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2nd Series 63
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| Question | Answer |
|---|---|
| What must me done to enter final orders? | appropriate prior notice to the interested parties, opportunity for hearing and written findings of fact and conslusions of law |
| Blue sky laws | common terms used to refer to state security laws |
| person | individual (natual person), corporation, partnership, association, joint stock company, trust where interests of the bene's are evidenced by a security, unincorp org, gov, political dubdivision, |
| what are the 3 non persons | dead, imcompetent, minor |
| broker/dealer | any person engaged in the business of effecting trans in securities for the account of others or for his own account. |
| broker | when acting on behalf of others |
| dealers | when acting on behalf of themselves |
| what is the primary function of a broker/dealerrs | making securities transactions |
| agent | any individual other than a broker/dealer, who represent a b/d in effecting purchases or sales of securities - these are always natural persons - also called registered reps |
| registered representatives | agents |
| t or f agents, instead of working for a broker, may sell securities on behalf of the issuer | true |
| investment advisor | any person who for compensation engages in the business of advising others as to the value of securities. or issues or promulgates analyses or reports concerning securities |
| who are investment advisor (IA) registered with? | either the SEC (fed covered) or with the state but never both. |
| investment adviser rep | any indiv who represents a state registered investment adviser or federal covered investment adviser performing duties related to the giving advisory services |
| issuer | means any person who issues or proposeds to issue any security. Issuers primarily include corps and gov's. |
| who (businesses) would fall under the category of "no issuer" under the USA | certificates of interest, participation in oil, gas or mining titles or leases, or in pmts out of production under such titles or leases |
| nonissuer | not directly or indirectly for the benefit of the issuer |
| security | stocks, bonds, debentures, mfunds, variable annuities, investment contracts, pre-orgs |
| exempt | To be excused from certain requirements. |
| exempt security | when a security is exempt under USA, it does not have to be registered to be sold and there are not requirements to file advertising about the security with the administrator. |
| exempt transaction | one in which the nature of the sale is such that registration with the administrator and filing of advertising material is not required in order for the trans to take place. |
| guaranteed | guaranteed as to pmt of principal, interest, or dividents, bu not capital gains. |
| how are most investment asdvisors set up? | in most cases, as legal persons, like a partnership or corp, that privide investmen advice or portfolio mgmt ongoing. IA Reps work for the IA just as RR work for the b/d. This can also be an individual if he is a sole proprietorship. |
| Sec Release IA-1092 | this is a congress directed mandated for the SEC to define the activities that would subject a person to the Investment Advisoers act of 1940. |
| how has the SEC Release IA-1092 impacted the investment industry? | it difines IA as financial planners, pension consultants, and others who offere investment advice as part of their financial practices. this is anyone who gives investment advise for compensation either direct or indectect. |
| how can Investment Adviser (IA) advice be given? | verbal, reports, or analyses with respect to securities |
| Investment adviser | includes financial planners, pension consultants, and sports and entertainment representatives |
| financial planers | advise clients as to the sesirability of investing in securities as an alternative to toehr investments, such as real estate, intangibles, or other assets, |
| pension consultants | advise employee benefit plans on how to fund their plans with securities are also considered investment advisers by the SEC. |
| Sports and entertainment reps | person who provide financially related service to entertainers and athletes that include advise related to investments, tax planning, budgeting and money mgmt are also investment advisers. |
| compensation | economic benits as a result of providing investment advice is an investment adviser. Can be direct or inderect compensation. This can include advisory fees, commissions, and other types of fees related to services rendered. |
| who is excluded from the definition of an investment adviser? | If exluded as an IA none of the registration requirements apply. Investment adviser reps (the business entity , not the rep), banks, savings instit, and trust co, lawyers, accts, teachers, engineers, whose advice is solely profess, b/d svc r incidental |
| When a is newsletter publisher not exlcuded from registration as an IA? | when the pubication is "event generated" like reports are issued as a result of certain market events. then the exclusion is lost and registration is necessary. |
| t or f exceptions and exclusiona are the same thing | true |
| federal covered investment advisers | these are advisers registered with the SEC. The largest firms are required to register with the SEC the rest register with the state. |
| when must an IA register with the SEC | when they manage $30 mill or more in assets, when they are under contract to a registered ivnestment co, manage co under the Invest co act of 1940, advisors that do business in 30 or more states, pension consult with at least $50 mil |
| notice filing | investement advisers exempt froms tate registration are not exempt from paying state filing fees and giving notice to administratior. |
| t or f as part of the notice filing procedure, the administrator can require the federal covered investment adviser to submit copies of all documentation filed with the SEC and pay filing fee | TRUE! |
| when is notice filing for a federally covered co not required? | if a federal covered adviser only deals with institutions, other IAs and other B/Ds |
| If an IA is registered with the state and their investements reach $30 mil, what must be done? | they have 90 days to register with the SEC. |
| If a fed covered IA fall below $25 mil what must be doen? | they have 180 days to regitster with the state(s) |
| who are excluded from being labled an IA in the state | IA who have office in another state and only deal with broker/dealer in another or other IA or institutional investors including lg employee bene plans, existing clients on vactaion (snowbirds), fimve or fewer clients int the state,anything else admin say |
| de minimis exemption | resident in the state during the preceding 12 months - this applies to I A and IARs but not B/d or their agents |
| t or f if the IA or IAR advertises and sets ppl up to come to a hotel, seminar or any other location in the state they are considered to have a office the state and therefore need to register in that state | true-but this is not the case for existing clients who come to his hotel room when he is passing through. But if they are asked to bring their friends the exemption is lost. |
| t or f the de minimis provision applies only to IAs and IARs no to broker/dealer or their agents. | true |
| If a IA advises 5 clients in state of NV and lives in CA with no office in NV do they have to register in NV? | no, reg is not required b/c the IA does not have an office in NV and directs business to 5 or less individuals in NV during the year. it would be needed if had an office or 6 or more clients |
| t or f if a IA is registered with the SEC because it manages over 30 mil it does not have to register with the many states it does business with. | true |
| notice filing | filing with the stae when an IA is a federal covered IA. |
| form ADV | the application for registration as a IA |
| What is included on the reg form form IA Part 1? | off location, records locat, form of business (sole prop, partner, corp), method of bus, other bis activ (b/d rr), custody of assets, disciple hx, |
| What is included on the reg form form IA Part 2? | focuses more on customer related info, compensation (fees, commissions, charges), types of clients (ppl, co, pension plan), types of invest. (equities, corporate debt, munis, treasuries), analysis used (tech, fundmtl), educational background of advisors |
| how is the From Adv submitted | federal covered advsers file part 1 with SEC and keep part 2 in their files. State covered advisers file both 1 & 2 wutg adnubustratir if each state they register. |
| is an IA rep an investment adviser? | no |
| what is the bond requirement for IA with Discretionary authority and for advisers maintaining custody of customer funds or securities? | bonds for $10K for discrtionary authority and $35 for custody. the administrator will accept cahs or marketabel securitis in lieu of bonds. |
| what must the adviser do if their bond or cash falls below the minimum required for discretionary or custody matters? | must notify administrator by close of business the next b/d. then the IA must file a financial report with the admin by the close of business on the next b/d. |
| t or f is a IA's principal is in another state and has lower surity bonds that than another state b/c that state is higher than USA standards, then the IA must meet the states requirements. | false - as long as the requirment is met in the state where their principal resides. |
| what are the proper terms to refer to financial requirements for IA and broker dealers? | IA - net worth and B/D - net capital |
| Does this IA have to register under the USA? Publiser of a newspaper that renders general financial advice | no |
| Does this IA have to register under the USA? broker/dealer that charges a fee for providing investment advice over and above commissions form securities transactions | yes |
