Free FINRA Series 63 practice exam
Question 1
Which of the following meets the definition of an offer of securities?
A.
Issuance of a stock dividend
B.
Offer of a free bond when an appliance is purchased
C.
Receipt of stock through a corporate spinoff
D.
Offer of non-assessable stock as a gift
Question 2
The NASAA Model Rule for Sales of Securities at Financial Institutions requires certain disclosures be made by broker-dealers to customers of financial institutions that purchase securities. What statement related to those disclosures is correct?
A.
The 'not-not-may' disclosure must be made verbally and in writing
B.
The 'not-not-may' disclosure must be made verbally only
C.
The 'not-not-may' disclosure must be made verbally or in writing
D.
The 'not-not-may' disclosure is provided upon the discretion of the broker-dealer
Question 3
An agent registered in State A calls a customer that maintains their primary residence in State A. The customer is visiting State B on vacation when the phone call is made. The agent offers the customer an unregistered non-exempt security, which the customer declines. The agent is:
A.
Subject to civil liability and punitive actions because they offered an unregistered non-exempt security
B.
Not subject to civil liability, but may be subject to punitive actions because they offered an unregistered non-exempt security
C.
Not subject to civil liability, but may be subject to punitive actions because they are not registered in State B
D.
Subject to civil liability and punitive actions because they are not registered in State B
Question 4
Which of the following meets the legal definition of an access person according to SEC and NASAA rules and regulations?
A.
A supervised person of an investment adviser with access to the holdings of a reportable fund
B.
A supervised person of a broker-dealer adviser involved in the formulation of non-public client recommendations
C.
A supervised person of a broker-dealer adviser with access to non-public client recommendations
D.
Any officer, director, or partner of a broker-dealer
Question 5
An individual employed by a securities firm advertises their ability to execute securities transactions on the firm's platform in a state. The advertisement targets wealthier investors exceeding $10 million in net worth. Neither the individual or the firm maintains an office in the state. According to the Uniform Securities Act, what statements are true?
- I. The individual must be registered as an agent in the state
- II. The individual is excluded from the definition of an agent in the state
- III. The firm must be registered as a broker-dealer in the state
- IV. The firm is excluded from the definition of a broker-dealer in the state
A.
I and IV
B.
I and III
C.
II and IV
D.
II and III
Question 6
A registered agent is currently operating in multiple states. Recently, the agent moved to a new home, but remained in the same municipality. What statement is true?
A.
This event requires Form U-5 to be updated within 10 days
B.
This event requires Form U-4 to be updated within 30 days
C.
This event does not require Form U-4 or U-5 to be updated
Question 7
A broker-dealer can be best described by which of the following definitions?
A.
Any person who, for compensation, engages in the business of advising others on securities
B.
Any person engaged in the business of effecting transactions in securities for the account of others or for his own account
C.
Any individual who represents a financial firm in offering securities advice
D.
Any individual who represents a financial firm in effecting or attempting to effect purchases or sales of securities
Question 8
NASAA rules and regulations prohibit the usage of certain language in communications with customers and clients. An example of prohibited language is:
A.
"Our firm just gained effective registration, so we can help you invest"
B.
"Registration approval allows us to help you invest"
C.
"Our firm could only engage investors if it was properly registered in your state"
D.
"We may help you trade securities given our effective registration status in Arkansas"
Question 9
In which of the following circumstances would the sale of an unregistered, non-exempt security be considered compliant with relevant laws and regulations?
A.
The security is offered to 12 retail investors in a 10 month period
B.
All of these choices
C.
The security is sold in an isolated issuer transaction
D.
The security is sold in an unsolicited transaction
Question 10
The state administrator is reviewing a recently received application for registration as an investment adviser representative. It is discovered the person submitting the application did not disclose an extensive history of speeding tickets and parking infractions. What scenario is most likely to unfold?
A.
Assuming all necessary documentation and fees were submitted, registration is approved
B.
Assuming all necessary documentation and fees were submitted, effective registration is granted
C.
The lack of disclosure results in the application being denied
D.
The lack of disclosure requires a prompt updating of the registration form
Question 11
An adviser plans to take custody in a state they are currently registered in. All of the following are requirements imposed by the state administrator for an adviser to take custody, EXCEPT:
A.
Notify the state administrator via Form ADV Part 2A
B.
Confirm the state administrator allows advisers to take custody
C.
Place the funds with a qualified custodian
D.
Provide annual statements to clients
Question 12
Of the scenarios listed, which does not qualify as an exempt transaction according to the Uniform Securities Act?
A.
Offer of non-registered securities to 10 or fewer retail investors
B.
Sale of a bank security to a retail client
C.
Transaction in an unregistered security by an estate executor
D.
Sale of an unregistered security to an institution
Question 13
The state administrator is not obligated to fulfill which of the following duties?
A.
Interpretation and applying relevant enforcement actions related to the USA
B.
Granting effective registration to covered securities
C.
Overseeing the registration of securities being offered in their state
D.
Denying registration applications if a statutory disqualification exists
Question 14
Which of the following orders submitted by a client would be considered a discretionary order?
A.
Purchase $55,000 of the newly issued FFF Corp. 25 year bonds
B.
Sell at least $80,000 of bonds of issuers from the health industry
C.
Sell all shares of CDE Long Term Bond Fund and use the proceeds to purchase the TUV International Fund now
D.
Buy the required number of puts to fully cover my position in OPQ stock
Question 15
Which of the following best represents the component of a prohibited action that will determine if criminal or civil consequences exist?
A.
Whether the prohibited action was willful or unintentional
B.
The size of loss absorbed by the client
C.
The frequency of the prohibited action
D.
Only instances of fraud are considered criminal
Question 16
An advisory firm is interviewed for a future magazine publication. As a part of the article, the firm wishes to disclose and publish its past recommendations. Which of the following NASAA rules are applicable in this scenario?
- I. Recommendations made less than 1 year ago cannot be disclosed
- II. Recommendations made less than 3 years ago cannot be disclosed
- III. No deceptive language referring to the indication of future success may be included
- IV. The adviser may implicate the potential for future success based on past recommendations
- V. Recommendations may never be disclosed publicly
A.
I only
B.
V only
C.
I and III
D.
II and III
Question 17
Individuals applying for registration as an agent must disclose which of the following to the state administrator on their registration form?
- I. Current securities holdings
- II. History of false statements made to securities regulators
- III. Prior civil money penalties imposed on the individual
- IV. Outcomes of non-securities related litigation
A.
II and III
B.
I and IV
C.
I, II, III, and IV
D.
II, III, and IV
Question 18
Which of the following actions is considered fraud by regulations established in the Uniform Securities Act?
A.
Knowingly omitting a non-material fact
B.
An agent places a personal trade for a security immediately after receiving a request from an institutional investor to purchase the same security
C.
An analyst placing a trade for a security after a research report on that security is released publicly
D.
Executing a significant amount of trades in one day
Question 19
Justice Kingsley is an IAR registered with UVX Financial Specialty, a state-registered investment adviser. Justice retires after a long career. In regards to filing the proper withdrawal documentation, which statement is NOT false?
A.
Only UVX Financial Specialty must file Form U5
B.
Both the IAR and the investment adviser must file form U5
C.
The IAR must file Form U5, and UVX Financial Specialty is excluded from this process
D.
Neither the investment adviser or the IAR are required to file documentation
Question 20
An adviser's fiduciary duty is best described as:
A.
Holding the adviser's interests above those of the clients
B.
Holding the client's interests above those of the adviser
C.
Holding the administrator's interests above those of the adviser
D.
All of these choices
Question 21
An insurance agent offers advice on a wide variety of insurance products. Advice related to which of the following products would require this individual to additionally obtain registration as an investment adviser representative?
A.
Variable annuities
B.
Term life insurance
C.
Universal life insurance
D.
Whole life insurance
Question 22
An investment adviser subject to state registration requirements plans to register in multiple states. A number of the states the firm will register in maintain unique minimum financial requirements. Which of the following statements are true?
- I. Investment advisers must maintain minimum net capital levels
- II. Investment advisers must maintain minimum net worth levels
- III. The state where the adviser's principal place of business exists determines minimum financial requirements
- IV. The SEC determines minimum financial requirements
A.
II and IV
B.
I and III
C.
I and IV
D.
II and III
Question 23
Regulations contained within the Uniform Securities Act require which of the following persons to register as an investment adviser representative?
- I. An employee of a broker-dealer providing investment advice, executing transactions, and charging commissions for their services
- II. A manager that does not provide investment advice to clients, but supervises a team of investment adviser representatives
- III. The appointed fund manager of a closed-end investment company
- IV. A person executing securities transactions for their own account or the accounts of others
A.
II, III, and IV
B.
II and III
C.
I and II
D.
I and III
Question 24
Person 1, who is currently registered as an agent and maintains a book of business in State X, is hired into a role that does not require registration. Person 2, an employee of the same firm who currently resides and is registered in another State Y, has been assigned to take over Person 1's responsibilities. The employing firm wants to move Person 1 into their new role as soon as possible without a disruption in business. What should be the top priority of the employing firm?
A.
Withdraw Person 1's registration in State X
B.
Register Person 1 in State Y
C.
Register Person 2 in State X
D.
Withdraw Person 2's registration in State Y
Question 25
The state administrator is granted the power to revoke exemptions related to all of the following, EXCEPT:
A.
Sale of unregistered securities by Court-appointed conservators
B.
Employee benefit plan securities
C.
Pre-organization certificates
D.
Brazilian government bond
Question 26
Post-registration obligations of a broker-dealer do NOT include:
A.
The requirement to quickly produce records created within the past 2 years
B.
3 year total record retention period
C.
To limit record access to authorized personnel and administrator only
D.
The requirement to maintain electronic copies of all records
Question 27
Which of the following would be considered persons according to provisions of the Uniform Securities Act?
- I. Executor of an estate of a deceased individual
- II. The US Government
- III. The custodian overseeing a minor's custodial account
- IV. An incapacitated individual
A.
II only
B.
I, II, and III
C.
I, II, III, and IV
D.
I and III
Question 28
A registered agent meets with a customer and discusses the possibility of investing in a debt security. The security is insured by a third party, and the agent refers to it as a 'guaranteed security.' They additionally explain to the client how the interest, principal, and market value is covered by the third party. The agent:
A.
Did not accurately describe the security as its market value is not covered
B.
Performed an unethical action as a guaranteed security cannot be offered
C.
Acted ethically and described the security accurately
D.
Performed an unethical action as they did not gain principal approval prior to the offer
Question 29
According to the Uniform Securities Act, all of the following would be categorized as an issuer transaction, EXCEPT:
A.
A mutual fund is sold to investors 18 years after its initial offering
B.
Trade of a stock on NASDAQ
C.
A secured bond issuer offers their security to investors through a private placement
D.
A security registered by coordination and sold in the primary market
Question 30
An individual applies for registration as an agent. Which of the following disclosures must be made during the registration process?
- I. Address of residence 9 years ago
- II. Employment status 6 years ago
- III. Securities-related fraud felony charge 14 years ago
- IV. DUI misdemeanor conviction 9 years ago
A.
II and IV
B.
I, II, III, and IV
C.
I and III
D.
II and III
Question 31
Which of the following statements is true regarding U-4 disclosures?
- I. All past compromises with creditors must be disclosed
- II. Only compromises with creditors in the past 10 years must be disclosed
- III. All felony history must be disclosed
- IV. Only felony history in the past 10 years must be disclosed
A.
I and III
B.
I and IV
C.
II and IV
D.
II and III
Question 32
An agent wants to offer a promissory note to a client. The security is currently unregistered, but the agent is fairly certain the security is exempt. Which of the following characteristics must the promissory note include in order to be considered exempt?
- I. 270 days or less to maturity
- II. 360 days or less to maturity
- III. One of three highest debt ratings
- IV. At least $10,000 denominations
A.
I, II, and IV
B.
I and II
C.
I and III
D.
I, III, and IV
Question 33
A broker-dealer enters into a networking agreement with a credit union. Part of the agreement involves the broker-dealer renting space in the credit union's primary deposit-taking center. To comply with relevant regulations, the NASAA Model Rule for Sales of Securities at Financial Institutions requires all of the following protocols to be followed, EXCEPT:
A.
The broker-dealer must maintain a space that is distinctly separate from the deposit-taking area
B.
The broker-dealer must promptly notify the credit union if an agent is terminated for reason
C.
The state administrator must have access to the credit union for inspection purposes
D.
The broker-dealer must offer hedges on offered products that act similarly to FDIC insurance
Question 34
NASAA rules cover a number of circumstances involving lending to or borrowing from clients. All of the following statements are true regarding these rules, EXCEPT:
A.
An IAR may connect their client with a margin loan through their affiliated broker-dealer
B.
Registered persons may only lend to customers claiming legitimate hardships
C.
An agent may connect a client with a loan through their margin account
D.
A broker-dealer may offer a loan to a client through margin
Question 35
Exclusion from registration as an agent applies to which of the following?
A.
A person representing small business while offering its securities to the public
B.
A secretary mails a prospectus after a client requests one over the phone
C.
A person only makes offers of securities to wealthy individual investors in a state where they maintain no office
D.
An offer of very risky securities is made to an investor relocating to another state by a person with no office in that state
Question 36
An agent's registration may be denied, suspended, or revoked according to provisions of the Uniform Securities Act when which of the following circumstances exist?
- I. The denial, suspension, or revocation is in the public's interest
- II. The denial, suspension, or revocation is in the administrator's interest
- III. The U4 was incomplete upon submission
- IV. The agent has a forgery felony charge on their record 6 years ago
A.
