TEAS Mathematics: Number and Algebra (Quiz 2) Welcome to your Series 63 Practice Exam 5 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 important definitions in the Uniform Securities Act is that of a security. That term would include which of the following? A) U.S. dollars B) Rare coins C) Shares of preferred stock D) Term life insurance None 2. Under the Uniform Securities Act, an exempt security is one that A) is excluded from registration with the state. B) must be registered before it can be offered for sale in the state. C) is exempt from registration with the state. D) cannot be sold in the state to retail investors. None 3. Which of the following characteristics is not included in the definition of an investment adviser? A) A person who buys and sells securities for his own account or the accounts of others B) A person who receives compensation for preparing reports on securities as a regular business C) A person who is in the business of giving advice on securities D) A person who receives compensation for rendering advice on securities None 4. Under the Uniform Securities Act, the Administrator can require a federal covered investment adviser to A) maintain net worth in excess of that required by the SEC. B) maintain books and records for a period of time in excess of SEC requirements. C) file a copy of all of the documents submitted to the SEC. D) file copies of the firm's advertisements. None 5. Under the Uniform Securities Act, the term investment adviser does not exclude A) a lawyer. B) a person who is paid a commission for selling securities. C) a publisher of a magazine. D) a person who is paid a fee for advising customers on securities. None 6. Under the Uniform Securities Act, which of the following is excluded from the definition of investment adviser? I. A bank II. An investment adviser representative III. A lawyer giving suggestions to a client on where to invest the proceeds of a divorce settlement that he helped her obtain IV. An investment adviser with an office in the state whose only client is a closed-end investment company registered under the Investment Company Act of 1940 A) II and IV B) II and III C) I, II, and III D) I, II, III, and IV None 7. An investor who trades securities for her own account is A) a public customer who does not need to register. B) an agent for a broker-dealer and must register in her state of residence. C) a broker-dealer and must register with the state. D) a broker-dealer who does not need to be registered at the state level. None 8. All of the following statements regarding broker-dealers are true except A) they act as agents in executing orders to buy and sell securities on the various stock exchanges in the secondary market. B) they may act as dealers who buy and sell securities for their own accounts. C) they employ only registered investment adviser representatives. D) they are regulated by the states where they conduct business. None 9. One of the terms defined in the Uniform Securities Act is broker-dealer. Which of the following is not included in that definition? I. An individual employed by a business entity to open new customer accounts for the purpose of trading securities II. A business entity seeking to raise additional capital using the regulated securities markets III. A person whose primary function is buying securities for his own account and for the accounts of others IV. A person whose primary function is providing advice on what assets belong in clients' investment portfolios A) I, II, and IV B) III and IV C) I, II, III, and IV D) II and III None 10. Under the Uniform Securities Act, which of the following statements are true? I. A broker-dealer may not also be registered as an investment adviser. II. A broker-dealer may be structured as a corporation, a partnership, or a sole proprietorship. III. A broker-dealer's primary business is effecting securities transactions for clients or for the broker-dealer's own account. IV. A broker-dealer need not register in a state in which it has noninstitutional clients unless it has an office in that state. A) III and IV B) I and II C) II and III D) I and IV None 11. A broker-dealer registered in State X has several clients in State Y. If the firm does not have a place of business in State Y, registration in State Y would be required if one of those clients is A) an investment adviser registered in State Y. B) a broker-dealer registered in State Y. C) a bank authorized to do business in State Y. D) a registered investment company. None 12. Under the Uniform Securities Act, which of the following is a broker-dealer? A) Corporation that sells interests in an oil and gas limited partnership to investors with the proceeds going to the issuer B) Agent C) Issuer D) Credit union that issues its own shares None 13. A broker-dealer having no place of business in a state is not required to be registered in that state if the broker-dealer does no business in that state other than with A) is licensed/registered in its state of residence. B) does no business in that state other than with institutional clients. C) is a member of FINRA. D) is a member of the New York Stock Exchange. None 14. According to the Uniform Securities Act, a person must register as a broker-dealer in a state if he had which of the following? I. No place of business in the state, but clients who relocated their official residence to that state more than 30 days