| Does this IA have to register under the USA? IA that manages $10 milion in assets | yes |
| Does this IA have to register under the USA? publisher of a monthly investment newsletter with an annual subcriptions fee that does not render specific advise based on the needs of any subscriber | no - the exclusion pertaining to securities advisory publishers includes newsletter publishers who do not give advice to subscribers on the specific invest situation and publish on reg basis |
| wrap fee programs | type of asset mgmt program, the b/d wraps all of its service together incl trans, advice, custody, research, for one flate fee - usually a % of AUM (assets under mgmt). When they use wrap their exlusion offered is lost. |
| why is exclusion lost when b/d use wrap fees | because the wrap fee includes pmt ofro securities advice. |
| when a firm uses the wrap fee what must they discloswe to their clients? | amt of wrap fee charged, if fees are negotiable, service provide, any fees in addition to wrap fee, a stmt that wrap fees may be more than paying indiv fees. |
| fiduciary | perosn legally appointed and authorized to hold assets in trust for another perosn. They manage the assets for the benefit of the ohter person rather than for his or her own profits and must exercise a standard of care imposed by law. |
| IAR | investment adviser rep, any indiv who represents an IA or federal covered investment adviser when making invest recomm, mging accts for client portfolios, soliciting investment advisory services including wrap fee accts, or supervising employees who do |
| does an IA rep have to be employed for their registration to be valid | yes their registration is not effective during any period when he is not employed by IA. |
| who's responsibility is it to notify the administrator if the IAR starts or stops a position with a co? | both IA and IAR. |
| when a IA registers, who else has automatic registration? | IAR of partners, officers, directors active in business and anyone else performing a similar function. (all indiv still must disclose info and take exams) |
| do IAR have financial requirements? | Unlike IAs there are no financial requirememnts or net worth requiremens to register as a IAR. The admin may however require the IAR to be bonded, particularly if the rep has discretion over a clients account. |
| when is a person excluded from being an investment adviser rep? | when their activities are confined to clerical duties and thosed activities that are solely incidental to the investment advisory services offered. If they are compensated for offering services, they would have to register as IAR. |
| t or f Investment advisers do not engage in securities transactions - they soley provide advice. | true |
| t or f an investment adviser rep must register with the SEC if she has clients with assets of $30 mil or more. | false - only the IA must reg with SEC the IAR must register with the state |
| t or f an IA maintaining custody of a customer's securities or funds and exercising discretion in the account is generally required to maintain a min net worth of $35k | true |
| t or f an employee of an IA firm is an investment adviser rep if his duties are limited to clerical activities. | false |
| t or f an employee of an investment advisory firm is an investment adviser rep if his duties involved making invest recommendations | true |
| t or f an administrative employee who receives specific compensation for offereing investment advisory services is not an IAR. | false |
| what must be done if B/d agent, IA or IAR to register with the state? | submit applic, consent to svc process, filing fees, post bond if required by administrator and pass exam (written, oral or both) |
| t or f fingerprints for b/d, agents, IA and IAR's do not have to be submitted | true |
| what must be incl on application subbmitted to adminstrator for registration of b/d, agent, IA and IARs? | place of business, qualifications (past work hx), injunctions, adjudications, convictions, felonies in past 10 years, financial condition and Hx of the firm, any info to got to client if IA, citizenship info if indiv agent or IAR. |
| who must make notifications if the IAR terminates? | If IA is state registered the firm must notify the administrator. If the IA is federal covered, the IAR must notify the administrator. |
| consent to service a process | provided for every state in which the rep registers. this appoints the administrator as the applicants attorney to receive and process noncriminal securities-related complaints against the applicant. |
| t or f the consent to service a process is sent in once and is good permanently. | true |
| if an application is submittted and terminated or denied what happens to the filing fees? | the administrator is entitled to retain a portion of the fee. |
| when is the renewal date for all registrations of b/d, agents, IA and IAR's | dec 31 annually. and there is no proation of fees. renewal is always dec 31, it does not matter when you acquired the license. |
| what documents must be kept by the b/d or IA and for how long? | must keep records of orig entry, correspondence (incl emails), memoranda, papers, books and other records the admin requires. B/D 3 yrs and IA 5 yrs. Both must have records on hand with principal for first 2 yrs |
| can Administrator require registered b/d and IA to file financial reports | yes but for SEC registered b/d or IA, the recordkeeping and financial rpts required may not exceed those required by Secur EXch act of 1934 or investment act of 1940. |
| are there any requirements to keep copies of clients tax returns by the b/d or IA? | no, none |
| How are records that are to be maintained by b/d or IA to be kept? | papers, micrographic media (incl microfilm, microfiche or any similar medium) or elec storage media, incl digital storage |
| what procedures are taken for elcetronic media storage | safeguard them from loss, alterartion or destruction, limit access to records to properly authorized personnel and the admin, ensure reproductions on electronic media is complete, true and legible |
| who are federal covered agents and reps accountable to more SEC or state? | SEC so long as they are federally covered. |
| When is the agents, b/d, IA or IAR license effective/ | at noon 30 days after the later of the date an application for lecensing id filed and is complete or the date of amendment to an application is filed and complete. |
| when does a request to w/d an applicastion for registration become effective? | 30 days - however if there are any legal proceedings in progress, the w/d will be held up until resolution of the issue. |
| how long does the aministrator have jurisdiction of the former registrant? | 1 year |
| Under the USA wh automatically becomes registered as an agent when a broker/dealer registration becomes effective? | any partner, officer, or person of similar status or similar function |
| t or f a consent to service a process must be sumitted with each renewal application? | false - one lasts forever. however, in each state registered a sep consent must be filed |
| t or f an administrator may establish net capital requirements for investment adviser reps? | false - although they may be required to post a bond if the are custodians |
| t or f when a securities professional registers in a state, he must provide the state administrator a list of all the states in which he intends to register. | false |
| security | The USA applies only to finan instruments that are securities. 1) an invest of $ 2) in common enterprise 3) with expectation of profits 4) to be derived from efforts of others |
| common enterprise | enterprise in which the fortunes of the investor are interwoven with those of either the person offereing the investment, a third party or other investors |
| What are some kinds of securities Under the USA (uniform securities act)? | notes, stocks, treasury stocks, bonds, debentures, evidence of indebtness, certificates of interest or participation in a profit sharing agreement; collateral trust certificates preorgs certificates or subscriptions, trans shares, investmnt contracts |
| What 6 things are not securities | collectables, commodities, condos, currency, confirmations, Annuities with fixed payouts (but VA are b/c they are dependent on the investment performance of securities w/in the annuity. |
| nonexempt security | a security subject to the registration provisions mandated by the USA. |
| exempt security | means not subject to registration. If a security is not registered and is not exempt, then it cannot be sold in the state unless in an exempt transaction. |
| t or f if a security is exempt, it does not have to register. | true |
| is a confirmation of securities trade a security | no, it is a document evidencey that a trans took place. |
| issuer | any person who issues or proposes to issue a security. the most common issuers are companies or governments |
| What does it mean if an issuer is non exempt? | it must register its securities in the sates where they will be sold under one of the registration methods. |
| issuer transactons | one in which the proceeds of the salee go to the issuer. All newly issued securities are issuer transactions. In ohter words, when a company raises moneyu by selling securities, the proceeds form the sale go to the company itself. |
| IPO | Initial Public Offering, or primary offering, the first time an issuer distributes securities to the public. Issuer trans b/c company recvs proceeds |
| non isssuer transaction | one in which the proceeds of sale go to the investor. Most commonly done in everyday trading in the secondary markets such as the NYSE or NASDAQ. |
| What else are non issure transactions called? | secondary transactions, or transactions between investors. |
| NSMIA created federal covered security, what is this? | National securities markets imoprovement act of 1996, a security that was exempt form regitration at the state level |
| t or f most securities sold today are federal covered? | true |
