[Apr 14, 2024] Series63 Dumps PDF and Test Engine Exam Questions - TestBraindump
Verified Series63 exam dumps Q&As with Correct 251 Questions and Answers
NEW QUESTION # 37
Which of the following describes a prohibited practice in the sale of shares of investment companies?
I. Sandy Slacker hands her client the fund's prospectus and tells him that the prospectus will provide him all that he needs to know about loads and fees associated with the fund.
II. Elliot Eager tells a client who has an investment objective that includes current income that a certain bond fund has a current yield of 8% and provides the client with a prospectus so that the client can peruse the average annual returns that the fund has generated in past years when the client has the time.
III. After explaining all the fees and loads involved in two different bond funds as well as the difference between current yield and total return, Patty shows the client the data on the average annual returns that the two bond funds provided. She explains to the client that the municipal bond fund has a lower yield than the similar-risk corporate bond fund because the interest income the client will receive from the municipal bond fund will be free from federal taxation, while the interest income on the corporate bond fund is fully taxable.
- A. I and II only
- B. I only
- C. I and III only
- D. All the choices describe prohibited practices in the sale of shares of investment companies.
Answer: A
Explanation:
Explanation
Only the scenarios described in Selections I and II represent prohibited practices. The NASAA rules state that it is not enough to hand a client a prospectus, but that the agent must fully explain all sales charges and also to explain the difference between current yield and total return to the client and present that client with the fund's most recent average annual returns over the past year, 5-year, and 10-year periods. Sandy and Elliot have not done this in the scenarios described. In Selection III, Patty has done so and has also provided the client with accurate and useful information regarding why a municipal bond offers a lower yield than a corporate bond fund.
NEW QUESTION # 38
The trade confirmation must be received by the customer no later than
- A. one week after the settlement date.
- B. five business days after the settlement date.
- C. the settlement date.
- D. the day after the trade takes place.
Answer: C
Explanation:
Trade confirmations must be received by the customer no later than the settlement date.
NEW QUESTION # 39
A "notice filing" refers to
- A. the right of an issuer to run tombstone ads in the newspapers and other publications upon filing a
registration application with the state Administrator. - B. notification to the public by the issuer or its underwriters that the issue is being sold on an "all or
nothing" basis. - C. 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. - D. 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.
Answer: C
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 # 40
Nat Smart was employed as an investment adviser representative and sold many of his clients on a
municipal bond fund of which he was fond, telling his clients that the returns earned on it were completely
free from federal taxation. Unfortunately, he had some unhappy clients when, at the end of the year, they
discovered that they had to pay federal tax on the capital gains earned by the fund when it sold some of
the bonds it held. Nat was as surprised as they were. Based on these facts, which of the following
statements is necessarily true?
I. Because Nat was as surprised as they were, he is guiltless.
II. Nat is subject to civil liability payments.
III. Nat will be subject to the criminal penalties for fraud and may spend time in prison.
- A. II only
- B. II and III only
- C. I only
- D. III only
Answer: A
Explanation:
Only Selection II is an accurate statement. In telling his clients that the returns earned on a
municipal bond fund were totally tax-free, Nat misled the clients, whether intentionally or not. This
constitutes fraud, and Nat is, at a minimum subject to civil liability payments, so this is "necessarily" true.
Whether or not Nat will be subject to criminal penalties for fraud and spend time in prison depends on his
ability to prove that he had no knowledge that he was misleading his clients.
NEW QUESTION # 41
Iggy recently started his own company. He soon discovered it required more cash to keep it going than he
had anticipated. He ran an ad in the local paper for investors and got a response. He found a template for
a promissory note on the internet, filled in the requisite information specific to the agreement he and the
investor had worked out, and printed it out. On it, he promised to make monthly interest payments of 2%
on the loan and to repay the principal amount at the end of 18 months. A few months after the
arrangement, Iggy read an article in a small business publication that indicated that promissory notes had
to be registered with the state unless they were sold in an exempt transaction, such as one enacted with a
financial institution, prior to being offered for sale. The article indicated that a seller who had sold an
unregistered note in error could remedy the situation by sending the buyer a formal offer to buy the
security back, with interest. Iggy turned to the computer once again, found a form that could be used for a
formal offer of rescission, filled it out, and sent it to the investor. Having done this,
- A. Iggy will not be assessed any penalties by the Administrator of the state, but the investor can still sue
for damages in civil court. - B. Iggy must follow up with a second notice sent via registered mail if he has not heard from the investor
within 30 days. - C. Iggy must wait 6 months for a response from the investor. If no response is received by the end of 6
months, Iggy is off the hook. - D. Iggy cannot be sued for civil damages if the investor fails to respond to the offer within 30 days.
