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Series 63 Administrative Provisions and Enforcement Practice Questions

Official outline
NASAA Series 63 Exam Content Outline
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6
Updated
Nov 3, 2026

  1. Question 1, medium

    A broker-dealer sends a client a written rescission offer that otherwise satisfies the Uniform Securities Act's requirements. Under which of the following circumstances is the client's right to sue for the underlying violation extinguished?

    • A.The client cashes any dividend checks received on the security
    • B.The client fails to file a written rejection of the offer within 10 days
    • C.The broker-dealer sends the offer within 3 years of the sale, since the timing of the offer is what controls
    • D.The client fails to accept the written offer within 30 days of receiving it
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    Correct answer: D. The client fails to accept the written offer within 30 days of receiving it

    A compliant written rescission offer must state the consideration to be paid (or other relief) and give the offeree a reasonable period. 30 days. To accept. If the client fails to accept within that 30-day window, the right to sue for that violation is extinguished, provided the offer otherwise met the statutory requirements and no suit was already pending.

    • A. Receiving ordinary dividend payments doesn't equate to accepting or rejecting the rescission offer, so it doesn't extinguish the client's right to sue.
    • B. There's no requirement that the client affirmatively file a written rejection within 10 days. The operative event is failing to accept within the offer's stated period.
    • C. What matters is the client's failure to accept within the offer's stated period, not when the broker-dealer sent the offer relative to the sale.
    • D. Correct. If the client fails to accept a compliant written rescission offer within the specified period (30 days), the right to sue for the underlying violation is extinguished.

  2. Question 2, medium

    An applicant for agent registration has an otherwise clean record. Which of the following, standing alone, is NOT a statutory ground on which the Administrator could deny the application?

    • A.The applicant was convicted of a felony within the past 10 years
    • B.The applicant is currently enjoined by a court from engaging in the securities business
    • C.The applicant completed a two-year college program rather than a four-year degree
    • D.The application contains a materially false statement
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    Correct answer: C. The applicant completed a two-year college program rather than a four-year degree

    The Act enumerates specific grounds for denial. Felony or relevant misdemeanor convictions within the statutory look-back period, injunctions, insolvency, failure to supervise, dishonest or unethical practices, and material misstatements in the application, among others. Educational attainment or degree type is not among these enumerated grounds and cannot by itself support denial.

    • A. A felony conviction within the past 10 years is an explicit statutory ground for denial under the Uniform Securities Act. The felony does not need to be securities-related, so this is a real ground and not the exception.
    • B. Being currently enjoined from engaging in the securities business is an explicit statutory ground for denial.
    • C. Correct. Educational attainment (a two-year versus four-year degree) is not a statutory ground on which the Administrator can deny an application.
    • D. A materially false statement in the application is an explicit statutory ground for denial.

  3. Question 3, medium

    Under the Uniform Securities Act's civil liability provisions, what remedy is available to a purchaser who still owns a security that was sold to them in violation of the Act?

    • A.Tendering the security back in exchange for the consideration originally paid, plus interest at the legal rate, less any income received on the security
    • B.Punitive damages equal to three times the original purchase price
    • C.The greater of actual damages or a fixed statutory penalty of $10,000
    • D.An order compelling the seller to hold the security in trust indefinitely for the purchaser's benefit
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    Correct answer: A. Tendering the security back in exchange for the consideration originally paid, plus interest at the legal rate, less any income received on the security

    The USA's civil liability remedy for a purchaser who still holds the security is rescission: the purchaser tenders the security back to the seller in exchange for the consideration paid, plus interest at the legal rate from the date of payment, minus any income (e.g., dividends) received on the security during the holding period. If the purchaser no longer owns the security, the remedy shifts to damages measured similarly.

    • A. Correct. Where the purchaser still holds the security, the civil liability remedy is rescission: tendering the security back for the amount originally paid plus interest at the legal rate, less any income received on it.
    • B. The Act's civil liability provisions are compensatory/rescissory in nature, not punitive; there's no treble-damages remedy built into Section 410.
    • C. There is no fixed statutory penalty option here; the remedy is calculated based on actual consideration paid and interest, not a flat $10,000 figure.
    • D. The Act doesn't impose an indefinite constructive trust remedy; the purchaser's remedy while still holding the security is tender-and-refund, not compelled indefinite trusteeship.

