ANSWER EXPLANATIONS
48. Which of the following are unethical business practices for an agent to engage in?
I. Commingling customer funds with the agent’s funds II. Misrepresenting to a customer the status of his account III. Giving inaccurate market quotations to a customer IV. Guaranteeing a profit in a customer’s account a. I and II
b. III and IV c. I, II, and IV d. All of the above
49. The term person under the Uniform Securities Act refers to a(n) I. Individual
II. Corporation
III. Government or political subdivision of a government IV. Partnership
a. I and II b. III and IV c. I, III, and IV d. All of the above
PRACTICE QUESTIONS 3—ANSWER EXPLANATIONS 1. (c) Choice c is correct concerning investment advisors.
2. (d) All three actions are examples of market manipulation and are prohibited under the Uniform Securities Act.
3. (b) Commingling occurs when an agent deposits customer money into his own checking account and is prohibited under the Uniform Securities Act.
4. (d) All of the actions listed are violations of the Uniform Securities Act.
5. (d) All of the actions listed are not considered offers or sales under the Uniform Securities Act.
6. (d) The agent can execute the order but should attempt to document the fact that the order was unsolicited.
7. (d) In each of these examples the agent must disclose a material public fact about an issuer to a customer in connection with a securities sale.
8. (d) Under the Uniform Securities Act, the administrator may require investment advisors, broker/dealers, and agents to post a surety bond. However, issuers are not required to post a surety bond under the Act.
9. (c) An agent will always be given the opportunity for a hearing if his license has been revoked in a summary suspension.
10. (d) The correct statement is d., since isolated nonissuer transactions are exempt transactions under the Uniform Securities Act.
11. (b) This was an unsuitable recommendation since the customer needed the funds in a few days to pay a loan.
12. (b) Sharing in profits and losses in customer accounts by investment advisors is prohibited under the Uniform Securities Act for public customers.
13. (d) All of the statements are true. Securities sold within a state must either be registered or exempt from registra- tion to comply with the Act.
14. (b) The Uniform Securities Act’s private placement exemption is narrower in scope than the federal exemption.
15. (b) Choice b. is clearly the best answer. Recommending securities to customers without any knowledge of their financial status is prohibited under the Uniform Securities Act.
16. (a) The maximum fine that may be imposed for violations of the Uniform Securities Act is $5,000.
17. (c) Choice c. is an exempt security by definition. Preferred stock in a bank holding company is not by definition an exempt security, since the issuer is a holding company and not the bank itself.
18. (c) Choice c. is correct as stated.
19. (c) Broker/dealers are responsible for the actions of their agents and must ensure that all agents are properly regis- tered. Both have violated the Act.
20. (a) The term rescission under the Uniform Securities Act means the right of a purchaser to recover consideration paid for the illegal sale of a security. In other words, an action is taken to rescind the sale and make the purchaser
“whole” with regard to the funds.
21. (d) Intentional violations of the Act are serious matters. In this case, all of the statements are true.
22. (d) All of the penalties could be imposed for a fraudulent violation of the Uniform Securities Act.
23. (c) The term annuity contracts refers to a fixed annuity contract, which is an insurance product. If a variable annuity is sold to a client, the fact that it is a “variable annuity” must be clearly stated.
24. (c) Both the agent and his employer are responsible for notifying the administrator of a change in the agent’s status.
25. (b) The broker/dealer in choice b must be registered under the Act since he has a place of business in the state.
26. (c) This recommended transaction is unsuitable, unethical, and grounds, in extreme cases, for suspension or revocation of the agent’s license.
27. (d) The maximum penalty upon conviction for a person who intentionally violates the Uniform Securities Act is
$5,000 fine or imprisonment of not more than three years, or both.
28. (d) The administrator may inspect a broker/dealer’s books at any time to ensure compliance with the Uniform Securities Act.
29. (c) Registration by coordination is available if a security is already being registered under the Securities Act of 1933.
30. (d) All of these practices are prohibited under the Act.
31. (b) Shares in a local bus company are not exempt by definition. Transportation companies operating in interstate commerce are exempt.
32. (b) Choice II is correct. State Z has jurisdiction relating to the transaction.
33. (a) Choices I and II are correct since they are both exempt transactions.
34. (d) The accountant is not an investment advisor since he is acting within the scope of his profession.
35. (d) In this example, all three administrators have jurisdiction. However, administrators work together to avoid duplication of effort in most cases.
36. (d) The administrator may deny or suspend a registration based on all of these factors.
37. (a) A broker/dealer buying for his own account would engage in a “principal” transaction. No agent would be in- volved in a principal trade.
38. (a) Stock sold to a bank under the Uniform Securities Act represents an exempt transaction.
39. (c) An administrator would not deny an application of an investment advisor solely for lack of experience.
40. (b) A civil suit can be avoided on an illegal sale of a security if the seller offers to buy back the security (rescis- sion).
41. (d) The administrator can do all of the choices under the Act.
42. (d) Choice d. is correct as stated.
43. (c) Agents cannot sell securities prior to the effective date of a registered offering.
44. (c) Choice c. is correct as stated.
45. (d) Oil and gas drilling programs are clearly not exempt securities under the Uniform Securities Act.
46. (c) Choice c. is correct as stated.
47. (b) A person must be registered as an agent for each and every broker/dealer for which he is acting as an agent.
48. (d) All of the actions are unethical business practices under the Act.
49. (d) The term person under the Act refers to an individual, business enterprise, or government agency.
PRACTICE QUESTIONS 4
1. Assume an individual has passed the Uniform Agent State Law examination (Series 63). The individual has filed an application in a particular state. The individual may
a. Solicit mutual fund transactions only b. Solicit new accounts
c. Not make any securities solicitations until the application is approved d. Solicit over-the-counter transactions only
2. It would be a violation of the Uniform Securities Act to trade which of the following securities on the basis of inside