Practice Quiz

FINRA Series 63 (NASAA)

Category - Series 63

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In its capacity as a full service broker, A-2-Z Associates is also in the investment advisory industry, charging its clients for investment advice for additional remuneration. One of the firm’s clients has been advised to buy some U.S. government treasury inflation-protected securities (TIPS.) A-2-Z is a dealer in these securities in the secondary market. Which of the following statements is true?
  1. Under no circumstances may A-2-Z sell the client TIPS that A-2-Z holds in its own portfolio. This would be a conflict of interest.
  2. A-2-Z can sell the client TIPS from its own portfolio as long as it tells the client that it is taking on the part of the seller in the transaction.
  3. A-2-Z can only sell the client TIPS if it informs the client it is acting as the seller in this transaction and receives the client’s written consent before the transaction is settled.
  4. A-2-Z can sell the client TIPS indirectly by getting a 3rd party-another broker-dealer-to effect the sale.
Explanation
Answer: C - A-2-Z can only sell a client TIPS from its own portfolio if it informs the client that it is acting as the seller in this transaction and receives the client’s written consent before the settlement date of the transaction.
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