Unit 3: Regulation of Broker Dealers and their Agents
what are the net worth requirements investment advisors with discretionary authority?
$10,000
what are the net worth requirements for investment advisors who exercise custodial authority over an account?
$35,000 (unless the IA's BD has custody over their accounts; in that case, they have their own net capital minimums to meet as BDs).
what are some examples of exempt issuers who may issue a security without registration, by law?
- US government and its agencies - municipalities - Canadian government and its political subdivisions - Foreign FEDERAL governments that have diplomatic relations with US.
when does "termination" become effective according to the law?
it's effective at NOON on the 30th day. but the admin will continue to have jurisdiction over the agent/IAR in case they have to get them for a CRIME.
what must be included in the submission of a registration when filing through "coordination"?
1. 3 copies of latest prospectus filed with SEC 2. copies of: articles of indenture, articles of incorporation, and underwriter agreements. 3. amendments to the prospectus filed with the SEC
who can file the registration statement?
1. the issuer (firm) 2. BD 3. an interested party (rich as f shareholder who wants to sell shares of their own stock, or a foundation owner)
what are the main points asked on the registration application forms (ADV/BD)?
1. what is the form of your organization? (sole prop., partnership, S corp., etc.) 2. what type of business do you do? (daily operations)
Which of the following must register as an agent when representing a broker-dealer? A) An employee who accepts unsolicited orders from institutional clients B) A partner of a broker-dealer who has no securities sales functions C) The telephone switchboard operator who directs orders to the appropriate extension D) An individual who represents an underwriter only in transactions between an issuer and the underwriter
A) An employee who accepts unsolicited orders from institutional clients **An employee of a broker-dealer who accepts orders must register as an agent. The fact that it is unsolicited and/or from an institution (making them exempt transactions) has no bearing on the requirement for the individual to register as an agent. A partner of a broker-dealer with no securities sales functions and an individual who represents an underwriter only in transactions between an issuer and the underwriter need not register. Individuals whose function is strictly clerical do not register as agents.**
A broker-dealer is registered in States A and B. An agent of theirs is registered in State A, and one of the agent's clients moves from State A to State C. If the agent wishes to continue to do business with this client, which of the following statements is CORRECT? A) Both the broker-dealer and the agent must register in State C. B) Only the agent must register in State C. C) As long as they have 5 or fewer retail clients in State C, neither the broker-dealer nor the agent must register there. D) Only the broker-dealer must register in State C.
A) Both the broker-dealer and the agent must register in State C. **As long as a broker-dealer has at least 1 retail client in a state, registration is required. Furthermore, an agent cannot do business with a client who has become a resident of a state unless she is registered as an agent of a registered broker-dealer in that state. Unlike investment advisers, there is no de minimis exemption for broker-dealers and agents.**
When applying for registration as an agent, which of the following must be disclosed? A) Certain financial information such as any unsatisfied judgments or liens against the applicant. B) Complete employment history for the past 5 years. C) Residential history for the past 3 years. D) Highest educational level achieved and the institution attended.
A) Certain financial information such as any unsatisfied judgments or liens against the applicant.
A person who has no place of business in this state would not be considered a broker-dealer if he effects transactions in this state exclusively with all of the following except... A) investment advisers. B) the issuers of the securities involved in the transaction. C) other broker-dealers. D) insurance companies.
A) investment advisers. **The Uniform Securities Act excludes from the definition of broker-dealer, a person who has no place of business in this state if he effects transactions in this state exclusively with or through the issuers of the securities involved in the transactions, - other broker-dealers, or - banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers.**
what can we safely assume about any securities issued by domestic and/or foreign FEDERAL governments w/ US diplomatic relations?
that they will be considered "exempt" issuers and can legally sell unregistered securities.
