[2024] New Series63 exam Free Sample Questions to Practice
Cover Real Series63 Exam Questions Make Sure You 100% Pass
NEW QUESTION # 12
Jeremy Sly considered himself somewhat of an inventor. The only problem was that his day job interfered with his opportunity to exercise his creativity. He came up with a plan to get outside investors to support his inventive activities. To this end, he produced and distributed a brochure advertising partnership interests with a guaranteed return on investment of at least 15% after the first 12 months, based on what he had allegedly generated from his other (non-existent) inventions.
Given these facts, is Jeremy guilty of any security violations under the Uniform Securities Act (USA)?
- A. Yes. Even an "offer" to sell securities must not contain any untruths.
- B. No. The facts don't indicate whether any partnership interests were actually sold, and there can be no violation unless there is a sale.
- C. No. An interest in a partnership is not considered a security.
- D. No. It is not against the law to believe in oneself and promote one's ideas.
Answer: A
Explanation:
Explanation
Yes. Jeremy is guilty of security violations under the Uniform Securities Act when he provides misleading information when offering securities for sale, even if no securities are actually sold. Partnership interests fall under the definition of securities, and Jeremy's claim to have generated a return of at least 15% on other inventions that he never created is an absolute falsehood.
NEW QUESTION # 13
BondsRUs is a broker-dealer that (unsurprisingly) specializes in bonds. The firm has found that it is able to sell Treasury bonds that it buys for $90 per $100 of par value for $99 per $100 of par value to some of its more naive clients, who never pay attention to the confirmation statements BondsRUs sends them. BondsRUs is guilty of
- A. nothing. It is acting as a dealer in bonds and, as such, can charge its clients whatever the clients are willing to pay.
- B. fraud.
- C. overcharging its clients by unreasonable markups. A $9 dealer's spread on Treasury bonds is unwarranted.
- D. both B and C.
Answer: C
Explanation:
Explanation
BondsRUs is guilty of overcharging its clients by unreasonable markups. A $9 dealer's spread on a risk-free investment such as a Treasury bond is unwarranted, and this practice is prohibited.
Based on the information provided, BondsRUs is not guilty of fraud since it appears that the firm is revealing the markup in its confirmation statements. The clients just aren't paying attention.
NEW QUESTION # 14
You are a newly licensed agent and are making cold calls to generate business. According to the
Telephone Consumer Protection Act of 1991 (TCPA), you may only place your calls between the hours of
- A. 8 a.m. and 9 p.m., based on your prospective customer's time zone.
- B. 8 a.m. and 7 p.m., based on the Pacific Time Zone.
- C. 8 a.m. and 9 p.m., based on your time zone.
- D. 8 a.m. and 7 p.m., based on your prospective customer's time zone.
Answer: A
Explanation:
The TCPA mandates that you place your calls only between the hours of 8 a.m. and 9 p.m.,
based on your prospective customer's time zone. This is a rule that applies to all telemarketers.
NEW QUESTION # 15
Shady Corporation's executives are concerned over the firm's steadily declining stock price and decide to
do something about it. They each decide to make significantly large purchases of their firm's stock in
order to stabilize and hopefully even to drive up its price, reasoning that they can sell the stock for the
higher price down the road and profit from the transaction. You are a broker-dealer for the firm's
executives. Are Shady's executives planning to do anything illegal?
- A. No. It's a win-win. They are using their own money to buy stock of their firm, and this can help drive the
stock price up and put profits in their pockets. - B. Yes. Although it is not illegal for them to purchase shares of their firm's stock, they cannot do so in
order to try to manipulate the price of the stock. - C. No. As long as they follow the rules and report their purchases to the SEC, it is not illegal for them to
purchase shares of their firm's stock. - D. Yes. To purchase shares of their own company is considered to be illegal insider trading.
Answer: B
Explanation:
Yes. Although it is not illegal for Shady's executives to purchase shares of their firm's stock,
in this case they are planning to do something illegal in deciding to make significantly large purchases of
their firm's stock in order to manipulate the price. This is an example of price pegging.
NEW QUESTION # 16
Broker-dealer Nebulous opted to withdraw its registration with the state. Six months later, the Administrator finds that Nebulous had been engaged in fraudulent securities transactions.
Which of the following statements is true?
- A. The Administrator has five years from the discovery of the misdeed to take disciplinary action, so Nebulous will have to be on the lookout for a long time to come.
- B. The Administrator can take disciplinary action against Nebulous for up to one year, so Nebulous is in trouble.
- C. The Administrator is only able to take disciplinary action if the misdeeds are discovered within three months of the effective date of the withdrawal, so Nebulous slipped by this time.
- D. The Administrator is unable to take disciplinary action against Nebulous because the self-initiated withdrawal became effective 30 days after the application was filed.
Answer: B
Explanation:
Explanation
Even though Nebulous withdrew its registration from the state, the Administrator has up to a year to take disciplinary action against the broker-dealer if he discovers that Nebulous has been engaged in fraudulent securities transactions after the fact. The Administrator can retroactively begin a revocation or suspension proceeding. Criminal courts can initiate proceedings anytime within five years of the alleged misdeeds.
NEW QUESTION # 17
Ari Gaunt is employed by a small state-registered broker-dealer and has recently received notification that his application to be a registered agent of the state has been accepted. Now that he is licensed to execute transactions for the firm's clients, Ari has a batch of business cards printed up, with a picture of himself on the right-hand side of the card. Underneath the picture is the caption, "State-Approved Agent." Will Ari be violating any securities laws if he distributes these business cards?
- A. Yes. Agents are not permitted to include a picture of themselves on their business cards.
- B. Yes. It is a violation of a securities law to suggest that he has been approved by the state Administrator.
- C. No. His registration with the Administrator of the state has been accepted, so he is entitled to call himself a "State-Approved Agent."
- D. No. However, he may be violating company policy of the broker-dealer he works for by designing his own cards.
Answer: B
Explanation:
Explanation
Yes, Ari will be violating a securities law if he distributes the business cards because the cards suggest he has been approved by the state Administrator. The Uniform Securities Act specifically states that the effective registration of a person does not mean that the Administrator has "given approval to" that person. Any statement to this effect is considered an unlawful representation.
NEW QUESTION # 18
Ms. Connie Fused sent her investment adviser a check, payable to a mutual fund that he had
recommended to her. What must the adviser do in order to avoid being considered the custodian of this
account and, thereby, subject to some strict requirements, including a higher minimum net capital?
- A. He needs to forward the check to the mutual fund within 3 days.
- B. He needs both to forward the check within 24 hours and to obtain a written statement from Ms. Fused.
- C. He needs to forward the check to the mutual fund within 24 hours.
- D. He needs to get a written statement from Ms. Fused, addressed to the state Administrator,indicating it
was her mistake.
Answer: C
Explanation:
As long as the adviser forwards the check to the mutual fund within 24 hours, he will not be
deemed to have taken custody of Ms. Fused funds. This assumes the mutual fund is in no way affiliated
with the investment adviser.
NEW QUESTION # 19
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
Answer: B
Explanation:
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.
NEW QUESTION # 20
Elizabeth is the owner of Lizbeth Investment Advisers, a small, state-registered investment advisory firm.
She has decided that her firm needs a niche and has learned that a consulting group is coming to the area
and offering a 3-day seminar on asset allocation for senior citizens offered by Advantage for Retirement
Persons (ARP). The seminar will cost $1,000 per individual, but after attending the seminar, each
attendee will receive a certificate verifying their involvement in the program. Elizabeth decides this is the
niche she has been looking for and signs up herself and her three investment adviser representatives for
the program. After attending the seminar and receiving their certificates, Elizabeth and her team can
- A. do none of the above.
- B. have the words "Senior-Citizen Investment Specialists" printed on their business cards.
- C. indicate that they are certified by the ARP program since money was paid for their attendance.
- D. represent themselves as certified senior citizen investment advisers.
Answer: A
Explanation:
After attending the ARP seminars on asset allocation for senior citizens, Elizabeth and her
team cannot represent themselves as certified senior citizen investment advisers, print "Senior-Citizen
Investment Specialists" on their business cards, or indicate that they are certified by the ARP program.
Under the NASAA model rules, their attendance does not entitle them to say they are in any way
especially certified to serve senior citizens. The attendance certification they received does not have any
competency requirements attached.
NEW QUESTION # 21
Which of the following trades is illegal?
- A. a margin transaction
- B. a short sale
- C. a market-not-held order
- D. the sale of a mutual fund if the purchaser hasn't received a prospectus
Answer: D
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 # 22
Which of the following are examples of the prohibited practice of manipulation in the securities markets?
I. Broker-Dealer Joker is unhappy with its investment in the stock of a speculative firm and engages
another broker-dealer to purchase a large number of shares from it, with the unofficial agreement to buy
back those shares, offer more shares which the second broker-dealer will purchase, and so on.
II. Broker-Dealer Joker has a large short position in the stock of a certain corporation. Joker offers a
bonus to its agents who effect sale transactions in the stock.
III. A client calls Broker-Dealer Joker with a request to purchase 20 bonds issued by Massachusetts
Institute of Technology (MIT.) The bonds are currently selling for their par value of $1,000. Knowing this,
Joker offers to sells the client the bonds for $120 per $100 of par, or $1,200 per $1,000 bond.
