FINRA-SERIES-63 Online Practice Questions and Answers

John Ketchum is an investment adviser representative with Load Investment Advisers, which has a family of load funds that it encourages its representatives to promote. Representatives of the firm that sell shares in these funds to their clients receive a greater share of the load than they do if they sell load funds offered by other firms.

Based on these facts, which of the following statements is true?

A. John is obligated to try to sell his clients the funds offered by Load first since he is affiliated with them and has a fiduciary responsibility to them.

B. John must provide his clients with a written disclosure that he will receive a greater remuneration for selling shares in the Load family of funds than if he sells them shares in other funds before he provides his clients with any investment advice.

C. If, after reviewing the information form a client has filled out, John believes that one of Load's funds is an appropriate investment, John can recommend that the client invest in that fund. There is no disclosure requirement necessary if the recommendation is a sound one that can be proved to be based on the client's specific situation.

D. Both A and B are true.

Under the NASAA Model Rules, the statute of limitations for civil liabilities is

A. the earlier of two years after the discovery of the facts and four years after the violation.

B. the earlier of three years after the discovery of facts and five years after the violation.

C. three years after the discovery of the facts and four years after the violation, whichever is greater.

D. the earlier of two years after the discovery of facts and three years after the sale.

Although an Administrator has broad powers, he or she cannot:

A. issue subpoenas involving compulsory attendance.

B. gather evidence.

C. deliver a judicial injunction.

D. formulate rules and orders.

Which of the following statements is false?

A. A state cannot require a higher minimum net capital for broker-dealers than the amount specified by the Securities Exchange Act of 1934.

B. A state cannot require a higher minimum net capital for investment advisers than the amount specified by the Investment Advisers Act of 1940.

C. The minimum net capital requirement for investment advisers that take custody of their clients' assets is higher than the net capital requirement for advisers who do not take custody of the assets.

D. None of the above statements is false; all are true statements.

If an issuer registers securities with the state, how long can the documentation supplied in the registration statement for those securities be incorporated by reference only into a registration statement for future securities the issuer wants to offer for sale?

A. one year

B. two years

C. five years

D. seven years

Which of the following is not in itself a reason for the Administrator to deny, suspend, or revoke the license of a person?

A. The applicant has never before worked in the securities industry although he has received the requisite training.

B. Some of the information supplied on the registration application was found to be false.

C. The person has been convicted of check kiting within the past ten years.

D. The person is a broker-dealer whose agents have repeatedly been accused of churning and burning, according to written client complaints.

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 client agrees to pay the investment adviser an hourly fee of $60.00.

B. 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.

C. The investment adviser will receive 0.1% of the gross capital gains earned on the portfolio each quarter.

D. All of the above are legitimate compensation arrangements between and investment adviser and an individual client with a net worth of $600,000.

Once you have passed the Series 63 examination, which entity must then approve your application to sell securities?

A. FINRA

B. NASAA

C. SEC

D. the state administrator

Trevor is currently a registered agent in the state of Connecticut where he has been employed by Connect and Company, a broker-dealer that is registered in Connecticut and has subsidiary operations in Massachusetts, New Jersey, and New York. Trevor has moved to Massachusetts and is now associated with one of Connect's subsidiaries, a broker-dealer registered in the state. Trevor has applied to the Administrator of Massachusetts for registration as an agent.

Can Trevor execute purchases and sales for clients while his registration is still pending?

A. No. Until he is informed by the Administrator of Massachusetts that his application has been accepted, Trevor may not affect any securities transactions in Massachusetts.

B. Yes. Because Trevor is a registered agent in another state and is affiliated with a broker- dealer that is registered in the state of Massachusetts, he is not restricted from executing trades.

C. Yes. Trevor can execute trades for new clients he solicits, but only for sixty days while his registration is pending.

D. It depends. Trevor can execute some purchases and sales, but only for clients that he already had who may have recently relocated to Massachusetts and only for sixty days while his registration is pending.

Rich Quick is a broker-dealer registered in the state of Massachusetts. He occasionally trades on abnormalities he observes in bond yield spreads for his own account, short selling a bond that appears to be overpriced based on its yield and buying a bond that is identical in almost every respect except for the price, which is less than that of the other bond. He has been able to earn arbitrage profits 95% of the time when he does this. Rich Quick

A. is in violation of securities laws. Arbitrage is a prohibited activity.

B. is skilled if he is able to earn profits 95% of the time using this strategy.

C. is trading on insider information, which is a violation of securities laws.

D. engaged in a fraudulent activity.