| What are the major categoies of federal covered securities that cannot be regulated by state securities administrators? | NYSE securities, ASE securities, CSE, Nasdaq, and several other exchanges. Also, an security = in seniority (rights or warrants) or senior to these securities (bonds or prefer stk), sec reg under 1940 act, gov offers, qual purch (priv purch) |
| what types of securities were registered under act of 1940 | open end mgmt invest co (mfunds), closed end mgmt invest co, unit investment trusts, and face amount certificates |
| t or f bonds are federal covered securities exem,pt from regis in the state, however, states may require regis of muni of their own states but not by other states | true |
| are minicipal securities issued in an administrator's state federal covered securities? | no, they are not covered by the exemption. States retain a;uthority over the issue of the minicipal securities by their own minicipalities. |
| Are all securities registered with the SEC federal covered? | no, states can require the registration of the securities of public offereings by non-bank, non gov issuers whose issues are traded in uncovered mktplaces such as pink sheets or the OTC bulletin board. |
| what are the different methos of state regis? | notice filing, coordination, and qualification filing |
| notice filing | filing with the state that federally covered securities must perform |
| which category of federal covered security is always required to engage in a special form of state registration? | Investment co and they must give notice filing and will be required to pay the specified fees. These fees are generally lower than for other forms of state registration. |
| What forms can the adminstrator require the issuers to file under notice filing? | docs filed with SEC for regis, docs file as amendments to initial reg stmt, report on the value of such securities offered in the state, consent to service a process |
| registration by coordination | may be reg by coor. if reg stmt was file under act of 1933, this is done so that there may be several IPOs in many states at same time |
| what is needed for reg by coordination? | consent to service process, latest prosectus, AOI and bylaws, underwriting agreement, any other info the admin requests, ea amendment to fed prospectus. |
| what would prevent reg by coordination from becoming effective at the same time? | stop orders issued by admin, the reg is was not filed 10-20 days prior, stmt of max & min offering prices and underwriting discounts and commisons have not been on file for 2 full bd |
| what is the most frequently used method used to register with the state | registration by coordination. It is the only sensible way to register a multistate offereing |
| registration by qualification | requires a registrant to supply any info required by the state securities administrator. Securities not eligible to register by another method must regis by qualification. Also securites only sold in 1 state (intrastate) will be registered by qualific |
| what info is need to register by qualification? | consent to service a process, name, address form of rog, descrip of property and NOB, info on directors and officers and all owenrs 10% or > of issuers securities and renumberation paid in last 12 mo, descrip of capitalization and long term debt |
| needs to register by qualification cont... | $$ & use, type & amt of secur offered, price, sell & undwrtng costs, stock options, copy prosp, pamphlet, circular, sales lit to use in offering, specimen security w/opinion of legality, audit bal sheet w/in pas 4 mo. & inc stmt for 3 yrs b4 bal sheet. |
| when does the effective date for qualification registration become effective? | unlike coordination where effective date is set by SEC, the registation by qualification becomes effective when tghe state administrator so orders. |
| how long is the state registration good for? | regardless of the method used, every registration stmt is effective for 1 yrs from effectiver date. Unlike agent or b/d that date is dec 31. |
| when can a registration for an issuer go past the 1 yr anniversary? | if there are still some unsold share remaining, as long as they are still being offered at the orig public offereing price by either the issuer or the underwriter. |
| how fast do initial public issues sell out normally | 1 - 2 weeks |
| how can an issuer add more shaes to an offereing w/out having to file a new registration stmt.? | a regis stmt may be amended after its effective date soas to increase the # if 1) the public offering price and @0 underwriters discounts and commissions are not chnged from the respective amts stated in the orig regs stmt |
| what fees are associated with an issuer amendment? | late regis fee and filing fee calculated in the manner as the orig quanity, levied against the additional securities proposed to be offered |
| t or f ABC Shoe Co, a new retail shoe store chain, has applied for the regis of its securities with the SEC as required by the Securities Act of 1933 & wants to reg in st of Ill. They would most likely use coordination. | true |
| t or f any co may reg by qualifcation whether or not it files a stmt with SEC | true |
| exempt security | retains its exemption when initially issued and in subsequent trading. |
| t or f provided it is in the public interest, the st administrator can deny, suspend, or revoke any securitueis trans exemption other than federal covered security. this may be taken with or w/out notice (summarily) | true |
| what make a security exempt? | it is exempt b/c of the nature of the issuer not the purchaser |
| exempt transaction | is exempt from the regulatory control of the state admin b/c of the manner in which a sale is makde or b/c of the person to whom the sale is made. A trans is an action and must be judged by the merits of ea instance. |
| what acts must be done first for anyone to sell a security in a state? | security must be registered, or the security or trans must be exempt or it is a fed covered security |
| exempt securities | these exempt fr st regis and st filing and sales lit. - incl US and Canadian gov and muni secur, foreign gov, deposititory institut, ins co securities, public util, fed cov secur, nonprof secur, cooperative secur, employ bene plan secur, some mmkt inst |
| which foreign gov securities are exempt | those in which the US maintains diplomatic relations |
| depository institutions | bank, savings institution, or trust co, and savings and loans only if they are authorized to do business in the state. |
| securities of employee bene plans | these incluide any investment contract issued by an employee stock purchase, saving, pension, or profit sharing plan |
| some money market instruments that are exempt securities include what? | commercial paper, and banker's acceptance are the two most common |
| t or f promiccory note and commercial paper are one in the same | true |
| when is the only case where a security's rating is part of the registration or exemption under the uniform securitis act | for promissory note, draft, bill of exchange or bankers acceptance that matures in 9 mo or <, and is $50k or moe and receives one of the 3 highest ratings by a nationally recognized rating agency these are fed covered and exempt fro regist with state. |
| when is a ins co investment instrument nonexempt? | variable annuities are nonexempt which means they are covered by the act abnd have to be registered. |
| exempt transactions | isolated nonissuer, unsolicited brokerage, underwriter, bankrulptcy, guaradian, and conservator, institutional investor trans, and limited offering trans, preorg certif, existing secur holders, trans by pledges, unit secured, control, rescission offers |
| isolated nonissuer transactions | secondary transactions, whether thru a broker or not, they occure infrequently 9very few per agent per yr, usually do not involve professionals, one person selling to another. |
| unsolicited brokerage transactions | transactions initiated by the client not the agent. most common of the exempt transactions, |
| underwriter transactions | btwn issuer and underwriter as well as those btwn underwriters them,selves 9mbrs of a selling syndicate) |
| limited offereing transactions | incl any offering called a private placement, directed at no more than 10 persons called offerees, other than institutional investors during the prev 12 mo. |
| what are the limitations to limited offereing transactions? | the seller believes thjat all the noninstitutional buyers are purchasing for investmtn purposes only, no commissions or other $4 is paid for soliciting noninstitutional investors, and no general solicitaiton for advertising is used |
| when is a preorganization certificate exempt | preorgs are exempt if no commission given directly or indirectly for soliciting subscriber, the # of subscribers not >10 and no pmt is make by any subscriber. |
| preorganization certificate | purpose is to enable enterprise to obtain a minimum # of subscriptions required by the corp law, the USA places a limitation on the # of subscribers rather than the # of offerees. |
| transactions with existing security holders | this is an exempt trans mad under an offer to existing security holders of issuers. no commission or other form of pay can be paid directly or indir for soliciting the security holder |
| nonissuer transactions by pledges | exempt trans if bona fide pledgee (one who recv'd the security as collateral for loan) as long as it was not for purpose of evading the act. |
| accredited investor | an investor who meets the accredited investor standards of Reg D. Reg D requires that an indiv hav a net worth > 1 Mill or $200k in income for at least 2 yrs. and have requisite knowleddge to evaluate investments. |
| Institutional investor | an investor that manages lg amounts of $$ such as a Mfund, ins co, bank, or pension fund. |
| t or f the USA grants the Administrator the authority, by rule or order to exempt a security, transaction or offer from the USA registration and filing requirements. | true |
