Series 63
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
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| show | An individual; corporation; business trust; estate; trust; partnership; limited liability company; association; joint venture; government; governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity
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| Non-persons | show 🗑
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| Exemption | show 🗑
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| Exclusion | show 🗑
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| show | investments initially sold to the public by issuers.
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| Issuers | show 🗑
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| show | • Issuer receives sales proceeds
• Occur in the primary market
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| Broker-dealer | show 🗑
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| Broker/Agency Capacity | show 🗑
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| Broker (Principal Capacity] | show 🗑
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| show | • Natural person (human being) representing broker-dealers and issuers
• Effects securities transactions for customers
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| show | A person (usually a firm) of providing regular ongoing advice or advisory products (e.g., wrap accounts) for compensation.
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| show | A natural person representing an investment advisor providing securities advice or supervising other IARs.
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| show | advice, business, compensation.
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| Power of Attorney | show 🗑
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| show | • A financial professional chooses any of the following for a client:
○ Action (buy or sell)
○ Amount (how much)
○ Asset (what security)
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| show | Provides clarity as to who is and isn't advisors:
• Added as investment advisers: Financial planners, Pension consultants andAthlete & celebrity advisers
• Not included: Lawyers, accountant, teachers Engineers; US Banks, IARs & Broker dealers
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| Investment adviser representative | show 🗑
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| show | An investment account that offers a wide range of services, including investment management, trade execution, and financial planning, with all services “wrapped” up into one single fee
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| show | • Registration and regulation of securities
• Enforcement of general securities regulations
• Enforcement of anti-fraud provisions
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| show | Uniform Securities Act
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| show | • Individual investors
• Typically lack market expertise
• Rules and regulations tend to protect retail investors
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| show | Institutional investors
• Single entity investing on behalf of a pool of capital
• Examples: Mutual funds, Hedge funds, Pension funds, Banks & credit unions, Insurance companies and Investment advisers
• Rules and regulations generally do not protect t
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| show | Includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value
Solicitation or attempt = offer
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| Sale | show 🗑
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| Assessable stock | show 🗑
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| show | Used for broker/dealer registration
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| show | any executive employee (officer, director, or partner) and/or any person (including outside entities) owning a significant amount of the business.
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| show | Legal order from a court requiring either an action to occur or cease
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| Enjoinment | show 🗑
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| Consent to service process | show 🗑
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| show | A guarantee offered by a third party covering obligations and promises made by another party (insurance
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| show | • Signifies a financial professional may legally operate in a state
• Requires BD disclosures, filing fees, consent of service process, net capital requirements and possibly surety bond
• granted on the 30th day after filing at noon
• Regi
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| Registrant | show 🗑
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| show | Registration of Agents and IARs; not used for controlling affiliates who are registered via Form BD
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| show | New events must be reported within 30 days:
• Criminal actions (only last 10 years can result in revokation)
• Regulatory actions (e.g., suspension or revocation)
• Civil litigation involving securities
• Certain customer complaints*
• Financia
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| show | Termination or withdrawal from State Registration
Responsibility of Agent & BD to report
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| Institutional Rule | show 🗑
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| show | If an existing customer travels to another state the broker-dealer does not do retail business in or maintain an office, they can continue to do business with that customer without registering in the new state.
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| Canadian broker-dealers | show 🗑
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| show | • Clerical roles
• Institution rule
• Vacation (snowbird) rule
• Representing an issuer during certain transactions
• Facilitating an employee benefit plan
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| Exempt transactions | show 🗑
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| Finder | show 🗑
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| show | Federal law regulating investment advisers
Excludes a person who solely provides advice on US securities
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| show | • Established the term “federal-covered”
• Enforces federal laws over state laws if common jurisdiction exists
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| show | • Register with and regulated by the SEC
• Provide notice filing to the state
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| show | • Advisers exceeding $110 million AUM
• Advisers to registered investment companies
• Advisers operating in 15 states or more.
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| show | • Advisers with $100 - $110 million AUM
• Advisers operating in 15 or more states
• Pension consultants with $200 million+ AUM
• Advisers expecting to qualify as federal-covered within 120 days
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| Federal de-Registration | show 🗑
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| National Securities Market Improvement Act of 1996 (NSMIA) | show 🗑
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| show | Investment Advisor Registration Form
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| show | • Discloses the basics of the business, including:
○ General business information
○ Other jurisdictions
○ Business structure
○ Business dynamics
○ Business history
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| Form ADV Part 2A (aka Brochure) | show 🗑
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| show | • Discloses information on IARs involved in:
○ Providing securities advice
○ Roles exercising discretion
• Disclosed information:
○ Educational background*
○ Business experience
○ Disciplinary information
○ Other business activities
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| Advisory Affiliate | show 🗑
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| show | custodial services and execute securities transactions, while investment advisers provide advice on what securities transactions should be performed.
