FINRA Uniform Securities State Law Examination Series 63 Dumps in PDF

Free FINRA Series 63 Real Questions (page: 2)

Rich Writewell wants to begin publishing an independent weekly financial newsletter that will provide investment recommendations as well as other financial news items to the general public. Rich hopes that his newsletter will achieve nationwide circulation within a few months.
Which of the following statements is true?

  1. Rich will have to register as an investment adviser since his publication will include investment recommendations.
  2. Rich will have to register as an investment adviser only if he sells this newsletter to the public. If the publication is to be distributed free of charge, he will not have to register.
  3. Rich may be exempt from registering as an investment adviser if he is a lawyer, accountant, engineer, or teacher. Otherwise, he will have to register.
  4. Rich will not have to register as an investment adviser since he is publishing a legitimate financial newsletter for distribution to the general public.

Answer(s): D

Explanation:

Rich will not have to register as an investment adviser since he is publishing a legitimate financial newsletter that will be distributed to the general public. The definition of the term “investment adviser” excludes publishers of bona fide business or financial publications that are published regularly and have general circulation.



Erin is a registered agent who works for SecureMoney Brokers-dealers. One of her clients, Mrs. McTurk, is a recently-widowed woman who relies on Erin for advice about her investment portfolio. Mrs. McTurk reminds Erin of her own grandmother, and she is happy to provide guidance within the sphere of her own knowledge.

Based on these facts, which of the following statements is true?

  1. SecureMoney Broker-dealers must register as an investment adviser since one of its employees is providing investment advice.
  2. Erin must register as an investment adviser since she is providing investment advice.
  3. SecureMoney Broker-dealers must register as an investment adviser since one of its employees is providing investment advice, and Erin must register as an investment adviser representative as the firm’s employee.
  4. Neither SecureMoney Broker-dealers nor Erin must register as an investment adviser based on the facts provided.

Answer(s): D

Explanation:

Neither SecureMoney Broker-dealers nor Erin must register as an investment adviser based on the facts provided since neither the broker-dealer nor Erin is receiving any compensation for the advice Erin is giving Mrs. McTurk. In this instance, the advice provided is considered incidental to the broker-dealer business.



Which of the following would not fall under the classification of “institutional investor”?

  1. Prudential Insurance
  2. Chase Bank
  3. Neuring Investment Advisers
  4. Franklin Templeton Mutual Funds

Answer(s): C

Explanation:

Nuering Investment Advisers would not fall under the classification of “institutional investor.” Institutional investors are defined as banks, insurance companies, mutual funds, some pension plans, and broker-dealers registered under the Securities Exchange Act of 1934. Investment advisers are not part of this group.



Which of the following is an example of a non-issuer transaction?

  1. IBM sells a new issue of bonds to an insurance company.
  2. Jose purchases a 10-year bond issued by Progress Energy when it has 6 years remaining to maturity.
  3. Google offers more shares of its stock for sale to the public.
  4. NewCorp, which has been a privately held company, is engaging in an initial public offering (IPO) of its stock.

Answer(s): B

Explanation:

When Jose buys a 10-year bond that has 6 years remaining to maturity, it is a non-issuer transaction since he is buying it in the secondary market from another investor, and Progress Energy does not benefit from the transaction. If a firm receives money when its securities are sold, it is considered an issuer transaction; otherwise it is a non-issuer transaction. When Progress Energy originally issued the bond, it had ten years to maturity, and Progress Energy received the proceeds from the bond issue; that was an issuer transaction. When Jose buys the bond, another investor is receiving the proceeds. When IBM sells new bonds, regardless of whether it is to the general public or to an institutional investor, IBM receives the proceeds from the transaction, so it is an issuer transaction. Similarly, when a firm that is already publicly held, like Google, sells more shares, the firm receives money from the sale, just as when a firm that is going public for the first time, like NewCorp, receives the proceeds generated through the IPO. Those are examples of issuer transactions.



Which of the following is not considered to be a security, as defined by the Uniform Securities Act (USA)?

  1. a debenture
  2. a certificate of deposit (CD)
  3. a put option
  4. an annuity contract wherein an insurance company promises to pay a fixed sum, either in a lump amount or through periodic payments.

Answer(s): D

Explanation:

The Uniform Securities Act excludes annuity contracts wherein an insurance company promises either to pay a fixed sum, either in a lump amount or through periodic payments, from its definition of a security. Debentures, CDs, and option contracts are all classified as securities under the USA.



Which of the following scenarios would not be considered a “sale,” as defined by the Uniform Securities Act (USA)?

I) Yoshito owned shares of Minnow Corporation and received shares of Whale Corporation from Whale when it merged with Minnow.
II) Olivia’s uncle, an agent with SecureMoney Brokers, sold Olivia ten call options on the stock of Microsoft.
III) Hans purchased a bond of Indebted Corporation that had detachable warrants and subsequently sold the warrants.
IV) Tom pledged some shares of stock he owned personally to secure a business loan for his company.

  1. Neither I nor II would be considered sales.
  2. Neither II nor III would be considered sales.
  3. Neither I nor IV would be considered sales.
  4. Neither III nor IV would be considered sales.

Answer(s): C

Explanation:

Neither Scenario I nor Scenario IV describes sales as defined by the USA. When an investor receives securities from Company X when Company X merges with a company in which the investor owns stock, Company X is not considered to have sold those securities to the investor. Likewise, when a person uses securities he owns as collateral for a loan, the USA does not consider this to be a sale of the securities.



Jeremy Sly considered himself somewhat of an inventor. The only problem was that his day job interfered with his opportunity to exercise his creativity. He came up with a plan to get outside investors to support his inventive activities. To this end, he produced and distributed a brochure advertising partnership interests with a guaranteed return on investment of at least 15% after the first 12 months, based on what he had allegedly generated from his other (non-existent) inventions.

Given these facts, is Jeremy guilty of any security violations under the Uniform Securities Act (USA)?

  1. No. The facts don’t indicate whether any partnership interests were actually sold, and there can be no violation unless there is a sale.
  2. No. An interest in a partnership is not considered a security.
  3. No. It is not against the law to believe in oneself and promote one’s ideas.
  4. Yes. Even an “offer” to sell securities must not contain any untruths.

Answer(s): D

Explanation:

Yes. Jeremy is guilty of security violations under the Uniform Securities Act when he provides misleading information when offering securities for sale, even if no securities are actually sold. Partnership interests fall under the definition of securities, and Jeremy’s claim to have generated a return of at least 15% on other inventions that he never created is an absolute falsehood.



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

  1. issue subpoenas involving compulsory attendance.
  2. gather evidence.
  3. deliver a judicial injunction.
  4. formulate rules and orders.

Answer(s): C

Explanation:

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.



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