Which of the following people would not meet the definition of a person associated with an investment adviser? A) The typist responsible for operating the desktop publishing system that prepares the investment adviser's weekly research bulletins B) A brokerage firm that is considered to be the parent of a registered investment adviser C) An individual who solicits potential clients to open advisory accounts D) A vice president of a registered investment adviser
A) The typist responsible for operating the desktop publishing system that prepares the investment adviser's weekly research bulletins **People in strictly clerical or administrative positions are not considered to be associated persons of an investment adviser. Expect to see several variations of this theme on the exam.**
Under the Uniform Securities Act, the Administrator may require a broker-dealer to post a surety bond of... A) an amount not in excess of that set by the SEC B) $50,000.00 C) $25,000.00 D) $10,000.00
A) an amount not in excess of that set by the SEC
The First Fidelity Building and Loan association, organized in State A and authorized to do business in State B, has an offering of common stock being made in State B. In order for an individual selling the offering to be excluded from the definition of agent in State B, the individual... A) could not sell without being an agent B) would have to be employed by a broker-dealer registered in this state C) would have to be employed by a broker-dealer registered in the other state D) would have to be employed by First Fidelity
A) could not sell without being an agent
In general, a broker-dealer is required to register with the SEC. An exception to that requirement would apply to a broker-dealer who A) maintains a place of business in a single state, only deals with residents of that states, and does not execute transactions in securities traded on a national exchange. B) is registered with the Administrator of the states in which it does business and only deals with issuers of the securities it trades. C) does not have a place of business in the state and limits its clientele to institutional clients. D) is currently registered with the SEC as an investment adviser.
A) maintains a place of business in a single state, only deals with residents of that states, and does not execute transactions in securities traded on a national exchange.
When an individual registered with a broker-dealer has a change of residence, an amended Form U4 must be filed... A) within 30 days B) within 90 days of the end of the fiscal year C) within 60 days D) within 2 business days
A) within 30 days Virtually any change to the information on the Form U4 (an action resulting in statutory disqualification is the notable exception) requires filing an amended Form U4 promptly. In this case, "promptly" is defined as within 30 days. Terminations are reported on Form U5 within 30 days.
what makes a federally covered security exempt?
FED law states that it does not need to register
who notifies the administrator when a state-registered IAR wants to leave their IA?
the IA will be the one to notify the ADMIN (because it's on the state level)
who notifies the administrator when a federal-covered IAR wants to leave their IA?
the IAR will be the one responsible for notifying the administrator.
Under the Uniform Securities Act, which of the following is a broker-dealer? A) A credit union that sells its own stock B) A corporation that sells interests in an oil and gas limited partnership to investors with the proceeds going to the issuer C) An agent D) An issuer
B) A corporation that sells interests in an oil and gas limited partnership to investors with the proceeds going to the issuer **A broker-dealer is any person that buys or sells for the accounts of others or for his own account. In this case, an entity structured as a corporation is selling , on behalf of the issuer, a security in the form of limited partnership units and is therefore a broker-dealer. A broker-dealer is not an issuer or an agent.**
Which of the following persons is defined as an agent by the Uniform Securities Act? A) Silent partner of a broker-dealer B) Clerk at a broker-dealer who is authorized to take orders C) President of the state university who sits on the broker-dealer's board of directors D) Secretary of a branch office sales manager
B) Clerk at a broker-dealer who is authorized to take orders **Anyone who solicits or receives an order while representing a broker-dealer is an agent. Silent partners, administrative personnel, and certain executives of broker-dealers, such as outside directors, who have nothing to do with the sales end of the business are not agents under the terms of the USA because they do not solicit or receive orders or supervise those who do. Remember, broker-dealers are not agents; agents represent broker-dealers. If, however, any of these individuals were authorized to accept orders, or supervise those that do, registration as an agent would be required.**
Under state law, the registration of an agent of a broker-dealer is in effect until... A) withdrawn by the agent or revoked by the Administrator B) December 31, unless renewed C) the anniversary of initial registration D) the last day of his employer's fiscal year
B) December 31, unless renewed **Under state law, registrations for broker-dealers, agents, investment advisers, and investment adviser representatives expire on December 31 of each year, unless renewed.**
What is the purpose of the Securities Exchange Act of 1934? A) It provides requirements relating to new issues. B) It regulates the persons involved in the secondary market. C) It provides standards among the states. D) It provides policies relating to unethical business practices.
