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

Question 1

Under the USA, which of the following is an example of a fraudulent act?

Accepted Answer

Making an untrue statement of a material fact in connection with a securities transaction

Answer

Selling a registered security at its market price

Answer

Recommending a security after conducting due diligence

Answer

Charging a standard commission for executing a trade

Question 2

What is 'churning' in the context of securities regulation?

Accepted Answer

Excessive trading in a client's account primarily to generate commissions

Answer

Selling securities at a loss to offset capital gains

Answer

Recommending speculative securities to conservative investors

Answer

Failing to execute trades in a timely manner

Question 3

Under the USA, an agent who guarantees a client that they will not lose money on an investment is in violation of what?

Accepted Answer

The anti-fraud provisions and prohibited practices rules

Answer

The registration requirements only

Answer

Only FINRA rules, not state law

Answer

No rule if the guarantee is in writing

Question 4

Under the USA, which of the following is NOT a prohibited practice for a registered agent?

Accepted Answer

Recommending a security after conducting reasonable research

Answer

Sharing in the profits and losses of a client's account without written consent

Answer

Borrowing money from a client who is not a financial institution

Answer

Executing trades in a client's account without prior authorization

Question 5

What does 'front-running' mean in securities regulation?

Accepted Answer

Trading a security in advance of a large pending client order to profit from the anticipated price movement

Answer

Selling securities before they have been fully registered

Answer

Recommending securities before providing clients with research reports

Answer

Executing trades at the opening of the market before other investors

Question 6

Under the USA, an agent who uses a customer's funds or securities for personal use without authorization is guilty of what?

Accepted Answer

Misappropriation, which is a fraudulent act

Answer

A minor regulatory violation only

Answer

Only a civil offense under state law

Answer

A technical violation requiring only a fine