BondsRUs is a broker-dealer that (unsurprisingly) specializes in bonds. The firm has found that it is able to sell Treasury bonds that it buys for $90 per $100 of par value for $99 per $100 of par value to some of its more naïve clients, who never pay attention to the confirmation statements BondsRUs sends them. BondsRUs is guilty of
Alter Advisers & Associates is a small investment adviser partnership registered only in a single state. One of the partners has died, and the surviving spouse has sold that partnership interest to the surviving partners.
Which of the following statements are true?
I. Alter Advisers must inform the state Administrator of this event.
II. Alter Advisers must inform the SEC of this event.
III. Alter Advisers must notify the firm’s clients of this event.
Under the NASAA Model Rules, which of the following must an investment adviser provide its clients with at least once a year?
Ms. Muffet is employed by Spyder Broker-Dealers. Her job duties include providing price quotes and executing purchases and sales for the firm’s clients. She is paid a salary plus commission. Ms. Muffet is
Which of the following is not a security, as defined by the Uniform Securities Act?
I. an option contract
II. a futures contract on gold
III. a 401K plan
IV. a variable annuity
: 65
Which of the following would meet the requirements for an “exempt security?”
Which of the following compensation arrangements between an investment adviser and an individual client with a net worth of $600,000 would be disallowed?
An investment adviser representative with Capital Investment Advisors, Inc. advised his client to invest $5,000 in bonds of a firm that the adviser claimed was an investment “almost as risk-free as investing in U.S. government bonds; maybe even more so, given the magnitude of the government deficit these days.” The client paid a total of $200 for this advice. The bonds paid interest at the rate of 6%, with semiannual payments, and the client received $300 in interest payments before the firm went belly-up at the end of a year, and its bonds were deemed worthless. The client has filed suit, and its attorneys’ fees and court costs are expected to be $1,000. When the investment is a bond, the state has recently been assessing an interest rate equal to the interest rate paid by the security as an equitable interest payment guideline in civil penalties.
The maximum the client can expect in civil penalties is
Nat Smart was employed as an investment adviser representative and sold many of his clients on a municipal bond fund of which he was fond, telling his clients that the returns earned on it were completely free from federal taxation. Unfortunately, he had some unhappy clients when, at the end of the year, they discovered that they had to pay federal tax on the capital gains earned by the fund when it sold some of the bonds it held. Nat was as surprised as they were.
Based on these facts, which of the following statements is necessarily true?
I. Because Nat was as surprised as they were, he is guiltless.
II. Nat is subject to civil liability payments.
III. Nat will be subject to the criminal penalties for fraud and may spend time in prison.
Which of the following securities would not necessarily be exempt from state registration?
