Series 66 - Unit 1
If violation is one which SEC seeks criminal penalties, the act provides for an fine of ...
*no more the $10k*, imprisonment of no more then *5 years*, or both.
In the *federal regulations*, the statute of limitations for a civil action is the sooner of ...
*one year* after discovery or three years after the action.
Under federal (and state) law, in order to qualify for a performance-based compensation program, the client must have either $1 million in assets managed by the adviser or a net worth of $2.1 million. If using joint assets, ...
*only those with a spouse* are allowed.
In the event of a civil judgment, the purchaser is able to claim for a return of the ...
*original investment*, not current market, plus interest at the state's legal rate.
Transfer or assignment of an advisory account without ...
*prior client consent* is always prohibited.
In the case of certificates or checks made out to the IA, they must be ...
*returned* w/in 3 business days of receipt in order to avoid custody issues; they are never forwarded.
Under most circumstances, minimum net worth or a surety bond is only required of an adviser who either maintains ...
custody of customer funds or securities, or has investment discretion over the account.
Reg S-P permits firms to disclose nonpublic into to unaffiliated 3rd persons unless ...
customer has elected to opt out of the disclosure.
Holding company are not included in the ...
definition of investment company.
Item #5 on the Form ADV Part 2A asks about the adviser's fee schedule. The adviser is asked if fees are negotiable. If so, it is necessary to ...
describe the nature of the fee structure and what type of variations there might be.
Supplement, ADV Part 2B in brochure for IA's ...
describes personnel.
ADV Part 2A in brochure for IA's ...
describes the firm.
If RR gets to pick ONE - action, asset, OR amount of a security for a client, it is a ..
discretionary account. Does not include time or price.
Advisers with custody of customer assets have a higher net worth requirement than advisers with ...
discretionary authority, not the other way around.
Under the Securities Act of 1933, there are 2 requirements for commercial paper to be exempt from registration ...
maturity may not exceed 9 mos AND proceeds must be used for *current* operational needs.
Unlike SEC, USA does not specify a ...
maximum suspension.
Every person who signed the registration statement is liable under the Securities Act of 1933 for ...
misleading statements or omitted information. This includes CEO, attorney, underwriter, ...
The state will consider a private placement an exempt transaction if it is anticipated that individual (noninstitutional) investors are ...
purchasing for investment only, not immediate resale.
Registration is effective when ordered by the Admin in the case of registration by ...
qualification; pertains to all other offerings (that are not federally exempt) that are made within a state.
A bank or savings association that has deposits insured by the FDIC under the Federal Deposit Insurance Act, a registered B-D holding clients assets, and a foreign financial institution that customarily holds financial assets for its customers (provided it's segregated from its proprietary assets) is called a ...
qualified custodian.
Admin may require issuer to file...
quarterly reports.
Discretion authorizes a representative to choose the ...
security (ASSET), the amount of shares (AMOUNT), or whether to buy or sell(ACTIVITY). Time or price alone are not discretionary decisions.
A Keogh plan, or any other *retirement plan*, is not defined as a ...
security under the USA.
An endowment contract is not a ....
security; it is an insurance product.
A securities transactions is completed upon ...
settlement, not execution (trade date).
Although the normal time for withdrawal of a registration is the 30th day after filing the Form U5, the Administrator has the jurisdiction to ...
shorten that period if circumstances warrant it.
Violations of the Investment Advisers Act or SEC rules carry penalties of up to ...
$10,000 in fines and prison terms of up to *five* years.
The Bank Secrecy Act requires every financial institution to electronically file with the Department of the Treasury a Currency Transaction Report (CTR) on FinCEN Form 112 for each cash transaction that exceeds ...
$10,000.
The currency reporting threshold for cash and equivalent instruments is over ...
$10,000. These transactions must be reported on a CTR (currency transaction report) (FinCEN Form 112).
Under the Investors Advisers Act of 1940, it does not become a substantial payments until it exceeds ...
$1200.
Under the De Minimus Exception rule, covered employees are allowed to make contributions up to...
$350 per official or candidate per election in which they can vote, or $150 for other elections.
The Howey decision defined a security as ...
(1) an investment of money (2) in a common enterprise (3) where there is an expectation of a profit (4) through the efforts of a third party and not the investor.
Under USA the maximum penalty for criminal infraction are a fine up to...
*$5k* or a prison sentence *not to exceed 3 years*, or both.
If an SEC registered adviser reports on its annual updating amendment that it no longer has sufficient assets under management to qualify for SEC registration, it must withdraw within ...
*180 days after the end of its fiscal year* by filing Form ADV-W.
If an adviser reports on its annual updating amendment that it has less than $90 million under management and it is not otherwise eligible to register with the SEC, it must withdraw from SEC registration within ...
*180 days of the adviser's fiscal year-end* by filing Form ADV-W.
Registration procedures for IA's involving filing form ...
