Finra Series-63 Exam Practice Test Instant Access

Question 1

S. White and Associates is an investment adviser registered in the state of Kentucky and, as such, is meeting Kentucky's minimum net capital requirement for investment advisers. The firm recently registered with the state of Virginia and has opened an office there. Virginia has a significantly higher net capital requirement for its investment advisers.

Which of the following statements is true?

AAccording to the Uniform Securities Act, S. White will have to meet Virginia's higher requirement.

BAccording to the Investment Advisers Act of 1940, S. White needs only to meet the net capital requirement of Kentucky.

CAccording to the Securities Exchange Act of 1934, S. White needs to meet at least the minimum net capital requirement specified by that Act since it is now operating in multiple states.

DAccording to the Investment Advisers Act of 1940, S. White will have to maintain a minimum net capital equal to the average of the net capital requirements of the two states.

Answer : B

Since S. White is already registered in the state of Kentucky and meeting the net capital requirement of that state, the Investment Advisers Act of 1940 stipulates that Virginia cannot require a higher minimum net capital. The Act states that if an investment adviser is registered in one state and is meeting its net capital requirement, a second state cannot impose a higher net capital requirement on the investment adviser.

Question 2

Under which of the following scenarios can a client legitimately sue a purported professional in the securities industry and expect an award for damages?

I . The securities were sold by an agent whose registration was not yet effective with the state, but who had already applied for registration.

II . The security was a variable annuity, and the sales representative neglected to reveal the details of the surrender clause to the client.

III . The security was the stock of a company, the stock had recently been registered with the state for sale, had been granted registration, and the selling agent had told his client that the security had been state-approved for sale.

AI only

BII and III only

CI and III only

DI, II, and III

Answer : D

All of the selections are scenarios describing instances in which a client can legitimately sue a purported professional in the securities industry and expect an award for damages. A client can legitimately sue a purported professional in the securities industry and expect an award for damages if the agent is not yet effectively registered to effect securities transactions in the state; if the professional has neglected-intentionally or otherwise-to inform the investor of all the relevant information involving the security, such as any surrender clause involved; or if the agent has indicated that a state-registered security has in any way been approved by the state.

Question 3

Assuming the security is not registered under the Uniform Securities Act, which of the following would not be exempt from state registration?

Aa variable annuity contract offered by an insurance company with offices in the state

Ba stock that is listed on the American Stock Exchange

Ca stock that is listed on the OTC Bulletin Board

Da put option on a stock that sells in the over-the-counter market

Answer : C

A stock that is listed on the OTC Bulletin Board would not be exempt from state registration unless it already happens to be registered under the Uniform Securities Act. Variable annuities and stocks listed on the American Stock Exchange are classified as federal covered securities by the NSMIA of 1996 and are exempt from state registration. An amendment to the Securities and Exchange Act of 1934 exempts option contracts from state registration.

Question 4

Which of the following describes an ''exempt security,'' as defined by the Uniform Securities Act (USA)?

AAn exempt security is any security that is being sold by an institutional investor, such as a bank, to another institutional investor, such as another bank or an insurance company.

BAn exempt security is one that need not be registered in the state in which it is sold.

CAn exempt security is any security being sold as a private placement.

DAn exempt security is any security that is being sold in an isolated non-issuer transaction.

Answer : B

As defined by the Uniform Securities Act, an exempt security is one that need not be registered in the state in which it is sold. Selections A and D describe exempt transactions. Although securities issued by financial institutions, such as banks, are exempt securities, not all securities that a bank purchases and sells qualify as exempt securities. Private placements may also be exempt transactions, but there are other stipulations that must be met.

Question 5

A limited power-of-attorney gives the designated person the right to

I . order the sale of an asset owned by the account holder and have a check written to the account holder for the amount of the proceeds.

II . obtain account statements, including tax statements, on behalf of the account holder.

III . order the purchase of an asset for the account holder's account.

AI, II, and III

BI and II only

CII and III only

DI and III only

Answer : C

Only Selections II and III are true. A limited power-of-attorney gives the designated person the right to obtain account statements, including tax statements, on behalf of the account holder and to order the purchase of an asset for the account holder's account. Only a full (or unlimited) power-of-attorney allows the designated person to withdraw any proceeds from the account.

Question 6

Most individual state securities laws today are based on:

Athe Uniform Securities Act of 1956.

Bthe Uniform Securities Act of 2002.

Cthe National Securities Markets Improvement Act of 1996.

Dthe Gramm-Leach-Bliley Act of 1999.

Answer : A

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.

Question 7

Assuming there is not a stop order or a proceeding pending, under the registration by coordination process a security's registration with the state becomes effective:

Aonly when it is approved by the state Administrator, regardless of whether it has been approved by the SEC.

Bimmediately after approval by the SEC as long as the registration statement has been on file for at least 20 days or the Uniform Securities Act has provided an exemption to this waiting period.

Cimmediately subsequent to approval by the SEC, regardless of how long the registration statement has been on file.

Donly when it is approved by the state Administrator, who will review the registration documentation upon notification that SEC approval has been granted.

Answer : B

Under the registration by coordination process, the security's registration with the state becomes effective immediately after approval by the SEC as long as the registration has been on file for at least 20 days or the Uniform Securities Act has provided an exemption to this waiting period. This assumes, of course, that there is not a stop order or a proceeding pending.

Finra Uniform Securities State Law Examination Series-63 Exam Practice Test