UNIT 2-SECURITY REGULATION UNDER THE USA-2.1-2.3 (REVIEW QUESTIONS)

Persons Subject to State Registration Under the USA, an individual would not be considered an agent while representing the issuer in any of the following transactions EXCEPT:

-nonexempt, initial public offerings. -Persons who represent nonexempt issuers of new securities, are agents under the USA unless it is stated that the transaction is exempt. Representing issuers in exempt transactions excludes the person from the definition of agent.

Persons Subject to State Registration Which of the following is required to register as a broker/dealer?

A person buying and selling securities for customers' accounts is deemed a broker/dealer under the Uniform Securities Act and must be registered as such. Specifically excluded from the definition of a broker/dealer are banks, trust companies, and savings and loan associations.

Persons Subject to State Registration Which of the following must register as an agent under the Uniform Securities Act?

A sales assistant who takes orders on behalf of agents in a branch office is required to register under the Uniform Securities Act. An administrative assistant who provides securities quotes to clients is not functioning as an agent and need not register. An individual who sells securities of an issuer to the issuer's employees without earning a commission need not register under the terms of the USA. Remember, a broker/dealer is excluded from the definition of an agent under the USA.

Definitions Under the Uniform Securities Act- Under the Uniform Securities Act (USA), a person is best defined as a(n):

According to the Uniform Securities Act (USA), a person is a competent adult individual or an entity that is able to enter into an enforceable contract. For example, the American Red Cross is a person (legal entity), although as a charitable organization, it is not subject to federal income tax.

Persons Subject to State Registration Under the Uniform Securities Act, which of the following statements is (are) TRUE regarding registration of broker/dealers and agents?

All persons defined as broker/dealers or agents under the act must register as such before transacting any securities business. It is unlawful for a broker/dealer to employ an agent unless the agent is registered.

Persons Subject to State Registration If ABC Brokers, Inc., has its license canceled, an agent for ABC may:

An agent for ABC may not sell any securities because her license is automatically canceled with that of ABC Brokers, Inc. Agents cannot sell securities unless they are associated with a licensed broker/dealer.

Definitions Under the Uniform Securities Act-Under the USA, the definition of person includes which of the following?

An unincorporated investment club, an individual who buys and sells securities for his own account, associations, and partnerships (whether or not they issue certificates), and the U.S. government are specifically listed as persons in the act. On the exam, minor children, deceased individuals, and mentally incompetent individuals are the only choices that are not persons under the act.

Persons Subject to State Registration Broker/dealer A wants to promote and reward teamwork. The firm plans to pay out a small percentage of the firm's profits to the clerical staff as a bonus for their hard work. Under NASAA rules, is this permitted?

Bonuses based on a broker/dealer's profits may be payable to nonregistered clerical help as long as there is no direct relationship to any specific sales.

Persons Subject to State Registration A sales agent who is only registered in Nebraska works for a broker/dealer that is registered in all 50 states. A customer who is a resident of North Dakota calls the representative in Nebraska and offers to purchase securities. Under the Uniform Securities Act, the agent should:

Both the broker/dealer and the agent must be registered in each state where they plan to do business. Although the broker/dealer is properly registered, in order for the agent to accept the order, she must be registered in North Dakota. Even though the order is unsolicited, making this an exempt transaction, agents must still be licensed in the state where the client is a resident.

Persons Subject to State Registration- An agent of a broker/dealer is currently doing business in one state and would like to conduct business in another state. When checking with the firm's compliance department, the agent would be told which of the following?

Both the broker/dealer and the agent must be registered in the state where business is to be transacted, unless they both qualify for an exemption from registration in that state (e.g. they have no place of business in the state and their only clients are institutions, issuers, or other broker/dealers). At the time the broker/dealer is registered, officers, directors, or partners of the firm who act as agents will be automatically registered as agents.

Persons Subject to State Registration Which of the following must be registered under state blue-sky laws?

Broker/dealers and investment adviser representatives, whether with state or federal covered IAs, are required to register with their states. U.S. government and municipal issues are exempt, and therefore, do not have to be registered.

Persons Subject to State Registration A registered investment adviser representative is instrumental in bringing a new account to the investment adviser. Although the IAR has not become registered as an agent, the adviser intends to pay the representative commissions for those securities transactions routed through their affiliated broker/dealer. Which of the following statements best describes the regulatory aspects of this situation?

Commissions on securities transactions paid to investment adviser representatives (solicitors) are permitted when the IAR is properly registered as an investment adviser representative and an agent of a broker/dealer.

Persons Subject to State Registration The Uniform Securities Act requires which of the following to be registered as agents of a broker/dealer?

Employees who take orders from the public and who trade securities for the accounts of broker/dealers must register as agents. The USA requires any person who represents a broker/dealer in effecting securities transactions to register as an agent of their employing broker/dealer. Partners (officers, directors) who play an active role in the securities business of a broker/dealer must register as agents; those who don't, are exempt from registration.

Persons Subject to State Persons Subject to State Registration 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:

Even though the college program is referred to as 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.

Persons Subject to State Registration- Which of the following must register as a broker/dealer under the USA?

If a broker/dealer has an office in the state, it must register with the state, regardless of what types of clientele it serves. The term "broker/dealer" excludes anyone without a place of business in the state who effects transactions exclusively with issuers, other broker/dealers, or institutions, or who directs an offer in the state to an existing customer who temporarily resides in the state where the offer is received, regardless of the length of time. As long as the broker/dealer is properly registered in the vacationer's state of permanent residence and does not maintain an office in the state being visited, it is not defined as a broker/dealer.

