[Nov-2024] FINRA Series63 Exam Practice Test Questions - DumpTorrent [Q118-Q132]

QUESTION 118
Ken Con is an agent with Blue Sky Broker-Dealers. He gets up early each morning so that he can study any late-breaking news that may affect the markets and figure out ways to incorporate this news into conversations with select clients in order to pressure them to restructure their portfolios by selling holdings they have in one particular industry to invest the money in another particular industry.
Ken has been very successful with this strategy and executes more trades for his clients than any other agent with the firm, but is he in danger of losing his license?

Yes. Ken is engaging in churning, a prohibited practice and can have his license revoked or suspended.

It depends. If his clients have lost money, Ken may lose his license; but if a review indicates that his clients’ accounts earn profits, then his license is safe.

Yes. Ken is guilty of the prohibited practice of “tailgating.”

No. Ken is just a successful sales person who is working harder than the other agents in the firm.

QUESTION 119
The discretionary powers over a clients’ accounts differ between broker-dealers and investment advisers
in that

An investment adviser can execute a discretionary transaction for a client upon receiving only verbal
authority initially, followed up by written authority to be received within 10 days of the order, whereas a
broker-dealer must require that written authority for the transaction is in the mail before proceeding with
the transaction.

An investment adviser can execute a discretionary transaction for a client upon receiving only verbal
authority initially, followed up by written authority to be received within 10 days of the order, whereas a
broker-dealer must require that written authority for the transaction is provided before the transaction
even takes place.

A broker-dealer can execute a discretionary transaction for a client upon receiving only verbal authority
initially, followed up by written authority to be received within 10 days of the order, whereas an investment
adviser must require that written authority for the transaction is in the mail before proceeding with the
transaction.

A broker-dealer can execute a discretionary transaction for a client upon receiving only verbal authority
initially, followed up by written authority to be received within 10 days of the order, whereas an investment
adviser must require that written authority for the transaction is provided before the transaction even takes
place.

QUESTION 120
Which of the following persons would not be required to register with the state as an agent under the
guidelines of the Uniform Securities Act (USA)?

Keith is a salaried employee of Middlesex County in Massachusetts who sells revenue bonds issued by
the county to the public.

John is employed by TrustUs Corporation to sell shares of the firm’s stock to the firm’s employees and
receives a commission on the shares he sells.

Stefan is a sales representative for SecureMoney Broker-Dealers and sells only mutual fund shares.

Preetham is part-owner of SecureMoney Broker-Dealers and executes the purchase and sale of
securities for the firm’s customers.

QUESTION 121
When a customer files a complaint with a broker-dealer,
I. the broker-dealer must submit the complaint to the firm’s compliance department.
II. the broker-dealer must provide a prompt written response to the complainant.
III. the broker-dealer must temporarily suspend the activities of any agent named in the complaint.

I, II and III

I and II only

I and III only

II and III only

QUESTION 122
Alice Wonder called her broker on Tuesday, August 10th, with a market order to buy 10 calls on the stock
of Abbott Laboratories. Under normal conditions, Alice will have to pay for the calls on

Wednesday, August 11th.

Tuesday, August 10th.

Friday, August 13th.

Monday, August 16th.

QUESTION 123
Ms. Naivete gave Mr. Smooth, owner of Smooth Construction, $40,000 in return for a 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. By
the end of the second year, Ms. Naivete had received a lot of fast talk and only one of the promised
interest payments. Have there been any violation of securities laws in this instance?

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

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

Yes. Ms. Naivete has been defrauded by Mr. Smooth.

Both B and C are true statements.

QUESTION 124
Which of the following would not be a prohibited activity for a broker-dealer?
I. A broker-dealer tells a client that a municipal revenue bond offered by the city of Boston, Massachusetts
is almost risk-free because it is backed by the taxes paid to the city, and the city generates a lot of tax
dollars.
II. A broker-dealer sells a client some bonds that the broker-dealer has in its portfolio, after informing the
client that it is acting as a seller in the transaction.
III. A broker-dealer purchases some stock that a client is selling for its own portfolio, after informing the
client that it is acting as a buyer in the transaction.
IV. A broker-dealer purchases 1,000 shares of Southwest Airlines for a client who calls and asks the
broker-dealer to buy some shares of a domestic airline stock at a good price for him and receives written
discretionary authority from the client two days later, prior to the settlement date.