  4. Question 4, medium

    An Administrator who reasonably believes a person is about to violate the Uniform Securities Act may:

    • A.Refer the matter to the attorney general for criminal prosecution, since the Administrator lacks authority to issue administrative orders directly
    • B.Act after obtaining prior concurrence from the SEC, since state action against threatened violations is subject to federal approval
    • C.Take no action until an actual, completed violation occurs
    • D.Issue a cease-and-desist order without first having to obtain a court injunction
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    Correct answer: D. Issue a cease-and-desist order without first having to obtain a court injunction

    The Administrator has independent authority to issue a cease-and-desist order to stop threatened or ongoing violations without first needing to obtain a court injunction (though injunctive relief may also be separately available through the courts).

    • A. Incorrect. The Administrator has its own direct administrative enforcement authority and need not route the matter through the attorney general.
    • B. Incorrect. No SEC concurrence is required for state administrative action.
    • C. Incorrect. The Administrator can act on a reasonable belief that a violation is about to occur, not only after the fact.
    • D. Correct.

  5. Question 5, hard

    An Administrator may deny a broker-dealer's registration application based on which of the following?

    • A.The applicant was convicted of a securities-related misdemeanor within the past 10 years
    • B.The applicant was convicted of an unrelated, non-securities misdemeanor 15 years ago
    • C.A customer filed a complaint against the applicant that was later dismissed with no finding
    • D.The applicant's principal office is located out of state
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    Correct answer: A. The applicant was convicted of a securities-related misdemeanor within the past 10 years

    Statutory grounds for denial or revocation must relate to the applicant's own conduct or qualifications, such as conviction of a securities- (or money-)related misdemeanor, or any felony, within a specified recent period (generally 10 years). An old, unrelated, non-securities misdemeanor outside that period, a customer complaint that was dismissed with no finding, and mere out-of-state location are not valid statutory grounds.

    • A. Correct.
    • B. Incorrect. A misdemeanor that did not involve securities or money, and that falls well outside the 10-year look-back, is not a statutory ground for denial.
    • C. Incorrect. A complaint that was dismissed without any finding of wrongdoing is not an order, conviction, or adjudication, so it does not support denial.
    • D. Incorrect. Out-of-state location alone isn't disqualifying; many registrants operate across state lines.

  6. Question 6, medium

    A state Administrator wants to remove from active status the registration of a broker-dealer whose principal office mail has been repeatedly returned as undeliverable and whose whereabouts cannot be determined after reasonable efforts. The most appropriate administrative action here is to:

    • A.Revoke the registration, since revocation (rather than cancellation or suspension) is the appropriate tool when a registrant has abandoned its business, and the abandonment itself supplies the grounds
    • B.Cancel the registration, since cancellation (rather than revocation or suspension) is the appropriate tool when a registrant can no longer be located or no longer exists, and does not require a fraud/misconduct finding
    • C.Suspend the registration pending a hearing, since suspension (rather than revocation or cancellation) is the appropriate tool when a registrant cannot be reached, and it preserves a later sanction
    • D.Issue a cease and desist order, since an order (rather than revocation or cancellation) is the appropriate tool when a registrant has abandoned its address, and it removes the registrant from active status
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    Correct answer: B. Cancel the registration, since cancellation (rather than revocation or suspension) is the appropriate tool when a registrant can no longer be located or no longer exists, and does not require a fraud/misconduct finding

    'Cancellation' is the administrative tool used when a registration is no longer effective for practical reasons. Such as the registrant no longer existing, ceasing business, or being unable to be located. Rather than as a punitive response to misconduct. Revocation and suspension are typically used in response to violations, and a cease and desist order directs a registrant to stop specific conduct rather than removing a registrant who cannot be found.

    • A. Wrong; revocation is a misconduct-based sanction that requires statutory grounds such as fraud, a rule violation, or a disqualifying event. Being unlocatable does not by itself establish any of these grounds, so it does not justify revocation.
    • B. Correct; under the Uniform Securities Act the Administrator may cancel a registration when the registrant no longer exists, has ceased to do business, or cannot be located. Cancellation is a non-punitive housekeeping action and needs no finding of fraud or misconduct, which fits an unlocatable broker-dealer.
    • C. Wrong; suspension is a temporary, sanction-type measure tied to a pending enforcement matter with notice and an opportunity for hearing. A registrant that cannot be found cannot be served, and a suspension would leave the registration on the books instead of ending it.
    • D. Wrong; a cease and desist order halts specific ongoing or threatened violations. It does not end or cancel a registration, so it does not remove a registrant that has simply disappeared. The tool for an unlocatable registrant is cancellation.

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