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NASAA Series 63 Uniform Securities Agent State Law Exam

8. Ethical Practices and Obligations: practice questions

Our Series 63 bank has 62 questions on this topic. Here are 5 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1

Under NASAA's model act on vulnerable adults, a qualified individual may notify a third party previously named by the eligible adult, except:

  1. A family member
  2. A third party suspected of the exploitation
  3. A lawyer
  4. A trusted friend who has been named on the account
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B. A third party suspected of the exploitation — Model act section 5: disclosure may not be made to any designated third party suspected of financial exploitation or other abuse of the eligible adult.

Question 2

Under NASAA's statement of policy, opening an account in a fictitious name to place trades that would otherwise be prohibited is:

  1. Allowed if the customer consents
  2. Allowed for a corporate account
  3. Unethical
  4. Allowed if the firm approves
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C. Unethical — Statement of Policy 2.c: establishing or maintaining an account containing fictitious information to execute transactions which would otherwise be prohibited.

Question 3

Under NASAA's statement of policy, which is unethical when an agent recommends a security to a retail customer?

  1. Explaining the risks of the security
  2. Putting the agent's own interest ahead of the customer's
  3. Telling the customer about the commission
  4. Recommending a low-cost index fund
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B. Putting the agent's own interest ahead of the customer's — Statement of Policy 1.d: placing the financial or other interest of the broker-dealer or agent ahead of the retail customer, or failing to comply with Regulation Best Interest.

Question 4

Under NASAA's statement of policy, which listed broker-dealer practice is not among those the policy applies to agents by cross-reference?

  1. Failing to segregate customers' free securities
  2. Churning a customer's account
  3. Making unsuitable recommendations
  4. Guaranteeing a customer against loss
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A. Failing to segregate customers' free securities — Statement of Policy 2.f applies 1.b, c, d, e, f, g, h, k, l, p, q, r, s, w, x and y to agents. Segregation (1.i) is a firm duty not on that list.

Question 5

A broker-dealer quotes a price to buy a stock but then refuses to trade at that price under the stated conditions. Under NASAA's statement of policy, this is:

  1. Allowed if the market moved
  2. Unethical
  3. Allowed for over-the-counter stocks
  4. Allowed if the quote was oral
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B. Unethical — Statement of Policy 1.n: offering to buy or sell at a stated price unless prepared to trade at that price under the stated conditions.

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