Free Sample Questions to Practice Series63 Certification Test Engine [Mar-2024]
2024 Valid Series63 Real Exam Questions, practice Uniform Securities State Law
NEW QUESTION # 22
An investment adviser
I. provides investment advice to clients.
II. sells securities to clients.
III. buys and sells securities in their clients' accounts for the clients.
- A. I and II only.
- B. I only.
- C. I, II, and III.
- D. I and III only.
Answer: D
Explanation:
Explanation
An investment adviser provides investment advice to clients and may also buy and sell securities in their clients' accounts for the clients. He does not, however, sell securities to his clients.
NEW QUESTION # 23
Which of the following would be an unsuitable recommendation for your 68-year-old client?
- A. a Treasury Inflation Protected Security (TIPS)
- B. an S&P 500 Index mutual fund
- C. a high quality corporate bond fund
- D. a deferred annuity
Answer: D
Explanation:
A deferred annuity would be an unsuitable recommendation for your 68-year-old client.
These annuities charge significant penalties for early withdrawals-and "early" can mean before 10 years,
or even longer. A 68-year-old client may have the need to withdraw his money early to make medical
payments.
NEW QUESTION # 24
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 broker-dealer licensed in the state of New Jersey to help her with the sale
of this stock. - C. Nancy will have to establish a mailing address in New Jersey before she can legally sell this stock.
- D. Nancy will need to contact a securities law firm in Florida to help her register the stock in the state of
Florida.
Answer: A
Explanation:
Nancy can sell the stock without a problem as executrix of her aunt's estate. This is
considered to be a fiduciary transaction and, as such, it is an exempt transaction.
NEW QUESTION # 25
If a person has had its license revoked by the Administrator of the state and has appealed the decision to a court of law, that person
- A. can continue business as usual pending the resolution of the appeal.
- B. is considered to have a revoked license until the courts rule otherwise.
- C. Both B and C are true statements.
- D. must notify the Administrator of the state that it has appealed the decision.
Answer: C
Explanation:
Explanation
If a person has had its license revoked by the Administrator of the state and has appealed the decision to a court of law, that person must notify the Administrator of the state that it has appealed the decision, but that person is considered to have a revoked license until the courts rule otherwise and may not continue "business as usual."
NEW QUESTION # 26
John Ketchum is an investment adviser representative with Load Investment Advisers, which has a family of load funds that it encourages its representatives to promote. Representatives of the firm that sell shares in these funds to their clients receive a greater share of the load than they do if they sell load funds offered by other firms.
Based on these facts, which of the following statements is true?
- A. Both A and B are true.
- B. John must provide his clients with a written disclosure that he will receive a greater remuneration for selling shares in the Load family of funds than if he sells them shares in other funds before he provides his clients with any investment advice.
- C. John is obligated to try to sell his clients the funds offered by Load first since he is affiliated with them and has a fiduciary responsibility to them.
- D. If, after reviewing the information form a client has filled out, John believes that one of Load's funds is an appropriate investment, John can recommend that the client invest in that fund. There is no disclosure requirement necessary if the recommendation is a sound one that can be proved to be based on the client's specific situation.
Answer: B
Explanation:
Explanation
As a representative for a family of load funds who receives greater remuneration for selling those funds, John must provide his clients with a written disclosure of this fact before providing any advice, according to NASAA Model Rules. This constitutes a material conflict of interest that must be disclosed "to clients in writing before any advice is rendered." John is not obligated to try to sell his clients the funds offered by Load first. His fiduciary responsibility is to his clients, not his employer.
NEW QUESTION # 27
Noah Aull is an investment adviser representative with Canto Investment Advisers. A client has called and
told Noah that he heard about a firm that had recently completed an IPO at a party he had attended that
weekend and instructed Noah to purchase shares of the company, which was now trading on the OTC
Bulletin Board. Noah did some research and felt the company was far too risky an investment for this
client, so he did not execute the trade. This turned out to be fortunate for his client since the firm became
insolvent within six months of its IPO. Has Noah done anything wrong?
- A. Yes. Noah is guilty of misappropriation and could have his license revoked.
- B. Yes. Noah is guilty of making an unauthorized transaction and could have his license revoked.
- C. Yes. Noah is guilty of not following a client's instructions and could have his license revoked.
- D. No. Noah did what he is hired to do-manage his clients' accounts to the best of his ability.
Answer: C
Explanation:
Yes. Noah is guilty of not following a client's instructions and could have his license revoked.
A refusal to act on a client's legitimate order is a prohibited practice, even if the client would have lost
money after-the-fact.
NEW QUESTION # 28
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. one-fourth of the annual fee required since only one quarter of the year remains.
- B. the full annual fee, and your license will expire on December 31st this year.
- C. the full annual fee, and your license will expire on December 31st next year.