*ADV* Part 1A (think ADV for ADVisers).
In a discretionary account, an agent has received authority to select the ...
*amount and type* of investment for a client; the authorization must be in writing. Timing and price of a trade are not considered discretionary.
Under Section 305(l) of the Uniform Securities Act, the Administrator may require that a prospectus be sent or given to each person to whom an offer is made ...
*before the sale* of the security, but not prior to the offer.
Qualification is most commonly used for ...
*intrastate* securities. Only use this when it's the only way to go. Effective when *declared with Admin.*
Notice filing is the registration method used by ...
*investment companies* registered under the Investment Company Act of 1940.
Contracts between funds and their advisers may not be terminated with ....
*more than 60 days notice*b and these contracts must be in writing. The initial contract is for a *2-year period* and then renewed on an annual basis.
A preorganizational subscription is an exempt transaction if there are no more than ....
*ten subscribers and no commissions are paid*, either directly or indirectly. The subscribers make no payments until they purchase the underlying security.
The Uniform Securities Act defines a place of business as one where the IAR regularly provides investment advisory services, solicits, meets with, or otherwise communicates with clients, or any other location held out to...
*the public* as a location where the representative will do any of these activities. The frequency of use is not a factor.
To use the term "investment counsel", two criteria must be met. First, the principal business of the adviser must be ...
*the rendering of investment advice.* Second, continuous investment advice to clients based on their individual needs must be given.
Under the *USA*, the statute of limitations for a civil action is the sooner of ...
*two years* after discovery or three years after the action.
An *agent* may determine which securities to purchase or sell for a client when...
*written discretion* authority has been received by the broker-dealer *before executing the first discretionary transaction.*
Under the USA, the Admin may bring an action against an agent's registration if the agent ...
-borrows money from his wealthy clients' account -alters market quotations to induce a client to invest in an attractive growth stock -solicits orders for nonexempt unregistered securities -buys and sells securities in accounts to generate a high level of commisions
Under the Investment Advisers Act of 1940, the SEC has the following powers at its disposal to enforce the act. The SEC may ...
-conduct investigations. -subpoena witnesses and administer oaths. -make and issue rules.
Some items that if received as soft dollar compensation, would likely fall under 28(e)'s safe harbor:...
-research report analyzing the performance of a particular co. or stock -financial newsletters if relate with appropriate specificity -quantitative analytical software -seminars or conferences -effecting or clearing security trades
Likely to fall out of safe harbor:
-telephone lines -furniture, computer hardware... -travel expenses assoc. with attending seminars -rent -any software not related to analysis of securities -payment of training courses -internet services
Conditions for cash referral fees...
1. IA be registered 2. Prohibits cash referral fees to those whose is subject to statutory disqualification 3. fees to be paid pursuant to a written agreement
SEC has the power to ...
1. censure 2. place limitations on activities, functions or operations 3. suspend for a period NOT EXCEEDING 12 months 4. or revoke registration of any IA if appropriate
Two exemptions where IA does NOT have to deliver brochure...
1. client is an investment company 2. If it's an impersonal advice (subscriptions) - cost under $500 (state and federal).
Records to be kept when it comes to cash referral fees..
1. separate written disclosure doc furnished by solicitor to the client (e.g. the Solicitors' Written Disclosure Document) 2. Copies of the IA's disclosure docs (e.g. Form ADV Part 2A) delivered to the solicited client by the solicitor.
IA does not have to deliver brochure supplement to clients ...
1. where brochure is not required 2.who receive only impersonal investment advice (ex. clients paying $500 or more a year for a subscription) 3. individual clients who are any execs, directors, trustees, gp's, or people serving ina similar capacity of that firm, or any employees in connection w/ their regular duties participate in inv activities and doing for at least 12 months.
In preorganization certificate, the number of sales (subscribers) is limited to ...
10 regardless of whether they are retail or institutional.
Checks made out to a 3rd party must be *forwarded* to that party within ...
3 business days or receipt or the IA will be considered to be maintaining custody.
The statute of limitations for civil liability is the earlier of ...
3 years after the date of the sale, or 2 years after discovery of the violation.
The record retention for for B-D's is ...
3 years.
And IA (or B-D) must give customer ...
30 days to implement any opt out provision in the privacy notice.
Under the Investment Advisers Act of 1940, unless delayed by the SEC, registration of an investment adviser becomes effective how many days after filing?
45 days.
Under the criminal provisions of the Uniform Securities Act, no indictment for IA's may be returned more than ...
5 years after the alleged violation.
The record retention for for IA's is...
5 years.
IA's (under Investment Advisers Act of 1940) are required to maintain books and records in a readily accessible place for a period of ...
5 years; during first 2 years need to be in principal office of the adviser.
Section 13(d) of the Securities Exchange Act of 1934 requires filing of a Schedule 13D once a person becomes an owner of more than ...
