Deck 4: Uniform Securities Act USA and State Registration Requirements

Question 1

The Uniform Securities Act (USA) is

A)a body of laws governing the purchase and sale of securities within a single state.
B)a set of guidelines for individual states to follow when formulating their own securities' laws.
C)a group of laws requiring state-issued securities, such as municipal bonds, to be registered with
D)federal legislation that requires all states to adopt the same registration requirements for all

Answer 1

B
The Uniform Securities Act (USA) provides a model for states to follow when formulating their own securities laws. It does not, itself, contain any laws.

Question 2

Once you have passed the Series 63 examination, which entity must then approve your application to sell securities?

A)FINRA
B)NASAA
C)SEC
D)the state administrator

Answer 2

D
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.

Question 3

Which of the following securities 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.

Answer 3

A
Stocks listed on the Tokyo Stock Exchange would not necessarily be exempt from state registration. Stocks that are registered with the SEC, such as NASDAQ National Market Issue stocks, securities issued or guaranteed by the Canadian government, and securities issued or guaranteed by banks or credit unions are all exempt.

Question 4

Moe is a registered investment adviser doing business under the name of MoeMoney Investment Advisers, LLC. Larry, Curly, and Mary all hold positions with the firm. Larry is on the board of directors; Mary is a sales representative for the firm; and Curly is an administrative assistant, who performs clerical duties. Given that Moe is already a registered investment adviser, which of the other three 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

Question 5

Jack is employed by NewCorp, which is engaging in an initial public offering (IPO). Jack will need to register as a sales representative if he:

A)engages in transactions with the underwriters of the IPO for the purpose of taking the firm public.
B)represents NewCorp in any transactions with financial institutions.
C)participates in the selling of the new stock to individual investors.
D)Jack will need to register as a sales representative if he performs any one of the above activities.

Question 6

Blue Sky Laws are designed to:

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

Question 7

An individual who represents a broker-dealer in the buying and selling of securities is called a(n):

A)underwriter
B)issuer
C)agent
D)administrator

Question 8

Which of the following statements best explains the difference between an agent and a broker-dealer?

A)An agent is an individual who represents a broker-dealer or an issuer and buys and sells securities he does not own in return for a commission on the transactions he executes. A broker-dealer may also buy and sell securities for his own portfolio, in which case the broker-dealer enjoys any price appreciation on those securities.
B)A broker-dealer must be licensed in the state in which he conducts business, but there are no separate licensing requirements for agents.
C)Agents are engaged exclusively in the purchase and sale of stocks whereas broker-dealers also buy and sell bonds and option contracts.
D)Agents conduct their business exclusively in the secondary market, while broker-dealers also operate in the primary market.

Question 9

Rich Writewell wants to begin publishing an independent weekly financial newsletter that will provide investment recommendations as well as other financial news items to the general public. Rich hopes that his newsletter will achieve nationwide circulation within a few months. Which of the following statements is true?

A)Rich will have to register as an investment adviser since his publication will include investment recommendations
B)Rich will have to register as an investment adviser only if he sells this newsletter to the public.If the publication is to be distributed free of charge, he will not have to register.
C)Rich may be exempt from registering as an investment adviser if he is a lawyer,accountant, engineer, or teacher. Otherwise, he will have to register.
D)Rich will not have to register as an investment adviser since he is publishing a legitimate financial newsletter for distribution to the general public.

Question 10

Erin is a registered agent who works for SecureMoney Brokers-dealers. One of her clients, Mrs. McTurk, is a recently-widowed woman who relies on Erin for advice about her investment portfolio. Mrs. McTurk reminds Erin of her own grandmother, and she is happy to provide guidance within the sphere of her own knowledge. Based on these facts, which of the following statements is true?

A)SecureMoney Broker-dealers must register as an investment adviser since one of its employees is providing investment advice.
B)Erin must register as an investment adviser since she is providing investment advice.
C)SecureMoney Broker-dealers must register as an investment adviser since one of its employees is providing investment advice, and Erin must register as an investment adviser representative as the firm's employee.
D)Neither SecureMoney Broker-dealers nor Erin must register as an investment adviser based on the facts provided.

Question 11

Which of the following would not fall under the classification of "institutional investor"?

A)Prudential Insurance
B)Chase Bank
C)Neuring Investment Advisers
D)Franklin Templeton Mutual Funds

Question 12

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.

Question 13

Which of the following is not considered to be a security, as defined by the Uniform Securities Act (USA)?

A)a debenture
B)a certificate of deposit (CD)
C)a put option
D)an annuity contract wherein an insurance company promises to pay a fixed sum, either in a lump amount or through periodic payments.

