Question 1

Vious and Associates is a small broker-dealer trying to generate more business. To this end, the firm had a professional four-color brochure printed that provides the years of industry experience of its management along with other information. The firm’s founder, Ms. D. Vious, is listed as having over 30 years of experience in the industry. Ms. D. Vious has worked for broker-dealers for over 30 years, but for 20 of those 30 years, she was a secretary. Has D. Vious violated any securities laws?

Options :

A :

No. Technically, Ms. D. Vious does have over 30 years of experience in the industry, even though it was not in the capacity of an agent or a broker-dealer.

B : No. Ms. D. Vious’ years of experience is not a material fact that would affect an investor’s investment decision.

C :

Yes. The broker-dealer is making a misleading statement in an advertising brochure in order to convince investors to do business with the firm.

D : No. Advertising brochures are not securities.

Answer: C

Question 2

Don is a state-registered agent with GetErDone Broker-Dealers. He has three other friends who are licensed agents-Huey, Dewey, and Louie. Huey is also an agent with GetErDone Broker-Dealers. Dewey is an agent with a different firm in the same city, CanDo Broker-Dealers. Louie works for a Broker-Dealer with an office just across the state line. Don can enter a commission-splitting agreement with

Options :

A : Huey only

B : either Huey or Dewey or both

C : Dewey only

D : Either Huey, Dewey, or Louie or any combination of the three

Answer: A

Question 3

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

Question 4

Which of the following trades is illegal?

Options :

A : a short sale

B : a margin transaction

C : a market-not-held order

D : the sale of a mutual fund if the purchaser hasn’t received a prospectus

Answer: D

Question 5

Under the NASAA Model Rules, which of the following must an investment adviser provide its clients with at least once a year?

Options :

A : the total number of agency cross transactions completed for the client during the period

B :

the total amount of commissions or other compensation that the investment adviser received or expects to receive in connection with agency cross transactions performed for the client during the period

C : the number of any complaints that each of its investment adviser representatives has received during the period

D : both A and B

Answer: D