Pass the FINRA Uniform Securities State Law Series-63 Questions and answers with ExamsMirror

Nancy can sell the stock without a problem as executrix of her aunt’s estate. This is considered to be a fiduciary transaction and, as such, it is an exempt transaction.

A variable annuity is defined as a security, but is exempt from state registration in the opinion of the North American Securities Administrators Association (NASAA.) The Supreme Court of the U.S. passed a ruling that deemed a variable annuity to be a security. The National Securities Market Improvement Act of 1996 (NSMIA) established variable annuities to be federal covered securities, however, since they are, for all intents and purposes, mutual funds. Federal covered securities are exempt from state registration.

Only Selections II and III describe activities that are not prohibited for a broker-dealer. A broker-dealer can act as a dealer and either sell securities that it owns to a client, as described in Selection II, or buy securities from a client, as described in Selection III, to hold in its own portfolio as long as it discloses to the client that it is doing so. A broker-dealer cannot tell a client that a revenue bond issued by the city of Boston, Massachusetts is almost risk-free since there is a risk of default, especially in the case of a revenue bond, which is not backed by the full taxing power of the city, but only by the revenues generated by a specific project. Moreover, there are other risks involved in bond investments, such as interest rate risk, so Selection I is a prohibited activity. A broker-dealer cannot make a discretionary trade for a client that involves more than just price and time within receiving written authorization prior to executing the trade, so Selection IV also describes a prohibited activity.

If your client places an order to purchase 500 shares of Oracle on the open market on Wednesday, September 15th, payment will be due on Monday, September 20th. The settlement date for stock transactions is T + 3, which means the third business day after the trade. Saturday is not a business day.

Yes. Constance is guilty of fraud. She misled her client into thinking he couldn’t lose money if he invested the money in a U.S. government bond fund. Although U.S. government bonds are referred to as risk-free, this just means they are considered free from default risk. The value of the bonds-and, therefore, the U.S. government bond funds-will change with changes in interest rates. As an investment adviser representative, Constance should know this. Regardless of whether or not she does, she is guilty of fraud simply by providing the misleading information. If she knew it and deliberately misled the client, she is guilty of criminal fraud.

The statement that an agent must demonstrate a specific minimum level of financial stability for his registration application to be accepted is false. The Administrator may require an agent to post a bond, but there are no specific minimum financial requisites that must be met. The Administrator also has the right to terminate an agent’s registration if the agent becomes bankrupt. Both the agent and his broker-dealer affiliate are required to inform the Administrator whenever there is a change in the agent’s personal information, such as a name change or a change of address.

An agent selling a Massachusetts general obligation bond can legitimately tell the investor that the interest income he receives from the bond will be free from federal taxation. It is not, however, a risk-free investment. States may default on their bond issues, and bonds issued by states are not guaranteed by the federal government.

In order to maintain its registration with a state, a broker-dealer may be required to take a written or oral exam, pay an annual filing fee, maintain a minimum net capital, and file all advertising material with the state’s Administrator. The Administrator of each state has the authority to determine the specific requirements for the state. All of the selections are within the realm of the Administrator’s jurisdiction.

The Uniform Securities Act specifies that the initial registration statement should be accompanied by all of the documents listed in the first three selections-a copy of the firm’s articles of incorporation and bylaws or their equivalent; copies of any underwriter agreements; and a copy of any indenture that applies to the security being registered. Moreover, these are only some of the documents that need to be included.

Even though Nebulous withdrew its registration from the state, the Administrator has up to a year to take disciplinary action against the broker-dealer if he discovers that Nebulous has been engaged in fraudulent securities transactions after the fact. The Administrator can retroactively begin a revocation or suspension proceeding. Criminal courts can initiate proceedings anytime within five years of the alleged misdeeds.