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Exam 4: Uniform Securities Act USA and State Registration Requirements

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Question 91

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Under the Uniform Securities Act (USA) , which of the following statements would be disallowed?

A) The government of the U.S. guarantees a 3% interest rate, to be paid semiannually, on a new 5-year Treasury note.
B) A sales representative of GetErDone Broker-Dealers guarantees that a client can expect an average annual rate of return of 2% on a mutual fund investment the sales representative is selling, pointing to the fact that the fund has returned an average annual rate of return of 6% over the past ten years.
C) An insurance company guarantees a fixed payment of $300 a month for life on an annuity it is selling.
D) Neither the statements in Selections B or C would be allowed under the guidelines of the Uniform Securities Act.

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Question 92

Multiple Choice

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Which of the following describes an "exempt security," as defined by the Uniform Securities Act (USA) ?

A) An exempt security is any security that is being sold by an institutional investor, such as a bank, to another institutional investor, such as another bank or an insurance company.
B) An exempt security is one that need not be registered in the state in which it is sold.
C) An exempt security is any security being sold as a private placement.
D) An exempt security is any security that is being sold in an isolated non-issuer transaction.

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Question 93

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L. Ranger is an agent for a broker-dealer and has overheard "talk" that a merger between two well-known high-tech companies is about to take place. Mr. Ranger knows that, on average, in these instances the target firm's price spikes. He calls his client and good friend, Mr. Tonto, and tells him of the rumor, suggesting that Tonto might want to buy shares in the target firm. He tells Mr. Tonto that if the rumor isn't true, the target firm's price may not spike at all and may, in fact, decline, and suggests that Mr. Tonto not invest any money he isn't willing to lose. Mr. Ranger knows that his friend likes to gamble, and decided he wouldn't be much of a friend if he didn't inform Tonto of this potential opportunity. Has Mr. L. Ranger violated any laws or engaged in any prohibited practices?

An investment adviser may not

You are an investment adviser to Mr. Crochety, an elderly man who lives solely on his social security income although he managed to accumulate an investment portfolio worth about $100,000 over the years. Mr. Crochety recently got his hands on a business publication and read about the tax-free interest paid by municipal bonds. He calls you and instructs you to sell his other investments and invest all his money in a municipal bond portfolio, so that "the government doesn't get any more of my hard-earned money." You tell Mr. Crochety that you don't believe this is a wise move because he's in such a low tax bracket that municipal bonds are not a good investment for him, but he is insistent. Based on these facts, you should

BigCash Broker-Dealers is registered in the state and is in the process of purchasing a smaller broker-dealer, Target Investments, as a subsidiary. Target Investments is also registered in the state. After completing the purchase, what actions must BigCash take regarding registration of its new subsidiary?

In an arrangement between MoeMoney Investment Advisers and one of the firm's clients, the YourMoney mutual fund, part of MoeMoney's compensation is based how the fund Performs compared to the S&P 500 Index. If the return on the fund exceeds the return on the index, MoeMoney gets a bonus. The S&P 500 had a return of negative 8% this year, and the fund returned a negative 2%, so MoeMoney invoiced the client for the bonus. Has MoeMoney violated any securities laws?

Which of the following constitutes a non-punitive order?

In its capacity as a full service broker, A-2-Z Associates is also in the investment advisory industry, charging its clients for investment advice for additional remuneration. One of the firm's clients has been advised to buy some U.S. government treasury inflation-protected securities (TIPS.) A-2-Z is a dealer in these securities in the secondary market. Which of the following statements is true?

Which of the following does not describe a prohibited activity by investment advisers and their representatives, according to NASAA Model Rules?

Which of the following statements about agents is (are) false?

Broker-Dealer Wheeler has no offices in the state. Wheeler does, however, sell corporate bonds from his portfolio to banks and insurance companies located in the state that Purchase the bonds for their investment portfolios. He executes about twelve of these transactions a year. Wheeler profits from the price appreciation of the bonds during the time he held them, but receives no other form of compensation. Based on these facts,

Which of the following persons is required to maintain its records in accordance with state dictates and meet the minimum net capital requirement imposed by the state? I. federal covered adviser II. state-registered investment adviser III. investment adviser representative

Price pegging refers to

Bootstraps, Inc. is a family-owned business that has experienced enormous growth in the last couple of years. The business needs more cash to support this growth and has decided to issue some promissory notes, each with a face value of $5,000, for sale to the general public. The firm plans to hire three individuals to help them sell these notes. These individuals will earn a commission based on the notes they sell. Given these facts, which of the following is true?

Which of the following persons falls under the definition of "broker-dealer," as defined by the Uniform Securities Act (USA) ?

Your client calls you with a market order to purchase 500 shares of the stock of Oracle and asks when payment will be due. If today is Wednesday, September 15^th, you inform the client that payment is due on

Which of the following is an example of a non-issuer transaction?

"Federal covered securities" were defined and exempted from state registration requirements by the:

In accordance with the National Securities Markets Improvement Act of 1996, which of the following is a federal covered adviser and, therefore, exempt from registering with the state Administrator? I. An adviser who does business in 26 states. II. An adviser who manages the portfolio of a mutual fund that is registered with the SEC. III. An adviser with $35 million in assets under management