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

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Total 251 questions
Question 1

The Administrator of a state will deny the registration of a security if

I . the mandated filing fee has not been paid.

II . the compensation of the underwriters is excessive.

III . the registration statement is incomplete.

IV . the issuer is registering the security through the registration by coordination process and has not complied with all the stipulated requirements.



Answer : A

The Administrator of a state will deny the registration of a security under any of the situations described in Selections I, II, III, and IV-if the mandated filing fee has not been paid; if the compensation of the underwriters is excessive; if the registration statement is incomplete; or if the issuer is attempting to use registration by coordination and has not complied with all the stipulated requirements of that process.


Question 2

Which of the following would not be found in a tombstone advertisement?



Answer : A

The price at which the security will be offered will not be found in a tombstone advertisement. A tombstone advertisement is not an offer to sell the security and, in any case, it is unlikely that the final offer price will have even been decided on at this point.


Question 3

on No: 239

A tombstone advertisement is



Answer : B

A tombstone advertisement is an announcement of a new security that may become available for purchase. It is the only type of advertisement that is allowed during the ''cooling off period'' once a firm has filed a registration statement for a new security. It is not an offer to sell the security, an act that is strictly prohibited during this period.


Question 4

Which of the following may be given to prospective investors during the ''cooling off period?''



Answer : A

During the ''cooling off period'' prospective investors may be given only a tombstone advertisement for the security.


Question 5

If an issuer registers securities with the state, how long can the documentation supplied in the registration statement for those securities be incorporated by reference only into a registration statement for future securities the issuer wants to offer for sale?



Answer : C

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.


Question 6

Under which of the following scenarios can a client legitimately sue a purported professional in the securities industry and expect an award for damages?

I . The securities were sold by an agent whose registration was not yet effective with the state, but who had already applied for registration.

II . The security was a variable annuity, and the sales representative neglected to reveal the details of the surrender clause to the client.

III . The security was the stock of a company, the stock had recently been registered with the state for sale, had been granted registration, and the selling agent had told his client that the security had been state-approved for sale.



Answer : D

All of the selections are scenarios describing instances in which a client can legitimately sue a purported professional in the securities industry and expect an award for damages. A client can legitimately sue a purported professional in the securities industry and expect an award for damages if the agent is not yet effectively registered to effect securities transactions in the state; if the professional has neglected-intentionally or otherwise-to inform the investor of all the relevant information involving the security, such as any surrender clause involved; or if the agent has indicated that a state-registered security has in any way been approved by the state.


Question 7

Nat Smart was employed as an investment adviser representative and sold many of his clients on a municipal bond fund of which he was fond, telling his clients that the returns earned on it were completely free from federal taxation. Unfortunately, he had some unhappy clients when, at the end of the year, they discovered that they had to pay federal tax on the capital gains earned by the fund when it sold some of the bonds it held. Nat was as surprised as they were.

Based on these facts, which of the following statements is necessarily true?

I . Because Nat was as surprised as they were, he is guiltless.

II . Nat is subject to civil liability payments.

III . Nat will be subject to the criminal penalties for fraud and may spend time in prison.



Answer : B

Only Selection II is an accurate statement. In telling his clients that the returns earned on a municipal bond fund were totally tax-free, Nat misled the clients, whether intentionally or not. This constitutes fraud, and Nat is, at a minimum subject to civil liability payments, so this is ''necessarily'' true.

Whether or not Nat will be subject to criminal penalties for fraud and spend time in prison depends on his ability to prove that he had no knowledge that he was misleading his clients.


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Total 251 questions