SERIES63 Certification Guides
Posted: Jul 10, 2017
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.
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.
Once you have passed the Series 63 examination, which entity must then approve your application to sell securities?
D. the state administrator
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.
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.
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.
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
As a director of the firm, Larry would automatically be registered as an investment adviser representative of MoeMoney Investment Advisers. Although directors and officers of the firm are automatically registered as investment adviser representatives, Mary, as a sales representative, would have to apply for her own registration. Curly does not need to be registered since he performs only clerical duties.
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.
Jack will need to register as a sales representative if he participates in the sale of new stock to individual investors. Those who deal directly with the public need to register as sales representatives under the Uniform Securities Act. If Jack limits his involvement to transactions with the underwriters or financial institutions, he need not register.
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.
The main purpose of Blue Sky Laws is to protect individual investors from fraud in their securities market transactions. Requiring the registration of new security issues and the registration of those persons who advise individual investors as well as those involved in the purchase and sale of securities to the public are just some of the regulations designed to do this. There are no provisions designed to protect agents, broker-dealers, or investment advisers and their representatives in any regard.
An individual who represents a broker-dealer in the buying and selling of securities is called a(n):
An individual who represents a broker-dealer in buying and selling securities is called an agent or a registered representative. An agent may also work for an issuer, which refers to the entity that is selling securities to raise money for itself. An underwriter is the entity that aids the issuer in bringing the new securities to market. Administrator is the title many states use to refer to the official in charge of enforcing the state’s securities regulations.
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.
The main difference between an agent and a broker-dealer is that an agent represents either a broker-dealer or an issuer and buys and sells securities he doesn’t own, receiving a commission for the trades he executes. A broker-dealer, when functioning as a dealer, is buying and selling for his own portfolio, thereby profiting from any price appreciation in the assets in his portfolio. Both agents and broker-dealers must meet state licensing requirements; both engage in the purchase and sale of stocks, bonds, and option contracts; and both operate in both the primary and secondary markets.
on No: 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.
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.
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.
Neither SecureMoney Broker-dealers nor Erin must register as an investment adviser based on the facts provided since neither the broker-dealer nor Erin is receiving any compensation for the advice Erin is giving Mrs. McTurk. In this instance, the advice provided is considered incidental to the broker-dealer business.
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
Nuering Investment Advisers would not fall under the classification of "institutional investor." Institutional investors are defined as banks, insurance companies, mutual funds, some pension plans, and broker-dealers registered under the Securities Exchange Act of 1934. Investment advisers are not part of this group.
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.
When Jose buys a 10-year bond that has 6 years remaining to maturity, it is a non-issuer transaction since he is buying it in the secondary market from another investor, and Progress Energy does not benefit from the transaction. If a firm receives money when its securities are sold, it is considered an issuer transaction; otherwise it is a non-issuer transaction. When Progress Energy originally issued the bond, it had ten years to maturity, and Progress Energy received the proceeds from the bond issue; that was an issuer transaction. When Jose buys the bond, another investor is receiving the proceeds. When IBM sells new bonds, regardless of whether it is to the general public or to an institutional investor, IBM receives the proceeds from the transaction, so it is an issuer transaction. Similarly, when a firm that is already publicly held, like Google, sells more shares, the firm receives money from the sale, just as when a firm that is going public for the first time, like NewCorp, receives the proceeds generated through the IPO. Those are examples of issuer transactions.
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.
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.
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.
Explanation: Neither Scenario I nor Scenario IV describes sales as defined by the USA. When an investor receives securities from Company X when Company X merges with a company in which the investor owns stock, Company X is not considered to have sold those securities to the investor. Likewise, when a person uses securities he owns as collateral for a loan, the USA does not consider this to be a sale of the securities.
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.
Yes. Jeremy is guilty of security violations under the Uniform Securities Act when he provides misleading information when offering securities for sale, even if no securities are actually sold. Partnership interests fall under the definition of securities, and Jeremy’s claim to have generated a return of at least 15% on other inventions that he never created is an absolute falsehood.
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.
An Administrator has broad powers, but he or she cannot deliver a judicial injunction because an Administrator does not have the authority bestowed on a court of law. The Administrator can issue subpoenas to require attendance, participate in evidence gathering, and formulate rules and orders.
"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.)
The National Securities Markets Improvement Act of 1996 defined "federal covered securities" and exempted them from state registration requirements. The Gramm-Leach-Bliley Act focused on financial institutions and provided for their registration as broker-dealers under certain conditions. The National Conference of Commissioners on Uniform State Laws (NCCUSL) is the organization that drafted the Uniform Securities Act, which is not comprised of actual laws itself, but is, instead, just a guideline for each state to use when formulating its own securities laws.
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.
Based on the facts provided, Rich Quick need not register in Florida since he has no offices in the state of Florida, and he is conducting business for existing clients who are merely vacationing in Florida and are not residents of the state.
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.
Most individual state securities laws continue to be based on the 1956 Uniform Securities Act. Although the Uniform Securities Act was revised in 1985, 1988, and 2002, none of these revisions have been widely incorporated by the individual states. The National Securities Markets Improvement Act of 1996 dealt mainly with the definition of federal covered securities and more efficient management of mutual funds. The focus of the Gramm-Leach-Bliley Act of 1999 was on financial institutions.
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.
After completing the purchase, BigCash will have to file a new registration application for its new subsidiary, but BigCash can utilize the remainder of any annual filing fees that Target Investments had paid for the year. Although registration applications are never transferable, annual filing fees are.
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