5% of the outstanding voting shares of a reporting company. Form 144 is only filed when securities are sold.
Appeals in both the case of SEC and USA must be made within ...
60 days of the court's decision.
Any final order of the Administrator may be appealed within ...
60 days of the order.
How many days does a registered person have to appeal any disciplinary finding by the state Admin?
60 days.
For IA's to withdraw from registration, they must file a ...
ADV-W form; effective 30th day for USA and 60th day for SEC.
If having discretion over $100 million or more in 13(f) securities, who would be exempt from filing a Form 13F?
A natural person who exercises investment discretion over her own account (they are not an institutional investment mgr).
Under the Uniform Securities Act, if the broker-dealer with which that agent is registered should have its registration revoked, the agent's license will be held by the...
Administrator and the agent will be required to register with an active broker-dealer no later than December 31.
The effective date of registration by qualification is set by the ...
Administrator.
If IAR terminates employment with IA and IA is *federal covered advisor* , then ...
IAR must notify Admin.
The Financial Crimes Enforcement Network (FinCEN) is responsible for administration of the ...
Bank Secrecy Act.
If IAR terminates employment with IA and IA is *state* registered, then ...
IA firm must notify Admin.
Filing of the Form ADV-E is required only when the ...
IA, rather than a qualified custodian, maintains custody of customer funds/securities.
Registration of all securities professionals expires on ...
December 31. Failure to renew by that time leads to a lapse. Once a registration lapses, a new registration is required.
The Form 112 is electronically filed with the ...
Department of the Treasury.
2 Types of qualified custodians NASAA rules permit to hold investment advisory clients' funds or securities are...
FDIC insured banks and savings associations and registered broker dealers.
Under Securities Exchange Act of 1934, all registered persons must be fingerprinted as stated in ...
Fingerprint Rule (17f-2).
In lieu of preparing a fancy brochure, an IA is permitted to provide its clients with a copy of its...
Form ADV Part 2A and Part 2B.
State registered advisers are required to file amendments to their brochure and amend their supplements w/ appropriate state securities through ..
IARD
Rule 204A-1 refers to the ...
Investment Advisor Code of Ethics.
The persons excluded from the definition of investment adviser when advice is provided solely incidental to their profession include lawyers (attorneys), accountants, engineers, and teachers.
Lawyers, accountants, teachers, engineers (LATE).
NASAA defines a substantial prepayment of fees to be ...
MORE than $500, six or more months in advance.
One respect in which NASAA treats the handling of discretionary authorization by an IA differently from the SEC is that ...
NASAA allows use of oral discretion for the first 10 business days after the date of the first transaction.
Employees of banks engaging in the retail sale of securities issued by that bank are ...
NOT agents regardless on how they are compensated.
The proper term to use when referring to the financial requirements of an IA is ...
Net Worth ... for B-D's it's Net Capital (but may be use interchangeably in the exam).
For investment advisors that charge wrap fee, they do not use normal brochure or Part 2A of the ADV. Instead furnishes clients and prospects with...
Part 2A, Appendix 1.
Under the Securities Exchange Act of 1934, commissioners of the SEC are appointed by the...
President and may not engage in any other business.
The policies of the SEC are determined by five Commissioners appointed to staggered, 5- year terms by the ...
President of the United States with the advice and consent of the Senate.
A communication that offers a security for sale, including newspaper, radio, and television offers is a...
Prospectus. Tombstone announcements are excluded from the definition.
To register securities is a very time consuming (file S1) and expensive. Regulation that allows you to bypass that registration is ...
Reg D (safe harbor).
Mutual funds must file semiannually with ...
SEC but NOT its shareholders.
Enforcement and administration of the Investment Advisers Act of 1940 is the responsibility of the ...
SEC.
The effective date under registration by coordination is set by the ...
SEC.
Unless exempt, issuer's must registers securities with...
SEC.
When a BD is registered with both the SEC and several states, the financial and operational requirements to be met are those of the ...
SEC.
SEC is concerned with the regulation of exchanges, registration of broker-dealers, inequitable and unfair trade practices, and regulation of OTC markets under the ....
Securities Exchange Act of 1934.
An IA registered with the state wishes to take custody of client's fund or securities. What best describes NASAA rules regarding notification to Admin?
The adviser must supply prompt notification to the Admin by immediately updating it's Form ADV.
Under the IAA of 1940, discretion and substantial prepayments are not considered custody, what is a standard tenet of "custody" is ..
access to funds in clients accounts (Ex. adviser receives the proceeds sale in the customer's account).
Pension consultants provide various forms of investment advice to ....
administrators of employee benefit plans. They might manage the assets or, as in this case, provide suggestions of portfolio managers.
Rule 482 of the Securities Act of 1933 permits the use of an omitting prospectus if it does NOT...
contain an application to purchase shares of the fund or may not make mention of the fund's expense ratio.