- A. I only
- B. I, II, and III
- C. I and II only
- D. I and III only
Answer: C
Explanation:
Only Selections I and II are examples of manipulation in the securities market. It is
considered to be manipulation if one firm engages another firm to make a series of purchases and sales
that will make it appear that there is very active trading in the security; it is also considered manipulation if
a broker-dealer encourages its agents to solicit sales of a security in which it has a short position since
that broker-dealer is hoping that the sales will drive the price of the security down, thereby making the
firm's position profitable. Although the offer to sell a client bonds at a much higher price than their market
price is illegal, it is not an example of price manipulation.
NEW QUESTION # 23
George Geek is a computer programmer who tired of working for others and started his own company. He
convinced forty investors that he could design software that would rival Microsoft, and sold them each a
1 0% partnership interest in his firm for $25,000. He designed and printed up the partnership certificates
himself. George told the investors that he had a product that was on the verge of being marketable and
that when it did-within the next two months-revenues would pour into the company, and he would begin
paying dividends. He told them they could expect a 20% return on their money this year, with even higher
returns in the years to come. As it turned out, George wasn't quite the programmer he thought he was,
and he wasn't able to get all the bugs out of the program to make it marketable within the promised two
months. Within a year, George had tired of the project and was too busy picking up chicks in his new
Corvette when he wasn't on the island of St. Bart overseeing the construction of his new beach
mansion-and picking up chicks. His activities, of course, were financed by the extremely generous
"salary" he paid himself from the investors' monies. Under the Uniform Securities Act, do the investors
have any civil claims against George?
- A. No. It wasn't George's fault that he was unable to do what he promised. Even if it wasn't for
- B. No. The Uniform Securities Act only involves securities laws and partnership interests are not
- C. Yes. They can sue George for the return of their original investment, plus interest. George would also
have to pay their court costs and attorneys' fees and any amounts assessed by the court for "pain and
suffering" on the parts of the clients. - D. Yes. They can sue George for the return of their original investment, plus interest. George would
Answer: D
Explanation:
Yes. The investors have a civil claim against George under the Uniform Securities Act and
can sue for the return of their original investment, plus interest, reasonable attorneys' fees, and court
costs. There is no provision for pain and suffering. Partnership interests fall under the definition of
securities, so the Uniform Securities Act does apply, and George sold the interests illegally. As securities,
they were required to be registered with the state before they could be sold.
NEW QUESTION # 24
In which of the following instances is it permissible for an investment adviser to borrow money from a
client?
- A. The investment adviser may borrow money from a client if the client is a bank.
- B. It is never permissible for an investment adviser to borrow money from a client.
- C. The investment adviser may borrow money from a client if the client is a close friend of the majority
owner of the investment advisory firm. - D. The investment adviser may borrow money in either of the scenarios described in B or C.
Answer: A
Explanation:
It is only permissible for an investment adviser to borrow money from a client if that client is
in the business of loaning money, as would be the case if the client is a bank, but not if the client is merely
a close friend of the majority owner of the investment advisory firm.
NEW QUESTION # 25
MoeMoney Investment Advisers, LLC is registered in the state of Texas, and its three offices are all
located in the greater Dallas-Fort Worth area. Five of its clients-all individuals-have relocated to Colorado
and all have indicated a desire to retain the services of MoeMoney. In order for this to be possible,
- A. Neither MoeMoney nor its clients need do anything.
- B. MoeMoney will need to apply for and be granted registration as an investment adviser in the state of
Colorado. - C. each client will have to write a letter to the Administrator of the state of Colorado on MoeMoney's
behalf. - D. MoeMoney will need to apply for and be granted registration as an investment adviser representative in
the state of Colorado.
Answer: A
Explanation:
In order for MoeMoney to continue servicing its five individual clients who have relocated to
Colorado, neither MoeMoney nor its clients need to do anything. The National Securities Markets
Improvement Act of 1996 (NSMIA) established a "de minimis" exemption for investment advisers if they
have no office in a state and do business with "no more than five non-institutional clients" during a
one-year time frame.
NEW QUESTION # 26
Assuming the security is not registered under the Uniform Securities Act, which of the following would not be exempt from state registration?
- A. a stock that is listed on the OTC Bulletin Board
- B. a variable annuity contract offered by an insurance company with offices in the state
- C. a stock that is listed on the American Stock Exchange
- D. a put option on a stock that sells in the over-the-counter market
Answer: A
Explanation:
Explanation
A stock that is listed on the OTC Bulletin Board would not be exempt from state registration unless it already happens to be registered under the Uniform Securities Act. Variable annuities and stocks listed on the American Stock Exchange are classified as federal covered securities by the NSMIA of 1996 and are exempt from state registration. An amendment to the Securities and Exchange Act of 1934 exempts option contracts from state registration.
