FINRA Series_63 : Uniform Securities Agent State Law Examination

D. 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
2 0 of those 30 years, she was a secretary. Has D. Vious violated any securities laws?

• 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. Advertising brochures are not securities.
• C. No. Ms. D. Vious' years of experience is not a material fact that would affect an investor's investment decision.
• D. Yes. The broker-dealer is making a misleading statement in an advertising brochure in order to convince investors to do business with the firm.

You are an investment adviser to Mr. Crochety, an elderly man who lives solely on his social security
income although he managed to accumulate an investment portfolio worth about $100,000 over the years.
Mr. Crochety recently got his hands on a business publication and read about the tax-free interest paid by
municipal bonds. He calls you and instructs you to sell his other investments and invest all his money in a
municipal bond portfolio, so that "the government doesn't get any more of my hard-earned money." You
tell Mr. Crochety that you don't believe this is a wise move because he's in such a low tax bracket that
municipal bonds are not a good investment for him, but he is insistent. Based on these facts, you should

• A. ignore Mr. Crochety's instruction since it is not in his best interest.
• B. require Mr. Crochety to sign an affidavit of liability waiver, indicating that you will not be held responsible for any adverse consequences of this decision.
• C. call Mr. Crochety's relatives and suggest they have him examined for mental instability.
• D. have Mr. Crochety sign a statement of investment policy that indicates that this transaction is being executed on the client's instructions and that you have advised the client against it.

A variable annuity is:

• A. not a security and, therefore, does not have to be registered with the state.
• B. not a security, but is still required to be registered with the state before it can be offered for sale.
• C. a security, but is exempt from state registration.
• D. a security and, therefore, has to be registered with the state before it can be offered for sale.

Rich Quick is a broker-dealer registered in the state of Massachusetts. He occasionally trades on
abnormalities he observes in bond yield spreads for his own account, short selling a bond that appears to
be overpriced based on its yield and buying a bond that is identical in almost every respect except for the
price, which is less than that of the other bond. He has been able to earn arbitrage profits 95% of the time
when he does this. Rich Quick

• A. is trading on insider information, which is a violation of securities laws.
• B. engaged in a fraudulent activity.
• C. is in violation of securities laws. Arbitrage is a prohibited activity.
• D. is skilled if he is able to earn profits 95% of the time using this strategy.

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?

• A. Mina needs to send notice to the state Administrator informing him of her extracurricular activity.
• B. Mina simply needs to tell her immediate supervisor at SecureMoney about her new job.
• C. Mina should have notified SecureMoney in writing before signing on to work at the fitness club.
• D. Because the job as a receptionist at a fitness club has nothing to do with the world of finance, Mina has
  done nothing inappropriate.