Free NASAA Series 65 (Uniform Investment Adviser Law Examination) Laws, Regulations, and Guidelines Practice Questions

Choice B is correct because under the USA, a court may issue an injunction when it appears that a person has engaged or is about to engage in a prohibited act or practice. The defendant's knowledge or intent is not a required element for injunctive relief — the standard focuses on the conduct itself and the need to prevent future harm, not the defendant's mental state.
Choice A is incorrect because while the Administrator is the primary party who seeks injunctions in securities enforcement, the USA does not prohibit other parties (such as defrauded investors) from seeking injunctive relief through appropriate civil proceedings.
Choice C is incorrect because injunctions are civil remedies that do not require a prior criminal conviction. A court can issue an injunction based on evidence that a violation has occurred or is imminent, entirely independent of any criminal proceeding.
Choice D is incorrect because injunctive relief is available against any person who violates the securities laws, whether or not that person is registered in the state. Unregistered persons engaged in prohibited conduct are equally subject to court-ordered injunctions.

Choice C is correct because when a broker-dealer terminates an agent's association, the BD must promptly notify the state administrator by filing a Form U5 (Uniform Termination Notice for Securities Industry Registration). This notification ensures that regulatory records accurately reflect who is currently registered and prevents the terminated individual from continuing to hold themselves out as an active agent.
Choice A is incorrect because there is no requirement for the state administrator to conduct an exit interview. The administrator is simply notified of the termination through the Form U5 filing.
Choice B is incorrect because there is no temporary holding status for agent registrations. Once the Form U5 is filed, the agent's registration with that BD is terminated. The individual must re-register with a new firm to resume activity.
Choice D is incorrect because client consent is not required to terminate an agent's employment or registration. The employment relationship is between the BD and the agent, and the termination notification is between the BD and the administrator.

Choice D is correct because SEC Rule 15c3-1 (the net capital rule) requires broker-dealers to maintain minimum levels of net liquid assets (net capital) at all times. The required amount varies based on the firm's business activities and customer obligations. The rule is designed to ensure that if a broker-dealer fails, it has sufficient liquid assets to wind down operations and return customer property.
Choice B is incorrect because the net capital rule does not require a fixed percentage of customer balances. The required net capital amount depends on the type of business conducted and is calculated using specific formulas based on aggregate indebtedness or customer assets.
Choice C is incorrect because the net capital rule applies to all registered broker-dealers, including introducing firms. While the minimum capital requirements for introducing firms are lower than for carrying firms, all BDs must comply with some level of net capital requirements.
Choice A is incorrect because net capital is not deposited in a separate bank account controlled by the SEC. Net capital refers to the firm's own liquid assets minus liabilities and certain deductions. It must be maintained within the firm's operations, not segregated in a government-controlled account.