The IA charges regular clients a fee that was larger for the same services because they were not members of the country club. Is this permissible?
This is permissible as long as proper disclosure is made in the adviser's brochure.
Securities issued by an insurance company and securities listed on an exchange are exempt under the ...
Uniform Securities Act, but not under the Securities Act of 1933 Act.
In the securities industry, the term "discretionary" refers to an...
account in which the agent has the power to decide which securities to buy or sell without customer authorization for those specific trades.
Under the USA, the term "sale" means:
a *contract* to dispose of a security for value.
A B-D with an office in the state, *regardless of the nature of its clients*, is defined as ...
a B-D under the USA.
The annual updating ADV amendment must be filed electronically unless...
a hardship exemption is granted.
A transactions exemption would be available under the USA when the agent for a B-D sells ...
a large block of an unregistered nonexempt security to an ins co. that is not authorized to do business in this state.
Under the Investment Advisers Act of 1940, *performance fees are allowed only* for clients with ...
a minimum of $1 million invested or a minimum net worth of $2.1 million.
Just Agents (not IAR's) who exercise discretion over clients accounts, need
a surety bond.
Excluded from the definition of agent ...
corporate entities (ex. subsidiary of a major commercial bank), B-D's and issuers.
Under rule 206(4)-7 it is unlawful for the IA registered with the Commission to provide investment advice unless the adviser has ..
adopted and implemented written policies and procedures reasonably designed to prevent violation of the Advisers Act by the adviser or any of it's supervised persons.
Under Reg D, rule 506(c) ...
advertising is ok, ALL investors must be accredited and the issuer MUST ensure they are, transfer is prohibited for 6 mos.
The term exempt reporting adviser refers to...
advisers that rely on either the venture capital fund adviser exemption or the private fund adviser exemption.
A person who sells securities for a B-D is an ...
agent (ex. clerk, representative, assistant, ...).
In an agency cross transaction, the adviser (or IAR) acts as an ...
agent for both its advisory client and the party on the other side of the trade.
Specifically excluded from the definition of a broker-dealer under the USA ...
agent/issuers and banks, international or domestic.
Under USA, only *individuals* can be ...
agents (an individual representing a B-D who sells federal covered securities).
There are no recordkeeping requirements for ...
agents or IARs.
When a securities professionals registers in a state, he must provide the Administrator with a list of ....
all the states where he intends to register.
The Securities Exchange Act of 1934 mandates that public issuers file ...
annual and quarterly reports with the SEC.
Investment companies must file audited reports with the SEC ....
annually and send at least semiannual reports to shareholders.
The investment adviser's contract is renewed ...
annually by either a majority of the board or a majority of the outstanding shares.
*Registrations of persons* renew ...
annually each December 31st.
Registrations of persons renew ....
annually each December 31st.
The investment strategy in which an investor buys a security on one exchange and simultaneously sells it on another to take advantage of a temporary price disparity is known as ...
arbitrage and is permissible.
Soft dollar practices is defined as
arrangements under which products and services (other than execution of securities transactions) are obtained by and adviser from or through a broker-dealer in exchange for the direction by the adviser of client brokerage transactions to the B-D, frequently referred to as *directed transactions.*
The adviser under contract to manage the fund receives a fee that is most commonly based on the amount of ...
assets under management.
Pledging a majority stock interest in an adviser structured as a corporation is considered an ..
assignment and, therefore, requires client consent.
*****The concept of performance-based compensation *only applies to investment advisers.* It is permissible for individual clients with a net worth of ....
at least $2.1 million, or at least $1 million in assets under management in an account with that adviser. In most cases, the performance bonus kicks in when the account in question outperforms a stated benchmark.
The firm brochure for State-Registered Advisers similar for covered advisers except under NASAA Model Rule, advisers are required to deliver brochure to client ...
at least 48 hours *before* entering into an advisory contract or at the time of entering into contract, if client has right to terminate the contract without penalty w/in 5 business days after entering contract.
If IA is collecting more than $1200 in advance ($500 USA), then they need to include a ...
balance sheet in brochure.
The SEC does not enforce state securities statutes, nor does it have jurisdiction over ...
banks or savings and loans regarding their securities activities.
Institution is considered a person and includes ...
banks, S&L's, trust co's, insurance co's, employee benefit plans (with assets of not less than $1mm), and gov't agencies.
A client's contracts, whether written or oral may not ....
be assigned without the client's consent under any circumstances.
With regard to a federal covered investment adviser, a copy of the most recent Form ADV Part 2A must ...
be delivered by IA to each client no later than at the time of entering into the advisory agreement.
Brochure must be delivered to client or prospective client is ..
before contract or at time of contract; for state (USA), you have 48 hours with 5 business days right to rescind without penalty.
In order for Preorganization certification to be an exempt transaction it must be ...
before incorporation (promise of seed money) and max of *10 subscribers* and no funds paid in.
