Question 1

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 2

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 His license to do business as an investment adviser in the state has been revoked.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 3

Registration by coordination is provided for by which of the following federal securities acts?

Options :

A : Securities Act of 1933

B : Securities and Exchange Act of 1934

C : Investment Advisers Act of 1940

D : Investment Company Act of 1940

Answer: A

Question 4

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 5

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