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Mr. Noah Scruples is a registered representative with CanDo Broker-Dealers. A client calls and wants Noah to purchase shares of a mutual fund the client has read about. CanDo is not authorized by this particular fund to effect purchases or sales of the fund shares.
Can Noah execute the order anyway?

• A. No. This is a prohibited practice known as front running.
• B. Yes. Since this is an unsolicited trade, Noah can execute the transaction on behalf of his client.
• C. No. This would be considered money laundering, which is highly illegal.
• D. No. This is a prohibited practice known as selling away.

The Administrator may require a firm to supply it with any prospectus, pamphlet, advertisement, or other sales literature intended for prospective investors unless the security
I. will be sold only through an investment advisory firm.
II. is a federal covered security.
III. is issued by a state credit union.

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

Under which of the following scenarios can a client legitimately sue a purported professional in the securities industry and expect an award for damages?
I. The securities were sold by an agent whose registration was not yet effective with the state, but who had already applied for registration.
II. The security was a variable annuity, and the sales representative neglected to reveal the details of the surrender clause to the client.
III. The security was the stock of a company, the stock had recently been registered with the state for sale, had been granted registration, and the selling agent had told his client that the security had been state-approved for sale.

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

In which of the following scenarios will the investment adviser be subject to criminal fraud charges?

• A. An adviser owns the stock of TweedleDee Corporation and has issued a report recommending the stock as a "buy" without disclosing the fact that it owns the stock.
• B. all of the above. It is considered criminal fraud for an investment adviser to make any recommendations on a security in which it has or plans to have a position.
• C. An adviser sells its shares of TweedleDee Corporation after issuing a report recommending the stock as a "buy."
• D. An adviser owns the stock of TweedleDee Corporation and has issued a report recommending the stock as a "buy," disclosing the fact that it owns the stock

An agent working for a broker-dealer mistakenly sends an investment adviser some bonds that the adviser purchased on behalf of his client instead of directing the bonds to the financial institution that is serving as the qualified custodian of the client's funds.
If the investment adviser wants to avoid being considered custodian of this client's account, what must the adviser do?

• A. Record what securities were sent, when he received them, and when he forwarded them--which
• B. Record what securities were sent, when he received them, and when he forwarded them--which must be within twenty-four hours-to his client.
• C. Record what securities were sent, when he received them, and when he forwarded them--which must be within three business days-to his client.
• D. Record what securities were sent, when he received them, and when he forwarded them--which must be within twenty-four hours-to the qualified custodian of the client's funds.