Question 14

Which of the following scenarios would not be considered a "sale," as defined by the Uniform Securities Act (USA)?
I.Yoshito owned shares of Minnow Corporation and received shares of Whale Corporation from Whale when it merged with Minnow.
II.Olivia's uncle, an agent with SecureMoney Brokers, sold Olivia ten call options on the stock of Microsoft.
III.Hans purchased a bond of Indebted Corporation that had detachable warrants and subsequently sold the warrants.
IV.Tom pledged some shares of stock he owned personally to secure a business loan for his company.

A)Neither I nor II would be considered sales.
B)Neither II nor III would be considered sales.
C)Neither I nor IV would be considered sales.
D)Neither III nor IV would be considered sales.

Question 15

Jeremy Sly considered himself somewhat of an inventor. The only problem was that his day job interfered with his opportunity to exercise his creativity. He came up with a plan to get outside investors to support his inventive activities. To this end, he produced and distributed a brochure advertising partnership interests with a guaranteed return on investment of at least 15% after the first 12 months, based on what he had allegedly generated from his other (non-existent) inventions. Given these facts, is Jeremy guilty of any security violations under the Uniform Securities Act (USA)?

A)No. The facts don't indicate whether any partnership interests were actually sold, and there can be no violation unless there is a sale.
B)No. An interest in a partnership is not considered a security.
C)No. It is not against the law to believe in oneself and promote one's ideas.
D)Yes. Even an "offer" to sell securities must not contain any untruths.

Question 16

Although an Administrator has broad powers, he or she cannot:

A)issue subpoenas involving compulsory attendance.
B)gather evidence.
C)deliver a judicial injunction.
D)formulate rules and orders.

Question 17

"Federal covered securities" were defined and exempted from state registration requirements by the:

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.)

Question 18

Rich Quick is a broker-dealer licensed in the state of Massachusetts and has offices only within the state. Two of Rich Quick's clients regularly vacation in Florida during the winter months, and Rich Quick executes trades for them when they call him from out-of-state. Based on these facts,
I. Rich Quick needs to register as a broker-dealer in the state of Florida as well.
II. Rich Quick needs to register only as an agent in the state of Florida.
III. Rich Quick needs to establish an office in the state of Florida in order to transact business.
IV. Rich Quick need not register in Florida.

A)Statements I and III are true.
B)Statements II and III are true.
C)Only Statement I is true.
D)Only Statement IV is true.

Question 19

Most individual state securities laws 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.

Question 20

BigCash Broker-Dealers is registered in the state and is in the process of purchasing a smaller broker-dealer, Target Investments, as a subsidiary. Target Investments is also registered in the state. After completing the purchase, what actions must BigCash take regarding registration of its new subsidiary?

A)BigCash need do nothing since Target Investments was already duly registered with the state as a broker-dealer.
B)BigCash must file a new application with the state to register its new subsidiary, but will be able to utilize the remainder of any annual filing fees that Target Investments had paid for the year.
C)BigCash must file a new application with the state to register its new subsidiary and must also pay the annual filing fees required by the Administrator.
D)BigCash will need to pay the annual filing fees required by the Administrator, but will not need to file a new registration application.

Question 21

In order to maintain its registration with a state, a broker-dealer may be required to
I. take a written or oral exam.
II. pay an annual filing fee.
III. maintain a minimum net capital.
IV. file all advertising material with the Administrator.

A)I and II only
B)II and III only
C)II, III, and IV only
D)I, II, III, and IV

Question 22

Once a broker-dealer has applied for and been granted state registration, the registration remains valid

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

Question 23

A broker-dealer is required to keep his records for how long?

A)at least three years
B)at least five years
C)at least seven years
D)A broker-dealer is required to keep his records for as long as he is registered in the state.

Question 24

Which of the following entities would be required to register with the state as a broker-
Dealer under the guidelines of the Uniform Securities Act (USA)?

A)an underwriter with no offices in the state that is helping a firm that is incorporated within the state with the sale of its new bond issue to insurance companies
B)a credit union that operates within the state and provides loans to its members
C)an agent who executes the purchase and sale of stocks and bonds for his clients
D)None of the above entities would be required to register with the state as a broker-dealer under the guidelines of the Uniform Securities Act.

Question 25

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)there is no problem as long as Ms. Buxom registers with the state as an agent within thirty days.
C)the Administrator may elect to revoke or suspend Joe Romeo's registration, and Joe may also face both civil and criminal penalties.
D)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.

Question 26

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 thirty days to find a job with another broker-dealer, or she will need to file a new registration application.
B)Maddie has sixty days to find a job with another broker-dealer, or she will need to file a new registration application.
C)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.
D)Maddie is required to call all of her clients at QuikDeals to inform them she is no longer employed there.

Question 27

Maddie, a registered agent affiliated with broker-dealer QuikDeals, quit her job on the spur of the moment. Under the guidelines of the Uniform Securities Act (USA), who is responsible for notifying the Administrator?

