State Regulation Under The USA Unit Test p.127 to 135

1. Which of the following would be an agent under the terms of the USA? (A)

• a sales representative of a licensed broker/dealer who sells secondary securities to the general public
• an assistant to the president of a broker/dealer who, for administrative purposes accepts orders on behalf of the senior partners

2. A publicly traded corporation offers its employees an opportunity to purchase shares of the company's common stock directly from the issuer. A specific employee of the company is designated to process any orders for that stock. Under the USA, the employee (D)

• must register as an agent if he will receive commissions or remuneration, either directly or indirectly

3. Which of the following persons is defined as an agent by the Uniform Securities Act? (C)

• clerk at a broker/dealer who is authorized to take orders

4. Under the Uniform Securities Act, an agent is (C)

• an individual representing a broker/dealer who sells federal covered securities exempt from registration under the act

*5. According to the Uniform Securities Act, which of the following is(are) considered a broker/dealer? (D)

• a corporation that specializes in the sale of registered oil and gas limited partnerships

6. GEMCO Securities, a registered broker/dealer, has a policy of hiring unpaid interns from top business schools. GEMCO is currently the lead underwriter on a new issue and has assigned three of its interns to specific tasks. One is doing entering the data as indications of interest are received, the second is calling clients to offer to deliver their prospectus via email instead of mail, and the third is  calling clients to offer the new issue and accept indications of interest. Which of the interns would need to register as agents. (Third-C)

• only the third intern would have to register

7. Under the USA, which of the following is considered a broker/dealer in a state? (B)

• XYZ broker/dealer with an office in the state whose only clients are insurance companies

8. Which of the following must register as an agent? (A)

• An individual representing a broker/dealer who sells commercial paper

9. Which of the following is defined as a security under the Uniform Securities Act? (D)

• an investment contract

10. Under the Uniform Securities Act, which of the following persons is responsible for proving that a securities issue is exempt from registration? (B)

• the person requesting the exemption 

11. Registration is effective when ordered by the Administrator in the case of registration by. (D)

• qualification 

12. The US Supreme Court in the Howey decision, ruled that an instrument that represents the investment of money in a common enterprise with an expectation of profit solely through the managerial efforts of others is a security. In following the Howey decision, the USA would consider which of the following a security? (C)

• investment in options to acquire a security 

13. Under the Uniform Securities Act, which of the following would be considered an exempt transaction? (A)

• an existing client calls you to purchase 1,000 shares of a common stock that is not registered in this state
• shares of a bank's IPO are sold to an institutional client

14. Which of the following securities is(are) exempt from the registration provisions of the USA? (D)

• issue of a savings and loan association authorized to conduct business in the state
• general obligation municipal bond
• bond issued by a company that has common stock listed on the New York Stock Exchange

15. A transactional exemption would be available under the USA when an agent for a broker/dealer: (B)

• sells a large block of an unregistered nonexempt security to an insurance company that is not authorized to do business in this state

16. All of the following describe exempt transactions EXCEPT (D)

• Joe Smith, an employee of Amalgamated National Bank, buys securities from ABC Brokerage Corporation

17. Under the USA, all of the following are exempt securities EXCEPT (C)

• unsolicited transactions
• transactions between issuers and underwriters

18. In general, registration statements for securities under the Uniform Securities Act are effective for (B)

• 1 year from the effective date 

19. Under the Uniform Securities Act, an issuer is any person who issues, or proposes to issue, a security for sale to the public. According to the USA, which of the following is NOT an issuer? (B)

• a partner in the AAA Oil and Gas Partnership sells his interest in the investment

20. Which of the following transactions are exempt from registration under the USA? (A)

• a trustee of a corporation in bankruptcy liquidates securities to satisfy debt holders
• an offer of a securities investment is directed to 10 individuals in the state during a 12-month consecutive period

21. Which of the following is(are) issuer transactions? (C)

• John's father, a founder of XYZ corporation, purchased shares of XYZ directly from the corporation subsequent to its founding 

22. XYZ Corporation has been in business for over 20 years. They need additional capital for expansion, and determine that a public offering in their home state and neighboring states is appropriate. Which method of securities registration would most likely be used to register this initial public offering? (A)

• coordination

23. Which of the following meet the USA's definition of an exempt transaction? (B)

• transactions by an executor of an estate
• transactions with an investment company registered under the Investment Company Act of 1940
• an unsolicited sale of a Bulletin Board stock 

24. Market manipulation is one of the prohibited practices under the USA. Which of the following is an example of  a broker engaging in market manipulation? (C)

• wash trades
• matched orders

25. Section 402 of the USA contains a listing of those securities that are granted an exemption from the registration and advertising filing requirements of the Act. Included in that listing would be (C)

• bonds issued by a Canadian province
• bonds issued by the District of Columbia
• securities issued by a credit union authorized to do business in the state 

26. All of the following are prohibited practices under the USA EXCEPT (D)

• selling rights instead of exercising them 

27. A customer is upset with her agent for not servicing her account properly and sends him a complaint letter about his actions. Under the USA, the agent should (D)