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| Investment advisers services | show 🗑
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| Custody | show 🗑
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| conflicts of interest | show 🗑
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| Investment adviser financial requirements | show 🗑
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| Large prepayment of fees | show 🗑
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| show | • notify the administrator the next business day
• file financial report the following business day
• obtain a surety bond in the amount of shortfall (rounded up to the nearest $5k increment)
• notify clients if IA has custody of assets
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| show | • Must maintain records of Accounts, Correspondence, Memoranda, Books and records and records required by the administrator
• 5-year record maintenance requirement -
Most recent 2 years must be readily available
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| Brochure updates | show 🗑
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| ADV-W | show 🗑
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| show | ○ Statements which do not purport to meet the objectives or needs of specific individuals or accounts
○ Through the issuance of statistical information containing no expression of opinion as to the investment merits of a particular security
○ Any
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| show | are legal entities set up to benefit a specific beneficiary (e.g. a family trust). Trustees are legally appointed to manage the trust, giving them full access to any securities or funds owned by the trust.
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| show | - Merely having access to client funds or securities is considered custody.
- Includes the ability to pull funds directly from a client’s bank account.
- Custody exists if a client mistakenly sends a check, wires funds, or transfers and not returned in
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| Annual surprise audit | show 🗑
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| show | Report of Exam must be made to Administration within 120 days. All deficiencies must be identified.
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| Balance sheet disclosure (state only) | show 🗑
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| show | Lawyers, Accountant, Teachers and Engineers are exempt from registration if incidental advice is provided
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| show | • Snowbird/vacation rule
• Institution rule
• De minimis rule
• Private fund advisers
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| Investment advisor exclusions | show 🗑
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| Form U5 | show 🗑
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| show | Applies to IAs and IARs, not BDs and Agents. Engaging no more than 5 retail clients in a 12-month period in that state and no office in state (if you have an office you must register)
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| show | Considered the cost of fulfilling a transaction request, not payment for securities advice. exist regardless of whether the trade was based on a recommendation or not (unsolicited trade)
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| show | issuers of federal-covered securities must provide a notice filing in every state their security will be offered in. (not considered registered with State)
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| Registration statements may be filed by | show 🗑
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| Required items in notice filing | show 🗑
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| show | a legal agreement between an issuer and the investors of its securities
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| show | is an administrator-created demand for an issuer to no longer issue a security. Orders may not be permanent, Orders prevent the issuer from raising capital (money) from investors for at least a short period.
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| show | this form of registration is primarily utilized by issuers of intrastate securities (sold in one state only)
• SEC has no jurisdiction;
• Subject to escrow requirements
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| Affinity fraud | show 🗑
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| show | a person or company that transports goods or passengers on regular routes at set rates (e.g., railroads)
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| show | • securities listed on exchanges,
• investment companies,
• Reg D offerings
• certain federally exempt securities (municipal - offered outside their state, only, Federal products)
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| Required Criminal Disclosure on U4 | show 🗑
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| Promoters/Solicitors | show 🗑
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| State Administrator Rules vs State Administrator Orders | show 🗑
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| show | IARs have fixed fees, hourly fees, based on AUM or Wrap account fees - usually not commissions. IARs must be affiliated with B/Ds to collect commissions.
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| Howie Test (1946) for a security (Ice-T) | show 🗑
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| Adoption | show 🗑
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| show | is when the firm has influence over the content of the third party content.
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| show | involving two clients, the transaction can only be recommended to one the clients. Trade confirmations must be provided. Written approval from both clients needs to be obtained. Must be shared with client annually.
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| Provision of Brochure To Prospective Clients | show 🗑
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| Balance sheet disclosure | show 🗑
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| show | Issuers of federal-covered securities must file with every state where security will be sold.
Registered with the SEC, not State. Regulated by SEC, but State can issue stop orders if fraud is suspected.
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| Registration by Coordination | show 🗑
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| Form BD-W | show 🗑
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| show | To legally prevent a person from engaging in a particular action or activity
State Admin must:
• Provide prior notice to the applicant
• Opportunity for hearing is provided
• Disclosure of written facts and findings of law
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| show | Initiated by the registrant, non-punitive
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| Cancellation of Registration | show 🗑
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| show | Must involve a willful violation of the law. Includes 5-year statute of limitations and 3 year prison term for each count/incident.
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| show | Applies to criminal as opposed to civil actions
5 year statute of limitation
$5,000 penalty
3 year prison term
for each incident
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| show | A performance-based fee. Charged by a financial adviser or an asset manager. FULCRUM FEES = PERFORMANCE FEES to qualified purchasers ($2.2 M Networth less residence or $1.1 M with Advisor). IAR must have been with firm 1 year.
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| NOT-NOT-MAY Rule for IAs Operating at Financial Institutions | show 🗑
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| Private Placements | show 🗑
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| Qualified Purchasers | show 🗑
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| show | Required to register w/SEC. Exceeding $100 in AUM or advisor to a registered management company. Eligible to register at $110 M AUM or operating in 15 states.
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| Access Person | show 🗑
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| Interactive Communications | show 🗑
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| show | Posted for longer term, lacks real time immediacy (e.g., blogs without comments or likes abilities).
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| Margin Agreement (parts of) | show 🗑
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Created by:
Mark H
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