Answer: D
Explanation:
Since Iggy realized the promissory note he had sold to the investor required state
registration and sent a formal offer of rescission to the investor, he cannot be sued for civil damages if the
investor has not responded to the offer within 30 days. The investor has 30 days to accept or reject the
offer. If he either rejects it or fails to accept it by not responding to the offer at all, the investor has lost the
right to sue for damages.
NEW QUESTION # 42
The 1988 Insider and Securities Enforcement Act indicates that a person convicted of insider trading can be subject to which of the following penalties?
- A. up to 3 years in prison, a $5,000 fine, or both
- B. up to 7 years in prison and a fine equal to 200% of the amount of profits gained or losses avoided
- C. up to 10 years in prison and a fine of $1 million or up to 3 times the amount of profits gained, or
- D. up to 5 years in prison and a fine of $1,500,000 or both
Answer: C
Explanation:
Explanation
The 1988 Insider Trading and Securities Enforcement Act increased the penalties for a person convicted of insider trading to up to 10 years in prison and a fine of $1 million or up to 3 times the amount of profits gained, or losses avoided.
NEW QUESTION # 43
A broker-dealer of commodity futures contracts has been profiting by trading for its own account either before or after executing a client's trade on the same commodity, depending on which will be most advantageous.
Under the Uniform Securities Act, the broker-dealer is guilty of
- A. churning.
- B. fraud.
- C. nothing. The Uniform Securities Act (USA) deals only with securities, and a commodity futures contract is not a security.
- D. unauthorized transactions.
Answer: C
Explanation:
Explanation
A broker-dealer of commodity futures contracts is guilty of nothing under the Uniform Securities Act since a commodity futures contract is not a security as defined by the USA. The broker-dealer may, however, find himself in trouble with the Commodity Futures Trading Commission, which is the regulatory agency of the futures market.
NEW QUESTION # 44
You are a registered agent with a broker-dealer. One of your clients visits you and wants you to sell some of the U.S. government bonds she owns and purchase shares of a specific aggressive growth mutual fund for her with the proceeds. Your client is a mentally-competent, 84-year-old woman but, based on your other knowledge of her situation, you believe it to be an unwise move. You should
- A. turn the matter over to your supervisor.
- B. nod politely, but not execute the transactions since they are not in her best interest.
- C. call the mutual fund and tell them that they must convince this client that an investment in their fund is not in her best interest, under penalty of law.
- D. advise her that you don't believe this is in her best interest, but execute the required transactions if she insists.
Answer: D
Explanation:
Explanation
If, as a registered agent with a broker-dealer, you receive an order from a client that you don't believe is in her best interests, you should tell her that, but you must still execute the transactions if she insists. You may not legally ignore her instructions, nor should you bother either the mutual fund or your supervisor with this, given the facts as provided; you should deal with it yourself.
NEW QUESTION # 45
Jack Bean is employed by Giant Investment Advisers, LLC. His job duties include advising clients on the
asset allocations of their portfolios. Jack Bean is
- A. an administrative assistant.
- B. an investment adviser.
- C. an agent.
- D. an investment adviser representative.
Answer: D
Explanation:
As an employee of Giant Investment Advisers who provides investment advice to clients,
Jack Bean is an investment adviser representative. Giant is the investment adviser. Agents are employed
by broker-dealers.
NEW QUESTION # 46
Which of the following would be an unsuitable recommendation for your 68-year-old client?
- A. a deferred annuity
- B. a high quality corporate bond fund
- C. an S&P 500 Index mutual fund
- D. a Treasury Inflation Protected Security (TIPS)
Answer: A
Explanation:
A deferred annuity would be an unsuitable recommendation for your 68-year-old client.
