FINRA Uniform Securities Agent State Law Examination Sample Questions:

1. Which of the following are examples of the prohibited practice of manipulation in the securities markets?
I. Broker-Dealer Joker is unhappy with its investment in the stock of a speculative firm and engages another broker-dealer to purchase a large number of shares from it, with the unofficial agreement to buy back those shares, offer more shares which the second broker-dealer will purchase, and so on.
II. Broker-Dealer Joker has a large short position in the stock of a certain corporation. Joker offers a bonus to its agents who effect sale transactions in the stock.
III. A client calls Broker-Dealer Joker with a request to purchase 20 bonds issued by Massachusetts Institute of Technology (MIT.) The bonds are currently selling for their par value of $1,000. Knowing this, Joker offers to sells the client the bonds for $120 per $100 of par, or $1,200 per $1,000 bond.

A) I only
B) I, II, and III
C) I and III only
D) I and II only

2. Which of the following practices would be prohibited in connection with the sale of investment company shares?
I. selling a client shares of a load stock fund when a no load stock fund with the same investment objective exists II. selling the client shares of five S&P 500 Index mutual funds, offered by different fund families III. encouraging a client to swap his money between two funds in the same family without informing him that this creates a taxable event

A) II and III only
B) I, II, and III
C) I and III only
D) I and II only

3. 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

A) None of the selections listed are securities.
B) Only Selections II and III are not securities.
C) Only Selection III is not a security.
D) Selections II, III and IV are not securities.

4. Ken Con is an agent with Blue Sky Broker-Dealers. He gets up early each morning so that he can study any late-breaking news that may affect the markets and figure out ways to incorporate this news into conversations with select clients in order to pressure them to restructure their portfolios by selling holdings they have in one particular industry to invest the money in another particular industry.
Ken has been very successful with this strategy and executes more trades for his clients than any other agent with the firm, but is he in danger of losing his license?

A) Yes. Ken is engaging in churning, a prohibited practice and can have his license revoked or suspended.
B) Yes. Ken is guilty of the prohibited practice of "tailgating."
C) It depends. If his clients have lost money, Ken may lose his license; but if a review indicates that his clients' accounts earn profits, then his license is safe.
D) No. Ken is just a successful sales person who is working harder than the other agents in the firm.

5. Noah Scruples, an agent with CanDo Broker-Dealers, just got a copy of the most recent report on a certain stock. The report was generated by CanDo's analyst department and is hot off the presses. It has not yet even been put on the firm's website for the firm's clients.
The analyst department has just changed its recommendation on the stock from "Hold" to "Strong Buy" based on new information that it has obtained on the company.
Can Noah rush to his office to buy shares of the stock before the analysts release their reports to CanDo's clients?

A) No. It is unethical for him to trade based on this information before the firm's clients have received the information.
B) Yes. The firm's analysts used publicly available information to assess the stock and make its recommendation, so Noah can buy the stock now on his own account.
C) Both B and C are true statements.
D) No. This is a prohibited activity referred to as "painting the tape."

Solutions: