2024 Series63 exam torrent Series63 Study Guide
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NEW QUESTION # 146
The maximum monetary civil liability that a person who has violated a securities law can be expected to
pay is
- A. the original investment + a state-deemed appropriate interest rate + court costs and reasonable
attorneys' fees + any income the victim has received on the investment. - B. the original investment + a state-deemed appropriate interest rate + court costs and reasonable
attorneys' fees + any state-determined "pain and suffering" award. - C. the original investment + a state-deemed appropriate interest rate + court costs and reasonable
attorneys' fees + any state-determined "pain and suffering" award - any income the victim has received on
the investment. - D. the original investment + a state-deemed appropriate interest rate + court costs and reasonable
attorneys' fees - any income the victim has received on the investment.
Answer: D
Explanation:
The maximum monetary civil liability that a person who has violated a securities law can be
expected to pay is the original investment + a state-deemed appropriate interest rate + court costs and
reasonable attorneys' fees - any income the victim has received on the investment. The monetary liability
is reduced by any dividends, interest income, or capital gains the investor may have received. Monetary
awards for pain and suffering are not considered.
NEW QUESTION # 147
Which of the following is not a prohibited practice for broker-dealers under the NASAA Model Rules?
- A. providing a client with a copy of their most recent balance sheet upon request
- B. borrowing money from a client
- C. charging commissions that are significantly higher than those charged by other broker-dealers
- D. lending money to clients for them to invest
Answer: D
Explanation:
Lending money to clients for them to invest is not a prohibited practice. This is otherwise
known as a margin transaction.
NEW QUESTION # 148
Joe Romeo is a broker-dealer registered with the state. He has recently hired Betty Buxom as his administrative assistant. As part of her duties, he has given her the responsibility for effecting the purchases and sales of securities for some of his firm's smaller accounts. Ms. Buxom has never applied for nor been granted registration as a broker-dealer or agent. Based on these facts,
- A. the Administrator is required by the Uniform Securities Act to revoke Joe Romeo's registration and file criminal and civil charges against him.
- B. the Administrator may elect to revoke or suspend Joe Romeo's registration, and Joe may also face both civil and criminal penalties.
- C. the Administrator is required to turn the case over to the state's district attorney, who will file criminal charges against both Joe Romeo and Betty Buxom.
- D. there is no problem as long as Ms. Buxom registers with the state as an agent within thirty days.
Answer: B
Explanation:
Explanation
Since Joe Romeo has allowed Betty Buxom to execute trades, a duty that can legally be performed only by a registered broker-dealer or agent, the Administrator may elect to revoke or suspend Joe Romeo's registration, and Joe may also face civil and criminal penalties. Ms. Buxom needed to be registered as an agent prior to effecting any transactions in the securities markets; there is no grace period. The Administrator is not required to take any action, however.
NEW QUESTION # 149
The settlement date refers to
- A. the date the order to purchase or sell a security is actually executed. This may differ from the date that the order is sent to the market in the cases of limit or stop orders.
- B. the latest date on which broker-dealers can file their quarterly financial statements with the Administrator of the state.
- C. the date the order to purchase or sell the security is sent to the market.
- D. the date the buyer must pay for the securities purchased.
Answer: D
Explanation:
Explanation
The settlement date is the date that the buyer must pay for the securities purchased. For stocks and bonds other than U.S. Treasury securities, this date is the third business day after the trade. For U.S. Treasuries and options that sell on exchanges, the settlement date is the next business day.
NEW QUESTION # 150
A broker-dealer is required to keep his records for how long?
- A. at least seven years
- B. at least five years
- C. at least three years
- D. A broker-dealer is required to keep his records for as long as he is registered in the state.
Answer: C
Explanation:
A broker dealer is required to keep his records at least three years.
NEW QUESTION # 151
Ari Gaunt is a registered agent employed by Small &Associates Broker-Dealers. He has been notified of a
hearing regarding the revocation of his license for making unauthorized trades on some of his clients'
accounts. Which of the following statements is necessarily true?
- A. If Ari is found guilty and has his license revoked, Small & Associates will be subject to a fine.
