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FINRA Uniform Securities Agent State Law Examination Sample Questions:

1. Moe is a registered investment adviser doing business under the name of MoeMoney Investment Advisers, LLC. Larry, Curly, and Mary all hold positions with the firm. Larry is on the board of directors; Mary is a sales representative for the firm; and Curly is an administrative assistant, who performs clerical duties.
Given that Moe is already a registered investment adviser, which of the other three are automatically registered as investment adviser representatives?

A) Larry and Mary only
B) Larry only
C) Mary and Curly only
D) Larry, Mary and Curly

2. Which of the following is not one of the criteria for a security to be eligible for registration by notification?

A) If the security to be issued is an equity interest in the firm, its offer price has to be at least $5 a
B) The issuer must never have defaulted on any bond or long-term lease obligation.
C) The issuer must have a net worth of $4 million, or its net income before tax for at least two of the
D) The issuer must have preferred stockholders as well as common stockholders.

3. Fly-By-Night Investment Advisers has closed its doors.
Which of the following statements is true?

A) Fly-By-Night must preserve and maintain all records, including client transactions and communications, advertising materials, and financial statements of the now-defunct business for five years.
B) Fly-By-Night must send each of its former clients its records of all that client's transactions and communications with the firm over the past five years.
C) Fly-By-Night is required to shred all documentation of client transactions and communications.
D) Fly-By-Night must send all records of client transactions and communications to the state Administrator for safekeeping.

4. The state of Massachusetts has issued a general obligation (G.O.) bond that pays 3% interest. As an agent selling this bond, you can legitimately tell the investor that

A) all of the above statements are true.
B) the bond is guaranteed by the state of Massachusetts and is, therefore, a risk-free investment.
C) the interest income the investor receives from the bond will be free from federal taxation.
D) all state general obligation bonds are also guaranteed by the federal government.

5. Goldie Locks is an agent with Bear Broker-Dealers. One of her clients is a single woman, Annie Spinster, who is retired and needs income from her investment portfolio to meet her current needs for liquidity. In addition to investing in mutual funds, Annie likes the thrill of investing in single stocks and asks Goldie for recommendations. Goldie recommends Annie invest some of her money in Alcon (ACL), a medical instrument and supplies company selling on the NYSE, based on the fact that it has a high dividend yield and is paying a dividend of $2.21 a share, which is guaranteed to continue or even increase, Goldie assures Annie.
Has Goldie violated any laws or engaged in any prohibited practices?

A) Yes. At the very least, Goldie has committed fraud since she cannot guarantee that a firm's dividend will continue or increase.
B) Both A and B are true.
C) Yes. As the agent of a broker-dealer, Goldie is not permitted to make recommendations for specific investments. Only investment adviser representatives and investment advisers can do that.
D) No. Goldie merely responded to a recommendation request from a client, and the recommendation is suitable since the client has a need for current income and the recommended stock pays a high dividend.

Solutions: