NASAA Series 63 — All Questions

An adviser consistently allocates profitable trades to its own account and its favored clients, giving losing trades to smaller clients. This is:

• a.A prohibited breach of the duty of fair and equitable trade allocation✓
• b.Acceptable portfolio management, because an adviser may allocate trades however it chooses once clients have signed discretionary agreements
• c.Acceptable if the allocation policy is disclosed in writing to the larger clients, who are the only accounts receiving the profitable trades
• d.A concern only for broker-dealers, because the duty to allocate trades fairly arises under the agent-conduct rules and not the adviser rules

An adviser is a fiduciary with a duty to act primarily for the benefit of its clients, so it must allocate trades fairly among them. Giving the profitable trades to itself and favored clients and the losing ones to smaller clients (cherry-picking) breaches that duty. Discretion does not allow unfair allocation, disclosure to the favored clients alone does not cure it, and the duty applies to advisers.NASAA Model Rule 102(a)(4)-1 (introduction: fiduciary duty to act primarily for the benefit of clients)

A state-registered adviser with discretionary authority learns of a net-worth deficiency that could impair its ability to meet commitments to clients. Under NASAA rules it must:

• a.Keep it confidential while it works to cure the shortfall, since disclosure is required only after the adviser fails to cure it within the time the Administrator allows
• b.Disclose it only at the next annual updating amendment to Form ADV, since a temporary net-worth shortfall is not a material change needing interim notice
• c.Promptly disclose the financial condition to clients and notify the Administrator, because it is material to the advisory relationship✓
• d.Disclose it only to prospective clients in the brochure, since existing clients are protected because a qualified custodian holds their assets

A financial condition reasonably likely to impair the adviser's ability to meet its commitments to clients is material to the advisory relationship, so an adviser with discretionary authority or custody must disclose it promptly to clients and notify the Administrator. It cannot wait for a cure period or the next annual amendment, and it cannot be limited to prospective clients.

An agent learns material nonpublic information about a pending merger and tells his brother, who then buys the stock. The agent has:

• a.Done nothing wrong, because only the person who actually trades on inside information violates the antifraud provisions
• b.Violated only the rule on confidential client information, since family members are not covered by the insider-trading prohibitions
• c.Engaged in prohibited tipping of material nonpublic information✓
• d.Acted properly because tips to relatives are lawful so long as the agent receives no payment in return for the information

Passing material nonpublic information to someone who then trades is tipping, which the antifraud provisions prohibit even though the tipper never trades. A tip to a family member is not excused because the agent was not paid, and the violation is not limited to a breach of client-confidentiality or suitability duties.

A trader repeatedly places sell orders to hold a stock's price down while quietly accumulating shares cheaply, creating a false impression of supply. This practice is:

• a.Permitted if the trader discloses the buying afterward, because the rule against manipulation reaches only orders meant to push a price higher
• b.Permitted for registered market makers, who may enter orders on one side of the market to maintain an orderly market in the stock
• c.Legitimate price stabilization, allowed for any trader who enters bona fide orders at or below the last sale price
• d.Prohibited, because artificially capping or pegging a price through deceptive orders is market manipulation✓

Effecting a series of transactions or orders that raise or depress a security's price in order to induce others to trade is a manipulative device. Repeated sell orders that hold a price down while the trader accumulates shares, creating a false impression of supply, are an example. After-the-fact disclosure, market-maker status and the label 'stabilization' do not make it permissible.NASAA Model Rule: Dishonest or Unethical Business Practices of Broker-Dealers and Agents (1.p(3))

A customer instructs an agent to sell a stock immediately, but the agent waits two days hoping for a rebound, and the price falls. The agent has:

• a.Committed a prohibited practice by failing to follow the customer's instructions✓
• b.Acted within his authority, because a sell instruction leaves the agent discretion over the day on which it is executed
• c.Violated only an internal firm order-handling policy, since the model rules regulate unauthorized trades but not delayed ones
• d.Committed no violation, because the customer never complained and the sale was eventually executed at the market price

An agent who does not execute a customer's order as instructed substitutes his own judgment for the customer's, which is contrary to the just and equitable principles of trade the model rule requires. The agent had no discretion over timing, the absence of a complaint does not excuse it, and the violation is not limited to unauthorized trades.NASAA Model Rule: Dishonest or Unethical Business Practices of Broker-Dealers and Agents (high standards of commercial honor and just and equitable principles of trade)

A customer authorizes the purchase of 100 shares; the agent buys 500 shares because he is confident in the stock. As to the extra 400 shares, the agent has:

• a.Effected an unauthorized transaction, a prohibited practice✓
• b.Acted properly if the price later rose
• c.Made a curable clerical error
• d.Acted properly because the customer wanted the stock

Buying more than the customer authorized, without prior written discretionary authority, is an unauthorized transaction; a favorable outcome does not cure it (NASAA unethical practices).

