SERIES 63 TEST QUESTIONS WITH
CORRECT ANSWERS
When trading on margin, clients are required to deposit:
Regulation T of the 1934 Act provided the Federal Reserve with the power to establish equity
requirements when trading on margin. The current initial requirement when purchasing common
stock is 50% of the market value of the security at the time of the transaction.
An investment adviser is entering into a contract with a new client. The adviser wants to
include a provision in the contract that says it will be compensated based on a share of the
capital gains or capital appreciation of the account. According to the NASAA Model Rule
on Performance-Based Compensation Exemption for Investment Advisers, the adviser
may insert this provision in the contract if the client is:
According to the NASAA Model Rules and the Investment Advisers Act of 1940, advisers are
generally prohibited from charging clients performance fees (fees based on the capital gains or
appreciation in the client's account). The concern is that advisers who are receiving performance
fees will be tempted to invest in speculative securities in order to increase their fees which might
not be in their clients long-term interests. However, there are exceptions to this prohibition for
qualified clients—clients who are considered sophisticated enough to look out for their own
interests.
Qualified clients include companies and natural persons (individuals) who have at least $1,000,000
under management with the adviser or who have a net worth in excess of $2,000,000.
, For individuals, the net worth calculation must exclude the value of that person's home. This
is the reason why choice (c) is correct and choice (b) is not.
When must action be taken for recovery on a transaction made in violation of a
registration provision?
If an agent sells a security in violation of a registration provision, a client must take action for
recovery within three years of the occurrence of the sale or two years of the discovery of the
violation, whichever occurs first.
Which of the following statements is NOT TRUE?
Agent refers to a person who represents an issuer in an exempt transaction
If an agent recommends a security to a client, this security must be suitable for the client
in relation to the client's investment objectives
If an agent receives insider information, the appropriate action would be to report the
news to a supervisor and ask the supervisor for advice
An agent may not promise a client that any investment will always result in a profit
Under the Uniform Securities Act, agent means any individual, other than a broker-dealer,
who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales
of securities. However, excluded from the definition is an individual who represents an issuer
in effecting transactions in certain exempt securities or who represents an issuer in an exempt
transaction.
Under what circumstances may an agent registered in State A sell securities to an investor
who is a resident of State B?
CORRECT ANSWERS
When trading on margin, clients are required to deposit:
Regulation T of the 1934 Act provided the Federal Reserve with the power to establish equity
requirements when trading on margin. The current initial requirement when purchasing common
stock is 50% of the market value of the security at the time of the transaction.
An investment adviser is entering into a contract with a new client. The adviser wants to
include a provision in the contract that says it will be compensated based on a share of the
capital gains or capital appreciation of the account. According to the NASAA Model Rule
on Performance-Based Compensation Exemption for Investment Advisers, the adviser
may insert this provision in the contract if the client is:
According to the NASAA Model Rules and the Investment Advisers Act of 1940, advisers are
generally prohibited from charging clients performance fees (fees based on the capital gains or
appreciation in the client's account). The concern is that advisers who are receiving performance
fees will be tempted to invest in speculative securities in order to increase their fees which might
not be in their clients long-term interests. However, there are exceptions to this prohibition for
qualified clients—clients who are considered sophisticated enough to look out for their own
interests.
Qualified clients include companies and natural persons (individuals) who have at least $1,000,000
under management with the adviser or who have a net worth in excess of $2,000,000.
, For individuals, the net worth calculation must exclude the value of that person's home. This
is the reason why choice (c) is correct and choice (b) is not.
When must action be taken for recovery on a transaction made in violation of a
registration provision?
If an agent sells a security in violation of a registration provision, a client must take action for
recovery within three years of the occurrence of the sale or two years of the discovery of the
violation, whichever occurs first.
Which of the following statements is NOT TRUE?
Agent refers to a person who represents an issuer in an exempt transaction
If an agent recommends a security to a client, this security must be suitable for the client
in relation to the client's investment objectives
If an agent receives insider information, the appropriate action would be to report the
news to a supervisor and ask the supervisor for advice
An agent may not promise a client that any investment will always result in a profit
Under the Uniform Securities Act, agent means any individual, other than a broker-dealer,
who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales
of securities. However, excluded from the definition is an individual who represents an issuer
in effecting transactions in certain exempt securities or who represents an issuer in an exempt
transaction.
Under what circumstances may an agent registered in State A sell securities to an investor
who is a resident of State B?
