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

FINRA FINRA-SERIES-63 Online Questions & Answers

• Question 191:

  Once a person has filed an application with the Administrator, and in doing so has truthfully disclosed every material fact, how long does the Administrator have after the effective date of the registration to commence a proceeding to deny, suspend, or revoke that person's license based on those facts?

  A. 30 days.
  B. 60 days.
  C. 90 days.
  D. one year.
  C. 90 days.

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  Explanation/Reference:

  If a person has appropriately and truthfully disclosed every material fact on its application for registration, the Administrator has 90 days after the registration becomes effective to commence a proceeding to deny, suspend, or revoke the license. If the Administrator has known about the fact for longer than this, he may not begin a proceeding against that person according to the Uniform Securities Act.

• Question 192:

  Under the guidelines of the Bank Secrecy Act (BSA), the Treasury Department now requires broker-dealers to obtain and keep certain information relating to clients that make or receive funds transfers that involve

  A. $3,000 or more.
  B. $10,000 or more.
  C. $5,000 or more.
  D. $100,000 or more.
  A. $3,000 or more.

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  Explanation/Reference:

  Under the guidelines of the BSA, the Treasury Department now requires broker-dealers to obtain and keep information relating to clients that make or receive funds transfers that involve $3,000 or more. If the transaction is a cash transaction over $10,000, the same rules apply, and a Currency Transaction Report must be filed with FinCEN. Under the USA Patriot Act, if the broker-dealer thinks that a transaction of $5,000 or more is suspect, the broker-dealer must file a suspicious activity report (SAR.)

• Question 193:

  Gazillions is an investment adviser with offices in the state that is registered with the SEC and has $100 billion dollars under management. A client has filed a complaint asserting that the firm has been involved in fraudulent activities. In this case,

  A. Gazillions only has to answer to the SEC regarding the allegations. Since it is a federal covered investment adviser, it need not respond to any state-issued requests for information.
  B. Gazillions only has to answer to the state in which the complaint was filed.
  C. Gazillions has to answer to both the SEC and the state in which the complaint was filed.
  D. Gazillions is in trouble for not registering with both the state and the SEC given the amount of money it has under management.
  C. Gazillions has to answer to both the SEC and the state in which the complaint was filed.

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  Explanation/Reference:

  If Gazillions is operating as an SEC-registered adviser in a state, it must answer to both the SEC and the state in which the complaint has been filed, even though there is no requirement that it had to register with the state, given that it was a federal covered investment adviser. Allegations of fraud come under the state's authority as well, even if the adviser is a federal covered investment adviser.

• Question 194:

  Alice Wonder called her broker on Tuesday, August 10th, with a market order to buy 10 calls on the stock of Abbott Laboratories. Under normal conditions, Alice will have to pay for the calls on:

  A. Wednesday, August 11th.
  B. Tuesday, August 10th.
  C. Friday, August 13th.
  D. Monday, August 16th.
  A. Wednesday, August 11th.

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  Explanation/Reference:

  If Alice places a market order to buy call options on Tuesday, August 10th, she will have to pay for them on Wednesday, August 11th, the next business day. Options and U.S. government bonds settle on the day after the trade date, or T + 1.

• Question 195:

  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.
  C. deliver a judicial injunction.

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  Explanation/Reference:

  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.

• Question 196:

  An individual who represents a broker-dealer in the buying and selling of securities is called a(n):

  A. underwriter
  B. issuer
  C. agent
  D. administrator
  C. agent

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  Explanation/Reference:

  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.

• Question 197:

  Switch Advisory is a small investment adviser partnership registered in a single state. A larger investment adviser firm, Bait Investment Adviser, is registered in the same state as well as two other states. Bait has offered to buy out three of Switch's partners who want to retire. This will give Bait a 60% ownership in Switch Advisory.

  Which of the following statements are true?

  I. Switch Advisory must obtain the approval of its clients before the partners can sell their interests to Bait.

  II. Switch Advisory must notify the state Administrator of this event.

  III. Switch Advisory must notify their clients of this event, but does not need the clients' approval.

  IV.

