Show S66 | Final 1 Incorrect QuestionsWhen a broker/dealer accepts an order for a trade from a customer, the order ticket must contain which of the following items? EXPLANATION = SEC Regulations on recordkeeping requirements state that a broker/dealer must maintain order tickets for 3 years and
the order tickets must include: When an investor or an investment advisor is doing a "capital needs analysis" they are determining which of the following? EXPLANATION = Capital Needs Analysis is used to determine if the investor has enough life insurance to cover all of their financial goals should the investor pass away unexpectedly. In which of the following scenarios would the individual giving advice have to register as an investment adviser for purposes of the Investment Advisers Act of 1940? EXPLANATION = All of the situations are excluded under the Act and/or are considered "incidental" to another profession except for the agent who gives advice for a fee. The professor and attorney are excluded under the "LATE" professions, and the newspape A current and updated amendment to an Investment Advisor's registration must be electronically filed with the SEC according to the Investment Advisers Act of 1940 how often? EXPLANATION = Under the Investment Advisers Act of 1940 investment advisers are required to send an electronic filing of an annual updated registration amendment within 90 days after the close of its fiscal year. Certain requirements apply to the retention of email communications under the 1933 Act. Which statement is true with regard to such e-mail communication regulations? EXPLANATION = Email communications related to the IA's business are required to be retained as correspondence by the IA. The definition of an issuer found in the Uniform Securities Act includes all of the following EXCEPT: EXPLANATION = In the Uniform Securities Act, any entity that is involved in the sale of certificates of interest or participation in oil, gas, or mining titles or leases is excluded from the definition of issuer for purposes of the Act. Which of the following would conflict with an IA's advertisement targeting the general public and stating that it is a "fee only" IA? EXPLANATION = As a general rule, performance-based fees (i.e., fees based on a share of capital appreciation) are not permitted, unless the client satisfies specific requirements (client must be a "qualified client"). An advertisement that targets the gen The burden of proving an exemption or exception to a definition under the Uniform Securities Act is placed on: EXPLANATION = In any proceeding under the Uniform Securities Act, the burden of proving an exemption or an exception from a definition is placed on the person claiming it. When is it acceptable under NASAA rules for an IAR to exercise discretionary authority over the account of an investor? EXPLANATION = The NASAA Model Rules permit the use of discretionary authority with verbal authorization, which must be followed by written authorization within 10 days of the verbal authorization. All of the following would be considered to be a plan fiduciary under ERISA except: EXPLANATION = A fiduciary is anyone who holds or controls the assets of a plan or who influences how the assets are managed or invested. Which of the following types of life insurance offers no cash value? EXPLANATION = Term life insurance does not offer any type of cash value. Term life insurance offers a death benefit only. You work for the only branch of Johnny's Broker-Dealer which is located in State X. Several of your agents have accounts in nearby State Y. Johnny's Broker-Dealer would only have to license its agents in State Y if clients in State Y were EXPLANATION = Other broker-dealers, registered investment advisers, and financial institutions such as banks do not warrant the need for licensing in the outside state, in this case State Y. Regardless of who employs them, individuals not falling into any The brother-in-law of an agent of a broker-dealer has asked the agent if he will be willing to offer his clients shares of a private placement in a brand new company the brother-in-law is starting. The agent would earn substantial commissions from the sal EXPLANATION = An agent shall not effect transactions not recorded on the regular books of the broker-dealer unless the transactions are authorized in writing by the broker-dealer prior to the execution of the transactions. A stop limit order to buy may result in a trade when the market price reaches the EXPLANATION = When the market price reaches the stop price, the order is activated. When a stop limit order to buy is in place, the limit order is activated once the market price reaches the stop price. Once the stop is triggered, the order may result in Which of the following investment advisers may, by law, transact business in a state according to the Uniform Securities Act? EXPLANATION = Under the Uniform Securities Act, an investment advisor must register when giving advice on any security, exempt or not. In the Investment Advisors Act of 1940, an exemption exists for federal covered advisors who give advice on government s When working