- B. If Ari is found guilty and has his license revoked, Small & Associates will have its license revoked as
well and must reapply for reinstatement by filling out an application and paying the requisite filing fees. - C. If Ari is found guilty and has his license revoked, he can appeal the decision in a court of law if he files
the appeal within sixty days. - D. The Administrator of the state can assess Ari with both civil and criminal penalties.
Answer: C
Explanation:
If Ari is found guilty of making unauthorized trades on his clients' accounts and has his
license revoked, he can appeal the decision in a court of law if he files the appeal within sixty days. Small
& Associates license is not in danger as long as the firm has been providing competent supervision of Ari
and its other agents. It will not be required to pay a fine based on Ari's fraudulent activities. Ari may end
up with civil and criminal penalties, but the Administrator cannot assess them. Only a court of law can do
that.
NEW QUESTION # 152
For how long after the effective date is a security's registration valid?
- A. two years
- B. three months
- C. one year
- D. six months
Answer: C
Explanation:
Explanation
A security's registration is valid for one year after the effective date, which is the date the Administrator approves the registration. If the entire issue has not been sold in this time frame, the offering may be renewed.
NEW QUESTION # 153
Nat Smart was employed as an investment adviser representative and sold many of his clients on a
municipal bond fund of which he was fond, telling his clients that the returns earned on it were completely
free from federal taxation. Unfortunately, he had some unhappy clients when, at the end of the year, they
discovered that they had to pay federal tax on the capital gains earned by the fund when it sold some of
the bonds it held. Nat was as surprised as they were. Based on these facts, which of the following
statements is necessarily true?
I. Because Nat was as surprised as they were, he is guiltless.
II. Nat is subject to civil liability payments.
III. Nat will be subject to the criminal penalties for fraud and may spend time in prison.
- A. III only
- B. II only
- C. I only
- D. II and III only
Answer: B
Explanation:
Only Selection II is an accurate statement. In telling his clients that the returns earned on a
municipal bond fund were totally tax-free, Nat misled the clients, whether intentionally or not. This
constitutes fraud, and Nat is, at a minimum subject to civil liability payments, so this is "necessarily" true.
Whether or not Nat will be subject to criminal penalties for fraud and spend time in prison depends on his
ability to prove that he had no knowledge that he was misleading his clients.
NEW QUESTION # 154
Which of the following persons is required to maintain its records in accordance with state dictates and
meet the minimum net capital requirement imposed by the state?
I. federal covered adviser
II. state-registered investment adviser
III. investment adviser representative
- A. II only
- B. I and II only
- C. I, II, and III
- D. II and III only
Answer: A
Explanation:
Only the investment adviser that is required to register with the state must maintain its
records in accordance with state dictates and meet the minimum net capital requirement imposed by the
state. A federal covered adviser is registered with the SEC and need only execute a notice filing with the
state. Its record-keeping rules and net capital requirement are dictated by the SEC. An investment adviser
representative must register with the state, but there are no record-keeping or minimum net capital
requirement dictates for representatives.
NEW QUESTION # 155
Once you have passed the Series 63 examination, which entity must then approve your application to sell securities?
- A. the state administrator
- B. FINRA
- C. SEC
- D. NASAA
Answer: A
Explanation:
Explanation
Once you have passed the Series 63 exam, it is the state administrator who can approve or deny your registration. NASAA developed the Uniform Securities Agent State Law Examination and FINRA administers it. The SEC is not a party to the state registration process.
NEW QUESTION # 156
No: 192
The maximum monetary civil liability that a person who has violated a securities law can be expected to pay is
- A. the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys' fees + any state-determined "pain and suffering" award.
- B. the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys' fees + any income the victim has received on the investment.
- C. the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys' fees - any income the victim has received on the investment.
- D. the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys' fees + any state-determined "pain and suffering" award - any income the victim has received on the investment.
Answer: C
Explanation:
Explanation
The maximum monetary civil liability that a person who has violated a securities law can be expected to pay is the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys' fees - any income the victim has received on the investment. The monetary liability is reduced by any dividends, interest income, or capital gains the investor may have received. Monetary awards for pain and suffering are not considered.
