FINRA-SERIES-63 Online Practice Questions and Answers

Which of the following orders can an Administrator issue without providing prior notice?

A. license suspension

B. license revocation

C. cease and desist

D. license denial

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.

the promised interest payments.

Have there been any violation of securities laws in this instance?

A. No. This was simply a loan transacted between two parties.

B. Yes. Mr. Smooth was required to register the promissory note before he offered it for sale.

C. Both B and C are true statements.

BondsRUs is a broker-dealer that (unsurprisingly) specializes in bonds. The firm has found that it is able to sell Treasury bonds that it buys for $90 per $100 of par value for $99 per confirmation statements BondsRUs sends them. BondsRUs is guilty of

A. nothing. It is acting as a dealer in bonds and, as such, can charge its clients whatever the clients are willing to pay.

B. overcharging its clients by unreasonable markups. A $9 dealer's spread on Treasury bonds is unwarranted.

C. fraud.

D. both B and C.

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

A. broker-dealer.

B. agent.

C. investment adviser.

D. investment company.

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

A. testimonials of satisfied clients

B. 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

C. a free initial consultation, with no obligation on the part of the potential client

D. a free financial planning kit, with no obligation on the part of the potential client

Fly-By-Night Investment Advisers has closed its doors.

Which of the following statements is true?

A. Fly-By-Night is required to shred all documentation of client transactions and communications.

B. Fly-By-Night must send all records of client transactions and communications to the state Administrator for safekeeping.

C. Fly-By-Night must preserve and maintain all records, including client transactions and communications, advertising materials, and financial statements of the now-defunct business for five years.

D. Fly-By-Night must send each of its former clients its records of all that client's transactions and communications with the firm over the past five years.

As an agent, which of the following statements about the Securities Investor Protection Corporation (SIPC) can you legitimately make to your client?

A. The SIPC is the FDIC of the stock and bond markets."

B. "The SIPC was established to restore funds to investors when the brokerage firm they have been using is bankrupt or in financial distress."

C. "The SIPC is a government agency created by an Act of Congress to combat fraud."

D. "The SIPC is a government agency that was created by an Act of Congress to protect investors against losses in the stock and bond market."

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:

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

B. immediately 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.

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

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

Alter Advisers and Associates is a small investment adviser partnership registered only in a single state. One of the partners has died, and the surviving spouse has sold that partnership interest to the surviving partners.

Which of the following statements are true?

I. Alter Advisers must inform the state Administrator of this event.

II. Alter Advisers must inform the SEC of this event.

III.

Alter Advisers must notify the firm's clients of this event.

A.

I only

B.

I and II only

C.

I and III only

D.

I, II, and III

Which of the following would be considered an "issuer" transaction?

A. Jacob calls his broker and places an order to purchase 100 shares of Hasbro, Inc. on the open market.

B. Maria purchases 500 shares of Dodge and Cox's International Fund, a mutual fund investing in foreign securities.

C. Kim sells an ATandT bond she holds that still has three years remaining to maturity.

D. None of the above is an "issuer" transaction.