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FINRA Uniform Securities Agent State Law Examination Sample Questions:

1. Jack Bean is employed by Giant Investment Advisers, LLC. His job duties include advising clients on the asset allocations of their portfolios. Jack Bean is

A) an investment adviser.
B) an agent.
C) an investment adviser representative.
D) an administrative assistant.

2. Which of the following does not describe a prohibited practice for investment advisers?
I. The adviser sells its non-institutional clients securities that it has issued.
II. The adviser makes a discretionary trade for a client after receiving verbal authorization only and does not receive written authorization from the client within 10 business days of doing so.
III. The investment adviser requires an advisory fee of $300 to be paid in advance at the beginning of each quarter.

A) II and III only
B) I and III only
C) I only
D) None of the selections describe prohibited practices.

3. An investment adviser representative with Capital Investment Advisors, Inc. advised his client to invest $5,000 in bonds of a firm that the adviser claimed was an investment "almost as risk-free as investing in U.S.
government bonds; maybe even more so, given the magnitude of the government deficit these days." The client paid a total of $200 for this advice. The bonds paid interest at the rate of 6%, with semiannual payments, and the client received $300 in interest payments before the firm went belly-up at the end of a year, and its bonds were deemed worthless. The client has filed suit, and its attorneys' fees and court costs are expected to be $1,000. When the investment is a bond, the state has recently been assessing an interest rate equal to the interest rate paid by the security as an equitable interest payment guideline in civil penalties.
The maximum the client can expect in civil penalties is

A) $6,000.
B) $5,900.
C) $5,200.
D) $6,200.

4. Harry Lange manages the investment portfolio for the Fidelity Magellan Mutual Fund. Mr. Lange is a(n)

A) broker-dealer.
B) investment adviser.
C) agent.
D) investment company.

5. Mr. Noah Scruples is a registered representative with CanDo Broker-Dealers. A client calls and wants Noah to purchase shares of a mutual fund the client has read about. CanDo is not authorized by this particular fund to effect purchases or sales of the fund shares.
Can Noah execute the order anyway?

A) No. This is a prohibited practice known as front running.
B) No. This is a prohibited practice known as selling away.
C) Yes. Since this is an unsolicited trade, Noah can execute the transaction on behalf of his client.
D) No. This would be considered money laundering, which is highly illegal.

Solutions: