Which of the following statements is NOT TRUE regarding an agent who misrepresents facts
about a security?
AThis is an unethical activity.
BIf the securities are exempt, there are no consequences for misrepresenting a material fact
about an investment.
CThere are potential civil liabilities and a client can sue for damages.
DThere will be no prison sentence if the agent can prove he had no knowledge of the rule he
violated. - ANSWER B
Please notice that the question is asking for the choice that's NOT TRUE. Misrepresenting
the investment risks of a security is unethical and could lead to civil liabilities, even if the
securities are exempt. If a client loses money due to the misrepresentation of a material fact,
she could sue and recover civil damages. If the agent can prove that he had no knowledge of
the rule he violated, he can avoid a prison sentence, but could still be forced to pay criminal
fines.
A Canadian agent has many clients who visit the United States for extended periods. In order
to continue to service these accounts while these clients are in the United States, the agent
must:
ARegister with the SEC under NAFTA
BRegister with the relevant states
CBecome associated with a U.S. registered broker-dealer
DOpen an office in the states in which these clients are temporarily residing - ANSWER B
A Canadian agent, who wishes to continue to service the accounts of clients who are visiting
the United States, must register with the states where these clients are staying. The agent's
broker-dealer must also register. Both broker-dealers and agents who are registered properly
in Canada may take advantage of the limited registration provisions available to Canadian
broker-dealers and agents under the Uniform Securities Act.
1
,An agent inadvertently misrepresents the risks associated with U.S. Treasury bonds. Under
the Uniform Securities Act, which of the following statements is TRUE?
A The activity constitutes fraud.
B The activity is unethical.
C There's no violation since the action was inadvertent.
D Since there are no risks associated with U.S. Treasury bonds, there's no violation of the
USA. - ANSWER B
Misrepresenting the investment risks of a security is unethical and could lead to civil
liabilities since clients have the right to sue and recover their losses. Because the agent
inadvertently misrepresented the risks, the activity doesn't constitute fraud. Despite the fact
that U.S. Treasury securities are safe, misrepresenting their characteristics is a violation of
the USA.
An agent for a broker-dealer fled the country after embezzling funds from a client. The client
was able to initiate a civil suit against the agent by sending legal papers to the Administrator
because the agent had signed a(n):
A Indemnity agreement
B Liability agreement
C Show cause agreement
D Consent to service of process - ANSWER D
A consent to service of process is an agreement whereby actions arising from violations of
the Uniform Securities Act may be initiated against the individual executing the consent. The
actions may be initiated by serving legal papers upon the Administrator. This is considered to
be legally equivalent to serving them to the defendant. Individuals registering as agents
under the USA must sign a consent to service of process as a registration requirement.
(89248)
Under the Uniform Securities Act, an investment adviser must deliver a disclosure document
to a client:
2
,A Five business days prior to signing the contract, with the client having two business days to
rescind the contract without penalty
B Within three business days of an existing client's request
C With each statement, but at least on a quarterly basis
D At least 48 hours prior to signing the contract, or at the time of the contract signing with
the customer having five days to rescind the contract - ANSWER D
A disclosure document (ADV Part 2 or a document containing the same information) must be
provided to new clients at least 48 hours prior to the signing of the contract, or at the time
of the contract signing with the customer. If provided at the time of the signing of the
contract, the client has five days to rescind the contract. The disclosure document must be
sent to existing clients at least annually. If an existing client requests a current copy of the
disclosure document, it must be sent to the client within seven days of the request. (75924)
(89262)
The Administrator of State P requests that the Administrator of State Q issue a cease-and-
desist order. May the Administrator of State Q grant this request?
A Only if the person against whom the order is being issued is a resident of State Q
B Only if the Administrator of State Q believes that the laws of that state are being violated,
or will be violated
C Only if there is a reciprocal agreement between to the states
D Not under any circumstances - ANSWER B
The USA gives the Administrator the power to issue a cease-and-desist order anytime he
believes that someone has violated one of the provisions of this Act or believes that
someone is about to violate one of its provisions. (89241)
You are an agent for a broker-dealer. You told a client that the price of a security in the
client's portfolio is higher than it actually is. The client sells the security based on this
information and incurs a loss. Which of the following is TRUE?
A The loss is covered under your broker's fidelity bond insurance
B Your firm will remedy the loss by making up the difference
3
, C You can remedy this by adjusting the price on the client's next transaction
D You are subject to action taken by the Administrator, as well as civil and criminal action -
ANSWER D
It is a fraudulent and prohibited practice to make inaccurate quotes. Persons doing so would
be subject to action taken by the Administrator, as well as civil and criminal actions. (89265)
Which of the following investors may be charged performance fees by investment advisers?
A Accredited investors under Regulation D
B Qualified clients
C Exempt investors
D None, since investment advisers are prohibited from charging performance fees -
ANSWER B
Under the Investment Advisers Act of 1940 and the NASAA Model Rules, advisers are
prohibited from charging performance fees—fees that are tied to the account's
performance. There is an exception for qualified clients.
A qualified client is an institutional or retail client with at least $1,000,000 under
management with the adviser or who has a net worth in excess of $2,000,000. If the client is
an individual, then the net worth calculation may NOT include the value of the client's
primary residence.
An accredited investor under Regulation D, choice (a), is not the same as a qualified client.
For example, someone with a total net worth of $1,000,000 excluding their home, would be
an accredited investor according to Regulation D, but not a qualified client. (89218)
According to the Uniform Securities Act, the term sale means:Any attempt to dispose of a
securityA solicitation of an offer to buyAny contract to dispose of a security for value
A I only
B II only
C III only
D I, II, and III - ANSWER C
4
about a security?
