An agent knowingly sells an unregistered exempt security to a number of non accredited investors. According to the USA which of the following are true?
I. The agent must offer rescission
II. The agent has engaged in a pattern of unethical practices
III. The agent does not have to offer rescission
IV. The agent could be held both civilly and criminally liable for their actions
A. II and IV
B. IV only
C. III only
D. I and IV
Explanation:
The agent sold an exempt security to investors. Exempt securities by definition are exempt from the registration process and are therefore unregistered. An example of an exempt security would be a municipal bond or a Treasury bond.
ABC wants to issue $15,000,000 worth of subordinated debentures maturing in 20 years. Which of the following governs the issuance of these securities?
A. The Securities Lending Act of 1941
B. The Trust Indenture Act of 1939
C. The Securities Act of 1934
D. The Corporate Finance Act of 1935
Explanation:
Answer: B
The Trust Debenture Act of 1939 regulates the issuance of corporate debt in excess of $5,000,000 and longer than 1 year.
A preliminary prospectus is used as:
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A. An offering document
B. A prospecting tool
C. Sales literature
D. To obtain orders to buy
Explanation:
A preliminary prospectus, or a red herring, is used to obtain indications of interest only.
If a person who is a lawyer for a bank writes a daily investment column for a local newspaper, which of the following is true?
A. The person is not considered an investment advisor because banks and financial institutions give advice as an incidental portion of their normal business.
B. The person is not considered an investment advisor because lawyers and other professionals such as accountants, teachers, and engineers, give investment advice as an incidental portion of their business.
C. The person is not considered an investment advisor because writers for newspapers, magazines, and business journals who do not give specific investment situations to individuals are exempt.
D. The writing for news papers is incidental to his practice as a lawyer
Explanation:
The person is not considered an investment advisor because the writer of a financial column is not considered an investment advisor and is exempt.
An agent and their brother in law open an account by both depositing $10,000 with the agent's firm. Which of the following is not true?
A. The registered representative is not required to sign any additional paperwork to open the account, other than the new account card.
B. All transactions in this joint account with a customer must be approved promptly by a principal of the firm.
C. The account must be approved prior to its opening by the principal of the firm.
D. The agent may not share in a customer's account unless they have made a financial contribution to the account.
Explanation:
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The agent and their brother in law would have to sign a joint account agreement. All of the following are violations except:
Showing a client the past performance of a mutual fund for the last three years since its inception
A. Recommending a mutual fund based on a pending dividend to an investor seeking income
B. Recommending a security because of its future price appreciation
C. Implying that the Administrator has approved the firm
Explanation:
Showing a client the past performance for a mutual fund that has only been around for three years is in line with the regulations. All of the other choices are violations.
Pete has a large position in VBNM Corporation common stock. The stock is low priced and lightly traded. Pete has given money to several other investors and directed them to purchase the stock at specific times. As the investors make their purchases, the stock begins to rise and Pete sells his position at a profit. Which of the following is true?
A. This activity is called arbitrage and is proper if conducted during normal market hours
B. This is an acceptable practice since the increase in the price of the security was due to demand for the stock
C. The coordinated purchases are a form of market manipulation and violate the Uniform Securities Act D. This is a form of churning but is improper only if Peter is an employee of a broker dealer
Explanation:
The coordinated purchases were designed solely to manipulate the price of the stock and are a violation of the antifraud section of the USA.
A regional firm is acquiring a local firm in state. The regional firm is not registered as a broker dealer in the state of the firm that it is acquiring. All of the following are true except:
A. The acquiring firm must file an application with the Administrator.
B. The acquiring firm will not have to pay registration fees.
C. The acquiring firm's registration will be effective upon completion of the transaction.
D. The acquiring firm will have to pay new registration fees.
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Explanation:
All of the answers listed are true except that the firm will have to pay new registration fees. The acquiring firm will pay the registration fees at year end for the next year.
The easiest and least costly of the three filing methods, usually available to well established corporations that can meet stringent financial requirements, is known as:
A. Registration by coordination
B. Registration by filing or notification
C. Registration by qualification
D. Registration by administration
Explanation:
Registration by filing or notification, the easiest and least costly of the three methods, is available to well established corporations that can meet stringent financial requirements.
Joe Lane has been employed by the Midwest Commodity Exchange for five years. He was barred from the commodity exchange for illegal and deceptive practices against clients. He has been out of the securities industry for one year and has now applied for registration as a broker with Titan Securities. Which of the following statements is considered true of his application?
A. His application for registration will be denied by the State Administrator
B. He has been out of the securities industry for one year, and can now work once again in the industry
C. He was barred only from commodity trading, but would still be permitted to sell equity securities
D. He does not have to list his previous employment on the commodity exchange
Explanation:
Any applicant that has been previously employed in the securities industry and has been subsequently barred from such exchange for illegal and deceptive practices will also be denied a registration with any other exchange. The State Administrator will deny the applicant's registration for just cause.
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