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Cease and Disist Order
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Series 63-1
| Question | Answer |
|---|---|
| Administrator | the office or agency that has the complete responsibility for administering the securities laws of the state. This person has Jurisdiction over all securities activity that eminates from their state as well as recieved in their state. Makes rules. |
| Cease and Disist Order | used when any registered person has engaged or is about to engage in any act or practice constituting a violation of any provision of this act or any rule or order. May be with or without a prior hearing. ONLY APPLIES TO PERSONS |
| Stop Order | used to deny effectiveness to, or suspend or revoke the effectiveness of, any registration statement. ONLY APPLIES TO SECURITIES |
| Summarily | Acting without prior notice |
| Summary Order | Used for postponing the registration of a securities professional or security pending a final determination of proceeding relating to a problem. also denying or revoking a specific security or transaction exemption. |
| Final Order | May not be entered without appropriate prior notice to interested parties, opportunity for hearing, written findings of fact and conclusions of law. |
| Blue Sky Laws | Common term for state securities laws |
| Person | any individual, corporation, partnership, association, joint stock company, or trust where the interests of the beneficiaries are evidenced by a security, an unicorporated org, a govt, or a political subdivision of a govt. |
| Non-Person | Minors, deceased people, individuals legally declared mentally incompetent |
| Broker | any person engaged in the business of effecting transactions in securities for the account on behalf of OTHERS. must register with the state and the SEC |
| Dealer | any person engaged in the business of effecting transactions in securities for the account on behalf of THEMSELVES. must register with the state and the SEC. |
| Agent | any individual, other than a B/D, who represents a B/D or issuer in affecting or attempting to affect purchases or sales of securities. Also referred to as Registered Representative. |
| Investment Advisor | any person who for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities. they also issue or promulgates analyses or reports concerning securities. |
| Investment Advisor Representative | any individual who represents a state-registered investment advisor or federal covered investment advisor performing duties related to the giving of or soliciting for advisory services |
| Issuer | any person who issues or proposes to issue any security. Primarily consist of corporations and governments |
| Exempt Security | does NOT have to be registered in order to be sold, and there are no requierments to file advertising about the security with the administrator. |
| Exempt Transaction | a sale is such that registration with the Admin and filing of advertising material is NOT required in order for that transaction to take place. |
| Offer/Offer to sell | every attempt or offer to dispose of, or solicitation of any offer to buy, a security or interest in a security of value. this is an attempt to sell. |
| Sale | every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value. This is when offers are successful. |
| Fraud | intentional effort to deceive someone for profit, not limited to common law deceit. |
| Solicitor | any individual who, for compensation, acts as an agent of an investment advisor in referring potential clients. They must be registered as investment adviser representitives. |
| Accredited Investor | a person who has a net worth in excess of $1 million, or has income of $200,000 for last 2 years (or $300,000 if married) with expectation of reaching that level this year. they are not counted as investor purchasing private placement under Reg D. |
| Registrant | those securities professionals, or securities issuers, who are in the process of or who have registered with the Administrator. |
| Institution | banks, trust companies, savings and loan associations, insurance companies, employee benefit plans with assets of not less than $1M, and governmental agencies or instrumentalities. |
| National Securities Markets Improvement Act (NSMIA) | promotes efficiency in capital information in the financial markets. preempts state blue sky laws, eliminating the dual system of state and federal registration of certain securities and investment advisors. |
| Excluded from Definition of B/D | Agents, Issuers, Banks, savings institutions, and trust companies |
| States exclude B/Ds from definition of B/D if: | the B/D has no place of business in the state and deal exclusively with issuers, other B/D, and other financial institutions. and B/D licensed in a state where they have place of bus. and offere to sell securities only with existing non resident customers |
| Effectiveness of Registration | when all required information is submitted, the B/D registration becomes effective at noon on the 30th day after filing. |
| Registration Expiration | December 31 unless renewed. |
| Excluded from Definition of Agent for Administrative Personnel | Clerical and administrative employees of a B/D are not included in definition of agent, and do not have to register. |