B) It regulates the persons involved in the secondary market. **The Securities Exchange Act of 1934 was designed to regulate securities transactions, securities markets, and securities firms that trade in the secondary market. The Securities Act of 1933 was designed to provide regulation in the new issue market. Unethical business practices are covered in NASAA's Statements of Policy on Unethical Business Practices. The Uniform Securities Act provides a model for the states.**
Under the Securities Exchange Act of 1934, which of the following would NOT be considered associated with XYZ Corp., a broker-dealer? A) Paula, who is on XYZ's board of directors but who has no other connection with the firm B) Robert, a client who owns 1,000 shares of XYZ's voting stock C) Brian, an XYZ vice president D) Arvin, one of XYZ's agents
B) Robert, a client who owns 1,000 shares of XYZ's voting stock **An associated person of a broker-dealer includes any partner, branch manager, officer, or director of a broker-dealer, including outside directors. It also includes employees such as account executives or sales representatives who are not clerks or ministerial personnel, and anyone who controls, is controlled by, or is under common control with the broker-dealer. Being a client of a broker-dealer or owning shares of the firm's stock does not make one an associated person, unless something in the choice indicated that this ownership put Robert into a position of control.**
All of the following statements regarding registration of broker-dealers under the Uniform Securities Act are true EXCEPT... A) no broker-dealer can be required to meet financial requirements in excess of those of the SEC B) a successor firm is exempt from filing a consent to service of process until the renewal date C) a successor firm is exempt from paying registration fees until the renewal date D) broker-dealers with discretion over client accounts may be required to post a surety bond
B) a successor firm is exempt from filing a consent to service of process until the renewal date When one firm succeeds another, no fees are due until renewal date. However, the successor firm must file a consent to service of process at the time it registers. Broker-dealers with discretionary authority may be required to post a surety bond or maintain minimum net capital. However, no state can impose financial or recordkeeping requirements that exceed those of the SEC.
An agent lives in Montana and is registered in Montana and Idaho. His broker-dealer is registered in every state west of the Mississippi River. The agent's client, who lives in Montana, decides to enroll in a 1-year resident MBA program in Philadelphia, Pennsylvania. During the 1-year period, when the client is in Philadelphia, the agent may... A) only accept unsolicited orders B) conduct business with the client as usual C) not deal with the client until the broker-dealer registers in Pennsylvania D) not conduct any business with the client
B) conduct business with the client as usual **Even though the college program is called a resident program, that does not mean that the client has changed his state of residence. Although neither the firm nor the agent is registered in Pennsylvania, the agent may continue to conduct business with the client. This is because both the agent and his firm are properly registered in the client's state of permanent residence.**
Under the USA, a person who has passed the appropriate NASAA examination but whose license has not yet been issued can participate in... A) accepting unsolicited orders B) filing payroll report C) prospecting for new clients by mail D) prospecting for new clients in person
B) filing payroll report **A person who has passed the NASAA exam cannot transact securities business until the Administrator notifies the employer that the registration is effective. Filing payroll reports is a clerical activity, and registration would not be required to perform that function.**
Angelo lives and votes in State W. He winters in State C, splitting his time 60/40 between the 2 states. Angelo has a brokerage account with Sunset Investment Securities (SIS) and trades with an agent housed in SIS's State W office. SIS is also registered in States M and I but, having no place of business there, is not registered in State C. In order for Angelo's agent to handle the account, registration as an agent is required... A) in State C. B) in State W. C) solely with FINRA. D) in State W and State C.
B) in State W. **By not having a place of business in State C and only having a client who is temporarily in the state, SIS (and those functioning as its agents) qualify for the "snowbird" exemption.**
An individual has been employed by a broker-dealer to solicit new subscriptions for the firm's free monthly stock market report. The individual is paid a salary plus bonus based on his success rate with signing up subscribers. Under the USA, this person would... A) have to be registered as an agent of the broker-dealer B) not have to be registered as an agent of the broker-dealer C) have to be registered as an investment adviser representative D) only be allowed to contact existing clients of the broker-dealer
B) not have to be registered as an agent of the broker-dealer **Agents of broker-dealers are in the business of securities-related transactions on behalf of clients of the firm. A free-market report is not a security, so this individual is not soliciting securities business.**
It has been a great year at Capital Funding, Inc., an SEC-registered broker-dealer that is also registered in 22 states. The company decides to share its good fortune with employees by paying a year-end bonus equal to 31% of annual salary. In order for clerical personnel to receive this bonus, A) they must be licensed as investment adviser representatives B) they must be employees of the broker-dealer C) they must be licensed as agents D) the bonus must be sales related
B) they must be employees of the broker-dealer
Which of the following is not included in the definition of broker-dealer as found in the Uniform Securities Act? A) Credit unions B) Attorneys C) Banks D) Investment advisers
C) Banks In the Uniform Securities Act, it specifically states: "Broker-dealer" means any person engaged in the business of effecting transactions in securities for the account of others or for his own account. "Broker-dealer" does not include (1) an agent, (2) an issuer, (3) a bank, savings institution, or trust company. Attorneys are excluded from the definition of investment adviser, as long as their advice is incidental to their legal practice, but that exclusion does not apply to the term "broker-dealer". Even though credit unions engage in banking activity, they are not included in the exclusion. Being an investment adviser does not exclude a person from the need to register as a broker-dealer if that person is performing the functions of a BD.
