FINRA-SERIES-63 Real Exam Questions
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You execute a stock transaction for a client on Thursday, September 23rd. The settlement date on the order ticket will be
Correct answer: D
If you execute a stock transaction for a client on Thursday, September 23rd, the settlement date for that trade will be Tuesday, September 28th, which is T + 3, meaning three business days after the trade date.
The Administrator of a state can deny an application if
Correct answer: D
The Administrator of a state can deny an application if the application is missing information, if the registrant has been enjoined from engaging in activities involving securities in another state, or if the Administrator determines the applicant is not financially solvent.
Rich Quick is a broker-dealer registered in the state of Massachusetts. He occasionally trades on abnormalities he observes in bond yield spreads for his own account, short selling a bond that appears to be overpriced based on its yield and buying a bond that is identical in almost every respect except for the price, which is less than that of the other bond. He has been able to earn arbitrage profits 95% of the time when he does this. Rich Quick
Correct answer: B
If Rich Quick is able to earn profits 95% of the time by trading on abnormalities he observes in bond yield spreads, he is skilled. There is nothing illegal in what he is doing. Arbitrageurs attempt to earn profits when they observe what they believe to be mispriced securities, and this is an accepted activity. Rich is not using insider information; bond yields are publicly available information.
The trade confirmation must be received by the customer no later than
Correct answer: B
Trade confirmations must be received by the customer no later than the settlement date.
Individual states are prohibited from requiring a broker-dealer or investment adviser to file financial reports more frequently than:
Correct answer: C
Individual states are prohibited from requiring a broker-dealer or investment adviser to file financial reports more frequently than four times a year. Under the Securities and Exchange Act of 1934, individual states are prohibited from imposing more stringent requirements than those already required by the SEC, and the SEC requires quarterly reporting. Therefore, a state may not require that a broker-dealer or investment adviser file monthly reports with it.
A bond issue has recently been registered with the state Administrator.
Which of the following statements are true?
Correct answer: B
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.
Which of the following statements about agents is (are) false?
Correct answer: C
The statement that an agent must demonstrate a specific minimum level of financial stability for his registration application to be accepted is false. The Administrator may require an agent to post a bond, but there are no specific minimum financial requisites that must be met. The Administrator also has the right to terminate an agent's registration if the agent becomes bankrupt. Both the agent and his broker-dealer affiliate are required to inform the Administrator whenever there is a change in the agent's personal information, such as a name change or a change of address.
Julia Hasty has recently applied with the Administrator to be a registered investment adviser in the state.
Eager to open her new business, she has business cards printed that indicate that she is a "state-registered" investment adviser and visits some local businesses, asking them for permission to put some of her cards in their waiting rooms.
Has Julia violated any of the provisions of the Uniform Securities Act by distributing her business cards?
Correct answer: C
Yes. Julia has violated a provision of the Uniform Securities Act by distributing business cards that indicate she is a "state-registered" investment adviser because she has not yet received notification of the acceptance of her application by the state Administrator. The filing of an application for registration is not the same as registration, and the placement of the cards is, at this early point, false advertising.
Mr. Noah Scruples is a registered representative with CanDo Broker-Dealers. A client calls and wants Noah to purchase shares of a mutual fund the client has read about. CanDo is not authorized by this particular fund to effect purchases or sales of the fund shares.
Can Noah execute the order anyway?
Correct answer: B
No. If CanDo is not authorized to effect purchases and sales of the fund, Noah would be engaged in the prohibited practice known as selling away if he were to execute the order. If his broker-dealer is not authorized to trade a security, Noah can't either.
In its prospectus, the YourMoney Mutual Fund provides charts and tables of its average annual return over the past year, three years, five years, and ten years. The fund's return has indeed been phenomenal over this time period, beating the S&P 500 Index by at least 15%. The prospectus states that this is because the fund invests in securities that are riskier and that, therefore, an investor can expect the fund to continue earning a return higher than the S&P 500 Index.
Is YourMoney guilty of any security violations?
Correct answer: C
Yes. YourMoney is guilty of fraud in its claim that "an investor can expect the fund to continue earning a return higher than the S&P 500 Index." Past performance is no indication of future performance, and this statement is clearly a misstatement of a material fact. In fact, because the securities the fund invests in are riskier than average, the fund returns can be expected to fall harder than the S&P 500 Index in a market downturn.