Which customer instruction gives an agent discretion that requires prior written authorization?

• a.'Invest $50,000 in whatever stocks you think are best.'✓
• b.'Buy 300 shares of DEF at the market right now.'
• c.'Buy 200 shares of XYZ; you pick the best price today.'
• d.'Sell 100 shares of ABC sometime this morning.'

Discretion over the security, the amount, or the action requires prior written authorization; choosing only time or price (with security, action, and amount specified) is time/price discretion, which does not (NASAA; USA).

Which statement correctly contrasts discretionary authority for a broker-dealer agent versus an investment adviser?

• a.A broker-dealer agent needs prior written authorization before any discretionary trade, while an adviser may rely on oral discretion for a limited period if written authorization is obtained within about 10 business days✓
• b.A broker-dealer agent may use oral discretion, but an adviser may not
• c.Neither may ever exercise discretion
• d.Both may rely on oral discretion indefinitely

This heavily tested distinction: a broker-dealer agent requires written authorization before the first discretionary trade; an adviser may act on oral discretion initially but must obtain written authorization within roughly 10 business days (NASAA; Advisers Act).

To make an unsuitable trade appear appropriate, an agent inflates the customer's net worth and risk tolerance on the new-account form. This is:

• a.Acceptable if the customer approves the trade
• b.Acceptable if the trade turns out profitable
• c.Prohibited falsification of firm records✓
• d.A harmless estimate

Falsifying customer information on firm records to disguise unsuitability is a prohibited practice that corrupts the books regulators rely on (NASAA unethical practices – falsification).

An agent receives a written customer complaint and personally negotiates a settlement, never telling the firm. This is:

• a.A prohibited practice, because complaints must be reported to the firm, which has supervisory and recordkeeping duties✓
• b.Acceptable if the agent pays from his own funds, since the customer is made whole and no firm money is spent
• c.Acceptable if the amount is small enough that the firm would not have had to report the complaint anyway
• d.Acceptable if the customer signs a release and the agent keeps a copy of it for his own records

A written complaint must go to the firm so that it can be recorded, supervised and retained. Settling it privately, even with the agent's own money, conceals it from the firm's supervisory system, and a small amount or a signed release does not change the duty to report the complaint.

A broker-dealer buys bonds from a customer as principal and applies a markdown far larger than justified by market conditions and services. This is:

• a.A prohibited practice, because unreasonable markdowns are as improper as unreasonable markups✓
• b.Permitted because principals set their own prices
• c.Permitted for unlisted bonds
• d.Permitted if the markdown appears on the confirmation

Charging an unreasonable markdown when buying from a customer as principal is an unethical practice, judged against the prevailing market and the services rendered (NASAA unethical practices – fair prices).

A broker-dealer recommends and sells a security issued by the firm's own parent company without disclosing the affiliation. This nondisclosure is:

• a.Governed only by the adviser conflict rules, not by the broker-dealer rules
• b.Acceptable if the affiliation is disclosed only after the sale settles
• c.Cured by disclosure in the firm's Form BD on file with the Administrator
• d.A prohibited failure to disclose a material control or affiliate relationship✓

A broker-dealer must disclose that it is controlled by, controlling, affiliated with or under common control with the issuer before entering into the contract with the customer, and written disclosure must be given at or before completion of the transaction. A fair price, disclosure only after settlement, a regulatory filing or adviser-specific rules do not excuse the nondisclosure.NASAA Model Rule: Dishonest or Unethical Business Practices of Broker-Dealers and Agents (1.t)

When a broker-dealer publishes a research report recommending a stock in which it makes a market, it must disclose:

• a.Only the security's current price
• b.That it makes a market in the security, a material conflict of interest✓
• c.The names of its customers who hold the stock
• d.Nothing, to avoid influencing readers

A firm publishing research on a security it makes a market in or holds a position in must disclose that conflict; concealing it is a prohibited practice (NASAA unethical practices – conflicts disclosure).

