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Updated Series63 Dumps Questions For FINRA Exam
NEW QUESTION # 128
Noah Scruples, an agent with CanDo Broker-Dealers, just got a copy of the most recent report on a
certain stock. The report was generated by CanDo's analyst department and is hot off the presses. It has
not yet even been put on the firm's website for the firm's clients.
The analyst department has just changed its recommendation on the stock from "Hold" to "Strong Buy"
based on new information that it has obtained on the company. Can Noah
rush to his office to buy shares of the stock before the analysts release their reports to CanDo's clients?
- A. Both B and C are true statements.
- B. No. This is a prohibited activity referred to as "painting the tape."
- C. No. It is unethical for him to trade based on this information before the firm's clients have received the
information. - D. Yes. The firm's analysts used publicly available information to assess the stock and make its
recommendation, so Noah can buy the stock now on his own account.
Answer: C
Explanation:
No. It is unethical for him to trade based on the information that just came from the analysts
before the firm's clients have the information. This is a prohibited practice called "front running."
NEW QUESTION # 129
What criminal penalties are specified for "willful violations" of the Uniform Securities Act?
- A. license suspension.
- B. up to 3 years in prison or a $5,000 fine, or both.
- C. up to 5 years in prison or a $10,000 fine, or both.
Answer: C
Explanation:
Explanation
The criminal penalties specified by the Uniform Securities Act for "willful violations" of the act are up to 3 years in prison or a $5,000 fine, or both, for each violation.
NEW QUESTION # 130
Which of the following is an example of a non-issuer transaction?
- A. IBM sells a new issue of bonds to an insurance company.
- B. Google offers more shares of its stock for sale to the public.
- C. NewCorp, which has been a privately held company, is engaging in an initial public offering (IPO) of its
stock. - D. Jose purchases a 10-year bond issued by Progress Energy when it has 6 years remaining to maturity.
Answer: D
Explanation:
When Jose buys a 10-year bond that has 6 years remaining to maturity, it is a non-issuer
transaction since he is buying it in the secondary market from another investor, and Progress Energy
does not benefit from the transaction. If a firm receives money when its securities are sold, it is considered
an issuer transaction; otherwise it is a non-issuer transaction. When Progress Energy originally issued the
bond, it had ten years to maturity, and Progress Energy received the proceeds from the bond issue; that
was an issuer transaction. When Jose buys the bond, another investor is receiving the proceeds. When
IBM sells new bonds, regardless of whether it is to the general public or to an institutional investor, IBM
receives the proceeds from the transaction, so it is an issuer transaction. Similarly, when a firm that is
already publicly held, like Google, sells more shares, the firm receives money from the sale, just as when
a firm that is going public for the first time, like NewCorp, receives the proceeds generated through the
IPO. Those are examples of issuer transactions.
NEW QUESTION # 131
Skip is a registered agent with state. He recently quit his job with Venus Broker-Dealers to become affiliated with Mars Broker-Dealers.
Which of the three entities must report this change to the state Administrator?
- A. Skip, Mars, and Venus
- B. Skip and either Mars or Venus, but not both
- C. Skip only
- D. Both Skip and Venus
Answer: A
Explanation:
Explanation
When Skip leaves one broker-dealer and signs on with another, all three entities-Skip, Mars, and Venus-must report this to the state Administrator. Under the Uniform Securities Act, when an agent leaves a broker-dealer, both the agent and the broker-dealer are required to report this to the state Administrator, and when an agent begins employment with a new broker-dealer, both the agent and the new broker-dealer must report it.
NEW QUESTION # 132
Under the NASAA Model Rules, which of the following must an investment adviser provide its clients with
at least once a year?
- A. both A and B
- B. the total amount of commissions or other compensation that the investment adviser received or
expects to receive in connection with agency cross transactions performed for the client during the period - C. the total number of agency cross transactions completed for the client during the period
- D. the number of any complaints that each of its investment adviser representatives has received during
the period
Answer: A
Explanation:
Under NASAA Model Rules, an investment adviser must provide its clients with the total
number of agency cross transactions completed for the client during the period as well as the total amount
of any commissions or other compensation that the investment adviser received or expects to receive in
connection with agency cross transactions performed for the client during the period.
NEW QUESTION # 133
The C&S Railroad is in the process of issuing new bonds. Before these bonds can be offered for sale,
- A. they must be registered in every state in which the bonds will be sold to investors.
- B. None of the above statements is true.
- C. they must be registered with the SEC and in each state through which the railroad passes.
