Curious about Actual Finra Uniform Securities State Law (Series-63) Exam Questions?

Correct : D

Selections I, II, III, and IV-investment advisers, their representatives, and broker-dealers and their agents-are subject to accusations of churning. Any activity on the part of any of these parties that suggests that they are engaged in encouraging excessive trading on the accounts of their clients makes them subject to allegations of churning their customers' accounts.

Correct : B

It is only permissible for an investment adviser to borrow money from a client if that client is in the business of loaning money, as would be the case if the client is a bank, but not if the client is merely a close friend of the majority owner of the investment advisory firm.

Correct : D

An investment adviser representative is required to disclose the fact that someone else performed the research on which advice to the client is based in scenarios described in I and III only. If the representative provides a recommendation to the client based solely on the recommendations provided by others to whom he provided the data, he must disclose this. However, if the adviser representative has based his recommendations on his own assessment of analysts' reports and recommendations, as is suggested in Selection II, then there is no disclosure requirement.

Correct : D

Only the investment adviser that is required to register with the state must maintain its records in accordance with state dictates and meet the minimum net capital requirement imposed by the state. A federal covered adviser is registered with the SEC and need only execute a notice filing with the state. Its record-keeping rules and net capital requirement are dictated by the SEC. An investment adviser representative must register with the state, but there are no record-keeping or minimum net capital requirement dictates for representatives.

Correct : C

It is not prohibited for LaGree to receive the software from SecureMoney in return for executing trades through that broker-dealer since LaGree has disclosed this to his clients. An investment adviser is permitted to receive soft dollars from broker-dealers in return for executing trades through them, as long as the client is informed of the arrangement and the soft dollars will benefit both the client and the adviser, which is the case in this instance since the software gives LaGree the ability to do research in order to better advise his client. Choice A is clearly prohibited since it constitutes an ''unreasonable advisory fee.'' In Choice B, LaGree is making unsuitable recommendations to his client. A 72-year-old retired social worker is likely to have a greater-than-average need for liquidity to pay for unexpected items, such as medical bills. Variable annuities are designed to be long-term investments, not short-term investments, so they would not meet this need. They typically have high surrender penalties that the client would be subject to if she needed to make withdrawals within, say, the next 10 years. Likewise, international growth funds are not liquid investments. International growth mutual funds are invested in foreign stocks and are riskier than average, and are, thus, not suitable investment vehicles for the typical 72-year-old retired social worker.