Series63 PDF Dumps Dec 10, 2023 Recently Updated Questions [Q127-Q151]

Series63 PDF Dumps | Dec 10, 2023 Recently Updated Questions

Series63 Exam Questions – Valid Series63 Dumps Pdf

NEW QUESTION # 127
Which of the following may an investment adviser not use in an attempt to solicit new clients?

• A. testimonials of satisfied clients
• B. a free initial consultation, with no obligation on the part of the potential client
• C. a complete list of the stocks they have recommended in the past year, even if a statement is included that states that past performance is no guarantee of future performance
• D. a free financial planning kit, with no obligation on the part of the potential client

Answer: A

Explanation:
Explanation
Investment advisers may not use testimonials of satisfied clients to solicit new clients. They may provide past stock picks, as long as they provide a complete list, that compilation period for the list is at least a year, and as long as they are careful to note that past performance is no guarantee of future performance. They can also offer freebies, such as a free initial consultation or a free financial planning kit, as long as these are indeed offered "free," with no obligation on the part of the client.

NEW QUESTION # 128
Ms. Naivete gave Mr. Smooth, owner of Smooth Construction, $40,000 in return for a promissory note that
promised to pay interest at the rate of 8% a quarter, with a repayment of principal at the end of two years.
The money would be used by Mr. Smooth to rehab a few beach condo units that had been severely
hurricane-damaged and that Mr. Smooth had been able to purchase for "pennies on the dollar," or so he
said. The first units would be completed within a month, and the rents would be used to make the interest
payments. The investment was almost as risk-free as U.S. government bonds, Mr. Smooth claimed. By
the end of the second year, Ms. Naivete had received a lot of fast talk and only one of the promised
interest payments. Have there been any violation of securities laws in this instance?

• A. Yes. Ms. Naivete has been defrauded by Mr. Smooth.
• B. No. This was simply a loan transacted between two parties.
• C. Both B and C are true statements.
• D. Yes. Mr. Smooth was required to register the promissory note before he offered it for sale.

Answer: C

Explanation:
Yes, there have been violations of securities laws in this instance; the promissory note
required registration, and Ms. Naivete has been defrauded. Promissory notes are considered to be
securities as defined by the Uniform Securities Act and, as such, must be registered with the state before
they can be offered for sale. Furthermore, a promissory note is a promise to repay, and Mr. Smooth has
defaulted on this promise after telling Ms. Naivete that the investment was close to being risk-free. In
essence, he took Ms. Naivete's money under false pretenses when he sold her the note, and that is the
definition of fraud.

NEW QUESTION # 129
Broker-Dealer Wheeler has no offices in the state. Wheeler does, however, sell corporate bonds from his portfolio to banks and insurance companies located in the state that purchase the bonds for their investment portfolios. He executes about twelve of these transactions a year. Wheeler profits from the price appreciation of the bonds during the time he held them, but receives no other form of compensation. Based on these facts,

• A. Wheeler need not register in the state, but the securities must be registered before they can be sold to in-state investors.
• B. Wheeler need not register in the state, and the securities are also exempt from registration.
• C. Wheeler must register as a broker-dealer in the state, and the securities must also be registered before they can be sold to in-state investors.
• D. Wheeler must register as a broker-dealer in the state, but the securities do not need to be registered.

Answer: B

Explanation:
Explanation
Since Wheeler has no offices in the state and is selling bonds from his portfolio to institutional investors, Wheeler need not register in the state, and the securities are exempt from registration. Broker-dealers with no physical location in a state that are doing business with other broker-dealers or with institutional investors such as banks and insurance companies that do have offices in that state are exempted from registering in the state.
Securities sales to institutional investors are exempt transactions, and securities sold in exempt transactions are themselves exempt from state registration requirements.

NEW QUESTION # 130
Most individual state securities laws today are based on:

• A. the Uniform Securities Act of 1956.
• B. the Gramm-Leach-Bliley Act of 1999.
• C. the Uniform Securities Act of 2002.
• D. the National Securities Markets Improvement Act of 1996.

Answer: A

Explanation:
Explanation
Most individual state securities laws continue to be based on the 1956 Uniform Securities Act. Although the Uniform Securities Act was revised in 1985, 1988, and 2002, none of these revisions have been widely incorporated by the individual states. The National Securities Markets Improvement Act of 1996 dealt mainly with the definition of federal covered securities and more efficient management of mutual funds. The focus of the Gramm-Leach-Bliley Act of 1999 was on financial institutions.

