FINRA Series63 : Uniform Securities Agent State Law Examination

Cassie Clueless has recommended that a client purchase shares of a mutual fund prior to its ex-dividend date, so that the client will receive the dividends when they are distributed.
In which of the following situations might this recommendation be justifiable and not in violation of NASAA rules?
I. The investor has refused to provide Cassie any information regarding his investment goals.
II. The investor is a young professional with an investment goal of long-term capital appreciation.
III. The investor is a retiree in a low tax bracket and needs current income to augment her social security check.

• A. It is always in violation of NASAA rules to recommend that a client purchase shares of a mutual fund prior to its ex-dividend date.
• B. III only
• C. I only
• D. I and II only

Elizabeth is the owner of Lizbeth Investment Advisers, a small, state-registered investment advisory firm. She has decided that her firm needs a niche and has learned that a consulting group is coming to the area and offering a 3-day seminar on asset allocation for senior citizens offered by Advantage for Retirement Persons (ARP). The seminar will cost $1,000 per individual, but after attending the seminar, each attendee will receive a certificate verifying their involvement in the program. Elizabeth decides this is the niche she has been looking for and signs up herself and her three investment adviser representatives for the program. After attending the seminar and receiving their certificates, Elizabeth and her team can

• A. have the words "Senior-Citizen Investment Specialists" printed on their business cards.
• B. indicate that they are certified by the ARP program since money was paid for their attendance.
• C. do none of the above.
• D. represent themselves as certified senior citizen investment advisers.

Mr. and Mrs. Cleaver are nearing retirement and have made an appointment with Mr. Eddie, an investment adviser representative who works for Haskell Investment Advisers, to get advice on how they can better structure their investments to meet their retirement goals. Their son, Theodore, who has recently graduated college and has a great job as a software writer for a video game company, accompanies them. Mr. Eddie explains that the main goal of any plan is diversification and recommends that Mr. and Mrs. Cleaver spread their investment monies equally among six load mutual funds that Mr. Eddie can sell them. He suggests that Theodore follow suit and invest any monies he has equally among the same ten funds.
Has Mr. Eddie done anything wrong?

• A. Yes. Mr. Eddie is guilty of misappropriation, a prohibited practice.
• B. Yes. Clients who are ready to retire have different investment needs than a client who is just entering the work force. The recommendation that both Theodore and his parents have the same asset allocation is clearly unsuitable.
• C. Yes. Mr. Eddie has advised his clients to invest in load funds when no load funds are clearly better investments.
• D. No. Diversification should, in fact, be the goal, and he has advised a well-diversified plan for his clients.

Stable Corporation registered a bond issue that it plans to offer for sale in the state with the Administrator.
The bond has a par value of $1,000 and will pay interest of 7% a year, with the principal to be repaid in 5 years. The registration became effective on September 8th. The registration is effective

• A. until December 31st of the same year
• B. for two full years.
• C. until the maturity date on the bond.
• D. for one full year.

In its capacity as a full service broker, A-2-Z Associates is also in the investment advisory industry, charging its clients for investment advice for additional remuneration. One of the firm's clients has been advised to buy some U.S. government treasury inflation-protected securities (TIPS.) A-2-Z is a dealer in these securities in the secondary market.
Which of the following statements is true?

• A. A-2-Z can sell the client TIPS from its own portfolio as long as it tells the client that it is taking on the part of the seller in the transaction.
• B. A-2-Z can sell the client TIPS indirectly by getting a 3rd party-another broker-dealer-to effect the sale.
• C. A-2-Z can only sell the client TIPS if it informs the client it is acting as the seller in this transaction and receives the client's written consent before the transaction is settled.
• D. Under no circumstances may A-2-Z sell the client TIPS that A-2-Z holds in its own portfolio. This would be a conflict of interest.