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Series-63
Uniform Securities State Law Examination Questions and Answers

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Questions # 71:

Which of the following does not describe a prohibited practice for broker-dealers under the NASAA Model Rules?

I. SecureMoney Broker-Dealers has received a request from a client who wants SecureMoney to “identify a few solid firms in the Asian market and invest up to $20,000 in them.” SecureMoney executes the purchases and receives the requisite signed discretionary authorization from the client before the settlement date.

II. CanDo Broker-Dealers executes a margin transaction for a client, promptly receiving a signed, written margin agreement from the client after the transaction takes place.

III. GetErDone Broker-Dealers receives a call from a client who wants to purchase some securities on margin. GetErDone has the client come into the office to sign a properly executed margin agreement prior to effecting the transaction.

Options:

None of the selections are prohibited practices.

I and III only

II and III only

III only

Answer

Explanation

Neither Selection II nor Selection III describes a prohibited practice for broker-dealers under the NASAA Model Rules. Broker-dealers are permitted to execute margin transactions for clients as long as they receive a signed, written margin agreement promptly after the initial margin transaction takes place. The agreement need not be signed beforehand. Discretionary authorizations do need to be signed before the broker-dealer executes any discretionary transactions for a client, so Selection I describes a prohibited practice.

Questions # 72:

No: 167

A “market not held” order is

Options:

an order in which the client tells the broker to use his own discretion in timing a purchase or sale in an attempt to get a better price.

a prohibited activity in which an agent engages in the purchase or sale of securities that are not offered by his broker-dealer.

an order to buy or sell a stock at a specified price, which differs from the current market price.

an order to sell securities that the investor owns if the stock decreases by a certain amount from the current price.

Answer

Explanation

A “market not held” order is one in which the client tells the broker to use his own discretion in timing a purchase or sale in an attempt to get a better price than the current market price. An order to buy or sell stock at a specified price is a limit order. An order to sell securities that the investor owns if the stock decreases by a certain amount is known as a stop sell order or a stop loss sell order.

Questions # 73:

Blue Sky Laws are designed to:

Options:

protect investors from fraud in their securities market transactions.

protect agents, broker-dealers, and investment advisers and their representatives from spurious allegations of fraudulent activity.

enhance the tourism industry within a state.

favor investment in companies that engage in environmentally friendly practices.

Answer

Explanation

The main purpose of Blue Sky Laws is to protect individual investors from fraud in their securities market transactions. Requiring the registration of new security issues and theregistration of those persons who advise individual investors as well as those involved in the purchase and sale of securities to the public are just some of the regulations designed to do this. There are no provisions designed to protect agents, broker-dealers, or investment advisers and their representatives in any regard.

Questions # 74:

Your next-door neighbor’s brother works for a large pharmaceutical company and confided in her that one of the company’s chemists has just discovered a compound that will cure baldness and that the firm plans to make the discovery public later in the week. Your next-door neighbor passes this information on to you over a cup of coffee the next morning. You immediately call your broker and place an order to buy shares of the company’s stock.

Has any illegal insider trading taken place?

Options:

Yes. The agent who executes your purchase order has engaged in illegal insider trading.

No. You are in no way related to your next-door neighbor’s brother, and she could have been lying.

Yes. You, your neighbor, and her brother are all guilty of illegal insider trading.

Yes. You are guilty of illegal insider trading because you traded on information that had not yet been made publicly available.

Answer

Explanation

Yes. You are guilty of illegal insider trading because you traded on information that was not yet public. Your neighbor and her brother did not execute any trades based on the information, so they’re innocent, as is the agent who executed your purchase order, who had no way of knowing that you had insider knowledge when you placed the order.

Questions # 75:

Once a person has filed an application with the Administrator, and in doing so has truthfully disclosed every material fact, how long does the Administrator have after the effective date of the registration to commence a proceeding to deny, suspend, or revoke that person’s license based on those facts?

Options:

30 days.

60 days.

90 days.

one year.

Answer

Explanation

If a person has appropriately and truthfully disclosed every material fact on its application for registration, the Administrator has 90 days after the registration becomes effective to commence a proceeding to deny, suspend, or revoke the license. If the Administrator has known about the fact for longer than this, he may not begin a proceeding against that person according to the Uniform Securities Act.

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