FINRA FINRA-SERIES-63 Online Practice Questions and Exam Preparation

FINRA FINRA-SERIES-63 Online Questions & Answers

• Question 121:

  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.
  A. Keith is a salaried employee of Middlesex County in Massachusetts who sells revenue bonds issued by the county to the public.

• Question 122:

  You are a registered agent with a large brokerage firm. Your client is a very busy woman. She is interested in purchasing 500 shares of Google, but she thinks this morning's opening price is too high. She's going to be in meetings and then on a transatlantic flight. She wants the purchase to take place today because she believes Google's price is just going to keep rising with only the occasional daily ups and downs. She wants you to use your discretion and try to get her the best price for the stock in today's trading session.

  Which of the following statements are true?

  A. You have to tell her that you can't do this without a signed discretionary authorization from her, and there's none on file.
  B. You tell her that you can do this for her, but only if you execute it as a margin transaction.
  C. You tell her you can enter it for her as a "market not held" order.
  D. You tell her to have her secretary type up a discretionary authorization for her to sign and drop in the mail before she boards the plane. As long as the written authorization is in the mail, you can place the order.
  C. You tell her you can enter it for her as a "market not held" order.

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  Explanation/Reference:

  You can tell her that you will be able to execute this for her as a "market not held" order that permits you to use your discretion in timing the purchase in order to try to get a better price than currently exists. As long as you are only being requested to use your discretion in the timing and price of the transaction, and not in the actual security being traded or the size of the trade, you do not need written authorization. However, if written authorization is required, you must have it in your hand before you can effect a transaction. In other words, it isn't good enough for it to be in the mail.

• Question 123:

  Ari Gaunt is employed by a small state-registered broker-dealer and has recently received notification that his application to be a registered agent of the state has been accepted. Now that he is licensed to execute transactions for the firm's clients, Ari has a batch of business cards printed up, with a picture of himself on the right-hand side of the card. Underneath the picture is the caption, "State-Approved Agent."

  Will Ari be violating any securities laws if he distributes these business cards?

  A. No. However, he may be violating company policy of the broker-dealer he works for by designing his own cards.
  B. No. His registration with the Administrator of the state has been accepted, so he is entitled to call himself a "State-Approved Agent."
  C. Yes. Agents are not permitted to include a picture of themselves on their business cards.
  D. Yes. It is a violation of a securities law to suggest that he has been approved by the state Administrator.
  D. Yes. It is a violation of a securities law to suggest that he has been approved by the state Administrator.

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  Explanation/Reference:

  Yes, Ari will be violating a securities law if he distributes the business cards because the cards suggest he has been approved by the state Administrator. The Uniform Securities Act specifically states that the effective registration of a person does not mean that the Administrator has "given approval to" that person. Any statement to this effect is considered an unlawful representation.

• Question 124:

  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.
  B. a set of guidelines for individual states to follow when formulating their own securities' laws.

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  Explanation/Reference:

  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 125:

  Which of the following is not a method that can be used to register securities with the state?

  A. registration by exception
  B. registration by notification
  C. registration by coordination
  D. registration by qualification
  A. registration by exception

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  Explanation/Reference:

  Registration by exception is not a method that is used to register securities with the state. Registration by notification is a method available for those securities that meet a certain set of criteria and requires the least amount of paperwork. Registration by coordination is the method used for most securities. Registration by qualification is the most burdensome method, requiring a voluminous amount of paperwork.

• Question 126:

  As an agent, which of the following statements about the Securities Investor Protection Corporation (SIPC) can you legitimately make to your client?

  A. The SIPC is the FDIC of the stock and bond markets."
  B. "The SIPC was established to restore funds to investors when the brokerage firm they have been using is bankrupt or in financial distress."
  C. "The SIPC is a government agency created by an Act of Congress to combat fraud."
  D. "The SIPC is a government agency that was created by an Act of Congress to protect investors against losses in the stock and bond market."
  B. "The SIPC was established to restore funds to investors when the brokerage firm they have been using is bankrupt or in financial distress."

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  Explanation/Reference:

  The statement that you can legitimately make about the SIPC to your client is that it was established to restore funds to investors when the brokerage firm they have been using is bankrupt or in financial distress. The SIPC does not insure investors against losses in the stock and bond markets like the FDIC does bank deposits, and it does not combat fraud.

• Question 127:

  Which of the following laws deals with identity theft protection?

  A. the Bank Secrecy Act (BSA)
  B. the USA Patriot Act
  C. ERISA
  D. Regulation S-P
  D. Regulation S-P

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  Explanation/Reference:

  Regulation S-P was enacted by the SEC to deal with identity theft. The law requires financial institutions to provide their clients with a statement of its privacy policies and practices and prohibits the disclosure of nonpublic personal information about even a prospective client to a nonaffiliated third party unless certain conditions are met, including giving the client or prospective client the right to opt out of the disclosure.

• Question 128:

  Which of the following statements would not be in violation of NASAA rules regarding the sale of investment company shares?

  I. "Investing your money in shares of this money market mutual fund is identical to putting your money in a savings account at a bank, except the money market fund provides a higher return."

  II. "Our U.S. government bond fund is invested only in government bonds issued by the S. government and is, therefore, a risk-free investment."

  III.

  "You are investing $22,000 in this fund today. The fund has a 5% load at this investment level, but if you sign a letter of intent to invest another $3,000 within the next 13 months, your load will be reduced to 4%. If something comes up and you can't invest the extra $3,000 within 13 months, you will only need to pay the difference in the two loads."

  A. I only
  B. I and II only
  C. III only
  D. I, II, and III
  I. "Investing your money in shares of this money market mutual fund is identical to putting your money in a savings account at a bank, except the money market fund provides a higher return." II. "Our U.S. government bond fund is invested only in government bonds issued by the S. government and is, therefore, a risk-free investment." III. "You are investing $22,000 in this fund today. The fund has a 5% load at this investment level, but if you sign a letter of intent to invest another $3,000 within the next 13 months, your load will be reduced to 4%. If something comes up and you can't invest the extra $3,000 within 13 months, you will only need to pay the difference in the two loads."
  C. III only

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  Explanation/Reference:

  Only Selection III would not violate NASAA rules regarding the sale of investment company shares because it is the only true statement. If a fund has a breakpoint at $25,000 that triggers a reduced front-end load and allows an investor to receive the reduced load charge if the investor signs a letter of intent stipulating that the additional investment will be made within 13 months, the only penalty to the investor who doesn't meet the breakpoint is payment of the difference in the two loads. Investing in shares of a money market mutual fund is not identical to putting money in a savings account at a bank. The bank account is insured by the FDIC in most cases; the money market mutual fund is not insured by the FDIC, and the investor can lose money (although, to date, money market mutual funds have covered any losses that they've experienced and not passed those losses onto their investors.) A U.S. government bond fund that is invested only in U.S. government bonds is free from default-risk, but it is still subject to interest rate risk. If interest rates increase, the value of the bonds in these funds-and therefore the fund itself-will decrease.

• Question 129:

  According to the NASAA Model Rules, which of the following institutions would not be considered a qualified custodian?

  A. a broker-dealer that is registered with the state
  B. a bank that is insured by a private, state-sponsored insurance company
  C. a foreign financial institution
  D. a savings institution that is insured by the FDIC
  B. a bank that is insured by a private, state-sponsored insurance company

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  Explanation/Reference:

  According to the NASAA Model Rules, a bank that is insured by a private, state-licensed insurance company would not be considered a qualified custodian. Registered broker- dealers, foreign financial institutions, and banks and savings institutions that are insured by the FDIC are on the list of qualified custodians.

• Question 130:

  Which of the following entities are subject to post-registration provisions?

  I. broker-dealers

  II. agents

  III. investment advisers

  IV.

  investment adviser representatives

  A. I and II only
  B. I and III only
  C. II and IV only
  D. All of the entities are subject to post-registration provisions.
  I. broker-dealers II. agents III. investment advisers IV. investment adviser representatives
  B. I and III only

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  Explanation/Reference:

  Only selections I and III are subject to post-registration provisions. Broker-dealers and investment advisers can be required to file advertising materials and financial reports with the Administrator, as specified by the Administrator. They are also required to keep records to the specifications of the Administrator. These records will include items such as client e- mails, client letters of complaint, and advertising brochures and must be kept for three years.