The firm brochure for SEC Registered Advisers must be given to each client ...
before or at the time an advisory agreement is entered. Thereafter, each year, w/in 120 days of the end of the fiscal year, a free updated brochure.
Some info included in ADV are ...
biz name, control persons info, educ, nature of business, balance sheet, compensation agreement, scope of authority of client funds, criminal record ...
Only in the case of state registered IA's is it required to file...
brochure supplments.
Registration statements may be filed under the USA by a ...
broker-dealer, a person on whose behalf the offering is made (e.g., a offering made by a large shareholder), or more commonly, the issuer... NEVER and Agent of a B-D.
Trade aggregation and allocation is the practice of ..
bundling (or bunching) trades to obtain volume discounts on execution costs.
If the adviser ceases to act as an adviser or goes out of business, the SEC will ...
cancel the registration.
If the person qualifies by virtue of training or knowledge, registration ...
cannot be denied for lack of experience only.
Under the NASAA Model Custody Rules, an investment adviser is deemed to have custody of customer funds or securities when ...
checks made payable to an unrelated third party are returned to the customer within 3 business days of receipt.
In almost every case, an IA acting as a principal (out of inventory) or agent in a trade with an advisory client must obtain ...
client consent and provide written disclosure of the IA's capacity in the trade no later the completion of the trade.
A firm's internal research is NOT considered inside information thus ...
clients may be contacted as soon as the IAR has access to the report; purchasing this stock personally prior to the release would be prohibited.
If the Administrator requires the filing of amendments, the ....
clock starts over again with the filing of those amendments.
The Securities Exchange Act of 1934 granted the SEC the power to ...
close any registered stock exchange for up to 90 days. All that is required is notice to the President of the U.S.
Under the Investment Advisers Act of 1940, it is legal for an investment adviser to keep the ...
commission on a mutual fund sale when the client who purchased the shares has paid for investment advice.
Not include in the fee disclosure documents are ...
commissions, mark ups/downs, advisory fees; these are in other docs.
Any income received from the sale of non-securities products that are part of that plan is considered to be ...
compensation for investment advice. For ex., an estate planner who charges a fee for setting up a trust is not charging for investment advice and, therefore, is not included in the definition.
Difference between consumer and customer is ...
consumer buys the product and has no further interaction with firm where customer has on on-going relationship.
The Investment Act of 1940 permits a reduction in sales charge when reaching a breakpoint for...
purchasers meeting the definition of *any person.*
When a broker-dealer receives a written complaint from a customer, it must ...
document that complaint and begin an investigation as to the complaint's merits. Part of that procedure would be sending a written acknowledgment to the client that the complaint has been received.
Enforcement and administration of the USA is the responsibility of ...
each individual Admin.
Brochure must be updated ...
each year and promptly whenever any info in the brochure become materially inaccurate.
Federal covered advisers are required to amendmend their brochure ...
electronically through IARD. However, not required to file amendments to brochure supplements with SEC, but must maintain copy in their files.
When a promoter of a public offering receives issuer shares for less than the public offering price, the Administrator of a state's securities department may require that the promoter's securities be ...
escrowed until the issuer receives a specified amount from the sale of the security in his state.
Investment advisers *cannot* recommend cross transactions to both buyer and seller ...
even if written consent is given.
*If* a firm did NOT have an office in the state and its clients were institutions such as insurance companies, or other B-D's, it would be
excluded from the definition of B-D.
Once a broker-dealer handles wrap fee accounts, it loses the ...
exclusion from the definition of investment adviser. Therefore, the firm must be registered with either the state or the SEC.
Examples of fiduciary (exempt) transactions...
executor, administrator, trustee, sheriff, a trustee in bankruptcy, etc.
When an issuer's stock is listed on the NYSE, any security issues that are equal to or senior to that stock is a federal covered security and ...
exempt from registration with any state.
Sales to institutions, sales by fiduciaries, or unsolicited transactions are all ...
exempt transactions under USA.
Only the securities of a regulated common carrier carry an...
exemption from federal registration.
SRO's such as FINRA and NYSE have no jurisdiction over ...
federal covered IA's; only SEC does.
Securities sold under Regulation D of the Securities Act of 1933 are private placements and, under the NSMIA, are considered....
federal covered securities.
The SEC may investigate violations of all ...
federal securities acts, including the Acts of 1933 and 1934, and may also investigate violations of the rules of SROs.
State registration by coordination is available only if a federal registration statement has been ....
filed under the Securities Act of 1933 in connection with the same offering.
The most common type of performance fee is known as a...
fulcrum fee; fee averaged over specified period (at least 12 mos) w/ an increase or decrease in proportion to the investment performance in relation to the performance of a specified securities index (usu S&P 500)
When a client delivers a stock certificate to the firm's office, the appropriate procedure is to ...
furnish the customer with a receipt on the spot.