A)QuikDeals has the sole responsibility for notifying the Administrator. Maddie is no longer deemed to be an agent after she terminated her relationship with QuikDeals, so she need do nothing.
B)Maddie has the sole responsibility for notifying the Administrator.
C)It depends. If Maddie becomes affiliated with another broker-dealer within thirty days, then she must notify the Administrator of her termination with QuikDeals and her current affiliation with the new firm. Otherwise, only QuikDeals must notify the Administrator.
D)Both QuikDeals and Maddie are responsible for notifying the Administrator.

Question 28

Trevor is currently a registered agent in the state of Connecticut where he has been employed by Connect & Company, a broker-dealer that is registered in Connecticut and has subsidiary operations in Massachusetts, New Jersey, and New York. Trevor has moved to Massachusetts and is now associated with one of Connect's subsidiaries, a broker-dealer registered in the state. Trevor has applied to the Administrator of Massachusetts for registration as an agent. Can Trevor execute purchases and sales for clients while his registration is still pending?

A)No. Until he is informed by the Administrator of Massachusetts that his application has been accepted, Trevor may not effect any securities transactions in Massachusetts.
B)Yes. Because Trevor is a registered agent in another state and is affiliated with a broker-dealer that is registered in the state of Massachusetts, he is not restricted from executing trades.
C)Yes. Trevor can execute trades for new clients he solicits, but only for sixty days while his registration is pending.
D)It depends. Trevor can execute some purchases and sales, but only for clients that he already had who may have recently relocated to Massachusetts and only for sixty days while his registration is pending.

Question 29

Ding is an administrative assistant to the manager of a mutual fund. Most of her day is spent entering data onto a spreadsheet for her boss and answering phone calls. Some of the calls require her to provide information about the some of the fund's financial aspects, such as its closing net asset value on the previous day. What type of registration does Ms. Ding require in order to perform her duties?

A)Ms. Ding needs to apply for registration as an agent since she is providing financial information.
B)Ms. Ding needs to apply for registration as an investment adviser representative since she is providing information about a specific mutual fund.
C)Ms. Ding will need to apply for registration as both an agent and an investment adviser representative in this case since she is providing information about a mutual fund.
D)Ms. Ding does not need to apply for any type of registration. She is merely supplying information and is not engaged in the purchase or sale of the fund shares.

Question 30

Which of the following statements about agents is (are) false?

A)If an agent files for bankruptcy, the Administrator may elect to terminate that agent's registration if the Administrator believes it is "in the public interest" to do so.
B)When an agent has a change of address, both he and his broker-dealer affiliate must inform the Administrator.
C)An agent must demonstrate a specific minimum level of financial stability for his registration application to be accepted.
D)All of the above are false statements.

Question 31

Which of the following entities must sign a "consent to service of process," thereby allowing the Administrator to receive legal documents that are meant to be served to the entity in place of that entity?
I. agents
II. investment advisers
III. investment adviser representatives
IV. broker-dealers

A)I and IV only
B)II and III only
C)II and IV only
D)I, II, III, and IV

Question 32

Which of the following would fall under the definition of "agent," as defined by the Uniform Securities Act (USA)?

A)Joe works as an administrative assistant for broker-dealer GetErDone, doing data entry, filing client forms that contain confidential information, and directing calls to registered representatives of the firm.
B)Freedom broker-dealers executes the purchase and sale of securities for its customers.
C)TrustUs Bank has a subsidiary operation that sells mutual funds to the public.
D)None of the above would fall under the definition of "agent," as defined by the Uniform Securities Act (USA.)

Question 33

The 2003 NASAA Model Rule requires that investment advisers that are not federal covered maintain their records for at least

A)three years.
B)five years.
C)seven years.
D)Investment advisers must maintain their records for as long as they remain registered with the state.

Question 34

Individual states are prohibited from requiring a broker-dealer or investment adviser to file financial reports more frequently than:

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

Question 35

A-2-Z Associates advertises itself as a full service brokerage firm that will buy and sell securities for its clients, as well as provide investment advice to them. Its brochure provides a variety of plans to which a client can subscribe. The basic plan is the cheapest and allows the client a maximum number of trades per month for a specified fee. Another, slightly more expensive, plan provides the client with the same maximum number of trades per month, but the client also receives a personalized quarterly review of his portfolio along with advice for restructuring his portfolio based on such factors as current market conditions and specific industry or company information. The most expensive plan is one in which the client is assigned to an individual portfolio manager, who will take total responsibility for the asset allocation of the client's portfolio and will provide the client with monthly reports. Based on the services A-2-Z provides, it must register with the state as:

A)a broker-dealer.
B)an investment adviser.
C)both a broker-dealer and an investment adviser.
D)an investment adviser representative.

