Updated Apr-2024 Test Engine to Practice Series63 Test Questions
Series63 Real Exam Questions Test Engine Dumps Training With 251 Questions
NEW QUESTION # 128
Once you have passed the Series 63 examination, which entity must then approve your application to sell securities?
- A. NASAA
- B. FINRA
- C. the state administrator
- D. SEC
Answer: C
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 # 129
A hypothecation agreement refers to
- A. an agreement signed by a client who is executing a margin transaction that allows the broker to hold the margined securities in street name as collateral for the loan.
- B. an agreement wherein a client gives his broker-dealer discretion to purchase securities that the broker-dealer deems appropriate in whatever quantity the broker-dealer feels appropriate and at a time and price the broker-dealer believes is a good deal.
- C. a document signed by a client indicating that he or she understands that some of the charts and examples presented in a broker-dealer's advertising literature are based on hypothetical trades.
- D. an agreement that a client must sign prior to executing any short sales with the broker-dealer.
Answer: A
Explanation:
Explanation
A hypothecation agreement refers to an agreement signed by a client who is executing a margin transaction that allows the broker to hold the margined securities in street name as collateral for the loan.
NEW QUESTION # 130
A broker-dealer of commodity futures contracts has been profiting by trading for its own account either before or after executing a client's trade on the same commodity, depending on which will be most advantageous.
Under the Uniform Securities Act, the broker-dealer is guilty of
- A. unauthorized transactions.
- B. fraud.
- C. churning.
- D. nothing. The Uniform Securities Act (USA) deals only with securities, and a commodity futures contract is not a security.
Answer: D
Explanation:
Explanation
A broker-dealer of commodity futures contracts is guilty of nothing under the Uniform Securities Act since a commodity futures contract is not a security as defined by the USA. The broker-dealer may, however, find himself in trouble with the Commodity Futures Trading Commission, which is the regulatory agency of the futures market.
NEW QUESTION # 131
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 not violated any laws or engaged in any prohibited practices.
- 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 possibly violated a state securities regulation. The Administrator in many states prohibits the
use of the word "certified" on any advertisement for services.
Answer: A
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 # 132
Under the 2002 Uniform Securities Act, registration by coordination allows:
- A. issuers of federal covered securities to submit only a notice filing with the Administrator of states in which the securities will be offered for sale.
- B. securities that do not fall within the category of federal covered securities to be registered simultaneously with the SEC and with the states in which the securities will be offered for sale.
- C. both state-registered and out-of-state investment bankers to participate in the underwriting and registration of a new security issue.
- D. federal covered securities to be registered simultaneously with the SEC and with the states in which the securities will be offered for sale.
Answer: B
Explanation:
Explanation
Under the 2002 Uniform Securities Act, registration by coordination allows securities that are not federal covered securities to be registered simultaneously with the SEC and with the states in which the securities will be offered for sale. Federal covered securities are exempt from state registration and are required to submit only a notice filing with the Administrator of the state. This is not the same as registration by coordination.
NEW QUESTION # 133
You have passed the necessary exams (congratulations!) and are applying for registration as a securities agent.
It is already the end of September. Therefore, you must pay
- A. the full annual fee, and your license will expire on December 31st next year.
- B. one-fourth of the annual fee required since only one quarter of the year remains.
- C. the full annual fee, and your license will expire on September 30th next year.
- D. the full annual fee, and your license will expire on December 31st this year.
Answer: D
Explanation:
Explanation
Once you have passed the necessary exams and are applying for registration as an agent, you must pay the full annual fee and your license will expire on December 31st of the current year, no matter how late in the year it is.
NEW QUESTION # 134
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. I, II, and III
- B. II only
- C. I and II only
- D. II and III only
Answer: B
Explanation:
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 # 135
A margin transaction refers to a transaction
- A. Both A and C are true statements.
- B. in which the client borrows some of the money that he is investing.
- C. that is illegal under the guidelines of the Uniform Securities Act.
- D. in which a registered agent makes trades on a customer's account without that customer's knowledge.
Answer: B
Explanation:
Explanation
A margin transaction refers to a transaction in which the client borrows some of the money that he is investing.
It is a recognized practice.
NEW QUESTION # 136
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 is not in violation of any laws as long as he has notified the state Administrator of his new designation and his new logo.
- B. Finn has not violated any laws or engaged in any prohibited practices.
- C. Finn has violated a securities law. The Uniform Securities Act prohibits anyone from using the word
"certified" on any advertisement for services. - D. 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.
Answer: B
Explanation:
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 # 137
Cassie Clueless has recommended that a client purchase shares of a mutual fund prior to its ex-dividend date, so that the client will receive the dividends when they are distributed.
