Free Uniform Securities State Law Examination Exam Series-63 Exam Practice Test

George Geek is a computer programmer who tired of working for others and started his own company. He convinced forty investors that he could design software that would rival Microsoft, and sold them each a 10% partnership interest in his firm for $25,000. He designed and printed up the partnership certificates himself. George told the investors that he had a product that was on the verge of being marketable and that when it did-within the next two months-revenues would pour into the company, and he would begin paying dividends. He told them they could expect a 20% return on their money this year, with even higher returns in the years to come. As it turned out, George wasn’t quite the programmer he thought he was, and he wasn’t able to get all the bugs out of the program to make it marketable within the promised two months.Within a year, George had tired of the project and was too busy picking up chicks in his new Corvette when he wasn’t on the island of St. Bart overseeing the construction of his new beach mansion-and picking up chicks. His activities, of course, were financed by the extremely generous “salary” he paid himself from the investors’ monies.Under the Uniform Securities Act, do the investors have any civil claims against George?

• Yes. They can sue George for the return of their original investment, plus interest. George would also have to pay their court costs and attorneys’ fees and any amounts assessed by the court for “pain and suffering” on the parts of the clients.
• No. It wasn’t George’s fault that he was unable to do what he promised. Even if it wasn’t for.
• Yes. They can sue George for the return of their original investment, plus interest. George would.
• No. The Uniform Securities Act only involves securities laws and partnership interests are not.

Assuming the security is not registered under the Uniform Securities Act, which of the following would not be exempt from state registration?

• a variable annuity contract offered by an insurance company with offices in the state
• a stock that is listed on the American Stock Exchange
• a stock that is listed on the OTC Bulletin Board
• a put option on a stock that sells in the over-the-counter market

John Ketchum is an investment adviser representative with Load Investment Advisers, which has a family of load funds that it encourages its representatives to promote. Representatives of the firm that sell shares in these funds to their clients receive a greater share of the load than they do if they sell load funds offered by other firms.Based on these facts, which of the following statements is true?

• John is obligated to try to sell his clients the funds offered by Load first since he is affiliated with them and has a fiduciary responsibility to them.
• John must provide his clients with a written disclosure that he will receive a greater remuneration for selling shares in the Load family of funds than if he sells them shares in other funds before heprovides his clients with any investment advice.
• If, after reviewing the information form a client has filled out, John believes that one of Load’s funds is an appropriate investment, John can recommend that the client invest in that fund. There is no disclosure requirement necessary if the recommendation is a sound one that can be proved to be based on the client’s specific situation.
• Both A and B are true.

Which of the following persons would not be required to register with the state as an agent under the guidelines of the Uniform Securities Act (USA)?

• Keith is a salaried employee of Middlesex County in Massachusetts who sells revenue bonds issued by the county to the public.
• John is employed by TrustUs Corporation to sell shares of the firm’s stock to the firm’s employees and receives a commission on the shares he sells.
• Stefan is a sales representative for SecureMoney Broker-Dealers and sells only mutual fund shares.
• Preetham is part-owner of SecureMoney Broker-Dealers and executes the purchase and sale of
• securities for the firm’s customers.

Which of the following is not considered to be a person, as defined by the Uniform Securities Act?

• a 16-year old cheerleader
• a law firm that is organized as a partnership
• a corporation
• a school district

Although an Administrator has broad powers, he or she cannot:

• issue subpoenas involving compulsory attendance.
• gather evidence.
• deliver a judicial injunction.
• formulate rules and orders.

Which of the following would be an unsuitable recommendation for your 68-year-old client?

• a Treasury Inflation Protected Security (TIPS)
• a deferred annuity
• an S&P 500 Index mutual fund
• a high quality corporate bond fund

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?

• Yes. Mr. Eddie has advised his clients to invest in load funds when no load funds are clearly better investments.
• No. Diversification should, in fact, be the goal, and he has advised a well-diversified plan for his clients.
• 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.
• Yes. Mr. Eddie is guilty of misappropriation, a prohibited practice.

For how long after the effective date is a security’s registration valid?

• three months
• six months
• one year
• two years

BondsRUs is a broker-dealer that (unsurprisingly) specializes in bonds. The firm has found that it is able to sell Treasury bonds that it buys for $90 per $100 of par value for $99 per $100 of par value to some of its more naïve clients, who never pay attention to the confirmation statements BondsRUs sends them. BondsRUs is guilty of

• nothing. It is acting as a dealer in bonds and, as such, can charge its clients whatever the clients are willing to pay.
• overcharging its clients by unreasonable markups. A $9 dealer’s spread on Treasury bonds is unwarranted.
• fraud.
• both B and C.