Jack is employed by NewCorp, which is engaging in an initial public offering (IPO). Jack will need to register as a sales representative if he:

• A. participates in the selling of the new stock to individual investors.
• B. Jack will need to register as a sales representative if he performs any one of the above activities.
• C. represents NewCorp in any transactions with financial institutions.
• D. engages in transactions with the underwriters of the IPO for the purpose of taking the firm public.

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While on vacation in Colorado, Massachusetts resident Ms. Jetset meets Mr. Snow, a registered representative with a Colorado broker-dealer, on a ski lift and accepts a dinner engagement with him later that evening, during which he obtains her cell phone number. A week later, while she is lounging around in her Florida beach condo, he calls and interests her in a local software company that is selling its preferred stock to investors and encourages her to buy it. Ms. Jetset tells Mr. Snow she'll think about it and calls him after she returns to her home in Massachusetts to tell him to buy the stock for her and sends him a check via express mail. Later, Ms. Jetset learns that the preferred stock certificate that she received is-and always was-a worthless piece of paper, and that, in fact, no such company ever existed.
Which state Administrator has jurisdiction in this instance?
I. the Administrator of the state of Colorado
II. the Administrator of the state of Florida
III. the Administrator of the state of Massachusetts

• A. I, II, and III
• B. I and III only
• C. I only
• D. I and II only

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An investment adviser suggests that his client, Arnold, a 74-year old gentleman, should consider a reallocation of the assets in his portfolio. The adviser tells Arnold that he has far too much invested in bonds, which don't earn as much as stocks. He advises Arnold to take 80% of the money he has in bonds and invest it in an aggressive growth mutual fund that has provided an average annual return of 40% over the past three years.
Arnold is impressed and follows this advice. Shortly thereafter, there is a steep drop in the market in general, and the net asset value of the aggressive growth mutual fund falls 85%.
Does Arnold have any remedies available to him?

• A. Yes. Arnold can sue for the amount of his losses, plus interest, court costs, and attorneys' fees.
• B. No. The investment adviser had no way of knowing that the market was going to fall when he provided the advice, so the adviser did not fail in his fiduciary responsibility to Arnold.
• C. No. Arnold had the choice and got greedy. As the old saying goes, "Bulls get rich, and bears get rich, but pigs get led to slaughter."
• D. Yes. Arnold can sue for the amount of his losses, plus interest, as well as an amount assessed by the court for "pain and suffering."

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Noah Aull is an investment adviser representative with Canto Investment Advisers. A client has called and told Noah that he heard about a firm that had recently completed an IPO at a party he had attended that weekend and instructed Noah to purchase shares of the company, which was now trading on the OTC Bulletin Board. Noah did some research and felt the company was far too risky an investment for this client, so he did not execute the trade. This turned out to be fortunate for his client since the firm became insolvent within six months of its IPO.
Has Noah done anything wrong?

• A. Yes. Noah is guilty of not following a client's instructions and could have his license revoked.
• B. Yes. Noah is guilty of misappropriation and could have his license revoked.
• C. Yes. Noah is guilty of making an unauthorized transaction and could have his license revoked.
• D. No. Noah did what he is hired to do-manage his clients' accounts to the best of his ability.

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Cassie Clueless has recommended that a client purchase shares of a mutual fund prior to its ex-dividend date, so that the client will receive the dividends when they are distributed.
In which of the following situations might this recommendation be justifiable and not in violation of NASAA rules?
I. The investor has refused to provide Cassie any information regarding his investment goals.
II. The investor is a young professional with an investment goal of long-term capital appreciation.
III. The investor is a retiree in a low tax bracket and needs current income to augment her social security check.

• A. III only
• B. I only
• C. It is always in violation of NASAA rules to recommend that a client purchase shares of a mutual fund prior to its ex-dividend date.
• D. I and II only

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