In which of the following situations might this recommendation be justifiable and not in violation of NASAA rules?
I. The investor has refused to provide Cassie any information regarding his investment goals.
II. The investor is a young professional with an investment goal of long-term capital appreciation.
III. The investor is a retiree in a low tax bracket and needs current income to augment her social security check.
- A. I only
- B. I and II only
- C. It is always in violation of NASAA rules to recommend that a client purchase shares of a mutual fund prior to its ex-dividend date.
- D. III only
Answer: D
Explanation:
Explanation
If Cassie makes her recommendation based on the scenario described in Selection III, she is not violating any NASAA rules. It is advantageous for an investor who is a retiree in a low tax bracket and needs current income to augment her social security check to buy shares of a mutual fund before its ex-dividend date in order to receive the dividend income. The NASAA rule states only that an agent cannot indicate that the purchase of shares of a mutual fund prior to the ex-dividend date would be advantageous to the client "unless there are specific, clearly described tax or other advantages to the customer." It would be unethical for Cassie to recommend this strategy to an investor whose investment goals were unknown to her, as in Selection I, or to an investor who is looking for long-term capital appreciation and has no need for the dividend income--which will be taxable--as in Selection II.
NEW QUESTION # 138
Ms. Muffet is employed by Spyder Broker-Dealers. Her job duties include providing price quotes and
executing purchases and sales for the firm's clients. She is paid a salary plus commission. Ms. Muffet is
- A. a broker-dealer.
- B. an investment adviser.
- C. an investment adviser representative.
- D. an agent.
Answer: D
Explanation:
As an employee of Spyder Broker-Dealers who executes trades for clients, Ms. Muffet is an
agent who works for the broker-dealer Spyder. She does not provide investment advice for a fee, so she
is neither an investment adviser nor an investment adviser representative.
NEW QUESTION # 139
Alice Wonder called her broker on Tuesday, August 10th, with a market order to buy 10 calls on the stock of Abbott Laboratories. Under normal conditions, Alice will have to pay for the calls on
- A. Monday, August 16th.
- B. Friday, August 13th.
- C. Wednesday, August 11th.
- D. Tuesday, August 10th.
Answer: C
Explanation:
Explanation
If Alice places a market order to buy call options on Tuesday, August 10th, she will have to pay for them on Wednesday, August 11th, the next business day. Options and U.S. government bonds settle on the day after the trade date, or T + 1.
NEW QUESTION # 140
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 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. - 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 you can enter it for her as a "market not held" order.
- D. You tell her that you can do this for her, but only if you execute it as a margin transaction.
Answer: C
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 # 141
Which of the following is not considered to be a security, as defined by the Uniform Securities Act (USA)?
- A. an annuity contract wherein an insurance company promises to pay a fixed sum, either in a lump amount or through periodic payments.
- B. a certificate of deposit (CD)
- C. a put option
- D. a debenture
Answer: A
Explanation:
Explanation
The Uniform Securities Act excludes annuity contracts wherein an insurance company promises either to pay a fixed sum, either in a lump amount or through periodic payments, from its definition of a security. Debentures, CDs, and option contracts are all classified as securities under the USA.
NEW QUESTION # 142
Which of the following is not a prohibited practice for a broker-dealer?
- A. requiring that a client who is engaged in margin transactions leave the securities with the broker-dealer in "street name"
- B. executing a trade for an account holder based on instructions from the account holder's spouse
- C. recommending a security to a new client without first ascertaining that client's level of risk tolerance
- D. waiting 36 hours before mailing a check after receiving a request for a cash withdrawal from a client if the client has that much cash available in his account
Answer: A
Explanation:
Explanation
It is not prohibited for a broker-dealer to require that a client who is engaging in margin transactions to leave the securities with the broker in "street name." This is the normal business practice. A margin transaction means that the client is borrowing part of the funds he's investing, and the securities are serving as collateral for the loan. It is illegal to delay sending a check upon receiving a request for a cash withdrawal, assuming the client has the cash available in his account; to recommend a security to a client without knowing anything about him, including his tolerance for risk; and to execute a trade on instructions from anyone other than the account holder unless that party has at least limited power of attorney.
NEW QUESTION # 143
Individual states are prohibited from requiring a broker-dealer or investment adviser to file financial reports more frequently than:
- A. twelve times a year.
- B. four times a year.
- C. once a year.
- D. twice a year.