with a new client to provide advice on planning for her financial future, you have the client create a list of financial goals. While creating this list, you should advise the client to: EXPLANATION = Of the choices offered the BEST choice would be to determine the beginning and end target date of each goal. She cannot really do any of the others without some time frames built into her plan. Which of the following would be considered a "federal covered advisor" for purposes of the Uniform Securities Act? EXPLANATION = Registration with the SEC under the Investment Advisors Act of 1940 would make an investment advisory firm a "federal covered advisor" for purposes of the Uniform Securities Act. Each of the other answers could be an investment advisory firm Which of the following investments is considered a derivative? EXPLANATION = Futures contracts and option contracts are both considered derivative securities. They can be used to arbitrage but are not "only used" in arbitrage situations. Options are used for swaps and futures contracts would not be involved. An equit An investment adviser representative (IAR) is engaged in options trading. The IAR decides that a fair charge for his services would be 7% per month of the assets under management. In order to do so, the IAR will disclose all fees and charges in both the a EXPLANATION = Even when disclosure has taken place, IARs can act inappropriately or in violation of the Investment Advisers Act of 1940. The fees charged for this IAR's services are excessive and beyond what is acceptable by the Act of 1940. Taking a real What constitutes an "offer" by Uniform Securities Act standards? EXPLANATION = A buy or sell offer has been made in a state when the offer originates in that state and is made to an individual in that state. In each of the other scenarios, the solicitation is either originating in another state, or is intended for an a Amendments to Form ADV Part II must be provided
to clients by advisers when? The Form must EXPLANATION = Part II of Form ADV must be sent to or offered to existing clients on an annual basis. The term agent, according to the Uniform Securities Act, would include all of the following people EXCEPT EXPLANATION = A person representing an issuer in effecting transactions that are exempt or exempt transactions, is not considered an "agent." All of the other people listed would be considered agents because they either work for a broker-dealer effecting A client asks an IAR to draft an irrevocable living trust and move
$3M in assets into the trust for management by the IAR. The IAR should EXPLANATION = Lawyers draft trusts. It's unethical and illegal for IARs to draft trusts. All of the following statements about the "efficient market" theory are TRUE EXCEPT: EXPLANATION = The "efficient market" theory is also known as the "random walk" theory and believes that throwing darts will produce as good results as using a professional investment adviser. According to the Investment Adviser's Act of 1940, the "Brochure Rule" states: EXPLANATION = Part II of Form ADV may be provided to satisfy the "brochure rule" requirement. Which of the following securities is not considered a "covered" security for
purposes of the 1933 Act, but is considered an exempt security? EXPLANATION = Under the Securities Act of 1933, a municipal security that is exempt from registration is not a covered security with respect to the offer or sale of such a security in the State in which the issuer of the security is located. A municipal b In order to
comply with NASAA Statements of Policy, when must the prospectus of a mutual fund be delivered to a client? EXPLANATION = NASAA Statements of Policy state that the prospectus of a mutual fund must be delivered to the client no later than the due date of confirmation of the transaction. Renewal registration fees
are NOT required of which of the following registered applicants? EXPLANATION = A broker/dealer filing for a successor would apply the unused portion of the existing registration to the new (successor) firm. A registered representative who engages in private securities transaction is
required to do all of the following except: EXPLANATION = The issuer does not need notification of such transactions. Which of the following statements is true with regard to the registration of investment advisers (IAs) and investment adviser representatives (IARs) under the Uniform Securities Act? EXPLANATION = It is unlawful for any investment adviser required to be registered to employ an investment adviser representative unless the investment adviser representative is also registered. Which of the following types of life insurance offers an adjustable death benefit and flexible premium payments? EXPLANATION = Universal life insurance offers and adjustable death benefit and flexible premium payments Of the following three choices, which are exempt according to the USA? EXPLANATION = Non-Issuer transactions (normal secondary market trades), unsolicited transactions, and underwriter transactions are all exempt. Of the following securities, which is always exempt from registration under the USA? EXPLANATION = Although securities issued by U.S. insurers are exempt from registration, securities issued by their holding companies are not exempt. The equipment trust certificates of government-regulated railroad companies are exempt. Which of the following should NOT be a major consideration by an investment advisor giving advice in accordance with the regulations of the Prudent Investor Act? EXPLANATION = Of the items listed, the amount of time until the contract between the advisor and client expires should NOT be a major consideration. Advice should be relative to the investment objectives of the client and should take into consideration in If an investment adviser representative (IAR) is also a licensed insurance agent and recommends that a client sells his/her mutual fund shares to buy life insurance, all of the following disclosures should be made EXCEPT: EXPLANATION = Remember that when an IAR sells both securities and non-securities related products, they continue to be regulated by the IA rules even when selling the non-securities products therefore the best answer is "D" since that advice would be conn When evaluating long-term investments by using Net Present Value, the NPV would consider all of the following except? EXPLANATION = NPV uses future cash inflows and outflows, a discount rate, and time period but does not consider today's market value. NPV is used to determine if projects will be profitable over a specified period of time. An investment advisor is assisting a client in preparing a personal income statement. Which of these items would the adviser need to complete the income statement? EXPLANATION = An income statement would include moneys coming in and expenses paid out by the individual or entity. Dividends would be included in this, but assets (such as real property) and liabilities would not be included on an Income Statement. Which of the following statements is true with regards to the power of an Administrator to take action when there are
violations of the Uniform Securities Act? EXPLANATION = The Administrator has the power to appoint or designate officers to conduct investigations within or outside of the state. An investment advisory firm's offices are located in State X. The IA exclusively services financial institutions such as insurance companies. This IA firm must EXPLANATION = With the information provided, the investment advisory firm must register with the state where it has it's principal place of business, State X, and does not need to register at the federal level with the SEC. An Investment advisor recommends that a client's portfolio include 12% of small cap securities. The customer strongly rejects the
recommendation. The IA's most appropriate response would be to EXPLANATION = In any situation, the wishes of the customer must be recognized. In this case, avoiding small cap stocks would not put the portfolio in any jeopardy, and thus the rejection of the customer to the small cap exposure must be noted and followed All of the following choices adhere to the NASAA Model Rule on
Unethical Business Practices of Investment Advisers and Federal Covered Advisers EXCEPT when an investment adviser: EXPLANATION = It is unacceptable for advisers to borrow money from individual clients. An IA, who is compensated for their services, must register under the USA if advice rendered relates to which securities listed below? EXPLANATION = Under the Uniform Securities Act, there are no exemptions from registration related to giving advice on specific securities. Because of this, all IAs must be registered when giving advice on any of the securities listed. In the Investment Ad Which of the following are defined as issuers under the Uniform Securities Act?Which of the following are defined as "issuers" under the Uniform Securities Act? I. For corporate securities, the corporation itself is the issuer. II. For collateral trust certificates, the person performing the functions of depositor under the Trust agreement is the issuer.
Which of the following are not defined as securities under the Uniform Securities Act?Which of the following is NOT defined as a security under the Uniform Securities Act? C; Under the Act, IRAs and Keoghs are not defined as securities. Variable annuities are securities under the Act (since the purchaser bears the investment risk), as are unit investment trusts and commodity option contracts.
Which terms are defined under the Uniform Securities Act?The Uniform Securities Act defines a "broker-dealer," it defines an "agent" of a broker-dealer (which is a registered representative, but this is the federal name, not the State name); it defines an "investment adviser;" and it defines an "investment adviser representative" (the agent of an investment adviser).
Which person is excluded from the definition of a brokerThe primary requirement for the exclusion is that the broker-dealer confines trading to financial institutions, issuers of the security being traded, or other broker-dealers. Trust companies are excluded from the definition of broker-dealer; the place of business is irrelevant.
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