Practice Quiz

FINRA Series 63 (NASAA)

Category - Series 63

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Broker-Dealer Wheeler has no offices in the state. Wheeler does, however, sell corporate bonds from his portfolio to banks and insurance companies located in the state that
purchase the bonds for their investment portfolios. He executes about twelve of these transactions a year. Wheeler profits from the price appreciation of the bonds during the time he held them, but receives no other form of compensation. Based on these facts,
  1. Wheeler must register as a broker-dealer in the state, but the securities do not need to be registered.
  2. Wheeler need not register in the state, and the securities are also exempt from registration.
  3. Wheeler must register as a broker-dealer in the state, and the securities must also be registered before they can be sold to in-state investors.
  4. Wheeler need not register in the state, but the securities must be registered before they can be sold to in-state investors.
Explanation
Answer: B - Since Wheeler has no offices in the state and is selling bonds from his portfolio to institutional investors, Wheeler need not register in the state, and the securities are exempt from registration. Broker-dealers with no physical location in a state that are doing business with other broker-dealers or with institutional investors such as banks and insurance companies that do have offices in that state are exempted from registering in the state. Securities sales to institutional investors are exempt transactions, and securities sold in exempt transactions are themselves exempt from state registration requirements.
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