NEW QUESTION # 131
Newbie Corporation is considering the possibility of an interstate initial public offering (IPO) of its stock. In
the initial meetings with BigFee Investment Bankers, Newbie has learned that the underwriting spread will
be 15%. Although the actual offering price won't be set until Newbie's registration statement is approved
by the SEC, BigFee has indicated that the offer price will probably be between $3 and $4 a share and that
the stock will initially be listed on the OTC Bulletin Board. What methods for state registration does
Newbie have available?
I. registration by coordination
II. registration by notification
III. registration by qualification

• A. Method II only
• B. Methods I and III only
• C. Newbie may elect to register by any one of the above methods although registration by qualification
  would be the most burdensome choice.
• D. Method I only

Answer: B

Explanation:
Newbie may apply for state registration using either the registration by coordination or the
registration by qualification method, although the latter method is the most burdensome of the three. The
firm is not eligible to register by notification. To be eligible, the offer price of the IPO would have to be at
least $5, and the underwriting spread would need to be no greater than 10%.

NEW QUESTION # 132
Harry Lange manages the investment portfolio for the Fidelity Magellan Mutual Fund. Mr. Lange is a(n)

• A. agent.
• B. investment company.
• C. broker-dealer.
• D. investment adviser.

Answer: D

Explanation:
If Harry Lange is managing the investment portfolio of Fidelity Magellan Mutual Fund, he is
an investment adviser. He is making the investment decisions and receives a percentage of the assets
under management as his compensation. He is not selling the mutual fund or the fund's investors
anything, which is the job of a broker-dealer or an agent. Fidelity Magellan is the investment company.

NEW QUESTION # 133
Moe is a registered investment adviser doing business under the name of MoeMoney Investment Advisers, LLC. Larry, Curly, and Mary all hold positions with the firm. Larry is on the board of directors; Mary is a sales representative for the firm; and Curly is an administrative assistant, who performs clerical duties.
Given that Moe is already a registered investment adviser, which of the other three are automatically registered as investment adviser representatives?

• A. Larry and Mary only
• B. Larry only
• C. Mary and Curly only
• D. Larry, Mary and Curly

Answer: B

Explanation:
Explanation
As a director of the firm, Larry would automatically be registered as an investment adviser representative of MoeMoney Investment Advisers. Although directors and officers of the firm are automatically registered as investment adviser representatives, Mary, as a salesrepresentative, would have to apply for her own registration. Curly does not need to be registered since he performs only clerical duties.

NEW QUESTION # 134
In which of the following scenarios would the Administrator of a state not have jurisdiction?
I. A monthly newspaper published by a resident of the state who is not a registered investment adviser has a column in which the publisher makes specific investment recommendations for clients who write in for advice.
About 80% of the circulation of the publication is to out-of-state residents.
II. An internet blog posted by an out-of-state resident makes investment recommendations.
III. An out-of-state firm solicits buyers for its promissory notes within the state.

• A. I only
• B. I, II, and III
• C. II only
• D. I and II only

Answer: D

Explanation:
Explanation
The administrator of a state would not have jurisdiction in the scenarios described in Selections I and II. In Selection I, more than 2/3 of the circulation of the newspaper is outside the state, which excludes it from the jurisdiction of the Administrator. Selection II describes an electronic communication that originates from outside the state, which excludes it. Selection III constitutes an offer to sell securities within the state, and this will always fall under the jurisdiction of the Administrator of the state.

NEW QUESTION # 135
Mr. L. Ranger is an agent for a broker-dealer and has overheard "talk" that a merger between two well-known high-tech companies is about to take place. Mr. Ranger knows that, on average, in these instances the target firm's price spikes. He calls his client and good friend, Mr. Tonto, and tells him of the rumor, suggesting that Tonto might want to buy shares in the target firm. He tells Mr. Tonto that if the rumor isn't true, the target firm's price may not spike at all and may, in fact, decline, and suggests that Mr. Tonto not invest any money he isn't willing to lose. Mr. Ranger knows that his friend likes to gamble, and decided he wouldn't be much of a friend if he didn't inform Tonto of this potential opportunity.
Has Mr. L. Ranger violated any laws or engaged in any prohibited practices?