ago II. No place of business in the state but dealt exclusively with broker-dealers in that state III. No place of business in the state but effected transactions exclusively with issuers of securities in that state IV. A place of business in the state A) I, II, III, and IV B) I and IV C) II and III D) I, II, and IV None 15. Under the Uniform Securities Act, the term broker-dealer would include A) a person with no office in the state who effects securities transactions with over 50 different banks domiciled in the state. B) agents registered under the act who from time to time sell stock from their personal brokerage accounts. C) an issuer distributing its own common stock offering. D) a person with no office in the state who effects securities transactions with no more than five individual residents of the state in any 12-month period. None 16. Which of the following statements regarding the Administrator's authority to examine the books and records of registrants is true? A) The records may be examined at any time for any reason within or outside the state if it is in the public interest to do so. B) Such examinations are not necessary or appropriate for the protection of investors or in the public interest. C) If a broker-dealer's or investment adviser's records are located outside the Administrator's state, they may only be examined to collect evidence for a hearing. D) Broker-dealer records may be examined at any time, but the same is not so in the case of investment advisers. None 17. Under the Uniform Securities Act, registrations of securities professionals expire A) one year from their effective date, unless renewed. B) three years from their effective date, unless renewed. C) every December 31, unless renewed. D) two years from their effective date, unless renewed. None 18. A broker-dealer is registered in five states. One of those states requires that trade blotters must be kept for 10 years. The state where the principal office of the firm is located only requires those records be kept for 5 years. SEC Rule 17a-4 has a 6-year retention requirement for trade blotters. This broker-dealer would be in compliance by keeping its trade blotters A) 6 years. B) for required time of each state where trade blotters are maintained. C) 5 years. D) 10 years. None 19. A person meeting the definition of broker-dealer registers with the state by doing all of the following except A) filing an application. B) submitting fingerprints. C) paying the appropriate fee. D) providing a consent to service of process. None 20. Which of the following is least likely to appear on a broker-dealer's application submitted to the Administrator? A) Disclosure of any charge, conviction, or guilty plea to any felony B) The form of business organization C) Proposed method of doing business D) The number of agents employed by the broker-dealer None 21. Which of the following statements regarding broker-dealer registration under the Uniform Securities Act are true? I. In the absence of any action by the Administrator, the effective date of a registration is noon of the 45th day. II. The Administrator may initiate a disciplinary action within two years of a broker-dealer's withdrawal of registration. III. The Administrator may request that the broker-dealer furnish a statement of assets and liabilities. IV. If, before the effective date of the registration, the Administrator requires amendments to the application, the registration will be considered to have first been filed upon filing of those amendments. A) II and III B) I and IV C) I and II D) III and IV None 22. Profitable Investment Planning (PIP) is a registered broker-dealer in State D. Walter, PIP's chief compliance officer (CCO), wins the lottery and announces his immediate retirement. PIP's president appoints Wendy as Walter's replacement. This change would require notification to the State D Administrator A) by noon of the 30th day after the appointment. B) within 90 days after the end of PIP's fiscal year. C) promptly. D) at the time of the annual renewal. None 23. What document must accompany an initial registration application for those natural persons required to register under the Uniform Securities Act? A) State photo identification B) Consent to service of process C) Proof of citizenship D) A birth certificate confirming the registrant is over 18 years of age None 24. All of the following may be required of broker-dealers by the post-registration provisions of the Uniform Securities Act except A) requiring a broker-dealer to maintain records for a period longer than specified in the Securities Exchange Act of 1934. B) the Administrator may require the maintaining of correspondence for a specified period of time. C) the Administrator may require the filing of any form letters sent to prospective investors. D) the Administrator may require them to file financial reports. None 25. Under the Uniform Securities Act, all of the following are securities except A) a trade confirmation for the purchase of 100 shares of a listed common stock. B) a put or call traded on a national exchange relating to foreign currency. C) a bank-issued certificate representing an interest in a foreign security. D) a real estate investment trust. None 26. Which of the following is an example of a nonissuer transaction? A) Private placement by an issuer B) Primary issue of corporate stock C) Secondary offering by an institutional seller D) Preemptive rights offering None 27. As defined in the Uniform Securities Act, which of the following is not a security? A) Variable life insurance policy B) Preferred stock C) Corporate bond D) Term life insurance policy None 28. Nobody Walks Motor Company, a licensed automobile dealer, is running a promotion offering a $1,000 corporate bond at no additional cost to anyone who purchases a new car over the weekend. Under the Uniform Securities Act, in order to make this offer A) Nobody Walks Motor Company may not pay a commission on the sale of a car to any salesperson who is not registered with the Administrator as an agent. B) the offer must be made available to anyone who purchases a used car during the specified period. C) no specific requirements need to be met because the company is a licensed automobile dealer and, as a result of the free offer, no sale of securities is involved. D) Nobody Walks Motor Company must be registered as a broker-dealer in the state. None 29. 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) 30 days. B) 45 days. C) 60 days. D) 15 days. None 30. An Administrator may deny or revoke a security's exemption A) without a hearing if the issuer is given an opportunity for a hearing after the revocation. B) if the Administrator determines that an exemption applicable to federal covered securities is inconsistent with state securities law. C) for a federal covered security if its issuer is in violation of state law. D) by providing the burden of proof that the exemption is not deserved. None 31. The Administrator has authority to A) issue a cease and desist order with or without a hearing. B) suspend the securities registration of an issue traded on the NYSE after learning that the issuer’s CEO has been convicted of a securities-related crime. C) issue a cease and desist order only after a hearing. D) order the arrest of a person who refuses to obey a subpoena issued in connection with an investigation or proceeding under the Uniform Securities Act. None 32. Under which of the following circumstances may an Administrator revoke an adviser's registration? A) The adviser has been declared mentally incompetent by a court of jurisdiction. B) The adviser cannot be located after a reasonable search by the Administrator. C) The adviser is no longer in business. D) The adviser has been convicted of a nonsecurities-related felony. None 33. Under the Uniform Securities Act, the Administrator has the power to I. examine files of registered persons who have their offices out of state. II. designate an officer who will then have the power to take evidence regarding investigations. III. sentence willful violators to up to three years in prison. A) I and III B) I, II, and III C) I and II D) II and III None 34. 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 those delivery requirements? I. The brochure must be delivered to prospective and new advisory clients at least 48 hours prior to entering into the advisory contract. II. The brochure must be delivered to prospective and new advisory clients no later than entering into the advisory contract. III. Annual delivery of the brochure to existing clients must be made within 90 days of the end of the adviser's fiscal year. IV. Annual delivery of the brochure to existing clients must be made within 120 days of the end of the adviser's fiscal year. A) I and IV B) II and IV C) II and III D) I and III None 35. In addition to transaction costs (e.g., commissions or markups), most broker-dealers have a schedule of miscellaneous fees. The purpose of these fees is to A) help reimburse the broker-dealer for expenses incurred in performing the transaction or a service for the client. B) build in a hidden markup. C) keep commissions low while making up the difference with fees. D) increase the broker-dealer’s net income. None 36. Securities regulators have taken a strong position on the need for registered broker-dealers to disclose the fees they charge. Which of the following is not a common way for making this disclosure? A) Presenting a chart with all of the fees B) Discussing the fees on a 30-second radio commercial C) Displaying the fees in tabular form D) Preparing a list of all of the fees None 37. The NASAA Model Brochure Rule for investment advisers states that delivery of the brochure and related brochure supplements need not be made to I. clients who receive only impersonal advice and who pay less than $500 in fees per year. II. individual clients meeting the definition of accredited investor. III. an investment company registered under the Investment Company Act of 1940. IV. an employee benefit plan with assets in excess of $1 million. A) I, II, III, and IV B) I and IV C) III and IV D) I and III None 38. Under the Uniform Securities Act, which of the following may an agent lawfully tell a customer? A) “This security is such a safe investment, it doesn’t have to be registered; it’s exempt.” B) “I am registered with both the SEC and the state, meaning that I have received the approval of all the proper authorities.” C) “This security is not registered, but it doesn’t have to be. It is an exempt security.” D) “If this security hasn’t increased in value in six months, I’ll buy it back from you for what you paid for it.” None 39. 