S63 - 2/9 #2
Registration with the Administrator as a broker-dealer generally requires the filing of A) Form Broker-Dealer. B) Form BD. C) Form U4. D) Form ADV.
B) Form BD. The form for broker-dealer registration is Form BD. Form ADV is for investment advisers and Form U4 is for agents. There is no Form Broker-Dealer. LO 2.c
Under the Uniform Securities Act, all of the following statements are true regarding private placements except A) they are offered to no more than 10 persons in a state in a 12-month period. B) they may be offered to an unlimited number of institutional investors. C) the seller reasonably believes that all of the noninstitutional buyers are purchasing for investment purposes only. D) no commission or other remuneration is paid for soliciting noninstitutional investors.
A) they are offered to no more than 10 persons in a state in a 12-month period. This question hinges on you remembering the broad definition of the term person; it is far more than just an individual. Although the limited-offering exemption (private placement) is available when there are offers to no more than 10 noninstitutional (retail) persons in 12 months, there is no limit when it comes to institutions. The offeror must be reasonably assured that retail buyers are purchasing for investment rather than resale within a short period of time. No commissions may be paid, directly or indirectly, for these retail transactions. However, sales to institutional purchasers are exempt from the limitations regarding number of sales, resale restrictions, and commissions. They may, therefore, be offered to more than 10 persons. LO 4.f
A client is completing a new account form that contains questions about the investor's investing experience and knowledge. More than likely, what type of account is being opened? A) Margin B) Options C) Discretionary D) Retirement
B) Options One question asked on a new options account form that is not required on a normal brokerage account opening is about investment experience and knowledge (e.g., number of years, size, frequency, and type of transactions) for options, stocks and bonds, commodities, and other financial instruments. LO 6.e
Under the Uniform Securities Act, an individual is not required to register as an agent if he represents any of the following issuers in the sale of their securities except A) any government with which the United States maintains diplomatic relations. B) a Canadian corporation. C) a savings institution or trust company . D) the Canadian government, a province, or a municipality.
B) a Canadian corporation. While an agent representing only the Canadian government or any other government with which the United States has diplomatic relations is exempt from registration, agents representing private Canadian corporations must register. Individuals who only represent certain depository institutions, such as savings institutions or trust companies, are exempt under the USA. LO 2.f
A control affiliate of a broker-dealer applying for state registration could be the cause of a statutory disqualification if its Form BD disclosed that the control affiliate was A) charged with committing a securities-related felony two years ago. B) convicted of a non-securities-related felony eight years ago. C) indicted for committing a securities-related misdemeanor two years ago. D) convicted of a non-securities-related misdemeanor eight years ago.
B) convicted of a non-securities-related felony eight years ago. Among the actions that can result in a statutory disqualification from registration are certain acts of control affiliates. These are individuals with the power to influence the activities of the firm. Conviction of any felony, securities-related or not, within the previous 10 years is listed as a specific justification for statutory disqualification. That would also be the case if the conviction was for a securities-related misdemeanor with the same 10-year limitation. If the misdemeanor is not securities-related, the action will not lead to statutory disqualification. It is important to understand that although arrests, charges, and indictments must be reported, it is only a conviction ("you are guilty") that leads to statutory disqualification. LO 2.c
Rona is an agent with Banff Investment Securities (BIS) registered in Province A. Rona has several clients who travel for business in the United States. To be able to serve their needs while they are traveling, Rona and BIS have obtained a limited registration in the states most frequented by those customers. The renewal date for Rona's annual registration is A) January 1. B) on the anniversary of the initial effective date. C) December 1. D) December 31.
C) December 1. Unlike securities professionals in the United States, where the annual renewal date is December 31, for those using the limited Canadian registration, it is December 1. LO 2.g
Broad Street Securities (BSS) is a broker-dealer based in State P with offices in no other state. In addition to its State P clients, BSS has 4 retail customers living in State M. During the winter, if 14 existing customers vacation in State A for up to two months at a time, BSS meets the Uniform Securities Act's definition of a broker-dealer in A) States P, M, and A. B) States M and A. C) States P and M. D) State P only.
C) States P and M. Under the USA, BSS is a broker-dealer in State P because it maintains an office there. BSS is also a BD in State M because with four State M retail (noninstitutional) customers, registration is required even if there is no physical office in the state. Please note the de minimis exemption does not apply to BDs. Because none of BSS's clients have taken up residence in State A, such clients are transients rather than residents and the snowbird exemption applies. Thus, BSS is not a BD in State A and is not subject to the state's registration requirements. LO 2.b
Which of the following statements regarding unsolicited orders is true? A) The state Administrator may not require the client to sign an acknowledgment that the order was unsolicited. B) Unsolicited orders are nonexempt transactions under the Uniform Securities Act. C) The state Administrator may not prohibit the solicitation of specific securities in the state. D) A client may purchase, at his own initiative, securities trading in the secondary market through an agent who otherwise is prohibited from soliciting the order.
D) A client may purchase, at his own initiative, securities trading in the secondary market through an agent who otherwise is prohibited from soliciting the order. If a client requests the purchase of a security that an agent is prohibited from soliciting, the agent can accept the order and mark the order unsolicited. This is the most common of the exempt transactions. LO 4.f
An applicant for registration as an investment adviser discloses on its application to the Administrator that it plans to use palm readers to help determine which investments are most suitable for their clients. Under the Uniform Securities Act, the Administrator A) will request that the applicant furnish past performance records to determine whether this method of investment analysis has merit. B) is empowered to deny this application for just cause. C) will probably turn to the SEC for guidance. D) may only justify denial for reasons listed in the Uniform Securities Act.
D) may only justify denial for reasons listed in the Uniform Securities Act. A denial of registration must be based on the concept of law. There are stated reasons for denial, such as felony convictions, outstanding injunctions, and insolvency. Where in the USA does it say an adviser can't use palm readers, a Ouija board, or a Magic 8 Ball? Although disclosure of methods of analysis is required, the Administrator is not empowered to pass judgment on the merits of those methods. The USA does state that the Administrator is empowered to "condition a particular applicant's registration as a broker-dealer upon his not transacting business as an investment adviser if the Administrator finds that he is not qualified as an investment adviser." But nowhere in this question does it indicate that the applicant is, or is applying for, registration as a broker-dealer. LO 5.b
An open-end investment company registered under the Investment Company Act of 1940 would most likely use the process known as A) coordination. B) qualification. C) consternation. D) notice filing.
D) notice filing. Investment companies registered under the Investment Company Act of 1940 are federal covered securities and, if required by the state Administrator, are only required to engage in notice filing. LO 4.c
