Chapter 1
Which of the following persons are investment advisers subject to state registration? A) financial planner or other person that provides investment advisory services to others for compensation B)A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation C)Any other person that the Administrator excludes by rule or order D)A federal covered investment adviser
A financial planning firm or other person that, as an integral component of other financially related services, provides investment advisory services for compensation is an investment adviser. A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation, a federal covered investment adviser, or any other person that the Administrator specifies by rule or order, are excluded from the definition of an investment adviser.
BD incurs a liability that materially affects its net capital
Prompt notification is required when a broker-dealer faces a potential financial impairment.
Under the Uniform Securities Act, an individual representing an issuer in the sale of which of the following securities would NOT have to register as an agent? I.Short term highly rated commercial paper II.Municipal bond III.U.S. bank issue IV.Investment contract issued in connection with an employee's stock purchase, savings, pension, profit-sharing, or similar benefit plan
I, II, III, IV
require to have Series 63 license
Passing the Series 63 exam (Uniform Securities State Law) is required before an agent may sell securities to the public as a representative of a broker-dealer.
Which of the following transactions would constitute a violation of the Uniform Securities Act?
Representing an issuer of certain exempt securities (the municipal bond) or of a non-exempt security that is sold in an exempt transaction, (choice I) does not require registration. If the sale is of an unregistered nonexempt security, the only way the individual could sell on behalf of the issuer without being an agent is if it was in an exempt transaction, one of which is the limited offering exemption (private placement). That applies when there is a maximum of 10 offers to retail clients within a 12 month period and choice II uses the term, sells. Without knowing the number of offers, we cannot determine if the individual's actions qualify as an exempt transaction. In the case of doubt, assume they don't. Even though the Canadian bond is an exempt security, any agent must be registered in the state(s) in which the security is sold - the exemption applies to the security, not the agent.
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,
Sharon must be registered in State X in order to accept the order; 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 BD is, only in those where she expects clients to reside.
Administrator able to enter the broker-dealer's premises
The Administrator does not have to give notice before conducting an audit of a firm. That is why it is known as a surprise audit.
Single broker-dealer unless
The USA generally limits agents to single employment unless the Administrator, by rule or order, authorizes multiple affiliations.
Dodd-Frank, investment adviser on the state level
Under the Dodd-Frank Act of 2010, only advisers who manage client assets that total less than $100 million are required to register with the state Administrators. Those who manage client assets of at least $110 million, advise registered investment companies, or act as pension consultants to large pension funds (at least $200 million in assets) are required (or are eligible, in the case of the pension consultant) to register with the SEC and are exempted from state registration. (There is a corridor between $100 and $110 million in which the adviser has a choice of state or federal registration.)
Under the Uniform Securities Act, the term "nonissuer" refers to
a person other than the issuer
A state-registered broker-dealer must keep business records
for 3 years
Under the Uniform Securities Act, an individual representing an issuer in the sale of its securities to the general public is defined as an agent if the issuer is
Agents represent broker-dealers or issuers. However, an individual representing an issuer in the sale of certain exempt securities or in an exempt transaction is not an agent. Even when authorized to do business in the state, an insurance company is not one of the exempt issuers qualifying for the exemption from agent's registration for those who selling the company's securities while representing the company. Banks and trust companies, yes, but not insurance companies. Please see the list in your LEM.
Which is ture
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 agents for sales activities unless they are also properly licensed in that state.
As defined in the Uniform Securities Act, which of the following persons is included in the term agent? A)A broker-dealer who sells registered securities to the general public B)An individual who sells to public investors, the sovereign debt securities of a foreign government with which the United States has diplomatic relations in the capacity of an employee of that government C)An individual who represents an issuer in an exempt transaction D)An individual, employed by a broker-dealer who sells NYSE-listed securities exclusively to institutional clients
An agent under the Uniform Securities Act is a person (an individual) who sells securities to both retail and institutional members of the public. The term agent is not applicable to a person who represents an issuer in an exempt transaction or in the sale of certain exempt securities, such as those issued or guaranteed by a foreign government with which the United States has diplomatic relations. The term agent specifically excludes broker-dealers.
