LA SERIES 103 EXAM QUESTIONS AND
CORRECT ANSWERS (VERIFIED ANSWERS)
PLUS RATIONALES 2026 Q&A | INSTANT
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Core Domains:
• Federal Securities Regulations (Securities Act of 1933 & Securities
Exchange Act of 1934)
• State Securities Regulations (Blue Sky Laws)
• Ethics and Fiduciary Standards (NASAA Model Rules)
• Equity and Debt Securities (Stocks, Bonds, REITs)
• Investment Companies (Mutual Funds, ETFs, Closed-End Funds)
• Annuities, Insurance Products, and Retirement Plans
• Economic Concepts (Monetary Policy, Inflation, Taxation)
• Client Communication, Suitability, and Anti-Fraud Provisions
• Recordkeeping and Compliance Procedures
Introduction:
This comprehensive assessment is designed to evaluate the professional knowledge,
regulatory understanding, and ethical decision-making skills required for
securities professionals. The exam covers foundational economic principles,
specific security products, and complex federal and state regulatory frameworks.
Each question is scenario-based to test the candidate's ability to apply rules to
real-world situations, ensuring they can navigate client interactions with integrity
and compliance. Candidates must analyze facts, apply regulations like the Uniform
Securities Act, and determine the best course of action. This rigorous test ensures
that successful candidates are equipped to protect investors and maintain market
integrity.
,SECTION ONE: QUESTIONS (1 – 100)
Question 1
According to the Uniform Securities Act, which of the following is considered a
"sale" or "offer to sell" a security?
A. A gift of a non-assessable security.
B. A stock dividend that changes the shareholder's proportionate interest.
C. A merger involving the exchange of shares.
D. A preliminary negotiation for a future transaction.
D
RATIONALE: Under the Uniform Securities Act, a "sale" or "offer to sell"
does not include preliminary negotiations or agreements between an issuer and an
underwriter. Gifts are not considered sales, stock dividends are not sales if they do
not alter proportion, and mergers are often exempt.
Question 2
An investment adviser representative who manages a client's portfolio on a
discretionary basis must:
A. Obtain written authorization from the client prior to each transaction.
B. Obtain written discretionary authority from the client and have the adviser's
principal approve it.
C. Execute trades without prior client approval to ensure speed.
D. Only trade in mutual funds to avoid suitability concerns.
B
RATIONALE: Discretionary authority must be granted in writing by the client.
Additionally, the principal of the advisory firm must approve the account before
discretionary trading begins. Prior approval for each transaction is not required if
the discretion is granted.
Question 3
Under the Securities Act of 1933, an issuer may file a Form S-1 Registration
Statement. The "waiting period" begins:
A. Immediately upon the filing of the registration statement.
B. When the SEC declares the registration effective.
,C. When the preliminary prospectus is distributed.
D. 20 days after the filing date.
A
RATIONALE: The waiting period begins immediately after the registration
statement is filed with the SEC. During this time, the SEC reviews the filing, and
the issuer may distribute a preliminary prospectus (Red Herring).
Question 4
Which of the following is NOT required to be included in the "Statement of
Additional Information" (SAI) for a mutual fund?
A. The fund's investment objectives.
B. The fund's financial statements.
C. A listing of the fund's directors and officers.
D. The fund's brokerage allocation policies.
A
RATIONALE: The investment objectives are required to be in the prospectus,
not necessarily the SAI. The SAI contains detailed information about the fund's
policies, financials, and management.
Question 5
An "agent" as defined by the Uniform Securities Act is generally exempt from
registration when:
A. Representing a broker-dealer in the secondary market.
B. Effecting transactions for an issuer's employee benefit plan.
C. Acting as a finder arranging a merger.
D. Selling securities to a relative of the agent.
B
RATIONALE: Agents representing a broker-dealer in transactions for an
issuer's employee benefit plan are often exempt, provided they are not
compensated based on the volume of sales.
Question 6
A client has a "cash account" with a broker-dealer. The broker-dealer re-
hypothecates the client's securities. This is:
, A. Permitted if the client signs a hypothecation agreement.
B. Permitted only if the client has a margin account.
C. Prohibited under all circumstances.
D. Permitted if the securities are fully paid for.
B
RATIONALE: Re-hypothecation (pledging client securities as collateral for a
broker-dealer loan) is only permitted in margin accounts. It is prohibited for fully
paid securities in cash accounts.
Question 7
An investment adviser has custody of client funds. To comply with the "Custody
Rule," the adviser must:
A. Keep client funds in the adviser's general operating account.
B. Have an independent public accountant conduct a surprise examination.
C. Provide clients with a receipt for every deposit.
D. Maintain a fidelity bond of at least $1,000,000.
B
RATIONALE: The Custody Rule requires advisers with custody to undergo a
surprise annual examination by an independent public accountant to verify client
assets.
Question 8
Which of the following is considered an "exempt transaction" under the Uniform
Securities Act?
A. A sale to a trust with assets exceeding $5,000,000.
B. A sale to a bank acting as a fiduciary.
C. An offer to sell securities to the general public.
D. A sale to a senior citizen over the age of 70.
B
RATIONALE: Sales to financial institutions (like banks) and fiduciaries are
typically exempt transactions under the Uniform Securities Act. Sales to trusts
generally require more than just high assets to be exempt.
