Finra Series-63 Exam Practice Test Instant Access

Question 1

The Turnover Corporation, a firm with 25,000 employees, has recently hired 50 new employees, many of whom have been hired to replace middle-level managers who have retired. Turnover has omitted this fact from its prospectus. Turnover is guilty of

Afraud.

Bmisrepresentation.

Cmisusing insider information.

Dnothing. The hiring of 50 new employees by a firm with 25,000 employees is not a material fact.

Answer : D

Turnover is guilty of nothing when it hires 50 new employees, but doesn't include this information in its prospectus because this is not a material fact. Most of the employees have been hired to replace middle-level managers who have retired, and these employees wouldn't be considered significant enough to affect the price of the stock in any way. If Turnover had hired a new CEO, that would be a material fact that must be disclosed.

Question 2

No: 93

The net worth of a broker-dealer has fallen below the minimum net capital requirement specified by the state in which the broker-dealer is registered. This broker-dealer must notify the Administrator of this fact

Abefore the beginning of the next quarter.

Bbefore the end of the month.

Cby the close of business on the next business day.

Dwithin a week's time.

Answer : C

When the net worth of a broker-dealer falls below the minimum net capital requirement specified by the state, the broker-dealer must notify the Administrator of this fact by the close of business on the next business day according to the Uniform Securities Act.

Question 3

Ari Gaunt is a registered agent employed by Small &Associates Broker-Dealers. He has been notified of a hearing regarding the revocation of his license for making unauthorized trades on some of his clients' accounts.

Which of the following statements is necessarily true?

AIf Ari is found guilty and has his license revoked, Small & Associates will have its license revoked as well and must reapply for reinstatement by filling out an application and paying the requisite filing fees.

BIf Ari is found guilty and has his license revoked, Small & Associates will be subject to a fine.

CIf Ari is found guilty and has his license revoked, he can appeal the decision in a court of law if he files the appeal within sixty days.

DThe Administrator of the state can assess Ari with both civil and criminal penalties.

Answer : C

If Ari is found guilty of making unauthorized trades on his clients' accounts and has his license revoked, he can appeal the decision in a court of law if he files the appeal within sixty days. Small & Associates license is not in danger as long as the firm has been providing competent supervision of Ari and its other agents. It will not be required to pay a fine based on Ari's fraudulent activities. Ari may end up with civil and criminal penalties, but the Administrator cannot assess them. Only a court of law can do that.

Question 4

A bond issue has recently been registered with the state Administrator.

Which of the following statements are true?

AAn 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.

BThe bond may now be offered for sale in the state.

CThe 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.

DBoth A and B are true statements.

Answer : B

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.

Question 5

Which of the following are accurate statements regarding the minimum financial requirements for investment advisers according to the NASAA Model Rules?

I . Any investment adviser who has discretionary authority over a client's assets, but who does not have actual custody of client funds or securities, is required to maintain a minimum net worth of $10,000 at all times.

II . An investment adviser who requires that a fee of more than $500 from his clients be paid six months or more in advance must maintain a positive net worth at all times.

III . Only an investment adviser who has actual custody of client assets is subject to a minimum net worth requirement, which the NASAA Model Rules specifies is $10,000.

AI only

BI and II only

CII and III only

DIII only

Answer : B

Only Selections I and II are accurate statements of the NASAA Model Rules regarding minimum financial requirements for investment advisers. The NASAA rules stipulate that an adviser who has only discretionary authority, but does not take custody of a client's assets, must maintain a minimum net worth of $10,000 at all times. Furthermore, any investment adviser who requires a fee of more than $500 from his clients to be paid six months or more in advance must maintain a positive net worth at all times.

Question 6

: 65

Which of the following would meet the requirements for an ''exempt security?''

Aa $500,000 promissory note that matures in two years

Bcommercial paper with a $100,000 face value and a maturity of five months that is rated AA by Standard and Poors

Ca $25,000 promissory note that matures in three months

Dcommercial paper with a $200,000 face value and a maturity of three months that is rated BB by Standard and Poors

Answer : B

An issue of commercial paper with a $100,000 denomination and a maturity of five months with an AA rating from Standard and Poors meets the requirements for an ''exempt security.'' A short-term security, with no more than 270 days to maturity, that has a denomination of at least $50,000, and has a rating of AAA, AA, or A from a recognized rating agency is exempt from registration with the state Administrator.

Question 7

Which of the following persons would not be required to register with the state as an agent under the guidelines of the Uniform Securities Act (USA)?

AKeith is a salaried employee of Middlesex County in Massachusetts who sells revenue bonds issued by the county to the public.

BJohn is employed by TrustUs Corporation to sell shares of the firm's stock to the firm's employees and receives a commission on the shares he sells.

CStefan is a sales representative for SecureMoney Broker-Dealers and sells only mutual fund shares.

DPreetham is part-owner of SecureMoney Broker-Dealers and executes the purchase and sale of securities for the firm's customers.

Answer : A

Keith would not have to register as an agent since he is a salaried employee of a county in Massachusetts selling county-issued bonds to the public. He is not representing a broker-dealer; he is not receiving a commission on the bonds he sells; and he is selling exempt (government-issued) securities. John receives a commission on his sales, so he is considered to be an agent. Stefan is a sales representative employed by a broker-dealer, which makes him an agent under USA guidelines. Even though Preetham is part-owner of the broker-dealer for which he is effecting transactions, he is acting as an agent in doing so.

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