Question 36

MoeMoney Investment Advisers, LLC is registered in the state of Texas, and its three offices are all located in the greater Dallas-Fort Worth area. Five of its clients-all individuals-have relocated to Colorado and all have indicated a desire to retain the services of MoeMoney. In order for this to be possible,

A)MoeMoney will need to apply for and be granted registration as an investment adviser in the state of Colorado.
B)each client will have to write a letter to the Administrator of the state of Colorado on MoeMoney's behalf.
C)MoeMoney will need to apply for and be granted registration as an investment adviser representative in the state of Colorado.
D)Neither MoeMoney nor its clients need do anything.

Question 37

Sam Shade had his agent's license revoked by the state of Washington for repeatedly making misleading claims about various investment to investors. He had had it with all the rain anyway and decided to move to the sunshine state of Florida. His brother-in-law was a computer whiz who made money on the side (more than his day job provided, in fact) by supplying illegal immigrants with official-looking documentation, including social security numbers. Sam Shade became Ian Creed in a few clicks of the mouse. As Ian Creed, Sam was hired by Sunny Investment Advisers, an investment adviser firm located in the Florida Keys, in a clerical role. As such, Sam/Ian had access to the confidential information of the firm's clients, which he and his brother-in-law utilized for the purpose of identity theft. Under the Uniform Securities Act guidelines, when Sam and his brother-in-law are caught in their illegal activities,

A)Sunny Investment Advisers will not be held liable if it can prove that there was no way it could have or should have known of the revocation of Sam Shade's (aka Ian Creed) license.
B)Sunny Investment Advisers will be subject to criminal prosecution for employing an individual whose license had been revoked by the Administrator of another state since it obviously did not use due diligence in hiring Ian Creed, aka Sam Shade.
C)Sunny Investment Advisers will be subject to civil penalties for employing an individual whose license had been revoked by the Administrator of another state.
D)Sunny Investment Advisers will be subject to both criminal prosecution and civil penalties for employing an individual whose license had been revoked by the Administrator of another state since it obviously did not use due diligence in hiring Ian Creed, aka Sam Shade.

Question 38

Which of the following statements regarding an investment adviser representative who has an office in the state is true?

A)If the investment adviser is registered with the SEC, then neither the investment adviser nor any of its affiliated investment adviser representative needs to be registered with the state.
B)Regardless of whether the investment adviser is registered with the SEC or is registered with the state, all investment adviser representatives of the firm must be registered with the state if they have offices in the state.
C)If the investment adviser that the investment adviser representative is affiliated with is itself registered with the state, then the investment adviser representative does not need to apply for a separate registration, regardless of whether the investment adviser representative has an office in the state.
D)If an investment adviser representative is registered with the SEC, he or she need not obtain state registration, regardless of whether the investment adviser representative has an office in the state.

Question 39

A variable annuity is:

A)not a security and, therefore, does not have to be registered with the state.
B)not a security, but is still required to be registered with the state before it can be offered for sale.
C)a security and, therefore, has to be registered with the state before it can be offered for sale.
D)a security, but is exempt from state registration.

Question 40

Which of the following is not a security, as defined by the Uniform Securities Act?
I. an option contract
II. a futures contract on gold
III. a 401K plan
IV. a variable annuity

A)None of the selections listed are securities.
B)Only Selection III is not a security.
C)Only Selections II and III are not securities.
D)Selections II, III and IV are not securities.

Question 41

An arrangement wherein a terminally ill person sells a second party his life insurance policy at a discount from its face value, giving the buyer the right to the policy's face value when the seller dies is called a:

A)death warrant.
B)viatical settlement.
C)deceased option.
D)life straddle.

Question 42

Bigwig, CEO of HiGrowth Corporation, meets with the president of BigFee Investment Bankers and arranges for BigFee to underwrite an Initial Public Offering (IPO) for the firm. When the IPO comes to market, GetErDone Broker-Dealers is part of the selling group, which handles the sale of the stock to the public. In this scenario, which party is the issuer?

A)HiGrowth Corporation
B)Mr. Bigwig
C)BigFee Investment Bankers
D)GetErDone Broker-Dealers

Question 43

Assuming the security is not registered under the Uniform Securities Act, which of the following would not be exempt from state registration?

A)a variable annuity contract offered by an insurance company with offices in the state
B)a stock that is listed on the American Stock Exchange
C)a stock that is listed on the OTC Bulletin Board
D)a put option on a stock that sells in the over-the-counter market

Question 44

Under the Uniform Securities Act, which of the following does not need to be included when filing to register a security issue with the state?

