TEAS Reading: Integration of Knowledge and Ideas (Quiz 2) Welcome to your Series 63 Practice Exam 2 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. 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 2. Which of the following is the best definition of a person who manages accounts or portfolios of clients of an investment adviser? A) A financial advisor B) A portfolio manager C) An account executive D) An investment adviser representative None 3. 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 4. 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 5. 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 6. Which of the following situations would require registration as an investment adviser? I. A broker-dealer provides investment research services to a customer and charges a fee for the service. II. An agent of a broker-dealer recommends the purchase of ABC securities to a customer, who then purchases 100 shares, and the agent earns a commission. III. An agent of a broker-dealer prepares a complete financial plan for a customer with a one-time charge of $950. The plan recommends specific securities transactions, which the customer orders. The agent earns commissions on the securities transactions. IV. A broker-dealer charges its customers a fee for collecting dividends and account maintenance, in addition to commission charges for transactions executed. A) I, II, III, and IV B) I and III C) I and II D) I, III, and IV None 7. Which of the following persons are excluded from the definition of, or exempt from registration as, a broker-dealer under the Uniform Securities Act? I. A broker-dealer with no office in the state that effects trades exclusively with other broker-dealers in the state II. A trust company with an office in the state that deals with the general public III. A broker-dealer with no office in the state that has no more than five retail clients resident in the state within the past year IV. A broker-dealer with no office in the state that effects securities trades exclusively with trust companies or other broker-dealers A) I and II B) I, II, and IV C) I, II, III, and IV D) III and IV None 8. 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 9. 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 10. 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 11. 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 12. 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 13. 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 14. 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) a maximum of five retail investors over a 12-month period. B) other broker-dealers. C) investment advisers registered in that state. D) accredited investors. None 15. Under the Uniform Securities Act, a broker-dealer is defined as any person who A) buys securities. B) sells securities. C) is registered with the SEC. D) is in the business of effecting securities transactions for its own account or for the accounts of others. None 16. 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 17. 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 18. 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 19. 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 20. 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 21. 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 22. Pelf Securities and Investments, Inc., (PSII) has been in business as a registered broker-dealer in State Z since 1932. During that time, control of the company was in the hands of the descendants of the founder. With no one in the current generation interested in continuing the firm's legacy, the board of directors votes to withdraw PSII's registration. Which of the following statements is true? A) The Administrator may bring an action against PSII for a period of 2 years after the effective date of the withdrawal. B) The withdrawal from registration will normally take place on the 60th day after filing. C) Once the application for withdrawal is filed, any pending actions against the firm are canceled. D) The withdrawal from registration will normally take place on the 30th day after filing. None 23. A control affiliate of a broker-dealer applying for state registration could be the cause of a statutory disqualification if its Form BD disclosed that the control affiliate was A) indicted for committing a securities-related misdemeanor two years ago. B) charged with committing a securities-related felony two years ago. C) convicted of a non-securities-related felony eight years ago. D) convicted of a non-securities-related misdemeanor eight years ago. None 24. Parlous Professional Investors (PPI) is applying for registration as a broker-dealer in State X. Which of the following would not be included in the registrant's application? A) A description of PPI's form of business structure B) Fingerprint cards for each of PPI's officers who will be registered as agents C) A disclosure if the applicant has ever been the subject of any adjudications by the SEC or any securities SRO D) The location of PPI's principal office None 25. An interest in which of the following is a security under the Uniform Securities Act? I. Merchandising marketing scheme II. Multilevel distributorship arrangement III. Oil and gas drilling program IV. Cattle feeding program A) I, II, III, and IV B) II and III C) I only D) III only None 26. 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 27. 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 28. 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 29. 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 30. 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 31. 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 32. Under the Uniform Securities Act, which of the following constitutes an offer of a security? A) A stock dividend distributed to current shareholders at no cost to them B) The delivery of a prospectus to a prospective purchaser C) A tombstone advertisement D) An agreement between an issuer and an underwriter None 33. As defined in the Uniform Securities Act, the terms sale or sell would include A) an investor using a cash dividend to automatically purchase additional shares of the issuer. B) the receipt of a stock dividend. C) the pledging of securities as collateral for a loan. D) a gift of nonassessable stock. None 34. 