security None 29. The Uniform Securities Act defined many terms. Among them is the term sale. Which of the following would be included in the definition of sale? I. An offer of common stock in a new issue properly registered or exempt from registration in the state II. A gift of assessable stock III. An investor exercising preemptive rights previously received directly from the issuer IV. An investor electing to forgo a cash dividend and receive the equivalent in stock instead A) III and IV B) I and II C) II and III D) I and IV None 30. In which of the following circumstances has John, an agent of AAA Securities Corporation, made an offer as defined in the Uniform Securities Act? I. John calls a long-standing client, Brenda, to indicate that a security on his firm's restricted list is suitable for her portfolio. John indicates that he cannot sell the securities unless Brenda requests them on an unsolicited basis. Brenda considers making the purchase but ultimately declines. II. John discovers that Brenda has inherited shares in a manufacturing firm trading on the New York Stock Exchange and suggests that she sell them to him in a private transaction in which no commission would be charged. III. John owned XYZ securities for several years and decided to transfer them to his college's endowment fund in lieu of giving a cash gift. He then took a tax deduction for the value of the securities transferred. IV. Baxter, as a reward for the years of John's service as his agent, transferred $5,000 worth of XYZ Corporation securities to John, claiming the transfer as a business expense on his tax form. A) I, II, and III B) I, II, III, and IV C) I only D) I and II None 31. Under the Uniform Securities Act, an offer is made in a state when it I. originates in that state. II. is broadcast by radio or TV from outside the state. III. is contained in a newspaper published outside the state but delivered to an address in that state. A) I, II, and III B) I only C) I and III D) II and III None 32. A customer living in one state receives a phone call from an agent in another state. A transaction between the two occurs in a third state. According to the Uniform Securities Act, under whose jurisdiction does the transaction fall? A) Administrator of the state in which the customer lives B) Administrator of the state in which the transaction took place C) Administrators of all three states involved D) Administrator of the state in which the agent is registered None 33. Under the Uniform Securities Act, an offer and sale does not exist if it is I. the result of a class vote by stockholders regarding a merger or consolidation. II. a bona fide pledge or loan. III. an act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding shares. IV. a gift of nonassessable securities. A) I and II B) I, II, and III C) II and IV D) I, II, III, and IV None 34. Clay Tompkins is registered as an agent with Integrity Asset Management (IAM), a FINRA-member broker-dealer. Tompkins is attempting to convince a prospect to transfer his account to IAM but is not having great success. When he returns to his office, he sends an email to the prospect listing the benefits of using IAM with him as the agent. Which of the following statements would be prohibited? A) “As a new agent, I have a small book of business and try to devote more of my time to my clients than might be the case with established agents.” B) “Integrity Asset Management is registered with the SEC, a member of FINRA, and registered in more than a dozen states.” C) “Because I passed the qualification exam one month ago, the regulatory bodies were able to grant effectiveness to my registration.” D) “Because I passed the qualification exam one month ago, you can be sure that I am up to date on the stock market.” None 35. According to the NASAA investor advisory regarding fees charged by broker-dealer firms for services and maintenance of investment accounts, A) as long as the schedule is available in electronic form, it is not necessary to provide a paper version to retail customers. B) the schedule should be made available on the broker-dealer’s public website without requiring any login or password. C) fee schedules should only be delivered by hand or postal mail to reduce cyber security threats. D) the schedule should be made available on the broker-dealer’s public website and should be password protected. None 36. You receive a note from your firm congratulating you on passing the exam and indicating that they have received notice from the Administrator that your registration as an agent is effective. At this point, you could not A) indicate to prospects that you are approved by the state. B) state that you have passed the required licensing exams. C) begin to accept orders from clients resident in the state. D) begin to prospect for new clients in the state. None 37. In reviewing prospectuses and registration statements, the Administrator A) guarantees the adequacy of the disclosures made in a prospectus. B) passes on the merits of a particular security covered by a registration statement. C) certifies the accuracy of the disclosures made in a prospectus. D) does not approve or disapprove of the issue. None 38. A customer calls his agent to inquire about something he read on a recent trade confirmation. It said, "The firm acted as a contra party to the trade," and the customer does not know what that means. The agent would explain that the broker-dealer A) acted as a principal in the trade. B) acted in an agency capacity in the trade. C) was not familiar with the party on the other side of the trade." D) acted contrary to the best interest of the customer. None 39. In the securities