Series 63 QUESTIONS AND
ANSWERS 100% CORRECT
Peter Smith, a prominent securities lawyer living in Connecticut, conducts his
securities law practice full time in New York state. He must register as an
investment adviser in New York state if:
a. the clients of Smith's law firm are all residents of Connecticut but conduct their
business with Smith in New York
b. Smith's clients, none of whom are residents of New York, receive investment
advice as an integral part of Smith's legal services
c. he advises his wife, who also has an office in New York, that her investment in
15 technology stocks is too high
d. the clients of Smith's law firm are New York residents and seek advice on the
construction of trust documents that may be helpful in reducing taxes on the
securities in their estates Correct Answer: b. Smith must register as an investment
adviser in New York when or if he is offering investment advice as an integral part
of his practice. Since his place of business is in New York, he must register in New
York as an investment adviser, even though his clients are not themselves residents
of the state. If Mr. Smith advises his wife, who also has an office in New York,
that her investment in 15 technology stocks is too high, he need not register in New
York because he is not charging his wife a fee for investment advice. Mr. Smith, as
a securities lawyer, need not register in New York as an investment adviser when
he advises clients on the construction of trust documents.
Under the Uniform Securities Act, which of the following is a broker-dealer?
A)
Credit union that sells its own stock
B)
Issuer
C)
Corporation that sells interests in an oil and gas limited partnership to investors
with the proceeds going to the issuer
D)
,Agent Correct Answer: c. A broker-dealer is any person that buys or sells for the
accounts of others or for his own account. In this case, an entity structured as a
corporation is selling a security in the form of limited partnership units and is
therefore a broker-dealer. A broker-dealer is not an issuer or an agent.
A broker-dealer having no place of business in a state is not required to be
registered in that state if the broker-dealer
A)
is a member of FINRA
B)
is licensed/registered in its state of residence
C)
is a member of the New York Stock Exchange
D)
does no business in that state other than with institutional clients Correct Answer:
d. A broker-dealer must be registered in every state it sells or offers to sell
securities, unless an exemption is available. If a broker-dealer has no office in a
particular state and no business is done in that state other than with institutional
clients, registration there is not required.
Which of the following firms in the business of rendering investment advice for
compensation would be considered a federal covered adviser?
A)
Retire in Luxury Pension Plan Consultants advising several corporate retirement
plans with combined total assets of $145 million
B)
GHI Consultants, a sole proprietorship, managing $89 million belonging to high
net worth individuals
C)
ABC Money Managers, a partnership with $385 million under management
D)
DEF Fund managers, a corporation managing an unregistered hedge fund with $10
million in assets Correct Answer: c. It makes no difference what the structure of
the adviser is. As long as the assets under management are $110 million or more,
SEC registration is required. If the investment company is registered under the
Investment Company Act of 1940, the adviser must be registered regardless of
size. The Hedge Fund is an unregistered fund so the rule does not apply to it.
,Under the Dodd-Frank Act, the pension consultant must have $200 million under
management to be eligible to be federal covered.
Which of the following are NOT agents as defined in the USA?
A broker-dealer acting on behalf of a properly registered issuer
An individual representing the U.S. government in the sale of its securities
An individual who, acting on behalf of a broker-dealer, sells exempt securities or
engages in an exempt transaction
An individual who represents an issuer selling a nonexempt security in a
nonexempt transaction Correct Answer: I and II
A broker-dealer by definition is not an agent. An individual who, while acting on
behalf of the issuer, sells certain exempt securities, such as those issued by the U.S.
government, is not an agent. The exclusion from the definition of an agent only
applies to those individuals who are selling on behalf of the issuer (never a broker-
dealer) and only when the transaction is exempt or the issuer is one of a specified
list of exempt issuers.
Under the terms of the Uniform Securities Act, which of the following is an
investment adviser for purposes of state regulatory jurisdiction?