A)a copy of the firm's articles of incorporation and bylaws, or the equivalent
B)copies of the underwriter agreements
C)a copy of any indenture applying to the security being registered
D)All of the above documents must be included when filing to register a security with the state.

Question 45

A "notice filing" refers to

A)the right of an issuer to run tombstone ads in the newspapers and other publications upon filing a registration application with the state Administrator.
B)the filing by a federal covered investment adviser of forms already filed with the SEC along with a consent to service of process with the state Administrator.
C)a document that the issuer must file with the SEC informing the SEC that the firm has applied to the state for registration of its new security.
D)notification to the public by the issuer or its underwriters that the issue is being sold on an "all or nothing" basis.

Question 46

Under the 2002 Uniform Securities Act, registration by coordination allows:

A)federal covered securities to be registered simultaneously with the SEC and with the 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)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.

Question 47

Newbie Corporation is considering the possibility of an interstate initial public offering (IPO) of its stock. In the initial meetings with BigFee Investment Bankers, Newbie has learned that the underwriting spread will be 15%. Although the actual offering price won't be set until Newbie's registration statement is approved by the SEC, BigFee has indicated that the offer price will probably be between $3 and $4 a share and that the stock will initially be listed on the OTC Bulletin Board. What methods for state registration does Newbie have available?
I. registration by coordination
II. registration by notification
III. registration by qualification

A)Newbie may elect to register by any one of the above methods although registration by qualification would be the most burdensome choice.
B)Method I only
C)Methods I and III only
D)Method II only

Question 48

Which of the following is not one of the criteria for a security to be eligible for registration by notification?

A)The issuer must have preferred stockholders as well as common stockholders.
B)The issuer must have a net worth of $4 million, or its net income before tax for at least two of the
C)The issuer must never have defaulted on any bond or long-term lease obligation.
D)If the security to be issued is an equity interest in the firm, its offer price has to be at least $5 a

Question 49

Assuming there is not a stop order or a proceeding pending, under the registration by coordination process a security's registration with the state becomes effective:

A)only when it is approved by the state Administrator, regardless of whether it has been approved by the SEC.
B)immediately after approval by the SEC as long as the registration statement has been on file for at least 20 days or the Uniform Securities Act has provided an exemption to this waiting period.
C)immediately subsequent to approval by the SEC, regardless of how long the registration statement has been on file.
D)only when it is approved by the state Administrator, who will review the registration documentation upon notification that SEC approval has been granted.

Question 50

Which of the following statements regarding "registration by qualification" is true?

A)Registration by qualification refers to the fact that certain categories of securities are exempt from state registration requirements.
B)Registration by qualification is the preferred method used by issuers since it requires the least amount of paperwork.
C)In its simplest form, registration by qualification requires the issuer to supply voluminous amounts of information about both the firm and its directors, officers, and major shareholders.
D)Registration by qualification refers to the fact that the highest quality bonds, i.e., those with a AAA rating, are exempt from registration with the state.

Question 51

Kevin has a pair of season tickets to the Boston Red Sox games. He and his wife can't attend all the games themselves, so Kevin has created "packages" of eight games each that he is listing for sale on Craig's List. Do these "packages" meet the definition of securities, and, if so, does Kevin need to register them with the state before offering them for sale?

A)If Kevin will be profiting from the sale of the packages, the packages are defined to be securities, but since he's selling the packages to only a few people, he will not have to register them with the state. (Kevin may, however, be guilty of violating ticket scalping laws.)
B)Only if Kevin will be selling the packages at or below cost are the packages not considered to be securities, in which case Kevin will not have to register them with the state.
C)The packages are not considered to be securities since each package is merely a purchase and sale agreement between Kevin and another person. There is no third party involved. Because they do not meet the definition of securities, Kevin does not need to register them with the state.
D)Statements A and B are both true statements.

Question 52

Which of the following securities would be exempt from state registration requirements, according to the Uniform Securities Act?
I. a municipal bond issued by the Canadian province of Nova Scotia
II. a bond issued by the county of Cork, Ireland
III. a bond issued by Nationwide Insurance Company

A)All of the selections would be exempt from state registration requirements under the Uniform
B)Selection I only
C)Selection I and III only
D)Selection III only

Question 53

Which of the following would be considered an "issuer" transaction?

A)Jacob calls his broker and places an order to purchase 100 shares of Hasbro, Inc. on the open market.
B)Maria purchases 500 shares of Dodge and Cox's International Fund, a mutual fund investing in foreign securities.
C)Kim sells an AT&T bond she holds that still has three years remaining to maturity.
D)None of the above is an "issuer" transaction.