NEW QUESTION # 157
Which of the following describes a prohibited practice in the sale of shares of investment companies?
I. Sandy Slacker hands her client the fund's prospectus and tells him that the prospectus will provide him
all that he needs to know about loads and fees associated with the fund.
II. Elliot Eager tells a client who has an investment objective that includes current income that a certain
bond fund has a current yield of 8% and provides the client with a prospectus so that the client can peruse
the average annual returns that the fund has generated in past years when the client has the time.
III. After explaining all the fees and loads involved in two different bond funds as well as the difference
between current yield and total return, Patty shows the client the data on the average annual returns that
the two bond funds provided. She explains to the client that the municipal bond fund has a lower yield
than the similar-risk corporate bond fund because the interest income the client will receive from the
municipal bond fund will be free from federal taxation, while the interest income on the corporate bond
fund is fully taxable.
- A. All the choices describe prohibited practices in the sale of shares of investment companies.
- B. I only
- C. I and II only
- D. I and III only
Answer: C
Explanation:
Only the scenarios described in Selections I and II represent prohibited practices. The
NASAA rules state that it is not enough to hand a client a prospectus, but that the agent must fully explain
all sales charges and also to explain the difference between current yield and total return to the client and
present that client with the fund's most recent average annual returns over the past year, 5-year, and
1 0-year periods. Sandy and Elliot have not done this in the scenarios described. In Selection III, Patty has
done so and has also provided the client with accurate and useful information regarding why a municipal
bond offers a lower yield than a corporate bond fund.
NEW QUESTION # 158
You are a registered agent with a large brokerage firm. Your client is a very busy woman. She is
interested in purchasing 500 shares of Google, but she thinks this morning's opening price is too high.
She's going to be in meetings and then on a transatlantic flight. She wants the purchase to take place
today because she believes Google's price is just going to keep rising with only the occasional daily ups
and downs. She wants you to use your discretion and try to get her the best price for the stock in today's
trading session. Which of the following statements are true?
- A. You tell her you can enter it for her as a "market not held" order.
- B. You have to tell her that you can't do this without a signed discretionary authorization from her, and
there's none on file. - C. You tell her to have her secretary type up a discretionary authorization for her to sign and drop in the
mail before she boards the plane. As long as the written authorization is in the mail, you can place the
order. - D. You tell her that you can do this for her, but only if you execute it as a margin transaction.
Answer: A
Explanation:
You can tell her that you will be able to execute this for her as a "market not held" order that
permits you to use your discretion in timing the purchase in order to try to get a better price than currently
exists. As long as you are only being requested to use your discretion in the timing and price of the
transaction, and not in the actual security being traded or the size of the trade, you do not need written
authorization. However, if written authorization is required, you must have it in your hand before you can
effect a transaction. In other words, it isn't good enough for it to be in the mail.
NEW QUESTION # 159
In which of the following cases is an investment adviser allowed to be compensated with a share of the capital gains of the client's portfolio?
I. The client is a mutual fund.
II. The client is a credit union.
III. The client is a private client whose minimum net worth is $1 million or more.
IV. The client is a private client who has at least $750,000 invested through the investment adviser.
- A. I, II, and III only
- B. I and II only
- C. I, II, and IV only
- D. none of the above. An investment adviser is never allowed to share in the capital gains earned on
Answer: C
Explanation:
Explanation
Selections I, II, and IV are correct. An investment adviser is permitted to be compensated with a share of the capital gains of the client's portfolio if the client is a mutual fund, a credit union, or a private client with at least $750,000 invested through the investment adviser. More generally, the adviser can charge a fee based on the capital appreciation of the portfolio if the client is an institutional investor, a private client with a net worth of at least $1.5 million, or a private client with at least $750,000 invested with the investment adviser.
NEW QUESTION # 160
Elizabeth is the owner of Lizbeth Investment Advisers, a small, state-registered investment advisory firm. She has decided that her firm needs a niche and has learned that a consulting group is coming to the area and offering a 3-day seminar on asset allocation for senior citizens offered by Advantage for Retirement Persons (ARP). The seminar will cost $1,000 per individual, but after attending the seminar, each attendee will receive a certificate verifying their involvement in the program. Elizabeth decides this is the niche she has been looking for and signs up herself and her three investment adviser representatives for the program. After attending the seminar and receiving their certificates, Elizabeth and her team can
- A. represent themselves as certified senior citizen investment advisers.