A broker-dealer is registered in States A and B. An agent of theirs is registered in State A, and one of the agent's clients moves from State A to State C. If the agent wishes to continue to do business with this client, which of the following statements is CORRECT? A) Only the broker-dealer must register in State C. B) Only the agent must register in State C. C) Both the broker-dealer and the agent must register in State C. D) As long as they have 5 or fewer retail clients in State C, neither the broker-dealer nor the agent must register there.
C) Both the broker-dealer and the agent must register in State C. As long as a broker-dealer has at least 1 retail client in a state, registration is required. Furthermore, an agent cannot do business with a client who has become a resident of a state unless she is registered as an agent of a registered broker-dealer in that state. Unlike investment advisers, there is no de minimis exemption for broker-dealers and agents.
An agent registered in one state may solicit business in another state, provided... A) the agent applies for registration in the other state B) the agent was previously registered with a different firm in the other state C) both the agent and the employing broker-dealer are properly registered in the other state D) the agent's firm is properly registered in the other state
C) both the agent and the employing broker-dealer are properly registered in the other state **An agent holding registration in one state may solicit and/or transact business in another state only if registered in that state and the employing broker-dealer is also registered in that state, unless an exemption is available.**
When an individual registered with a broker-dealer has a change of residence, an amended Form U4 must be filed... A) within 60 days B) within 2 business days C) within 30 days D) within 90 days of the end of the fiscal year
C) within 30 days **Virtually any change to the information on the Form U4 (an action resulting in statutory disqualification is the notable exception) requires filing an amended Form U4 promptly. In this case, "promptly" is defined as within 30 days. Terminations are reported on Form U5 within 30 days.**
what are 2 things that you CANNOT change when you decide to amend your registration after the effective date and increase the offering of your security?
CANNOT change the PRICE or the COMMISSIONS earned on each sale.
As defined in the Uniform Securities Act, which of the following statements is TRUE regarding an agent? A) An agent may be an individual or a firm. B) An agent may be a broker-dealer. C) If someone meets the definition of an agent, that person is exempt from registration requirements. D) An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities.
D) An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. **The text in Section 401(b) of the Uniform Securities Act reads, "Agent means any individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities." There are cases where an individual representing an issuer would not be considered an agent, such as if the transaction is exempt, but that doesn't change the definition.**
What document must accompany an initial registration application for those individuals required to register as agents under the Uniform Securities Act? A) Proof of U.S. citizenship B) State photo identification C) A birth certificate confirming the registrant is over 18 years of age D) Consent to service of process
D) Consent to service of process **The USA requires that a consent to service of process accompany an application for registration. Although the Administrator will generally request information about the applicant's citizenship, it is not necessary to be a U.S. citizen. Proof of age is not a requirement.**
If Somerville Discount Securities has its principal office in New Jersey and recently registered a branch office in Minnesota, which of the following statements is TRUE? A) Agents working in the principal office that are licensed only in New Jersey may take unsolicited orders from Minnesota residents. B) Agents working in the branch office that are licensed only in Minnesota may take unsolicited orders from New Jersey residents. C) Each agent is automatically registered in both states. D) Each agent must be registered in the appropriate state before soliciting or taking orders.
D) Each agent must be registered in the appropriate state before soliciting or taking orders. **Agents must be registered in every state in which they do business. An agent is not automatically registered in a state just because his employer is registered in that state.**
Seven years ago, Ivan was found guilty of embezzling securities from clients. He now wishes to join another brokerage firm. Which of the following statements is TRUE regarding this situation? A) There are no provisions restricting his employment because the restriction time period has elapsed. B) He may be employed by a brokerage firm, provided he is not involved directly in any dealings with clients. C) He may be employed in a sales position, provided the firm agrees to be liable for any losses due to his misconduct. D) He cannot be employed because he is still subject to statutory disqualification provisions.