BD registration under USA is revoked
An agent's license is only effective as long as that agent is associated with a registered broker-dealer. In most cases, it would be said that the agent's registrations are placed in suspense. 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.
Under the Uniform Securities Act, an agent is a(n) broker-dealer who sells registered securities to the general public individual who represents an issuer in an exempt transaction individual representing a broker-dealer who sells federal covered securities individual who represents an issuer in a transaction exempt from the act
An individual employed by a broker-dealer who sells securities to the public is an agent under the Uniform Securities Act. The USA defines an agent as "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." The Uniform Securities Act excludes from the definition of an agent, those individuals who represent an issuer in exempt transactions, the sale of certain exempt securities, and transactions with issuers' employees when no commission is paid. There is virtually no case in which a salesperson representing a broker-dealer is not an agent.
Not required to be register
An individual representing (employed by) an issuer is exempt from registration as an agent when selling certain exempt securities (see your LEM for the 5 categories that qualify) or non-exempt securities in an exempt transaction.
Under the Uniform Securities Act, the term "agent" refers to individuals who act on behalf of a broker-dealer or issuer in effecting securities transactions. Which of the following individuals are NOT included in the definition of an agent? I.A lawyer acting on behalf of an issuer in preparing documents describing the issuance of nonexempt securities II.A lawyer acting on behalf of a broker-dealer who prepares documents describing the sales or purchase of securities to the general public III.A partner or officer of a broker-dealer whose only securities activity is the purchase of shares of an issuer for his personal investment account IV.An officer of an issuer who sells shares of the issuer's stock to employees without receiving any special compensation
I, II, III, IV; An agent is described in the Uniform Securities Act as an individual, other than a broker-dealer or issuer, who represents a broker-dealer or issuer in effecting transactions in securities. The lawyer is not engaged in effecting securities transactions on behalf of the issuer or broker-dealer. Therefore, the lawyer is not considered an agent subject to regulation by the Uniform Securities Act. A partner (or anyone else) of a securities firm making a personal investment does not make him an agent. An officer of an issuer not receiving any compensation for sales of the issuer's stock to employees is not an agent under the USA.
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?
If the agent is a partner, officer, or director and held that position at the time the broker-dealer was registered in that state, the individual need not register separately; 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). At the time the broker-dealer is registered in a state, officers, directors, or partners of the firm who act as agents will be automatically registered as agents.
Investment adviser
None of the above are included in the term "investment adviser" as used in the Uniform Securities Act. Federal covered advisers are regulated by the Securities Exchange Commission (SEC). The National Securities Markets Improvement Act of 1996 (NSMIA) prohibits dual registration of investment advisers by federal and state authorities. If federal covered advisers were defined as investment advisers under the USA, then they would be subject to the same state registration procedures as local or state investment advisers.
If an individual acting on behalf of an issuer engages in the sale of securities issued by a savings institution organized and supervised under the laws of any state, which of the following statements is TRUE?
The individual is not required to be registered; An individual representing (employed by) an issuer is exempt from registration as an agent when selling certain exempt securities (see your LEM for the 5 categories that qualify) or non-exempt securities in an exempt transaction.
If Brokers, Inc., a broker-dealer registered in this state, refuses to comply with the Administrator's order to retain records for two years longer than required by the Securities Exchange Act of 1934, which of the following statements are TRUE? I. The securities Administrator cannot require registrants to retain books and records longer than required by the SEC. II. Brokers Inc. is not in violation of the Securities Exchange Act of 1934. III. Both the securities Administrator and Brokers Inc. are in violation of both the Securities Exchange Act of 1934 and the Uniform Securities Act. IV. Brokers Inc. must comply with orders issued by state securities regulators whether or not the orders are in compliance with the NSMIA.