A broker-dealer receives a valid court subpoena for a customer's account records. The firm:

• a.Must first obtain the customer's written consent, because a subpoena cannot override a customer's privacy rights
• b.May release the records only to the customer's own attorney, since confidentiality admits no exception for third parties
• c.May release the records in response to the lawful subpoena, a recognized exception to the confidentiality rule✓
• d.Must give the customer an opt-out period first, and may release the records only if no objection is made

Under the Gramm-Leach-Bliley Act, the privacy restrictions do not stop a financial institution from disclosing customer information to comply with a properly authorized subpoena or summons, 15 U.S.C. 6802(e)(8). The firm does not need the customer's consent first, and it does not have to hold off for an opt-out period, because the exception exists precisely so legal process can be answered. The duty of confidentiality is not absolute, since records may go to a party with legal authority, but a subpoena opens the door for that party only, not for anyone who asks.15 U.S.C. 6802(e)(8) (Gramm-Leach-Bliley Act)

A customer delivers a stock certificate to an agent to sell. The agent must:

• a.Sell it through his own personal account
• b.Store it in his personal safe-deposit box indefinitely
• c.Keep it in his desk until the price improves
• d.Promptly forward the certificate to the firm for handling, not hold or divert it✓

Agents must promptly transmit customer funds and securities to the firm or proper party; holding or diverting them is prohibited (NASAA unethical practices – prompt transmittal).

A mutual fund wholesaler gives an agent expensive sporting-event tickets as a reward for sales. Under prohibited-practice principles, the concern is that:

• a.Undisclosed sales incentives create a conflict of interest that can bias recommendations✓
• b.There is no concern because the customer pays nothing extra
• c.Only cash gifts raise any concern
• d.Gifts are always illegal regardless of value or disclosure

Sales-contest prizes and gifts tied to selling a product create conflicts that may bias recommendations; such compensation must be disclosed and is subject to gift limits and firm supervision (NASAA unethical practices; SRO gift rules).

An agent conducts securities business with customers through a personal messaging app the firm cannot monitor or archive. This is:

• a.A concern only for investment advisers
• b.Acceptable if he screenshots the messages
• c.A violation, because business communications must occur through the firm's supervised, retained channels✓
• d.Acceptable because messaging is informal

Securities communications must run through channels the firm can supervise and retain; using an unmonitored app defeats supervision and recordkeeping (NASAA; recordkeeping rules).

A broker-dealer must send a customer a written confirmation of a securities transaction:

• a.Only for purchases, never for sales
• b.Only if the customer requests it
• c.At or before completion (settlement) of the transaction, disclosing required trade details and the firm's capacity✓
• d.Once a year in a summary statement

Firms must send trade confirmations at or before completion of the transaction, disclosing details such as price, quantity, capacity (agent or principal), and compensation; failure is a recordkeeping and disclosure violation (NASAA; SEC Rule 10b-10).

To reassure a nervous client, a firm promises in writing to repurchase a bond at the client's original cost anytime in the next year. This is:

• a.Permitted because the firm, not the agent, made the promise
• b.Permitted for investment-grade bonds
• c.Permitted because it is in writing
• d.A prohibited guarantee against loss✓

Guaranteeing a customer against loss—including a promise to repurchase at cost—misrepresents investment risk and is prohibited whether made by the agent or the firm (NASAA unethical practices; USA §101).

An agent urges a client to buy a mutual fund in a taxable account right before its year-end capital-gains distribution 'to capture the payout.' This is:

• a.Selling dividends, a prohibited practice, because the price drops by the distribution and the client incurs an immediate tax liability with no economic gain✓
• b.Sound advice, because the client receives cash sooner
• c.Acceptable as long as the fund is suitable
• d.Acceptable because the distribution is publicly announced

Enticing a purchase just before a distribution ('selling dividends') is prohibited: the share price falls by the distribution amount and the investor merely converts principal into a taxable payment (NASAA unethical practices – selling dividends).

