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Download DemoVendor: FINRA
Certifications: FINRA Certifications
Exam Code: FINRA-SERIES-63
Exam Name: FINRA Uniform Securities Agent State Law Examination
Updated: Nov 28, 2024
Q&As: 251
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While on vacation in Colorado, Mr. Moneybags became interested in the stock of a company called SafeAway, which designs and installs customized high-tech security systems in the multimillion dollar mansions located in Colorado's pricier ski resort areas, such as Vail and Aspen. Upon returning to his home in Boston, he calls his broker-dealer with an order to purchase 10,000 shares of the stock, which he learned trades in the over- the-counter market. Fast Eddie, a registered agent with his broker-dealer, discovers that SafeAway's stock is registered only in the states of Colorado and Wyoming. Neither Fast Eddie nor his broker-dealer are registered to do business in either of those states. Under these circumstances,
A. Fast Eddie cannot effect Mr. Moneybags purchase of SafeAway stock since neither he nor his broker are registered to do business in Colorado or Wyoming, and SafeAway stock is not registered for sale in the state of Massachusetts.
B. Fast Eddie can execute the trade for Mr. Moneybags since this would be considered an exempt transaction because it is a private placement.
C. Fast Eddie should contact a broker-dealer that is registered in either Colorado or Wyoming and negotiate a finder's fee for referring Mr. Moneybags to them.
D. Fast Eddie can execute the trade for Mr. Moneybags since this would be considered an exempt transaction because it is an unsolicited transaction.
Correct Answer: D
Under the circumstances described, Fast Eddie can execute the trade for Mr. Moneybags even though SafeAway stock is registered for sale only in the states of Colorado and Wyoming since neither Fast Eddie nor the broker-dealer solicited the transaction, making this an exempt transaction. However, the Massachusetts Administrator may demand that Fast Eddie and his broker-dealer provide proof that the trade was indeed unsolicited.
Which of the following is not a prohibited practice for a broker-dealer?
A. waiting 36 hours before mailing a check after receiving a request for a cash withdrawal from a client if the client has that much cash available in his account
B. requiring that a client who is engaged in margin transactions leave the securities with the broker-dealer in "street name"
C. recommending a security to a new client without first ascertaining that client's level of risk tolerance
D. executing a trade for an account holder based on instructions from the account holder's spouse
Correct Answer: B
It is not prohibited for a broker-dealer to require that a client who is engaging in margin transactions to leave the securities with the broker in "street name." This is the normal business practice. A margin transaction means that the client is borrowing part of the funds he's investing, and the securities are serving as collateral for the loan. It is illegal to delay sending a check upon receiving a request for a cash withdrawal, assuming the client has the cash available in his account; to recommend a security to a client without knowing anything about him, including his tolerance for risk; and to execute a trade on instructions from anyone other than the account holder unless that party has at least limited power of attorney.
Which of the following is not considered to be a security, as defined by the Uniform Securities Act (USA)?
A. a debenture
B. a certificate of deposit (CD)
C. a put option
D. an annuity contract wherein an insurance company promises to pay a fixed sum, either in a lump amount or through periodic payments.
Correct Answer: D
The Uniform Securities Act excludes annuity contracts wherein an insurance company promises either to pay a fixed sum, either in a lump amount or through periodic payments, from its definition of a security. Debentures, CDs, and option contracts are all classified as securities under the USA.
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