industry, when a person is acting in an agency capacity, the form of compensation received is A) markups or markdowns. B) commissions. C) fees. D) account maintenance charges. None 40. When a security is registered with the Administrator, it means that A) the Administrator has approved of the issue. B) it is probably a federal covered security. C) the security may be legally sold in the state. D) it is now exempt from the advertising filing requirements of the Uniform Securities Act. None 41. NASAA has created a Model Rule dealing with the creation of and delivery requirements for an investment adviser brochure. Unless qualifying for an exception, a registered investment adviser shall deliver, I. within 90 days of the end of its fiscal year, a free updated brochure and related brochure supplements, which include or are accompanied by a summary of material changes. II. within 120 days of the end of its fiscal year, a free updated brochure and related brochure supplements, which include or are accompanied by a summary of material changes. III. within 120 days of the end of its fiscal year, a summary of material changes that includes an offer to provide a copy of the updated brochure and supplements and information on how the client may obtain a copy of the brochures and supplements. IV. not later than entering into a new advisory agreement, a summary of material changes that includes an offer to provide a copy of the updated brochure and supplements and information on how the client may obtain a copy of the brochures and supplements. A) I and III B) II and III C) I and IV D) II and IV None 42. Which of the following clients of a registered investment adviser is exempt from the requirement to receive annual delivery of the adviser's brochure? A) The NewBean Municipal Bond Fund, a unit investment trust registered with the SEC B) Peter Platinum, an accredited investor C) Family Investment Planning (FIP), a registered broker-dealer D) Katalyst Investment Advisers (KIA), a registered investment adviser None 43. In general, a broker-dealer will disclose its fee schedule A) when requested by the client. B) at the time of the account opening. C) to its agents who are then responsible for sharing with client. D) within 30 days following any changes in fees or charges. None 44. When the compensation arrangements or incentives for the broker-dealer or its agents could affect whether employees recommend or offer a particular security or transaction to a client, it is required that the firm A) sell as much of that security as possible to maximize the firm’s earnings. B) refuse to recommend that security. C) disclose the potential conflict of interest. D) only accept unsolicited orders for that security. None 45. Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, an investment adviser may guarantee investment results A) if he uses a system based on objective evaluation of data, can document consistent gains using the system, and discloses to clients all of the limitations and difficulties of using the system. B) under no circumstances. C) provided the basis for making guarantees is fully and accurately described in the application for registration filed with the Administrator. D) if the guarantees are reasonable based on the results other clients have obtained by following his recommendations. None 46. Which of the following is an example of a fraudulent practice? A) A broker-dealer selling a security to a client at the offer price B) Refusing to guarantee a customer’s account against loss C) Furnishing fictitious quotations D) Recommending U.S. Treasury bonds to a conservative investor None 47. An agent puts together a recommendation for a customer but is unable to attend the meeting. Another agent from the firm meets with the customer and presents the recommendation but omits some material facts. According to the Uniform Securities Act, this is A) considered a fraudulent act. B) permitted if the recommendation pertains to an exempt security. C) permitted if the second agent was unaware of the omission. D) permitted if the second agent receives no compensation for presenting the recommendation. None 48. John, a newly registered agent with a broker-dealer in Illinois, violated the Uniform Securities Act if he A) deliberately omitted the number of employees at a corporation making its first issue of securities to the public because he did not consider that fact relevant to the investor’s decision-making process. B) told his clients, against his better judgment, that past performance is no guarantee of future performance. C) knowingly sold revenue bonds as general obligation bonds because he wanted his best client to earn additional interest without taking on significantly higher risk. D) mistakenly told a client that the dividend yield on a common stock selling at $75 per share was 5%, though he accurately indicated that the dividend payment was $0.75 per quarter. None 49. Your advisory customer called to check on her account value at 10:00 am, but you were unavailable at the time. It is now 2:00 pm and you are able to call her back. If between 10:00 am and 2:00 pm her account value dropped from $711,500 to $710,000, what should you tell her? A) “Your account has a value of $711,500.” B) “Your account value cannot be determined until the market closes.” C) “Your account was down to $699,700 earlier today but is up to $711,500.” D) “Your account is valued at $710,000 at this time.” None 50. A customer asks an agent for a valuation of his securities portfolio. Because the agent does not want to cause the customer to panic and sell his shares at a loss, the agent inflates the value of the stock. Under the Uniform Securities