CORRECT ANSWERS (VERIFIED ANSWERS)
PLUS RATIONALES 2026 Q&A | INSTANT
DOWNLOAD PDF
Core Domains:
• Federal Securities Regulations (Securities Act of 1933 & Securities
Exchange Act of 1934)
• State Securities Regulations (Blue Sky Laws)
• Ethics and Fiduciary Standards (NASAA Model Rules)
• Equity and Debt Securities (Stocks, Bonds, REITs)
• Investment Companies (Mutual Funds, ETFs, Closed-End Funds)
• Annuities, Insurance Products, and Retirement Plans
• Economic Concepts (Monetary Policy, Inflation, Taxation)
• Client Communication, Suitability, and Anti-Fraud Provisions
• Recordkeeping and Compliance Procedures
Introduction:
This comprehensive assessment is designed to evaluate the professional knowledge,
regulatory understanding, and ethical decision-making skills required for
securities professionals. The exam covers foundational economic principles,
specific security products, and complex federal and state regulatory frameworks.
Each question is scenario-based to test the candidate's ability to apply rules to
real-world situations, ensuring they can navigate client interactions with integrity
and compliance. Candidates must analyze facts, apply regulations like the Uniform
Securities Act, and determine the best course of action. This rigorous test ensures
that successful candidates are equipped to protect investors and maintain market
integrity.
,SECTION ONE: QUESTIONS (1 – 100)
Question 1
According to the Uniform Securities Act, which of the following is considered a
"sale" or "offer to sell" a security?
A. A gift of a non-assessable security.
B. A stock dividend that changes the shareholder's proportionate interest.
C. A merger involving the exchange of shares.
D. A preliminary negotiation for a future transaction.
D
RATIONALE: Under the Uniform Securities Act, a "sale" or "offer to sell"
does not include preliminary negotiations or agreements between an issuer and an
underwriter. Gifts are not considered sales, stock dividends are not sales if they do
not alter proportion, and mergers are often exempt.
Question 2
An investment adviser representative who manages a client's portfolio on a
discretionary basis must:
A. Obtain written authorization from the client prior to each transaction.
B. Obtain written discretionary authority from the client and have the adviser's
principal approve it.
C. Execute trades without prior client approval to ensure speed.
D. Only trade in mutual funds to avoid suitability concerns.
B
RATIONALE: Discretionary authority must be granted in writing by the client.
Additionally, the principal of the advisory firm must approve the account before
discretionary trading begins. Prior approval for each transaction is not required if
the discretion is granted.
Question 3
Under the Securities Act of 1933, an issuer may file a Form S-1 Registration
Statement. The "waiting period" begins:
A. Immediately upon the filing of the registration statement.
B. When the SEC declares the registration effective.
,C. When the preliminary prospectus is distributed.
D. 20 days after the filing date.
A
RATIONALE: The waiting period begins immediately after the registration
statement is filed with the SEC. During this time, the SEC reviews the filing, and
the issuer may distribute a preliminary prospectus (Red Herring).
Question 4
Which of the following is NOT required to be included in the "Statement of
Additional Information" (SAI) for a mutual fund?
A. The fund's investment objectives.
B. The fund's financial statements.
C. A listing of the fund's directors and officers.
D. The fund's brokerage allocation policies.
A
RATIONALE: The investment objectives are required to be in the prospectus,
not necessarily the SAI. The SAI contains detailed information about the fund's
policies, financials, and management.
Question 5
An "agent" as defined by the Uniform Securities Act is generally exempt from
registration when:
A. Representing a broker-dealer in the secondary market.
B. Effecting transactions for an issuer's employee benefit plan.
C. Acting as a finder arranging a merger.
D. Selling securities to a relative of the agent.
B
RATIONALE: Agents representing a broker-dealer in transactions for an
issuer's employee benefit plan are often exempt, provided they are not
compensated based on the volume of sales.
Question 6
A client has a "cash account" with a broker-dealer. The broker-dealer re-
hypothecates the client's securities. This is:
, A. Permitted if the client signs a hypothecation agreement.
B. Permitted only if the client has a margin account.
C. Prohibited under all circumstances.
D. Permitted if the securities are fully paid for.
B
RATIONALE: Re-hypothecation (pledging client securities as collateral for a
broker-dealer loan) is only permitted in margin accounts. It is prohibited for fully
paid securities in cash accounts.
Question 7
An investment adviser has custody of client funds. To comply with the "Custody
Rule," the adviser must:
A. Keep client funds in the adviser's general operating account.
B. Have an independent public accountant conduct a surprise examination.
C. Provide clients with a receipt for every deposit.
D. Maintain a fidelity bond of at least $1,000,000.
B
RATIONALE: The Custody Rule requires advisers with custody to undergo a
surprise annual examination by an independent public accountant to verify client
assets.
Question 8
Which of the following is considered an "exempt transaction" under the Uniform
Securities Act?
A. A sale to a trust with assets exceeding $5,000,000.
B. A sale to a bank acting as a fiduciary.
C. An offer to sell securities to the general public.
D. A sale to a senior citizen over the age of 70.
B
RATIONALE: Sales to financial institutions (like banks) and fiduciaries are
typically exempt transactions under the Uniform Securities Act. Sales to trusts
generally require more than just high assets to be exempt.