- D. the full annual fee, and your license will expire on September 30th next year.
Answer: B
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 # 29
No: 167
A "market not held" order is
- A. an order to sell securities that the investor owns if the stock decreases by a certain amount from the current price.
- B. a prohibited activity in which an agent engages in the purchase or sale of securities that are not offered by his broker-dealer.
- C. an order in which the client tells the broker to use his own discretion in timing a purchase or sale in an attempt to get a better price.
- D. an order to buy or sell a stock at a specified price, which differs from the current market price.
Answer: C
Explanation:
Explanation
A "market not held" order is one in which the client tells the broker to use his own discretion in timing a purchase or sale in an attempt to get a better price than the current market price. An order to buy or sell stock at a specified price is a limit order. An order to sell securities that the investor owns if the stock decreases by a certain amount is known as a stop sell order or a stop loss sell order.
NEW QUESTION # 30
When a client has purchased securities on margin, the broker-dealer
- A. Both B and C are correct statements.
- B. may use any securities that the client purchased on margin as collateral for a loan from a bank upon receiving a written agreement signed by the client.
- C. may require that the client leave all his securities, even those not purchased on margin, in street name.
- D. must keep the securities that the client paid cash for separate from the securities that the client purchased on margin.
Answer: A
Explanation:
Explanation
A broker-dealer is required to keep any securities a client paid cash for separate from the securities that the client purchased on margin, and upon receiving a written agreement signed by the client-a hypothecation agreement-may use those securities that were purchased on margin as collateral for a loan from a bank. The broker-dealer may not require that a client leave securities purchased through cash transactions in street name.
NEW QUESTION # 31
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
- A. 60 days.
- B. 30 days.
- C. 45 days.
- D. 1 year.
Answer: B
Explanation:
Explanation
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.
NEW QUESTION # 32
In which of the following scenarios will the investment adviser be subject to criminal fraud charges?
- A. An adviser owns the stock of TweedleDee Corporation and has issued a report recommending the stock as a "buy," disclosing the fact that it owns the stock
- B. An adviser owns the stock of TweedleDee Corporation and has issued a report recommending the stock as a "buy" without disclosing the fact that it owns the stock.
- C. An adviser sells its shares of TweedleDee Corporation after issuing a report recommending the stock as a "buy."
- D. all of the above. It is considered criminal fraud for an investment adviser to make any recommendations on a security in which it has or plans to have a position.
Answer: C
Explanation:
Explanation
An adviser that sells its shares of TweedleDee Corporation after issuing a report recommending the stock as a
"buy" is subject to criminal fraud charges for willfully deceiving its clients.
The adviser who recommends the stock as a buy without disclosing the fact that it owns the stock is engaging in a prohibited activity for non-disclosure, but would be unlikely to face criminal fraud charges.
NEW QUESTION # 33
Registration by coordination is provided for by which of the following federal securities acts?
- A. Investment Company Act of 1940
- B. Investment Advisers Act of 1940
- C. Securities and Exchange Act of 1934
- D. Securities Act of 1933
Answer: D
Explanation:
The Securities Act of 1933 is the Act that requires that all new securities be registered and
provides for registration by coordination.
NEW QUESTION # 34
Mina is a new agent with SecureMoney Broker-Dealers and is struggling to make ends meet. She gets a
job as a receptionist at a fitness club on the weekends to generate more income. Which of the following is
true?
- A. Mina simply needs to tell her immediate supervisor at SecureMoney about her new job.
- B. Mina needs to send notice to the state Administrator informing him of her extracurricular activity.
- C. Because the job as a receptionist at a fitness club has nothing to do with the world of finance, Mina has
done nothing inappropriate. - D. Mina should have notified SecureMoney in writing before signing on to work at the fitness club.
Answer: D
Explanation:
Mina should have notified SecureMoney in writing before taking on the job at the fitness club.
Regardless of whether the job has anything to do with finance, an agent must notify her broker-dealer in
writing prior to engaging in any extracurricular activity for which she gets paid. She is not required to send
any notice to the Administrator, however.
NEW QUESTION # 35
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 prospective customer's time zone.
- B. 8 a.m. and 7 p.m., based on your prospective customer's time zone.
- C. 8 a.m. and 9 p.m., based on your time zone.
- D. 8 a.m. and 7 p.m., based on the Pacific Time Zone.
Answer: A
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 # 36
Mr. Teche is an agent with broker-dealer CanDo, and his only compensation is the commissions he earns
on trades he executes. He has applied for and been granted an adjunct teaching position with a local
university that will allow him to earn money while he is establishing himself. Which of the following
statements are true?
- A. As an agent with broker-dealer CanDo, Mr. Teche must notify CanDo in writing of this position prior to
accepting it. - B. Mr. Teche is, in essence, an independent contractor with broker-dealer CanDo and can engage in any
other business activity at will. - C. Both A and B are true.