| the administrator may deny or revoke the SECURITY EXEMPTIONS of what two securities? | yes they can revoke or deny them or any investment conteract issued in connection with an employee's stock purchase, savings, prnsion, profit sharing or similar benefit plan. |
| what are the only 2 exempt securities a administrator can deny? | nonprofit and employees stock purchase, savings pension profit sharing or similar benefit plans |
| how long does the admin have if the aggrieved party wished to contes the admin removal of an exemption? | the administrator must provide an opportunity for a hearing within 15 days of the receipt of written request. |
| t or f there are only 2 securities exemptions that the Admin may revoke but all exempt trans other than federal may be revoked | absolutely true!@ |
| It is unlawful for any person to offer or sell a security in a state unless? | 1) it is registered under act 2) the security or trans is exempted under this act or 3) it is a federal covered security |
| Exempt or Nonexempt: Mr. Thompson, an agent with First Securities, Inc. (B/D) recv's an unsolicited request to purcahse a security for Mary Gordon, a high net worth Indiv. | Exempt |
| Exempt or Nonexempt: the sale of an unregistered security in a private, nonpublicly advertisded transaction offered to 10 or fewer investors over the last 120months. | Exempt (private Placement) |
| Exempt or Nonexempt: the sale of unclaimed securities by the sherrif of Santa Fe, New Mexico | exempt |
| Exempt or Nonexempt: Sale of stock of a privately owned co to the public in a IPO. | non exempt |
| Exempt or Nonexempt: an agent sells a securitty isued by a foreign gov with which the US has diplomatic relations to and indiv client | non exempt |
| Exempt or Nonexempt: an unsolicited request from an existing client to purchase an nonexempt security | exempt |
| Exempt or Nonexempt: the sale of an unregistered securithy in a private, nonpublicly advertised transactio0n to 14 noninstitutional investors over a period not exceeding 12 mo. | nonexempt |
| Exempt or Nonexempt: the sale of unlisted securitiers by a trustee in bankruptcy | exempt |
| what is the first step in the state securities registration procederes? | the issuer or its rep to complete a registraion app and file it with the state securities Administrator. |
| Registrant | the person registering the securities with the state Administrator. |
| What info is required on State securities registrations? | amt of securities to be issued by the state, states in which the security is to be offered, amt in other states not needed) any adverse orders concerning offereing by reg authorities, court or SEC. Applic may incl docs fr past 5 yr if info is still good |
| who other than the issuer, may file an application with the State Administrator for security registration? | seling stockholder, such as an insider making a large block sale, or by and broker/dealer. |
| filing fee | this a fee that must be paid as determined by the administrator when filing the security registration. they are often based on a % of the totyal offering price. (if regis is w/d'n the Admin may retain part of the filing fee and refund the rest |
| ongoing reports | Admin may require the person who filed the registration stmt to file rps to keep the info contained in a registration stmt current and to inform the admin of the progress of the offering.. (cannot be required more than qtrly) |
| when is excrow of a security necessary | as a condition of registration the Admin may require that a security be placed in excrow if the security is issued to w/in past 3 yrs; at a price grossly different than offering pr, or to any person for a consideration other than cash |
| when can a registrant w/d their registration stmt? | not until one yr after its effective date if any securities of the same class are outstanding and may only be w/d with the approval of the admin. |
| which security transactions does the state administrator have jurisdiction over/ | those that originated in, are directed into or are accepted in the Administrator's state. |
| how does the administrator compel compliance with with an order? | while they can issue cease and desist orders, they must apply to a court of competent jurisdiction for an injunction |
| enjoined | the legal term used to refer to a person who is the subject of a court injunction. |
| what are the difference between cease and desist orders and stop orders? | cease and desist are directed to persons requiring them to cease activities, stop orders are directed to applications regarding registration of a security. |
| what are the requirements for an administrator to order formal orders of cease and desist? | 1) Give notice to affected ppl 2) grant oppor for hearing 3) provide findings and conclusion of law |
| What must be found by the Administrator to deny a securities professional's license? | Admin must find that the order is in the public interest and also find that the applicant has filed: Incomplete, false, willfully violated, convicted of securites misd, felony, insolvent, failed to pay app fees, lack of tng, experience, knowlege |
| how long must have passed since an applicants felony or misdemeanor b4 they can qualify for a securities license/ | 10 yrs |
| What happens if an applicant has a misdemeanor in one state that is considered a felony in another state they apply in. | the admin of the new state must consider the crime under the statutues of the state where it occured not his own state. |
| Is the publics best interest enough reason for the administrator to deny an applicants license? | no, there must be an additional reason. |
| how long does the administrator have to provide a hearing from the denied applicant | 15 days |
| when is it okay for an administrator to deny registration of a security? | misleading or incomplete reg stmt, fradulent, excessive fees, ctrl person convicted of secur crime, court injunction, illegal business, sub to admin's stop order in another state, or if fee not paid |
| vacated | when the conditions that led to the issuance of the stop order have changed for the better this is the legal term to decribe the lifting of the stop order. |
| what reasons can administrator use to terminated a registration even if there has not been a viloation of the USA? | A request for withdraw and lack of qualification are both reasons for cancellation |
| if an indiv on his own initiative request a w/d of registration when isit effective? | 30 days after the admin receives it. provided no revocation or suspension proceedings are in process against the person making the request. |
| once a registration is w/d'n how long does the administrator have jurisdiction over you? | for a 1 year period |
| when may the administrator cancel an applicant or registrant? | if applicant no longer exists or has canceled his business |
| t or f an administrator can base a denial of a person's registration solely on lack of experience. | false - he cannot - however the admin may choose to reg them as a broker/dealer rather than a investment adviser based on experience. |
| t or f just b/c a person has been a b/d or an agent for a b/d does not mean that the person is qualified to be an investment adviser. | true |
| when will an administrator cancel a person's registration? | when the applicant or registrant no longer e3xists or has ceased to transact business or if the person is declared mentally incompetent. |
| what would the administrator do if mailings to a registrant were returned with no forwarding address? | cancel the registration |
| When may the purchaser of securities sue the seller? | if securities were sold in violation of USA, or ommitted material facts, sold by an agent not registered, sold in violation of a rule or order of the securities admin |
| who brings on a civil suit against an agent? | the securities purchaser, but administrator may also if to prevent publication, circulation or use of materials required by the admin to to be filed under Act not yet filed |
| treble damages | in addition to receiving back your investment, you receive pmt = to 3 x's what you lost. (usually found in insider trading) |
| statute of limitations for civil violation | time limit for violations of the civil provision of the USA is 3 yrs from date of sale or 2 yrs after discovering the violation whichever occured first. |
| t or f every cause of action under the statute survives the deathj of any person who might have been a plaintiff or defendant. | true |
| what does it mean for the buyer to be "made whole" | of a person buys a security that is sold in violation of the USA, they may sue the seller to recover $ paid, interest @ (x) % per yr, court costs, and attorney's fees, less amt of income recv'd |
| right of recission | if the seller of security discovers that he has made a sale in violation of the USA, the sellfer may offer to repurchase the securities from the buyer. Seller must refund purchas amt and int % determined by administrator. |
| how long does the buyer have after reciving a letter of recisission to respond | 30 days - if they do not respond w/in 30 days the buyer forfeits the right to pursue a lawsuit at a later date. If he rejects w/in 30 days he may sue. (this almost never happens) |
| who else besides the seller of a security or the IA who gives the advice can be held liable? | The person wo directly or indirectly controls the perosn who sold the securities or the advice or is a material aid to the transaction. |
| t or f when improper investment advice is offered the purchaser of the advice is not entitled to recover the original purchase price from the adviser. | true they do not get back the orig purchas price, they can however recover cost of advice, losses incurred and legal costs |
| surety bonds need to provide for what? | that any customer who can prove a violation, and does so w/in the stature of limitations, is entitled to collect agains the bond. |