- D. they must be registered with the SEC since railroads are involved in interstate commerce.
Answer: B
Explanation:
Explanation
None of the statements is true because securities issued by highly regulated industries, such as the railroad industry are exempt from registration with both the SEC and the states.
NEW QUESTION # 134
The Administrator may not introduce a stop order to deny, revoke, or suspend the effective registration of a security based on facts that were disclosed during the registration process unless he does so within
- A. 45 days.
- B. 30 days.
- C. 1 year.
- D. 60 days.
Answer: B
Explanation:
Explanation
The Administrator may not introduce a stop order against the registration of a security based on facts that were disclosed during the registration process unless he does so within 30 days.
NEW QUESTION # 135
Which of the following does not describe a prohibited practice for investment advisers?
I. The adviser sells its non-institutional clients securities that it has issued.
II. The adviser makes a discretionary trade for a client after receiving verbal authorization only and does
not receive written authorization from the client within 10 business days of doing so.
III. The investment adviser requires an advisory fee of $300 to be paid in advance at the beginning of
each quarter.
- A. None of the selections describe prohibited practices.
- B. II and III only
- C. I only
- D. I and III only
Answer: B
Explanation:
Selections II and III do not describe prohibited practices. If an adviser makes a discretionary
trade for a client after having received verbal authorization to do so and does not receive written
authorization from the client within 10 business days of doing so, the adviser is limited to making
recommendations to the client and executing unsolicited trades only, but he has not engaged in a
prohibited practice, and this is the scenario described in Selection II. There is no provision that prohibits
an adviser from requiring an advisory fee to be paid in advance as long as it is reasonable, as described
in Selection III. An adviser is not permitted to sell its non-institutional clients securities it has issued itself
because of the significant conflict of interest involved. The exception is if the client is an institution that is
in the business of lending money, but Selection I specifically indicates "non-institutional clients."
NEW QUESTION # 136
Which of the following is not one of the criteria for a security to be eligible for registration by notification?
- A. The issuer must have preferred stockholders as well as common stockholders.
- B. The issuer must have a net worth of $4 million, or its net income before tax for at least two of the
- C. The issuer must never have defaulted on any bond or long-term lease obligation.
- D. If the security to be issued is an equity interest in the firm, its offer price has to be at least $5 a
Answer: A
Explanation:
The issuer does not have to have both preferred stockholders and common shareholders in
order to be eligible for registration by notification. If, however, the issuer does use preferred stock
financing, it must not have missed a preferred stock dividend payment.
NEW QUESTION # 137
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
- A. 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. - B. list the names of the players he's advising as long as he has their written permission to do so.
- C. use testimonials from any of the players who willingly provide them without compensation.
- D. list the names of the players he's advising as long as he lists the names of all his other clients, too.
Answer: B
Explanation:
In advertising his services, Big Bo can list the names of the players he's advising only if he
has their written permission to do so. Under both NASAA Model Rules and the Investment Adviser Act of
1 940, an investment adviser representative may not use client testimonials in their advertisements,
regardless of whether the testimonials are willingly provided and uncompensated.
NEW QUESTION # 138
A variable annuity is:
- A. a security and, therefore, has to be registered with the state before it can be offered for sale.
- B. not a security and, therefore, does not have to be registered with the state.
- C. not a security, but is still required to be registered with the state before it can be offered for sale.
- D. a security, but is exempt from state registration.
Answer: D
Explanation:
A variable annuity is defined as a security, but is exempt from state registration in the opinion
of the North American Securities Administrators Association (NASAA.) The Supreme Court of the U.S.
passed a ruling that deemed a variable annuity to be a security. The National Securities Market
Improvement Act of 1996 (NSMIA) established variable annuities to be federal covered securities,
however, since they are, for all intents and purposes, mutual funds. Federal covered securities are
exempt from state registration.
NEW QUESTION # 139
Joe Romeo is a broker-dealer registered with the state. He has recently hired Betty Buxom as his administrative assistant. As part of her duties, he has given her the responsibility for effecting the purchases and sales of securities for some of his firm's smaller accounts. Ms. Buxom has never applied for nor been granted registration as a broker-dealer or agent. Based on these facts,
- A. there is no problem as long as Ms. Buxom registers with the state as an agent within thirty days.
- B. the Administrator may elect to revoke or suspend Joe Romeo's registration, and Joe may also face both civil and criminal penalties.
- C. the Administrator is required by the Uniform Securities Act to revoke Joe Romeo's registration and file criminal and civil charges against him.