A client's mutual fund purchase would reach a reduced sales-charge breakpoint if a letter of intent were used, but the agent never mentions it. This omission is:

• a.Acceptable if the client did not ask about discounts, since the agent has no duty to raise them unprompted
• b.A prohibited breakpoint-related practice, because the agent must disclose letters of intent and rights of accumulation that reduce sales charges✓
• c.A concern only for purchases of $1 million or more, because that is the only breakpoint FINRA Rule 2342 covers
• d.Acceptable if the sales charge is shown in the prospectus the client receives, since delivery of the prospectus satisfies every breakpoint duty the agent owes

Breakpoint discounts, such as those available through a letter of intent or rights of accumulation, reduce the sales charge on mutual fund purchases, and FINRA Rule 2342 prohibits breakpoint sales in which the agent steers a client past a discount. Failing to mention an available discount is therefore a prohibited practice. It does not matter whether the client asked about discounts, because the burden is on the agent. The practice is not limited to purchases above $1 million, a letter of intent being optional for the client does not excuse the agent from mentioning it, and delivering the prospectus does not discharge the duty.FINRA Rule 2342; FINRA Rule 2341(d)

An agent repeatedly recommends replacing one variable annuity with another, generating new sales and surrender charges without a documented client benefit. This is:

• a.An improper switching or replacement practice, because inducing exchanges without reasonable grounds imposes needless charges✓
• b.Proper diversification, because annuities from different insurers spread the customer's credit risk across companies
• c.Acceptable because each replacement contract is suitable on its own, apart from the cost of leaving the old one
• d.Acceptable if the client signs each form and receives the new contract's prospectus

Recommending the purchase, sale or exchange of a security without reasonable grounds to believe it is suitable, or inducing exchanges that generate new sales and surrender charges without a documented benefit, is an unethical practice. A replacement must be judged with the costs of leaving the old contract, and a signature or a prospectus does not show a reasonable basis.NASAA Model Rule: Dishonest or Unethical Business Practices of Broker-Dealers and Agents (1.c)

An agent recommends that a conservative client open a margin account to buy more stock but does not explain that losses and required deposits can exceed the original investment. This is:

• a.Acceptable, because a signed margin agreement already serves as the required risk disclosure
• b.Acceptable if the client is an experienced investor who has used margin before
• c.A prohibited failure to disclose the material risks of margin✓
• d.A concern only if the client later receives a margin call and actually loses money

Recommending margin to a conservative client without explaining that losses and required deposits can exceed the original investment omits a material risk, which is a prohibited practice and a suitability failure. FINRA Rule 2264's margin disclosure statement warns that you can lose more funds than you deposit, but a signed margin agreement does not replace the agent's own explanation when the agent is the one recommending margin. Prior experience with margin does not remove the duty to describe the risk to this client. The violation lies in the omission at the time of the recommendation, not in whether a loss or margin call happens later.FINRA Rule 2264 (Margin Disclosure Statement)

A broker-dealer's advertisement highlights only its most successful past stock picks and omits comparable picks that lost money. The advertisement is:

• a.Acceptable because past performance is factual
• b.Acceptable because the winning picks are real
• c.Acceptable if a disclaimer appears somewhere
• d.Misleading, because selectively presenting only favorable past recommendations is deceptive✓

Cherry-picking only profitable past recommendations while omitting losers creates a misleading impression of skill and is a prohibited deceptive practice (NASAA unethical practices; USA §101).

Which advertising practice by a state-registered investment adviser is prohibited?

• a.Stating the adviser's fee schedule
• b.Presenting a chart or formula as able, by itself, to determine which securities to buy or sell without disclosing its limitations✓
• c.Disclosing that advisory services involve risk
• d.Describing the adviser's investment philosophy

Advertising that a graph, chart, or formula can by itself determine what or when to buy or sell, without disclosing its limitations, is a prohibited advertising practice for advisers (NASAA model advertising rule; Advisers Act Rule 206(4)-1 tradition).

An adviser recommends a proprietary product from which it earns extra compensation. To satisfy its fiduciary duty, the adviser must:

• a.Say nothing, because the product is suitable
• b.Disclose the conflict of interest, including the additional compensation, so the client can evaluate the recommendation✓
• c.Avoid all proprietary products entirely
• d.Obtain the Administrator's approval first

An adviser's fiduciary duty of loyalty requires full and fair disclosure of material conflicts, including extra compensation from proprietary products, so the client can give informed consent (Advisers Act §206; NASAA).