D) He cannot be employed because he is still subject to statutory disqualification provisions.
Under the Regulation D, Rule 506(b) private placement offering exemption, which of the following statements is true? A) The rule allows general solicitations but no advertising. B) The issue may be sold to an unlimited number of nonaccredited investors. C) The exemption is forfeited if there are any sales to nonaccredited investors. D) The issuer can use an online questionnaire to qualify potential investors
D) The issuer can use an online questionnaire to qualify potential investors Rule 506(b) permits a maximum of 35 nonaccredited investors and an unlimited number of accredited investors. The questionnaire is used by the issuer to determine the status of the potential investor. It is Rule 506(c) that permits general solicitation and advertising and requires that all investors be accredited.
Under the Uniform Securities Act, the term broker-dealer would include.. A) an agent registered under the act who from time to time sells stock from personal inventory B) a trust company C) an issuer distributing its own common stock offering D) a person with no office in the state who directs offers to no more than 5 individual residents of the state in any 12-month period
D) a person with no office in the state who directs offers to no more than 5 individual residents of the state in any 12-month period **Although a person has no office in the state, offers are directed to residents of the state. Under the USA, this person is defined as a broker-dealer. There is no de minimis exemption for broker-dealers. A person is exempt from the definition of broker-dealer if there is no office in the state and offers are directed to institutional clients or existing individual clients who are not residents of that state. The agent is merely selling his own stock as would any other individual; that does not make one a broker-dealer.**
Under the Securities Exchange Act of 1934, the term associated person would include each of the following EXCEPT a person who is associated with a broker-dealer... A) in the capacity of a partner solely by virtue of a contribution of capital B) as a branch office manager C) as an agent D) and whose functions are solely ministerial
D) and whose functions are solely ministerial
An agent lives in Montana and is registered in Montana and Idaho. His broker-dealer is registered in every state west of the Mississippi River. The agent's client, who lives in Montana, decides to enroll in a 1-year resident MBA program in Philadelphia, Pennsylvania. During the 1-year period, when the client is in Philadelphia, the agent may... A) not conduct any business with the client B) only accept unsolicited orders C) not deal with the client until the broker-dealer registers in Pennsylvania D) conduct business with the client as usual
D) conduct business with the client as usual Even though the college program is called a resident program, that does not mean that the client has changed his state of residence. Although neither the firm nor the agent is registered in Pennsylvania, the agent may continue to conduct business with the client. This is because both the agent and his firm are properly registered in the client's state of permanent residence.
what is a notice filing?
a unique method of "demanding" registration of federal covered to the administrator (they cannot deny). you may be required to additionally send in documents to position yourself, to the SEC. you'll need to pay a fee to the administrator.
what happens if you sell more than you anticipated within the year of your newly registered security?
after the date the security becomes effective, you can actually AMEND the registration if you want to INCREASE the size (quantity) of your offering (shares).
if an agent is leaving 1 BD to go work for another BD, who must notify the administrator?
all 3 parties must notify the administrator. * think of the "A" in "agent" as ALL...ALL of them must notify the administrator.
how do you know if an order is discretionary or if its solicited?
an order is discretionary if the 3 A's are left up to the decision of the registered representative: 1. Action 2. Asset 3. Amount
who benefits from a registration for themselves when their firm (BD/IA) submits an application for registration?
anyone listed on the form as a person with essential responsibilities to the functionality of the firm. this could be executive officers, BOD, partners. they won't have to apply for a registration once their firm has, since all of that same info was already provided on the form.
when is the registration effective date for the COORDINATION method of registration?
both SEC and administrator(s) have the same 10-20 day cool off period, so they become active at the SAME TIME. if there was an issue with your submission, that's the only way they wouldn't be registered at the same time.
what is the only way a non-exempt can be legally sold without it being registered?
it may only be sold in an exempt transaction
what is an example of a short-term, registration EXEMPT security?
commercial paper with a maturity of 270 days or less.
how long is the registration of a security active for once initiated?
