🏦LTB
← Series 63: Regulation of Broker-Dealers & Agents
Series 63 practice questionhardExemptions — Scenario

In a remedial practice session, the fact pattern is framed this way. The key is the registration, exemption, or ethical rule doing the real work. Global Investments, a Canadian broker-dealer with no U.S. office, effects transactions exclusively with U.S. institutional investors. A high-net-worth individual in State C asks Global to execute a trade. If Global complies, what is the consequence?

  1. AGlobal may lose its exemption from registration in State C because it transacted with a non-institutional client✓ Correct answer
  2. BNo consequence, as the individual qualifies as an accredited investor
  3. CGlobal is protected because the client initiated the transaction
  4. DGlobal faces no issue because it is a Canadian firm outside U.S. jurisdiction
Explanation

Why A — Global may lose its exemption from registration in State C because it transacted with a non-institutional client

Under USA Section 401(c), a broker-dealer with no office in a state is exempt only if it deals exclusively with institutional investors, broker-dealers, or issuers in that state. Effecting a transaction with a high-net-worth individual (who is not an institutional investor) would cause Global to lose the exemption and require registration in State C. State-law analysis leads to the same conclusion despite the alternate scenario.

Turn it into reps

Reading one answer is not the same as being ready

Lucky the Banker is a free practice app with 646+ Series 63 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.

Practice Series 63 freeSeries 63 exam guide
Related Regulation of Broker-Dealers & Agents questions