Answer: B
Explanation:
Explanation
Individual states are prohibited from requiring a broker-dealer or investment adviser to file financial reports more frequently than four times a year. Under the Securities and Exchange Act of 1934, individual states are prohibited from imposing more stringent requirements than those already required by the SEC, and the SEC requires quarterly reporting. Therefore, a state may not require that a broker-dealer or investment adviser file monthly reports with it.
NEW QUESTION # 144
Noah Scruples, an agent with CanDo Broker-Dealers, just got a copy of the most recent report on a
certain stock. The report was generated by CanDo's analyst department and is hot off the presses. It has
not yet even been put on the firm's website for the firm's clients.
The analyst department has just changed its recommendation on the stock from "Hold" to "Strong Buy"
based on new information that it has obtained on the company. Can Noah
rush to his office to buy shares of the stock before the analysts release their reports to CanDo's clients?
- A. Both B and C are true statements.
- B. No. This is a prohibited activity referred to as "painting the tape."
- C. No. It is unethical for him to trade based on this information before the firm's clients have received the
information. - D. Yes. The firm's analysts used publicly available information to assess the stock and make its
recommendation, so Noah can buy the stock now on his own account.
Answer: C
Explanation:
No. It is unethical for him to trade based on the information that just came from the analysts
before the firm's clients have the information. This is a prohibited practice called "front running."
NEW QUESTION # 145
You are a newly licensed agent and are making cold calls to generate business. According to the Telephone Consumer Protection Act of 1991 (TCPA), you may only place your calls between the hours of
- A. 8 a.m. and 9 p.m., based on your time zone.
- B. 8 a.m. and 9 p.m., based on your prospective customer's time zone.
- C. 8 a.m. and 7 p.m., based on your prospective customer's time zone.
- D. 8 a.m. and 7 p.m., based on the Pacific Time Zone.
Answer: B
Explanation:
Explanation
The TCPA mandates that you place your calls only between the hours of 8 a.m. and 9 p.m., based on your prospective customer's time zone. This is a rule that applies to all telemarketers.
NEW QUESTION # 146
According to the NASAA Model Rules, which of the following institutions would not be considered a
qualified custodian?
- A. a savings institution that is insured by the FDIC
- B. a broker-dealer that is registered with the state
- C. a foreign financial institution
- D. a bank that is insured by a private, state-sponsored insurance company
Answer: D
Explanation:
According to the NASAA Model Rules, a bank that is insured by a private, state-licensed
insurance company would not be considered a qualified custodian. Registered broker-dealers, foreign
financial institutions, and banks and savings institutions that are insured by the FDIC are on the list of
qualified custodians.
NEW QUESTION # 147
The state official who has regulatory authority over the securities industry within the state is known as the
- A. attorney-general.
- B. investor-protection officer.
- C. administrator.
- D. secretary of state.
Answer: C
Explanation:
Explanation
The state official who has regulatory authority over the securities industry within the state is the administrator.
NEW QUESTION # 148
Which of the following conditions is necessary for an act involving securities fraud to be considered criminal and subject to criminal penalties?
- A. The victim(s) lost a combined total of at least $25,000 because of the act.
- B. The Administrator decides to send the case to criminal court.
- C. The perpetrator willfully committed the fraudulent act.
- D. The act extended across state lines.
Answer: C
Explanation:
Explanation
In order for an act of fraud to be considered criminal, the perpetrator must have willfully committed the fraudulent act. In this case, the Administrator will probably ask the court to impose criminal penalties, but an Administrator can't cause an act of fraud to be criminal by sending it to the criminal court system. If an agent misleads a customer regarding the returns to be expected on an investment but hasn't deliberately done so, it is still fraud, but not criminal fraud, regardless of how much the victims lost.
NEW QUESTION # 149
Gazillions is an investment adviser with offices in the state that is registered with the SEC and has $100
billion dollars under management. A client has filed a complaint asserting that the firm has been involved
in fraudulent activities. In this case,
- A. Gazillions has to answer to both the SEC and the state in which the complaint was filed.
- B. Gazillions only has to answer to the state in which the complaint was filed.
- C. Gazillions only has to answer to the SEC regarding the allegations. Since it is a federal covered
investment adviser, it need not respond to any state-issued requests for information. - D. Gazillions is in trouble for not registering with both the state and the SEC given the amount of money it
has under management.
Answer: A
Explanation:
If Gazillions is operating as an SEC-registered adviser in a state, it must answer to both the
SEC and the state in which the complaint has been filed, even though there is no requirement that it had
to register with the state, given that it was a federal covered investment adviser. Allegations of fraud come
under the state's authority as well, even if the adviser is a federal covered investment adviser.
NEW QUESTION # 150
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