An investment adviser representative with Capital Investment Advisors, Inc. advised his client to invest
$ 5,000 in bonds of a firm that the adviser claimed was an investment "almost as risk-free as investing in
U.S. government bonds; maybe even more so, given the magnitude of the government deficit these
days." The client paid a total of $200 for this advice. The bonds paid interest at the rate of 6%, with
semiannual payments, and the client received $300 in interest payments before the firm went belly-up at
the end of a year, and its bonds were deemed worthless. The client has filed suit, and its attorneys' fees
and court costs are expected to be $1,000. When the investment is a bond, the state has recently been
assessing an interest rate equal to the interest rate paid by the security as an equitable interest payment
guideline in civil penalties. The maximum the client can expect in civil penalties is

• A. $5,200.
• B. $6,000.
• C. $6,200.
• D. $5,900.

Iggy recently started his own company. He soon discovered it required more cash to keep it going than he
had anticipated. He ran an ad in the local paper for investors and got a response. He found a template for
a promissory note on the internet, filled in the requisite information specific to the agreement he and the
investor had worked out, and printed it out. On it, he promised to make monthly interest payments of 2%
on the loan and to repay the principal amount at the end of 18 months. A few months after the
arrangement, Iggy read an article in a small business publication that indicated that promissory notes had
to be registered with the state unless they were sold in an exempt transaction, such as one enacted with a
financial institution, prior to being offered for sale. The article indicated that a seller who had sold an
unregistered note in error could remedy the situation by sending the buyer a formal offer to buy the
security back, with interest. Iggy turned to the computer once again, found a form that could be used for a
formal offer of rescission, filled it out, and sent it to the investor. Having done this,

• A. Iggy will not be assessed any penalties by the Administrator of the state, but the investor can still sue
  for damages in civil court.
• B. Iggy must follow up with a second notice sent via registered mail if he has not heard from the investor
  within 30 days.
• C. Iggy must wait 6 months for a response from the investor. If no response is received by the end of 6
  months, Iggy is off the hook.
• D. Iggy cannot be sued for civil damages if the investor fails to respond to the offer within 30 days.

Mr. L. Ranger is an agent for a broker-dealer and has overheard "talk" that a merger between two
well-known high-tech companies is about to take place. Mr. Ranger knows that, on average, in these
instances the target firm's price spikes. He calls his client and good friend, Mr. Tonto, and tells him of the
rumor, suggesting that Tonto might want to buy shares in the target firm. He tells Mr. Tonto that if the
rumor isn't true, the target firm's price may not spike at all and may, in fact, decline, and suggests that Mr.
Tonto not invest any money he isn't willing to lose. Mr. Ranger knows that his friend likes to gamble, and
decided he wouldn't be much of a friend if he didn't inform Tonto of this potential opportunity. Has Mr. L.
Ranger violated any laws or engaged in any prohibited practices?

• A. Yes. Mr. Ranger has engaged in fraud in telling Mr. Tonto about the rumor, given that the merger hasn't
  been officially announced by the two companies.
• B. No. Mr. Ranger and Mr. Tonto are friends, so there can be no violations of any laws or practices
  because of their non-business relationship.
• C. No. Mr. Ranger has informed Mr. Tonto that the merger is just a rumor and has informed him of the risk
  involved. Mr. Ranger is knowledgeable about his friend's risk tolerance level as well and recognizes this
  investment as one his good friend might want to take.
• D. Yes. Mr. Ranger is privy to knowledge that is not available to the general public and both he and Mr.
  Tonto will be guilty of illegal insider trading if Mr. Tonto trades on Mr. Ranger's information.

Finn Nance has recently passed his CFP exam and is now a certified financial planner. He has new
business cards printed that have the words "Certified Financial Planner" printed under his picture. In doing
so,

• A. Finn has violated a securities law. The Uniform Securities Act prohibits anyone from using the word
  "certified" on any advertisement for services.
• B. Finn is not in violation of any laws as long as he has notified the state Administrator of his new
  designation and his new logo.
• C. Finn has possibly violated a state securities regulation. The Administrator in many states prohibits the
  use of the word "certified" on any advertisement for services.
• D. Finn has not violated any laws or engaged in any prohibited practices.

Trevor is currently a registered agent in the state of Connecticut where he has been employed by Connect
& Company, a broker-dealer that is registered in Connecticut and has subsidiary operations in
Massachusetts, New Jersey, and New York. Trevor has moved to Massachusetts and is now associated
with one of Connect's subsidiaries, a broker-dealer registered in the state. Trevor has applied to the
Administrator of Massachusetts for registration as an agent. Can Trevor execute purchases and sales for
clients while his registration is still pending?

• A. Yes. Trevor can execute trades for new clients he solicits, but only for sixty days while his registration
  is pending.
• B. Yes. Because Trevor is a registered agent in another state and is affiliated with a broker-dealer that is
  registered in the state of Massachusetts, he is not restricted from executing trades.
• C. It depends. Trevor can execute some purchases and sales, but only for clients that he already had who
  may have recently relocated to Massachusetts and only for sixty days while his registration is pending.
• D. No. Until he is informed by the Administrator of Massachusetts that his application has been accepted,
  Trevor may not effect any securities transactions in Massachusetts.