Ch 1 The Uniform Securities Act - Definitions
According to the Uniform Securities Act, which of the following are defined as securities? U.S. Government bonds Limited partnership interests certificates of deposit on a security shares of stock issued by a corporation [A]All choices [B]I, II, III only [C]III, IV only [D]II, IV only
[A]All choices All choices offered are classified as securities under the Uniform Securities Act
All of the following would be considered to be excluded from the definition of an Investment Adviser under the Uniform Securities Act except? [A]An IA who gives advice about bank securities for an advisory fee [B]Accountants whose advice is incidental to the practice of their profession as an accountant [C]A college professor who teaches courses on finance and discusses specific securities during class [D]A bank which charges a fee for advice provided to clients
[A]An IA who gives advice about bank securities for an advisory fee Lawyers, accountants, teachers, and engineers whose advice is incidental to the practice of their profession would be excluded from the definition of Investment Adviser. As well, banks, savings institutions, trust companies, and investment companies would also be exempt, even when charging fees. Publishers of general advice in a newspaper would also be exempt. An IA who received compensation for giving advice related to securities would have to be registered as an Investment Adviser.
In regards to the Uniform Securities Act, which of the following statements is/are true? A broker-dealer's primary business is effecting securities transactions for clients or for the broker-dealer's own account. A broker-dealer may be either an individual or a firm. A broker-dealer may not also be registered as an investment adviser. [A]I and II [B]I and III [C]II and III [D]I, II, and III
[A]I and II Under the Uniform Securities Act, a broker-dealer means any person engaged in the business of effecting transactions in securities for the accounts of others or for his own account.The Uniform Securities Act uses the term "person" within the definition of a broker-dealer, and the definition of "person" can include both individuals and business entities (firms).A broker-dealer is not automatically also registered an investment adviser when they register as a broker-dealer, but it is false to state that a broker-dealer may "not" also be registered as an investment adviser. Many broker-dealer firms are also registered as investment advisory firms.
According to the Uniform Securities Act, which of the following is a federal covered security? [A]Pennsylvania state bonds offered outside of Pennsylvania [B]A fixed annuity [C]A futures contract [D]Securities issued by a non-profit organization
[A]Pennsylvania state bonds offered outside of Pennsylvania Under the definition of federal covered security municipal bonds (Pennsylvania) offered outside the state of issue are included whereas the other choices are NOT federal covered.
Which of the following are Federal Covered Securities assuming state fees have been paid in a timely manner? Maine state bonds offered in Florida Securities sold without a public offering Securities listed on the New York Stock Exchange Los Angeles City Bonds offered only in California [A]I and IV [B]II and III [C]I, II, and III [D]I, II, III, and IV
[C]I, II, and III Interstate Municipal bonds (meaning municipal bonds issued in more than one state) are Federally Covered Securities, so a Maine bond being sold in Florida would be a Federal Covered security because it is sold in more than one state.Intrastate Municipal bonds (meaning municipal bond issued in one state) are NOT Federally Covered Securities, so a Los Angeles bond sold in CA would NOT be a Federal Covered security because it is sold in one state only. Securities sold without a public offering is a Private Placement (Reg D), which is a Federally Covered Security. Securities listed on the NYSE, are registered with the SEC, and are also Federally Covered.
According to the Uniform Securities Act, which of the following would be specifically excluded in the definition of a broker-dealer? [A]Investment Advisers and Investment Adviser Representatives [B]Accountants [C]Lawyers [D]Issuers
[D]Issuers Of the choices offered the only one that is "specifically" excluded from the definition of broker-dealer is an issuer.
Disclosure to clients must be made to which of the following clients when an agent of a broker-dealer is also an investment adviser representative (IAR)? [A]Disclosure must be made in situations where, based on advice from the IAR, a client who purchases a security will also pay commissions on the execution of trades to the broker-dealer who is also the IA. [B]Disclosure by means of a financial statement must be made to the client regarding the IAR's financial condition. [C]Outside of investment advisory services, disclosure must be made as to the dollar amount of commissions received from other investment activities by the IAR. [D]Disclosure must be made by the IAR if compensation agreements with other clients differ significantly from the standard practice.
[A]Disclosure must be made in situations where, based on advice from the IAR, a client who purchases a security will also pay commissions on the execution of trades to the broker-dealer who is also the IA. Disclosure must be made when an IAR makes a recommendation to execute a trade and also receives a commission as the broker-dealer when the trade is executed.
According to the Uniform Securities Act, which of the following is NOT an Investment Adviser Representative? [A]An associate in an SEC-registered investment advisory firm who has a place of business in the state and manages the account of a single client [B]A clerk employed by a state-registered investment advisory firm [C]A director in a state-registered investment advisory firm who determines specific recommendations for clients [D]A vice president of a state-registered investment advisory firm who supervises employees who solicit clients for the firm[B]A clerk employed by a state-registered investment advisory firm
[B]A clerk employed by a state-registered investment advisory firm Persons who provide clerical services only do not have to be registered and are not included in the definition of an Investment Adviser Representative.
