Series-63 FINRA Uniform Securities State Law Examination Free Practice Exam Questions (2025 Updated)

Under the guidelines of the USA, none of the entities described in Selections A, B, or C would be required to register with the state as a broker-dealer since the term, as defined by the USA, does not include agents, savings institutions, or entities with no offices in the state who deal exclusively with issuers and/or other broker-dealers, financial institutions, insurance companies, pension funds, or insurance companies. Selections B and C refer to a financial institution and an agent, respectively. In the scenario described in Selection A, the underwriter has no offices in the state and is dealing exclusively with the issuer of the bonds and insurance companies.

Once an issuer has registered securities with the state, the documentation supplied in that registration statement can be incorporated into the registration statement for future securities the issuer wants to offer for sale by reference only for a period of five years.

To say a security is “exempt” means only that the security is exempt from state registration requirements. It is not exempt from the state’s anti-fraud laws and may or may not be part of an exempt transaction. That is defined by the transaction.

An investment adviser may not recommend a stock to the client that the adviser holds without disclosing to the client that it owns the stock. They are permitted to also be registered as a broker-dealer in the state and to accept certain types of soft dollars as compensation from brokers. And they can have positions in securities that their clients have positions in-just as long as this is disclosed.

If a prospective client requests being put on your firm’s DNC list, you must keep that name on your list for 10 years, according to the TCPA.

“A state cannot require a higher minimum net capital for investment advisers than the amount specified by the Investment Advisers Act of 1940” is a false statement. The Investment Advisers Act of 1940 does not specify a minimum net capital requirement. The Act simply indicates that if an investment adviser is already registered in one state and meeting that state’s minimum net capital requirement, a second state can’t impose a higher net capital requirement on it.

The discretionary powers of a broker-dealer and an investment banker differ in that an investment adviser is allowed to execute a discretionary transaction for a client upon receiving verbal authority only, as long as it is followed up with a written authorization within 10 days, whereas a broker-dealer is prohibited from executing a discretionary transaction unless it has already received written authority for that transaction.

The firm will be expected to provide all of the above-sales and advertising materials to be used in the offering, the agreement between the issuing firm and its underwriters, and the agreement among the underwriters themselves.

No, Joe cannot take his client’s offer of a loan because it could lead to a conflict of interest--if not today, perhaps in the future--and as a fiduciary Joe will be expected to put this client’s welfare ahead of his own. If it takes him a lot longer than expected to get on his feet again, he may be tempted to act in his own best interest.

Only Selections II and III are correct. Under NASAA Model Rules, a registered representative of a broker-dealer is entitled to split his or her commission only with his or her broker-dealer or with another registered representative of that broker-dealer. He is not permitted to share commissions with a client or with anyone who works for the broker-dealer, but is not a registered agent.

Yes. Noah is guilty of not following a client’s instructions and could have his license revoked. A refusal to act on a client’s legitimate order is a prohibited practice, even if the client would have lost money after-the-fact.

It is not prohibited for a broker-dealer to require that a client who is engaging in margin transactions to leave the securities with the broker in “street name.” This is the normal business practice. A margin transaction means that the client is borrowing part of the funds he’s investing, and the securities are serving as collateral for the loan. It is illegal to delay sending a check upon receiving a request for a cash withdrawal, assuming the client has the cash available in his account; to recommend a security to a client without knowing anything about him, including his tolerance for risk; and to execute a trade on instructions from anyone other than the account holder unless that party has at least limited power of attorney.

Neither Scenario I nor Scenario IV describes sales as defined by the USA. When an investor receives securities from Company X when Company X merges with a company in which the investor owns stock, Company X is not considered to have sold those securities to the investor. Likewise, when a person uses securities he owns as collateral for a loan, the USA does not consider this to be a sale of the securities.

Under the guidelines of the BSA, the Treasury Department now requires broker-dealers to obtain and keep information relating to clients that make or receive funds transfers that involve $3,000 or more. If the transaction is a cash transaction over $10,000, the same rules apply, and a Currency Transaction Report must be filed with FinCEN. Under the USA Patriot Act, if the broker-dealer thinks that a transaction of $5,000 or more is suspect, the broker-dealer must file a suspicious activity report (SAR.)

Based on the services A-2-Z provides, it must register with the state as both a broker-dealer and an investment adviser. It is receiving compensation as a broker-dealer for executing purchases and sales of securities for its clients under its basic plan, but it is receiving additional compensation for acting as an investment adviser under the two higher level plans.

As an employee of Spyder Broker-Dealers who executes trades for clients, Ms. Muffet is an agent who works for the broker-dealer Spyder. She does not provide investment advice for a fee, so she is neither an investment adviser nor an investment adviser representative.

Selections I, II, and III are true statements. In order for an investment adviser to act as a custodian for a client’s securities, he must first make certain that the Administrator of the state in which he’s registered does not prohibit it. Then he must inform the Administrator in writing that he will be acting as a custodian for the client, and he has to pay for an independent CPA to audit his books once a year to make certain that everything is copasetic, upon which the CPA reports his findings to the state Administrator. There are also other requirements that must be met.

A hypothecation agreement refers to an agreement signed by a client who is executing a margin transaction that allows the broker to hold the margined securities in street name as collateral for the loan.

To continue operating as an agent, broker-dealer, investment adviser, or investment adviser representative next year, you must pay your filing fee to renew your license by December 31st of this year. Otherwise, your license will expire. There is no grace period.