II and III
B.
I and II
C.
I, II, and IV
D.
I and III
Question 37
The Uniform Securities Act in conjunction with NASAA regulations would deem which of the following actions as unethical?
A.
A registered agent offers a non-exempt, unregistered security to a retail investor
B.
An IAR borrows money from a client in the business of lending
C.
A person representing the US Government offers unregistered Treasury bonds in a state they are not registered
D.
A broker-dealer offers unregistered common stock only to institutions
Question 38
Which of the following statements regarding an adviser's brochure is NOT false?
A.
The brochure must only be delivered upon request from a new client
B.
Institutional investors may opt out of receiving an adviser's brochure
C.
Delivery of the brochure may be waived only if all clients provide written consent
D.
The brochure must be updated annually
Question 39
The state administrator determines a registered person in their state is offering non-exempt, unregistered securities as a regular business practice. To protect investors, the administrator quickly sends a cease and desist to the person, requesting an immediate cessation of the activity. Assuming the person does not respond to the cease and desist, which of the following administrator actions is most appropriate?
A.
Charge the person with securities fraud
B.
Rule the person is enjoined from the securities industry
C.
Petition the state courts for an injunction
D.
Implement an automatic revocation of their registration as required by the USA for ignoring the administrator's order
Question 40
An investment adviser representative (IAR) is employed by a federal covered adviser. The IAR works in the adviser's headquarters, located in State X. The IAR travels a few times a year to meet with clients in State Y. The firm maintains no offices in State Y, and the IAR typically meets with their clients in their homes. Regarding the registration status of the IAR and their firm, what is true?
A.
The IAR and the adviser must be registered in State X
B.
The IAR and the adviser must be registered in States X and Y
C.
The IAR must be registered in State X, but the adviser does not register in any state
D.
The IAR must be registered in States X and Y, but the adviser does not register in any state
Question 41
An employee of an investment adviser only supervises other IARs, and does not offer securities advice to clients. What statement is true?
A.
They qualify to be exempt from IAR registration
B.
They may claim themselves as clerical and avoid registration
C.
They must register as an IAR
D.
They qualify to be excluded from IAR registration
Question 42
A broker-dealer offers margin accounts to their customers. What statement is NOT true regarding this type of account?
- I. The loan consent form must be signed
- II. The hypothecation agreement must be signed
- III. The margin agreement must be signed and submitted promptly after the first trade
- IV. The margin agreement must be signed prior to the first trade
A.
None of these choices
B.
I, II, and III
C.
I and IV
D.
IV only
Question 43
The state administrator has sole authority over the registration of which of the following?
A.
A security subject to registration by coordination
B.
A person subject to registration as a broker-dealer in multiple states
C.
A security subject to registration by qualification
D.
A security subject to registration by filing
Question 44
The Uniform Securities Act empowers which of the following persons to enforce state securities laws and oversee the registration of financial professionals?
A.
State administrator
B.
Federal Reserve
C.
FINRA
D.
Securities and Exchange Commission (SEC)
Question 45
An exempt transaction does NOT exist in which of the following choices?
A.
10 retail investors are offered a subscription to pre-organization certificates
B.
A registered agent sells a Treasury bills to retail clients throughout the year
C.
Private placement
D.
Institutional sales
Question 46
An issuer plans on offering a security only in one state. What form of registration will the issuer be subject to?
A.
Registration by coordination
B.
Notice filing
C.
Registration by filing
D.
Registration by qualification
Question 47
A broker-dealer applies for registration in a state they plan to perform securities business activities in. Which of the following statements is true?
A.
Barring any setbacks, registration will be approved on the 30th day after filing
B.
The firm may engage clients in the state during the registration process
C.
Broker-dealers must meet a minimum net worth requirement
D.
The administrator can require the firm to announce themselves via a newspaper ad
Question 48
A radio show involving an offer of securities is recorded and broadcast from Colorado. The broadcast is primarily received by institutional investors in Illinois, retail investors in Minnesota and all types of investors in Rhode Island. Virtually no audience heard the broadcast in any other US state. The administrators of which of the following states are given jurisdiction over this broadcast?
- I. Colorado
- II. Illinois
- III. Minnesota
- IV. Rhode Island
A.
II, III, and IV
B.
I, II, and IV
C.
I only
D.
II only
Question 49
Which of the following social media-related actions would NOT violate FINRA communication rules?
A.
An Instagram post includes false information related to a product's secondary features
B.
An Instagram post includes all material information, but much of the risk-related material is included at the bottom of the post
C.
