16 State Securities Law (Series 63) Practice Questions & Answers

1. 1. Under the Uniform Securities Act, which of the following is specifically EXCLUDED from the definition of a 'security'?

   • A.A stock option or warrant
   • B.An investment contract
   • C.A whole life insurance policy or fixed annuity contract✓ Answer
   • D.A variable annuity contract

   The Act expressly excludes an insurance or endowment policy and a fixed annuity from the definition of a security because the buyer bears no investment risk, so those returns are guaranteed by the insurer. By contrast, a variable annuity places investment risk on the holder and IS a security.

   Source: Uniform Securities Act Section 401(m) definition of 'security'Report a problem with this question

2. 2. The term 'agent' under the Uniform Securities Act is defined as which of the following?

   • A.The partnership or corporation that issues the securities being sold
   • B.Any individual who represents a broker-dealer or issuer in effecting transactions in securities✓ Answer
   • C.Any legal entity engaged in the business of effecting securities transactions
   • D.Any person who gives investment advice for compensation

   An 'agent' is defined as an individual (a natural person) who represents a broker-dealer or issuer in effecting or attempting to effect securities transactions. The definition is limited to natural persons; entities are broker-dealers, not agents.

   Source: Uniform Securities Act Section 401(b) definition of 'agent'Report a problem with this question

3. 3. A broker-dealer with no place of business in a state deals exclusively with which type of client without being required to register in that state?

   • A.New retail residents of the state
   • B.Institutional clients and existing clients who are temporarily in the state (e.g., on vacation)✓ Answer
   • C.Any client, as long as fewer than ten transactions occur
   • D.Any retail client who initiates the contact

   A firm with no place of business in the state is excluded from the definition of 'broker-dealer' if its only clients there are other broker-dealers, institutions, or existing customers who are not residents but are merely temporarily present in the state. This 'snowbird' exclusion prevents a resident-client relationship from lapsing when a customer travels.

   Source: Uniform Securities Act Section 401(c) exclusions from 'broker-dealer'Report a problem with this question

4. 4. Which of the following transactions is an 'exempt transaction' under the Uniform Securities Act?

   • A.The initial public offering of common stock to the general public
   • B.Any transaction in the securities of a manufacturing company
   • C.An isolated non-issuer transaction, whether or not through a broker-dealer✓ Answer
   • D.A solicited retail sale of a limited partnership interest

   An isolated non-issuer transaction is one of the enumerated exempt transactions because it involves a one-off sale not by the issuer and poses little risk of the ongoing distribution abuses that registration is designed to police. Exempt-transaction status attaches to the manner of sale, not to the type of security.

   Source: Uniform Securities Act Section 402(b) exempt transactionsReport a problem with this question

5. 5. When an agent leaves one broker-dealer to associate with another, who must notify the Administrator of the change?

   • A.The Administrator detects it automatically; no notice is required
   • B.The agent, the former broker-dealer, and the new broker-dealer must all notify the Administrator✓ Answer
   • C.Only the agent
   • D.Only the new broker-dealer

   Because an agent's registration is tied to the employing broker-dealer, a move requires all three parties—the agent, the old firm, and the new firm—to promptly notify the Administrator so the registration can be properly terminated and re-established. The registration does not travel automatically with the individual.

   Source: Uniform Securities Act Section 201(a) agent registration transfer requirementReport a problem with this question

6. 6. Filing a consent to service of process with the Administrator accomplishes which of the following?

   • A.It must be re-filed every year to keep a registration effective
   • B.It exempts the applicant from all civil liability under the Act
   • C.It appoints the Administrator as the applicant's agent to receive legal process, giving that service the same force as if served personally on the applicant✓ Answer
   • D.It guarantees that the applicant's registration will be granted

   A consent to service of process irrevocably appoints the Administrator as the applicant's attorney to receive lawful process in any noncriminal action, and service on the Administrator is legally equivalent to personal service. It is filed once and remains in effect; it does not guarantee registration or waive liability.

   Source: Uniform Securities Act Section 611 consent to service of processReport a problem with this question

7. 7. Which of the following powers does the Administrator NOT have under the Uniform Securities Act?

   • A.To imprison a violator, since criminal penalties can be imposed only by a court✓ Answer
   • B.To conduct investigations and subpoena witnesses and records
   • C.To deny, suspend, or revoke a registration
   • D.To issue cease and desist orders

   The Administrator has broad administrative and civil powers—cease and desist orders, investigations, subpoenas, and registration actions—but cannot impose criminal penalties. Only a court, after prosecution by the appropriate authority, may impose imprisonment.

   Source: Uniform Securities Act Sections 407–409 Administrator's powers and criminal penaltiesReport a problem with this question

8. 8. An issuer wishing to register a security in a state and coordinate that filing with a concurrent federal registration under the Securities Act of 1933 would use which method?

   • A.Registration by coordination✓ Answer
   • B.Registration by exemption
   • C.Registration by qualification
   • D.Notice filing

   Registration by coordination is used when a security is registered federally under the Securities Act of 1933 at the same time; the state registration becomes effective simultaneously with the federal registration. Qualification is the fallback method used when no federal registration is involved.

   Source: Uniform Securities Act Section 303 registration by coordinationReport a problem with this question

9. 9. Under the Uniform Securities Act, the term 'person' includes which of the following?

   • A.An individual, a corporation, a government, and a political subdivision of a government✓ Answer
   • B.Only registered broker-dealers and investment advisers
   • C.Only natural persons who are U.S. citizens
   • D.Only business entities engaged in interstate commerce

   The Act defines 'person' extremely broadly to include natural persons and virtually every kind of entity—corporations, partnerships, associations, trusts, governments, and their political subdivisions. This wide scope ensures the Act's prohibitions reach all actors, not just individuals or private firms.