• bring the customer complaint to his employer immediately 

28. Under the USA, the Administrator may deny or revoke a registration if the agent (D)

• borrows money from his wealthy clients' accounts
• solicits orders for nonexempt unregistered securities
• buys and sells securities in accounts to generate a high level of commissions
• alters market quotations to induce a client to invest in an attractive growth stock 

29. According to the USA, which of the following is an example of market manipulation? (A)

• creating the illusion of active trading 

30. Registration as an investment adviser under the USA would be required for any firm in the business of giving advice on the purchase of (A)

• convertible bonds

31. Which of the following practices is prohibited under the USA? (B)

• offering services that an agent cannot realistically perform of his broker/dealer's limitations 

32. An agent hears a rumor concerning  a security and uses the rumor to convince a client to purchase the security. Under the USA, the agent may (D)

• not recommend the security 

33. If an agent thought that a technology stock was undervalued and actively solicited all customers, the agent (C)

• committed an unethical business practice

34. Which of the following transactions are prohibited? (D)

• borrowing money or securities from a high net worth customer
• selling speculative issues to a retired couple of modest means on a fixed income
• failing to follow a customer's orders so as to prevent investment in a security not adequately covered by well-known securities analysts
• backdating confirmations for the benefit of the client's tax reporting

35. It is legal under the USA for an individual licensed as an agent in the state to tell a client that (A)

• a registered security may lawfully be sold in that state 

36. Fearing loss of a potential sale, an agent omits facts that a prudent investor requires to make informed decisions. Under the USA, this action is (C)

• fraudulent for both exempt and nonexempt securities 

37. Which of the following actions is NOT a prohibited practice under the USA? (B)

• a specialist buys and sells stock as principal 

38. Which of the following is(are) prohibited under the USA? (D)

• recommending tax shelters to low-income retirees
• stating that a state Administrator has approved an offering on the basis of the quality of information found in the prospectus
• soliciting orders for unregistered, nonexempt securities
• employing any device to defraud

39. According to the USA, which of the following is a prohibited activity? (A)

• the agent enters into an agreement to share in the profit/losses of a customer's account without written consent of the employing broker/dealer

40. Under the Uniform Securities Act, broker/dealers are required to prepare and maintain certain records. Which of the following statements reflects the position of the act? (B)

• a firm registered in more than one state must meet the recordkeeping requirements of the state where its principal office is located, even if those are less comprehensive than those of some of the other states where it is registered
• a broker/dealer's website is considered advertising 

41. If convicted of a willful violation of the Uniform Securities Act, an agent is subject to (B)

• a fine of $5000 and/or imprisonment for 3 years 

42. To protect the public, the Administrator may (B)

• consider that an applicant for registration as an investment adviser is not necessarily qualified solely on the basis of experience as a broker/dealer or agent and, therefore, when he finds that an applicant for initial or renewal registration as a broker/dealer is not qualified as an investment adviser, he may by other condition the applicant's registration as a broker/dealer upon his not transacting business in this state as an investment adviser
• take into consideration that the registrant will work under the supervision of a registered investment adviser or broker/dealer in approving a registration 

43. Aaron is a client of XYZ Financial Services. Over the past several years, Aaron has been suspicious of possible churning of his account, but has taken no action because account performance has been outstanding. After reviewing his most recent statement, Aaron suspects that excessive transactions have occurred. He consults his attorney who informs him that under the USA, any lawsuit for recovery of damages under the USA must be started within (C)

• 3 years of occurrence or 2 years of discovery, whichever comes first 

44. Which of the following accurately describes a cease and desist order as authorized by the USA? (B)

• an Administrator's order to refrain from a practice of business believed by that Administrator to be unfair 

45. A resident of Albany, NY, is visiting relatives in Albany, GA. While there, she receives a phone call from her agent in the Troy, NY, office of Capital City Investments who offers a security that the client immediately agrees to purchase. The next day, she sends her payment from Georgia. The agent sends the trade confirmation to the purchaser's residence in New York. This agent is registered in 12 states, including New York and Georgia. The security is not exempt and was not registered. Which Administrator has the authority to pursue action against the agent? (C)

• both Georgia and New York

46. The Administrator may, by rule (A)

• forbid investment advisers registered in his state from taking custody of client funds 

47. If it is in the public interest, the Uniform Securities Act provides that the state Administrator may deny the registration of a person for all of the following reasons EXCEPT (A)

• the applicant is not qualified owing to a lack of experience 

48. If an agent chooses to appeal an Administrator's order, when must the agent file for review of the order with the appropriate court? (C)

• within 60 days after the entry of the order

49. An Administrator may summarily suspend a registration pending final determination of proceedings under the USA. However, the Administrator may not enter a final order without (C)

• appropriate prior notice to the applicant as well as the employer or prospective employer of the applicant
• opportunity for a hearing
• findings of fact and conclusions of law 

50. The Administrator has authority to (A)

• issue a cease and desist order without a hearing