AThis is an unethical activity.
BIf the securities are exempt, there are no consequences for misrepresenting a material fact
about an investment.
CThere are potential civil liabilities and a client can sue for damages.
DThere will be no prison sentence if the agent can prove he had no knowledge of the rule he
violated. - ANSWER B
Please notice that the question is asking for the choice that's NOT TRUE. Misrepresenting
the investment risks of a security is unethical and could lead to civil liabilities, even if the
securities are exempt. If a client loses money due to the misrepresentation of a material fact,
she could sue and recover civil damages. If the agent can prove that he had no knowledge of
the rule he violated, he can avoid a prison sentence, but could still be forced to pay criminal
fines.
A Canadian agent has many clients who visit the United States for extended periods. In order
to continue to service these accounts while these clients are in the United States, the agent
must:
ARegister with the SEC under NAFTA
BRegister with the relevant states
CBecome associated with a U.S. registered broker-dealer
DOpen an office in the states in which these clients are temporarily residing - ANSWER B
A Canadian agent, who wishes to continue to service the accounts of clients who are visiting
the United States, must register with the states where these clients are staying. The agent's
broker-dealer must also register. Both broker-dealers and agents who are registered properly
in Canada may take advantage of the limited registration provisions available to Canadian
broker-dealers and agents under the Uniform Securities Act.
1
,An agent inadvertently misrepresents the risks associated with U.S. Treasury bonds. Under
the Uniform Securities Act, which of the following statements is TRUE?
A The activity constitutes fraud.
B The activity is unethical.
C There's no violation since the action was inadvertent.
D Since there are no risks associated with U.S. Treasury bonds, there's no violation of the
USA. - ANSWER B
Misrepresenting the investment risks of a security is unethical and could lead to civil
liabilities since clients have the right to sue and recover their losses. Because the agent
inadvertently misrepresented the risks, the activity doesn't constitute fraud. Despite the fact
that U.S. Treasury securities are safe, misrepresenting their characteristics is a violation of
the USA.
An agent for a broker-dealer fled the country after embezzling funds from a client. The client
was able to initiate a civil suit against the agent by sending legal papers to the Administrator
because the agent had signed a(n):
A Indemnity agreement
B Liability agreement
C Show cause agreement
D Consent to service of process - ANSWER D
A consent to service of process is an agreement whereby actions arising from violations of
the Uniform Securities Act may be initiated against the individual executing the consent. The
actions may be initiated by serving legal papers upon the Administrator. This is considered to
be legally equivalent to serving them to the defendant. Individuals registering as agents
under the USA must sign a consent to service of process as a registration requirement.
(89248)
Under the Uniform Securities Act, an investment adviser must deliver a disclosure document
to a client:
2
,A Five business days prior to signing the contract, with the client having two business days to
rescind the contract without penalty
B Within three business days of an existing client's request
C With each statement, but at least on a quarterly basis
D At least 48 hours prior to signing the contract, or at the time of the contract signing with
the customer having five days to rescind the contract - ANSWER D
A disclosure document (ADV Part 2 or a document containing the same information) must be
provided to new clients at least 48 hours prior to the signing of the contract, or at the time
of the contract signing with the customer. If provided at the time of the signing of the
contract, the client has five days to rescind the contract. The disclosure document must be
sent to existing clients at least annually. If an existing client requests a current copy of the
disclosure document, it must be sent to the client within seven days of the request. (75924)
(89262)
The Administrator of State P requests that the Administrator of State Q issue a cease-and-
desist order. May the Administrator of State Q grant this request?
A Only if the person against whom the order is being issued is a resident of State Q
B Only if the Administrator of State Q believes that the laws of that state are being violated,
or will be violated
C Only if there is a reciprocal agreement between to the states
D Not under any circumstances - ANSWER B
The USA gives the Administrator the power to issue a cease-and-desist order anytime he
believes that someone has violated one of the provisions of this Act or believes that
someone is about to violate one of its provisions. (89241)
You are an agent for a broker-dealer. You told a client that the price of a security in the
client's portfolio is higher than it actually is. The client sells the security based on this
information and incurs a loss. Which of the following is TRUE?
A The loss is covered under your broker's fidelity bond insurance
B Your firm will remedy the loss by making up the difference
3
, C You can remedy this by adjusting the price on the client's next transaction
D You are subject to action taken by the Administrator, as well as civil and criminal action -
ANSWER D
It is a fraudulent and prohibited practice to make inaccurate quotes. Persons doing so would
be subject to action taken by the Administrator, as well as civil and criminal actions. (89265)
Which of the following investors may be charged performance fees by investment advisers?
A Accredited investors under Regulation D
B Qualified clients
C Exempt investors
D None, since investment advisers are prohibited from charging performance fees -
ANSWER B
Under the Investment Advisers Act of 1940 and the NASAA Model Rules, advisers are
prohibited from charging performance fees—fees that are tied to the account's
performance. There is an exception for qualified clients.
A qualified client is an institutional or retail client with at least $1,000,000 under
management with the adviser or who has a net worth in excess of $2,000,000. If the client is
an individual, then the net worth calculation may NOT include the value of the client's
primary residence.
An accredited investor under Regulation D, choice (a), is not the same as a qualified client.
For example, someone with a total net worth of $1,000,000 excluding their home, would be
an accredited investor according to Regulation D, but not a qualified client. (89218)
According to the Uniform Securities Act, the term sale means:Any attempt to dispose of a
securityA solicitation of an offer to buyAny contract to dispose of a security for value
A I only
B II only
C III only
D I, II, and III - ANSWER C
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