exactly 1 year. if you have leftover shares that year that you'd like to sell, you can still remain as a registered security until all of the leftover shares are sold. (when everyone thinks your security sucks ass)
what is the form that an IA completes when submitting an application for a registration?
form ADV
what is the form that a BD completes when submitting an application for a registration?
form BD
Which of the following would be an agent under the terms of the Uniform Securities Act? i. A sales representative of a licensed broker-dealer who sells secondary securities to the general public ii. An assistant to the president of a broker-dealer who, for administrative purposes, accepts orders on behalf of senior partners iii. A subsidiary of a major commercial bank registered as a broker-dealer that sells securities to the public iv. An issuer of nonexempt securities that are registered in the state and sold to the general public
i and ii **Under the USA, only an individual can be an agent (a person who sells securities for a broker-dealer). An administrative person, such as the assistant to the president of a broker-dealer, is considered an agent if that individual takes securities orders from the public. Corporate entities, broker-dealers, and issuers are all excluded from the definition of an agent.**
An agent is registered in Illinois and Ohio. One of her substantial clients has just moved from Ohio to Arizona, and the agent would like to continue to do business with her. Under the Uniform Securities Act, which of the following statements is TRUE? i. The agent's broker-dealer must already be registered in Arizona or complete the Arizona registration process within a time period specified by the act. ii. The agent must complete the Arizona registration process within a time period specified by the act. iii. The agent must ask the Ohio Administrator to request reciprocal registration from the Arizona Administrator. iv. The agent must suggest that the client maintain a mailing address, such as a post office box, in Ohio.
i and ii. **The USA permits broker-dealers and their agents to continue to do business with existing customers who change their state of residence, as long as registration in the new state takes place within a reasonable period of time. This time period varies from state to state but is generally 30 days. Because an agent's registration is not valid without a broker-dealer, the agent and the agent's broker-dealer must be registered in Arizona for the relationship with this customer to continue. There is no such thing as reciprocal registration.**
Which of the following may be required by the Administrator to post surety bonds? i. An agent who has discretion over client funds and securities ii. A broker-dealer who has custody of, or discretion over, client funds and securities iii. An investment adviser who has custody of, or discretion over, client funds and securities
i and iii **A broker-dealer, investment adviser, or agent who has discretion over or, in the case of broker-dealers and advisers, custody of funds or securities may be required to post a bond.**
Which of the following persons are included in the definition of an agent under the Uniform Securities Act? i. An individual who represents First Securities Brokers, Inc., in selling shares of XYZ Corporation, a New York Stock Exchange listed company ii. An individual who, as part of the job description, represents the City of Chicago in selling its bonds to the public iii. An individual who represents a corporation traded on the New York Stock Exchange in selling securities to the public iv. An individual who is employed by the Federal Reserve Board to sell Treasury Bills to retail investors
i and iii **Under the USA, an agent is defined as an individual who represents a broker-dealer selling any type of security, whether that security is exempt or nonexempt. Individuals who represent issuers in trading exempt securities or exempt transactions are not defined as agents. An individual who represents an issuer selling nonexempt securities is an agent and must be registered.**
An agent terminates his association with broker-dealer A and begins to work for broker-dealer B. Under the Uniform Securities Act, which of the following must take place? i. Broker-dealer A must notify the Administrator. ii. Broker-dealer B must notify the Administrator. iii. The agent must notify the Administrator. iv. The supervisor to which the agent reported must notify the Administrator.
i, ii, and iii **In the event an agent transfers from one broker-dealer to another broker-dealer, all three (the former employer, the new employer, and the agent) must report the transfer to the Administrator.**
Under the Uniform Securities Act, it is required to file an application with the Administrator to become a registered broker-dealer in the state. Among the disclosures that must be made on that application are... i. the form of business organization to be used by the firm ii. any felonies or certain misdemeanors on the records of partners or officers iii. business history of the principals of the firm iv. financial information about the firm
i, ii, iii, and iv **Many disclosures have to be made, and this is just a partial list. This would be the same answer if the question asked about an investment adviser.**
Under the Uniform Securities Act, unless renewed, the registration of which of the following securities professionals expires on December 31? i. Agents ii. Broker-dealers iii. Investment advisers iv. Investment adviser representatives
i, ii, iii, and iv **State registration of any securities professional expires on December 31, unless renewed.**
Except as limited by the Securities Exchange Act of 1934, the state securities Administrator may require, by rule or order, that broker-dealers make or maintain which of the following records? i. Account ledgers ii. Correspondence iii. Papers and memoranda iv. Blotters and books
i, ii, iii, and iv.
