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Series 63

Prove You've Got This

10 exam-style questions to measure your exam readiness.

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Question 1 of 10

Under the Uniform Securities Act, which of the following individuals would be required to register as an Investment Adviser Representative (IAR) in a state? 

A

A clerical employee of a federal covered adviser who occasionally updates client files.

B

An individual who works for a state-registered adviser and only provides research reports to the firm’s investment committee, never meeting with clients.

C

An individual who solicits investment advisory services on behalf of a state-registered adviser and receives a commission for successful referrals.

D

A person who provides investment advice solely regarding U.S. Treasury bonds.

Question 2 of 10

An IAR takes on a new client who transfers $1.4 million in assets to be managed by the adviser. Based

on this information, which of the following is true regarding this client?

A

The client is automatically considered an "accredited investor" under Regulation D, based on the assets now under management.

B

The client meets the definition of a "qualified client," making the account eligible for a performancebased fee arrangement.

C

The client meets the definition of a "qualified purchaser," making the account eligible to invest in privately offered funds relying on that exemption.

D

The client's account is automatically subject to enhanced custody safekeeping requirements, based on the size of the assets under management.

Question 3 of 10

A broker-dealer begins offering a wrap fee program to its clients, and one of its agents provides

investment advice to clients as part of this program. Which of the following is true regarding this agent's

registration requirements?

A

The agent must register as an Investment Adviser Representative (IAR) with the state.

B

The agent must register as an Investment Adviser Representative (IAR) with the SEC.

C

The agent would need to independently register as an investment adviser, since the agent is now offering fee-based advice.

D

The agent and the employing broker-dealer are excluded from the definition of an investment adviser, since the advice is offered through a broker-dealer.

Question 4 of 10

 A client discloses material nonpublic information about Company X to their agent. The agent then

shares this information with a second client. Which of the following is true regarding potential insider

trading liability?

A

All three parties -- the disclosing client, the agent, and the second client -- are automatically subject to insider trading liability based on these facts alone.

B

Only the agent is subject to insider trading liability, since the agent was the party who passed the information along to another individual.

C

None of the three parties would be found liable for insider trading based on these facts alone, since liability requires that a trade actually be executed using the material nonpublic information.

D

Only the disclosing client and the agent are subject to insider trading liability; the second client, having only received the information secondhand, cannot be held liable.

Question 5 of 10

An investment adviser presents historical performance of a strategy in marketing materials. What is

 

the required minimum presentation period?

A

At least one year.

B

1-, 3-, and 5-year returns (or since inception, if shorter), consistent with standard fund reporting.

C

Any period the adviser chooses, provided it is accompanied by disclosure explaining the impact of the timeframe selected.

D

No more than the most recent twelve months, to avoid presenting stale data.

Question 6 of 10

An investment adviser (IA) is drafting a new advisory contract and proposes a fee schedule of 1% to be charged on a quarterly basis. Under the Uniform Securities Act, which of the following fee structures would be prohibited? 

A

A fee consisting of 1% of the net capital appreciation of the account's value over the quarter.

B

A fee consisting of 1% of the average daily balance of the total assets under management (AUM).

C

A fee consisting of 1% of the assets under management as valued on the last day of the quarter.

D

A fee consisting of a flat $2,500 quarterly retainer regardless of account performance.

Question 7 of 10

Which of the following is true regarding a financial planner who provides investment advice as part of a comprehensive financial plan? 

A

The individual must register as an investment adviser if the compensation received is incidental to the advice.

B

The individual is exempt from registration if they do not charge a separate fee for securities advice.

C

The individual is exempt from registration if providing advice to 5 clients or fewer in the state.

D

The individual is not required to register if they are a licensed insurance agent.

Question 8 of 10

A registered representative, at a client's specific request, facilitates the purchase of a security that

is not offered through the representative's broker-dealer. The representative receives no compensation

of any kind for arranging this transaction, and the firm was never made aware of or approved the activity.

Which of the following is true regarding this conduct?

A

This conduct is permissible, since the representative did not personally profit from facilitating the transaction.

B

This conduct is permissible, since the transaction was initiated at the client's own request rather than solicited by the representative.

C

This conduct is a prohibited practice, since the representative engaged in the transaction without the knowledge and approval of the broker-dealer.

D

This conduct is a prohibited practice only if the security involved turns out to be an unregistered, non-exempt security.

Question 9 of 10

An investment adviser enters into a new advisory contract with a client but fails to deliver its Form

ADV Part 2 (brochure) to the client at least 48 hours prior to entering into the contract. Under the

Uniform Securities Act, what is the adviser required to do as a result?

A

Obtain written acknowledgment from the client that the brochure was received, and provide a 48- hour period during which the client may terminate the contract without penalty.

B

Deliver the brochure to the client via certified mail within five business days of contract execution, with no additional termination right required.

C

Notify the state securities Administrator of the delayed delivery within 15 business days of the contract's execution.

D

Provide the client with the ability to terminate the contract without penalty within five business days of entering into it.

Question 10 of 10

An agent is preparing materials for a client considering a new issue. Which of the following would

be considered unethical or a violation under the Uniform Securities Act?  

A

The agent prepares a condensed written overview of the offering's key terms, drawn from the prospectus, and provides it to the client alongside the prospectus itself.

B

In response to a client's question about a specific item in the prospectus, the agent prepares a separate written report containing additional, supplemental information related to the client's inquiry.

C

The agent verbally discusses specific terms of the offering with the client over the phone, prior to delivering the final prospectus at the time the sale is confirmed.

D

The agent delivers a copy of the preliminary prospectus to the client prior to the offering's effective date, clearly marked to reflect that it is subject to change.

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