- B. do none of the above.
- C. indicate that they are certified by the ARP program since money was paid for their attendance.
- D. have the words "Senior-Citizen Investment Specialists" printed on their business cards.
Answer: B
Explanation:
Explanation
After attending the ARP seminars on asset allocation for senior citizens, Elizabeth and her team cannot represent themselves as certified senior citizen investment advisers, print "Senior-Citizen Investment Specialists" on their business cards, or indicate that they are certified by the ARP program. Under the NASAA model rules, their attendance does not entitle them to say they are in any way especially certified to serve senior citizens. The attendance certification they received does not have any competency requirements attached.
NEW QUESTION # 161
Ms. Connie Fused sent her investment adviser a check, payable to a mutual fund that he had
recommended to her. What must the adviser do in order to avoid being considered the custodian of this
account and, thereby, subject to some strict requirements, including a higher minimum net capital?
- A. He needs to forward the check to the mutual fund within 24 hours.
- B. He needs to get a written statement from Ms. Fused, addressed to the state Administrator,indicating it
was her mistake. - C. He needs both to forward the check within 24 hours and to obtain a written statement from Ms. Fused.
- D. He needs to forward the check to the mutual fund within 3 days.
Answer: A
Explanation:
As long as the adviser forwards the check to the mutual fund within 24 hours, he will not be
deemed to have taken custody of Ms. Fused funds. This assumes the mutual fund is in no way affiliated
with the investment adviser.
NEW QUESTION # 162
Until yesterday Maddie was a registered agent employed by the broker-dealer, QuikDeals. Yesterday
afternoon, issues that had been brewing between her and another employee of the firm came to a head,
and Maddie impulsively quit her job. At this point,
- A. Maddie has sixty days to find a job with another broker-dealer, or she will need to file a new registration
application. - B. Maddie will have to file a new application for registration with the Administrator upon finding
employment with another broker-dealer since she is no longer considered to be a registered agent by the
state. - C. Maddie has thirty days to find a job with another broker-dealer, or she will need to file a new registration
application. - D. Maddie is required to call all of her clients at QuikDeals to inform them she is no longer employed
there.
Answer: B
Explanation:
When Maddie quit her job, her status as a state-registered securities agent was
automatically terminated, and she will need to file a new application for registration with the Administrator
upon obtaining a position with another broker-dealer. If she does so within thirty days, her registration will
become effective as soon as she has filed her application and paid her application fee. While she is
required to notify the Administrator that she has terminated her employment with QuikDeals, there is no
requirement that she contact any of her clients at QuikDeals.
NEW QUESTION # 163
Finn Nance has recently passed his CFP exam and is now a certified financial planner. He has new
business cards printed that have the words "Certified Financial Planner" printed under his picture. In doing
so,
- A. Finn has possibly violated a state securities regulation. The Administrator in many states prohibits the
use of the word "certified" on any advertisement for services. - B. Finn has violated a securities law. The Uniform Securities Act prohibits anyone from using the word
"certified" on any advertisement for services. - C. Finn is not in violation of any laws as long as he has notified the state Administrator of his new
designation and his new logo. - D. Finn has not violated any laws or engaged in any prohibited practices.
Answer: D
Explanation:
Finn has not violated any laws or engaged in any prohibited practices in using the words
"Certified Financial Planner" on his business cards. Had he indicated he had been certified or approved
by the state, he would have been in violation, but he is allowed to indicate a certification with a
professional organization in any advertising literature.
NEW QUESTION # 164
Broker-Dealer Wheeler has no offices in the state. Wheeler does, however, sell corporate bonds from his
portfolio to banks and insurance companies located in the state that purchase the bonds for their
investment portfolios. He executes about twelve of these transactions a year. Wheeler profits from the
price appreciation of the bonds during the time he held them, but receives no other form of compensation.
Based on these facts,
- A. Wheeler need not register in the state, and the securities are also exempt from registration.
- B. Wheeler need not register in the state, but the securities must be registered before they can be sold to
in-state investors. - C. Wheeler must register as a broker-dealer in the state, and the securities must also be registered before
they can be sold to in-state investors. - D. Wheeler must register as a broker-dealer in the state, but the securities do not need to be registered.
Answer: A
Explanation:
Since Wheeler has no offices in the state and is selling bonds from his portfolio to
institutional investors, Wheeler need not register in the state, and the securities are exempt from
registration. Broker-dealers with no physical location in a state that are doing business with other
broker-dealers or with institutional investors such as banks and insurance companies that do have offices
in that state are exempted from registering in the state. Securities sales to institutional investors are
exempt transactions, and securities sold in exempt transactions are themselves exempt from state
registration requirements.
NEW QUESTION # 165
Jack and Jill are a newly married couple in their mid-20s. They are determined to retire by the time they
are 50 and have arranged a meeting with a representative of Professional Investment Advisers to
structure a financial plan that will allow them to achieve this goal.
The representative, Mr. Hill, advises them to invest at least 60% of their money in bond funds to minimize
the risk of loss on the way to their goal. Mr. Hill has
- A. committed fraud in indicating that bonds are less risky than stocks.
- B. has committed fraud in promoting their delusion that they can possibly expect to retire by the time they
turn 50, regardless of their investment strategy. - C. advised Jack and Jill well with a conservative allocation of their money to preserve principal.
- D. made an unsuitable recommendation for these clients and is subject to license suspension or
revocation.
Answer: D
Explanation:
Mr. Hill has made an unsuitable recommendation in recommending a 60% investment in
bonds to clients in their mid-20s with an investment goal of early retirement, and his license can be
suspended or revoked because of this. Bonds do not generate the returns that stocks do, and Jack and
Jill are unlikely to be able to retire by the time they are 50 with such a high percentage invested in bonds.
Given their investment time horizon, they can invest in growth and aggressive growth stocks, which offer
significantly higher returns and will advance them toward their goal, since they can ride the waves of the
up and down markets. This, of course, assumes that they are risk-tolerant enough to do so. There has
been no fraud since a couple in their mid-20s can retire by the time they turn 50 if they have reasonably
well-paying jobs, are frugal, and invest wisely.
NEW QUESTION # 166
Under the NASAA Model Rules, which of the following must an investment adviser provide its clients with
at least once a year?
- A. both A and B
- B. the total number of agency cross transactions completed for the client during the period
- C. the total amount of commissions or other compensation that the investment adviser received or
expects to receive in connection with agency cross transactions performed for the client during the period - D. the number of any complaints that each of its investment adviser representatives has received during
the period
Answer: A
Explanation:
Under NASAA Model Rules, an investment adviser must provide its clients with the total
number of agency cross transactions completed for the client during the period as well as the total amount
of any commissions or other compensation that the investment adviser received or expects to receive in
connection with agency cross transactions performed for the client during the period.
NEW QUESTION # 167
You are employed as an agent with CanDo Broker-Dealers. Your brother is software engineer with
VideoMagic. When you were talking to him on the phone the other day, he told you that he overheard a
conversation by some of the firm's executives that indicated that VideoMagic was about to take over
another software company. Which of the following would violate insider trading rules?
I. The next day, you get an unsolicited call from a client requesting that you sell his shares in Video Magic,
and you execute the trade.
II. You buy stock in Video Magic's target firm in anticipation that its stock price will rise when the
information becomes public.
III. You recommend the stock of Video Magic's target firm to investors based on the fact that, on average,
the stock price of target firms increases.
- A. I and II only
- B. I, II and III
- C. II and III only
- D. I and III only
Answer: C
Explanation:
Only selections II and III are violations of insider trading rules. If you receive an unsolicited
call from a client requesting a sale (or purchase) of that firm's stock, it is not considered to be an insider
transaction. If you have insider information from you brother about the merger of VideoMagic with another
firm, you cannot buy stock yourself in the target firm in anticipation of a rise in price, nor can you
recommend the stock to customers based on your expectation of a stock price increase.
NEW QUESTION # 168
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