• A. Yes. Mr. Ranger has engaged in fraud in telling Mr. Tonto about the rumor, given that the merger hasn't been officially announced by the two companies.
• B. No. Mr. Ranger has informed Mr. Tonto that the merger is just a rumor and has informed him of the risk involved. Mr. Ranger is knowledgeable about his friend's risk tolerance level as well and recognizes this investment as one his good friend might want to take.
• C. Yes. Mr. Ranger is privy to knowledge that is not available to the general public and both he and Mr.Tonto will be guilty of illegal insider trading if Mr. Tonto trades on Mr. Ranger's information.
• D. No. Mr. Ranger and Mr. Tonto are friends, so there can be no violations of any laws or practices because of their non-business relationship.

Answer: B

Explanation:
Explanation
No, Mr. Ranger has not violated any laws or engaged in any prohibited practices in his recommendation to Mr.
Tonto. He has simply informed Mr. Tonto of the rumor and has told him of the risk involved, and he has not lied or misled Mr. Tonto about the investment. He is also well aware of his friend's risk tolerance level, so he is not making an unsuitable recommendation. This is not considered insider trading since there is no way Mr.
Ranger can know whether or not the rumor is true. Selection A is not true because there can be violations of laws or practices, even if the agent and client are friends.

NEW QUESTION # 136
A "notice filing" refers to

• A. notification to the public by the issuer or its underwriters that the issue is being sold on an "all or nothing" basis.
• B. the right of an issuer to run tombstone ads in the newspapers and other publications upon filing a registration application with the state Administrator.
• C. a document that the issuer must file with the SEC informing the SEC that the firm has applied to the state for registration of its new security.
• D. the filing by a federal covered investment adviser of forms already filed with the SEC along with a consent to service of process with the state Administrator.

Answer: D

Explanation:
Explanation
A "notice filing" refers to the filing by a federal covered investment adviser of forms filed with the SEC along with a consent to service of process with the state Administrator. The notice filing must be accompanied by the requisite state filing fee as well.

NEW QUESTION # 137
You have recently discovered that a security you purchased has not been registered with the state, nor is it exempt from registration. You can file a civil claim against the seller as long as you do so within

• A. three years from discovery or five years from the event, whichever comes first.
• B. two years from discovery or three years from the event, whichever comes first.
• C. one year from discovery.
• D. five years.

Answer: B

Explanation:
Explanation
If you discover that a security you purchased has not been registered with the state and was sold unlawfully, you can file a civil claim against the seller as long as you do so within two years from discovery or three years from the event, whichever comes first, under the guidelines of the Uniform Securities Act. Therefore, if you know about an unlawful sale for more than two years or if the sale took place more than three years ago, you cannot sue. The statute of limitations has expired.

NEW QUESTION # 138
Needy Investment Advisers, LLC needs a loan. One of its wealthier clients has offered to lend the firm the money at the prime rate of interest. A promissory note is drawn up stipulating the terms of the loan. Based on these facts,

• A. Needy is in violation of securities laws only if the face value of the note is for $50,000 or more.
• B. Needy is in violation of securities laws by acting as an issuer of securities.
• C. Needy is not in danger of violating any securities laws since the loan was unsolicited and has been properly executed via a promissory note.
• D. Needy will be in violation of securities laws unless a waiver of compliance form is signed by the client and submitted to the administrator.

Answer: B

Explanation:
Explanation
In accepting a loan from a wealthy client, Needy is in violation of securities laws by acting as an issuer of securities. Under NASAA Model Rules, investment advisers may not borrow money from clients unless the client is in the business of lending money, as would be the case if the client were a financial institution. It doesn't matter if the client is in agreement with the loan; waiver of compliance agreements is prohibited by both the NASAA Model Rules and the Investment Advisers Act of 1940. Nor does it matter that the loan was unsolicited and formalized with a promissory note.

NEW QUESTION # 139
Which of the following entities is subject to be accused of churning?
I. investment advisers
II. investment adviser representatives
III. broker-dealers
IV. agents

• A. I and III only
• B. I, II, III, and IV
• C. II, III, and IV only
• D. II and IV only

Answer: B

Explanation:
Explanation
Selections I, II, III, and IV-investment advisers, their representatives, and broker-dealers and their agents-are subject to accusations of churning. Any activity on the part of any of these parties that suggests that they are engaged in encouraging excessive trading on the accounts of their clients makes them subject to allegations of churning their customers' accounts.