Which of the following entities would be required to register as an Investment Adviser under the Uniform Securities Act? [A]An individual who is registered with the Administrator as an investment adviser representative. [B]A person who, for compensation, provides investment advice solely on investment companies such as mutual funds. [C]Lawyers, accountants, engineers, or teachers whose financial advice relates to the practice of their profession and is incidental.[D]A bank, savings institution, or trust company that charges a fee for financial advice.
[B]A person who, for compensation, provides investment advice solely on investment companies such as mutual funds. All of the entities listed qualify for exemption from the definition of an investment adviser under the Uniform Securities Act except for the person who charges a fee to provide financial advice on investment companies such as mutual funds. This person would be providing advice on securities for a fee and would therefore fall under the definition of an investment adviser unless the person qualified for some other exemption.
Under the Uniform Securities Act, which of the following would be included in the definition of a broker-dealer? A firm, who for compensation, directly engages in the business of advising others as to the value of securities. A firm who engages in the business of effecting transactions in securities for the accounts of others. A firm who engages in the business of effecting transactions in securities for the firm's own account. A firm, who for compensation, engages in the business of advising others as to the value of securities through publications or writings. [A]I & IV [B]II & III [C]I & III [D]II & IV
[B]II & III The USA's definition of Broker-dealer states that a broker-dealer is any person in the business of effecting transactions in securities for the accounts of others or for its own account.
Which of the following are included in the definition of an "Investment Adviser" under the Uniform Securities Act: a bank which for compensation advises others as to the value of securities a person who for compensation engages in the business of advising others as to the value of securities a broker-dealer who for no special compensation engages in the business of advising others through publications as to the value of securities a person who for compensation and as part of regular business issues a report and recommendations concerning securities to each client [A]I, II [B]II, IV [C]I, III, IV [D]II, III, IV
[B]II, IV Choice I is exempt from the definition because it is a bank. Choice II is included in the definition of an Investment Adviser. Choice III would not be considered an investment adviser since no compensation is being paid. Choice IV is included in the definition of an Investment Adviser.
A farmer in Montana receives a copy of the Wall Street Journal which contains advertisements offering the sale of 100,000 shares of XYZ Corporation. The Wall Street Journal is not published in Montana. Given the facts, which of the following is true according to the Uniform Securities Act? [A]An offer to sell was made in Montana. [B]No offer to sell was made in Montana. [C]An offer to buy was made in Montana if the farmer was a subscriber of the Wall Street Journal. [D]An offer to buy was made in Montana.
[B]No offer to sell was made in Montana. Since the Wall Street Journal is distributed nationwide (general circulation), it would not have been considered to be an offer to sell in the state of Montana.
Under the Uniform Securities Act, are endowment policies included in the definition of a security? [A]Yes, they are defined as a security because they can act like a savings plan. [B]No, they are not defined as a security because they are a specialized insurance product. [C]Yes, they are defined as a security because they can be used to meet specific needs financial needs of clients. [D]They may or may not be defined as a security, depending on the decision of the State Administrator.
[B]No, they are not defined as a security because they are a specialized insurance product. In the USA, the definition of a "security" does not include endowment policies. An Endowment policy is a specialized insurance product that acts like a savings plan and can be used to meet specific goals like a child's educations.
Under the Uniform Securities Act a person who, for compensation, in the form of a fee, engages in the business of advising others, either directly or indirectly as to the value of securities or as to the advisability of investing in, purchasing or selling securities is defined as which of the following? [A]An Analyst [B]A Principal [C]An Investment Adviser [D]An Agent
[C]An Investment Adviser An Investment Adviser is a person who, for compensation, in the form of a fee, commission, or hourly wage, engages in the business of advising others, either directly or indirectly as the value of securities or as to the advisability of investing in, purchasing or selling securities.
Which of the following is the Uniform Securities Act definition of a "guarantee"? [A]Guaranteed means any guarantee, by an issuer, investment adviser, or broker-dealer. [B]Guaranteed means that regardless of actual performance, the client will, at a minimum, receive their principal back. [C]Guaranteed means guaranteed as to payment of principal, interest, or dividends. [D]Guaranteed means that regardless of actual performance, the client will, at a minimum, receive their principal and the guaranteed return.
[C]Guaranteed means guaranteed as to payment of principal, interest, or dividends. The Uniform Securities Act definition is, "Guaranteed means guaranteed as to payment of principal, interest, or dividends."
Which of the following is true under the Uniform Securities Act? [A]Any broker-dealer who gives investment advice is considered an investment adviser even though such advice is incidental to the conduct of his business and he receives no special consideration.[B]A publisher of a financial magazine with a paid circulation is considered to be an investment adviser. [C]Lawyers, teachers, engineers and accountants who perform advisory services incidental to the practice of their profession is not considered to come within the definition of investment adviser. [D]The term investment adviser includes banks.
[C]Lawyers, teachers, engineers and accountants who perform advisory services incidental to the practice of their profession is not considered to come within the definition of investment adviser. Choice "C" is the only true statement of the four. Lawyers, teachers, engineers, and accountants whose performance of advisory services is incidental to the practice of their profession would not have to be registered as an investment adviser.
