FINRA-SERIES-63 Online Practice Questions and Answers

Which of the following describes a prohibited practice in the sale of shares of investment companies?

I. Sandy Slacker hands her client the fund's prospectus and tells him that the prospectus will provide him all that he needs to know about loads and fees associated with the fund.

II. Elliot Eager tells a client who has an investment objective that includes current income that a certain bond fund has a current yield of 8% and provides the client with a prospectus so that the client can peruse the average annual returns that the fund has generated in past years when the client has the time.

III.

After explaining all the fees and loads involved in two different bond funds as well as the difference between current yield and total return, Patty shows the client the data on the average annual returns that the two bond funds provided. She explains to the client that the municipal bond fund has a lower yield than the similar-risk corporate bond fund because the interest income the client will receive from the municipal bond fund will be free from federal taxation, while the interest income on the corporate bond fund is fully taxable.

A.

All the choices describe prohibited practices in the sale of shares of investment companies.

B.

I only

C.

I and II only

D.

I and III only

A tombstone advertisement is

A. an offer to sell a new security.

B. the announcement of a new security that may become available for purchase.

C. the only type of advertisement that an investment advisory firm is allowed to use.

D. an offer to sell a new security that is being issued by an Arizona firm.

Until yesterday Maddie was a registered agent employed by the broker-dealer, QuikDeals. Yesterday afternoon, issues that had been brewing between her and another employee of the firm came to a head, and Maddie impulsively quit her job.

At this point,

A. Maddie has thirty days to find a job with another broker-dealer, or she will need to file a new registration application.

B. Maddie has sixty days to find a job with another broker-dealer, or she will need to file a new registration application.

C. Maddie will have to file a new application for registration with the Administrator upon finding employment with another broker-dealer since she is no longer considered to be a registered agent by the state.

D. Maddie is required to call all of her clients at QuikDeals to inform them she is no longer employed there.

You are a registered agent with a broker-dealer. One of your clients visits you and wants you to sell some of the U.S. government bonds she owns and purchase shares of a specific aggressive growth mutual fund for her with the proceeds. Your client is a mentally- competent, 84-year-old woman but, based on your other knowledge of her situation, you believe it to be an unwise move. You should

A. advise her that you don't believe this is in her best interest, but execute the required transactions if she insists.

B. call the mutual fund and tell them that they must convince this client that an investment in their fund is not in her best interest, under penalty of law.

C. nod politely, but not execute the transactions since they are not in her best interest.

D. turn the matter over to your supervisor.

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

You are a newly licensed agent and are making cold calls to generate business. According to the Telephone Consumer Protection Act of 1991 (TCPA), you may only place your calls between the hours of

A. 8 a.m. and 9 p.m., based on your time zone.

B. 8 a.m. and 9 p.m., based on your prospective customer's time zone.

C. 8 a.m. and 7 p.m., based on your prospective customer's time zone.

D. 8 a.m. and 7 p.m., based on the Pacific Time Zone.

MoeMoney Investment Advisers, LLC is registered in the state of Texas, and its three offices are all located in the greater Dallas-Fort Worth area. Five of its clients-all individuals-have relocated to Colorado and all have indicated a desire to retain the services of MoeMoney. In order for this to be possible,

A. MoeMoney will need to apply for and be granted registration as an investment adviser in the state of Colorado.

B. each client will have to write a letter to the Administrator of the state of Colorado on MoeMoney's behalf.

C. MoeMoney will need to apply for and be granted registration as an investment adviser representative in the state of Colorado.

D. Neither MoeMoney nor its clients need do anything.

Trevor is currently a registered agent in the state of Connecticut where he has been employed by Connect and Company, a broker-dealer that is registered in Connecticut and has subsidiary operations in Massachusetts, New Jersey, and New York. Trevor has moved to Massachusetts and is now associated with one of Connect's subsidiaries, a broker-dealer registered in the state. Trevor has applied to the Administrator of Massachusetts for registration as an agent.

Can Trevor execute purchases and sales for clients while his registration is still pending?

A. No. Until he is informed by the Administrator of Massachusetts that his application has been accepted, Trevor may not affect any securities transactions in Massachusetts.

B. Yes. Because Trevor is a registered agent in another state and is affiliated with a broker- dealer that is registered in the state of Massachusetts, he is not restricted from executing trades.

C. Yes. Trevor can execute trades for new clients he solicits, but only for sixty days while his registration is pending.

D. It depends. Trevor can execute some purchases and sales, but only for clients that he already had who may have recently relocated to Massachusetts and only for sixty days while his registration is pending.

Nat Smart was employed as an investment adviser representative and sold many of his clients on a municipal bond fund of which he was fond, telling his clients that the returns earned on it were completely free from federal taxation. Unfortunately, he had some unhappy clients when, at the end of the year, they discovered that they had to pay federal tax on the capital gains earned by the fund when it sold some of the bonds it held. Nat was as surprised as they were.

Based on these facts, which of the following statements is necessarily true?

I. Because Nat was as surprised as they were, he is guiltless.

II. Nat is subject to civil liability payments.

III.

Nat will be subject to the criminal penalties for fraud and may spend time in prison.

A.

I only

B.

II only

C.

II and III only

D.

III only

Jack is employed by NewCorp, which is engaging in an initial public offering (IPO). Jack will need to register as a sales representative if he:

A. engages in transactions with the underwriters of the IPO for the purpose of taking the firm public.

B. represents NewCorp in any transactions with financial institutions.

C. participates in the selling of the new stock to individual investors.

D. Jack will need to register as a sales representative if he performs any one of the above activities.