The securities Administrator is in violation of the National Securities Markets Improvement Act of 1996 (NSMIA), which prohibits state securities regulators from establishing requirements in excess of those required by the Securities Exchange Act of 1934
Require registration as an investment adviser
Under the Uniform Securities Act, broker-dealers and their agents are not defined as investment advisers if their performance is solely incidental to the conduct of a brokerage business, and no special compensation is received for the advisory services. A broker-dealer charging for research advice is charging for advisory services, which would require registration as an investment adviser. A charge for creating a comprehensive financial plan is considered to be a charge for investment advice, even if it is only a one-time expense. It could also be considered that the commissions earned from the recommendations are indirect compensation (which is still looked at as advisory compensation). Recommendations of securities purchases are incidental to conducting a brokerage business and would not require registration as an investment adviser if no fees are charged for the advice. Broker-dealers may charge for clerical services provided to customers, but clerical services are not considered investment advisory services.
Brokers-dealers under the Uniform Securities Act
When one firm succeeds another, no fees are due until renewal date. However, the successor firm must file a consent to service of process at the time it registers. Broker-dealers with discretionary authority may be required to post a surety bond or maintain minimum net capital. However, no state can impose financial or recordkeeping requirements that exceed those of the SEC.
Agent for BD terminates
You were probably looking for a choice that said, "both the agent and the broker-dealer would have to notify the Administrator" because that's what the procedure is when an agent terminates employment. But, this question is dealing with the fact that the IA registration remains. On the Form ADV, Part 1A, the IA indicated that he was also an agent for a BD. Since that is no longer the case, the ADV must be promptly amended.
Traditionally, banks have been excluded from the definition of a broker-dealer. However, under recent federal legislation, a bank is included in the definition if it
bought and sold securities on behalf of customers in a wholly owned brokerage subsidiary;Under financial modernization legislation (known as the Gramm-Leach-Bliley Act), banks can have wholly owned brokerage subsidiaries. In such cases, the bank would be a broker-dealer subject to registration. The bank is not a broker-dealer if it refers securities to unrelated third-party brokerage houses or limits its securities-related activities to trust and custodial activities.
Federal covered investment adviser
federal covered investment adviser refers to a natural person or entity registered under the Investment Advisers Act of 1940 or excluded from the definition under that act. A person registered under the Investment Advisers Act of 1940 is exempt from state registration or licensing requirements of state securities Administrators under the NSMIA and the Uniform Securities Act. Federal covered investment advisers are not exempt from the antifraud provisions of the USA. Investment advisers, whether state-registered or federal covered, do not register with NASAA.
Which of the following are not specifically excluded from the definition of an investment adviser under the Uniform Securities Act? I.An investment adviser representative of an advisory firm who makes securities recommendations on a regular basis for compensation II.A temporary employee hired to assist in administrative responsibilities of an advisory firm III.Any person who is a federal covered investment adviser IV.A person who, on a regular basis for compensation, offers specific investment advice to clients as to the value of securities
Clerical and ministerial personnel, full-time or temporary, are not included in the definition of either investment adviser representatives (supervised persons) or investment advisers. Other persons associated with an investment adviser, including officers of the firm, are generally considered to be investment adviser representatives. An investment adviser representative is not an investment adviser in the same manner that an agent is not a broker-dealer. A federal covered adviser is not, for definitional purposes, considered an adviser under the USA to avoid duplicate regulation by both the state and the federal government.
Which of the following are NOT agents as defined in the USA? I.A broker-dealer acting on behalf of a properly registered issuer II.An individual representing the U.S. government in the sale of its securities III.An individual who, acting on behalf of a broker-dealer, sells exempt securities or engages in an exempt transaction IV.An individual who represents an issuer selling a nonexempt security in a nonexempt transaction
I, II ; A broker-dealer by definition is not an agent. An individual who, while acting on behalf of the issuer, sells certain exempt securities, such as those issued by the U.S. government, is not an agent. The exclusion from the definition of an agent only applies to those individuals who are selling on behalf of the issuer (never a broker-dealer) and only when the transaction is exempt or the issuer is one of a specified list of exempt issuers.