A state-registered adviser deposits client funds it holds into the firm's general operating account for convenience. This is:

• a.Prohibited commingling of client assets with firm assets✓
• b.Acceptable if the balance is tracked on a spreadsheet
• c.Acceptable because the adviser is bonded
• d.Acceptable if the funds are refunded later

Client funds must be segregated from firm assets with a qualified custodian; depositing them into the firm's operating account is prohibited commingling and triggers custody violations (NASAA custody rule; unethical practices).

A state-registered investment adviser advertises that its registration means it is 'recommended by' and 'approved by' the state securities regulator. This is:

• a.Acceptable for firms with a clean disciplinary record
• b.Acceptable if placed only in the brochure
• c.Acceptable because the firm is in fact registered
• d.Prohibited, because it misrepresents the meaning of registration✓

Implying that registration is an approval, recommendation, or endorsement by the Administrator is prohibited; registration is not a seal of approval (USA §404; NASAA advertising rule).

An investment adviser borrows money from an advisory client who is not a lending institution or a family member. This is:

• a.Permitted for clients with large accounts
• b.Permitted as long as interest is paid
• c.Permitted if disclosed after the fact
• d.Prohibited, because borrowing from a client outside narrow exceptions breaches the adviser's fiduciary duty✓

An adviser generally may not borrow from a client unless the client is a broker-dealer, an affiliate, or a financial institution in the lending business; borrowing from an ordinary advisory client is a prohibited conflict (NASAA unethical practices for advisers).

A state-registered adviser wants to increase advisory fees for existing clients. It must:

• a.Amend Form ADV and wait to tell existing clients until the annual summary of material changes, with no client consent needed for the new fee
• b.Apply the increase at the next billing date, because the adviser's Form ADV fee schedule already lets it change fees at will without notice
• c.Disclose the change and generally obtain the clients' agreement, because the fee is a material term of the advisory contract✓
• d.Raise the fee only for new clients, because existing clients' fees can never be changed once the contract is signed

An advisory fee is a material term of the advisory contract, so an increase has to be disclosed to the affected clients and, as a general matter, agreed by them. Telling the Administrator or updating Form ADV does not substitute for telling the client, an earlier fee schedule does not give the adviser a right to change fees at will, and the fee for existing clients is not frozen forever, since the contract can be amended with their agreement.

An agent begins selling fixed insurance products for an outside insurer for compensation without notifying his broker-dealer. Regarding this outside business activity, the agent:

• a.Must provide prior written notice to his broker-dealer, because undisclosed outside business activity is a supervisory and prohibited-practice concern✓
• b.Must notify the Administrator rather than the broker-dealer, because insurance is regulated at the state level
• c.Need not tell the firm, because a business outside the securities industry falls beyond the reach of FINRA Rule 3270
• d.May begin selling and give written notice within thirty days after the first sale, since notice is due only once the agent has actually earned compensation from the insurer

FINRA Rule 3270 bars a registered person from being employed by or compensated by another person for outside business activity unless the person gives the member firm prior written notice, and the rule is not limited to securities businesses, so selling insurance for compensation is covered. The notice goes to the employing broker-dealer, not to the Administrator, and it is due before the activity starts, not after the first sale or the first commission. Doing the work on personal time is no exception. FINRA Rule 3290, approved 2026-09-15, has no effective date yet, so Rule 3270 still applies.FINRA Rule 3270

Which of the following is a statutory ground for the Administrator to deny, suspend, or revoke a registration?

• a.The applicant has only a few clients
• b.The applicant is a first-time registrant
• c.The applicant was convicted, within the past 10 years, of a felony or a securities-related misdemeanor✓
• d.The applicant charges low fees

Enumerated grounds include a felony conviction within 10 years or a securities-related misdemeanor, insolvency, injunctions, willful violations, dishonest or unethical practices, and false filings, coupled with a public-interest finding (USA §204).

A broker-dealer's principal ignores repeated red flags that an agent is churning accounts. The firm and principal may be disciplined for:

• a.A criminal offense the Administrator may punish with prison
• b.Failure to reasonably supervise, an independent ground for discipline✓
• c.Nothing, because only the agent violated the rules
• d.A private matter only between the customer and the agent

Failure to reasonably supervise agents and employees is itself a ground for disciplinary action against the firm and supervisors, separate from the underlying violation (USA §204; NASAA).

