Chapter 2 Practice Questions
1. Which of the following best describes the activities of a broker?
A. Buying securities for its own account
B. Selling securities from its own account
C. Day trading securities for its own account
D. None of these choices
2. All of the following are exceptions to the definition of a broker-dealer except:
A. A broker-dealer’s agent
B. An issuer
C. An investment adviser
D. A bank
3. When a firm acts as a dealer in a securities transaction with one of its clients, the parties exchanging funds and securities include:
I. The firm
II. The firm’s client
III. Another firm’s client
IV. A securities issuer
A. I and II
B. II and III
C. I, II, and III
D. I, II, III, and IV
4. A broker-dealer registered in one state whose only office is located in that state does not need to register in another state if it has:
A. Less than $50,000,000 in assets
B. Over $100,000,000 in assets
C. No non-institutional clients in that state
D. Five or fewer non-institutional clients in that state
5. All of the following are generally requirements for registration of a broker-dealer except:
A. Completing a Form ADV
B. Meeting net capital requirements
C. Meeting bonding requirements
D. The state securities administrator must allow the registration to take effect
6. A broker-dealer whose clients include only the following investors and does not have an office in a state would not be required to be registered with the state:
I. Other broker-dealers
II. An individual with $1 million in assets
III. A pension trust
IV. Investment companies (mutual funds)
A. I only
B. I and III
C. I, II, and III
D. I, III, and IV
7. The state securities administrator may set the net capital requirements for broker-dealers operating in its state:
A. In any amount it deems fit
B. No higher than 150% of the national requirements
C. No higher than 125% of the nationa