Persons Subject to State Registration Agents A and B work for the same firm and wish to share commissions. Agent A is licensed in states X, Y, and Z. Agent B is licensed in states X, Y, and C. Which of the following statements is TRUE in regard to their sharing commissions?

In order to share commissions, agents must be registered as an agent for the same broker/dealer or for an affiliated broker/dealer. Additionally, in order to receive a commission, an agent must be registered in the state where the transaction is made.

Persons Subject to State Registration 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

Included in the USA's list of exempt securities are those issued by any building and loan or similar association organized under the laws of any state and authorized to do business in this state. However, they are not included in the short list of exempt securities under which individuals selling on behalf of the issuer are excluded from the definition of an agent. Had this been a bank, savings institution, or trust company, then, as long as the individual was an employee of the institution, no registration would be necessary.

Persons Subject to State Registration An investor who trades for her own account is a(n):

Investors who trade solely for their own accounts are public customers who do not need to register.

Persons Subject to State Registration USATrade Securities, a FINRA member broker-dealer, is registered in 10 midwestern states. Regarding financial requirements, USATrade must meet those of

It may be assumed that a broker-dealer member of FINRA is also registered with the SEC. As such, when it comes to financial requirements, bonding, recordkeeping, and so forth, the SEC's requirements always trump those of the states.

Persons Subject to State Registration Under the Uniform Securities Act, which of the following is (are) investment advisers?

Jane's advice does not concern securities; banks are exempt from the definition; Tom's advice is not specific on the basis of the situation of each client (impersonal advice). While an attorney is generally excluded, Jill is giving investment advice for a fee in a manner that is not incidental to her legal practice.

Persons Subject to State Registration Andrew voluntarily leaves his position as an agent with Gibraltar Securities. Which of the following best describes the reporting requirements relative to this termination?

On termination of an agent from a firm with which he is registered, both the agent and the firm must notify the Administrator of such termination promptly.

Definitions Under the Uniform Securities Act- Which of the following is responsible for the administration of the USA in a state?

On this exam, the chief state regulator is the Administrator. The Securities and Exchange Commission is the federal agency, not state agency, that oversees and regulates securities on a national level.

Persons Subject to State Registration Under the USA, which of the following is considered a broker/dealer in a state?

Regardless of who its clients are, XYZ is considered a broker/dealer because it has an office in the state. Banks and trust companies, as well as agents, are specifically excluded from the definition of broker/dealer.

Persons Subject to State Registration Sarah has passed her Series 6 qualification exam but not the Series 63. As Jack's assistant, Sarah has frequent telephone contact with Jack's customers to whom she provides account information and current stock quotes. In this situation Sarah is:

Provided Sarah does not solicit business, offer advice to customers, or accept orders, she has not committed a violation of any act.

Persons Subject to State Registration Sharon Smith is an agent for Highwater Securities, a broker/dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act,

Regardless of whether the security is exempt or the transaction is exempt, an agent must be licensed in any state which is the domicile of a client placing an order (unless the agent is representing a broker/dealer that is exempt from registering in that state). An agent does not have to be registered as an agent in every state the B/D is, only in those where the agent expects clients to reside. Remember, there is no de minimis exemption for B/Ds and agents as there is for IAs and IARs.

Persons Subject to State Registration KAPCO Securities is a broker/dealer registered with the SEC doing business throughout the Midwest. KAPCO must meet the net capital requirements of:

SEC rules pre-empt those of the states. As long as the broker/dealer complies with the SEC's net capital rule, all state requirements are satisfied. It is state covered investment advisers who must meet the net worth (or capital) requirements of the state in which their principal office is located.

Persons Subject to State Registration First Growth Securities, Inc., a member of the Financial Industry Regulatory Authority (FINRA), has its main office in Illinois and is therefore:

Securities firms that are members of FINRA must register as broker/dealers in the states in which they conduct business. Under the USA, broker/dealers are firms engaged in the business of effecting security transactions in customer or proprietary accounts. A broker/dealer is not a registered investment adviser, although many broker/dealers own separate legal subsidiaries that are investment advisers. FINRA does not license its members to conduct business in the states; the state securities licensing agent is the state securities Administrator. Also, a broker/dealer is not an agent; an agent is a person who is employed by a broker/dealer to conduct securities transactions as a representative of the broker/dealer.

Persons Subject to State Registration Under the National Securities Markets Improvement Act of 1996 (NSMIA), states are prevented from:

The NSMIA streamlined much of federal and state securities law and specifically prevented dual regulation. As a result, states may not impose capital, custody, and recordkeeping requirements that exceed requirements under federal securities law. States can register securities and investment advisers that are not covered by the registration requirements of federal legislation.

Persons Subject to State Registration According to the Uniform Securities Act, the Administrator has the power to require persons wishing to register as an agent to: 7 of 112

The Administrator may require that, as a condition of registration, the agent post a surety bond (if given discretion by clients over their accounts) pay filing fees, and pass an examination that may be written, oral, or both. Minimum net capital orders apply to broker/dealers, not their agents.

Persons Subject to State Registration 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?

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. Since 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.

Persons Subject to State Registration Under the USA, each of the following is specifically excluded from the definition of a broker/dealer EXCEPT an:

The USA specifically excludes agent/issuers and banks, international or domestic, from the definition of a broker/dealer. Investment advisers also may have to register as broker/dealers if their method of operation requires it.

Definitions Under the Uniform Securities Act- What is the official designation of the person or agency that enforces the USA in each state?

The USA specifies that a state's securities Administrator has the authority to enforce the act in that state. A transfer agent is the person or corporation responsible for recording the names and holdings of registered security owners.

Definitions Under the Uniform Securities Act- Which of the following would meet the USA's definition of "person"?

The USA's definition of person is extremely broad. Just remember the three non-persons: minors, those who are deceased, and those declared mentally incompetent.

Definitions Under the Uniform Securities Act- Which of the following statements are TRUE?

The Uniform Securities Act is not the actual law of any state or territory. Rather, it is model legislation that states use as a guide in drafting their own securities laws. Those laws give the responsibility to the state Administrator for enforcement and administration of those laws. The NSMIA's purpose is to eliminate dual registration, not to require identical laws.

Persons Subject to State Registration- A Canadian broker/dealer is registered in Province Q. The firm has clients who vacation in several New England states and they would like to continue to do business with them while on their holidays. Under the Uniform Securities Act: 6 OF 112

The Uniform Securities Act provides for a form of limited registration for Canadian broker/dealers wishing to do business with their clients who are vacationing or otherwise traveling through the United States. In order to qualify for the limited registration, the B/D must be properly licensed in its home province and they're only dealing in the states is with an existing client.

Persons Subject to State Registration Under the Uniform Securities Act, a person whose business model is selling reports concerning specific securities to investors on a subscription basis will be defined as:

The definition of investment adviser includes any person who for compensation engages in the business of advising others as to the value of securities or the advisability of buying, selling, or investing in securities or who, as a part of a regular business, publishes securities analyses or securities reports for individual investors on a paid subscription basis.

Persons Subject to State Registration An agent with a broker/dealer is suddenly called out of town on a personal family matter. While away, the agent's unregistered sales assistant receives a phone call from an existing client wishing to purchase 200 shares of a listed stock. What would be the most appropriate action for the sales assistant to take?

The fact that the order is unsolicited does not preclude the rule that under no circumstances shall an unregistered individual accept and place orders.

Persons Subject to State Registration Which of the following statements regarding an agent's registration is most accurate?

The registration of an agent is not effective during any period when he is not associated with a particular broker/dealer registered under the Uniform Securities Act. Therefore, when the broker/dealer's registration is revoked, the agent's license is no longer in effect. The Administrator does not "hold" licenses. Agents must register in each state in which they wish to do business; there is no automatic registration other than for certain officers and partners when the firm first registers.

Definitions Under the Uniform Securities Act- Under the Uniform Securities Act, the term person would include:

The term person has an extremely broad definition. It is best to remember the three things that are not persons: minors, individuals who have been judged incompetent, and deceased individuals.

Persons Subject to State Registration As defined in​ the Uniform Securities Act, which of the following statements is TRUE regarding an agent?

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.

Persons Subject to State Registration A local customer of broker/dealer A is on vacation in Nevada. Broker/dealer A, who is registered and maintains an office in Florida, wishes to make the customer aware of an investment opportunity that has just become available. Which of the following is TRUE?

This is an example of the Uniform Securities Act's position that, in certain situations, a broker/dealer is not a broker/dealer. If a broker/dealer registered in one state contacts an existing customer in another state and that customer is not a resident of the other state, the broker/dealer is not defined as a broker/dealer in the state in which the contact is made and is therefore not subject to the laws of that state. Of course, this is only true when the broker/dealer does not have an office in that state.

Persons Subject to State Registration A woman wants to buy from an agent who is not registered in her state. She decides to use a friend's address in the state in which the agent is licensed. This action is:

This should be obvious. The new account form must always include your residence address.

Persons Subject to State Registration- If an agent representing a broker/dealer located in Utah wishes to solicit business in California, under the Uniform Securities Act, the agent would:

Typically, an agent, when representing the broker/dealer to solicit securities transactions, must register in every state where business is conducted even if the securities or the transactions are exempt.

Persons Subject to State Registration Under the NSMIA, state securities Administrators retain authority to:

Under the NSMIA, state Administrators are not prohibited from enforcing the antifraud provisions of state and federal securities laws. Investment companies and SEC-registered advisers are exempt from state registration but they may be required to pay state filing fees.

Persons Subject to State Registration Anyone who represents an issuer in effecting transactions between the underwriter and the issuer:

Under the Uniform Securities Act, a person representing an issuer in securities transactions between an underwriter and an issuer is not deemed an agent and is exempt from the agent registration requirements of the act.

Persons Subject to State Registration If Wallace resigned his position as an agent with Rockland Securities to work for Gibraltar securities, which of the following parties must notify the Administrator of Wallace's move?

When an agent with one broker/dealer resigns and affiliates with another, both broker/dealers and the agent must notify the Administrator of the change in registration. Notification is accomplished by filing Forms U-5 and U-4 with FINRA's CRD.

Persons Subject to State Registration It would not be a violation of the Uniform Securities Act for an applicant for registration as an agent to do which of the following while the application is pending?

While registration as an agent is pending, the applicant can take no active role in the sale or offering of securities. However, because fixed annuities are not securities, registration as an agent is not required. Yes, I know that an insurance license would be required, but, apparently, NASAA doesn't care about that.

Persons Subject to State Registration While an application for registration as an agent of a broker/dealer is still pending, that person would be permitted to:

While registration as an agent is pending, the applicant can take no active role in the sale or offering of securities. However, performing research on an internal basis does not involve contact with the public in a sales effort and would be permitted.

Persons Subject to State Registration Your friend is a licensed life insurance agent whose client wants to purchase a variable annuity. You are a licensed securities and insurance agent, and your friend wants you to sell the policy and split commissions with him. Splitting commissions:

You must be licensed in both insurance and securities to sell variable annuities or to split commissions. Commissions on securities transactions may only be split with registered agents of the same or affiliated broker/dealers.

Persons Subject to State Registration Under the Uniform Securities Act, a broker/dealer is defined as any person who:

A broker/dealer is any person, partner, officer, director, or securities firm engaged in the business of effecting securities transactions for the accounts of others (broker) or for its own account (dealer).

Persons Subject to State Registration- Under the Uniform Securities Act, the definition of a broker/dealer includes a(n)

A broker/dealer is defined as any person in the business of making trades in its own account or for the accounts of others.

Persons Subject to State Registration Under the Uniform Securities Act of 1956, which of the following statements is NOT true about registration of broker/dealers?

Although rare, there is nothing in the law that prevents a broker/dealer from being organized as a sole proprietorship. Remember, the term broker or dealer is defined with the phrase, "any person" and that term is very broad. Under the Securities Exchange Act of 1934, registrations become effective in 45 days, unless delayed by the SEC. Under the Uniform Securities Act, it is 30 days, although the Administrator may accelerate the process. The state may require an examination for all registered personnel and may require minimum standards of recordkeeping and net capital. However, those standards may not exceed those promulgated by the SEC.

Persons Subject to State Registration Which of the following statements regarding an agent's registration is CORRECT?

An agent of a broker/dealer is only active when that broker/dealer's registration is in force.

Persons Subject to State Registration An individual living in this state would like to become registered as an agent for a broker/dealer. Which of the following conditions must be met?

An individual may not be eligible for registration. For example, if the applicant has been convicted of a felony or securities-related misdemeanor in the past ten years, registration will be denied. An agent may only be registered with a broker/dealer that is also registered in this state. Agents have no minimum net worth requirements.

Persons Subject to State Registration Under the Uniform Securities Act, which of the following are elements in the definition of an investment adviser?

An investment adviser provides advice related to securities for compensation. The advice may be given orally or in writing.

Persons Subject to State Registration A federally chartered credit union is domiciled in Texas. The credit union is making an offering of securities in Nebraska. To comply with the Uniform Securities Act's exclusion from the definition of agent, any individual offering the security in Nebraska:

It is unusual to have an answer set up this way, but it does happen sometimes on the exam - "to comply with" and then there is no way to comply. First of all, the USA's exclusions from the t\definition of agent only apply to individuals working for the issuer, never broker/dealers. Then, the exclusion only applies when selling the following exempt securities in non-exempt transactions: ◾US government and municipal securities; ◾Securities of governments with which the United States has diplomatic relationships; ◾Securities of US commercial banks and savings institutions or trust companies (when not engaged in securities-related broker/dealer activities; ◾Commercial paper rated in the top three categories by the major rating agencies with denominations of $50,000 or more with maturities of nine months or less; and ◾Investment contracts issued in connection with employee's stock purchase, savings, pensions, or profit-sharing plans. Selling other exempt securities, such as those issued by a federal chartered credit union, on behalf of the issuer, requires one to become registered as an agent of the issuer. Don't confuse this with the exemption offered in the case of exempt transactions. In that case, regardless of whether the security is exempt or not, if an individual's only sales activity while representing an issuer is in exempt transactions, then the exclusion from the definition of an agent applies. It is obviously a much broader exemption than when selling exempt securities.

Persons Subject to State Registration Under the Uniform Securities Act, which of the following is an agent?

The Uniform Securities Act defines an agent as any individual (other than a broker/dealer) who represents a broker/dealer in effecting securities transactions.

Persons Subject to State Registration The Uniform Securities Act authorizes the Administrator to make certain demands of broker/dealers. In general, the Administrator would not require a broker/dealer to

The question asks for something that cannot be required by the Administrator. The other choices are requirements you should memorize. In general, the Administrator can require a bond only if registrants have custody or discretion.

Persons Subject to State Registration If two agents of a broker/dealer agree to work together as a partnership in soliciting business and they agree to split commissions, this practice is:

There is nothing in the USA that prohibits agents registered with the same broker/dealer from forming a partnership to conduct business or solicit clients. Under the USA, a principal of the firm need not audit the financial performance of such an arrangement. It is considered an unethical business practice for agents who are not licensed with the same or affiliated broker/dealers to share commissions.

Persons Subject to State Registration Which of the following is (are) required to register with a state Administrator?

Under federal law, publishers of bona fide newspapers, magazines, and financial publications of general and regular circulation are excluded from the definition of an investment adviser. Under state law, the publication of investment advice that is not based on the specific investment situation of each client excludes the publisher from the definition of an investment adviser. Based on these definitions, the publisher of an investment advisory newsletter providing only impersonal investment advice available only on a subscription basis is not required to register under federal or state law. 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 Uniform Securities 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 the state. A person employed by and supervised by a federal registered investment adviser who is not an investment adviser representative with natural person clients (as defined by federal law) is not required to register with state Administrators

Persons Subject to State Registration ABC Securities is a broker/dealer registered with the SEC and domiciled in Missouri. ABC Securities would not be defined as a broker/dealer in Nebraska under the Uniform Securities Act if it had no offices in Nebraska and:

A broker/dealer with no office in the state is not defined as a broker/dealer in that state if its only business is with institutions, other broker/dealers, and issuers when engaged in underwriting their securities. There is no de minimis exemption, and any solicitation of individuals into the state, whether in person or by radio, television, or any publication, requires registration in the state

Persons Subject to State Registration Which of the following must register as an agent?