A Twitter post including comedic elements slightly exaggerates the benefits of a service offered
D.
A TikTok post omits non-material information related to a marketed service
Question 50
An option account is officially considered opened when:
A.
The options agreement is signed and returned
B.
The first trade is executed
C.
The ODD is received by the customer
D.
The account is approved by a principal
Question 51
All of the following statements made by a registered person would be considered unethical and prohibited, EXCEPT:
A.
"If you lose money on this investment, we'll refund your advisory fees"
B.
"The bond market is always less volatile than the stock market"
C.
"Losses are impossible with US Government bonds"
D.
"While most aspects of a guaranteed security are insured, loss of market value is not"
Question 52
Of the following choices provided, which would be considered a broker-dealer according to the Uniform Securities Act?
- I. A person effecting securities transactions for their own account
- II. A person making securities recommendations for compensation
- III. A person effecting securities transactions for the accounts of others
- IV. A natural person representing an issuer during the sale of its securities
A.
I, III, and IV
B.
All of these choices
C.
I and III
D.
II only
Question 53
Which of the following statements are true?
- I. A gift of assessable stock is considered a gift
- II. A gift of assessable stock is considered an offer and sale of securities
- III. A gift of non-assessable stock is considered a gift
- IV. A gift of non-assessable stock is considered an offer and sale of securities
A.
II and IV
B.
II and III
C.
I and IV
D.
I and III
Question 54
A broker-dealer is filing for its initial registration in a state. Which of the following individuals associated with the broker-dealer is automatically registered as an agent of the firm without a separate Form U-4 filing?
A.
A manager supervising a team of 20 stock-trading agents
B.
A marketing director overseeing digital ad sales
C.
A silent partner that is not engaged in the firm's business
D.
An entry level employee that executes simple retail customer transactions
Question 55
The state administrator takes punitive action against a person, resulting in their inability to offer securities products and services. After the notice of punitive action has been issued, what additional obligations must the administrator provide to the person?
- I. Opportunity for a hearing
- II. Disclosures of written facts and findings of law
- III. Opportunity for re-application
- IV. Disclosure of NASAA employee signing off on action
A.
I and II
B.
II and IV
C.
I, II, and III
D.
I only
Question 56
A broker-dealer publishes the following digital advertisement on social media, meant to target active traders:
Looking for best trade execution at the lowest cost? We charge the lowest commissions when acting as your securities dealer! Trade 10 times a month and we'll waive the commissions on half of your trades!
Which statement is true regarding this advertisement?
A.
This advertisement is proper
B.
This advertisement is improper because broker-dealers cannot waive commissions
C.
This advertisement is improper because it guarantees performance
D.
This advertisement is improper because it incorrectly references trading capacity
Question 57
Which of the following statements is true regarding NASAA rules on participating in a joint account with customers or clients?
- I. Agents may share accounts with customers if certain protocols are followed
- II. IARs may share accounts with customers if certain protocols are followed
- III. The registered person must gain written approval from their employing firm
- IV. Sharing accounts with customers is strictly prohibited for all registered persons
A.
IV only
B.
I and III
C.
I, II, and III
D.
II and III
Question 58
An adviser implements certain hiring standards for its workforce of IARs. Included in those requirements is a bachelor's or master's degree in finance. What statement is true?
A.
New hires' education backgrounds are disclosed on Form ADV Part 2B
B.
New hires' educational backgrounds are disclosed on Form U4
C.
New hires' educational backgrounds are disclosed on Form U5
D.
Education requirements may not be imposed during hiring
Question 59
An investment adviser files Form ADV-W with the state administrator, which is officially processed on March 14, 2023. The state administrator may initiate punitive proceedings against the firm until what date?
A.
March 14, 2024
B.
March 14, 2025
C.
December 31, 2023
D.
December 31, 2024
Question 60
A broker-dealer is registered in State A, where the firm primarily performs its business. A retail investor that resides in State C contacts the broker-dealer by phone while temporarily visiting State B. The investor requests a securities transaction be performed on the phone call. The broker-dealer has not performed transactions on behalf of the investor previously and does not maintain an office in States B or C. What statement is true?
A.
The broker-dealer is not required to be registered in States B or C for this transaction
B.
The broker-dealer must be registered in State B for this transaction
C.
The broker-dealer must be registered in States B and C for this transaction
D.
The broker-dealer must be registered in State C for this transaction
Pass the FINRA Series 63. Guaranteed.
Achievable is the best Series 63 exam prep course: effective, personalized, and convenient. With Achievable, you'll spend less time studying and pass your exam the first time, or your money back.