SERIES 63 PREP QUESTIONS WITH
CORRECT ANSWERS
NASAA - ✔✔responsible for updating the uniform securities act as well as maintaining the
content of the Series 63
33 act - ✔✔-regulates primary markets
-prevent fraud in sale of new issues
34 act - ✔✔-established the SEC
-secondary markets
Investment advisors act of 1940 - ✔✔-governs IAs that must register with the SEC
National Securities Markets Improvement Act - ✔✔-eliminated the duplication of state and
federal regulation of securities and advisors.
-created specific category of securities that are exempt from formal registration
required elements of a security - ✔✔1. an investment of money
2. In a common enterprise
3. with the expection of profits
4. solely from efforts of others
what aren't securities - ✔✔-futures
-commodities
-endowments
-life insurance
,viatical investments - ✔✔-represent the purchase of the rights to the death benefits from
individual life insurance policies
-a policyholder who is ill or in need of cash will sell the rights to the death benefit from his life
insurance policy to a viatical company. They then resell these interest to investors
-considered a security
Suitable investors for viatical products - ✔✔-min net worth 150k and 100k annual income
-min n/w of 250k
-accredited investors
what you need to provide to the state to register a security - ✔✔1. amount of securities to be
offered
Investment advisory contracts must provide that: - ✔✔1. The adviser will not be compensated
on the basis of a share of the capital appreciation of the account.
2. The adviser may not assign client contracts without the consent of the client.
3. If the adviser is a partnership, clients will be notified of changes in the partnership within a
reasonable period of time.
to meet definition of adviser, person must satisfy - ✔✔1. Advice
2. Business
3. Compensation
limited discretion - ✔✔allows an adviser to enter orders to buy or sell securities, but not to
remove money or securities from account
full discretion - ✔✔gives adviser all of the abilites of limited discretion and check-writing
privileges and authority to remove other assets from the accounts
oral discretion - ✔✔available for 10 business days
, following that you need written consent
custody - ✔✔1. legal ownership or access to cleint's funds
2. full discretionary authority
3. inadvertently received client's funds and not returned them within 3 business days
4. accepted a third party check from a client and hasn't forwarded it within 3 business days
if adviser has custody they must... - ✔✔1. provide immediate written notification to the
administrator using Form ADV
2. use qualified custodian
3. providen written notification to clients of the custodian
4. send quarterly account statements
if adviser has custondy of client assets min financial requirement - ✔✔35,000
if adviser has limited discretionary authority - ✔✔10k
If adviser has prepaid fees of more that 500 six months or more at a time - ✔✔positive net
worth at all times
entities exempt from definition of state IA - ✔✔-IARs
-banks
-LATE (laweys, accountants, teachers, engineers)
exemption from state registration as an investment adviser - ✔✔1. adviser has no place of
business in the state and clients are only institutional investors
2. adviser has no place of business in the state and doesn't direct advice to more than 5 non-
institutional investors in a 12 month period
CORRECT ANSWERS
NASAA - ✔✔responsible for updating the uniform securities act as well as maintaining the
content of the Series 63
33 act - ✔✔-regulates primary markets
-prevent fraud in sale of new issues
34 act - ✔✔-established the SEC
-secondary markets
Investment advisors act of 1940 - ✔✔-governs IAs that must register with the SEC
National Securities Markets Improvement Act - ✔✔-eliminated the duplication of state and
federal regulation of securities and advisors.
-created specific category of securities that are exempt from formal registration
required elements of a security - ✔✔1. an investment of money
2. In a common enterprise
3. with the expection of profits
4. solely from efforts of others
what aren't securities - ✔✔-futures
-commodities
-endowments
-life insurance
,viatical investments - ✔✔-represent the purchase of the rights to the death benefits from
individual life insurance policies
-a policyholder who is ill or in need of cash will sell the rights to the death benefit from his life
insurance policy to a viatical company. They then resell these interest to investors
-considered a security
Suitable investors for viatical products - ✔✔-min net worth 150k and 100k annual income
-min n/w of 250k
-accredited investors
what you need to provide to the state to register a security - ✔✔1. amount of securities to be
offered
Investment advisory contracts must provide that: - ✔✔1. The adviser will not be compensated
on the basis of a share of the capital appreciation of the account.
2. The adviser may not assign client contracts without the consent of the client.
3. If the adviser is a partnership, clients will be notified of changes in the partnership within a
reasonable period of time.
to meet definition of adviser, person must satisfy - ✔✔1. Advice
2. Business
3. Compensation
limited discretion - ✔✔allows an adviser to enter orders to buy or sell securities, but not to
remove money or securities from account
full discretion - ✔✔gives adviser all of the abilites of limited discretion and check-writing
privileges and authority to remove other assets from the accounts
oral discretion - ✔✔available for 10 business days
, following that you need written consent
custody - ✔✔1. legal ownership or access to cleint's funds
2. full discretionary authority
3. inadvertently received client's funds and not returned them within 3 business days
4. accepted a third party check from a client and hasn't forwarded it within 3 business days
if adviser has custody they must... - ✔✔1. provide immediate written notification to the
administrator using Form ADV
2. use qualified custodian
3. providen written notification to clients of the custodian
4. send quarterly account statements
if adviser has custondy of client assets min financial requirement - ✔✔35,000
if adviser has limited discretionary authority - ✔✔10k
If adviser has prepaid fees of more that 500 six months or more at a time - ✔✔positive net
worth at all times
entities exempt from definition of state IA - ✔✔-IARs
-banks
-LATE (laweys, accountants, teachers, engineers)
exemption from state registration as an investment adviser - ✔✔1. adviser has no place of
business in the state and clients are only institutional investors
2. adviser has no place of business in the state and doesn't direct advice to more than 5 non-
institutional investors in a 12 month period
