Question 1

Which of the following scenarios describes activities that are disallowed under the NASAA Model Rules? I. Broker-dealer Anon observes that a client placed a stop loss order to sell her 1,500 shares of Amazon.com stock for $131 when the stock was selling for $134. Anon sold the stock for $133 when it started to fall during the day and credited the client’s account with $131 per share when stock dropped further to $129 a share. II. Penny is an agent with Broker-dealer Anon. She recently recommended that a client buy a stock that Penny thought would do well. As it turned out, Penny was wrong, and she offers to refund the commission that the client paid her. III. Broker-dealer Anon is part of the selling group of a hot new IPO. As such, the firm purchases 50% of the shares for its own portfolio and sells the remainder to the public.

Options :

A : I only

B : I and II only

C : I and III only

D : I, II, and III

Answer: D

Question 2

A hypothecation agreement refers to

Options :

A :

an agreement wherein a client gives his broker-dealer discretion to purchase securities that the broker-dealer deems appropriate in whatever quantity the broker-dealer feels appropriate and at a time and price the broker-dealer believes is a good deal.

B : an agreement that a client must sign prior to executing any short sales with the broker-dealer.

C :

an agreement signed by a client who is executing a margin transaction that allows the broker to hold the margined securities in street name as collateral for the loan.

D :

a document signed by a client indicating that he or she understands that some of the charts and examples presented in a broker-dealer’s advertising literature are based on hypothetical trades.

Answer: C

Question 3

Which of the following statements would not be in violation of NASAA rules regarding the sale of investment company shares? I. “Investing your money in shares of this money market mutual fund is identical to putting your money in a savings account at a bank, except the money market fund provides a higher return.” II. “Our U.S. government bond fund is invested only in government bonds issued by the U.S. government and is, therefore, a risk-free investment.” III. “You are investing $22,000 in this fund today. The fund has a 5% load at this investment level, but if you sign a letter of intent to invest another $3,000 within the next 13 months, your load will be reduced to 4%. If something comes up and you can’t invest the extra $3,000 within 13 months, you will only need to pay the difference in the two loads.”

Options :

A : I only

B : I and II only

C : III only

D : I, II, and III

Answer: C

Question 4

Sam Shyster had his day in court-and lost. His license to do business as an investment adviser in the state has been revoked. What legitimate options does Sam have available to him now?

Options :

A : Sam can move to another state and apply for registration as an investment adviser there.

B : Sam has 45 days in which to file an appeal with the attorney general.

C : Sam can register with the SEC as an investment adviser, which will exempt him from state registration requirements.

D : Sam has 60 days to file an appeal of the decision in a court of law.

Answer: D

Question 5

Mina is a new agent with SecureMoney Broker-Dealers and is struggling to make ends meet. She gets a job as a receptionist at a fitness club on the weekends to generate more income. Which of the following is true?

Options :

A : Mina should have notified SecureMoney in writing before signing on to work at the fitness club.

B :

Because the job as a receptionist at a fitness club has nothing to do with the world of finance, Mina has done nothing inappropriate.

C : Mina simply needs to tell her immediate supervisor at SecureMoney about her new job.

D : Mina needs to send notice to the state Administrator informing him of her extracurricular activity.

Answer: A

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