- D. the Administrator is required to turn the case over to the state's district attorney, who will file criminal charges against both Joe Romeo and Betty Buxom.
Answer: B
Explanation:
Explanation
Since Joe Romeo has allowed Betty Buxom to execute trades, a duty that can legally be performed only by a registered broker-dealer or agent, the Administrator may elect to revoke or suspend Joe Romeo's registration, and Joe may also face civil and criminal penalties. Ms. Buxom needed to be registered as an agent prior to effecting any transactions in the securities markets; there is no grace period. The Administrator is not required to take any action, however.
NEW QUESTION # 140
Which of the following compensation arrangements between an investment adviser and an individual client with a net worth of $600,000 would be disallowed?
- A. The investment adviser will receive 0.1% of the total value of the client's assets under management as of the end of each month.
- B. The investment adviser will receive 0.1% of the gross capital gains earned on the portfolio each quarter.
- C. All of the above are legitimate compensation arrangements between and investment adviser and an individual client with a net worth of $600,000.
- D. The client agrees to pay the investment adviser an hourly fee of $60.00.
Answer: B
Explanation:
Explanation
A compensation arrangement between an investment adviser and an individual client with a net worth of
$600,000 that stipulates the adviser will receive 0.1% of the gross capital gains earned on the portfolio would be disallowed. An investment adviser of an individual client cannot be compensated with a share of the capital gains earned on the portfolio unless that client has a net worth of at least $1.5 million or has at least $750,000 invested through that investment adviser.
NEW QUESTION # 141
Under the NASAA Model Rules, the statute of limitations for civil liabilities is
- A. three years after the discovery of the facts and four years after the violation, whichever is greater.
- B. the earlier of two years after the discovery of facts and three years after the sale.
- C. the earlier of three years after the discovery of facts and five years after the violation.
- D. the earlier of two years after the discovery of the facts and four years after the violation.
Answer: B
Explanation:
Explanation
Under the NASAA Model Rules, the statue of limitations for civil liabilities is the earlier of two years after the discovery of facts and three years after the sale. This follows the recommendations provided by the Uniform Securities Act of 1956.
NEW QUESTION # 142
Which of the following funds can an agent indicate is "no load?"
- A. a fund with no front-end load that has 12b-1 fees equal to 0.10% of the average net assets of the fund and a rear-end load that varies depending on how long the investor has held the shares.
- B. a fund with no front-end or back-end load that has 12b-1 fees equal to 0.25% of the average net assets of the fund.
- C. Both A and C can be advertised as "no load" funds.
- D. a fund with no front-end or back-end load that has 12b-1 fees equal to 0.30% of the average net assets of the fund.
Answer: B
Explanation:
Explanation
A fund with no front-end or back-end load that has 12b-1 fees equal to 0.25% or less of the average net assets of the fund is considered a no load fund. In Choice A, the 12b-1 fees exceed 0.25%, and in Choice B, there is a rear-end load.
NEW QUESTION # 143
Which of the following constitutes a non-punitive order?
- A. summary license suspension
- B. All of the above are punitive orders.
- C. registration cancellation
- D. registration denial
Answer: C
Explanation:
Explanation
Registration cancellation is a non-punitive order. The Administrator issues a cancellation order if a registered person dies, becomes mentally incompetent, is no longer in business, or is unable to be located.
NEW QUESTION # 144
The Administrator of a state will deny the registration of a security if
I. the mandated filing fee has not been paid.
II. the compensation of the underwriters is excessive.
III. the registration statement is incomplete.
IV. the issuer is registering the security through the registration by coordination process and has not
complied with all the stipulated requirements.
- A. I or III only
- B. I, III or IV only
- C. III or IV only
- D. I, II, III, or IV
Answer: D
Explanation:
The Administrator of a state will deny the registration of a security under any of the situations
described in Selections I, II, III, and IV-if the mandated filing fee has not been paid; if the compensation of
the underwriters is excessive; if the registration statement is incomplete; or if the issuer is attempting to
use registration by coordination and has not complied with all the stipulated requirements of that process.
NEW QUESTION # 145
Which of the following trades is illegal?
- A. a short sale
- B. a market-not-held order
- C. the sale of a mutual fund if the purchaser hasn't received a prospectus
- D. a margin transaction
Answer: C
Explanation:
Explanation
It is illegal to sell a mutual fund if the purchaser hasn't received a prospectus. The purchaser must receive this no later than the date on which the trade confirmation is due. Short sales, margin transactions, and market-not-held orders are all legitimate.
NEW QUESTION # 146
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