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Author Topic: Try to answer a Series 63 related question. (a game)
Primal Curve
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I have lots of these so this should prove to be fun. These questions are intentionally opaque and backwards. The correct respondee will have the joy of knowing they got the answer right. All correct answers must include correct rationale. Guessing is not acceptable.

I'll take it easy for the first few rounds. I'll only let you guys squirm for a while before I reveal the answer. You should be able to learn from the answers, so I'll gradually make them harder and won't be so kind about the rationale.

The first is a gimme. Prohibited practices are easy.
quote:
When it comes to borrowing and lending money, the Uniform Securities Act (hereby known as USA) is concerned that activity not take place which would compromise the objectivity of securities professionals. Which of the following is not a prohibited practice?

I. A broker/dealer lending money to a client to purchase additional securities.
II. An agent taking out a car loan from a bank whose branch manager is a client of that agent.
III. An investment adviser borrowing money from an affiliated broker/dealer.
IV. An investment adviser lending money to a client in order to enable that client to maintain the minimum required asset level in the account.

A. I, II, III and IV
B. I, II and III only
C. I and III only
D. II and IV only


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Hiroshima
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I guess D. All the other answers outlaw margin accounts. This is a fun game, almost as fun as a root canal.
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Dagonee
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I would say C. I creates immediate conflicts of interest - the broker may make suggestions later that tend to safeguard his loan, not help the client. The two will not always coincide.

II doesn't create a conflict of interest, assuming the loan is available to any customer with similar credit rating at the same rate. The dealer will be beholden to the bank, not the manager.

III Borrowing money from an affiliated broker carries the possibility of pressure to reccomend that broker's products/services, which threatens objectivity.

I wasn't quite sure of IV, but there's no I, III, and IV option. I tended to think it might be OK, analogizing it to an attorney fronting court fees to a client. I assume there would be time, amount, and term limits if it is allowed.

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Papa Moose
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My guess is D, for pretty much the same reasons as Dag, except I think he missed a "not" in the question.
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Dagonee
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Right, Pops. Very tired, and I haven't stopped moving since I finished exams.
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Primal Curve
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The correct answer is actually B. Here's the rationale:

I. A broker/dealer lending money to a client to purchase additional securities.

A broker/dealer is specifically in the profession of lending money. Think of margin accounts, for instance. The broker/dealer is "lending" money, allowing the client to purchase more securities than they would normally be able to purchase.

II. An agent taking out a car loan from a bank whose branch manager is a client of that agent.

The fact that the client is a manager of the bank is irrelevant. However, agents are allowed to borrow from clients if that client is in the profession of lending money (such as a banker or a broker/dealer). However, the fact that the client is the manager of the bank is irrelevant, since the loan is from the bank and not the manager himself. So this is permisable.

III. An investment adviser borrowing money from an affiliated broker/dealer.

An exception to the "lending" rule is when affiliated companies lend money to one another. However, there is another exception here- the lender is a broker/dealer. Since they both qualify the lending, the transaction is lawful.

IV. An investment adviser lending money to a client in order to enable that client to maintain the minimum required asset level in the account.

This is specifically prohibited. Comingling of client/agent funds is a big no-no in the securities business. Also, an investment adviser, personally, is not in the business of lending money. So this is out.

Fun, eh?

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Primal Curve
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Here's an easier one...

quote:
When recommending a corporate security, an agent indicates that the top officers of the company were responsible for the rapid growth of LBJ corporation, a well-known, very successful firm in the same industry. Under the USA, all of the following statements by the registered representative are permitted EXCEPT

A. "Time will tell whether these guys can repeat their success with LBJ Corporation."
B. "The president of this company was responsible for LBJ Corporation's success."
C. "There is no doubt that these guys will repeat the success they enjoyed with LBJ Corporation."
D. "The president of this company used to run LBJ Corporation."


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Beren One Hand
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C?
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Primal Curve
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Rationale please.
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Beren One Hand
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C seems like the most deceptive statement. It is a sweeping, forward looking speculation. I also don't think agents should be allowed to give guarantees of performance.

D is a factual statement. A is a fair statement that does not make any predictions. I thought about picking B. It is a speculative statement as well, but at least one that is verifiable by research.

When is the test PC?

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Primal Curve
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You are correct, and your rationale is accurate. The most important point is that investment advisers/agents must never promise profits. It is deceptive and dishonest.

B looks funky, but it is verifiable. That answer was put in there to make you second guess yourself- one of the best tricks of the test.

When? Tomorrow 1:15PM central. I think I'm ready. I was concerned earlier, but I just needed to refresh my mind on this stuff. I don't think I'll tromp the test, but I'll probably pass.

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Kwea
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I would say C. The reason is that he sin't allowed to make promises/guarentees of future returns, and past performance is not a reliable indicator of future gains in most situations.
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Beren One Hand
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I would say good luck, but I'm sure you don't need it. Just don't start whistling if you finish the test earlier than the other folks. People hate that. [Wink]
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Primal Curve
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Okay, on to question number three. This one is tougher.

quote:
Which of the following is(are) considered investment adviser representatives (supervised persons) under the Uniform Securities Act?

I. Vice-president of an investment advising firm
II. Temporary employee hired to solicit clients
III. Employee who performs only clerical tasks
IV. Employee who supervises the management of customer accounts

A. I only
B. I, II and IV only
C. III and IV only
D. I, II, III and IV


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Primal Curve
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Whew, I passed the thing. Next time, maybe I'll actually study, instead of cramming the night before. Wait, there won't be a next time. WOOOHOOO! Freedom!
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DarkKnight
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I think my head exploded! I read the questions and just start chanting USA! USA! USA!
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Dagonee
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Congratulations, PC! Does this mean Series 7 isn't in your future?
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Kwea
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D, because they all have something to do with the accounts...although I am not positive about the clerical worker....


They DO have access to the records though, and advisors use those records to make decisions, and they are supervised.... [Big Grin]

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Primal Curve
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Dags,

I don't really know. Technically, I don't need the 6 or the 63 for my job since I don't offer advice nor do I solicit the sale of securities. I think the 7 would be a little more than overkill.

I also don't really want to be a broker. It's a crappy job. You spend the first 10 years making little-to-no money while you build up your client base. Only after that time do you start making money on commissions, and even then there's no guaruntee of riches. It's like being drafted by the NBA- only the best get to play in the big leagues.

I guess I'm also not really interested in the pursuit of money. I'd be much happier doing something like teaching. At this point, however, I just need to pay the bills. Passing these tests has given me 18 months of job security.

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Primal Curve
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The Answer is actually B.

Here's the rationale:

- Vice-president of an investment advising firm
Since the Vice President acts in a supervisory capacity to those who solicit business and give financial advice, they are required to register as an investment adviser agent. Even though the question states "supervised persons" the definition of investment adviser representative still stands.

II. Temporary employee hired to solicit clients
A person who solicits for a company falls under the definition of investment adviser representative.

III. Employee who performs only clerical tasks
This person, since they have no contact with the public need not register. They do not solicit clients, nor do they offer advice. They do not fall under the definition of investment adviser representative.

IV. Employee who supervises the management of customer accounts
The same rationale applies here as with the VP.

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