- D. CanDo can deny Mr. Teche permission to accept the adjunct teaching position.
Answer: C
Explanation:
Both statements A and B are true. As an agent for broker-dealer CanDo, Mr. Teche is
required to inform CanDo in writing before accepting any outside position that will provide him with
additional compensation, and CanDo has the right to deny Mr. Teche the permission to accept this
position.
NEW QUESTION # 37
A bond issue has recently been registered with the state Administrator.
Which of the following statements are true?
- A. An investor can feel secure in buying the bond because it has recently been registered, which means that the state Administrator finds it to be of sound quality at this point in time.
- B. The bond may now be offered for sale in the state.
- C. Both A and B are true statements.
- D. The issuer may now offer this bond for sale, and any other bonds that the issuer may want to offer for sale in the future will be able be sold after the issuer executes a notice filing.
Answer: B
Explanation:
Explanation
When a bond issue has been effectively registered with the state Administrator, it can be offered for sale in the state. The bond's acceptance by the Administrator simply means that the issuer has supplied enough information in order for an investor to judge the quality of the bond for himself; it in no way implies that the bond is of sound quality. It could, in fact, be a very risky security and still have met the registration requirements.
NEW QUESTION # 38
The discretionary powers over a clients' accounts differ between broker-dealers and investment advisers in that
- A. A broker-dealer can execute a discretionary transaction for a client upon receiving only verbal authority initially, followed up by written authority to be received within 10 days of the order, whereas an investment adviser must require that written authority for the transaction is provided before the transaction even takes place.
- B. An investment adviser can execute a discretionary transaction for a client upon receiving only verbal authority initially, followed up by written authority to be received within 10 days of the order, whereas a broker-dealer must require that written authority for the transaction is provided before the transaction even takes place.
- C. An investment adviser can execute a discretionary transaction for a client upon receiving only verbal authority initially, followed up by written authority to be received within 10 days of the order, whereas a broker-dealer must require that written authority for the transaction is in the mail before proceeding with the transaction.
- D. A broker-dealer can execute a discretionary transaction for a client upon receiving only verbal authority initially, followed up by written authority to be received within 10 days of the order, whereas an investment adviser must require that written authority for the transaction is in the mail before proceeding with the transaction.
Answer: B
Explanation:
Explanation
The discretionary powers of a broker-dealer and an investment banker differ in that an investment adviser is allowed to execute a discretionary transaction for a client upon receiving verbal authority only, as long as it is followed up with a written authorization within 10 days, whereas a broker-dealer is prohibited from executing a discretionary transaction unless it has already received written authority for that transaction.
NEW QUESTION # 39
Bob Gogetter is an agent with CanDo Broker-Dealers. One of Bob's clients is out of the country and
cannot be contacted. The client holds some stock in a company that just released some information that
should make its stock price soar. Bob knows that this client would probably want to increase his holdings,
so Bob opens a margin account for his client and borrows the money to buy shares. As it happened, the
stock price did soar, and Bob's client earned a sizeable profit. Is Bob in violation of any securities acts?
- A. Yes. Bob is guilty of prohibited practice of churning.
- B. Yes. It is against the law for an agent to open a margin account for a client without the client's
- C. No. Bob has a fiduciary responsibility to his client to act in his best interest, and Bob knew this
- D. No, but only because Bob's client profited from Bob's intervention. If the stock had declined in
Answer: B
Explanation:
Yes. When he opened a margin account for a client without the client's written authorization,
Bob committed a securities violation. This is strictly prohibited regardless of whether the client profited or
not.
NEW QUESTION # 40
Stable Corporation registered a bond issue that it plans to offer for sale in the state with the Administrator.
The bond has a par value of $1,000 and will pay interest of 7% a year, with the principal to be repaid in 5
years. The registration became effective on September 8th. The registration is effective
- A. until December 31st of the same year
- B. for one full year.
- C. for two full years.
- D. until the maturity date on the bond.
Answer: B
Explanation:
The bond's registration is effective for one full year from the effective date of the registration.
NEW QUESTION # 41
Price pegging refers to
- A. the practice of buying large amounts of a security to drive its price up artificially.
- B. the illegal activity of a group of investors who buy and sell a security among themselves to create an artificially high volume of trading in hopes of luring investors to buy the security.
- C. the prohibited practice of excessively trading on a client's account that is used by some broker-dealers and/or their agents to generate more commissions for themselves.
- D. the unethical practice of investment advisers who issue "buy" recommendations for stocks that they own themselves without disclosing the fact.
Answer: A
Explanation:
Explanation
Price pegging refers to the practice of buying large amounts of a security to drive its price up artificially. This is a form of illegal price manipulation.
NEW QUESTION # 42
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