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

While on vacation in Colorado, Mr. Moneybags became interested in the stock of a company called SafeAway, which designs and installs customized high-tech security systems in the multimillion dollar mansions located in Colorado’s pricier ski resort areas, such as Vail and Aspen. Upon returning to his home in Boston, he calls his broker-dealer with an order to purchase 10,000 shares of the stock, which he learned trades in the over-the-counter market. Fast Eddie, a registered agent with his broker-dealer, discovers that SafeAway’s stock is registered only in the states of Colorado and Wyoming. Neither Fast Eddie nor his broker-dealer are registered to do business in either of those states. Under these circumstances,

Options :

A :

Fast Eddie cannot effect Mr. Moneybags purchase of SafeAway stock since neither he nor his broker are registered to do business in Colorado or Wyoming, and SafeAway stock is not registered for sale in the state of Massachusetts.

B :

Fast Eddie can execute the trade for Mr. Moneybags since this would be considered an exempt transaction because it is a private placement.

C :

Fast Eddie should contact a broker-dealer that is registered in either Colorado or Wyoming and negotiate a finder’s fee for referring Mr. Moneybags to them.

D :

Fast Eddie can execute the trade for Mr. Moneybags since this would be considered an exempt transaction because it is an unsolicited transaction.

Answer: D

Question 3

Once you have passed the Series 63 examination, which entity must then approve your application to sell securities?

Options :

A : FINRA

B : NASAA

C : SEC

D : the state administrator

Answer: D

Question 4

The maximum monetary civil liability that a person who has violated a securities law can be expected to pay is

Options :

A :

the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys’ fees + any state-determined “pain and suffering” award.

B :

the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys’ fees + any state-determined “pain and suffering” award - any income the victim has received on the investment.

C :

the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys’ fees - any income the victim has received on the investment.

D :

the original investment + a state-deemed appropriate interest rate + court costs and reasonable attorneys’ fees + any income the victim has received on the investment.

Answer: C

Question 5

Mr. Noah Scruples is a registered representative with CanDo Broker-Dealers. A client calls and wants Noah to purchase shares of a mutual fund the client has read about. CanDo is not authorized by this particular fund to effect purchases or sales of the fund shares. Can Noah execute the order anyway?

Options :

A : No. This would be considered money laundering, which is highly illegal.

B : No. This is a prohibited practice known as selling away.

C : No. This is a prohibited practice known as front running.

D : Yes. Since this is an unsolicited trade, Noah can execute the transaction on behalf of his client.

Answer: B

Confidently Practice Online with Free Series-63 Exam Cram

Buying Options: