Series 63

bank holding companies

securities are NOT exempt

insurance companies

securities are exempt

AUM and registering

small firms, less than 25mil, register with state; mid sized from 25 - 100 generally with state; over 100 million then register with SEC but buffers at 110 and 90

investment adviser advertising what is considered unethical

testimonials, exaggerations, guarantees

who is excluded from agent registration requirements

those who represented issuers in selling exempt securities like government bonds and munis.

exempt transaction

transaction by sheriffs, trustees, et cetera are exempt

agent has no responsibility to make sure previous firm notified administrator tf

true

agent must be represented in a state where they take unsolicited orders

true

registration requires that you are charging a fee tf

true

cease and desist

used by administrator whenever it appears any registered person has engaged or is about to violate provisions of the USA. may be issued without prior hearing ; only applies to registered persons not securities

who can file registration statemetn

usually issuer but BD and selling stockholders can as well

when crossing state borders, when does the new state's administrator have jurisdiction

when the BD accepts the buyer's order

if administrator in a state is tipped off about a scam in another state

where the Administrator smells smoke, he can go looking for the fire."

TV or radio jurisdiction

wherever the camera or microphone eis and typically only under that state's jurisdiction, regardless of broadcast

investment adviser

who's compensation is in the business of advertising others

requirements for sharing in profits and losses with client

written authorization from client and approval granted by BD

BD's exempt from agent?

yes

Notice Filings

• SEC documents filed • Amendments to initial federal registration statements • A report on the value of such securities offered in the state • Consent to service of process

General State Registration

• Submit and application • Provide a consent to service of process • Pay filing fees • Post a bond • Take and pass an exam, which may be written oral or both

admininstrar has how long after registration expiration to fiel compliant?

1 year

exclusions from securities

1. An insurance or endowment policy or annuity contract where fixed payments are received 2. Interest in retirement plan (IRA, Keogh plan) 3. Collectibles 4. Commodities (precious metals, grains) or futures contracts for commodities 5. Condominiums used as personal residences 6. Currency

Howey decision and precedent to qualify as a security

1. an investment of money 2. in a common enterprise 3. with the expectation of profits 4. to be delivered primarily from the efforts of a person other than the investor

Required net worth for investment advisers who does not have custody of customer funds but has discretionary powers

10,000

retention requirement for email

3 years for BDs, 5 for investment advisers. emails that of a strictly personal nature to not have to be retained

civil suit stateu of limitations

3 years from the alleged infraction or 2 years from discovering the infraction, whichever comes first

statue of limitations from criminal prosecution vs statue of limitation sfor civil liability

5 years vs 3 years from date of event or 2 years from discovery whichever occurs first Since civil liability under the act is limited to restitution, costs, and reasonable interest, a lawsuit could be avoided by a return of the investor's funds plus interest. Payment of restitution to a client does not prevent the Administrator from prosecution for violating the provisions of the act.

BD must do what if selling investment research or any other form of investment advice even if it is to institutions

A broker-dealer must register as an investment adviser if it charges a fee for selling investment research or any other form of investment advice, even to institutions. If a person is in the business of selling research for a fee, that person or firm must register as an investment adviser. If a broker-dealer charges commissions for selling securities and offers investment advice incidental to the sale of the securities, the broker-dealer need not register as an investment adviser because it is not compensated for the research.

performance based fee comp must come with disclosure of

Advisers must always describe the method of fee calculation. When compensation is performance based, it must include gains and losses using a time period of no less than 12 months. It is not necessary to disclose the additional risks inherent in performance-based compensation.

underwriting recommendations and registration in state

An adviser advising an issuer on the quality of potential underwriters does not fall within the definition of investment adviser under the Uniform Securities Act and is therefore exempt from registration.

four classes of persons:

BDs, agents (always individuals), investment advisers (generally corporations/partnerships/legal persons), and investment adviser representatives (always individuals)

soft dollar safe harbor

Client portfolio management software, registration fees for conferences, and research provided by a broker-dealer to an investment adviser and providing brokerage services in the form of execution and clearing of securities trades is the fourth

Canadian renewal applications

December 1

registration by coordination

Registration by coordination is done concurrently with registration at the federal level. Registration by qualification is the method for local companies sold only within the state.

registration by qualification is effective

Registration by qualification is effective when determined by the Administrator. Qualification is the only form of registration where the timing of the effective date is determined by the Administrator.

are investment advisers exempt from registration when making recommednationts to accredit investors on exempt sercurities

The Uniform Securities Act exempts investment advisers with no place of business in the state who deal with certain institutional customers such as banks, insurance companies, investment management companies, and employee benefit plans with assets of $1 million or more.

burden of proof for proving that a securities issue is exempt from registration

The burden of proof for claiming eligibility for an exemption falls to the person claiming the exemption, most commonly the issuer. In the event the registration statement was filed by someone other than the issuer, such as selling stockholders or a broker-dealer, that person must prove the claim.

place of business requires what

The investment adviser representatives of a federal covered adviser are required to register in each state in which they have a place of business, even if the only clients are institutions.

model rule exeception

They include statements that even though the investments are being sold on the premises of a financial institution (typically a bank), they are not FDIC insured, may lose money, and are not an obligation of the bank. However, an exception from those required disclosures is made in the case of a short (no longer than 30 seconds) radio advertisement as long as there is nothing in that ad that could be construed as misleading without those disclaimers.

Federally Covered Securities

[cannot be regulated by the States] 1. Securities listed on the NYSE, American Stock Exchange, the Chicago Stock Exchange, the Nasdaq Stock Market (or if the note is equal or senior) 2. Investment company securities a. Open-end / closed-end management investment companies, unit investment trusts, face-amount certificates 3. Offers and sales of certain exempt securities a. US security or one issued by a bank regulated by the FED b. Municipal securities, other than the state of issuance c. Offers and sales sold through Regulation D

BD registration becomes effected

`at noon on the 30th day after filing

summary order/acting summarily

acting without prior notice; can be used with regard to registration of both persons and securities. must promptly nofiy all parties that it has been entered, the reason, and within 15 days after the receipt of a written requestiuon a hearing will be granted

investment advisers representatives are excluded when

always

wash trade

an attempt to manipulate a security's price by creating an apparent interest in the security that really does not exist

an agent can only be

an individual

Investment adviser brochure deliver

annually whether or not the adviser has custody or discretion; Unless there have been no material changes, a copy of the adviser's brochure or brochure supplement must be delivered to all current clients,(except those who are exempt from the brochure delivery requirements {impersonal advise costing less than $500 per year and investment companies registered under the Investment Company Act of 1940}), within 120 days of the end of the adviser's fiscal year. Custody or discretion is irrelevant to this question. Under the USA, all advisory contracts, both initial and renewal, must be in writing.

investment adviser representative

any individual who represents a state registered investment advisers. IAR

person

any individual, corporation, partnership, association, joint stock compny, et cetera. very broad

agent

any individual, other than BD, who represents a BD or issuer in effecting of purchasing or sale of securities

form ADV

application for registration as an investment adviser

bank securities

are exempt

leaving for academia requires whom to notify the adminiistrator

both the firm and the employee

net finance requirements

broker dealers who meet the SEC's net capital or bonding requirements cannot be required to meet higher ones in any state in which they do busieness

broker dealer

broker is anyone acting on behalf of others, dealers act on their own behalf. BD

matched order

broker-dealers engage in buying and selling between themselves for the purpose of creating the misleading appearance of increased activity in a security.

private hearings

can be done if requested

administrator can do what?

compel witnesses to testify, may enforce subpoenas from another state if it was a violation in the state, and convicted felons can be denyed a license

anyone who sells securities on behalf of a BD is what

defined as agent.Those who sell on behalf of an issuer are excluded from the definition under certain circumstances. If the transaction is exempt or the security is one of a specified group of exempt securities, such as municipal bonds (general obligation or revenue), the individual is not defined as an agent under the Uniform Securities Act.

stop order

deny effectiveness of any registration statement. applies only to securities

exempt security

does not have to be registered in order to be sold

Registration with state and feds for IAR

done solely on state basis

who needs to supply a consent to service of process with registration applications?

every legal or natural person

wrap fee

exclusion to BDs is lost when brokerage firms earn special commission for wrap account. must include a statement that the program may cost the client more than purchasing the services separately

guaranteed

guaranteed as to payment of principal, interest, or dividnds but NOT capital gains

place of business

if a BD doesn't have a place of business in a state and only transacts with other BDs in that statre, they do not need to register with that state's administrator

commission in exempt registration

if an existing employee gets compensate dfor selling offering then they need to register.

investment advisers in state not registered

if no office and have five or fewer clients then no need to register; if they had transacted with other investment advisers, broker dealers or insituttionsal investors there is no limit as long as there is no office in the state

waiver signed by client letting advisers compliance with the provision of the act

is never valid on the exam

person who only provides advice on commodities

is not a registered investment adviser; commodities do not count as a security

issuer

issues or proposes any security

gift of nonassessable stock is

just a gift. accessible stock gift would be an offer or a sale

LATE

lawyers, accoutnants, teachers, and engineers whose investment advisory services are solely incidental to their professional practices

disposition with cash consideration

liquidation where shareholder has choice of cash or securities is a sale

nonissuer

means not directly or indirectly for benefit of the issuer. nonissuer transaction is nonissuewr because issuer doesn't get the cash

excluded from person definition

minors, deceased individuals, mentally incompetent

Uniform Securities Act

model legislation from 1956

sharing commissions

must be commissions from the states in which both are licensed

person working on behalf of broker dealer

must be registered as an agent

if majority partners leaves

must get client consent again

if minority partner in investment advisory partnership leaves

must notify clients as soon as reasonably possible

Canadian firms with customers temporarily in the US

must obtain a form of limited registration

consent to service process

new applications must provide this; appoints the administrator as the applicant's attorney to receive and process noncriminal securities related complains; does not need renewal

final order

no final order can be entered without prior notice, opportunity of hearing, written findings of fact and conclusions of law

USA unregistered private placement limits

no more than 10

advisory contract renewing

no requirement

can an IAR earn commissions?

no unless they are also registered as an agent

register with both states and SEC?

no, if you register with SEC then no need to do states as well

can administrator issue an injunction?

no. never.

exempt transaction

nonissuer transactions, transactions between issuers and underwrtiers, transactions with financial institutions such as banks or trusts, insurance and investment companies, and private placement

trust company as IA?

nope. exempt

blanket recommendation

not allowed; cannot recommend to all clients

performance based compensation

not permitted; flat fees and fees based on total portfolio value are permitted

if transaction or security is exempt, what is exempt?

not the agent's registration, just the registration requiremtnts for the issue or security

administrator

office or agency that has the complete responsibility for administering the securities laws of that state; has jurisdiction over all security activities in the state

BD's registration expires when

on Dec 31 unless renewed

unsuitable trading is what?

prohibit business practices

three prongs

provides investment advice, reports or analysis about securities; in business of providing advice and analysis; and receives compensation for these services

blue sky laws

refers to state securities laws

exempt transaction

registaration with administrator and filing of advertising material is not required in order for that transaction to take place

any person who receives compensation related to securities sales must

register as an agent