Series 63 practice questionhardProhibited Practice: Selling Securities Not Owned
An agent sells securities to a client, representing that they own the securities when the agent does not. Under the USA, this is:
- APermitted as long as the agent delivers the securities later
- BA fraudulent act, regardless of later delivery✓ Correct answer
- CPermissible if the agent borrows the securities
- DNot regulated under the USA
Explanation
Why B — A fraudulent act, regardless of later delivery
Representing ownership when it is untrue is fraudulent under USA Section 501, even if the agent later delivers the securities. Borrowing (C) or later delivery (A) does not excuse the initial misrepresentation.
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