A)
An accountant located in the state who offers general securities advice as an
incidental part of his business
B)
A commercial bank with a place of business in the state that advises clients on
investment matters
C)
A federal covered adviser with clients in the state
D)
An investment subsidiary of a bank holding company located in the state that
manages $70 million in assets Correct Answer: d. A bank holding company's
investment subsidiary that manages less than $100 million in assets is an
investment adviser subject to the Uniform Securities Act (USA). Under the
language of the USA, a commercial bank is excluded from the definition of
investment adviser whereas a bank holding company subsidiary is not. While a
federal covered adviser is an investment adviser in practice (that is, it performs the
functions of an investment adviser), it is excluded from the definition of an
investment adviser under the USA to avoid duplicate regulation. An accountant
, located in the state that offers general securities advice as an incidental part of his
business is not an investment adviser.
Under the Uniform Securities Act, the definition of an investment adviser does
NOT include
I. investment adviser representatives
II. lawyers and accountants whose investment advisory services are solely
incidental to their practices
III. broker-dealers who offer investment advice on an incidental basis without
special compensation for the advice provided
IV. federal covered investment advisers Correct Answer: All
None of the above are included in the term "investment adviser" as used in the
Uniform Securities Act. Federal covered advisers are regulated by the Securities
Exchange Commission (SEC). The National Securities Markets Improvement Act
of 1996 (NSMIA) prohibits dual registration of investment advisers by federal and
state authorities. If federal covered advisers were defined as investment advisers
under the USA, then they would be subject to the same state registration
procedures as local or state investment advisers.
Under the USA, each of the following is specifically excluded from the definition
of a broker-dealer EXCEPT an
A)
issuer
B)
investment adviser
C)
international bank
D)
agent Correct Answer: b. The USA specifically excludes agent/issuers and banks,
international or domestic, from the definition of a broker-dealer. Investment
advisers also may have to register as broker-dealers if their method of operation
requires it.
A state Administrator may require an applicant for registration to do which of the
following?
I. Furnish information about any SEC adjudications within the past 10 years
ANSWERS 100% CORRECT
Peter Smith, a prominent securities lawyer living in Connecticut, conducts his
securities law practice full time in New York state. He must register as an
investment adviser in New York state if:
a. the clients of Smith's law firm are all residents of Connecticut but conduct their
business with Smith in New York
b. Smith's clients, none of whom are residents of New York, receive investment
advice as an integral part of Smith's legal services
c. he advises his wife, who also has an office in New York, that her investment in
15 technology stocks is too high
d. the clients of Smith's law firm are New York residents and seek advice on the
construction of trust documents that may be helpful in reducing taxes on the
securities in their estates Correct Answer: b. Smith must register as an investment
adviser in New York when or if he is offering investment advice as an integral part
of his practice. Since his place of business is in New York, he must register in New
York as an investment adviser, even though his clients are not themselves residents
of the state. If Mr. Smith advises his wife, who also has an office in New York,
that her investment in 15 technology stocks is too high, he need not register in New
York because he is not charging his wife a fee for investment advice. Mr. Smith, as
a securities lawyer, need not register in New York as an investment adviser when
he advises clients on the construction of trust documents.
Under the Uniform Securities Act, which of the following is a broker-dealer?
A)
Credit union that sells its own stock
B)
Issuer
C)
Corporation that sells interests in an oil and gas limited partnership to investors
with the proceeds going to the issuer
D)
,Agent Correct Answer: c. A broker-dealer is any person that buys or sells for the
accounts of others or for his own account. In this case, an entity structured as a
corporation is selling a security in the form of limited partnership units and is
therefore a broker-dealer. A broker-dealer is not an issuer or an agent.
A broker-dealer having no place of business in a state is not required to be
registered in that state if the broker-dealer
A)
is a member of FINRA
B)
is licensed/registered in its state of residence
C)
is a member of the New York Stock Exchange
D)
does no business in that state other than with institutional clients Correct Answer:
d. A broker-dealer must be registered in every state it sells or offers to sell
securities, unless an exemption is available. If a broker-dealer has no office in a
particular state and no business is done in that state other than with institutional
clients, registration there is not required.