An individual who represents a broker/dealer selling commercial paper must register under the USA. Though the securities (commercial paper) are exempt, the representative must be registered as an agent of the broker/dealer. The only exceptions from the definition of "agent" apply to those who sell on behalf of issuers either of exempt securities or in exempt transactions. The commercial paper and Treasury bonds are exempt securities and the bank CDs here referred to are not of the negotiable, jumbo variety sold in the money market and are not securities so no registration is required.

Persons Subject to State Registration Which of the following statements is NOT true?

A broker/dealer or investment adviser can be either a natural person (i.e., organized as a sole proprietorship) or a legal person (i.e., a corporation or partnership). There is no prohibition against an investment adviser representative also being licensed as an agent with a broker/dealer.

Persons Subject to State Registration Which of the following may be required by the Administrator to post surety bonds?

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.

Persons Subject to State Registration An agent under the USA is a(n):

Agents generally work for and represent a broker/dealer in conducting securities sales or transactions but are excluded from the definition of an agent if they have no place of business in the state and sell securities to an existing client who is not a resident of the state. Individuals employed by issuers to sell in nonexempt transactions are also included in the definition of "agent".

Persons Subject to State Registration An individual may NOT act as an agent for more than one broker/dealer:

An individual may only act as an agent for multiple broker/dealers that are affiliated with each other. If the broker/dealers are unrelated, an agent may not work for them unless the state securities Administrator, by rule or order, authorizes such employment.

Persons Subject to State Registration Under the Uniform Securities Act, the Administrator can require which of the following from broker/dealers and investment advisers?

Answer: C The act requires the filing of sales literature and advertising (as well as a prospectus) addressed or intended for clients or prospective clients, unless exempt under the act. In addition, it requires that books and records be kept for a minimum of three years for broker/dealers and five years for investment advisers and provides that an Administrator may require the filing of financial reports regarding the net worth of the firm. The act also requires broker/dealers and investment advisers to update any information filed with the state regarding any material change that takes place. Even federal covered investment advisers may be required to file copies of their SEC registration and amendments with state Administrators, along with filing fees.

Persons Subject to State Registration Which of the following persons are excluded from the definition of, or exempt from registration as, a broker/dealer under the Uniform Securities Act?

As long as a broker/dealer does not have an office in the state, it is possible to qualify for exclusion from the definition. The primary requirement for the exclusion is that the broker/dealer confines trading to financial institutions or other broker/dealers. Unlike with investment advisers, there is no de minimis exemption for broker/dealers. Trust companies are excluded from the definition of broker/dealer.

Persons Subject to State Registration A broker/dealer is registered in State X. It has no offices in State Y, although it does do business in that state. Under the Uniform Securities Act, registration in State Y is required if the client is a(n):

Broker/dealers must always register in a state if they do business there with noninstitutional clients, regardless of the nature of the individual's employer.

Persons Subject to State Registration Under the USA, which of the following statements regarding the posting of surety bonds is NOT true?

Firms that maintain net capital in excess of minimum requirements may be exempted from the requirement of posting surety bonds. Agents exercising discretion over client accounts may be required to post a surety bond.

Persons Subject to State Registration Mountain High Securities is a broker/dealer registered in Wyoming and Colorado with their principal office located in Colorado. With reference to the Uniform Securities Act, it would be correct to state that:

For B/Ds registered in more than one state (who are not SEC Registered and, in this question, one must assume they are not), meeting the requirements of their "home" state, in this case Colorado, is sufficient anywhere they are registered. However, one of the things the Administrator does not do is approve or disapprove of the recordkeeping method used. If they were SEC registered, then all they have to do is meet the SEC's requirements.

Persons Subject to State Registration If an agent feels that his secretary is underpaid and decides to split his commissions on an 80%/20% basis, this practice is:

If the secretary is a registered agent, then the agent may split commissions, but only if the arrangement is approved by the firm's principal.

Persons Subject to State Registration Which of the following statements regarding financial requirements that may be imposed by the Administrator are TRUE?

Individuals registered as agents may be required to be bonded, but these individuals, as well as those registered as investment adviser representatives, never have to meet net worth or net capital standards; those are for broker/dealers and investment advisers only. The USA does allow a broker/dealer or investment adviser to post a bond instead of demonstrating a certain net capital or net worth.

Persons Subject to State Registration Which of the following activities are violations of the Uniform Securities Act?

It is a violation under the USA to solicit customers for unregistered, nonexempt securities (such securities should be registered) or to sell securities in states other than where the agent of a broker/dealer is registered. This is true even if, as in this choice, the securities are exempt from registration. Payment of commissions is irrelevant; registration is required in any case. Arbitrage, the simultaneous buying and selling of the same security in different markets to take advantage of different prices, is not a violation. An individual who sells certain exempt securities, such as government securities, as a representative of the issuer, does not have to register as an agent.

Persons Subject to State Registration Which of the following is included in the definition of a broker/dealer under the Uniform Securities Act?

Only one who is in the business of effecting transactions for his account or on behalf of others fits the definition of a broker/dealer. All of the other choices are specifically excluded from the definition.