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) KAPCO Growth Fund, a mutual fund registered with the SEC B) First National Bank of Bigville, a bank whose deposits are insured by the FDIC C) An individual receiving impersonal advisory services billed at a rate of $150 per quarter D) Valued Life Insurance Company, authorized to do business in the state None 40. Operating as a broker-dealer requires making a number of disclosures for the protection of their customers. One of those required disclosures is not A) the fees and charge schedule used by the broker-dealer. B) the annual income of the broker-dealer. C) the capacity in which the broker-dealer acts in a securities transaction. D) conflicts of interest faced by the broker-dealer. None 41. Under the Uniform Securities Act, an agent may tell a customer that the registration of a particular security indicates approval by the Administrator A) under no circumstances. B) as long as the security has been registered by qualification. C) as long as the Administrator has, in fact, approved the security. D) as long as the issuer is solvent. None 42. Niesha is registered as an agent with Execrable Investment Returns (EIR), a broker-dealer registered with the SEC and the Administrators of 22 states. Niesha likes the future prospects of Afinet, a company whose common stock trades in the over-the-counter market. She is so positive on the future performance of the stock that she tells her customers, "If Afinet hasn't increased by $5 per share in the next six months, I will make up the difference out of my own pocket." One of Niesha's customers mentions this great opportunity to a person she meets at a local social gathering. This person works for the Administrator of Niesha's state and tells her, A) “Niesha’s offer violates the provision of the regulations prohibiting performance guarantees.” B) “Be sure to get Niesha’s offer in writing before you make the investment into Afinet.” C) “Niesha’s offer sounds like a ‘can’t lose’ proposition for the customer.” D) “Be sure to get Niesha’s offer in writing from the broker-dealer before you make the investment into Afinet.” None 43. A state-registered investment adviser would be permitted to A) use Part 2 of the Form ADV to satisfy the brochure requirement. B) make annual delivery of the brochure within 150 days of the end of the fiscal year. C) deliver the brochure to a new client within 48 hours of entering into the contract. D) use Part 1 of the Form ADV to satisfy the brochure requirement. None 44. Which of the following statements regarding the brochure delivery requirements of the NASAA Model Rule for investment advisers are true? I. The brochure must be updated each time Part 1A of Form ADV is updated. II. The brochure delivery requirement does not apply to investment companies or clients who are serviced on an impersonal basis, such as with a newsletter, with an annual cost of less than $500. III. A brochure, or summary of material changes, if any, must be delivered to all clients within 120 days of the end of the adviser's fiscal year. A) I and II B) II and III C) I, II, and III D) I and III None 45. When a broker-dealer is acting as a principal in a securities transaction A) earning a commission. B) acting in an agency capacity. C) acting in the capacity of a broker. D) a contra party to the trade. None 46. Which of the following are prohibited by the antifraud provisions of the Uniform Securities Act? I. A misstatement of a material fact II. An omission of a fact important for understanding other statements that are made III. A deceptive sales presentation that does not result in a sale A) I, II, and III B) I and II C) I only D) I and III None 47. It would be considered fraud for an agent to intentionally do all of the following except A) tell a client that a subordinated debenture is a prior lien mortgage bond. B) tell a client that a bond is yielding 10% when the actual yield is 1%. C) tell a client that you are so sure the client will not lose money that you have placed funds in escrow equal to the amount of the purchase to cover any possible loss. D) share commissions with another agent in your office without disclosing this fact to the client. None 48. An agent omits facts that a prudent investor requires to make informed decisions. Under the Uniform Securities Act, this action is A) not fraudulent if there was willful intent to omit the information. B) fraudulent for both exempt and nonexempt securities. C) fraudulent for exempt securities only. D) fraudulent for nonexempt securities only. None 49. Al Watson, a customer of Billy Baird (an agent of Gibraltar Securities), is considering the purchase of 2,000 shares of Kansas Plains Gas and Electric Company common stock. Watson has stock in 10 other utilities companies in his portfolio, and this stock trades on the New York Stock Exchange (NYSE). Baird tells Watson that the company has been increasing its dividend for the past 19 years and will surely continue to do so. Which of the following statements best reflects this situation? A) Baird has acted fraudulently, misleading Watson by stating that increased dividend distributions from Kansas Plains Gas and Electric Company are a sure thing. B) Baird has acted unethically because he made an unsuitable recommendation to Watson. C) Baird has acted ethically because he did not guarantee profits or the absence of potential loss to Watson. D) Baird has acted ethically in recommending the purchase of a stock with a long history of dividends. None 50. Under the Uniform Securities Act, it is not