Question 1

According to the NASAA Model Rules, a broker-dealer is not permitted to allow a customer to engage in margin transactions unless

Options :

A : the broker-dealer already has a margin agreement signed by the client in hand.

B : the broker-dealer receives a margin agreement signed by the client promptly after the client’s first margin transaction.

C : the client has a net worth of at least $500,000.

D : the client has been a customer of the firm for at least 6 months.

Answer: B

Question 2

Registration by coordination is provided for by which of the following federal securities acts?

Options :

A : Securities Act of 1933

B : Securities and Exchange Act of 1934

C : Investment Advisers Act of 1940

D : Investment Company Act of 1940

Answer: A

Question 3

MoeMoney Investment Advisers, LLC is registered in the state of Texas, and its three offices are all located in the greater Dallas-Fort Worth area. Five of its clients-all individuals-have relocated to Colorado and all have indicated a desire to retain the services of MoeMoney. In order for this to be possible,

Options :

A : MoeMoney will need to apply for and be granted registration as an investment adviser in the state of Colorado.

B : each client will have to write a letter to the Administrator of the state of Colorado on MoeMoney’s behalf.

C :

MoeMoney will need to apply for and be granted registration as an investment adviser representative in the state of Colorado.

D : Neither MoeMoney nor its clients need do anything.

Answer: D

Question 4

Ken Con is an agent with Blue Sky Broker-Dealers. He gets up early each morning so that he can study any late-breaking news that may affect the markets and figure out ways to incorporate this news into conversations with select clients in order to pressure them to restructure their portfolios by selling holdings they have in one particular industry to invest the money in another particular industry. Ken has been very successful with this strategy and executes more trades for his clients than any other agent with the firm, but is he in danger of losing his license?

Options :

A : Yes. Ken is engaging in churning, a prohibited practice and can have his license revoked or suspended.

B :

It depends. If his clients have lost money, Ken may lose his license; but if a review indicates that his clients’ accounts earn profits, then his license is safe.

C : Yes. Ken is guilty of the prohibited practice of “tailgating.”

D : No. Ken is just a successful sales person who is working harder than the other agents in the firm.

Answer: A

Question 5

Which of the following may an investment adviser not use in an attempt to solicit new clients?

Options :

A : testimonials of satisfied clients

B :

a complete list of the stocks they have recommended in the past year, even if a statement is included that states that past performance is no guarantee of future performance

C : a free initial consultation, with no obligation on the part of the potential client

D : a free financial planning kit, with no obligation on the part of the potential client

Answer: A

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