Persons Subject to State Registration Sharon Smith is an agent for Highwater Securities, a broker/dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act,

Regardless of whether the security is exempt or the transaction is exempt, one must be licensed in any state which is the domicile of a client placing an order. One does not have to be registered as an agent in every state the B/D is, only in those where she expects clients to reside.

Persons Subject to State Registration Which can be substituted for a surety bond?

The Uniform Securities Act states that cash or securities may be used instead of a surety bond.

Persons Subject to State Registration Joan, who has a PhD in economics, has been employed as an agent by Gibraltar Securities for the past 15 years. Missing academic life, she resigns from the broker/dealer and accepts a position as an economics professor at a state university. Which, if any party, is required to notify the state securities Administrator of this change?

The license of an agent expires when she ceases to be employed by the broker/dealer or issuer for whom she was previously licensed. Both the agent and the former broker/dealer are required to notify the Administrator promptly.

Persons Subject to State Registration According to the USA, a person must register as a broker/dealer in a state if he had which of the following?

The term "broker/dealer" excludes a person who has no place of business in the state, who effects transactions exclusively through issuers, other broker/dealers or institutions, or who directs an offer in the state to an existing customer. When clients move from one state to another, the broker/dealer may continue to do business with that client without registering in that state for up to 30 days. Once the client has been a new resident for more than 30 days, the broker/dealer (and any agents handling that account) must register in that state or cease doing business with that customer. If a broker/dealer has a place of business in the state, regardless of the nature of its clients, it must register with the Administrator.

Persons Subject to State Registration Which of the following would be an agent under the terms of the Uniform Securities Act?

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.

Persons Subject to State Registration If XYZ is a registered broker/dealer with its lone office located in Texas, under which of the following circumstances must it also register in Louisiana?

Under the Uniform Securities Act, broker/dealers must register in any state that they engage in securities transactions with individual investors. The net worth of the individual is irrelevant. Broker/dealers with no offices in the state who engage in transactions in the state with certain institutional investors, such as insurance companies or investment companies, need not register in that state. Transactions between the issuer and a broker/dealer are exempt transactions.

Persons Subject to State Registration State securities law generally limits agents to employment with a single broker/dealer unless:

Unless the broker/dealers are under common control, the USA generally limits agents to single employment unless the Administrator, by rule or order, authorizes multiple affiliations.

Persons Subject to State Registration When an agent transfers employment from a broker/dealer registered with the SEC to a broker/dealer registered solely in this state:

When an agent transfers employment from any broker/dealer to any other broker/dealer, both the agent and the broker/dealers must notify the state securities Administrator.

Persons Subject to State Registration All of the following statements about an agent's need to be registered in a state are correct EXCEPT:

- registration is required in each state in which the employing broker/dealer has a place of business. -The fact that the broker/dealer does business in a state has nothing to do with a specific agent. Many broker/dealers are registered in all states; very few agents are. Agents must register in each state where they are selling or offering securities, even if the security or the transaction is exempt. That exemption only applies to the need for the security to be registered, not the agent. Soliciting the sale of securities by telephone is considered making an offer and there is no de minimis exemption available. Finally, registration is not required when making use of the "snowbird" exemption.

Persons Subject to State Registration All of the following statements regarding securities brokerage firms are true EXCEPT:

- they employ only registered investment adviser representatives. Agents work for broker/dealers, while investment adviser representatives work for investment advisers.

Definitions Under the Uniform Securities Act-The Securities Act of 1933 covers all of the following EXCEPT

-blue-sky laws -The purpose of the Securities Act of 1933 is to provide investors with full disclosure about a new securities issue. The act is federal in scope, whereas blue-sky laws refer to state securities regulations.

Definitions Under the Uniform Securities Act-Blue-sky laws pertain to all of the following EXCEPT the:

-regulation of securities trading in other countries. -Blue-sky (Uniform Securities Act) laws refer to state securities regulation in the state. Blue-sky laws require new securities to be registered with the state and regulate trading of securities in a state.

Definitions Under the Uniform Securities Act- A discussion referring to blue-sky laws would include all of the following EXCEPT:

-the Securities Act of 1933 and Securities Exchange Act of 1934. -Blue-sky laws are state securities laws. The Securities Act of 1933 and the Securities Exchange Act of 1934 are federal securities laws.

Persons Subject to State Registration Secure Wealth Advisers has $21 million in assets under management and is currently registered and has offices only in North and South Dakota. While spending the winter in Arizona, 3 of their North Dakota and 4 of their South Dakota clients change their residences to Arizona. The firm would be permitted to continue to service these clients:

30 days after existing clients have changed state of residence, an investment adviser must either register with that state or no longer transact business with them. The de minimis requirement is not based on the state from which the clients are moving.

Persons Subject to State Registration If an incorporated entity sells nonexempt securities to public customers, receives a commission on the sale of the securities, and pays commissions to the employees who sell them, according to the USA, the corporation is a:

A broker/dealer is an entity in the business of effecting transactions in securities for its own account or for the accounts of others, and pays its sales agents commissions. Under the USA, the broker/dealer must register in the states where business is transacted.

Persons Subject to State Registration Under the Uniform Securities Act, which of the following is a broker/dealer?

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.

Persons Subject to State Registration One of the terms defined in the Uniform Securities Act is "broker/dealer". Which of the following is NOT included in that definition?

A broker/dealer is defined as a person in the business of effectuating securities transactions for its own account or the account of others. Those employed to open new accounts are defined as agents. Those seeking to raise new capital are issuers, and a person who provides investment advice is an investment adviser.

