Deal of The Day! Hurry Up, Grab the Special Discount - Save 25% - Ends In 00:00:00 Coupon code: SAVE25
Welcome to Pass4Success

- Free Preparation Discussions
Mail Us support@pass4success.com
Location US
Mob_nav_barsMENU

Finra Series-63 Exam - Topic 2 Question 11 Discussion

Rich Quick is a broker-dealer registered in the state of Massachusetts. He occasionally trades on abnormalities he observes in bond yield spreads for his own account, short selling a bond that appears to be overpriced based on its yield and buying a bond that is identical in almost every respect except for the price, which is less than that of the other bond. He has been able to earn arbitrage profits 95% of the time when he does this. Rich Quick
B) is skilled if he is able to earn profits 95% of the time using this strategy.
A) is in violation of securities laws. Arbitrage is a prohibited activity.
C) is trading on insider information, which is a violation of securities laws.
D) engaged in a fraudulent activity.

Finra Series-63 Exam - Topic 2 Question 11 Discussion

Actual exam question for Finra's Series-63 exam
Question #: 11
Topic #: 2
[All Series-63 Questions]

Rich Quick is a broker-dealer registered in the state of Massachusetts. He occasionally trades on abnormalities he observes in bond yield spreads for his own account, short selling a bond that appears to be overpriced based on its yield and buying a bond that is identical in almost every respect except for the price, which is less than that of the other bond. He has been able to earn arbitrage profits 95% of the time when he does this. Rich Quick

Show Suggested Answer Hide Answer
Suggested Answer: B

If Rich Quick is able to earn profits 95% of the time by trading on abnormalities he observes in bond yield spreads, he is skilled. There is nothing illegal in what he is doing. Arbitrageurs attempt to earn profits when they observe what they believe to be mispriced securities, and this is an accepted activity. Rich is not using insider information; bond yields are publicly available information.


by Isaiah at Jul 06, 2025, 12:28 PM

Limited Time Offer

25%

Off

Get Premium Series-63 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

0/2000 characters
Submit Cancel
Stacey
7 months ago
I think he might be crossing some legal lines here.
upvoted 0 times
...
Erasmo
7 months ago
95% success rate? That's impressive!
upvoted 0 times
...
Brande
7 months ago
Definitely not insider trading; he's just spotting price differences.
upvoted 0 times
...
Margery
7 months ago
Wait, isn't arbitrage legal? This seems off.
upvoted 0 times
...
Freeman
8 months ago
Sounds like he's just doing smart trading to me.
upvoted 0 times
...
Renea
8 months ago
I think option A is definitely wrong because arbitrage isn't prohibited, but I'm torn between B and C. If he's not using insider info, then maybe he's just really skilled?
upvoted 0 times
...
Lisbeth
8 months ago
I feel like I read somewhere that trading on yield spreads is common, but I can't remember if there are specific regulations against it. Could he be violating any laws?
upvoted 0 times
...
Rebeca
8 months ago
This question reminds me of a practice question about market manipulation. I think if he's consistently profiting, it might raise some red flags, but I don't recall the exact rules.
upvoted 0 times
...
Devora
9 months ago
I remember studying that arbitrage is generally legal as long as it's not based on insider information, but I'm not entirely sure if Rich's strategy crosses any lines.
upvoted 0 times
...
Lai
9 months ago
This is a tricky one. Arbitrage can be a valid trading strategy, but the high success rate and the fact that it's for the broker-dealer's own account makes me suspicious. I'm leaning towards option A or D, but I want to make sure I fully understand the legal implications before committing to an answer.
upvoted 0 times
...
Shawana
9 months ago
Hmm, I'm a little unsure about this one. On the one hand, the broker-dealer seems to be taking advantage of market inefficiencies, which could be considered a legitimate trading strategy. But the high success rate and the fact that he's trading for his own account raises some red flags. I'll need to think this through carefully before selecting an answer.
upvoted 0 times
...
Virgilio
9 months ago
Okay, this one seems pretty clear-cut to me. Earning profits 95% of the time by exploiting price differences in nearly identical bonds? That's got to be a violation of securities laws, probably insider trading or some kind of fraudulent activity. I'm going with option C or D on this one.
upvoted 0 times
...
Claudia
9 months ago
This question seems straightforward, but I want to make sure I understand the key details before answering. The broker-dealer is trading on bond yield spreads, which could potentially be considered arbitrage. I'll need to review the rules around arbitrage to determine if this is a violation.
upvoted 0 times
...
Micaela
11 months ago
Overpriced bonds, you say? Rich Quick must be the king of 'buy low, sell high'!
upvoted 0 times
...
Roselle
11 months ago
Fraudulent activity, eh? Sounds like Rich Quick is playing a dangerous game. I hope he's got a good lawyer on retainer.
upvoted 0 times
Ocie
10 months ago
A) is skilled if he is able to earn profits 95% of the time using this strategy.
upvoted 0 times
...
...
Lettie
11 months ago
Insider trading, huh? Tsk tsk, Rich. You can't just be making bank off private info like that.
upvoted 0 times
Evan
10 months ago
A) is in violation of securities laws. Arbitrage is a prohibited activity.
upvoted 0 times
...
Deeanna
11 months ago
C) is trading on insider information, which is a violation of securities laws.
upvoted 0 times
...
Samuel
11 months ago
B) is skilled if he is able to earn profits 95% of the time using this strategy.
upvoted 0 times
...
Kristian
11 months ago
A) is in violation of securities laws. Arbitrage is a prohibited activity.
upvoted 0 times
...
...
Cruz
12 months ago
A) is in violation of securities laws. Arbitrage is a prohibited activity.
upvoted 0 times
...
Mozell
1 year ago
I think Rich Quick is taking advantage of his skills and knowledge in bond trading.
upvoted 0 times
...
India
1 year ago
95% success rate? Dang, that guy's got some skills. I wish I could pull that off legally.
upvoted 0 times
Miesha
11 months ago
B) is in violation of securities laws. Arbitrage is a prohibited activity.
upvoted 0 times
...
Oliva
11 months ago
A) is skilled if he is able to earn profits 95% of the time using this strategy.
upvoted 0 times
...
...
Chantell
1 year ago
B) is skilled if he is able to earn profits 95% of the time using this strategy.
upvoted 0 times
...
Burma
1 year ago
Wait, arbitrage is prohibited? That's news to me. Guess Rich Quick is in hot water.
upvoted 0 times
Helaine
12 months ago
B) is trading on insider information, which is a violation of securities laws.
upvoted 0 times
...
Stephanie
1 year ago
A) is in violation of securities laws. Arbitrage is a prohibited activity.
upvoted 0 times
...
Hermila
1 year ago
B) is skilled if he is able to earn profits 95% of the time using this strategy.
upvoted 0 times
...
...

Save Cancel