what are the rules regarding successor firms and registration renewals?
if a firm participates in a merge, acquisition, or sale of another firm, they do NOT have to re-register for that year. they will only need to pay the fees for renewal of their registration come DEC 31st of the nearest year!
what makes a non-exempt security qualified for registration?
if it does not fall under and exemptions, and is required to be registered through either: coordination OR qualification.
what is the deciding factor on who notifies the administrator when an IAR terminates employment/switches IAs?
if it is a state-registered advisor or if it is a federal-covered advisor.
what are the ways to you can legally sell a security?
if it is: an exempt security, if its a federally covered security, the TRANSACTION itself is exempt under the act, and if the security is already registered under the USA.
Information required on an application for registration as an agent would include... i. the form of business (corporation, partnership, LLC, etc.). ii. felony convictions, whether securities related or not. iii. a statement of financial condition. iv. citizenship information.
ii and iv **Applicants for registration as agents must include any felony conviction (misdemeanors are limited to those that are securities related) and a statement of citizenship. Agents can only be individuals, not business entities, and it is only broker-dealers and investment advisers that must submit financial information.**
if an agent decides to terminate their employment with a BD, who must notify the admin?
the agent AND the BD must notify the administrator.
what is the securities exchange act of 1934?
known as the "people" act. regulates the registrations of BDs, registered representatives, and exchanges.
when is the effective date of a security registered under the qualification method of registration?
literally WHENEVER the admin wants to grant it.
when must you notify the administrator when the BDs/IAs net worth falls short of the minimum requirements?
must notify the administrator by the END OF THE VERY NEXT BUSINESS DAY.
what are the 3 classifications of securities?
non-exempt, exempt, and federally covered
what is the coordination method of filing for registration of a security?
occurs when a security wants to be registered with the SEC (fed level) AND with the ADMINISTRATOR(s). simultaneously register with SEC and whichever states you request. the supplemental docs that you send to the SEC also need to be filed with the state(s) you are applying in.
when does registration for IAs/BDs expire each year?
on the nearest December 31st. even if you get your registration in October, you will still need to renew your registration on the upcoming December 31st.
what is a principal within an IA / BD?
one who supervises all activities occurring at their BD, responsible for the actions of the firm, and must sign new account paperwork. they also review all transactions, public communications, and customer complaints.
what does the administrator sometimes require the issuer to provide?
quarterly statements.
which act created the antifraud provisions?
the securities and exchange act of 1934.
what act created the SEC, statutory disqualification, the fingerprint rule, qualification exam, and the registration of principals?
the securities exchange act of 1934.
what are antifraud provisions?
they are rules that prohibit the use of any "device, scheme, or artifice with the intention to defraud". they created a LIABILITY for those responsible (IA/IAR/BD/agent) for misstatements or omission of a material fact.
what does it mean to have discretionary authority over an account?
this means that a registered representative can buy/sell without asking the customer before they make the trade. discretionary authority was granted by a prior written approval from the customer, but additional permission for each transaction is not necessary.
when does registration for BD / IA / IAR / agent become active?
those registrations become active at noon of the 30th day past when your application was ACCEPTED. if you had them contact you because you incorrectly completed your form, those 30 days don't start until your application is accepted
what are the 2 items not involved in a discretionary decision?
time and price. if the customer gives you all of the order info BUT you are left to determine the time / price of the transaction, you are NOT acting with discretionary authority over their account.
what are some exemptions that may allow securities to be sold without registration?
under the USA: short-term notes (of 270 days or less) and debt obligations are 2 exempt securities. these short-term notes must be a MINIMUM of $50,000 to be exempt from the registration requirement. these ST notes and debt obligations are ONLY exempt if they fall within the 3 highest ratings of fixed-income instruments. if they are issued by exempt issuers.
what is the qualification method of filing a registration of a security?
used only for INTRASTATE (only in 1 state on state and not FED level). you'll need to provide any information the state admin requests of you.
when an agent/IAR wants to leave their position, do they terminate their application or do they withdraw it?
withdraw.