Finra Series 63 – Uniform Securities Agent State Law Sample Questions

Question 1. As a sales representative for NewCorp, which is preparing for an initial public offering (IPO), Henry will be required to register as such if he:

• A. is engaging in transactions with the underwriters of the IPO to take the firm public.
• B. is representing NewCorp in any transactions with financial institutions.
• C. is participating in the selling of the new stock to individual investors.
• D. if he is performing any one of the above activities.

Correct Answer: C 

Explanation: Sales representatives must register under the Uniform Securities Act if they deal directly with the public.

Question 2. Among the following securities, which would not necessarily be exempt from state registration?

• A. a stock listed on the Tokyo Stock Exchange
• B. a bond guaranteed by the Canadian government
• C. a bond issued by another state’s employees’ credit union
• D. a stock listed as a NASDAQ National Market Issue.

Correct Answer: A 

Explanation: It is not necessary for Tokyo Stock Exchange-listed stocks to be registered at the state level. The SEC exempts stocks that are registered with it, such as NASDAQ NMSK stocks, securities issued or guaranteed by the Federal Government of Canada, and securities issued or guaranteed by a bank or credit union.

Question 3. Larry, Curly, and Mary all have positions with MoeMoney Investment Advisers, LLC. Moe is an investment adviser contracted by MoeMoney Investment Advisers, LLC. Larry serves as a board member, Mary represents the firm as a sales representative, and Curly is the administrative assistant who handles clerical duties.

Considering that Moe is already a registered investment adviser, which of the three other individuals are automatically registered as investment adviser representatives?

• A. Larry only
• B. Larry and Mary only
• C. Larry, Mary, and Curly
• D. Mary and Curly only

Correct Answer: A 

Explanation: A director of MoeMoney Investment Advisers automatically becomes an investment adviser representative. The Director and officers of the company are automatically registered as investment adviser representatives, but Mary, as a sales representative, must fill out a separate application. Also, Curly need not be registered as he performs only clerical duties.

Question 4. Person(s) who represent a broker-dealer in the buying and selling of securities are referred to as (are):

• A. underwriter
• B. issuer
• C. agent
• D. administrator

Correct Answer: C 

Explanation: Individuals who represent a broker-dealer in buying and selling securities are known as agents or registered representatives, and may also work for issuers, which are companies that sell securities to raise money for themselves. An underwriter is an entity that assists the issuer in bringing new securities to the market. A securities administrator is the official entrusted with enforcing the state’s securities laws in many states.

Question 5.  Blue Sky Laws are designed for:

• A. protecting investors from fraud in their securities market transactions.
• B. protecting agents, broker-dealers, investment advisers, and their representatives from spurious allegations of fraudulent activity.
• C. enhancing the tourism industry within a state.
• D. favoring investment in companies that engage in environmentally friendly practices.

Correct Answer: A 

Explanation: An individual investor’s right to protection from securities market fraud is the major purpose of Blue Sky Laws. Registration requirements for new securities issues as well as those who sell securities to the public as well as those who advise individual investors are just a few of the regulations that aim to accomplish this. Brokers, investment advisers, and agents are not protected by any provisions of the law.

Question 6. The goal of Rich Write well is to publish an independent weekly financial newsletter that will provide investment recommendations and other financial information to the general population. Within the next few months, Rich hopes to distribute his newsletter nationwide.

Which of the following statements is true?

• A. Rich will be required to get himself registered as an investment adviser as his publication will be inclusive of investment recommendations.
• B. Rich will be required to get himself registered as an investment adviser only if he sells this newsletter to the public. He need not register if the publication is to be distributed free of charge, 
• C. If he is a lawyer, accountant, engineer, or teacher, he may be exempted from registering himself as an investment adviser.
• D. Since he is publishing a legitimate financial newsletter for distribution to the general public, he need not get himself registered as an investment adviser

Correct Answer: D 

Explanation: Rich will not have to register as an investment adviser since he is publishing a legitimate financial newsletter that will be distributed to the general public. The definition of the term “investment adviser” excludes publishers of bona fide business or financial publications that are published regularly and have general circulation.

Question 7. Erin serves as a registered agent for SecureMoney Brokers-dealers. She advises Mrs. McTurk, a recently-widowed woman, about her investment portfolio on behalf of one of her clients. It reminds Erin of her own grandmother, and Mrs. McTurk provides guidance within her own area of expertise.

In the light of these facts, which of the following statements is true?

• A. SecureMoney Broker-dealers must get themselves registered as an investment advisers as one of its employees is providing investment advice.
• B. Erin must get himself registered as an investment adviser as she is providing investment advice.
• C. SecureMoney Broker-dealers must get registered as an investment adviser as one of its employees is providing investment advice, and Erin must also get himself registered as an investment adviser representative as the firm’s employee.
• D. Neither SecureMoney Broker-dealers nor Erin must get self themselves registered as an investment advisers based on the facts provided.

Correct Answer: D 

Question 8. Which of the following is an example of a non-issuer transaction?

• A. IBM sells a new issue of bonds to an insurance company.
• B. Jose purchases a 10-year bond issued by Progress Energy when it has 6 years remaining to maturity.
• C. Google offers more shares of its stock for sale to the public.
• D. NewCorp, which has been a privately held company, is engaging in an initial public offering (IPO) of its stock.

Correct Answer: B

Question 9. What among the following is not a security under the Uniform Securities Act (USA)?

• A. a debenture
• B. a certificate of deposit (CD)
• C. a put option
• D. An annuity contract that promises a periodic or lump-sum payment from an insurance company.

Correct Answer: D 

Explanation: Under the Uniform Securities Act, insurance contracts in which an insurance company guarantees to pay a fixed amount either through a lump-sum payment or periodic payments do not qualify as securities. USA law classifies debentures, CDs, and options contracts as securities.

Question 10. An Administrator has control over a broad scope, however, he or she cannot:

• A. Serve subpoenas that require mandatory attendance.
• B. gather evidence.
• C. deliver a judicial injunction.
• D. formulate rules and orders.

Correct Answer: C 

Despite having broad powers, an Administrator cannot issue a judicial injunction because he or she does not possess the authority of a court. As an Administrator, you have the power to issue subpoenas, collect evidence, and enact rules and regulations.

Question 11. “Federal covered securities” are defined and excluded from state registration by the following:

• A. National Securities Markets Improvement Act of 1996 (NSMIA.)
• B. Gramm-Leach-Bliley Act of 1999 (GLBA.)
• C. Uniform Securities Act (USA.)
• D. National Conference of Commissioners on Uniform State Laws (NCCUSL.)

Correct Answer: A

Question 12. The majority of securities laws in each state today are based on:

• A. the Uniform Securities Act of 1956.
• B. the Uniform Securities Act of 2002.
• C. The National Securities Markets Improvement Act of 1996.
• D. the Gramm-Leach-Bliley Act of 1999.

Correct Answer: A

Question 13. A smaller broker-dealer, Target Investments, will be acquired by BigCash Broker-Dealers as a subsidiary. Also, the state has the Target Investments registered.

In order to register its new subsidiary, what steps must BigCash take after completing the acquisition?

• A. Target Investments is already a duly registered broker-dealer with the state, so BigCash does not need to do anything.
• B. In order to register its new subsidiary, BigCash must file a new application with the state, but Target Investments will be able to use the remainder of its annual filing fees.
• C. BigCash must register its new subsidiary with the state and pay the state annual filing fee.
• D. BigCash will be required to pay the Administrator’s annual filing fees, but no new registration will be required.

Correct Answer: B 

Explanation: The new subsidiary will have to be registered with the SEC, but BigCash will be able to utilize the remainder of any annual registration fees that Target Investments paid for the year. Fees for annual filings are transferable, although registration applications are not.

Question 14. If a broker-dealer is granted state registration after applying for it, the registration remains in effect

• A. until December 31st.
• B. for twelve months.
• C. for three years.
• D. for five years.

Correct Answer: A

Question 15. How long does a broker-dealer need to keep his records?

• A. at least three years
• B. at least five years
• C. at least seven years
• D. A broker-dealer must still maintain records as long as he remains registered in the state.

Correct Answer: A

Question 16. According to the guidelines of the Uniform Securities Act (USA), which entity is required to register as a broker-dealer with the state?

• A. A bond underwriter who has no offices in the state, helping an insurance company issue a bond within the state.
• B. A credit union provides loans to its members that are located within the state.
• C. An agent who carries out stock and bond purchases and sales for clients.
• D. These entities would not be required to register as broker-dealers with the state under Uniform Securities Act guidelines.

Correct Answer: D

Question 17. Broker-dealer Joe Romeo is registered with the state. Betty Buxom has recently been hired as his administrative assistant. His firm has given her the responsibility of effecting purchases and sales of securities for some of its smaller accounts as part of her duties. A broker-dealer registration or agent license has never been applied for or received by Ms. Buxom. Choose the most suitable option.

• A. Joe Romeo’s registration should be revoked in accordance with the Uniform Securities Act, and he needs to be charged criminally and civilly.
• B. Ms. Buxom does not have a problem as long as she registers with the state as an agent within thirty days.
• C. Joe Romeo’s registration may be revoked or suspended by the Administrator, and Joe may also face civil and criminal penalties.
• D. Joe Romeo and Betty Buxom will both be charged with crimes under state law if the Administrator turns the case over to the state’s district attorney.

Correct Answer: C

Question 18. Out of the following statements, which is(are) NOT true about agents?

• A. Administrators may terminate the registration of an agent who files for bankruptcy if they believe doing so would be “in the public interest.”.
• B. The Administrator must be informed when an agent’s address changes, as well as his broker-dealer affiliate.
• C. For an agent’s registration application to be accepted, he must demonstrate a specific level of financial stability.
• D. All of the above

Correct Answer: C

Question 19. The 2003 NASAA Model Rule requires that non-federally insured investment advisers maintain their records for a period of at least:

• A. three years.
• B. five years.
• C. seven years.
• D. Until and unless they are registered with the state, investment advisers must maintain their records.

Correct Answer: B

Question 20. A state may not require a broker-dealer or investment adviser to file financial reports more often than:

• A. once a year.
• B. twice a year.
• C. four times a year.
• D. twelve times a year.

Correct Answer: C 

Explanation: Broker-dealers and investment advisers are not required to file financial reports more frequently than four times a year by individual states. Individual states are prohibited by the Securities and Exchange Act of 1934 from imposing more stringent requirements than what is already required by the SEC, and a quarterly report is required by the SEC. Consequently, a state may not require brokers and investment advisers to file monthly reports with it.