NEW QUESTION # 140
Which of the following statements regarding the registration of broker-dealers and investment advisers is true?

• A. Investment advisers are required either to be registered with a state or with the SEC, while broker-dealers must be registered both with the SEC and the state.
• B. Investment advisers must always be registered with the SEC to conduct business; broker-dealers may be registered with either an individual state or the SEC or both.
• C. Investment advisers are required to register with both the state and the SEC, while broker-dealers may be registered with only one or the other.
• D. Both investment advisers and broker-dealers must be registered with the SEC and with the states in which they have offices.

Answer: A

Explanation:
Explanation
The true statement is C: Investment advisers are required either to be registered with a state or with the SEC, but broker-dealers must be registered with both the SEC and the state. Investment advisers who are federal covered do not need to be registered with the state as well, but they do have to execute a notice filing with the Administrator of any state in which they have an office.

NEW QUESTION # 141
In order to maintain its registration with a state, a broker-dealer may be required to:
I. take a written or oral exam.
II. pay an annual filing fee.
III. maintain a minimum net capital.
IV. file all advertising material with the Administrator.

• A. II and III only
• B. I, II, III, and IV
• C. I and II only
• D. II, III, and IV only

Answer: B

Explanation:
Explanation
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.

NEW QUESTION # 142
An agent working for a broker-dealer mistakenly sends an investment adviser some bonds that the adviser purchased on behalf of his client instead of directing the bonds to the financial institution that is serving as the qualified custodian of the client's funds.
If the investment adviser wants to avoid being considered custodian of this client's account, what must the adviser do?

• A. Record what securities were sent, when he received them, and when he forwarded them--which must be within twenty-four hours-to the qualified custodian of the client's funds.
• B. Record what securities were sent, when he received them, and when he forwarded them--which must be within three business days-to his client.
• C. Record what securities were sent, when he received them, and when he forwarded them--which must be within twenty-four hours-to his client.
• D. Record what securities were sent, when he received them, and when he forwarded them--which

Answer: C

Explanation:
Explanation
In order to avoid being considered custodian of his client's account, the investment adviser needs to record what securities he had been sent, when he received them, and when he returned them-which must be within three business days-to the sender.

NEW QUESTION # 143
Which of the following describes an investment adviser that is not required to register with the state
Administrator?

• A. CanDo Broker-Dealers is a state-registered broker-dealer. It has begun to offer asset management
  services to a few of its wealthier clients for a small management fee equal to 0.1% of the assets under
  management.
• B. Financial Freedom Investment Advisers has no offices in the state although it does advise six wealthy
  individuals who are residents of the state.
• C. MoeMoney Investment Advisers, LLC has an office in the state with a client base of fifty individuals.
• D. Buckeye Investment Advisers has no offices in the state, but it provides portfolio management services
  to an insurance company located in the state.

Answer: D

Explanation:
Buckeye Investment Advisers is not required to register with the state Administrator since it
has no offices in the state and provides portfolio management services to an institutional investor within
the state. Both MoeMoney and Financial Freedom must register since they advise more than 5 individual
clients. It doesn't matter in that case whether they have offices within the state or not. CanDo is registered
only as a broker-dealer, but it has begun offering investment advice for a fee, so it must also register with
the state as an investment adviser.

NEW QUESTION # 144
Which of the following is not a method that can be used to register securities with the state?

• A. registration by exception
• B. registration by coordination
• C. registration by notification
• D. registration by qualification

Answer: A

Explanation:
Registration by exception is not a method that is used to register securities with the state.
Registration by notification is a method available for those securities that meet a certain set of criteria and
requires the least amount of paperwork. Registration by coordination is the method used for most
securities. Registration by qualification is the most burdensome method, requiring a voluminous amount
of paperwork.

NEW QUESTION # 145
Which of the following would not be found in a tombstone advertisement?

• A. the names of the underwriters
• B. the name of the issuer
• C. the price at which the security will be offered
• D. the interest rate and time to maturity of a bond issue

Answer: C

Explanation:
Explanation
The price at which the security will be offered will not be found in a tombstone advertisement. A tombstone advertisement is not an offer to sell the security and, in any case, it is unlikely that the final offer price will have even been decided on at this point.

NEW QUESTION # 146
A bond issue has recently been registered with the state Administrator. Which of the following statements
are true?

• A. The issuer may now offer this bond for sale, and any other bonds that the issuer may want to offer for
  sale in the future will be able be sold after the issuer executes a notice filing.
• B. The bond may now be offered for sale in the state.
• C. An investor can feel secure in buying the bond because it has recently been registered, which means
  that the state Administrator finds it to be of sound quality at this point in time.
• D. Both A and B are true statements.

Answer: B

Explanation:
When a bond issue has been effectively registered with the state Administrator, it can be
offered for sale in the state. The bond's acceptance by the Administrator simply means that the issuer has
supplied enough information in order for an investor to judge the quality of the bond for himself; it in no
way implies that the bond is of sound quality. It could, in fact, be a very risky security and still have met the
registration requirements.

NEW QUESTION # 147
Once you have passed the Series 63 examination, which entity must then approve your application to sell
securities?

• A. FINRA
• B. NASAA
• C. SEC
• D. the state administrator

Answer: D

Explanation:
Once you have passed the Series 63 exam, it is the state administrator who can approve or
deny your registration. NASAA developed the Uniform Securities Agent State Law Examination and
FINRA administers it. The SEC is not a party to the state registration process.

NEW QUESTION # 148
Goldie Locks is an agent with Bear Broker-Dealers. One of her clients is a single woman, Annie Spinster,
who is retired and needs income from her investment portfolio to meet her current needs for liquidity. In
addition to investing in mutual funds, Annie likes the thrill of investing in single stocks and asks Goldie for
recommendations. Goldie recommends Annie invest some of her money in Alcon (ACL), a medical
instrument and supplies company selling on the NYSE, based on the fact that it has a high dividend yield
and is paying a dividend of $2.21 a share, which is guaranteed to continue or even increase, Goldie
assures Annie. Has Goldie violated any laws or engaged in any prohibited practices?

• A. Yes. At the very least, Goldie has committed fraud since she cannot guarantee that a firm's dividend
  will continue or increase.
• B. Yes. As the agent of a broker-dealer, Goldie is not permitted to make recommendations for specific
  investments. Only investment adviser representatives and investment advisers can do that.
• C. Both A and B are true.
• D. No. Goldie merely responded to a recommendation request from a client, and the recommendation is
  suitable since the client has a need for current income and the recommended stock pays a high dividend.

Answer: A

Explanation:
In recommending that Annie buy stock in Alcon because its stock is guaranteed to pay a
dividend of $2.21 a share or higher, Goldie has committed fraud. The company itself could not even make
such a guarantee legitimately. Goldie may also be guilty of an unsuitable recommendation since factors
other than dividend yield-such as the risk of the investment--should have been considered. That being
said, Goldie is permitted to make recommendations for specific investments as an agent of a
broker-dealer, as long as she doesn't receive special compensation for it.

NEW QUESTION # 149
Once a broker-dealer has applied for and been granted state registration, the registration remains valid

• A. until December 31st.
• B. for three years.
• C. for five years.
• D. for twelve months.

Answer: A

Explanation:
Once a broker-dealer has been granted state registration, that registration is valid until
December 31st of that year. Registration automatically terminates annually on December 31st although
an Administrator may elect to revoke or suspend a broker-dealer's registration at any time if the
Administrator finds just cause.

NEW QUESTION # 150
Nancy's Aunt Ethel died, making Nancy executrix of her estate. In going through Aunt Ethel's belongings,
Nancy discovered some stock certificates that she learned had been issued by a small New Jersey firm
that was still in business. The problem lay in the fact that Nancy's Aunt Ethel had moved from New Jersey
to Florida years ago, and the stock is registered only in the state of New Jersey. Nancy herself is a
resident of Massachusetts. What does Nancy have to do in order to sell this stock?

• A. Nancy can sell the stock without a problem as executrix of her aunt's estate.
• B. Nancy will have to establish a mailing address in New Jersey before she can legally sell this stock.
• C. Nancy will need to contact a broker-dealer licensed in the state of New Jersey to help her with the sale
  of this stock.
• D. Nancy will need to contact a securities law firm in Florida to help her register the stock in the state of
  Florida.

Answer: A

Explanation:
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.

NEW QUESTION # 151
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