| what may the penalties be for a person found gulty of fraudulent securities trans? | criminal penalties to include fines, prison or both. |
| Fraud | the deliberate or willful concealment, misrepresentation or omission of material information or the truth to deceive or manipulate another person for unlawful or unfair gain, Under the USA, fraud is not limited to common-law deceit. |
| statute of limitations for crimianl penalties | the time is 5 yrs from the date of the offense. (5-5-3 rule 5 yrs of SOL, $5k fine, amd 3 yr prison) |
| judicial review of orders | This is an appeal and any person affected by an order of the Administrator may obtain a review of the order in a court by filin a written petition w/in 60 days. However, even though the appeal is filed the order will go into effect unless court says diff |
| what literature can the administrator by rule or order require filing for? | prospectus, pamphlet, circular, form letter, advertisment, other sales lit or advertising commo to prospective investors |
| when is a document considered to be filed with the administrator? | when the administrator has recv'd it |
| who maintains records for the IA and B/Ds | the administrator |
| fraud | the DELIBERATE or WILLFUL act to deceive someone for profit or gain. |
| t or f you can go to jail for committing fraud ( a criminal offense) while engaging in a securities sale | true but most of the time it is limited to a fine, and or suspension or revocation. |
| What are considered fraudulent practices with regard to offer, sale or purchase of a security? | employ any device, scheme to defraud, untrue stmt of material fact or omit facts, engage in deceit of a person, |
| What are considered fraudulent practices with regard to invesstment advice? | advising person as to the value of securities, employ devoce pr scheme to defraud, engage in deceit of a person, |
| material information | used by a prospective purchaser to make an informed investment decision. Agents must not delibertly withold information. |
| t or f all information must be given to a buyer about a security? | false - USA does not require an agent to provide all info about an investment, but only info that is material to making an informed decision. |
| what information must be included on an order ticket? | account id, description, # of shares, total par value (bond), terms and conditions of order, time of order entry, exectuion price, and agent's name |
| can facts be materaila at some times and not material facts at others? | yes, normally an acccounting change would not be a mterial fact. However, if this change means lower earnings then it then becomes a materail fact. |
| what is an agent to do if they come accross insider information? | report it to his supervisor or compliance officer. |
| is the use of a broker/dealer or investment adviser's internally generated research report prior to public release considered insider information? | no |
| material inside information | any info about a company that has not been communicated to the general public and that would likely affect the value of a security. Even if you aquire the info "accidently" you cannot use it until it become public. |
| is a corporate officer who divulges material inside information to a friend that never uses the information guilty of fraud? | no, simply giving inside info is not a violation of the law. |
| delivery delays (Unethical) | in the event that client requests certificate for a security purchased, it would be considered unethical business practice for the firm to delary delivering to the client |
| churning (Unethical) | inducing trading in a clients acct which is excessive in size or frequency in view of the financial resources, objectives and character of the account. |
| unsutable recommendations (Unethical) | recommending the pruchase, sale, or exchange of any security without reasonble grounds to believe that transaction or recommendation is good for the client based on invest objectives, financial situtation and needs |
| what information must the agent collect before making recommendations to the client to buy securities? | finan status, investment objectives, ability to assume risk |
| what is an agent to do if a client will not reveal their financial information before buying securities | all the agent can do is accept unsolicited orders because there is no basis for making any recommendation. |
| t or f an agent may make a blanket recommendation for securities. | fales - it will almost always be unsuitable if the same security is recommended to the majority of your clients. All clients do not have the same needs. |
| unauthorized transaction | executing a trans on behalf of a client w/o authorization to do so. Unless discretionary auth has been recv'd, b/d and their agenst may never enter an order for a client on their own volition, even when it is in the best interest of the client. |
| Can a spouse of a clent contact the agent with transaction instructions? | no, not unless there is written 3rd party trading authorization on file, no activity can take place. |
| when is it okay for an agent to exercise discretion in an acct for a client? | when the agent has prior written authority (power of attorney) from the client. This is also known as trading authorization. |
| trading authorization | prior written authority to transact business on a clients acct. |
| What actions can the client give the agent discretion over? | asset (security), action (buy or sell), amount (how many shares) |
| free securities | those securities that have no lienagainst them. Securities are pledged as collateral in a margin account |
| t or f securities that are held in a customer's name must not be commingled with securities of the firm. | true |
| why are clients securities and company's securities not to me commingled? | to mix shares togehter would give undue leverage or borrowing power to a firm and could jeopardized the security of client securities in the event of default |
| hypothecation | the pledging of securities for a margin account |
| what is need from the client before hypothecatin a customers securities? | the b/d must secure from the customer a properly executed written consent promptly after the initial transaction, except as permitted by rules of the securities and Exchange commission. |
| what is considered and unreasonable commission or mark-up | entering in a transaction with a client at a price not reasonbly related to the current market price of the security or recving an unreasonable commission or profit. |
| when is the prospectus mandated to be given to a buying client/ | must be given to each person to whom an offer is made no later than with with confirmation of the trade. And one must be sent to ea person who actually purchases the security. |
| If a broker dealer quotes a stock at 20.60 to 20.75 what is he saying? | that he is ready to sell at least the min trading unit (usually 100 shares) to a client at $20.75 per share (ask price) or buy from a clent at $20.60 (bid price) |
| maket maniputlation | effecting any transaction in or inducing the purchase or sale of any security by means of any manipulative, deceptive, or fraudulent device, practice, plan, program, design or contrivance. |
| what are the most common forms of market manipulation? | matched purcases and wash sales |
| matched purchases | occure when market participants agree to buy and sell securities among themselves to create the appearance of activity or trading in a security. This can make the price go up. As the price rises, participants who started matched purch sell for profit |
| wash sale | an attempt to manipulate security's price by creating an apparent interest in security that really does not exist. this is done by an investory buying in one brokerage acct and simult. selling thru another. No change occured, but it looks like it did. |
| arbitrage | the simultaneous buying and selling of the same security in different markets to take advantage of different prices. it is not a form of manipulation. |
| how does arbitrage affect prices? | Simultaneously buying a security in one market and selling it in another forces prices to converge and therefore provides uniform prices for the general public. |
| what is a common way in which deceptive advertising takes place | when broker/dealers prepares a sales brochure for a new issue but includes only the positive info from the prospectus. Leaving out risk factors and other "deal killing" info is prohibited. |
| are you allowed to highlight on a prospectus? | no, mor making any other marks on a prospectus to draw attention to key points |
| What is a common conflict of interest that must be disclosed to client before selling security? | controlling affiliated with common control withn the issuer of any security b4 entering into any contract with or for a client. ex. you are selling securities where you sister is in control, you have to disclose this. |
| Can a firm keep shares from an IPO for themselves? | No. they must be sure to allocated the shares to clients in an equitable manner and not keep any for themselves |
| What complaints must be responded to and how? | only written complaints. action must be taken. the client is notified that a complaint is recv'd and noted in firms file. If agent is subject of complaint, then agent is notified. If agent gets it, they must tell supv. |
| front running | unethical practice of b/d placing a personal order ahead of a previously recv'd customer order. Happens when firm recv's large order that will move the market. The rep can profit from the order. |
| are you allowed to backdate documents? | no, all documents must show the actual date.q |
| investment company sales | adopted in 1977, NASAA made poli9cy titled dishonest or unethical business practices by broker-dealer and agents in connection with investment ocm shares. |
| when are agents considered dishonest when stating facts about a fund being no load or no sales charge? | when there is a front end load, a contingent deferred sales load (CDSC) or a rule 12 b-1 fee that exceeds .25% of average net fund assets per year |
