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

FINRA FINRA-SERIES-63 Online Questions & Answers

• Question 141:

  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.
  A. an investment adviser representative.

  ---

  Explanation/Reference:

  As an employee of Giant Investment Advisers who provides investment advice to clients, Jack Bean is an investment adviser representative. Giant is the investment adviser. Agents are employed by broker-dealers.

• Question 142:

  While on vacation in Colorado, Massachusetts resident Ms. Jetset meets Mr. Snow, a registered representative with a Colorado broker-dealer, on a ski lift and accepts a dinner engagement with him later that evening, during which he obtains her cell phone number. A week later, while she is lounging around in her Florida beach condo, he calls and interests her in a local software company that is selling its preferred stock to investors and encourages her to buy it. Ms. Jetset tells Mr. Snow she'll think about it and calls him after she returns to her home in Massachusetts to tell him to buy the stock for her and sends him a check via express mail. Later, Ms. Jetset learns that the preferred stock certificate that she received is-and always was-a worthless piece of paper, and that, in fact, no such company ever existed. Which state Administrator has jurisdiction in this instance?

  I. the Administrator of the state of Colorado

  II. the Administrator of the state of Florida

  III.

  the Administrator of the state of Massachusetts

  A. I only
  B. I and II only
  C. I and III only
  D. I, II, and III
  I. the Administrator of the state of Colorado II. the Administrator of the state of Florida III. the Administrator of the state of Massachusetts
  D. I, II, and III

  ---

  Explanation/Reference:

  All three state administrators have jurisdiction since Mr. Snow made the offer to sell from Colorado, to a person who was in Florida at the time, and Ms. Snow accepted the offer and received the certificate in her home state of Massachusetts. According to NASAA, an Administrator has jurisdiction over all offers and all acceptances of offers to purchase or sell securities if they "originate from, are directed to, or are accepted in a state.

• Question 143:

  An investment adviser or its representative may

  A. only exercise any discretionary power in the purchase or sale of securities for a client's account after receiving written authority prior to the execution of the transactions.
  B. exercise discretionary power in the purchase or sale of securities for a client's account as long as it receives written discretionary authority over the account within 10 business days of the first discretionary transaction placed, assuming oral authority has already been given.
  C. exercise discretionary power in the purchase or sale of securities for a client's account as long as.
  D. exercise discretionary power in the purchase or sale of securities for a client's account only after.
  B. exercise discretionary power in the purchase or sale of securities for a client's account as long as it receives written discretionary authority over the account within 10 business days of the first discretionary transaction placed, assuming oral authority has already been given.

  ---

  Explanation/Reference:

  An investment adviser or its representative may exercise discretionary power in the purchase or sale of securities for a client's account as long as it receives written discretionary authority over the account within 10 business days of the first transaction placed, assuming oral authority has already been given.

• Question 144:

  Which of the following may an investment adviser not use in an attempt to solicit new clients?

  A. testimonials of satisfied clients
  B. a complete list of the stocks they have recommended in the past year, even if a statement is included that states that past performance is no guarantee of future performance
  C. a free initial consultation, with no obligation on the part of the potential client
  D. a free financial planning kit, with no obligation on the part of the potential client
  A. testimonials of satisfied clients

  ---

  Explanation/Reference:

  Investment advisers may not use testimonials of satisfied clients to solicit new clients. They may provide past stock picks, as long as they provide a complete list, that compilation period for the list is at least a year, and as long as they are careful to note that past performance is no guarantee of future performance. They can also offer freebies, such as a free initial consultation or a free financial planning kit, as long as these are indeed offered "free," with no obligation on the part of the client.

• Question 145:

  Big Bo is an investment adviser representative who has a lot of the members of a well- known professional football team as clients. In advertising his services, Big Bo can

  A. list the names of the players he's advising as long as he lists the names of all his other clients, too.
  B. list the names of the players he's advising as long as he doesn't provide any other specifics, such as the amount each one has invested with him.
  C. list the names of the players he's advising as long as he has their written permission to do so.
  D. use testimonials from any of the players who willingly provide them without compensation.
  C. list the names of the players he's advising as long as he has their written permission to do so.

