Series 63 – Uniform Securities Agent State Law Exam Fraudulent and Prohibited Practices 2

Question 1

Under the USA, which of the following constitutes 'market manipulation'?

Accepted Answer

Creating false or misleading appearances of active trading through wash sales

Answer

Wash sales and matched orders that create artificial appearances of trading activity are forms of market manipulation prohibited under the USA.

Question 2

What is 'scalping' in the context of securities fraud?

Accepted Answer

An investment adviser purchasing securities for personal accounts before recommending them to clients

Answer

Scalping occurs when an investment adviser buys a security for their own account and then recommends it to clients, profiting from the price increase caused by client purchases.

Question 3

Under the USA, which of the following is required if an agent wants to share in the profits and losses of a client's account?

Accepted Answer

Written authorization from the client and written authorization from the broker-dealer

Answer

Sharing in client account profits and losses requires both written client authorization and written broker-dealer authorization under the USA.

Question 4

Under the USA, an agent who recommends a security that is unsuitable for a client's investment profile is in violation of what principle?

Accepted Answer

The suitability obligation under the anti-fraud provisions

Answer

Recommending unsuitable securities violates the suitability standard, which is part of the anti-fraud provisions under the USA.

Question 5

What must an agent disclose to a client when the agent has a material conflict of interest in recommending a security?

Accepted Answer

The existence of the conflict so the client can make an informed decision

Answer

Material conflicts of interest must be fully disclosed to clients so they can make informed investment decisions, regardless of the dollar amount involved.

Series 63 – Uniform Securities Agent State Law Exam Practice Test

Series 63 – Uniform Securities Agent State Law Exam Practice Test

Series 63 – Uniform Securities Agent State Law Exam Fraudulent and Prohibited Practices 2