Question 54

While on vacation in Colorado, Mr. Moneybags became interested in the stock of a company called SafeAway, which designs and installs customized high-tech security systems in the multimillion dollar mansions located in Colorado's pricier ski resort areas, such as Vail and Aspen. Upon returning to his home in Boston, he calls his broker-dealer with an order to purchase 10,000 shares of the stock, which he learned trades in the over-the-
Counter market. Fast Eddie, a registered agent with his broker-dealer, discovers that SafeAway's stock is registered only in the states of Colorado and Wyoming. Neither Fast Eddie nor his broker-dealer are registered to do business in either of those states. Under these circumstances,

A)Fast Eddie cannot effect Mr. Moneybags purchase of SafeAway stock since neither he nor his broker are registered to do business in Colorado or Wyoming, and SafeAway stock is not registered for sale in the state of Massachusetts.
B)Fast Eddie can execute the trade for Mr. Moneybags since this would be considered an exempt transaction because it is a private placement.
C)Fast Eddie should contact a broker-dealer that is registered in either Colorado or Wyoming and negotiate a finder's fee for referring Mr. Moneybags to them.
D)Fast Eddie can execute the trade for Mr. Moneybags since this would be considered an exempt transaction because it is an unsolicited transaction.

Question 55

Nancy's Aunt Ethel died, making Nancy executrix of her estate. In going through Aunt Ethel's belongings, Nancy discovered some stock certificates that she learned had been issued by a small New Jersey firm that was still in business. The problem lay in the fact that Nancy's Aunt Ethel had moved from New Jersey to Florida years ago, and the stock is registered only in the state of New Jersey. Nancy herself is a resident of Massachusetts. What does Nancy have to do in order to sell this stock?

A)Nancy can sell the stock without a problem as executrix of her aunt's estate.
B)Nancy will need to contact a securities law firm in Florida to help her register the stock in the state of Florida.
C)Nancy will need to contact a broker-dealer licensed in the state of New Jersey to help her with the sale of this stock.
D)Nancy will have to establish a mailing address in New Jersey before she can legally sell this stock.

Question 56

Which of the following describes an "exempt security," as defined by the Uniform Securities Act (USA)?

A)An exempt security is any security that is being sold by an institutional investor, such as a bank, to another institutional investor, such as another bank or an insurance company.
B)An exempt security is one that need not be registered in the state in which it is sold.
C)An exempt security is any security being sold as a private placement.
D)An exempt security is any security that is being sold in an isolated non-issuer transaction.

Question 57

Which of the following persons falls under the definition of "broker-dealer," as defined by the Uniform Securities Act (USA)?

A)Marge is a loan officer at Treadwater Bank and Trust.
B)Juan is employed by TrustUs Corporation to sell shares of the firm's stock to the firm's employees and receives a commission on the shares he sells.
C)Michaela is employed by GetErDone broker-dealers and sells both exempt and non-exempt securities to GetErDone's clients.
D)MyTrades is a sole proprietorship owned by Nathan Newmoney, who has established the firm solely to make trades on his own account, thereby avoiding the commissions he would have to pay a middleman.

Question 58

Which of the following persons would not be required to register with the state as an agent under the guidelines of the Uniform Securities Act (USA)?

A)Keith is a salaried employee of Middlesex County in Massachusetts who sells revenue bonds issued by the county to the public.
B)John is employed by TrustUs Corporation to sell shares of the firm's stock to the firm's employees and receives a commission on the shares he sells.
C)Stefan is a sales representative for SecureMoney Broker-Dealers and sells only mutual fund shares.
D)Preetham is part-owner of SecureMoney Broker-Dealers and executes the purchase and sale of securities for the firm's customers.

Question 59

Treadwater Bank and Trust is selling a portfolio of municipal bonds it owns to the SafeRisk Insurance Corporation. Under the Uniform Securities Act (USA), in this transaction Treadwater is defined as a

A)broker-dealer.
B)agent.
C)issuer.
D)none of the above.

Question 60

Under the Uniform Securities Act (USA), the term "investment adviser" does not apply to
I. an investment advisory firm owned and operated by a sole proprietor.
II. a bank or savings institution.
III. an investment adviser representative.
IV. a broker-dealer or its agents if the advice is incidental to the business although there is a nominal charge for any specific investment advice given.

A)I, II, III, or IV.
B)I, II, and III only.
C)II and III only.
D)II, III and IV only.

Question 61

Which of the following statements regarding the registration of broker-dealers and investment advisers is true?

A)Investment advisers are required to register with both the state and the SEC, while broker-dealers may be registered with only one or the other.
B)Investment advisers must always be registered with the SEC to conduct business; broker-dealers may be registered with either an individual state or the SEC or both.
C)Investment advisers are required either to be registered with a state or with the SEC, while broker-dealers must be registered both with the SEC and the state.
D)Both investment advisers and broker-dealers must be registered with the SEC and with the states in which they have offices.

Question 62

Under the Uniform Securities Act (USA), which of the following statements would be disallowed?

A)The government of the U.S. guarantees a 3% interest rate, to be paid semiannually, on a new 5-year Treasury note.
B)A sales representative of GetErDone Broker-Dealers guarantees that a client can expect an average annual rate of return of 2% on a mutual fund investment the sales representative is selling, pointing to the fact that the fund has returned an average annual rate of return of 6% over the past ten years.
C)An insurance company guarantees a fixed payment of $300 a month for life on an annuity it is selling.
D)Neither the statements in Selections B or C would be allowed under the guidelines of the Uniform Securities Act.

Question 63

Which of the following would meet the requirements for an "exempt security?"

A)a $500,000 promissory note that matures in two years
B)commercial paper with a $100,000 face value and a maturity of five months that is rated AA by Standard and Poors
C)a $25,000 promissory note that matures in three months
D)commercial paper with a $200,000 face value and a maturity of three months that is rated BB by Standard and Poors

Question 64

Which of the following describes an investment adviser that is not required to register with the state Administrator?

A)MoeMoney Investment Advisers, LLC has an office in the state with a client base of fifty individuals.
B)Financial Freedom Investment Advisers has no offices in the state although it does advise six wealthy individuals who are residents of the state.
C)CanDo Broker-Dealers is a state-registered broker-dealer. It has begun to offer asset management services to a few of its wealthier clients for a small management fee equal to 0.1% of the assets under management.
D)Buckeye Investment Advisers has no offices in the state, but it provides portfolio management services to an insurance company located in the state.

Question 65

The state official who has regulatory authority over the securities industry within the state is known as the

A)attorney-general.
B)administrator.
C)investor-protection officer.
D)secretary of state.

Question 66

Which of the following actions is the Administrator of a state empowered to take?

A)gather evidence
B)require restitution for the victims of a scam
C)impose civil penalties in cases of fraud
D)The Administrator of a state has the authority to take all of the above actions.

Question 67

Which of the following orders can an Administrator issue without providing prior notice?

A)license suspension
B)license revocation
C)cease and desist
D)license denial

Question 68

It has come to the attention of the Administrator of the state that Samuel Shyster provided false information on his application to become a registered investment adviser with the state. Prior to revoking Samuel's license, the Administrator will provide Samuel with which of the following?
I. prior notice
II. an opportunity to fill out a new registration statement
III. an opportunity for a hearing
IV. a written statement regarding the facts and the legal consequences

A)I, II, III, and IV
B)I, II, and III
C)I, III, and IV
D)I, II, and IV

Question 69

Sam Shyster had his day in court-and lost. His license to do business as an investment adviser in the state has been revoked. What legitimate options does Sam have available to him now?

A)Sam can move to another state and apply for registration as an investment adviser there.
B)Sam has 45 days in which to file an appeal with the attorney general.
C)Sam can register with the SEC as an investment adviser, which will exempt him from state registration requirements.
D)Sam has 60 days to file an appeal of the decision in a court of law.

Question 70

Which of the following constitutes a non-punitive order?

A)summary license suspension
B)registration cancellation
C)registration denial
D)All of the above are punitive orders.

Question 71

Broker-dealer Nebulous opted to withdraw its registration with the state. Six months later, the Administrator finds that Nebulous had been engaged in fraudulent securities transactions. Which of the following statements is true?

A)The Administrator is unable to take disciplinary action against Nebulous because the self-initiated withdrawal became effective 30 days after the application was filed.
B)The Administrator is only able to take disciplinary action if the misdeeds are discovered within three months of the effective date of the withdrawal, so Nebulous slipped by this time.
C)The Administrator has five years from the discovery of the misdeed to take disciplinary action, so Nebulous will have to be on the lookout for a long time to come.
D)The Administrator can take disciplinary action against Nebulous for up to one year, so Nebulous is in trouble.

Question 72

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 must register as a broker-dealer in the state, but the securities do not need to be registered.
B)Wheeler need not register in the state, and the securities are also exempt from registration.
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 need not register in the state, but the securities must be registered before they can be sold to in-state investors.

Question 73

Jack Bean is employed by Giant Investment Advisers, LLC. His job duties include advising clients on the asset allocations of their portfolios. Jack Bean is

A)an investment adviser representative.
B)an investment adviser.
C)an administrative assistant.
D)an agent.

Question 74

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 agent.
C)an investment adviser.
D)an investment adviser representative.

Question 75

What criminal penalties are specified for "willful violations" of the Uniform Securities Act?

A)license cancellation.
B)license suspension.
C)up to 3 years in prison or a $5,000 fine, or both.
D)up to 5 years in prison or a $10,000 fine, or both.

Question 76

George Geek is a computer programmer who tired of working for others and started his own company. He convinced forty investors that he could design software that would rival Microsoft, and sold them each a 10% partnership interest in his firm for $25,000. He designed and printed up the partnership certificates himself. George told the investors that he had a product that was on the verge of being marketable and that when it did-within the next two months-revenues would pour into the company, and he would begin paying dividends. He told them they could expect a 20% return on their money this year, with even higher returns in the years to come. As it turned out, George wasn't quite the programmer he thought he was, and he wasn't able to get all the bugs out of the program to make it marketable within the promised two months. Within a year, George had tired of the project and was too busy picking up chicks in his new Corvette when he wasn't on the island of St. Bart overseeing the construction of his new beach mansion-and picking up chicks. His activities, of course, were financed by the extremely generous "salary" he paid himself from the investors' monies. Under the Uniform Securities Act, do the investors have any civil claims against George?

A)Yes. They can sue George for the return of their original investment, plus interest. George would also have to pay their court costs and attorneys' fees and any amounts assessed by the court for "pain and suffering" on the parts of the clients.
B)No. It wasn't George's fault that he was unable to do what he promised. Even if it wasn't for
C)Yes. They can sue George for the return of their original investment, plus interest. George would
D)No. The Uniform Securities Act only involves securities laws and partnership interests are not

Question 77

Naiveté gave Mr. Smooth, owner of Smooth Construction, $40,000 in return for a promissory note that promised to pay interest at the rate of 8% a quarter, with a repayment of principal at the end of two years. The money would be used by Mr. Smooth to rehab a few beach condo units that had been severely hurricane-damaged and that Mr. Smooth had been able to purchase for "pennies on the dollar," or so he said. The first units would be completed within a month, and the rents would be used to make the interest payments. The investment was almost as risk-free as U.S. government bonds, Mr. Smooth claimed. By the end of the second year, Ms. Naiveté had received a lot of fast talk and only one of the promised interest payments. Have there been any violation of securities laws in this instance?

A)No. This was simply a loan transacted between two parties.
B)Yes. Mr. Smooth was required to register the promissory note before he offered it for sale.
C)Yes. Ms. Naiveté has been defrauded by Mr. Smooth.
D)Both B and C are true statements.

Question 78

You have recently discovered that a security you purchased has not been registered with the state, nor is it exempt from registration. You can file a civil claim against the seller as long as you do so within

A)five years.
B)three years from discovery or five years from the event, whichever comes first.
C)two years from discovery or three years from the event, whichever comes first.
D)one year from discovery.

Question 79

Iggy recently started his own company. He soon discovered it required more cash to keep it going than he had anticipated. He ran an ad in the local paper for investors and got a response. He found a template for a promissory note on the internet, filled in the requisite information specific to the agreement he and the investor had worked out, and printed it out. On it, he promised to make monthly interest payments of 2% on the loan and to repay the principal amount at the end of 18 months. A few months after the arrangement, Iggy read an article in a small business publication that indicated that promissory notes had to be registered with the state unless they were sold in an exempt transaction, such as one enacted with a financial institution, prior to being offered for sale. The article indicated that a seller who had sold an unregistered note in error could remedy the situation by sending the buyer a formal offer to buy the security back, with interest. Iggy turned to the computer once again, found a form that could be used for a formal offer of rescission, filled it out, and sent it to the investor. Having done this,

A)Iggy cannot be sued for civil damages if the investor fails to respond to the offer within 30 days.
B)Iggy must follow up with a second notice sent via registered mail if he has not heard from the investor within 30 days.
C)Iggy must wait 6 months for a response from the investor. If no response is received by the end of 6 months, Iggy is off the hook.
D)Iggy will not be assessed any penalties by the Administrator of the state, but the investor can still sue for damages in civil court.

Question 80

An investment adviser suggests that his client, Arnold, a 74-year old gentleman, should consider a reallocation of the assets in his portfolio. The adviser tells Arnold that he has far too much invested in bonds, which don't earn as much as stocks. He advises Arnold to take 80% of the money he has in bonds and invest it in an aggressive growth mutual fund that has provided an average annual return of 40% over the past three years. Arnold is impressed and follows this advice. Shortly thereafter, there is a steep drop in the market in general, and the net asset value of the aggressive growth mutual fund falls 85%. Does Arnold have any remedies available to him?

A)No. Arnold had the choice and got greedy. As the old saying goes, "Bulls get rich, and bears get rich, but pigs get led to slaughter."
B)Yes. Arnold can sue for the amount of his losses, plus interest, as well as an amount assessed by the court for "pain and suffering."
C)No. The investment adviser had no way of knowing that the market was going to fall when he provided the advice, so the adviser did not fail in his fiduciary responsibility to Arnold.
D)Yes. Arnold can sue for the amount of his losses, plus interest, court costs, and attorneys' fees.