These annuities charge significant penalties for early withdrawals-and "early" can mean before 10 years,
or even longer. A 68-year-old client may have the need to withdraw his money early to make medical
payments.
NEW QUESTION # 47
Which of the following would not appear on an order ticket?
- A. the agent's commission
- B. the settlement date
- C. the stock symbol
- D. the account number of the client buying or selling the security
Answer: A
Explanation:
The agent's commission does not appear on an order ticket. It does appear on the trade
confirmation, however, which the client receives.
NEW QUESTION # 48
Under the 2002 Uniform Securities Act, registration by coordination allows:
- A. securities that do not fall within the category of federal covered securities to be registered simultaneously with the SEC and with the states in which the securities will be offered for sale.
- B. both state-registered and out-of-state investment bankers to participate in the underwriting and registration of a new security issue.
- C. issuers of federal covered securities to submit only a notice filing with the Administrator of states in which the securities will be offered for sale.
- D. federal covered securities to be registered simultaneously with the SEC and with the states in which the securities will be offered for sale.
Answer: A
Explanation:
Explanation
Under the 2002 Uniform Securities Act, registration by coordination allows securities that are not federal covered securities to be registered simultaneously with the SEC and with the states in which the securities will be offered for sale. Federal covered securities are exempt from state registration and are required to submit only a notice filing with the Administrator of the state. This is not the same as registration by coordination.
NEW QUESTION # 49
Which of the following describes an investment adviser that is not required to register with the state
Administrator?
- A. Financial Freedom Investment Advisers has no offices in the state although it does advise six wealthy
individuals who are residents of the state. - B. 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. - 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 # 50
Which of the following practices would be prohibited in connection with the sale of investment company shares?
I. selling a client shares of a load stock fund when a no load stock fund with the same investment objective exists II. selling the client shares of five S&P 500 Index mutual funds, offered by different fund families III. encouraging a client to swap his money between two funds in the same family without informing him that this creates a taxable event
- A. I, II, and III
- B. I and II only
- C. II and III only
- D. I and III only
Answer: C
Explanation:
Explanation
The scenarios described in Selections II and III only would be prohibited. Five S&P 500 Index mutual funds, even if offered by different fund families, all have the same investment objective-duplicating the returns earned on the S&P 500 Index, and they will be invested in very similar stocks. Therefore, the client is getting little or no more diversification of risk by investing in five funds over investing in just one. The agent is just getting richer from more commissions. Encouraging a client to swap his money between two funds in the same family without informing the client that this creates a taxable event is not providing the client with "full and fair disclosure." It may well be in the client's best interest to make the switch, but he needs to be made aware of the tax consequences. It is not necessarily prohibited to sell a client shares of a load stock fund when a no load stock fund with the same investment objective exists as long as the agent believes that the load stock fund is a better investment for his client.
NEW QUESTION # 51
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
- A. fraud.
- B. misrepresentation.
- C. misusing insider information.
- D. nothing. The hiring of 50 new employees by a firm with 25,000 employees is not a material fact.
Answer: D
Explanation:
Explanation
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.
NEW QUESTION # 52
If a person has had its license revoked by the Administrator of the state and has appealed the decision to a court of law, that person
- A. Both B and C are true statements.
- B. must notify the Administrator of the state that it has appealed the decision.
- C. can continue business as usual pending the resolution of the appeal.
- D. is considered to have a revoked license until the courts rule otherwise.
Answer: A
Explanation:
Explanation
If a person has had its license revoked by the Administrator of the state and has appealed the decision to a court of law, that person must notify the Administrator of the state that it has appealed the decision, but that person is considered to have a revoked license until the courts rule otherwise and may not continue "business as usual."
NEW QUESTION # 53
Under NASAA Model Rules, it is permissible for the registered representative of a broker-dealer to split his or her commission with
I. a client.
II. the broker-dealer with which the registered representative is affiliated.
III. another registered representative working for the same broker-dealer.
IV. the administrative assistant who directs calls to the registered representative and provides other services for the agent.