NEW QUESTION # 27
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. 60 days.
- B. 30 days.
- C. 1 year.
- D. 45 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 # 28
Which of the following scenarios describes activities that are disallowed under the NASAA Model Rules?
I. Broker-dealer Anon observes that a client placed a stop loss order to sell her 1,500 shares of Amazon.com stock for $131 when the stock was selling for $134. Anon sold the stock for $133 when it started to fall during the day and credited the client's account with $131 per share when stock dropped further to $129 a share.
II. Penny is an agent with Broker-dealer Anon. She recently recommended that a client buy a stock that Penny thought would do well. As it turned out, Penny was wrong, and she offers to refund the commission that the client paid her.
III. Broker-dealer Anon is part of the selling group of a hot new IPO. As such, the firm purchases 50% of the shares for its own portfolio and sells the remainder to the public.
- A. I, II, and III
- B. I only
- C. I and II only
- D. I and III only
Answer: A
Explanation:
Explanation
Selections I, II, and III are all disallowed under the NASAA Model Rules. In Selection I, Broker-dealer Anon has made an unauthorized transaction and has also stolen from his client. The stop order indicated that the client's Amazon.com order should be effected only if the stock dropped to $131 a share or less. Anon jumped the gun and sold it for $133, but only gave the client the specified price of $131 a share. In the scenario described in Selection II, Penny's intentions might have been good, but an agent is not allowed to refund commissions. Anon is also in violation in Selection III's scenario. A member of the selling group is expected to make "bona fide" public offerings of the securities allotted him. To purchase some of the securities for itself is prohibited.
NEW QUESTION # 29
Until yesterday Maddie was a registered agent employed by the broker-dealer, QuikDeals. Yesterday
afternoon, issues that had been brewing between her and another employee of the firm came to a head,
and Maddie impulsively quit her job. At this point,
- A. Maddie will have to file a new application for registration with the Administrator upon finding
employment with another broker-dealer since she is no longer considered to be a registered agent by the
state. - B. Maddie has sixty days to find a job with another broker-dealer, or she will need to file a new registration
application. - C. Maddie has thirty days to find a job with another broker-dealer, or she will need to file a new registration
application. - D. Maddie is required to call all of her clients at QuikDeals to inform them she is no longer employed
there.
Answer: A
Explanation:
When Maddie quit her job, her status as a state-registered securities agent was
automatically terminated, and she will need to file a new application for registration with the Administrator
upon obtaining a position with another broker-dealer. If she does so within thirty days, her registration will
become effective as soon as she has filed her application and paid her application fee. While she is
required to notify the Administrator that she has terminated her employment with QuikDeals, there is no
requirement that she contact any of her clients at QuikDeals.
NEW QUESTION # 30
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. I only
- C. II and III only
- D. I and III only
Answer: C
Explanation:
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 # 31
Which of the following entities must sign a "consent to service of process," thereby allowing the Administrator to receive legal documents that are meant to be served to the entity in place of that entity?
I. agents
II. investment advisers
III. investment adviser representatives
IV. broker-dealers
- A. II and IV only
- B. I, II, III, and IV
- C. I and IV only
- D. II and III only
Answer: B
Explanation:
Explanation
Agents, investment advisers, investment adviser representatives, and broker-dealers must all sign a consent to service of process, allowing the Administrator to receive legal documents in their stead. The consent to service of process must accompany the application for registration with the state or the documentation provided with a notice filing when permitted.
NEW QUESTION # 32
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, III or IV only
- B. I, II, III, or IV
- C. I or III only
- D. III or IV only
Answer: B
Explanation:
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 # 33
Jeremy Sly considered himself somewhat of an inventor. The only problem was that his day job interfered
with his opportunity to exercise his creativity. He came up with a plan to get outside investors to support
his inventive activities. To this end, he produced and distributed a brochure advertising partnership
interests with a guaranteed return on investment of at least 15% after the first 12 months, based on what
he had allegedly generated from his other (non-existent) inventions. Given these facts, is Jeremy guilty of
any security violations under the Uniform Securities Act (USA)?
- A. Yes. Even an "offer" to sell securities must not contain any untruths.
- B. No. The facts don't indicate whether any partnership interests were actually sold, and there can be no
violation unless there is a sale. - C. No. An interest in a partnership is not considered a security.
- D. No. It is not against the law to believe in oneself and promote one's ideas.
Answer: A
Explanation:
Yes. Jeremy is guilty of security violations under the Uniform Securities Act when he
provides misleading information when offering securities for sale, even if no securities are actually sold.
Partnership interests fall under the definition of securities, and Jeremy's claim to have generated a return
of at least 15% on other inventions that he never created is an absolute falsehood.
NEW QUESTION # 34
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