I only

II and III only

I and IV only

II, III and IV only

QUESTION 125
Which of the following describes an investment adviser that is not required to register with the state
Administrator?

MoeMoney Investment Advisers, LLC has an office in the state with a client base of fifty individuals.

Financial Freedom Investment Advisers has no offices in the state although it does advise six wealthy
individuals who are residents of the state.

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.

Buckeye Investment Advisers has no offices in the state, but it provides portfolio management services
to an insurance company located in the state.

QUESTION 126
Switch Advisory is a small investment adviser partnership registered in a single state. A larger investment adviser firm, Bait Investment Adviser, is registered in the same state as well as two other states. Bait has offered to buy out three of Switch’s partners who want to retire. This will give Bait a 60% ownership in Switch Advisory.
Which of the following statements are true?
I. Switch Advisory must obtain the approval of its clients before the partners can sell their interests to Bait.
II. Switch Advisory must notify the state Administrator of this event.
III. Switch Advisory must notify their clients of this event, but does not need the clients’ approval.
IV. Switch Advisory must notify the SEC of this event.

I only

I and II only

II, III, and IV only

I, II, and IV only

QUESTION 127
Big Bo is an investment adviser representative who has a lot of the members of a well-known professional
football team as clients. In advertising his services, Big Bo can

list the names of the players he’s advising as long as he lists the names of all his other clients, too.

list the names of the players he’s advising as long as he doesn’t provide any other specifics, such as
the amount each one has invested with him.

list the names of the players he’s advising as long as he has their written permission to do so.

use testimonials from any of the players who willingly provide them without compensation.

QUESTION 128
Which of the following trades is illegal?

a short sale

a margin transaction

a market-not-held order

the sale of a mutual fund if the purchaser hasn’t received a prospectus

QUESTION 129
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?

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

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.

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.

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

QUESTION 130
BigCash Broker-Dealers is registered in the state and is in the process of purchasing a smaller broker-dealer, Target Investments, as a subsidiary. Target Investments is also registered in the state.
After completing the purchase, what actions must BigCash take regarding registration of its new subsidiary?

BigCash need do nothing since Target Investments was already duly registered with the state as a broker-dealer.

BigCash must file a new application with the state to register its new subsidiary, but will be able to utilize the remainder of any annual filing fees that Target Investments had paid for the year.

BigCash must file a new application with the state to register its new subsidiary and must also pay the annual filing fees required by the Administrator.

BigCash will need to pay the annual filing fees required by the Administrator, but will not need to file a new registration application.

QUESTION 131
In which of the following instances is it permissible for an investment adviser to borrow money from a
client?

It is never permissible for an investment adviser to borrow money from a client.

The investment adviser may borrow money from a client if the client is a bank.

The investment adviser may borrow money from a client if the client is a close friend of the majority
owner of the investment advisory firm.

The investment adviser may borrow money in either of the scenarios described in B or C.

QUESTION 132
Mr. and Mrs. Cleaver are nearing retirement and have made an appointment with Mr. Eddie, an
investment adviser representative who works for Haskell Investment Advisers, to get advice on how they
can better structure their investments to meet their retirement goals. Their son, Theodore, who has
recently graduated college and has a great job as a software writer for a video game company,
accompanies them. Mr. Eddie explains that the main goal of any plan is diversification and recommends
that Mr. and Mrs. Cleaver spread their investment monies equally among six load mutual funds that Mr.
Eddie can sell them. He suggests that Theodore follow suit and invest any monies he has equally among
the same ten funds. Has Mr. Eddie done anything wrong?

Yes. Mr. Eddie has advised his clients to invest in load funds when no load funds are clearly better
investments.

No. Diversification should, in fact, be the goal, and he has advised a well-diversified plan for his clients.

Yes. Clients who are ready to retire have different investment needs than a client who is just entering
the work force. The recommendation that both Theodore and his parents have the same asset allocation
is clearly unsuitable.

Yes. Mr. Eddie is guilty of misappropriation, a prohibited practice.

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[Nov-2024] FINRA Series63 Exam Practice Test Questions – DumpTorrent [Q118-Q132]

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