Series 63 - Practice Exam Questions

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Series 63 - Practice Exam Questions An existing customer of a broker-dealer registered in State A is vacationing in State B. Can the broker-dealer solicit the customer? - ANS - The broker-dealer may ... solicit the customer in State B without registering in State B. If a broker-dealer effects a transaction in a state (unless an exemption is available), the brokerdealer must be registered in that state. One of the exemptions available, however, covers the instance where an existing customer of a registered broker-dealer is vacationing in another state. That customer may be contacted while on vacation in the other state without the broker-dealer being required to register in that state. Which of the following is/are defined as either a "sale" or an "offer to sell" common stock of an issuer? I. Any offer to sell the common stock for value II. Any solicitation of an offer to buy the common stock for value III. The sale of a bond with detachable warrants to buy the common stock of that issuer IV. The gift of the common stock to an employee of the issuer - ANS - I, II, & III The definition of a "sale" is every contract of sale, contract to sell, or disposition of a security or interest in a security for value. The definition of an "offer to sell" is every attempt or offer to dispose of or solicitation of an offer to buy a security. In addition, the sale or offer of a security that includes rights or warrants to buy another security is considered to be an offer or sale of the other security. The gift of a security is not considered to be a sale unless the security is assessable. Common stock is non-assessable; therefore, it is simply a gift, not a sale. An applicant's registration can be denied by the Administrator if that individual was convicted within the past ___________ of any misdemeanor involving a security or any aspect of the securities business or any felony. - ANS - 10 years An applicant's registration can be denied if he or she was convicted of a misdemeanor involving securities or any felony within the past 10 years. It is prohibited for an investment adviser to be compensated only on the basis of __________ achieved. It is allowable for the adviser to receive a percentage of all assets under management (even if this value includes capital gains) or for a fixed fee arrangement to be established. - ANS - capital gains Securities that are sold through a private placement _________. - ANS - are unregistered Securities sold through a private placement are unregistered and are an exempt transaction. Under Uniform State Law, a private placement is defined as an offer to no more than 10 persons in a 12 month period. The Administrator is NOT empowered to __________. - ANS - Issue injunctions The Administrator can issue subpoenas even to persons outside the Administrator's state. It is also possible for the Administrator to conduct investigations to determine if any securities laws have been broken and to hold hearings. It is not possible, however, for the Administrator to issue an injunction against the alleged violator. The Administrator may only petition the appropriate court to issue an injunction. Under the Uniform Securities Act, the term 'sale' or 'sell' includes which of the following? I. A disposition of a security for consideration II. A stock dividend given to stockholders in lieu of a cash dividend III. An exchange of stock in a merger transaction which is approved by stockholders - ANS - I only To be considered to be a sale, there must be some consideration or exchange of value. Sales do not include bona fide pledges of securities as collateral for loans, stock dividends, corporate mergers approved by stockholders, the exchange of corporate assets in consideration of stock of another corporation, or acts incidental to judicially-approved reorganizations in which securities are issued in exchange for other outstanding securities. Which of the following actions could constitute fraud? I. Omission of any material fact II. Omission of any known fact III. A deceptive statement made in connection with the sale of a government bond - ANS - I & III only The intentional omission of any material information is fraud. Even though government bonds are exempt securities, they are not exempt from the anti-fraud provisions and deceptive statements are always considered fraud. Immaterial facts need not be disclosed. [Show More]

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