Which of the following firms in the business of rendering investment advice for
compensation would be considered a federal covered adviser?
A)
Retire in Luxury Pension Plan Consultants advising several corporate retirement
plans with combined total assets of $145 million
B)
GHI Consultants, a sole proprietorship, managing $89 million belonging to high
net worth individuals
C)
ABC Money Managers, a partnership with $385 million under management
D)
DEF Fund managers, a corporation managing an unregistered hedge fund with $10
million in assets Correct Answer: c. It makes no difference what the structure of
the adviser is. As long as the assets under management are $110 million or more,
SEC registration is required. If the investment company is registered under the
Investment Company Act of 1940, the adviser must be registered regardless of
size. The Hedge Fund is an unregistered fund so the rule does not apply to it.
,Under the Dodd-Frank Act, the pension consultant must have $200 million under
management to be eligible to be federal covered.
Which of the following are NOT agents as defined in the USA?
A broker-dealer acting on behalf of a properly registered issuer
An individual representing the U.S. government in the sale of its securities
An individual who, acting on behalf of a broker-dealer, sells exempt securities or
engages in an exempt transaction
An individual who represents an issuer selling a nonexempt security in a
nonexempt transaction Correct Answer: I and II
A broker-dealer by definition is not an agent. An individual who, while acting on
behalf of the issuer, sells certain exempt securities, such as those issued by the U.S.
government, is not an agent. The exclusion from the definition of an agent only
applies to those individuals who are selling on behalf of the issuer (never a broker-
dealer) and only when the transaction is exempt or the issuer is one of a specified
list of exempt issuers.
Under the terms of the Uniform Securities Act, which of the following is an
investment adviser for purposes of state regulatory jurisdiction?
A)
An accountant located in the state who offers general securities advice as an
incidental part of his business
B)
A commercial bank with a place of business in the state that advises clients on
investment matters
C)
A federal covered adviser with clients in the state
D)
An investment subsidiary of a bank holding company located in the state that
manages $70 million in assets Correct Answer: d. A bank holding company's
investment subsidiary that manages less than $100 million in assets is an
investment adviser subject to the Uniform Securities Act (USA). Under the
language of the USA, a commercial bank is excluded from the definition of
investment adviser whereas a bank holding company subsidiary is not. While a
federal covered adviser is an investment adviser in practice (that is, it performs the
functions of an investment adviser), it is excluded from the definition of an
investment adviser under the USA to avoid duplicate regulation. An accountant
, located in the state that offers general securities advice as an incidental part of his
business is not an investment adviser.
Under the Uniform Securities Act, the definition of an investment adviser does
NOT include
I. investment adviser representatives
II. lawyers and accountants whose investment advisory services are solely
incidental to their practices
III. broker-dealers who offer investment advice on an incidental basis without
special compensation for the advice provided
IV. federal covered investment advisers Correct Answer: All
None of the above are included in the term "investment adviser" as used in the
Uniform Securities Act. Federal covered advisers are regulated by the Securities
Exchange Commission (SEC). The National Securities Markets Improvement Act
of 1996 (NSMIA) prohibits dual registration of investment advisers by federal and
state authorities. If federal covered advisers were defined as investment advisers
under the USA, then they would be subject to the same state registration
procedures as local or state investment advisers.
Under the USA, each of the following is specifically excluded from the definition
of a broker-dealer EXCEPT an
A)
issuer
B)
investment adviser
C)
international bank
D)
agent Correct Answer: b. The USA specifically excludes agent/issuers and banks,
international or domestic, from the definition of a broker-dealer. Investment
advisers also may have to register as broker-dealers if their method of operation
requires it.
A state Administrator may require an applicant for registration to do which of the
following?
I. Furnish information about any SEC adjudications within the past 10 years