   Source: Uniform Securities Act Section 401(j) definition of 'person'Report a problem with this question

10. 10. Which statement about the Administrator's authority to deny or revoke a registration for lack of 'good cause' is TRUE?

    • A.The Administrator must obtain a court order before denying any registration
    • B.The Administrator may deny a registration for any reason at his sole personal discretion
    • C.The Administrator may revoke a registration only after a criminal conviction
    • D.The Administrator may not base a denial on the applicant's lack of experience alone; the action must be in the public interest and supported by an enumerated ground✓ Answer

    The Administrator's disciplinary power is constrained: any denial, suspension, or revocation must be in the public interest AND rest on one of the specific statutory grounds. Lack of experience by itself is not a permissible basis; the Administrator may consider it only alongside a lack of qualifying training or knowledge.

    Source: Uniform Securities Act Section 204(a) grounds for denial, suspension, or revocationReport a problem with this question

11. 11. A person who transacts business as an agent in a state without being registered has committed a violation for which the Administrator may seek which of the following?

    • A.Only a private lawsuit brought by the affected customer
    • B.No remedy, because registration of agents is voluntary
    • C.Only revocation of the broker-dealer's registration
    • D.Administrative, civil, and criminal remedies, depending on the circumstances✓ Answer

    Transacting business as an unregistered agent is a prohibited act, and the Act gives the Administrator layered enforcement tools—administrative orders (cease and desist, bars), civil actions (injunctions, restitution), and referral for criminal prosecution—because willful violations can be charged as crimes. Registration of agents is mandatory, not voluntary.

    Source: Uniform Securities Act Sections 201(a), 408, 409 registration requirement and remediesReport a problem with this question

12. 12. Which of the following best describes a 'broker-dealer' under the Uniform Securities Act?

    • A.An individual who solely represents an issuer in selling that issuer's securities
    • B.A person engaged in the business of effecting securities transactions for the accounts of others or for its own account✓ Answer
    • C.A person whose only business is giving investment advice for a fee
    • D.A bank, savings institution, or trust company acting in that capacity

    A broker-dealer is any person (usually an entity) in the business of effecting securities transactions for others (broker) or for its own account (dealer). Individuals representing a broker-dealer are agents, banks acting as banks are expressly excluded, and a person only giving advice is an investment adviser—so those three are not broker-dealers.

    Source: Uniform Securities Act Section 401(c) definition of 'broker-dealer'Report a problem with this question

13. 13. Under the Uniform Securities Act, an 'issuer' is best described as which of the following?

    • A.Any person who issues or proposes to issue a security✓ Answer
    • B.The state Administrator that approves the registration
    • C.Any person who buys a security in the secondary market
    • D.The broker-dealer that underwrites a public offering

    An 'issuer' is any person who issues or proposes to issue a security—typically the company creating and selling the security to raise capital. A secondary-market buyer, an underwriting broker-dealer, and the Administrator each play a different role and none of them 'issues' the security.

    Source: Uniform Securities Act Section 401(g) definition of 'issuer'Report a problem with this question

14. 14. Which of the following is TRUE regarding the effectiveness and renewal of a state securities registration for an agent or broker-dealer?

    • A.Once granted, a registration is permanent and never needs renewal
    • B.A registration automatically transfers to any new employer without any filing
    • C.A registration is effective until a set expiration date and must be renewed periodically to remain in force✓ Answer
    • D.A registration takes effect only after the Administrator issues a written certificate of merit

    A registration, once effective, remains in force only until its stated expiration and must be renewed periodically (with the required filing) to continue. Registrations are not permanent, the Administrator does not certify the 'merit' of any security or applicant, and an agent's registration does not automatically follow the individual to a new firm.

    Source: Uniform Securities Act Section 202 registration effectiveness and periodic renewalReport a problem with this question

15. 15. Under the Uniform Securities Act, which method of securities registration is used when an issuer registers a security with the SEC under the Securities Act of 1933 and, at the same time, registers it at the state level so that state effectiveness coincides with federal effectiveness?

    • A.Registration by qualification
    • B.Registration by exemption
    • C.Notice filing
    • D.Registration by coordination✓ Answer

    Registration by coordination is available only when a federal registration statement is filed under the Securities Act of 1933 in connection with the same offering; the state registration is coordinated to become effective at the same moment the federal registration becomes effective. Registration by qualification is the fallback for securities not eligible for coordination, and notice filing applies to federal covered securities rather than a full state registration.

    Source: Uniform Securities Act Section 303 (Registration by Coordination)Report a problem with this question

16. 16. Under the Uniform Securities Act, an attorney or accountant who gives investment advice that is solely incidental to the practice of their profession and who receives no special compensation for that advice is:

    • A.Excluded from the definition of "investment adviser"✓ Answer
    • B.Required to register as an investment adviser
    • C.Defined as a federal covered adviser
    • D.Required to register as an investment adviser representative

    The Act excludes certain professionals—lawyers, accountants, teachers, and engineers (the "LATE" exclusion)—from the definition of investment adviser when the advice is solely incidental to their profession and no special compensation is received for it. Because the person is excluded from the definition entirely, no registration as an investment adviser is triggered.

    Source: Uniform Securities Act Section 102(15) / 401 exclusions from "investment adviser" definition (LATE exclusion)Report a problem with this question

Practice questions based on the NASAA content outlines and the Uniform Securities Act. Not affiliated with NASAA or FINRA, and not investment or legal advice. About NASAA exams →