When a client delivers a stock certificate to the firm's office, the appropriate procedure is to...
furnish the customer with a receipt on the spot.
Under the USA, bonds (securities) issued by states, Canadian provinces, federally chartered credit union, or one authorized to do business in the state, are ...
granted an exemption from the registration and advertising filing requirements of the Act.
The Investment Company Act of 1940 generally prohibits mutual funds from making ...
purchases on margin.
The Securities Exchange Act of 1934 defines government securities as those issued or ....
guaranteed by the U.S. government or one of its agencies. Securities issued or guaranteed by a state, county, city, etc., or any agency of a nonfederal governmental unit are municipal securities.
A stay of order (or stay of proceedings) is a ruling by the court in civil and criminal procedure, ...
halting further legal process in a trial or other legal proceeding. The court can subsequently lift the stay and resume proceedings based on events taking place after the stay is ordered.
Under the Securities Exchange Act of 1934, regarding the jurisdiction of the SEC over a person who violates the rules of the Municipal Securities Rulemaking Board, the SEC....
has the authority to investigate such violations unless the person is a financial institution; financial institutions come under the jurisdiction of banking regulatory authorities.
Antifraud provision of the SEC are violated by the employment of any hedge clause (sometimes referred to as exculpatory clause) which is likely to lead an investor to believe that ...
he has in any way waived any right of action he may have. *Waivers are never permitted!*
Regulation S-P, mandated by the Gramm-Leach-Bliley Act, requires that firms take...
identity theft seriously and have adequate safeguards.
A cease and desist order is a directive from an Admin agency to ...
immediately stop a particular action. May come from federal, state or judicial body and may be issued *without prior hearing.*
Persons convicted of willful violations of the USA or of knowingly filing a fraudulent document under the act may be subject to....
imprisonment of 3 years, fines of up to $5,000, or both.
If defendant (IA) is found guilty, he may appeal and SEC order against him by filing that appeal ...
in the US Court of Appeals.
The USA requires all initial and renewal investment advisory contracts to be ...
in writing.
If BD or IA is registering in a state there is automatic registration for ...
individuals who are partners, officers, or directors of the firm who performs the functions of an agent or IAR.
IA must deliver brochure supplements to client ...
initially and annual; with some exceptions.
A privacy notice is given to a consumer ...
initially only; where as customer get initial privacy notice AND annual one.
Although recent rule changes to the Investment Advisers Act of 1940 require annual compliance reviews, such reviews may be conducted ...
internally by the firm's appointed chief compliance officer. The new rules require written policies and procedures, an annual compliance review, and the appointment of a chief compliance officer (CCO).
A holding company is a company that ...
invests in other companies for the purpose of management control.
When securities that have been pledged as collateral for a loan, if that loan goes into default, the liquidation of that collateral...
is an exempt transaction.
Persons who own more than 5% of the outstanding equity securities of a registered issuer are known as interested persons under the act. These persons are required to file a Schedule 13D report of beneficial ownership with the ...
issuer, the exchanges, and the SEC within ten days of reaching the greater than 5% level.
Rule 506(b) (of Reg D) rules state ...
it's for accredited investors/ 35 unaccredited, no advertising, understanding the risk.
Registration may be canceled by the Administrator if the registered individual has been ...
judged mentally incompetent. Cancellation is a nonpunitive action of the Administrator.
An investment adviser must register in a state if it manages ...
less than $100 million in assets.
Unless some type of exemption applies, an IA must register on the state level if it manages ...
less than $100mm in assets.
One business succession issue that applies to virtually all investment advisers is...
loss of the designated regulatory contact person. *All* investment advisers must have a designated regulatory contact person.
The Form ADV-E (E for Examination) is completed by every investment adviser who ...
maintains custody of client assets.
The Securities Exchange Act of 1934 granted the Board of Governors of the Federal Reserve System the power to regulate ...
margin requirements.
Effecting transactions with no change in beneficial ownership is a form of ...
market manipulation in conflict with NASAA's Statement of Policy.
Under Federal Law, Canadian cities (or provinces) are not ...
municipal securities.
If an employee of a publicly traded corporation is designated to process any orders for stocks, under USA, the employee...
must register as an agent if commissions or other remuneration will be received.
Under the Securities Act of 1934, order tickets do not include the ....
name of the customer. The account number is the appropriate identifier. Thus not considered fraudulent and prohibited business practice for an order ticket for a transaction in shares of a common stock to exclude this.
NASAA followed the lead of the SEC and permitted performance-based compensation when the investor (or company) had a...
net worth requirement of $2.1mm with $1m in AUM.
Both state and federal law require that records be kept easily accessible for a period of ...
no less than 5 years; and in the *principal office* of the IA for the first 2 years.
Any performance fee entered into with a qualified clients, must take into consideration gains and losses, both realized and unrealized, and the performance period must be ...
no less than one year.
