FINRA FINRA Certifications FINRA-SERIES-63 Questions & Answers

• Question 231:

  "T + 3" refers to

  A. the form, also known as a "trade ticket," that is filled out when an order is entered into the market.

  B. the form that is filled out and sent to the client confirming that the trade has been executed.

  C. the fact that the settlement date will be three business days after the trade date, which is the "regular way settlement" for transactions involving stocks and corporate and municipal bonds.

  D. a procedure to minimize the potential for money laundering.

  Correct Answer: C

  "T + 3" is an abbreviation indicating that the settlement date will be three business days after the trade date, which is the "regular way settlement" for transactions involving stocks and corporate and municipal bonds.

• Question 232:

  Which of the following does not need to be included in an investment advisory contract?

  A. the term of the contract

  B. the total amount of money that the investment adviser currently has under management

  C. the advisory fees and the formula used to compute them

  D. a statement that the contract cannot be assigned to another party without the client's consent

  Correct Answer: B

  The amount of money that the investment adviser currently has under management need not be included in an investment advisory contract. The contract does have to include the term of the contract, the advisory fees and the formula used to compute them, and a statement that the contract cannot be assigned to another party without the client's consent, along with other information.

• Question 233:

  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

  Correct Answer: D

  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 234:

  In which of the following scenarios will the investment adviser be subject to criminal fraud charges?

  A. An adviser owns the stock of TweedleDee Corporation and has issued a report recommending the stock as a "buy" without disclosing the fact that it owns the stock.

  B. An adviser owns the stock of TweedleDee Corporation and has issued a report recommending the stock as a "buy," disclosing the fact that it owns the stock

  C. An adviser sells its shares of TweedleDee Corporation after issuing a report recommending the stock as a "buy."

  D. all of the above. It is considered criminal fraud for an investment adviser to make any recommendations on a security in which it has or plans to have a position.

  Correct Answer: C

  An adviser that sells its shares of TweedleDee Corporation after issuing a report recommending the stock as a "buy" is subject to criminal fraud charges for willfully deceiving its clients.

  The adviser who recommends the stock as a buy without disclosing the fact that it owns the stock is engaging in a prohibited activity for non-disclosure, but would be unlikely to face criminal fraud charges.

• Question 235:

  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

  Correct Answer: A

  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 236:

  Which of the following would be considered an "issuer" transaction?

  A. Jacob calls his broker and places an order to purchase 100 shares of Hasbro, Inc. on the open market.

  B. Maria purchases 500 shares of Dodge and Cox's International Fund, a mutual fund investing in foreign securities.

  C. Kim sells an ATandT bond she holds that still has three years remaining to maturity.

  D. None of the above is an "issuer" transaction.

  Correct Answer: B

  When Maria purchases shares of Dodge and Cox's International Fund, it is an "issuer" transaction. Shares of mutual funds are bought and sold through the fund itself, so the money she pays for the shares is received by Dodge and Cox, the issuer of the shares. Jacob's purchase of Hasbro stock and Kim's sale of her ATandT bond are non-issuer transactions. Neither Hasbro nor ATandT receive the proceeds from these transactions. In Jacob's case, another investor receives the cash; and in Kim's cash, she receives the cash.

• Question 237:

  The maximum monetary civil liability that a person who has violated a securities law can be expected to pay is

  A. the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys' fees + any state-determined "pain and suffering" award.

  B. the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys' fees + any state-determined "pain and suffering" award - any income the victim has received on the investment.

  C. the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys' fees - any income the victim has received on the investment.

  D. the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys' fees + any income the victim has received on the investment.

  Correct Answer: C

  The maximum monetary civil liability that a person who has violated a securities law can be expected to pay is the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys' fees - any income the victim has received on the investment. The monetary liability is reduced by any dividends, interest income, or capital gains the investor may have received. Monetary awards for pain and suffering are not considered.

• Question 238:

  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.

  Correct Answer: C

  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 239:

  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.

  Correct Answer: B

  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 240:

  In accordance with the National Securities Markets Improvement Act of 1996, which of the following is a federal covered adviser and, therefore, exempt from registering with the state Administrator?

  I. An adviser who does business in 26 states.

  II. An adviser who manages the portfolio of a mutual fund that is registered with the SEC.

  III.

  An adviser with $35 million in assets under management

  A.

  All of the selections meet the qualifications of a federal covered adviser.

  B.

  I and II only

  C.

  II and III only

  D.

  I and III only

  Correct Answer: C

  The advisers described in Selections II and III are federal covered advisers and, therefore, exempt from registering with the state Administrator. An adviser who advises a registered investment company, as in Selection II, and an adviser with over $30 million in assets under management, as in Selection III are exempt. In order to be exempt from registration, the adviser in Selection I would have to be doing business in more than 30 states.