Under the Uniform Securities Act, which of the following is considered a place of business of a registered investment adviser representative? I.An office from which the representative regularly provides advisory services to clients II.A location published in a professional directory, indicated on business cards, or telephone book listing that identifies it as a place where the representative will be available to meet or communicate with clients III.A hotel or auditorium at which the representative has advertised to the public that he will be available to conduct advisory business at that site IV.A hotel meeting room identified only to current clients as a place the representative will be available to conduct advisory business
I,II,III 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. Publicly advertising a hotel location only used once makes it a place of business that year and will probably subject the representative to regulation by the Administrator of the state in which the hotel is located. A hotel room is not included when it is not advertised and only used with existing clients, presumably when the adviser is traveling through their state.
In October 1987, the SEC promulgated Release IA-1092, which had the effect of broadening the definition of investment adviser. As a result of the Release, which of the following would be included in the definition? I.Commercial banks offering comprehensive financial planning for their high-net-worth clients II.Entertainment agents earning a fee for negotiating contracts for their clients and then placing a portion of the client's royalties into investment grade bonds or large-cap stocks as market conditions dictate III.Persons who receive a nominal fee for assisting employee benefit plan administrators select investment managers for the plan's assets IV.Lawyers who prepare trust agreements for clients with large securities holding with a goal of minimizing estate taxes
II, III; Once the entertainment agent makes investment decisions for a client who is paying fees for overall services rendered, that agent now comes under the IA-1092 definition of investment adviser. Similarly, any person who is compensated for giving investment-related advice to employee benefit plans is considered a pension consultant and is required to register under IA-1092. Banks are never IAs, and the lawyer is merely doing legal and tax work.
Under the Uniform Securities Act, an issuer is any person who issues or proposes to issue a security for sale to the public. According to the USA, which of the following is NOT an issuer? I.The city of Chicago, which is involved in a distribution of tax-exempt highway improvement bonds II.AAA Partnership issues certificates of interest or participation in its oil, gas, and mining titles III.The AAA Manufacturing Company, which proposes to offer shares to the public but has not completed the offering IV.The United States government, which proposes to offer Treasury bonds
II; Under the Uniform Securities Act, an issuer is any person who issues or proposes to issue a security. However, with respect to certificates of interest or participation in oil, gas, or mining titles or leases, there is not considered to be any issuer even though those certificates are included in the definition of "security." Examples of issuers are a municipality such as the city of Chicago, which issues tax-exempt highway improvement bonds; the AAA Manufacturing Company, which proposes to offer shares to the public even though it has not completed the offering; and the United States government, when it proposes to offer Treasury bonds.
If an investment adviser is registered in another state and has no place of business within an Administrator's state, the adviser is exempt from registration under the Uniform Securities Act if
the adviser has no more than 5 retail clients who are residents of the state during the year;If an adviser has no more than 5 retail clients who are residents of the state during the year, the adviser does not have to register with the state. This is the de minimis exemption; advisers with no place of business in this state must register if they have more than 5 non institutional clients in the state.
An individual representing the issuer in the sale of that issuer's securities to the public would have to register in this state if
the issuer is a federal savings and loan association authorized to do business in this state; Individuals representing an issuer in the sale of its securities are exempt from registration if the security is 1 of 5 specified exempt securities or if the transaction is exempt. Securities issued by a federal savings and loan are not in the list of 5.
An issuer employs its officers and directors to sell newly issued shares of the company to the public. To comply with the USA, the officers and directors would have to be registered as agents of
the issuer;Unless something in the question indicates that the securities being issued are exempt, employees, including officers and directors, who sell shares of their companies to the public fall under the definition of agent under the USA.
