Uniform Securities Agent State Law Exam (FINRA Series 63)
The Series 63 exam - the Uniform Securities Agent State Law Examination - assesses one's knowledge of the state laws associated with securities and registered representative activities. The Uniform Securities Act (or "USA") is a model legislation adopted by states, meaning it's a framework of laws and regulations that states can adopt and implement to properly regulate the securities industry. Nearly all states require individuals to pass state-based exams like the Series 63 as a condition of registration.
The Uniform Securities Act (or "USA") is a model legislation adopted by states, meaning it's a framework of laws and regulations that states can adopt and implement to properly regulate the securities industry. Nearly all states require individuals to pass state-based exams like the Series 63 as a condition of registration.
The exam contains a total of 65 questions, 5 of which are experimental and unscored.
Despite commonly being called the "FINRA Series 63" it is more accurately a North American Securities Administrators Association (NASAA) exam administered by FINRA.
Question 1
An investment adviser representative can be best described by which of the following definitions?
A.
Any person engaged in the business of effecting transactions in securities for the account of others or for his own account
B.
Any individual who represents a financial firm in offering securities advice
C.
Any individual who represents a financial firm in effecting or attempting to effect purchases or sales of securities
D.
Any person who, for compensation, engages in the business of advising others on securities
Question 2
An IAR maintains their only office in Vermont, and only maintains five clients in their book of business. All her clients are incredibly wealthy, and the IAR collects a sizeable amount in asset management fees from the client base. Two of her clients are moving south to Massachusetts, a state where the IAR does not currently maintain registration. Regardless, the IAR plans to continue providing their services to these clients, although they will not be relocating or opening an additional office in the state. In order to do so, USA and NASAA rules would require which of the following?
I. The IAR must be registered in Vermont
II. The employing investment adviser must be registered in Vermont
III. The IAR must be registered in Massachusetts
IV. The employing investment adviser must be registered in Massachusetts
A.
II and IV
B.
All of these choices
C.
I and II
D.
None of these choices
Question 3
According to the Uniform Securities Act, an offer of securities is occurring in which of the following scenarios?
A.
An investor pledges a security to a bank in return for a loan
B.
An investor receives rights on a stock owned in their portfolio
C.
An investor gifts a non-assessable security to a family member
D.
An investor receives new company stock through a corporate spinoff
Question 4
An exclusion from classification as an agent would be granted to which of the following?
A.
Engaging very few wealthy retail investors located in a state where an office exists
B.
An employee dedicated to benefit plans offers a security to other employees in return for a below average commission
C.
Administrative assistant provides a quote on a security while no registered agents are available
D.
A person performing clerical duties makes an offer of a very safe government security
Question 5
A radio broadcast is produced in, broadcast from, and is received in Mississippi. The popular broadcast is also received in 35 different states. During the hour long broadcast, an offer of securities is made at the end in the last minute of the program. According to provisions of the Uniform Securities Act, which of the following statements is true in relation to jurisdiction over the offer made?
A.
No state administrator is granted jurisdiction because more than 2/3 was broadcast outside of the originating state
B.
Only the state administrator of Mississippi is granted jurisdiction
C.
No state administrator is granted jurisdiction because the offer was an incidental part of the broadcast program
D.
The state administrators in all states the broadcast was received in are granted jurisdiction
Question 6
A person's application for registration in a state could be denied for which of the following reasons?
I. An incomplete application was submitted
II. The applicant's registration is currently suspended in another state
III. The applicant reported a securities-related misdemeanor conviction 17 years ago
IV. The appropriate filing fee has not been paid
A.
II, III, and IV
B.
I only
C.
II only
D.
I, II, and IV
Question 7
A broker-dealer performs securities business activities in multiple states. They currently maintain their principal place of business in Hawaii while maintaining a small office in Massachusetts. The firm only offers its services to insurance companies in Hawaii and Virginia. In Massachusetts, the firm maintains 4 retail investors and 5 institutional investors. In Oregon, the firm maintains 3 retail investors and 14 institutional investors. In which of the following state(s) must the firm be registered?
A.
Hawaii and Oregon
B.
Hawaii only
C.
Hawaii, Massachusetts, Oregon, and Virginia
D.
Hawaii, Massachusetts, and Oregon
Question 8
Eden is an unregistered secretary at QRS Security Executions, a registered broker-dealer in all 50 states. The firm maintains a small office, and a number of agents call out sick. In order to assist the firm, Eden begins answering phone calls. During the course of one of their calls, a client requests for a simple trade. Without collecting commission, Eden places the trade. What statement is true?
A.
Eden could accept the order, but only if the security was exempt
B.
As long as Eden applies for retroactive registration, this is a permitted action
C.
Although generally prohibited, the order could be accepted due to the office situation
D.
This is strictly a prohibited action
Question 9
A customer of a broker-dealer meets with their assigned agent to discuss their portfolio. During the course of the conversation, the agent discovers the client holds stock certificates at home. They encourage the customer to bring the stock certificates to the broker-dealer to ensure they're maintained safely. A few days later, the agent receives the stock certificates by registered mail. They subsequently take note of receiving the certificates and place them in a fire-proof safe in the agent's office. What statement is true?
A.
The agent acted ethically by placing the certificates in safekeeping
B.
The agent acted ethically if their principal supervisor was notified of the location of the certificates
C.
The agent acted unethically by taking custody of the certificates
D.
The agent acted unethically by not recommending the client insure the certificates when mailed
Question 10
A client is assessed a significant commission during a transaction placed with their broker-dealer. A few months later, the state administrator investigates the broker-dealer's records. Which of the following circumstances related to the large commission would NOT trigger punitive action against the firm?
A.
The security was thinly traded and difficult to locate
B.
The firm's net capital was at risk of declining below minimum levels
C.
The firm properly disclosed the significant commission prior to the transaction
D.
The security was subject to significant levels of market risk
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FINRA's Series 63 exam summary
Regulations of Investment Advisers, Including State-Registered and Federal Covered Advisers
5%
3 questions
The definition and regulations of Investment Advisers, including state-registered and federal covered advisers. Contains topics including activities requiring registration and exclusions from registration.
Regulations of Investment Adviser Representatives
5%
3 questions
The definition and regulations of Investment Adviser Representatives (IARs). Contains topics including activities requiring registration and exclusions from registration.
Regulations of Broker-Dealers
12%
7 questions
The definition and regulations of Broker-Dealers. Contains topics including registration and post-registration requirements, activities requiring registration and exclusions from registration, and Broker-Dealer Agent supervision.
Regulations of Agents of Broker-Dealers
13%
8 questions
The definition and regulations of Agents of Broker-Dealers. Contains topics including registration and post-registration requirements, activities requiring registration and exclusions from registration, and updating uniform forms.
Regulations of Securities and Issuers
9%
5 questions
The definition and regulations of Securities and Issuers. Contains topics such as state registration and post-registration requirements, exemptions, and state enforcement and antifraud authority.
Remedies and Administrative Provisions
11%
7 questions
The authority of state securities administrators, types of administrative actions, and other penalties and liabilities.
Communication with Customers and Prospects
20%
12 questions
Required product disclosures, unlawful representations concerning broker-dealer agent registration, and rules around performance guarantees. Contains topics on customer agreements requirements for activities such as new accounts, margin trading, and options trading. Also covers correspondence and advertising via social media, email/digital messaging, website and internet communications.
Ethical Practices and Obligations
25%
15 questions
Ethical practices and obligations related to compensation, customer funds and securities, conflicts of interest, criminal activities, and other ethics issues.
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