Persons Subject to State Registration Under the Uniform Securities Act, which of the following statements are TRUE?

A broker/dealer may be structured as a business entity or a sole proprietorship. Its primary business is effecting securities transactions for clients or for its own account. A person may be registered as both a broker/dealer and an investment adviser at the same time. Although a person is not a broker/dealer in this state if there is no office in this state and transactions within this state are limited to issuers, other broker/dealers and institutions if the broker/dealer wishes to offer securities to individuals, it must register in the state.

Persons Subject to State Registration A broker/dealer having no place of business in a state is not required to be registered in that state if the broker/dealer:

A broker/dealer must be registered in every state it sells or offers to sell securities, unless an exemption is available. If a broker/dealer has no office in a particular state and no business is done in that state other than with institutional clients, registration there is not required.

Persons Subject to State Registration If you are registered as an agent for a broker-dealer in State Y and you conduct business as an agent of theirs in State Z, a state in which you are not registered as their agent, you:

Agents must be registered in each state where selling or offering to sell securities unless an exemption is available. Failure to do so exposes the agent and the broker-dealer to fines and possible disciplinary action. In addition, the individual could have his registration revoked where he is registered, and the broker-dealer could be required to offer customers the right to rescind any securities transactions.

Persons Subject to State Registration- 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?

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.

Persons Subject to State Registration 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:

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.

Definitions Under the Uniform Securities Act-As defined in the Uniform Securities Act, the term person would include:

All of these would be included in the USA's definition of person. Not included are a minor, a deceased person, or someone judged mentally incompetent.

Persons Subject to State Registration- Under the Uniform Securities Act, which of the following is responsible for notifying the Administrator when an agent changes his place of employment from one broker/dealer to another?

All three parties must notify the Administrator.

Persons Subject to State Registration Under the Uniform Securities Act, the term broker/dealer would include:

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 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.

Persons Subject to State Registration Which of the following are TRUE under the Uniform Securities Act?

An agent can only conduct business when associated with a broker/dealer. An agent's license could be suspended without the broker/dealer's license being suspended. To suspend a license, the Administrator must base the decision on the public interest and prohibited conduct. The Administrator cannot suspend or revoke licenses because he does not approve of the type of business a broker/dealer may engage in. Licenses must be issued before associated persons can accept orders.

Persons Subject to State Registration An agent registered in one state may solicit business in another state provided:

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.

Persons Subject to State Registration Under the Uniform Securities Act, an agent registered in one state may transact business in another state in which he is not registered with which of the following?

An agent may conduct business in a state in which he is not registered if an existing client is visiting in that state or if the client has moved to the state within the past 30 days.

Persons Subject to State Registration Which of the following statements are TRUE?

An agent must be registered in the state in which a security is advertised and solicited. A secretary who takes orders for the broker/dealer's clients must be registered. If the state Administrator specifically grants an exception, an agent may be registered with two unrelated broker/dealers. The fact that a broker/dealer is registered in a state does not qualify the agent for sales unless he is also properly licensed in that state.

Persons Subject to State Registration When a broker/dealer's registration under the Uniform Securities Act is revoked, which of the following occur?

An agent's license is only effective as long as that agent is associated with a registered broker/dealer. The agent's registrations are neither held in escrow until a hearing nor does the Administrator choose a broker/dealer to oversee activities of the agents until the broker/dealer's registration is reinstated

Persons Subject to State Registration Which of the following must register as an agent when representing a broker/dealer?

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.

Persons Subject to State Registration Under Section 401 of the Uniform Securities act, the term "agent" does not include an individual who represents an issuer in effecting transactions in a security

An individual representing an issuer in the sale of that issuer's security is not defined as an agent if the security is ◾issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution, or trust company organized and supervised under the laws of any state; ◾issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency of the foregoing; ◾any security issued or guaranteed by Canada, any Canadian province, any political subdivision of any such province, any agency of the foregoing, or any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; ◾a promissory note, draft, bill of exchange or bankers' acceptance that evidences an obligation to pay cash within 9 months after the date of issuance, is issued in denominations of at least $50,000, and receives a rating in one of the 3 highest rating categories from a nationally recognized statistical rating organization; or ◾any investment contract issued in connection with an employees' stock purchase, savings, pension, profit-sharing, or similar benefit plan if the Administrator is notified in writing thirty days before the inception of the plan It is not just any exempt security that qualifies the individual for the exemption - only the five listed above. A confusing point is that the individual is not an agent when the sales are made in any exemption transaction with no exceptions.

Persons Subject to State Registration- Which of the following persons is defined as an agent by the Uniform Securities Act?

Anyone who solicits or receives an order while representing a broker/dealer is an agent. Silent partners, administrative personnel, and executives of broker/dealers with no sales responsibilities are not agents under the terms of the USA because they do not solicit or receive orders.

Persons Subject to State Registration An individual currently registered in State A would not have to register as an agent in State B if he:

As long as the agent is properly registered in the customer's state of residence, (and he must be if this is an "existing" customer), transactions made in another state being visited by the client do not require the registration of the agent. A customer living in State B can only be called by an agent registered in that state, whether or not the securities are exempt. There is no de minimis exemption for broker/dealers or agents.

Persons Subject to State Registration Mary, who is licensed as an agent in State A, got a promotion and will turn her clients over to Julie, who is licensed only in State B. Before Julie can take over the accounts, she must:

For an individual to sell securities in a particular state, she must be licensed in that state unless an exemption applies. There is nothing in the USA that requires client consent when the agent of record on the account changes.

Persons Subject to State Registration Hal owns a successful plumbing business. If he engages in a substantial amount of short-term trading in stocks for his own benefit, he would be considered a(n):

Hal is not in the business of engaging in securities transactions, he is in the plumbing business. Thus, he is an individual investor rather than a dealer. As the question provides no information as to Hal's annual income or net worth, we have no indication that he is an accredited investor. Hal is a plumber rather than a financial institution similar to a bank or an insurance company.

Persons Subject to State Registration Under the Uniform Securities Act, an employee of a licensed broker/dealer firm is allowed to sell securities as an unregistered agent when:

It is unlawful for a person to transact business as a representative of a broker/dealer unless that person is registered as an agent, even if the securities are exempt.

Persons Subject to State Registration- According to the USA, under what circumstances is an employee of a licensed broker/dealer in a state allowed to sell exempt securities as an unregistered agent?

It is unlawful for a person to transact business on behalf of a broker/dealer unless that person is registered as an agent in the state. Only individuals selling on behalf of the issuer may qualify to be exempt from registration as an agent.

Persons Subject to State Registration XYZ Securities is a broker/dealer based in Wisconsin with offices in no other state. In addition to its Wisconsin clients, XYZ has 30 retail customers living in Illinois. During the winter, if 10 existing customers vacation in Florida for up to 7 weeks at a time, XYZ Securities is a broker/dealer in:

Under the USA, XYZ Securities is a broker/dealer in Wisconsin because it maintains an office there. XYZ Securities is also a broker/dealer in Illinois because with 30 Illinois retail (non-institutional) customers, registration is required even if there is no physical office in Illinois. Because none of XYZ's clients has taken up residence in Florida, such clients are transients rather than residents. Thus, XYZ Securities is not a broker/dealer in Florida subject to the state's registration requirements

Persons Subject to State Registration If a broker/dealer in Iowa addresses 15 solicitations to potential customers in the nearby Nebraska town of Middleton, and the return address on the mailings is that of the broker/dealer's satellite office in Middleton, which of the following statements is TRUE?

Under the USA, a broker/dealer must register in any state in which it has an office or conducts business with noninstitutional clients.

Persons Subject to State Registration- A publicly traded corporation offers its employees an opportunity to purchase shares of the company's common stock directly from the issuer. A specific employee of the company is designated to process any orders for that stock. Under the USA, the employee:

Under the USA, an individual is an agent when effecting transactions with an issuer's existing employees if commissions or other remuneration related to the sale are paid. Therefore, there are cases where the employee would have to register as an agent. When the individual is paid a straight salary for this work, no registration is required.

Definitions Under the Uniform Securities Act- Which of the following is NOT a person as defined by the Uniform Securities Act?

Under the Uniform Securities Act, the term "person" has a specific meaning. "Person" refers to an individual, corporation, association, joint-stock company, trust, unincorporated organization, government, or political subdivision of a government. A minor child, is not a person legally capable of entering into contracts. Adults must open custodial accounts on behalf of minor children.

Persons Subject to State Registration Under the Uniform Securities Act, the Administrator may require a broker/dealer to post a surety bond of:

Unlike investment advisers where the USA specifies posting a surety bond in the amount of $35,000, the Uniform Securities Act does not specify an amount for broker/dealers. However, the NSMIA states that the Administrator may not require a broker/dealer be bonded in an amount above that set by the SEC. Furthermore, bonds will not be required of broker/dealers that maintain a specified net capital.

Persons Subject to State Registration When a broker/dealer registers with the state Administrator, which of the following persons are automatically registered as agents of the broker/dealer in the state?

When a broker/dealer registers with the state securities Administrator, those persons who are partners, directors, or officers are automatically considered agents in the state.

Persons Subject to State Registration The Administrator has just notified Rockland Securities that its application to operate as a broker/dealer in this state is now effective. Which of the following parties would be considered registered?

When a business registers as a broker/dealer with the Administrator, the firm's, its officers, and directors are simultaneously registered as agents along with the firm's effective registration as a broker/dealer. Individuals employed for the purpose of representing the firm as agents are considered to be applying for registration after the firm's license is effective.

Persons Subject to State Registration An agent of a broker/dealer registered in Illinois terminates his employment to accept a new position with broker/dealer who is also registered in Illinois. If his previous employer fails to notify the state Administrator of the termination, the agent must:

When an agent begins or terminates a connection with a broker/dealer, the agent as well as the broker/dealer must promptly notify the Administrator. The agent has no responsibility to insure that the previous employer has notified the Administrator.

Persons Subject to State Registration Broker-dealers, investment advisers, agents, and investment adviser representatives who use the internet, the World Wide Web, and similar proprietary or common carrier electronic systems to distribute information on available products and services through certain communications made on the internet, directed generally to anyone having access to the internet and transmitted through postings on Bulletin Boards, displays on home pages, or similar methods, are not deemed to be transacting business in this state for purposes of the Uniform Securities Act solely on the basis of that fact if which of the following conditions are observed?

With the growth of the internet, NASAA developed an interpretive order concerning broker-dealers, investment advisers, agents, and investment adviser representatives using the internet for general dissemination of information on products and services. The primary focus of this order was to set the parameters under which securities professionals could communicate on the internet or use their websites in states in which they were not registered. Meeting all of the requirements stated in the answer is necessary.