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 35. 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 36. 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 37. 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 38. 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 39. 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 40. 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 41. 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 42. A corporation offering securities registered under the Uniform Securities Act may make which of the following statements? I. "The Administrator has passed on the merits of these securities as an investment." II. "The Administrator has released our securities for sale to the public." III. "The Administrator has passed on the accuracy of the information in our prospectus." IV. "The Administrator has declared this prospectus effective." A) II and III B) I and IV C) I and III D) II and IV None 43. The NASAA Model Rule on investment adviser brochures contains one condition where verification of receipt of a readable copy of the brochure and supplements by the customer is required. That is the case A) of an initial delivery to a potential client in electronic form. B) of an initial delivery to a potential client in paper form. C) when the investment adviser will be maintaining custody of customer funds and securities. D) of an annual delivery to an existing client in electronic form. None 44. An agent tells a customer that by investing in U.S. Treasury bonds, he is guaranteed to make money. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following statements is true? A) This is unethical if the customer loses money but not if he at least breaks even. B) This is ethical if the Treasury bonds mature in less than one year. C) This is unethical because it constitutes a guarantee against market risk. D) This is ethical because U.S. Treasury bonds carry no risk. None 45. Typical broker-dealer fees that must be disclosed as part of a fee disclosure document would include I. a charge when a client requests that a stock certificate be issued in his name. II. a commission charge when a client buys a security on a listed exchange. III. the interest charged by the firm on money owed by customers in their margin accounts. IV. fees for providing advisory services to high-net-worth individuals. A) II and III B) I and IV C) I and III D) III and IV None 46. Agent B is working late in the office one night and happens to notice something on Agent C's desk. It is a report stamped Confidential. Agent B opens the report and sees that it indicates that XYZ Company is in terrible financial condition. The next morning, Agent B begins contacting his clients urging them to get out of their positions in XYZ. Under the Uniform Securities Act, this would be A) legal because Agent B did not actively seek out the information. B) a smart thing to do to save Agent B’s clients’ money. C) the fraudulent practice of acting on inside information. D) a violation of Agent C’s confidentiality agreement. None 47. A customer buys 200 shares of a common stock at $30 per share. On a day when the stock's price is down $5, the customer calls her agent and inquires as to its current price; the agent tells her the price is around where she bought it. In the next few weeks, the stock's price turns around and the customer liquidates the shares at $35 per share, realizing a $5 per share profit excluding commission. In this situation, the agent has acted A) ethically because he prevented the customer from losing a profit opportunity. B) unlawfully because accurate quotes must be provided to the customer at all times. C) unlawfully because the customer could easily discern that the price quoted by the agent did not match readily available quotes in the financial media. D) ethically because the interim price fluctuation did not impact the customer’s results. None 48. 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 49. 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 50. 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 51. 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 52. 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 53. 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 54. Baird, a registered agent, receives an order from Miller, her customer, for an unusually large order of common stock in XYZ, Inc. He states that he overheard the CFO of XYZ, Inc., telling his golfing partner that XYZ was close to being acquired by Monolith Communications, Inc. In light of ethical standards under the Uniform Securities Act, which of the following actions is most acceptable? A) Baird purchases 1,000 shares of XYZ for her personal account. B) Baird takes Miller’s order and does not discuss the conversation she had with Miller regarding XYZ and Monolith with anyone. C) Within the trading day, Baird recommends XYZ to 20 of her customers who have indicated aggressive growth as their main trading objective. D) Baird tells her immediate supervisor (principal) of Miller’s intent to trade based upon material nonpublic (inside) information. None 55. 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 56. 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 57. 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 58. 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 59. According to the Uniform Securities Act, which of the following is an example of market manipulation? A) Creating the illusion of active trading B) Omitting material facts in a presentation C) Transactions in excess of a customer’s financial capability D) Guaranteeing performance of a security None 60. Alan Richards is the next-door neighbor of Marc Terry, the CEO of a Nasdaq Stock Market security. Terry tells Richards that a major NYSE-listed corporation is in the process of submitting an offer to buy out his company at a very handsome premium over the current market price. Richards would be permitted to I. immediately purchase shares of Terry's company. II. immediately purchase shares of the NYSE-listed company. III. purchase shares of Terry's company once the news becomes known to the investing public. IV. purchase shares in the NYSE-listed company once the news becomes known to the investing public. A) III and IV B) I and II C) II and III D) I and IV None 1 out of 60 Time is Up! Time's upTime is Up!
