Online Access Free Series_63 Exam Questions

Which of the following may an investment adviser not use in an attempt to solicit new clients?

• A.testimonials of satisfied clients
• B.a free initial consultation, with no obligation on the part of the potential client
• C.a complete list of the stocks they have recommended in the past year, even if a statement is included
  that states that past performance is no guarantee of future performance
• D.a free financial planning kit, with no obligation on the part of the potential client

Which of the following scenarios does not meet the definition of "custody" under NASAA Model Rules?

• A.An investment adviser is mistakenly sent a client's securities, but returns them to the sender within
  three business days of receipt.
• B.An investment adviser receives a check from a client that is written to a mutual fund and forwards the
  check to the mutual fund within three business days of receipt.
• C.An investment adviser has general power of attorney for a client and is authorized to withdraw client
  funds or securities that are on deposit with a registered broker-dealer upon the investment adviser's
  request.
• D.An investment adviser keeps a client's securities in its safety deposit box.

In which of the following scenarios will the investment adviser be subject to criminal fraud charges?

• A.An adviser owns the stock of TweedleDee Corporation and has issued a report recommending the
  stock as a "buy," disclosing the fact that it owns the stock
• B.An adviser owns the stock of TweedleDee Corporation and has issued a report recommending the
  stock as a "buy" without disclosing the fact that it owns the stock.
• C.all of the above. It is considered criminal fraud for an investment adviser to make any
  recommendations on a security in which it has or plans to have a position.
• D.An adviser sells its shares of TweedleDee Corporation after issuing a report recommending the stock
  as a "buy."

Fly-By-Night Investment Advisers has closed its doors. Which of the following statements is true?

• A.Fly-By-Night must preserve and maintain all records, including client transactions and communications,
  advertising materials, and financial statements of the now-defunct business for five years.
• B.Fly-By-Night is required to shred all documentation of client transactions and communications.
• C.Fly-By-Night must send each of its former clients its records of all that client's transactions and
  communications with the firm over the past five years.
• D.Fly-By-Night must send all records of client transactions and communications to the state Administrator
  for safekeeping.

Iggy recently started his own company. He soon discovered it required more cash to keep it going than he
had anticipated. He ran an ad in the local paper for investors and got a response. He found a template for
a promissory note on the internet, filled in the requisite information specific to the agreement he and the
investor had worked out, and printed it out. On it, he promised to make monthly interest payments of 2%
on the loan and to repay the principal amount at the end of 18 months. A few months after the
arrangement, Iggy read an article in a small business publication that indicated that promissory notes had
to be registered with the state unless they were sold in an exempt transaction, such as one enacted with a
financial institution, prior to being offered for sale. The article indicated that a seller who had sold an
unregistered note in error could remedy the situation by sending the buyer a formal offer to buy the
security back, with interest. Iggy turned to the computer once again, found a form that could be used for a
formal offer of rescission, filled it out, and sent it to the investor. Having done this,

• A.Iggy must wait 6 months for a response from the investor. If no response is received by the end of 6
  months, Iggy is off the hook.
• B.Iggy must follow up with a second notice sent via registered mail if he has not heard from the investor
  within 30 days.
• C.Iggy will not be assessed any penalties by the Administrator of the state, but the investor can still sue
  for damages in civil court.
• D.Iggy cannot be sued for civil damages if the investor fails to respond to the offer within 30 days.