| is it ever okay to borrow from your clients | no, not unless the client is a lending professional, brokder/dealer, an affiliate of the professional or a financial institution engaged in the business of loaning money |
| selling away | effecting securities transactions not recorded on the regular books or records of the broker/dealer which the agent represents, unless the transactions are authorized in writing by the b/d prior to execution of the transaction |
| if an agent trades privately owned shares with a client of his firm does he have to report it to his company? | yes, it makes no difference whether the shares sold are privately held; when an agent trades with clients of the firm , the trans must be recorded on the books unless prior written author is obtained from the firm |
| beefing up a clients net worth | fictious accounts so a clients net worth to enable him to engage in margin or options trading. |
| when is it okay for a client and an agent to have a joint account? | only when there is a written approval. |
| what must happen before you can split commissions with another agent/ | they must be registered and work for the same broker/dealer. you do not have to disclose this to the client unless it increases their costs |
| Unlawful or Lawful? an agent guarantees a client that funds invested in mutual fund made up of government securities cannot lose principal? | Unlawful |
| Unlawful or Lawful? a nondiscretionary customer calls his agent and places a buy order for 1000 shares of any hot internet company. Later in the day, the agent enters an order for 1000 shares of global internet services | Unlawful-b/c the client is nondiscretionary the agent could not on his own initiative selec t which Iternet company to invest in. |
| Unlawful or Lawful? an agent recv's a call from client's spouse, advising him to sell her husband's securities. Her husband is out of the country and told her to call. The agent refuses b/c wife not authorized. She complains to the mgr. | Lawful |
| Unlawful or Lawful? A client writes a letter of complaint to his agent regarding securities that the agent had recommended. The agent calls the client to apologize and then disposes of the letter b/c the client seemed satisfied. | Unlawful |
| Unlawful or Lawful? a registered agent borrows $10k from a credit union that is one of her best customers | Lawful |
| Unlawful or Lawful? An agent is convinced that Internet Resources will rise significantly over the next 3 mo. She offers to buy the stock back from her customers at 10% higher than its current price at any time during the next 3 mo. | Unlawful - An agent may not guarantee the performance of a security |
| Unlawful or Lawful? An agent receives an order for the purchase of an obscure foreign security. The agent informs the client that the commissions and charges on this purchase will be much higher than those of domestic securities | Lawful |
| Unlawful or Lawful? an agent who works for a small b/d that employs no securities analysts assures her clients that she can analyze any publicly traded security better than any analyst and that she will do it personally for each security purch by client | Unlawful - It is unlawful to promise services that an agent cannot reasonbly perform or is not qualified to perform |
| Unlawful or Lawful? An agent recommends that her client buy 1000 shares of Internet consultants, inc an unregistered nonexempt security with a bright future | Unlawful - it is unlawful to solicit unregistered nonexempt securities |
| when is it unlawful for an advisor to have custody or clients funds? | if Admin prohibits it, the adviser fails to tell admin, if the adviser fails to give clients at least qtrly stmt of acct activity and the location and amt of their assets |
| what does custody include? | possess. of clients funds or secur. unless recv'd inadvertently & retrn'd promptly (w/in 3 BD), any arrangement (incl POA) u r allowed to w/d funds or secur. maintained with custod. any capacity that gives you or your ppl legal ownership 2 clients assets |
| t or f custoday incl recpt's of checks drawn by clents and made payable to 3rd parties if fwded to 3rd party w/in 24 hours. | false - this is not custody if fowarded in 24 hours |
| t or f having investment discretion over the client's accounts constitutes custody | false - this is not custody |
| t or f receiving substanttial prepayments (more than $500 six or more months in advance) still does not constitute custody | true - this is still not considered custody |
| custody | the physical possession or control of funds and securities. Many advisers do not have custody b/c they are maintained at a bank or brokerage house. |
| What do advisers need to supply to the admin is they have custody of their clients funds or securitites? | a surety bond or meet certain net worth standards |
| qualified custodians | may be used by advisers to hold clients assets, these include banks, savings associations and B/D's |
| t or f statements to clients about their assets may be sent by the custodian instead of the investment adviser | true-but the IA still has the fiduciary responsiblity to make sure it was sent |
| what is the min net worth requirement for the adviser if they are custodians? | $35,000 and they must supply clents with annual audited balance sheet |
| what is the min net worth if an adviser exercises discretion over clients accounts? | $10,000 |
| what does an administrator inspect during routine Adviser inspections | adviser's filings with SEC (if fed covered) or materials given to clinets to ensure the adviser diclosures are accurate and timely and do not omit material information. |
| substantial repayment | if an adviser requires prepayment of advisory fees of more than $500 from a client, 6 or more months in advance |
| soft dollars | commission dollars that pay for the entire bundle of services the practice of allocating certain of thes dollars to pay for research component. (arrangements under which products other than securities trans are obtained) |
| directed transactions | products and services other than security trans are obtained by an adviser from the b/d in exchange for the direction by the adviser of client brokerage trans to the b/d. |
| how does an adviser avoid conflicts of interest in using commissions to purcahse research from broker dealers? | the SEC requires the adviser to disclose soft-dollar arrangements to their clients |
| What does Section 28(e) (Safe Harbor Act) of the Securities Exchange Act of 1934 do? | Congress adknowledged the important service b/ds provide in producing and distributing investment research to money mgrs. It defines when ppl are deemed to be providing brokerage and research svcs. |
| What items fall under the Safe harob 28(e)? | research rpts, financial newsltrs, trade jrnals, quantitative software, seminars, effecting and clearing security trades |
| when an investment adviser with discretion over a client's acct directs trade executions to a specific b/d and used the commission $$ to acquire software that analyzes tec mkt trends, it is known as what? | soft-dollar compensation |
| what kind of advice can IA display on their web-sites? | only general advice no specific advice or recommendations. |
| t or f if IA advertises on the Internet, they don't have to be registered in the state, but if they follow up with advice or offer securities, they either have to register or find some kind of exemption | true |
| what is a huge difference in the Advertisements between broker/dealers and Investment advisers literature and web-sites? | b/d are permitted to use testimonials in advertisments. Therefore, a b/d could contain praise from a client. However, nothting can ever be used to contrue praise from the administrator. |
| what should the setting be like for a b/d? | shall be conducted in a physical location distinct from teh area in which the financial institution's retail deposits are taken. In no space is available for the distinction, the b/d has the responsiblity to distinguish its services from those of bank |
| what must be disclosed if a b/d works at a financial institution? | must disclose orally and in writing, that securities purchased are not FDIC insured, aren't deposits of bank, are subject to risks, incl possible loss, clients must in writing acknowlege these |
| When advertising what must be displayed in a conspicuours manner? | not FDIC insured, no bank guarantee, and may lose value |
| When are communication disclosure for not FDIC insured, not bank guaranteed, and may lose value not needed? | in radio brodcast 30 or <, electronic signs, (excluding msgs contained in tv. or online computer svcs or ATMs), and signs such as banners and posters when used only as location indicators |
| SIPC Coverage | Securities Investors Protection Corporation. provides protection to clients of b/d's in the event the b/d eners bankruptcy. SIPC appts a trustee to return assets to clients. Does not protect against decline in value of client's portfolio. |
| CTR | Currency Transaction Reports. The bank secrecy act requires financial institution to file CTRs on FinCen form 104 for ea cash trans over $10k. |
| NASAA | North American Securities Administrators Association. |
| NS,OA | National Securities Markets Improvements Act - designed to integrate securities markets and eliminate conflicting state and federal securities legislation. |
| t or f the power of the SEC supersedes that of the state | true |
| What are the 4 classes of security professionals? | broker/dealer, agents, Investment Advisers, Investment adviser reps. |
| Blue Sky laws | state security laws helped with the need for uniformity in security laws among the states |
| NCCUSL | National Conference of Commissioners on Uniform State Laws - a national org of lawyers devoted to unifying state laws they drafted the orig USA as a mode for states to adopt. |