Act, this action is A) not permitted because the agent must not deceive the customer by misstating a material fact. B) permitted because the agent was not recommending a transaction. C) not permitted because the agent must not attempt to influence the market value of a security. D) permitted because the agent determined that selling the securities was not suitable. None 51. Under the Uniform Securities Act, which of the following statements regarding the use of material facts is true? A) Restrictions apply only to sales with regard to the use of material facts, not to the purchases of securities. B) The agent must not use material facts unless they are the only ones available. C) The client is the final arbiter on what is material and what is not. D) Omitting material facts when selling securities is a fraudulent practice. None 52. A person makes a sale that is in violation of the antifraud provisions of the Uniform Securities Act. Which of the following is not a true statement? A) The antifraud provisions apply to exempt transactions. B) The antifraud provisions apply to both exempt and nonexempt securities. C) If the sale is made by an agent registered in another state but not in this state, the antifraud provisions still apply. D) If the sale is made by someone not in the securities business, the antifraud provisions do not apply. None 53. If a customer reveals material nonpublic information to an agent, that agent should A) notify the firm’s trading desk. B) confirm the rumor by checking with other agents. C) alert other customers who hold stock in that company. D) immediately report it to the supervisor and await further instructions. None 54. An agent tells his customer that a corporation has graduated to the level of quality acceptable for trading on the New York Stock Exchange and, therefore, has less market risk. If he recommends the stock to the customer based on the exchange's listing requirements, the agent has acted A) lawfully because returns were not guaranteed. B) fraudulently because listing on the New York Stock Exchange does not reduce the client’s loss exposure; therefore, the agent misled his client. C) fraudulently because the NYSE listing requirements are not a matter of public knowledge. D) lawfully because the New York Stock Exchange requires that the companies it lists be substantially capitalized. None 55. The Uniform Securities Act contains a number of broad references to activities that might be construed as being in violation of the act's antifraud provisions. An individual making a sales presentation for which of the following would be exempt from the antifraud provisions of the Uniform Securities Act? A) Options traded on a listed exchange B) Unit investment trusts registered with the SEC under the Investment Company Act of 1940 C) Bonds issued or guaranteed by the United States government D) Fixed annuities None 56. James Jones, quarterback for a National Football League franchise team, deliberately misstated material information in the private sale of securities he owned. Jones claims he is not subject to the antifraud provisions of the Uniform Securities Act because he is not a registered agent and, secondly, the securities involved are exempt from registration requirements of the act. Which of the following statements is true? A) The antifraud provisions of the Uniform Securities Act do not apply to Jones because he is not suitably trained, nor does he have a securities license. B) As a professional athlete, Jones is not in the securities business and is therefore not subject to the antifraud provisions of the act. C) Jones’s failure to accurately state material facts does not constitute fraud because the securities he sold were exempt from registration. D) The antifraud provisions of the Uniform Securities Act apply to any person who acts fraudulently in connection with the offer, sale, or purchase of a security. None 57. When does a deliberate omission of a fact in a securities sale constitute fraud? A) Only when a new issue of securities is being offered B) If a reasonable person would base an investment decision on the omitted information C) Any time the information is known by more than 15 people D) Only if the information was known to be true None 58. At dinner one night, your father-in-law, a member of the board of directors of ABC Company, tells you the firm failed to gain government approval of a new product under development. This information, when it is made public, will seriously harm the value of the company's stock. You should A) sell any holdings you have in ABC stock. B) advise your customers to sell ABC stock immediately. C) buy put options on ABC stock. D) keep this information confidential and not make any use of it that could lead to insider trading abuses. None 59. Under the Uniform Securities Act, an agent who deliberately gives a fictitious quote to a customer A) is guilty of a felony and subject to criminal penalties. B) has committed a fraudulent act. C) is committed to selling or buying only 100 shares at that price. D) must execute at the price quoted, regardless of the market. None 60. Walt and Bryan are old friends who are agents with different broker-dealers. Bryan attends one of Walt's investment seminars and, at a prearranged point in the presentation, stands up and exclaims that his rich brother-in-law wisely purchased the same investment. This action is A) a legitimate sales tactic known as priming the pump. B) a deliberate attempt to mislead and deceive investors. C) only problematic if someone invests in the product and loses money. D) a dubious sales practice but not strictly prohibited. None 1 out of 60 Time is Up! Time's upTime is Up!