  Switch Advisory must notify the SEC of this event.

  A. I only
  B. I and II only
  C. II, III, and IV only
  D. I, II, and IV only
  I. Switch Advisory must obtain the approval of its clients before the partners can sell their interests to Bait. II. Switch Advisory must notify the state Administrator of this event. III. Switch Advisory must notify their clients of this event, but does not need the clients' approval. IV. Switch Advisory must notify the SEC of this event.
  B. I and II only

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  Explanation/Reference:

  Only Selections I and II are true. Switch must obtain the approval of its clients before the partners can sell their interests, and Switch must notify the state Administrator of this event. Whenever a change in partnership will result in new ownership of the business, which is the case when an external entity acquires a 60% interest, an investment adviser must get its clients' approval. As a state-registered investment adviser, switch also needs to notify the state Administrator. The SEC does not require notification since Switch is not a federal covered investment adviser.

• Question 198:

  The Turnover Corporation, a firm with 25,000 employees, has recently hired 50 new employees, many of whom have been hired to replace middle-level managers who have retired. Turnover has omitted this fact from its prospectus. Turnover is guilty of

  A. fraud.
  B. misrepresentation.
  C. misusing insider information.
  D. nothing. The hiring of 50 new employees by a firm with 25,000 employees is not a material fact.
  D. nothing. The hiring of 50 new employees by a firm with 25,000 employees is not a material fact.

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  Explanation/Reference:

  Turnover is guilty of nothing when it hires 50 new employees, but doesn't include this information in its prospectus because this is not a material fact. Most of the employees have been hired to replace middle-level managers who have retired, and these employees wouldn't be considered significant enough to affect the price of the stock in any way. If Turnover had hired a new CEO, that would be a material fact that must be disclosed.

• Question 199:

  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.
  D. Neither SecureMoney Broker-dealers nor Erin must register as an investment adviser based on the facts provided.

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  Explanation/Reference:

  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.

• Question 200:

  Sam Shade had his agent's license revoked by the state of Washington for repeatedly making misleading claims about various investment to investors. He had had it with all the rain anyway and decided to move to the sunshine state of Florida. His brother-in-law was a computer whiz who made money on the side (more than his day job provided, in fact) by supplying illegal immigrants with official-looking documentation, including social security numbers. Sam Shade became Ian Creed in a few clicks of the mouse. As Ian Creed, Sam was hired by Sunny Investment Advisers, an investment adviser firm located in the Florida Keys, in a clerical role. As such, Sam/Ian had access to the confidential information of the firm's clients, which he and his brother-in-law utilized for the purpose of identity theft. Under the Uniform Securities Act guidelines, when Sam and his brother-in-law are caught in their illegal activities.

  A. Sunny Investment Advisers will not be held liable if it can prove that there was no way it could have or should have known of the revocation of Sam Shade's (aka Ian Creed) license.
  B. Sunny Investment Advisers will be subject to criminal prosecution for employing an individual whose license had been revoked by the Administrator of another state since it obviously did not use due diligence in hiring Ian Creed, aka Sam Shade.
  C. Sunny Investment Advisers will be subject to civil penalties for employing an individual whose license had been revoked by the Administrator of another state.
  D. Sunny Investment Advisers will be subject to both criminal prosecution and civil penalties for employing an individual whose license had been revoked by the Administrator of another state since it obviously did not use due diligence in hiring Ian Creed, aka Sam Shade.
  A. Sunny Investment Advisers will not be held liable if it can prove that there was no way it could have or should have known of the revocation of Sam Shade's (aka Ian Creed) license.

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  Explanation/Reference:

  When Sam and his brother-in-law are caught, Sunny Investment Advisers will not be held liable if it can prove that there was no way it could have or should have known of Sam Shade/Ian Creed's license revocation. The drafters of the Uniform Securities Act were cognizant of the fact that employees can be remarkably deceptive when applying for a position, and because of this the Act indicates that the investment adviser must either "have known or should have known" of the Administrator's adverse decision against the employee in order to itself be deemed liable.