FINRA Uniform Securities State Law Examination Series 63 Dumps in PDF

Free FINRA Series 63 Real Questions (page: 32)

An arrangement wherein a terminally ill person sells a second party his life insurance policy at a discount from its face value, giving the buyer the right to the policy’s face value when the seller dies is called a:

  1. death warrant.
  2. viatical settlement.
  3. deceased option.
  4. life straddle.

Answer(s): B

Explanation:

A viatical settlement is an arrangement under which a terminally ill person sells a second party his life insurance policy at a discount from its face value. When the terminally ill person dies, the buyer of the policy receives its face value. Some states consider viatical settlements to be securities, and they have come under the scrutiny of the NASAA since there is a significant potential for fraud in the writing of these contracts.



Mr. Bigwig, CEO of HiGrowth Corporation, meets with the president of BigFee Investment Bankers and arranges for BigFee to underwrite an Initial Public Offering (IPO) for the firm.

When the IPO comes to market, GetErDone Broker-Dealers is part of the selling group, which handles the sale of the stock to the public. In this scenario, which party is the issuer?

  1. HiGrowth Corporation
  2. Mr. Bigwig
  3. BigFee Investment Bankers
  4. GetErDone Broker-Dealers

Answer(s): A

Explanation:

HiGrowth Corporation is the issuer in this instance. Its stock will be sold, and HiGrowth will receive the proceeds from the sale-less BigFee’s underwriting spread. Mr. Bigwig is merely HiGrowth’s representative in this instance.



Assuming the security is not registered under the Uniform Securities Act, which of the following would not be exempt from state registration?

  1. a variable annuity contract offered by an insurance company with offices in the state
  2. a stock that is listed on the American Stock Exchange
  3. a stock that is listed on the OTC Bulletin Board
  4. a put option on a stock that sells in the over-the-counter market

Answer(s): C

Explanation:

A stock that is listed on the OTC Bulletin Board would not be exempt from state registration unless it already happens to be registered under the Uniform Securities Act. Variable annuities and stocks listed on the American Stock Exchange are classified as federal covered securities by the NSMIA of 1996 and are exempt from state registration. An amendment to the Securities and Exchange Act of 1934 exempts option contracts from state registration.



Under the Uniform Securities Act, which of the following does not need to be included when filing to register a security issue with the state?

  1. a copy of the firm’s articles of incorporation and bylaws, or the equivalent
  2. copies of the underwriter agreements
  3. a copy of any indenture applying to the security being registered
  4. All of the above documents must be included when filing to register a security with the state.

Answer(s): D

Explanation:

The Uniform Securities Act specifies that the initial registration statement should be accompanied by all of the documents listed in the first three selections-a copy of the firm’s articles of incorporation and bylaws or their equivalent; copies of any underwriter agreements; and a copy of any indenture that applies to the security being registered. Moreover, these are only some of the documents that need to be included.



For how long after the effective date is a security’s registration valid?

  1. three months
  2. six months
  3. one year
  4. two years

Answer(s): C

Explanation:

A security’s registration is valid for one year after the effective date, which is the date the Administrator approves the registration. If the entire issue has not been sold in this time frame, the offering may be renewed.



A “notice filing” refers to

  1. the right of an issuer to run tombstone ads in the newspapers and other publications upon filing a registration application with the state Administrator.
  2. 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.
  3. 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.
  4. notification to the public by the issuer or its underwriters that the issue is being sold on an “all or nothing” basis.

Answer(s): B

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.



Under the 2002 Uniform Securities Act, registration by coordination allows:

  1. federal covered securities to be registered simultaneously with the SEC and with the states in which the securities will be offered for sale.
  2. 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.
  3. both state-registered and out-of-state investment bankers to participate in the underwriting and registration of a new security issue.
  4. 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.

Answer(s): B

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.



Newbie Corporation is considering the possibility of an interstate initial public offering (IPO) of its stock. In the initial meetings with BigFee Investment Bankers, Newbie has learned that the underwriting spread will be 15%. Although the actual offering price won’t be set until Newbie’s registration statement is approved by the SEC, BigFee has indicated that the offer price will probably be between $3 and $4 a share and that the stock will initially be listed on the OTC Bulletin Board.

What methods for state registration does Newbie have available?

I) registration by coordination
II) registration by notification
III) registration by qualification

  1. Newbie may elect to register by any one of the above methods although registration by qualification would be the most burdensome choice.
  2. Method I only
  3. Methods I and III only
  4. Method II only

Answer(s): C

Explanation:

Newbie may apply for state registration using either the registration by coordination or the registration by qualification method, although the latter method is the most burdensome of the three. The firm is not eligible to register by notification. To be eligible, the offer price of the IPO would have to be at least $5, and the underwriting spread would need to be no greater than 10%.



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