  ---

  Explanation/Reference:

  In advertising his services, Big Bo can list the names of the players he's advising only if he has their written permission to do so. Under both NASAA Model Rules and the Investment Adviser Act of 1940, an investment adviser representative may not use client testimonials in their advertisements, regardless of whether the testimonials are willingly provided and uncompensated.

• Question 146:

  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
  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
  C. Selection I and III only

  ---

  Explanation/Reference:

  The municipal bond issued by the Canadian province of Nova Scotia and the bond issued by Nationwide Insurance Company are both exempt securities under the Uniform Securities Act. Bonds issued by Canadian government entities at both the national and the municipal level and bonds issued by domestic entities in highly regulated industries, as is the case with insurance companies, are exempt. The bond issued by a county in Ireland is not exempt; with the single exception of Canada, only bonds issued by national governments with which the U.S. has diplomatic relations are exempt.

• Question 147:

  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 clientsD.
  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.
  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.

  ---

  Explanation/Reference:

  Under the guidelines of the USA, none of the entities described in Selections A, B, or C would be required to register with the state as a broker-dealer since the term, as defined by the USA, does not include agents, savings institutions, or entities with no offices in the state who deal exclusively with issuers and/or other broker-dealers, financial institutions, insurance companies, pension funds, or insurance companies. Selections B and C refer to a financial institution and an agent, respectively. In the scenario described in Selection A, the underwriter has no offices in the state and is dealing exclusively with the issuer of the bonds and insurance companies.

• Question 148:

  Which of the following is not a prohibited practice for a broker-dealer?

  A. waiting 36 hours before mailing a check after receiving a request for a cash withdrawal from a client if the client has that much cash available in his account
  B. requiring that a client who is engaged in margin transactions leave the securities with the broker-dealer in "street name"
  C. recommending a security to a new client without first ascertaining that client's level of risk tolerance
  D. executing a trade for an account holder based on instructions from the account holder's spouse
  B. requiring that a client who is engaged in margin transactions leave the securities with the broker-dealer in "street name"

  ---

  Explanation/Reference:

  It is not prohibited for a broker-dealer to require that a client who is engaging in margin transactions to leave the securities with the broker in "street name." This is the normal business practice. A margin transaction means that the client is borrowing part of the funds he's investing, and the securities are serving as collateral for the loan. It is illegal to delay sending a check upon receiving a request for a cash withdrawal, assuming the client has the cash available in his account; to recommend a security to a client without knowing anything about him, including his tolerance for risk; and to execute a trade on instructions from anyone other than the account holder unless that party has at least limited power of attorney.

• Question 149:

  Which of the following persons is required to maintain its records in accordance with state dictates and meet the minimum net capital requirement imposed by the state?

  I. federal covered adviser

  II. state-registered investment adviser

  III.

  investment adviser representative

  A. I and II only
  B. I, II, and III
  C. II and III only
  D. II only
  I. federal covered adviser II. state-registered investment adviser III. investment adviser representative
  D. II only

  ---

  Explanation/Reference:

  Only the investment adviser that is required to register with the state must maintain its records in accordance with state dictates and meet the minimum net capital requirement imposed by the state. A federal covered adviser is registered with the SEC and need only execute a notice filing with the state. Its record-keeping rules and net capital requirement are dictated by the SEC. An investment adviser representative must register with the state, but there are no record-keeping or minimum net capital requirement dictates for representatives.

• Question 150:

  In which of the following instances is it permissible for an investment adviser to borrow money from a client?

  A. It is never permissible for an investment adviser to borrow money from a client.
  B. The investment adviser may borrow money from a client if the client is a bank.
  C. The investment adviser may borrow money from a client if the client is a close friend of the majority owner of the investment advisory firm.
  D. The investment adviser may borrow money in either of the scenarios described
  B. The investment adviser may borrow money from a client if the client is a bank.

  ---

  Explanation/Reference:

  It is only permissible for an investment adviser to borrow money from a client if that client is in the business of loaning money, as would be the case if the client is a bank, but not if the client is merely a close friend of the majority owner of the investment advisory firm.