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

Making untrue statements or misleading omissions of material facts in connection with securities transactions is explicitly fraudulent under the USA.

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

Churning is the practice of excessive and unnecessary trading in a client's account for the purpose of generating commissions, which is a prohibited practice.

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

Guaranteeing a client against loss is a prohibited practice under the USA regardless of whether the guarantee is verbal or written.

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

Recommending a security after conducting reasonable due diligence is a proper and permitted activity for a registered agent.

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

Front-running involves trading for one's own account ahead of a known pending customer order, taking advantage of the expected price impact of that order.

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