Fraudulent and Prohibited Practices Flashcards
6 cards from real Series 63 – Uniform Securities Agent State Law Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Fraudulent and Prohibited Practices flashcards as text
Under the USA, which of the following is an example of a fraudulent act?
Answer: Making an untrue statement of a material fact in connection with a securities transaction
Making untrue statements or misleading omissions of material facts in connection with securities transactions is explicitly fraudulent under the USA.
What is 'churning' in the context of securities regulation?
Answer: Excessive trading in a client's account primarily to generate commissions
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.
Under the USA, an agent who guarantees a client that they will not lose money on an investment is in violation of what?
Answer: The anti-fraud provisions and prohibited practices rules
Guaranteeing a client against loss is a prohibited practice under the USA regardless of whether the guarantee is verbal or written.
Under the USA, which of the following is NOT a prohibited practice for a registered agent?
Answer: Recommending a security after conducting reasonable research
Recommending a security after conducting reasonable due diligence is a proper and permitted activity for a registered agent.
What does 'front-running' mean in securities regulation?
Answer: Trading a security in advance of a large pending client order to profit from the anticipated price movement
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.
Under the USA, an agent who uses a customer's funds or securities for personal use without authorization is guilty of what?
Answer: Misappropriation, which is a fraudulent act
Misappropriation of client funds or securities is a serious fraudulent act under the USA and may result in criminal prosecution.
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