Series-63 Exam Questions & Answers
Uniform Securities State Law Examination • Finra
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Sample Series-63 Questions
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The Administrator may not introduce a stop order to deny, revoke, or suspend the effective registration of a security based on facts that were disclosed during the registration process unless he does so within
The Administrator may not introduce a stop order against the registration of a security based on facts that were disclosed during the registration process unless he does so within 30 days.
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.
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.
Carrie is a registered agent employed by CanDo Broker-Dealers. Her uncle is a minister who regularly refers his parishioners to Carrie, in return for which Carrie has agreed to donate a quarter of her commissions from these transactions to the parish.
Is Carrie doing anything illegal?
Yes. Carrie is violating NASAA's Model Rules in splitting her commissions with an entity that is not a registered agent affiliated with her firm. It doesn't matter that the entity is a church, even if that church is itself a client of the broker-dealer.
AllTime Investment Advisers advertises that its phones are manned 24/7, so that a client ''doesn't have to lie awake all night worrying about a financial problem.'' In fact, AllTime does have a answering service that answers calls in the evenings and on the weekends when its offices are closed. The service informs the caller of the firm's business hours, which will be the earliest opportunity the caller will have to talk to an investment adviser representative.
Is this a violation of any securities laws?
Yes. The Uniform Securities Act prohibits investment advisers from making deceptive statements in the solicitation of its clients, so when AllTime suggests in its advertisements that a client will be able to talk to someone who can relieve his worries, AllTime has violated the law and is guilty of fraud.
Which of the following scenarios does not meet the definition of ''custody'' under NASAA Model Rules?
If an investment adviser is mistakenly sent a client's securities, but returns them to the sender within three business days of receipt, he is not deemed to have taken custody of the securities under NASAA Model Rules. Custody is defined by the NASAA as ''holding directly or indirectly, client funds or securities, or having any authority to obtain possession of them.'' Therefore, an investment adviser who has general power of attorney to withdraw a client's funds or securities from a broker-dealer is acting as a custodian, as is an investment adviser who keeps a client's securities in its safety deposit box. If an investment adviser receives a check from a client that is written to a third party, such as a mutual, that check must be forwarded within 24 hours of receipt, or the investment adviser is deemed to be a custodian.
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