FINRA-SERIES-63 Online Practice Questions and Answers

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 10 years in prison and a fine of $1 million or up to 3 times the amount of profits gained, or

B. up to 3 years in prison, a $5,000 fine, or both

C. up to 5 years in prison and a fine of $1,500,000 or both

D. up to 7 years in prison and a fine equal to 200% of the amount of profits gained or losses avoided

Under the NASAA Model Rules, the statute of limitations for civil liabilities is

A. the earlier of two years after the discovery of the facts and four years after the violation.

B. the earlier of three years after the discovery of facts and five years after the violation.

C. three years after the discovery of the facts and four years after the violation, whichever is greater.

D. the earlier of two years after the discovery of facts and three years after the sale.

Which of the following is not a prohibited practice for broker-dealers under the NASAA Model Rules?

A. lending money to clients for them to invest

B. borrowing money from a client

C. charging commissions that are significantly higher than those charged by other broker- dealers

D. providing a client with a copy of their most recent balance sheet upon request

AllTime Investment Advisers advertises that its phones are manned 24/7, so that a client "doesn't have to lie awake all night worrying about a financial problem." In fact, AllTime does have a answering service that answers calls in the evenings and on the weekends when its offices are closed. The service informs the caller of the firm's business hours, which will be the earliest opportunity the caller will have to talk to an investment adviser representative.

Is this a violation of any securities laws?

A. No. It's not a violation of any securities laws, but the firm probably won't retain many clients this way.

B. Yes. The Uniform Securities Act prohibits investment advisers from making deceptive statements in the solicitation of clients as well as in advising clients.

C. No. The firm's phones are manned 24/7, so it hasn't lied.

D. It depends. If, before a client signs a contract with the firm, it is made clear that investment adviser representatives are not, in fact, available to him 24/7, then AllTime is in the clear.

An investment adviser may not

A. also be registered as a broker-dealer in the state.

B. accept any kind of soft dollar compensation for using certain broker-dealers to execute trades on their clients' accounts.

C. take a position-either long or short-in securities in which any of its clients have a position.

D. recommend a stock to a client that the adviser itself holds without disclosing to the client that the adviser owns the stock.

An investment adviser

I. provides investment advice to clients.

II. sells securities to clients.

III.

buys and sells securities in their clients' accounts for the clients.

A.

I only.

B.

I and II only.

C.

I and III only.

D.

I, II, and III.

Which of the following does not describe a prohibited activity by investment advisers and their representatives, according to NASAA Model Rules?

A. A new client comes to Simon LaGree for investment advice. The client has $25,000 to invest. Simon tells the client that it will cost the client $5,000 to have a customized financial plan developed for him, but after that the client needs to pay only 5% of the total value of the assets under management each quarter.

B. A 72-year-old retired social worker comes to Simon LaGree for investment advice. She has $50,000 to invest. Simon recommends she invest half of it in an international growth mutual fund and half in a variable annuity.

C. The agreement that Simon LaGree has his clients sign indicates that LaGree uses SecureMoney Broker-Dealers in executing trades for his clients and that, in return, LaGree receives software from the broker-dealer that allows LaGree to perform some fundamental and technical analysis.

D. All of the above describe prohibited practices.

Broker-dealer Nebulous opted to withdraw its registration with the state. Six months later, the Administrator finds that Nebulous had been engaged in fraudulent securities transactions.

Which of the following statements is true?

A. The Administrator is unable to take disciplinary action against Nebulous because the self-initiated withdrawal became effective 30 days after the application was filed.

B. The Administrator is only able to take disciplinary action if the misdeeds are discovered within three months of the effective date of the withdrawal, so Nebulous slipped by this time.

C. The Administrator has five years from the discovery of the misdeed to take disciplinary action, so Nebulous will have to be on the lookout for a long time to come.

D. The Administrator can take disciplinary action against Nebulous for up to one year, so Nebulous is in trouble.

Which of the following funds can an agent indicate is "no load?"

A. a fund with no front-end or back-end load that has 12b-1 fees equal to 0.30% of the average net assets of the fund.

B. a fund with no front-end load that has 12b-1 fees equal to 0.10% of the average net assets of the fund and a rear-end load that varies depending on how long the investor has held the shares.

C. a fund with no front-end or back-end load that has 12b-1 fees equal to 0.25% of the average net assets of the fund.

D. Both A and C can be advertised as "no load" funds.

Which of the following persons is required to maintain its records in accordance with state dictates and meet the minimum net capital requirement imposed by the state?

I. federal covered adviser

II. state-registered investment adviser

III.

investment adviser representative

A.

I and II only

B.

I, II, and III

C.

II and III only

D.

II only