| Exclusions from Definition of Agent for Personnel Representing Issuers | when representing issuers in transactions of exempt securities, exempt from registration, and with existing employees, partners, or directors of the issuer with no commission for soliciting people |
| examples of exempt securities | US govt and municipal securities, securities of GOVT that US has diplomatic ties, sec. of US comm banks and savings instituions or trusts, Commercial paper rated in top 3 with denom of $50k+ and mature in 9 mo, invest contracts tied to employee plans |
| examples of exempt transactions | isolated nonissuer transactions, transactions btwn issuers and underwriters, transactions btwn savings institutions or trust companies, and private placements. |
| Fee and Commission Sharing | Agents of B/D can do this with others provided they are registered as agents for the same broker dealer or for a broker dealer under common ownership or control. they can do this without disclosure to their clients. |
| Multiple Registrations | an individual may not act at anyone time as an agent for more than one B/D or for more than one issuer, unless the B/D or issuer for whom the agent acts are affiliated by direct or indirect common control of Admin gives an exception |
| Limited Registration of Canadian B/D and Agents | B/D from Canada can induce purchase of sale by a person from Candada who is temporarily resident in US and is existing client, or a person from Canada who is resident of US and transactions are in self directed tax advantage retirement plan in Canada |
| For Canadian company to allow reps to service USA | must file application in the form required by the jurisdiction where it has its principal office in Canada, file a consent to service of process, provide evidence that it is registered in good standing, be a member of an SRO or stock exchange in Canada |
| Non-Investment Advisors | any individual who gives advice on investments not considered securities such as rare coins, art, and real estate. Also, someone who offers only NONspecific investment advice through publication of a general newsletter |
| Requirements to be an Investment Advisor | Must provide advice about securities, provide that advice as part of an ongoing business on a regular basis, and must receive compensation |
| SEC Release IA-1092 | Interprets the definition of investment advisor under the Investment Advisors Act of 1940 to include financial planners, pension consultants, and others who offer investment advice as part of their finaicial practices. |
| Financial Planners | someone who makes recommendations regarding a persons financial resources or perform analyses that concern securities. also, someone who advise clients a to the desirability of investing in securities as an alternative to other investments. |
| Pension Consultants | someone who advise employee benefit plans on how to fund their plans with securities. Advise on the selection, performance, and retention of investment managers for employee benefit plans |
| Sports and Entertainment Representatives | provide financially related services to entertainers and athletes that include advice related to investments, tax planning, budgeting, and money management |
| Person In Business of Providing advice | gives advice on regular basis such that is constitutes a business activity conducted with some regularity, and advertises investment advisory services and presents himself to the public as an investment advisor. These people are subject to regulation. |
| Compensation | includes advisory fees, commissions, and other types of fees related to the service rendered |
| Exclusion from Definition of Investment advisor | IAR's, Banks/savings institutions/trusts, L.A.T.E. whose investment advisory services are incidental, B/D whose IA services are incidental and receive no extra compensation, publisher of newspaper/mag, owner/op/producer of TV or Radio station |
| Federal Covered Advisors | registered with SEC, required to be registered as IA, under contract to manage an investment company regardless of assets, excluded from the definition of an investment adviser by the IA act of 1940. |
| Registering | Big firms with SEC, and small Firms with State |
| Exempt from registration for investment advisors | have no place of bus in state but registered in another state and only clients are other B/D's, IA's, institutional investors, existing clients temporarily in state, 5 of fewer clients resident in state over last 12 months (de minimis) |
| De Minimis Provision | only applies to IA's and IAR's, limits a advisor to five or fewer clients of residency over 12 months if not registered in that state |
| Part 1 of ADV | location of office, location of books and records, form of business organization, method of business, other business activities, maintaining custody of customers assets, details relating ot control persons, disciplinary history |
| Part 2 of ADV | compensation arrangements, types of clients, type of investments, methods of analysis used, educational and business background of those who render advice. |
| Section 222 of IA Act of 1940 | prohibits an Administrator from conducting an audit of a federal covered adviser unless the adviser's principal office is located in that state |
Created by:
Jseveska