Ari Gaunt is employed by a small state-registered broker-dealer and has recently received notification that
his application to be a registered agent of the state has been accepted. Now that he is licensed to execute
transactions for the firm's clients, Ari has a batch of business cards printed up, with a picture of himself on
the right-hand side of the card. Underneath the picture is the caption, "State-Approved Agent." Will Ari be
violating any securities laws if he distributes these business cards?

• A.No. However, he may be violating company policy of the broker-dealer he works for by designing his
  own cards.
• B.No. His registration with the Administrator of the state has been accepted, so he is entitled to call
  himself a "State-Approved Agent."
• C.Yes. Agents are not permitted to include a picture of themselves on their business cards.
• D.Yes. It is a violation of a securities law to suggest that he has been approved by the state
  Administrator.

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o: 52
Which of the following statements regarding "registration by qualification" is true?

• A.Registration by qualification refers to the fact that certain categories of securities are exempt from state registration requirements.
• B.Registration by qualification is the preferred method used by issuers since it requires the least amount of paperwork.
• C.In its simplest form, registration by qualification requires the issuer to supply voluminous amounts of information about both the firm and its directors, officers, and major shareholders.
• D.Registration by qualification refers to the fact that the highest quality bonds, i.e., those with a AAA rating, are exempt from registration with the state.

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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.I, II, and III
• B.I and II only
• C.I and III only
• D.II and III only

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You are employed as an agent with CanDo Broker-Dealers. Your brother is software engineer with
VideoMagic. When you were talking to him on the phone the other day, he told you that he overheard a
conversation by some of the firm's executives that indicated that VideoMagic was about to take over
another software company. Which of the following would violate insider trading rules?
I. The next day, you get an unsolicited call from a client requesting that you sell his shares in Video Magic,
and you execute the trade.
II. You buy stock in Video Magic's target firm in anticipation that its stock price will rise when the
information becomes public.
III. You recommend the stock of Video Magic's target firm to investors based on the fact that, on average,
the stock price of target firms increases.

• A.I, II and III
• B.I and II only
• C.I and III only
• D.II and III only

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You are an investment adviser to Mr. Crochety, an elderly man who lives solely on his social security income although he managed to accumulate an investment portfolio worth about $100,000 over the years. Mr.
Crochety recently got his hands on a business publication and read about the tax-free interest paid by municipal bonds. He calls you and instructs you to sell his other investments and invest all his money in a municipal bond portfolio, so that "the government doesn't get any more of my hard-earned money." You tell Mr. Crochety that you don't believe this is a wise move because he's in such a low tax bracket that municipal bonds are not a good investment for him, but he is insistent. Based on these facts, you should

• A.ignore Mr. Crochety's instruction since it is not in his best interest.
• B.require Mr. Crochety to sign an affidavit of liability waiver, indicating that you will not be held responsible for any adverse consequences of this decision.
• C.have Mr. Crochety sign a statement of investment policy that indicates that this transaction is being executed on the client's instructions and that you have advised the client against it.
• D.call Mr. Crochety's relatives and suggest they have him examined for mental instability.

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