Finra Series-63 Exam Questions Instant Access

Question 1

Which of the following constitutes a non-punitive order?

Asummary license suspension

Bregistration cancellation

Cregistration denial

DAll of the above are punitive orders.

Answer : B

Registration cancellation is a non-punitive order. The Administrator issues a cancellation order if a registered person dies, becomes mentally incompetent, is no longer in business, or is unable to be located.

Question 2

The C&S Railroad is in the process of issuing new bonds. Before these bonds can be offered for sale,

Athey must be registered with the SEC since railroads are involved in interstate commerce.

Bthey must be registered in every state in which the bonds will be sold to investors.

Cthey must be registered with the SEC and in each state through which the railroad passes.

DNone of the above statements is true.

Answer : D

None of the statements is true because securities issued by highly regulated industries, such as the railroad industry are exempt from registration with both the SEC and the states.

Question 3

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 4

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

AMoeMoney Investment Advisers, LLC has an office in the state with a client base of fifty individuals.

BFinancial Freedom Investment Advisers has no offices in the state although it does advise six wealthy individuals who are residents of the state.

CCanDo 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.

DBuckeye Investment Advisers has no offices in the state, but it provides portfolio management services to an insurance company located in the state.

Answer : D

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.

Question 5

Although an Administrator has broad powers, he or she cannot:

Aissue subpoenas involving compulsory attendance.

Bgather evidence.

Cdeliver a judicial injunction.

Dformulate rules and orders.

Answer : C

An Administrator has broad powers, but he or she cannot deliver a judicial injunction because an Administrator does not have the authority bestowed on a court of law. The Administrator can issue subpoenas to require attendance, participate in evidence gathering, and formulate rules and orders.

Question 6

A variable annuity is:

Anot a security and, therefore, does not have to be registered with the state.

Bnot a security, but is still required to be registered with the state before it can be offered for sale.

Ca security and, therefore, has to be registered with the state before it can be offered for sale.

Da security, but is exempt from state registration.

Answer : D

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.

Question 7

Individual states are prohibited from requiring a broker-dealer or investment adviser to file financial reports more frequently than:

Aonce a year.

Btwice a year.

Cfour times a year.

Dtwelve times a year.

Answer : C

Individual states are prohibited from requiring a broker-dealer or investment adviser to file financial reports more frequently than four times a year. Under the Securities and Exchange Act of 1934, individual states are prohibited from imposing more stringent requirements than those already required by the SEC, and the SEC requires quarterly reporting. Therefore, a state may not require that a broker-dealer or investment adviser file monthly reports with it.

Finra Uniform Securities State Law Examination Series-63 Exam Questions