Series 63 Sample Questions & Answers

Explanation:
A broker-dealer is not permitted to allow a customer to engage in margin transactions unless the broker-dealer receives a margin agreement signed by the client promptly after the client’s first margin transaction.

Explanation:
None of the selections describe an “agent,” as defined by the Uniform Securities Act (USA.) Joe is not executing trades for clients of the broker-dealer, and clerical assistants are not classified as agents. Agents must be individuals, so a firm like Freedom broker-dealers would not be considered an agent. A bank is not an individual, and banks are even excluded from the definition of a broker-dealer.

Explanation:
The bond’s registration is effective for one full year from the effective date of the registration.

Explanation:
Under the guidelines of the USA, none of the entities described in Selections A, B, or C would be required to register with the state as a broker-dealer since the term, as defined by the USA, does not include agents, savings institutions, or entities with no offices in the state who deal exclusively with issuers and/or other broker-dealers, financial institutions, insurance companies, pension funds, or insurance companies. Selections B and C refer to a financial institution and an agent, respectively. In the scenario described in Selection A, the underwriter has no offices in the state and is dealing exclusively with the issuer of the bonds and insurance companies.

Explanation:
If Alice places a market order to buy call options on Tuesday, August 10th, she will have to pay forthem on Wednesday, August 11th, the next business day. Options and U.S. government bonds settle on the day after the trade date, or T + 1.

Explanation:
Both a debenture and a futures option contract on wheat are securities as defined by the USA. A debenture is a long-term, unsecured debt instrument and is specifically listed as a security in the Act.
Although commodity futures contracts are not considered to be securities as defined by the Act, options on commodity futures contracts are.

Explanation:
A broker-dealer of commodity futures contracts is guilty of nothing under the Uniform Securities Act since a commodity futures contract is not a security as defined by the USA. The broker-dealer may, however, find himself in trouble with the Commodity Futures Trading Commission, which is the regulatory agency of the futures market.

Explanation:
The National Securities Markets Improvement Act of 1996 defined “federal covered securities” and exempted them from state registration requirements. The Gramm-Leach-Bliley Act focused on financial institutions and provided fortheir registration as broker-dealers under certain conditions. The National Conference of Commissioners on Uniform State Laws (NCCUSL) is the organization that drafted the Uniform Securities Act, which is not comprised of actual laws itself, but is, instead, just a guideline for each state to use when formulating its own securities laws.

Explanation:
Trade confirmations must be received by the customer no later than the settlement date.

Explanation:
If Rich Quick is able to earn profits 95% of the time by trading on abnormalities he observes in bond yield spreads, he is skilled. There is nothing illegal in what he is doing. Arbitrageurs attempt to earn profits when they observe what they believe to be mispriced securities, and this is an accepted activity. Rich is not using insider information; bond yields are publicly available information.