| USA | Uniform Securities Act, not actually legislation, it is a templae or guid that ea state uses in drafting its securities legislation |
| administrator | the office or agency that has the complete responsibility for administering the securities laws fo the state. has jurisdiction over all security activities in his state as well as those recv'd in his state. jusis over reg of agents, securities. |
| t or f Admin has the power to make rules and issue orders | true |
| Can an administrator deny, suspend or revoke registrations? | yes, this is one powerful person. |
| cease and desist order | used by Admin whenever it appears to him that any registered person has engaged or is about to engage in any act constituting violations of any provision of this act or rule. Can be ordered with or w/o hearing. (just for person not securities) |
| stop order | used to deny effectiveness to or suspend or revoke the effectiveness of any registration statement. (applies only to securities not ppl) |
| Summary Order | May act w/out prior notice the Admin can 1) postpone the regis of any security professional pending final outcome of problem 2) postpone the regis of a security pend final outcome of problem 3) deny or revoke security or trans exemption |
| exempt | something is excused from certain requirements. An exempt security means it does not have to be registered in order to be sold. You do not have to file advertising with the Administrator |
| exempt transaction | one in which the nature of the sale is such that registration with the Admin and filing of advertising material is not required in order for that trans to take place |
| guaranteed | guarantee payment as to principal, interest or dividends but not capital gains |
| offer or offer to sell | include every attempt or offer to dispose of or solicitation of an offer to buy, a security or interest in a security for value |
| sale or sell | includes every contract of sale of contract to sell or disposition of a security or interest in a security for value. (offer = attempt, sale = sucessful) |
| fraud | means an intentional effort to deceive someone for profit; not limited to common-law deceit. |
| SRO | Self Regulatory Org, the most prominent is FINRA |
| solicitor | any indiv who for compensation, acts as an agent of an investment adviser in referring potential clients. They must be registered as IAR's |
| accredited investor | refers to person not counted when computing the number of investors purchasing a private placement under Reg D of the Fed Securities Act of 1933. One qualifies if the have a net worth > $1 mil or income at least $200k/yr for past 2 yrs ($300k if married) |
| registrant | used inj legal circles to refer to those securities profesionals (B/D, IA, agents, and IARs) or securities issuers, who are in the process of or who have registered with the Administrator |
| institution | include banks, trust co, savings & loans, ins co, employee benefit plans w/assets not < $1 mil, gov agencies or instrumentalities. the act affords less protection to these investors b/c of their investment sophistication |
| state | means any of he 50 states, any territory or possession of the US such as Samoa and Guam the District of Columbia and PR. |
| Broker/Dealer | fall under USA and is a legal person such as corp or partnership, engaged in business of effecting trans in securities for the accts of others or for own acct. or firm with an office in the state |
| Agents | indiv work under broker and fall under USA |
| Investment Adviser | Fall under USA legal person such as a corp or partnership |
| IAR | always indiv work under IA and fall under USA |
| Agency Capacity | When acting on behalf of their customers--that is, buying and selling securities for their clients acct--b/d act in agency capacity. |
| Principal capacity | When b/d buy and sell securities for thei own accounts it is call principal capacity |
| Proprietary accounts | a broker/dealer's own account |
| financial modernization act | federal securities law adopted a functional approact to the reg of financ institutions. Func Approach means that finan injstit that engage in b/d related activities are subject to SEC registration |
| do commercial banks have to register? | no, they are subsidiearies of bank holding companies and do not have tot register b/c they are exempt |
| when is a b/d excluded from the definition of a b/d within a state? | if they have no place of business in the state and deal with only b/d, banks, sav & loan, trust co, ins co, invest co and pension or prof sharing trust, and those falling under snowbird exempt |
| snowbird exemption | persons who are already existing customers and who are not residents of the state. They live in the state the b/d is registered and travel to other states |
| How long, in moste states, does a b/d have when an existing client legally moves to another state to get registered in the new state | 30 days in whch they may continue to do business after the 30 days they must reg in inte new state. |
| t or f at the time or registration of a b/d, any partner, officer or director of the b/d is automatically registered as an agenet of the b/d? | true, however this does not mean that they don't have to take an exam. |
| net capital | liquid net worth |
| if a b/d meets the SEC's net capital or bonding requirements be required to meet higher ones in any state in which they do business? | no |
| what else might an administrator accept in lieu of surety bonds? | deposits of cash or securities |
| when does an b/d's submision of information to the state securities admin become effective for registration? | at noon on the 30thj day after filing |
| when does b/d's registration expire? | on Dec 31st ea yr unless renewed |
| t or f in general, a person who effects trans actins in securities for itself or for the acct of others in the course of business must register in the state as a b/d? | true |
| t or f an out of state firm that transacts business with an established customer who is on vacation is not considered a brokder in the state in which the customer is on vacation | true |
| t or f a person not defined under the USA as a b/d in the state need not register as such | true |
| t or f a b/d regis in several states must meet the net cap standard of the state with the most stringent requirement | false |
| agent | any indiv who represents a b/d or an issuer in effecting or attempting to effect transactions in securities - also known as registered reps |
| t or f only an indiv or a natural person can be an agent | true |
| are clerical and admin ppl (sometimes called ministerial) required to registered | no |
| t or f an admin person can respond to existing clients request for quote, or post records for client and not be registered | true-however if the take orders over the phone or in any other manner they must be registered |
| how does issuers sell new securities? | they can use its own employees or hire outside sales force to sell them. |
| if an indiv is selling for an issurer, ubnder what circumstances would that indiv be exempt from registration in a state? | if the security is exempt, if exempt from registration, and with existing employees, partners, or directors of the issuer if not commission or other pay is given directly or indirectly for soliciting any person in the state |
| exempt securities | securities that are exempt, ex gov and muni secur, secur of US commercial banks and sav instit or trust co, commercial paper with denom of $50k or > and matures in 9 mor or <, Investment contracts in employeee stock purse plan |
| exempt transactions | transactions exempt from registration - isolated nonissuer trans, trans btwn issuers & underwriters, trans btwn savs instit or trust co & private placements |
| t or f an employee of an issuer is not an agent when representing an issuer if the issue is exempt from registration (ie banks, finan instit, and gov) | true |
| When an agent begins or terminates a connection with a b/d or issuer who must notify the administrator? | the agent and the b/d or the issuer must promptly notify the adminsitrator |
| t or f exemptions from regis generally apply to indiv who represent issuers rather than to indiv who represent b/d's/ | true |
| t or f an indiv may not act at any one time as an agent for more than one b/d or for more than one issuer, unless the b/d or issuers for whom the agent acts are affiliated by direct or indirect common control or the Admin grants an exception. | true |
| RRSP | The Canada equivalent of our IRA it is a Registered Retirment SAvings Plan |
| How do Canadian agents do business in the states? | file app in Canada, file consent to svc of process, show evidence that regis in good standing in Canada, be a member of SRA or stock exch in Canada, they need not have bldgl, in the state & no requir to regis if only dealing with b/d and instit clients. |
| when do renual applications for Canadian b/d's and agens who file limited regis have to be renewed? | Dec 1 ea year |
| Agent or not? A person who effects transactions in muni securities on behalf of a b/d | Agent |
| Agent or not? An agent's salaried secretary who takes buy and sell orders from clients | agent |
| Agent or not? an employee of a bank whos job is selling securities issued by the bank | Not an agent - an employee thar represents an issuer of exempt securities (a bank) is selling its securities does not register as an agent b/c such an indiv is not an agent under the USA |
| Agent or not? an indiv who represents her nonexempt employer in the sale of its securities to existing employees for a commission | agent |
| Agent or not? a person who represents an issuer in effecting transactions with underwriters | not an agent |
| Investment adviser | as any person who for compensation and as part of a regular business, engages in the business of advising others on the value of securities oron the advisability of invest in or selling them |
| how can IA deliver advice? (What vehicle of info can be used) | in person, through publications, or writings, or through research reports concerning securities. |