Both the Investment Company Act of 1940 (applicable here because this is a covered adviser) and the NASAA Model Rule on Recordkeeping require that investment advisers maintain certain records, such as partnership agreements and corporate articles of incorporation, for a period of ...
no less than three years after dissolution.
For IA's, if registering with USA (state), you pay the filing fee and becomes effective at ...
noon of the 30th day after filing.
Unless a condition such as issuer's common stock is listed on an exchange or Nasdaq (making it federal covered), a corporate debenture is ...
not an exempt security.
Nonexempt means the security is ...
not exempt from the state's registration requirements. However, if the nonexempt security is sold in an exempt transaction, registration is not required.
Under the Securities Act of 1933, shares of bank holding companies listed on the NYSE are ....
not exempt securities and they must be registered with the SEC.
If there are no material changes, then ...
nothing (not the brochure nor the supplement, nor the summary) is required to be sent.
In order to do business with their Canadian customers who are temporarily in an states, Canadian BD's (and their agents) must ...
obtain a form of limited registration.
Part 2, Appendix 1 is used for investment advisers who ...
offer wrap fee programs.
Securities registration is effective for ...
one year from effective date.
While it is rare, the USA does reserve the right to require a potential registrant to submit to an...
oral examination in addition to or instead of a written test.
In the case of acting as a principal or agents no blanket authorization is permitted and ...
oral, rather than written consent must be obtained prior to the completion of the transaction.
The Administrator is not authorized to conduct investigations in ...
other states to determine whether a violation of the USA has occurred in those states.other states to determine whether a violation of the USA has occurred in those states.
The investment adviser's contract must be initially approved by a majority vote of the ...
outstanding shares and a majority of the noninterested members of the board of directors.
An IA (NOT IAR) must register with SEC if firm manages assets ...
over $110mm.
A private placement will lose its exemption if those who sell the offering are...
paid commissions on sales to noninstitutional clients.
An investment adviser need not inform clients of departures of employees, senior or otherwise, from investment advisory firms that are incorporated. Clients must, however, be informed of the departure or addition of any ...
partner if the firm is organized as a partnership.
Under Section 202(a) of the Uniform Securities Act, registration of an investment adviser automatically constitutes registration of any investment adviser representative who is a ...
partner, officer, or director, or a person occupying a similar status or performing similar functions.
Then Consent to Service once you register, is ...
permanent; you don't have to do it every year and the Admin has authority to receive legal papers for you.
A covered account is an account, primarily for personal, family, or household purposes, that involves or is designed to ...
permit multiple payments or transactions. Where the money goes is less of a factor than the frequency of transactions.
Although performance-based investment adviser compensation is generally prohibited, it is ...
permitted under certain circumstances on the basis of the nature of the client.
Under Federal Law, an application for becoming an associate person of a B-D would be denied for an individual ...
pleading no contest to a misdemeanor involving a financial matter in the previous 10 years (120 mos).
Preliminary prospectus does not include ...
pricing and effective date.
In the case of agency cross transaction, permission to engage in them must be obtained in writing ...
prior to the first transaction.
The most common purpose of a BCP (Business Continuity Plan) is to have ...
processes and procedures in place to ensure that business can continue after a disaster.
Other than securities issued or guaranteed by the U.S. government, SEC commissioners are ...
prohibited from investing during their term in office.
In order for a Canadian broker-dealer to qualify for limited registration to do business with clients vacationing in the states, the BD must be ...
properly licensed in its home province and they're only dealing in the states is with an existing client and registers in each of the states.
An investment adviser cannot perform effectively for a client who refuses to ....
provide information necessary for determining the suitability of investments or a portfolio; thus must decline to work with the client. Unlike the broker-dealer, who may act merely as order filler, the investment adviser has a fiduciary responsibility is obligated to determine suitability.
In an agency cross transaction, the adviser may not ...
recommend the transaction to both parties of the trade.
Unlike broker-dealers, where there is no such concept as federal covered, a new investment adviser that reasonably expects to reach the $100 million minimum threshold within 120 days of the initial filing of the Form ADV invariably registers with the SEC as a federal covered investment adviser and, therefore, does not ...
register in any state.
The investment adviser representatives of a federal registered adviser are required to ...
register in each state in which they have a place of business. The act provides a de minimis standard exemption from state registration for advisers who have no place of business in a state and have fewer than six clients resident in that state.
Once a broker-dealer handles wrap fee accounts, it loses the exclusion from the definition of investment adviser. Therefore, the firm must be registered with either the state or the SEC. Any agents handling these accounts would be ...
registered as investment adviser representatives.
The principal executives of the company involved with money and a majority of the board of directors are required to sign the
registration statement attesting to the facts presented as being true to the best of their knowledge and belief. This includes the chief executive officer, chief financial officer, and a majority of the board, but not the chief operating officer.