An applicant for agent registration was recently barred by a self-regulatory organization. The Administrator may:

• a.Deny the registration, because being subject to an SRO or another regulator's disciplinary order is a ground for denial✓
• b.Approve automatically because SRO actions are private
• c.Not consider the SRO action at all
• d.Deny only if the SRO action was criminal

An applicant subject to an order of another state's Administrator, the SEC, an SRO, or a foreign regulator within the past 10 years may be denied registration, after notice and an opportunity for hearing (USA §204).

To obtain an injunction and an order of restitution against a person violating the Act, the Administrator must:

• a.Simply issue the injunction administratively
• b.Wait for a criminal conviction first
• c.Apply to a court, which may grant injunctive relief, restitution, disgorgement, and other equitable remedies✓
• d.Refer the matter to the SEC for an injunction

Injunctions and monetary equitable relief such as restitution and disgorgement are judicial remedies; the Administrator applies to a court for them, distinct from its administrative powers (USA §509/§603).

Under the Uniform Securities Act, a willful violation is a criminal offense. Which statement reflects the model level tested?

• a.There is no time limit at all on beginning a prosecution
• b.Only civil remedies exist; there is no criminal exposure
• c.The Administrator personally sentences violators to prison
• d.It is punishable by a fine and/or imprisonment, with prosecution generally begun within five years; the 1956 Act sets lower maximums (about $5,000 and up to 3 years) than the 2002 Act✓

Willful violations are criminal (fine and/or imprisonment), prosecuted in court within a five-year limitations period. The 1956 Act caps penalties lower (about $5,000 / 3 years) than the 2002 Act (higher fine / up to 10 years)—a tested 1956-versus-2002 difference (USA 1956 §409; USA 2002 §508).

In a criminal prosecution under the Uniform Securities Act for violating a rule or order, the defendant:

• a.May not be imprisoned if he proves he had no knowledge of the rule or order✓
• b.Is automatically acquitted by claiming ignorance of the law
• c.Has no available defenses of any kind
• d.Faces only civil liability, never imprisonment

The Act provides that no person may be imprisoned for violating a rule or order of which he had no knowledge; this is narrower than a general 'ignorance of the law' defense and applies to rules and orders, not the statute itself (USA 1956 §409; 2002 §508).

An investor who was sold securities unlawfully has since sold them at a loss. In a civil action under the Uniform Securities Act, the investor may generally recover:

• a.Only his out-of-pocket loss, with no interest
• b.Nothing, because he no longer owns the securities
• c.The tender remedy (price paid plus interest, less income received) reduced by the amount received on resale, plus costs and reasonable attorney's fees✓
• d.Triple damages as a statutory penalty

If the buyer no longer owns the security, recovery is measured as the tender remedy (consideration plus interest less income received) reduced by the value received on the sale, plus costs and reasonable attorney's fees (USA §410/§509).

A seller sends a proper written rescission offer to a buyer who bought securities in a nonexempt, unregistered sale. If the buyer does not accept within the statutory period, the buyer:

• a.Must accept, because rescission is mandatory
• b.Generally loses the right to bring the civil action based on that violation✓
• c.Automatically receives triple damages
• d.May still sue at any time within ten years

A conforming written rescission offer—disclosing the violation and offering the price paid plus interest, less income—cuts off the buyer's civil claim if not accepted within the statutory response period (USA §410/§510).

A person aggrieved by a final order of the Administrator seeks review. Which statement is correct?

• a.The order is stayed automatically upon filing the petition
• b.Review is obtained by petition to the appropriate court within 60 days, and filing the petition does not automatically stay the order✓
• c.A jury retries the facts before the Administrator
• d.Review is by appeal directly to the SEC

Final orders are reviewed by petition to court within 60 days on the administrative record; filing does not stay the order unless the court so orders, and there is no jury before the Administrator (USA §411/§609).

A securities offer is mailed from outside a state and received by a resident within the state. With respect to that offer, the state's Administrator:

• a.Has jurisdiction only if a sale actually results
• b.Has jurisdiction, because an offer directed into and received in the state is made in the state✓
• c.Has no jurisdiction because the offer originated elsewhere
• d.Has jurisdiction only over the mailing state

Jurisdiction attaches where an offer originates, is directed to and received, or is accepted; an offer received in the state is made there, giving that Administrator authority even without a completed sale (USA §414/§610).

