Question 1

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 His license to do business as an investment adviser in the state has been revoked.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 2

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 3

Big Bo is an investment adviser representative who has a lot of the members of a well-known professional football team as clients. In advertising his services, Big Bo can one has invested with him.

Options :

A : list the names of the players he’s advising as long as he lists the names of all his other clients, too.

B :

list the names of the players he’s advising as long as he doesn’t provide any other specifics, such as the amount each one has invested with him.

C : list the names of the players he’s advising as long as he has their written permission to do so.

D : use testimonials from any of the players who willingly provide them without compensation.

Answer: C

Question 4

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

Question 5

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