SERIES 63 MOST TESTED EXAM
QUESTIONS WITH CORRECT ANSWERS
Under the Uniform Securities Act, which of the following activities of an investment adviser
would constitute impersonal advisory services?
A) Telling a client to buy municipal bonds in order to reduce her tax liability
B) Providing clients with a recommended list of mutual funds for their retirement accounts
C) Giving a client a list of mutual funds with the lowest expense ratios for the past five years
D) Telling a client that investment XYZ will meet her investment objectives - ✔✔C) Giving a
client a list of mutual funds with the lowest expense ratios for the past five years
Impersonal advisory services are those activities of an investment adviser that do not meet the
specific needs or objectives of a client, or that do not render an opinion of the investment merits
of a particular security.
A newly hired employee is applying for registration as an agent in State X. What information is
NOT required to be disclosed by the agent on his application for registration (Form U4)?
A) Any alias that the agent uses
B) The fact that a real estate partnership controlled by the agent declared bankruptcy five years
ago
C) The fact that the agent is applying for a mortgage
D) A felony charge that the agent received five years ago - ✔✔C) The fact that the agent is
applying for a mortgage
An applicant for registration must disclose any alias used, felony charges, personal bankruptcies,
or bankruptcies of entities that the agent controlled during the last 10 years. The fact that the
agent is applying for a mortgage is not required to be disclosed on Form U4.
A broker-dealer must keep all the following records, EXCEPT:
,A) Original copies of all incoming client correspondence
B) Form ADV for any investment adviser for which the broker-dealer provides safekeeping
services
C) Signed copies of all discretionary account agreements executed by clients
D) Copies of all order tickets - ✔✔B) Form ADV for any investment adviser for which the
broker-dealer provides safekeeping services
According to the Securities Exchange Act of 1934 (Rules 17a-3 and 17a-4), a broker-dealer must
keep all these records except for Form ADV. Investment advisers who have custody of client
assets must place these assets with a qualified custodian for safekeeping (such as a broker-dealer)
and must notify the regulators that it has custody using Form ADV.
After buying a large block of stock for herself, an agent is overheard telling another employee
that after her purchase she recommended the same stock to a number of her clients who also
purchased it. After completing the clients' orders, the agent sold her stock for a large profit. The
agent's prohibited action is best described as:
A) Cross trading
B) Making unsuitable recommendations
C) Front-running
D) Excessive trading - ✔✔front running
Front-running is the prohibited practice of a broker-dealer or agent buying or selling stock before
the public release of proprietary information concerning a large block order. In this question,
another form of front-running is exemplified by the agent buying a stock and then recommending
that her clients buy the same stock. After the recommendation to her clients, the agent would
likely benefit from the potential increase in the stock's price. Even if the client recommendations
are suitable, it is unethical for the agent to put herself before her clients. (67710)
What information is not included on the registration application for a broker-dealer?
A) Whether the broker-dealer is a partnership or corporation
B) The types of businesses in which the broker-dealer intends to engage
,C) The names and addresses of the agents the broker-dealer intends to register
D) The broker-dealer's current financial condition - ✔✔C) The names and addresses of the
agents the broker-dealer intends to register
The names and addresses of the agents the broker-dealer intends to register are not required. The
qualifications and history of any partner, officer, director, or controlling person are required.
(75505)
A client requests that her agent display a quote in a thinly traded security. The client is the
majority shareholder in this security and the broker-dealer honors the request and displays the
quote. Which of the following statements is TRUE?
A) This would be permissible if the broker-dealer believed the quote was bona fide
B) This would be considered an unethical business practice
C) A broker-dealer may always enter a quote on behalf of a client
D) A broker-dealer is not permitted to enter quotes on behalf of its clients - ✔✔A) This would
be permissible if the broker-dealer believed the quote was bona fide
A broker-dealer is permitted to publish quotes (bid and ask prices) on behalf of its clients or for
its own account. The broker-dealer must believe the quotes are bona fide and not intended to
manipulate the market price of a security. If the quotes are not bona fide and the broker-dealer
publishes them, it would have committed an unethical business practice. (75703)
The LEAST suitable investment for Mrs. McCarthy, a 70-year-old investor, would be a:
A) Treasury note
B) Utility stock mutual fund
C) Fixed annuity
D) Zero-coupon bond - ✔✔D) Zero-coupon bond
, An assumption that you must make with this question is that since the client is 70, she is most
likely retired and dependent on her portfolio for income. Zero-coupon bonds do not provide
current income that the majority of elderly investors are seeking. In addition, zero-coupon bonds
traditionally are the most volatile securities in periods of fluctuating interest rates. The
combination of the volatility and lack of current income make zero-coupon bonds the most
unsuitable vehicle of the choices given.
According to the Uniform Securities Act, when does a broker-dealer's registration expire?
AWhen the Administrator declares it to be no longer effective.
BWhen the broker-dealer notifies the Administrator that it no longer has an office in the state.
One year from the effective date.
On December 31. - ✔✔Dec 31
A Canadian broker-dealer has many clients who vacation frequently in the United States. In
order to continue doing business with these customers while they are in the United States, the
broker-dealer must file all the following material with the Administrator, EXCEPT:
A) A Consent to Service of Process
B) A Form B/D
C) A copy of current registration filed in Canada
D) Proof of membership in a self-regulatory organization - ✔✔Form B/D
A Canadian broker-dealer may continue to do business with any clients in the United States with
whom it has a bona fide preexisting relationship and who are here temporarily—not permanent
residents of the United States. According to the Uniform Securities Act, the broker-dealer must
be registered properly in Canada and must file the following documents with the Administrator:
-a Consent to Service of Process,
-a copy of the registration document filed with its Canadian regulator at the provincial level
-proof that it is regulated by a self-regulatory entity, such as an exchange.