| Are rare coins or real estate considered securities? | no and therefore a person who deals in these would not be considered an IA. |
| t or f any b/d registered in several states is alos going to be registered with the SEC | true |
| Which is higher, State Law or Federal Law | Federal, always! |
| t or f most of the exlusion from the term agent refer to the indiv represent an isuer? | true |
| what is prim role of administrator? | to admister the securities laws of the state as well as make rules and issue orders in the pblic interest to ensure a well functioning investment climate to the state |
| jurisdiction | the scope of the admin authority, the legal tuthority to regulate securities activities that take place in the admin state |
| offer or offer to sell | every attempt or offer to dispose of , or solicitation of an offer to buy, a security or interest in a security for value. |
| what constitutes the selling of a security? | security given as bonus, purchase of security, gift of asseccable stock or warrant or right to purchase or subscribe to another security. |
| assessabel stock | stock issued below par for which the issuer or creditors have the right to assess sharehodlers for the balance of unpaid par |
| what is the difference between sale of security and and offer to sell? | the offer is the attempt, an transaction has not taken place. In a sale, there has been an actual transaction involving money or another form of consideration for value. One must be properly registered to do both. |
| to or f when assessable stock is given as a gift the Administrator has no jurisdiction over the transaction? | false - b/c there is a potential future oblicagiton in that eithere the issuer or more likely, creditors can demand payment for the balance fo the par value, the Admin does have jurisdiction. |
| t or f a purported gift of assessable stock is considered to involve an offer and sale. | true |
| what are not inclueded in the terms offer, offer to sell and sell or sale? | bonafide pledge or loan, gift of non-assessabel stock, stock divident or stock split, merger, consolidations, reclass reorgs |
| In which circumstances of selling, accepting an offer are considered in Admin jurisdiction? | If originated in, directed to, or accepted in Administrator's state |
| t or f more than one Administrator may have jurisdiction | true - b/c securities transactions often involve several states |
| When does the Admin not have jurisdiction? | if offer were made by TV or Radio outside his state, newspaper or periodical published outside state, or Mewspaper or periodical published inside the state that has more than 2/3 (66%) of its circulation outside of state in last yr. |
| What are the 4 broad powers of the administrator? | 1) make rules & orders 2) investigations & supoenas 3) cease and disist orders 4) deny, suspend, cancel or revoke regis and licenses |
| how long does a person have to challenge an order of the Administrator? | 60 days of the order issuance |
| what is the difference btwn rule and order? | rule applies to everyone, order applies to a specific instance |
| t or f although the administrator has the power to make and amend rules for compliance with his state's blue-sky law, he does not have the power to alter the law itself | true |
| does the administrator have to publish all rules and orders | yes, it is required to publish all under USA law |
| are investigations by the state amdinistrator made in public or private | both |
| When conduction and investigation what is the admis or any officer designated by him have the power to do? | get stmts in writing, under oath, publish the facts, supoena witnesses, gather evidence (books, papers, correspondence, and other docs deemed relevent) |
| Contumacy | This is when a person who is the subject of an investigation with securities refuses to furnish the required evidence or igmores a subpoena. |
| What are the consequences of contumacy | the admin may apply to the appropriate court in his state and ask for help. The Court can then order person to appear b4 admin, if they don't appear they can be held in contempt of court. this can lead to jail time. |
| When can an Admin issue a cease and desist order w/o a hearing? | when he determines that a perosn is about to engage in an activity that constitutes a violation of the USA or the Admin's rules. (This is often called Admin smells the smoke) |
| what info should be gathered by the security professional b4 recommendations are made for suitable investments. | investment objectives, financial situation, needs and other info know by the IA |
| what is the difference btwn Agents and IA or IAR's | the agent's onlyu job is to effect securities transactions, while that of the IA or IAR is to give advice |
| what is true about the discretionary authority before an agenet places and order for a client | prior to placing an order, an investment adviser must have written discretionary authority from the client. |
| how long does discretionary authority lasts? | it permits oral discretinary authority to be used for the initial transactions in the customer's account within the first 10 BD after the date of the first transaction. |
| What would constitute and unreasonble advisory fee? | a fee that in relation to fees charged by others advisers for similar services is much higher. |
| what things must be revealed to client b4 advice is rendered? | any conflict of interest to include: conpensation (arrangements connected with clients who pay IA), charging an advisory fee, also affiliations btwn IA and product suppliers. |
| When is it okay for IA to use testimonials? | they are strictly forbidden for use bhy IAs. They may use a charting system but must state that there are limitations and difficulties inherent to using such programs |
| advertisement definition? | a communication to more than one perons. No difference btwn advertisement and sales literature. |
| how often does the IA need to send an itemized list of all securities in custody to his client? | not less than every 3 months and all funds and securities be verified annually by actual examination by and independent CPA on a surprise basis |
| who is held to a higher standard, B/d or IA? Why? | IA because of their position of trust. They must act for the benefit of the client and place the interests of clients above their own. When they charge a fee they have a higher level of fiduciary responsibility |
| t or f the act prohibits an IA from effecting trans as a principal with his clints or as an agent for his clents, unless his clinets rec'v full written disclosure as to the capacity in which the adviser proposes to act & consent to do so can they procee | true |
| when is a securities transaction determined to be completed? | upon settlement not upon execution |
| Settlement | the ending point of a transaction is when the actual exchange of securities and pmt occurs. |
| when does the adviser need to obtain client's consent to comply with regs? | either before execution or after exec but prior to settlement |
| how often does an adviser need to get consent for transactions? | for each transaction. A "blanket approval" is not permited as of 1945 federal law. |
| agency cross transaction | the adviser acts as agent for both its advisory client and the party on the other sid e fo the trade. Adviser must get written consent from Client that states: commissions from both sides, poten conf of interest, annual stmt, doc stating this may term |
| can a IA recommend the transactions for both the seller and the buyer? | NO! |
| In cross transactions the client muist be sent a written trade confirmation with what information? | stmt of NOB, date, time or trans, source of amt of an renumeration bcv'd by IA in connection with transaction |
| what determines the relationship btwn the client and IA | the contract |
| what info must be disclosed in IA contract? | services, term, fee and formula, fee to be rtn'd if contract is terminated, discretionary power, no assigment of contract, any change in partnership will be communicated to advisory clients w/in reasonable time. |
| the USA prohibits certain performance fee arrangements contingent on capital gains except when? | a registered inves co, or any person with $750k under an adviser's mgmt or net worth of at least $1.5 mil |
| t or f a fee based on the average amt of money under mgmt over a particular period of time is considered to be a performance fee | false |
| If a partner dies is this considered an assignment? what about if a majority change, is that an assigment? | no for death, yes for Majority |
| if an adviser is going to uses performance based compensation how should it be done? | use net performance (consider both gains and losses) and the Admin has the power to authorize this type of fee even when the state conditions are not met |
| t or f any material legal action against the adviser must be disclosed to existing clients promptly | true, if the action occured in the past 10 yrs, it must be disclosed to clients not less than 48 hours b4 entering into a contract or no later than the time of entering into such contract if the client has the right to terminated with no fee w/in 5 BD. |
| material | any actions taken agains teh firm or mgmt perons by a court or reg authority w/in the past 10 yrs. this incl fins over $2500, court and stat proceedings |
| how long does the IA have to deliver teh disclosure statement with any material information to the client before entering into a contract? | 48 hours before entering in contract unless the client has the right to terminate w/out penalty w/in 5 BD aftering entering in the contract. |
| wrap fee program | a progam under which a client is charged a specified fee or fees nto based directly on trans in client's acct for investment advisory services and for executiton fo client trans. Must inform client of this |
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