Chapter 2

Pretest

Definition of Terms

  1. Which of the following is NOT considered a person under the Uniform Securities Act (USA)?
    1. A joint stock company
    2. A trust
    3. A 17-year-old honor student
    4. A government agency
  2. Which of the following is NOT considered a sale of a security?
    1. A gift of assessable stock
    2. A contract to convey ownership for value
    3. A pledge of securities as collateral for a margin loan
    4. A bonus of securities
  3. Which of the following is the minimum financial requirement for an individual to be considered a qualified purchaser?
    1. $1,000,000
    2. $2,500,000
    3. $5,000,000 individually or $10,000,000 jointly with a spouse
    4. $5,000,000 individually or jointly with a spouse
  4. As it pertains to the USA, which of the following are considered institutional investors?
    1. A bank
    2. An insurance company
    3. An employee benefit plan with $800,000 in assets
    4. A trust
    1. I and II
    2. I and IV
    3. I, II, and IV
    4. I, II, III, and IV
  5. All of the following are considered securities, EXCEPT:
    1. whiskey warehouse receipts.
    2. a trust indenture.
    3. a commodity future option.
    4. interest in a marketing scheme.
  6. An individual gives 1,500 shares of assessable stock to his child. Under the USA this is:
    1. subject to approval of the state securities administrator.
    2. considered an offer of securities.
    3. irrevocable.
    4. considered a sale of securities.
  7. Which of the following is considered an investment adviser?
    1. The publisher of a market report with a $495 subscription fee based on market events
    2. A publisher of a financial newspaper
    3. An accountant
    4. A person paid a commission for executing a securities transaction
  8. Which of the following is considered a qualified purchaser?
    1. An individual with $1,000,000 in investments held jointly with a spouse and with annual income of $375,000
    2. A publicly held company with at least $5,000,000 in net assets
    3. A pension plan with $2,000,000 in assets
    4. A family-owned business with at least $5,000,000 in assets
  9. XYZ common stock trades on the Boston Stock Exchange. XYZ common stock is an example of a(n):
    1. blue-chip security.
    2. federally covered security.
    3. exempt security.
    4. security of an exempt issuer.
  10. A security is represented by an interest in which of the following?
    1. Farmland or animals
    2. A cooperative
    3. A marketing scheme
    4. A multilevel distributorship
    1. None of these
    2. I and II
    3. I, II, and III
    4. I, II, III, and IV
  11. Under the USA, which of the following are considered to be an investment adviser?
    1. XYZ Advisers, Inc.
    2. Mr. Jones, the owner of XYZ Advisers, Inc.
    3. The publisher of a market-based letter charging $800 per year
    4. A partner for XYZ who solicits new clients for XYZ Advisers, Inc.
    1. I only
    2. I and III
    3. I, II, and IV
    4. I, II, III, and IV
  12. When using the Howey test to determine if an investment is a security, all of the following are used, EXCEPT:
    1. third-party management.
    2. investment of money.
    3. a common enterprise.
    4. the promise of a profit.
  13. A broker is a(n):
    1. registered representative.
    2. duly licensed agent.
    3. issuer of collateralized securities.
    4. person who executes transactions for the accounts of others.
  14. An offer of securities is considered to have been made in which of the following circumstances?
    1. A sales presentation for a fixed annuity
    2. Delivering a market report
    3. Mailing a form letter
    4. Delivering a prospectus
  15. The Uniform Securities Act defines an issuer as a:
    1. broker dealer.
    2. bank.
    3. corporation proposing the sale of common shares.
    4. savings and loan.
  16. An individual in which of the following situations is considered an
    agent?
    1. An individual who represents a bank as the issuer of securities
    2. An individual who represents a corporate issuer in the sale of large-denomination commercial paper
    3. An individual who represents a Canadian province
    4. An individual who represents an out-of-state broker dealer selling securities to residents
  17. Which of the following is NOT a broker dealer?
    1. A firm with no office in the state that transacts business only with existing customers who do not reside within the state
    2. A firm with no office in the state that transacts business only with broker dealers in the state
    3. A firm with an office in the state that only transacts business with other broker dealers
    4. A firm with no office in the state that only transacts business with wealthy clients in the state
    1. I and II
    2. II and IV
    3. I, II, and IV
    4. I, II, III, and IV
  18. Which of the following is NOT a federally covered security?
    1. A security issued by an investment company
    2. A security issued by a UIT
    3. A security only sold to qualified purchasers
    4. A security listed on Nasdaq OTCBB
  19. A guarantee may be issued by which of the following?
    1. An insurance company
    2. The U.S. government
    3. A parent company
    4. An investment adviser
    1. I and IV
    2. I and III
    3. I, II, and III
    4. I, II, III, and IV
  20. An offer to sell has been made:
    1. when stock has been pledged as collateral for a loan at the bank.
    2. when a gift of securities to a charity results in tax credit for the donor.
    3. when a representative calls a client and recommends a security.
    4. when an account is transferred to the surviving party under joint tenants with rights of survivorship.