FINRA-SERIES-63 Online Practice Questions and Answers

When selling shares of an investment company to a client, an agent must provide the client with

I. the fund's prospectus, which provides information on any loads or other fees as well as historical return information.

II. information about any breakpoints if it is a load fund along with an explanation of a letter of intent

III.

information regarding the investment adviser used by the fund IV. an explanation of the various loads and fees outlined in the fund's prospectus

A.

I, II, III, and IV

B.

I, II, and III only

C.

I and II only

D.

I, II, and IV only

Penny Swyne, an agent employed by Bear Broker-Dealers, has received a written complaint via e-mail from Mr. Wolf regarding her performance as his agent. What are Ms. Swyne's legitimate options?

A. Ms. Swyne can call Mr. Wolf and offer to meet him for a romantic dinner and try to convince him to revoke the complaint.

B. As illegal as it may sound, since the complaint was via e-mail, Ms. Swyne can hit the delete button and make it all go away.

C. Ms. Swyne must forward the complaint to the state Administrator.

D. Ms. Swyne must provide Bear Broker-Dealers with a copy of the complaint.

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. 30 days.

B. 45 days.

C. 60 days.

D. 1 year.

Which of the following documents must a broker-dealer deliver on or prior to the confirmation due date to a client who is purchasing a security?

A. a margin agreement if the purchase is being made on margin

B. a final prospectus

C. a preliminary prospectus

D. a hypothecation agreement

Registration by coordination is provided for by which of the following federal securities acts?

A. Securities Act of 1933

B. Securities and Exchange Act of 1934

C. Investment Advisers Act of 1940

D. Investment Company Act of 1940

For how long after the effective date is a security's registration valid?

A. three months

B. six months

C. one year

D. two years

According to the NASAA Model Rules, which of the following institutions would not be considered a qualified custodian?

A. a broker-dealer that is registered with the state

B. a bank that is insured by a private, state-sponsored insurance company

C. a foreign financial institution

D. a savings institution that is insured by the FDIC

An investment adviser may act as a custodian for a client's securities if

I. the Administrator of the state doesn't have a rule prohibiting custodial arrangements.

II. he informs the state Administrator in writing that he will be acting as a custodian for the client.

III.

he arranges to pay an independent certified public accountant to perform an unannounced audit of his books each year so that the accountant can report his findings to the state Administrator.

A.

I only

B.

I and II only

C.

I and III only

D.

I, II and III

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

An investment adviser suggests that his client, Arnold, a 74-year old gentleman, should consider a reallocation of the assets in his portfolio. The adviser tells Arnold that he has far too much invested in bonds, which don't earn as much as stocks. He advises Arnold to take 80% of the money he has in bonds and invest it in an aggressive growth mutual fund that has provided an average annual return of 40% over the past three years. Arnold is impressed and follows this advice. Shortly thereafter, there is a steep drop in the market in general, and the net asset value of the aggressive growth mutual fund falls 85%.

Does Arnold have any remedies available to him?

A. No. Arnold had the choice and got greedy. As the old saying goes, "Bulls get rich, and bears get rich, but pigs get led to slaughter."

B. Yes. Arnold can sue for the amount of his losses, plus interest, as well as an amount assessed by the court for "pain and suffering."

C. No. The investment adviser had no way of knowing that the market was going to fall when he provided the advice, so the adviser did not fail in his fiduciary responsibility to Arnold.

D. Yes. Arnold can sue for the amount of his losses, plus interest, court costs, and attorneys' fees.

Mr. Bigwig, CEO of HiGrowth Corporation, meets with the president of BigFee Investment Bankers and arranges for BigFee to underwrite an Initial Public Offering (IPO) for the firm. When the IPO comes to market, GetErDone Broker-Dealers

is part of the selling group, which handles the sale of the stock to the public.

In this scenario, which party is acting as a dealer?

A. HiGrowth Corporation

B. Mr. Bigwig

C. BigFee Investment Bankers

D. GetErDone Broker-Dealers

If a person has had its license revoked by the Administrator of the state and has appealed the decision to a court of law, that person

A. can continue business as usual pending the resolution of the appeal.

B. must notify the Administrator of the state that it has appealed the decision.

C. is considered to have a revoked license until the courts rule otherwise.

D. Both B and C are true statements.

Which of the following would not fall under the classification of "institutional investor"?

A. Prudential Insurance

B. Chase Bank

C. Neuring Investment Advisers

D. Franklin Templeton Mutual Funds

You are a registered agent with a large brokerage firm. Your client is a very busy woman. She is interested in purchasing 500 shares of Google, but she thinks this morning's opening price is too high. She's going to be in meetings and then on a transatlantic flight. She wants the purchase to take place today because she believes Google's price is just going to keep rising with only the occasional daily ups and downs. She wants you to use your discretion and try to get her the best price for the stock in today's trading session.

Which of the following statements are true?

A. You have to tell her that you can't do this without a signed discretionary authorization from her, and there's none on file.

B. You tell her that you can do this for her, but only if you execute it as a margin transaction.

C. You tell her you can enter it for her as a "market not held" order.

D. You tell her to have her secretary type up a discretionary authorization for her to sign and drop in the mail before she boards the plane. As long as the written authorization is in the mail, you can place the order.

Once a broker-dealer has applied for and been granted state registration, the registration remains valid

A. until December 31st.

B. for twelve months.

C. for three years.

D. for five years.