According to the Uniform Securities Act, a corporation would not be an investment adviser if it: [A]was located outside the state in which the advice was rendered and only charged a fee periodically. [B]charges less than $600 per year in advisory fees. [C]gives advice exclusively on fixed annuity contracts. [D]gives advice exclusively on registered mutual funds.
[C]gives advice exclusively on fixed annuity contracts. Fixed annuity contracts do not fall under the definition of a security according to the USA. The corporation would not be required to be an investment adviser when dealing in fixed annuities only.
Which of the following is considered to be a broker-dealer under the Uniform Securities Act? [A]A savings bank. [B]An issuer selling its own securities to the public. [C]A bank executing orders for its trust accounts. [D]A person engaged in effecting transactions in securities for the accounts of others.
[D]A person engaged in effecting transactions in securities for the accounts of others By definition the term "broker-dealer" means any person (this is a broad definition of a person and does not necessarily mean human) engaged in the business of effecting transactions for the accounts of others (clients) or for their own account (firm).
According to the Uniform Securities Act, which of the following is excluded from the definition of an "Investment Adviser"? [A]An individual whose reports relate only to municipal securities [B]A broker-dealer who is a member of FINRA [C]A person whose investment analysis relates only to securities [D]A teacher whose investment advice is solely incidental to the practice of his/her profession
[D]A teacher whose investment advice is solely incidental to the practice of his/her profession When the investment advice is "solely incidental to the practice of the profession" of a lawyer, accountant, teacher, and engineer (LATE) those persons would be excluded from the definition of an investment adviser.
According to the Uniform Securities Act, the definition of "fraud" would include which of the following? fraud pertaining to federal securities statutes fraud pertaining to states securities statutes common law deceit [A]II only [B]I, II [C]II, III [D]I, II, III
[D]I, II, III All choices offered are included in the Uniform Securities Act's definition of "fraud".
Which of the following would NOT be considered a bona fide "gift" of securities? A corporation gives preemptive rights to existing shareholders in relation to an existing issue of common stock. After receiving several assessments, a grandfather gives 100 shares of assessable stock to his adult grandchild for his birthday. As part of his last will and testament, an uncle gives regular common stock in a widely known corporation to his adult niece upon passing away. During a bond issuance, a corporation gives warrants to those buying the bonds in order to make the issuance more marketable. [A]I and II only [B]I and IV only [C]II, III, and IV only [D]I, II, III, and IV
[D]I, II, III, and IV All of the items listed would not be considered bona fide gifts. A corporation is required to distribute preemptive rights if a rights clause is involved in the issuance of common stock. A "gift" of assessable stock is not considered bona fide, because the person giving the stock alleviates the liability of future assessments. A gift through a last will and testament is considered an inheritance, not a bona fide gift. Last, a corporation issuing warrants in connection with a bond issuance is not a gift if the warrants are only given with the purchase of the bonds. As well, warrants are considered to be an offer for common stock, since they entitle the holder to purchase shares of common stock at a set price.
Under the Uniform Securities Act, in order for a person to sell a security that person must be registered. Which of the following securities would be included in the USA's definition of a Security? Futures contracts on soybeans Common stock issued by a publically traded company Variable Annuity Contract Interest in oil, gas, or mining titles [A]I only [B]II & III only [C]III & IV only [D]II, III, IV only
[D]II, III, IV only Of the items listed, Futures contracts on soybeans would be the only item that is not included in the definition of a security.
Under the Uniform Securities Act, which of the following would NOT be an offer or a sale? [A]A contract of sale for a security [B]A gift of assessable stock [C]The sale of a warrant [D]Negotiations for a merger
[D]Negotiations for a merger Negotiations could result in an offer to sell or an offer for sale, but the "negotiation" of a deal is not an offer.
ABC Broker-Dealer Firm is located in Wyoming and sells securities only to institutional clients in Nevada. Would ABC Broker-Dealer Firm be required to register in Nevada? [A]Yes, because the firm is doing business in the State of Nevada [B]Yes, because the firm only has institutional clients in Nevada [C]No, because the firm has already registered in Wyoming [D]No, because the only clients that the firm has in Nevada are institutional clients and the firm has no place of business in Nevada
[D]No, because the only clients that the firm has in Nevada are institutional clients and the firm has no place of business in Nevada Under the USA, it is unlawful for a firm to transact business in a state as a broker-dealer unless it is registered in the state or exempt from registration. The exemption applies to broker-dealers who sell exclusively to sophisticated institutional investors including registered investment companies.
According to the Uniform Securities Act, there is an exemption from registration for investment advisers who solely service institutional investors. Institutional investors are defined as [A]people who have assets totaling more than $2,000,000. [B]people who directly purchase their inventories of securities from issuers. [C]people who are solely involved in the purchase of securities that are exempt. [D]people who have been designated as such by the state Administrator either by rule or order.
[D]people who have been designated as such by the state Administrator either by rule or order. Institutional investors are those who have been designated as such by the rule or order of the state Administrator.