considered unlawful if an agent A) omitted a material fact because she knew she did not have time to cover everything in a short presentation. B) deliberately failed to follow a customer’s instructions. C) made an untrue statement of a material fact. D) actively solicited orders in unregistered exempt securities. None 51. Which of the following sales would be exempt from the antifraud provisions of the Uniform Securities Act? A) Sale of an exempt security in an exempt transaction B) Sale of a nonexempt security C) Sale of a modified endowment policy D) Sale of an exempt security None 52. Which of the following may not be used as the basis for a recommendation to customers? A) Information obtained while acting in a fiduciary capacity for a corporation that indicates the strong possibility of future mergers B) Recommendations of private firms charging special fees for their research C) The best estimate of the agent’s firm regarding the potential movement of a stock D) Recommendations of major financial publications generally available through newsstand purchases None 53. Watson, a customer of Gibraltar Securities, wishes to place an order to buy 50 shares of a thinly traded stock priced at $8 per share. Because the stock is so thinly traded, Gibraltar Securities feels it needs to charge Watson a commission of $100 to justify the time it must spend locating a seller of the stock. Which of the following statements best describes this action? A) It would not be considered a prohibited practice for Gibraltar to charge Watson $100 to complete the transaction, provided Gibraltar disclosed the $100 commission prior to the transaction and Watson chose to proceed with the trade. B) Gibraltar Securities is not required to disclose the amount of the commission in advance to Watson. However, it must receive clearance from the Administrator before charging a commission in an amount exceeding 10% of the value of the securities traded under the transaction. C) A commission of $100 on a transaction involving $400 worth of stock would generally not be deemed excessive. D) It would not be considered a prohibited practice for Gibraltar to charge Watson $100 to complete the transaction. None 54. All of the following are fraudulent sales practices except A) buying and selling intentionally to create market activity. B) buying on one exchange and selling on another. C) falsifying a quote. D) withholding a material fact from the buyer. None 55. A broker-dealer is not acting fraudulently if the firm is A) engaging in trades between other broker-dealers to increase or decrease the price of securities. B) engaging in transactions that do not result in the transfer of ownership between buyers and sellers. C) acting as agent for both buyer and seller on a transaction. D) trading securities between house accounts and customer accounts to create trading volume or the appearance of interest in a security. None 56. An agent engaging in which of the following would not be considered to be acting fraudulently? A) Providing customers with all the material facts about an investment B) Misrepresenting the status of a customer’s account C) Making use of material nonpublic inside information D) Participating in a series of trades where there is no change to beneficial ownership None 57. Which of the following would not be an example of market manipulation? A) Three broker-dealers begin trading shares of ABC common stock between themselves at successively higher prices with no effective change of ownership. B) A principal of an SEC-registered broker-dealer leaks a rumor that ABC is going to acquire LMN. After a few days, the broker-dealer sells short LMN for its own account. C) A market maker in an over-the-counter stock buys and sells stock for its own account. D) Matched orders None 58. An investment adviser representative recommends that a customer purchase shares of Silicon Switches. The representative indicates that the company has reduced market risk because it has graduated to the level of quality acceptable to the New York Stock Exchange. According to the Uniform Securities Act, the investment adviser's statement is A) permitted because an investment adviser may recommend listed stocks. B) not permitted because it is misleading to imply that meeting listing requirements reduces market risk. C) permitted because the NYSE sets stringent earnings requirements for listed stocks. D) not permitted because the transaction is not suitable for the customer. None 59. Which of the following activities are unethical or fraudulent for agents? I. Stating that a specific stock always follows the performance of the Dow Jones Average II. Stating that the agent will always follow the client's account and recommend changes prior to a market shift III. Recommending speculative, low-priced stocks with no knowledge of the client's financial condition IV. Stating that the client will always make money investing prior to quarterly reports A) I, II, III, and IV B) I and III C) I and II D) I and IV None 60. All of the following statements regarding customer complaints sent by email are correct except A) once received and reviewed, they may be discarded. B) they are sometimes referred to as electronic communications. C) they must be retained in the same fashion as any other record. D) customer complaints received by email are considered to be in writing. None 1 out of 60 Time is Up! Time's upTime is Up!