The term 'Administrator' under the Uniform Securities Act refers to:

• a.A self-regulatory organization such as FINRA
• b.The state official or agency charged with administering the state securities act✓
• c.The Securities and Exchange Commission
• d.The federal Department of the Treasury

The 'Administrator' is the state securities regulator—official or agency—responsible for administering the state's Uniform Securities Act, not a federal body or SRO (USA §401 'Administrator').

A person served with the Administrator's subpoena refuses to testify. The Administrator may:

• a.Automatically revoke the person's citizenship
• b.Jail the person directly by administrative order
• c.Do nothing, because subpoenas are voluntary
• d.Apply to a court, which may compel compliance and punish refusal as contempt✓

The Administrator cannot itself punish refusal; upon contumacy it applies to a court, which may order compliance and hold a refusing person in contempt (USA §407/§602).

Which action can the Administrator take directly, without first going to court?

• a.Freeze a defendant's bank accounts by its own order
• b.Issue an injunction
• c.Impose a prison sentence
• d.Issue a cease and desist order to stop an ongoing or threatened violation✓

A cease and desist order is an administrative remedy the Administrator may issue directly (with or without a prior hearing); injunctions, imprisonment, and asset freezes are judicial remedies (USA §604/§411).

While a registration proceeding is pending, the Administrator concludes emergency action is warranted. It may:

• a.Summarily postpone or suspend the registration, provided it promptly gives written notice and grants a hearing if requested✓
• b.Take no action until a final order is entered
• c.Permanently revoke the registration without any notice or hearing
• d.Have the registrant arrested

The Administrator may summarily postpone or suspend a registration pending final determination of a proceeding, balanced by prompt written notice and a hearing on request (USA §204).

Under the Uniform Securities Act, the Administrator:

• a.Is forbidden to issue any interpretive guidance
• b.May honor requests for interpretive opinions and may charge a reasonable fee for them✓
• c.Must guarantee the outcome of every transaction
• d.May issue opinions only to federal covered advisers

The Act allows the Administrator to issue interpretive opinions in its discretion and to charge fees; good-faith reliance on a rule, form, or order is also a defense to liability (USA §413/§605).

A customer signs a statement agreeing that her broker-dealer 'need not comply with the state securities act' for her account. This waiver is:

• a.Enforceable if it is notarized
• b.Enforceable if the customer is warned of the consequences
• c.Void, because any condition binding a person to waive compliance with the Act is unenforceable✓
• d.Enforceable for institutional customers

The Act voids any condition, stipulation, or provision binding a person acquiring a security or receiving advice to waive compliance with the Act or its rules (USA §411/§509 nonwaiver).

A firm's officer is sued as a control person for the firm's unlawful securities sale. The officer can avoid liability by:

• a.Proving that the firm was profitable that year
• b.Demonstrating that the security later rose in value
• c.Sustaining the burden of proving he did not know, and in the exercise of reasonable care could not have known, of the facts giving rise to liability✓
• d.Showing that the customer was wealthy

Control persons, partners, officers, directors, and materially aiding employees are jointly and severally liable unless they prove they did not know and could not reasonably have known of the facts creating liability (USA §410/§509).

Regarding the civil statute of limitations under the Uniform Securities Act, which statement is accurate?

• a.There is no limitations period for civil actions
• b.Both acts allow ten years with no discovery rule
• c.The 1956 Act allows suit within the earlier of three years after the sale or two years after discovery, while the 2002 Act generally uses the earlier of two years after discovery or five years after the violation, so periods differ by version✓
• d.The period is fixed at 30 days in every state

The 1956 Act's civil limitation is the earlier of 3 years after the sale or 2 years after discovery; the 2002 Act revised it to the earlier of 2 years after discovery or 5 years after the violation—a tested 1956-versus-2002 distinction (USA 1956 §410(e); USA 2002 §509(j)).

The antifraud provisions of the Uniform Securities Act apply to:

• a.Only registered broker-dealers and agents
• b.Any person, whether or not registered, in connection with the offer, sale, or purchase of any security, exempt or not✓
• c.Only completed sales, never offers
• d.Only non-exempt securities

The antifraud provisions reach any person in connection with the offer, sale, or purchase of any security—exempt or not, registered or not—and apply to offers as well as sales (USA §101/§501).