Practice Quiz

FINRA Series 63 (NASAA)

Category - Series 63

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An investment adviser may not
  1. also be registered as a broker-dealer in the state.
  2. accept any kind of soft dollar compensation for using certain broker-dealers to execute trades on their clients’ accounts.
  3. take a position-either long or short-in securities in which any of its clients have a position.
  4. recommend a stock to a client that the adviser itself holds without disclosing to the client that the adviser owns the stock.
Explanation
Answer: D - An investment adviser may not recommend a stock to the client that the adviser holds without disclosing to the client that it owns the stock. They are permitted to also be registered as a broker-dealer in the state and to accept certain types of soft dollars as compensation from brokers. And they can have positions in securities that their clients have positions in-just as long as this is disclosed.
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