QUESTIONS WITH CORRECT ANSWERS
Under the Uniform Securities Act, which of the following activities of an investment adviser
would constitute impersonal advisory services?
A) Telling a client to buy municipal bonds in order to reduce her tax liability
B) Providing clients with a recommended list of mutual funds for their retirement accounts
C) Giving a client a list of mutual funds with the lowest expense ratios for the past five years
D) Telling a client that investment XYZ will meet her investment objectives - ✔✔C) Giving a
client a list of mutual funds with the lowest expense ratios for the past five years
Impersonal advisory services are those activities of an investment adviser that do not meet the
specific needs or objectives of a client, or that do not render an opinion of the investment merits
of a particular security.
A newly hired employee is applying for registration as an agent in State X. What information is
NOT required to be disclosed by the agent on his application for registration (Form U4)?
A) Any alias that the agent uses
B) The fact that a real estate partnership controlled by the agent declared bankruptcy five years
ago
C) The fact that the agent is applying for a mortgage
D) A felony charge that the agent received five years ago - ✔✔C) The fact that the agent is
applying for a mortgage
An applicant for registration must disclose any alias used, felony charges, personal bankruptcies,
or bankruptcies of entities that the agent controlled during the last 10 years. The fact that the
agent is applying for a mortgage is not required to be disclosed on Form U4.
A broker-dealer must keep all the following records, EXCEPT:
,A) Original copies of all incoming client correspondence
B) Form ADV for any investment adviser for which the broker-dealer provides safekeeping
services
C) Signed copies of all discretionary account agreements executed by clients
D) Copies of all order tickets - ✔✔B) Form ADV for any investment adviser for which the
broker-dealer provides safekeeping services
According to the Securities Exchange Act of 1934 (Rules 17a-3 and 17a-4), a broker-dealer must
keep all these records except for Form ADV. Investment advisers who have custody of client
assets must place these assets with a qualified custodian for safekeeping (such as a broker-dealer)
and must notify the regulators that it has custody using Form ADV.
After buying a large block of stock for herself, an agent is overheard telling another employee
that after her purchase she recommended the same stock to a number of her clients who also
purchased it. After completing the clients' orders, the agent sold her stock for a large profit. The
agent's prohibited action is best described as:
A) Cross trading
B) Making unsuitable recommendations
C) Front-running
D) Excessive trading - ✔✔front running
Front-running is the prohibited practice of a broker-dealer or agent buying or selling stock before
the public release of proprietary information concerning a large block order. In this question,
another form of front-running is exemplified by the agent buying a stock and then recommending
that her clients buy the same stock. After the recommendation to her clients, the agent would
likely benefit from the potential increase in the stock's price. Even if the client recommendations
are suitable, it is unethical for the agent to put herself before her clients. (67710)
What information is not included on the registration application for a broker-dealer?
A) Whether the broker-dealer is a partnership or corporation
B) The types of businesses in which the broker-dealer intends to engage
,C) The names and addresses of the agents the broker-dealer intends to register
D) The broker-dealer's current financial condition - ✔✔C) The names and addresses of the
agents the broker-dealer intends to register
The names and addresses of the agents the broker-dealer intends to register are not required. The
qualifications and history of any partner, officer, director, or controlling person are required.
(75505)
A client requests that her agent display a quote in a thinly traded security. The client is the
majority shareholder in this security and the broker-dealer honors the request and displays the
quote. Which of the following statements is TRUE?
A) This would be permissible if the broker-dealer believed the quote was bona fide
B) This would be considered an unethical business practice
C) A broker-dealer may always enter a quote on behalf of a client
D) A broker-dealer is not permitted to enter quotes on behalf of its clients - ✔✔A) This would
be permissible if the broker-dealer believed the quote was bona fide
A broker-dealer is permitted to publish quotes (bid and ask prices) on behalf of its clients or for
its own account. The broker-dealer must believe the quotes are bona fide and not intended to
manipulate the market price of a security. If the quotes are not bona fide and the broker-dealer
publishes them, it would have committed an unethical business practice. (75703)
The LEAST suitable investment for Mrs. McCarthy, a 70-year-old investor, would be a:
A) Treasury note
B) Utility stock mutual fund
C) Fixed annuity
D) Zero-coupon bond - ✔✔D) Zero-coupon bond
, An assumption that you must make with this question is that since the client is 70, she is most
likely retired and dependent on her portfolio for income. Zero-coupon bonds do not provide
current income that the majority of elderly investors are seeking. In addition, zero-coupon bonds
traditionally are the most volatile securities in periods of fluctuating interest rates. The
combination of the volatility and lack of current income make zero-coupon bonds the most
unsuitable vehicle of the choices given.
According to the Uniform Securities Act, when does a broker-dealer's registration expire?
AWhen the Administrator declares it to be no longer effective.
BWhen the broker-dealer notifies the Administrator that it no longer has an office in the state.
One year from the effective date.
On December 31. - ✔✔Dec 31
A Canadian broker-dealer has many clients who vacation frequently in the United States. In
order to continue doing business with these customers while they are in the United States, the
broker-dealer must file all the following material with the Administrator, EXCEPT:
A) A Consent to Service of Process
B) A Form B/D
C) A copy of current registration filed in Canada
D) Proof of membership in a self-regulatory organization - ✔✔Form B/D
A Canadian broker-dealer may continue to do business with any clients in the United States with
whom it has a bona fide preexisting relationship and who are here temporarily—not permanent
residents of the United States. According to the Uniform Securities Act, the broker-dealer must
be registered properly in Canada and must file the following documents with the Administrator:
-a Consent to Service of Process,
-a copy of the registration document filed with its Canadian regulator at the provincial level
-proof that it is regulated by a self-regulatory entity, such as an exchange.