- A. I, II, III, and IV
- B. II, III, and IV only
- C. II and III only
- D. I, II, and III only
Answer: C
Explanation:
Explanation
Only Selections II and III are correct. Under NASAA Model Rules, a registered representative of a broker-dealer is entitled to split his or her commission only with his or her broker-dealer or with another registered representative of that broker-dealer. He is not permitted to share commissions with a client or with anyone who works for the broker-dealer, but is not a registered agent.
NEW QUESTION # 54
Which of the following would a firm not be expected to provide to the Administrator when registering an issue of securities with the state?
- A. the agreement between the issuing firm and the underwriters.
- B. all sales and advertising materials that will be used in conjunction with the offering.
- C. The firm will be expected to provide all of the above to the Administrator when registering an issue of securities with the state.
- D. the agreement among the underwriters themselves.
Answer: C
Explanation:
Explanation
The firm will be expected to provide all of the above-sales and advertising materials to be used in the offering, the agreement between the issuing firm and its underwriters, and the agreement among the underwriters themselves.
NEW QUESTION # 55
Which of the following is a security as defined by the Uniform Securities Act (USA)?
- A. a debenture
- B. a futures option contract on wheat
- C. Both A and B are securities as defined by the Uniform Securities Act.
- D. a term life insurance policy
Answer: C
Explanation:
Explanation
Both a debenture and a futures option contract on wheat are securities as defined by the USA. A debenture is a long-term, unsecured debt instrument and is specifically listed as a security in the Act. Although commodity futures contracts are not considered to be securities as defined by the Act, options on commodity futures contracts are.
NEW QUESTION # 56
Cal Turner calls his client and recommends that the client sell his shares in the Alpha High Quality Bond Fund and use the proceeds to buy shares in the Omega High Quality Bond Fund. Cal has done nothing unethical if his recommendation is based on the fact that
- A. the Alpha Fund has been performing poorly relative to other funds in the same category.
- B. the Alpha Fund has a back-end load.
- C. the Omega Fund has a front-end load.
- D. It would always be unethical for Cal to recommend that a client sell shares in one fund in order to buy shares of another fund that has the same investment objective.
Answer: A
Explanation:
Explanation
Cal has done nothing unethical if his recommendation that a client sell his shares in the Alpha Fund and buy shares of the Omega Fund is due to the fact that the Alpha Fund has been performing poorly relative to other funds in the same category. While past performance is no guarantee of future performance, a client may not want to hang on to a fund that isn't returning as much as its competition.
NEW QUESTION # 57
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 $100 of par value to some of its more naive clients, who never pay attention to the confirmation statements BondsRUs sends them. BondsRUs is guilty of
- A. fraud.
- B. overcharging its clients by unreasonable markups. A $9 dealer's spread on Treasury bonds is unwarranted.
- C. both B and C.
- D. nothing. It is acting as a dealer in bonds and, as such, can charge its clients whatever the clients are willing to pay.
Answer: B
Explanation:
Explanation
BondsRUs is guilty of overcharging its clients by unreasonable markups. A $9 dealer's spread on a risk-free investment such as a Treasury bond is unwarranted, and this practice is prohibited.
Based on the information provided, BondsRUs is not guilty of fraud since it appears that the firm is revealing the markup in its confirmation statements. The clients just aren't paying attention.
NEW QUESTION # 58
Which of the following may be given to prospective investors during the "cooling off period?"
- A. a copy of the registration statement
- B. a final prospectus
- C. a tombstone advertisement
- D. all of the above
Answer: C
Explanation:
Explanation
During the "cooling off period" prospective investors may be given only a tombstone advertisement for the security.
NEW QUESTION # 59
Your client calls you with a market order to purchase 500 shares of the stock of Oracle and asks when payment will be due. If today is Wednesday, September 15th, you inform the client that payment is due on
- A. Friday, September 17th.
- B. Saturday, September 18th.
- C. Monday, September 20th.
- D. Thursday, September 16th.
Answer: C
Explanation:
Explanation
If your client places an order to purchase 500 shares of Oracle on the open market on Wednesday, September
15th, payment will be due on Monday, September 20th. The settlement date for stock transactions is T + 3, which means the third business day after the trade. Saturday is not a business day.
NEW QUESTION # 60
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