An investment adviser with no place of business in the state is not exempt from registration with the state when making recommendations to individual accredited investors who are...
residents of that state, even when the securities being recommended are exempt from registration.
In order for Private Placements to be an exempt transaction it must be ...
restricted to *10 offers in any 12 consecutive most*- other than to institutional client, no immediate resale except for institutions, and no compensation paid on sales to non-institutional buyers.
Non-securities include ...
retirement plans, nonvariable insurance policies, collectibles, commodities, condominiums, and currencies.
According to the Investment Advisers Act of 1940, Part 2 of Form ADV may be used to ...
satisfy the brochure requirement.
Broker-dealers are permitted to lend money against ...
securities held in client's portfolios. This is known as a margin loan.
Under USA, an individual licensed as an agent by the state may NOT...
simultaneously represent 2 different unrelated BD's in the same transaction.
Under NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, a securities agent may NOT...
simultaneously represent two different unrelated broker-dealers in the same transaction.
In a nonissuer transaction, the *proceeds* of the sale go to ...
someone other than the issuer.
Under USA in the case of an appeal, it is made through the ...
state court system; not federal one.
Investment Advisers Act of 1940 and the SEC have no jurisdiction over...
state-registered investment advisers.
Coordination is when issuer coordinates registration of a security with ...
states and federal at the same time; becomes effective at the same time in state as the federal level.
An appeal does not act as a ...
stay of the order. Only a court of competent jurisdiction may issue a stay of the order.
Under USA, when an IA accepts prepayment fees of more than $500 for a contract period of 6 months OR more it is known as a ...
substantial payment.
Willful violations under the Investment Advisers Act of 1940 may result in the SEC...
suspending the violator for up to 12 months or bar individuals from the industry.
The executive office of the Investment Adviser from which the officers, partners, or managers of the IA direct, control, and coordinate the activities of the IA is know as ...
the Principal Office and Place of Business.
Failure to adequately supervise a person associated with the IA could be cause for ...
the SEC to revoke the firm's registration.
Investment advisers with $110 million or more in assets under management must register with ...
the SEC, not the state Administrator.
An adviser may NOT deposit client funds into ...
the adviser's account; at the very least, a separate omnibus account must be maintained for all client funds.
Rebating commissions on mutual fund sales is prohibited, but the adviser may reduce ...
the client's fee or keep the commission; mutual funds, being new issues, are sold with a sales commission stated in the prospectus.
"Buy and hold" clients are not suitable for wrap fee account because ...
the don't do enough trading to benefit from the fact that commissions are included in the program fee.
When the issuer acts as a general partner in a real estate offering, it is not their security that is being sold so ...
the exemption from registration under the USA does not apply.
In order to be considered discretionary, the agent must *choose at least one* of the following: ...
the security, the number of shares (or dollar amount), or whether to buy or sell.
The sale of Canadian government securities by a registered dealer represents a security that is exempt under the Uniform Securities Act, but ...
the transaction itself is not.
An IA registered with the SEC could use the term *investment counsel* if the following 2 requirements exist ...
their principal business consists of rendering investment advice and a substantial portion of their business involves investment supervisory services.
Investment advisers must keep partnership records for ...
three years after the partnership is terminated.
Recordkeeping requirements for broker-dealers are ...
three years.
Adviser must disclose soft dollar arrangements due to conflicts of interests that may exist when an IA receives research, products, etc from brokerage on behalf of clients. Sections 28(e) provides that a person who exercises investment discretion with respect to an account will not be deemed to have acted unlawfully or to have breached a fiduciary duty solely be reason of his having caused the account ...
to pay more than the lowest available commission if such person determines in good faith that the amount of the commission is reasonable in relation to the value of the brokerage and research services provided.
An omitting prospectus is a mutual fund ...
tombstone advertisement. It must include information on obtaining a prospectus and may include the fund's past performance.
Scalping is the practice by which IA, before dissemination of securities recommendation, ...
trades on the anticipated short run market activity that may result from the recommendation.
All contracts between an investment company and an outside adviser must be in writing and must contain certain provisions; these include that the contract may not be ...
unilaterally assigned to another adviser. The initial contract may be for two years, but it is subject to annual reapproval by a majority vote of the outstanding shares or the board of directors as well as a majority of the directors who are considered to be non-interested parties.
It is unlawful to recommend a ...
unregistered, nonexempt security.
Nonissuer transactions (2ndary transactions) is an ...
unsolicited *exempt* transaction.
An *investment adviser* may determine which securities to purchase or sell for a client ....
with *oral consent for a period of 10 days* from the initial discretionary trade.
Any person who receives an order from the Administrator can petition the court to change or set aside the order, but an appeal must be filed ...
within 60 days after the order was entered.
The annual updating amendment to Form ADV must be filed ...
within 90 days of the adviser's fiscal year end.
For IA's, if registering with SEC (federal live), you pay the filing fee and becomes effective ...
withing 45 days.
