Series 63
Under the Uniform Securities Act, a state Administrator may NOT: AConduct investigations involving broker-dealers domiciled in other states BEnjoin an investment adviser from participating in the securities business CConduct an investigation without proof of wrongdoing DIssue subpoenas to individuals outside the state
A court has the power to enjoin (prohibit) an investment adviser from participation in the securities business, but the state Administrator does not
Under the Uniform Securities Act, a person who sells securities in violation of state securities law is civilly liable for which TWO of the following penalties? Fines Interest Punitive damages Attorney fees AII and III BI and IV CI and III DII and IV
A person who sells securities in violation of state securities law is civilly liable for principal, interest, reasonable attorney fees, and court costs.
A broker-dealer is registering a new issue with the Administrator of State A. What information must be sent to the Administrator? The number of shares The Articles of Incorporation The financials The tax identification number filed with the IRS AI, II, and III only BI only CII and III only DI, II, III, and IV
A. This is an example of the detailed nature of the examination. You are expected to know that the number of shares, the issuer's financial information, and Articles of Incorporation (the charter) generally are all required by the states. A tax identification number is not required by the Administrator
Which of the following choices is considered a securities offering? AAn investor receives a stock dividend An investor receives more shares due to a stock split An investor purchased bonds and receives a warrant as a bonus DAn investor receives a tender offer
According to the Uniform Securities Act, the security that the investor received as a bonus would be considered a stock offering. The Act specifically states that a stock dividend, or shares received due to a corporate action is never considered an offer or offer to sell a security. A tender offer is an offer to buy a security from existing shareholders
Under the Uniform Securities Act, which of the following choices is NOT disclosed in an investment advisory contract? AThe manner in which the advisory fee will be computed BA provision prohibiting the investment adviser from being compensated based on a share of capital gains CA provision disallowing the investment adviser to assign the contract to another party without client consent DAny other states in which the investment adviser is registered
An investment advisory contract must disclose the manner in which the adviser will be compensated. The contract must also include a statement that the adviser may not assign the contract to another party unless the client consents and may not be compensated based on a share of capital gains
Under the Uniform Securities Act, which of the following choices is NOT considered a security? AA certificate of interest in an oil and gas leasing program BA multi-level distributorship agreement CA certificate of interest in a real estate investment trust DAn equity-indexed annuity
Any insurance policy, endowment policy, or annuity contract, under which an insurance company promises to pay a fixed sum of money either in a lump sum or periodically, is not considered a security. A variable annuity is a security.
All of the following products are securities, EXCEPT a(n): AAnnuity contract with several subaccounts BLife insurance subaccount CUniversal life insurance policy with a substantial cash value DVariable universal life insurance policy
C. A universal life insurance policy is not a security. On the other hand, a life insurance subaccount, a variable universal life insurance policy, and an annuity with several subaccounts (i.e., a variable annuity) are considered securities. Universal life insurance policies accumulate a cash value, but the rate of return that the policy owner receives is fixed by the insurance company. By contrast, in a variable policy, the investor has a separate account and may choose investment options (referred to as subaccounts) and the return will vary according to the investment options selected by the owner.
Which of the following is not a security as defined by the USA? AA preorganization certificate BA certificate of interest in a profit-sharing agreement CA futures contract in precious metals DA certificate of interest in a mining title
C. Futures and commodity contracts are not securities. However, the Uniform Securities Act includes some seemingly odd instruments as securities, such as interests in mining or drilling titles and preorganization certificates
Under the Uniform Securities Act, which of the following is considered a stock offering? AShareholders receiving a stock dividend BCreditors receiving stock as part of a bankruptcy proceeding CAn issuer pledging its securities as collateral for a loan DShareholders receiving the right to purchase additional shares of a subsidiary at a prearranged price
D. Under the USA, when existing shareholders receive the right to purchase additional shares at a prearranged price, it's referred to as a rights offering and considered an offer or offer to sell. An offer or offer to sell does not include creditors receiving stock as a part of a bankruptcy proceeding, stockholders receiving a stock dividend, or an issuer pledging its securities as collateral for a loan
All of the following persons are excluded from the definition of investment adviser, EXCEPT: AAn economics professor who teaches classes in portfolio analysis BAn attorney who sets up a financial planning practice CAn engineer who receives fees for consulting services on stock offerings of aerospace companies for broker-dealers DA tax accountant who evaluates clients' portfolios as part of his annual tax review
Lawyers, accountants, teachers, and engineers are not considered investment advisers if they provide financial advice that is incidental to the practice of their profession. However, when any of these entities starts to charge a fee for their advice, they lose the exemption and must register as an investment adviser. In this question, the best answer is that the lawyer is considered an investment adviser because she set up a financial planning practice (i.e., the service is no longer incidental). Although the engineer is receiving a fee, it's for providing consulting services, not financial advice
Which TWO of the following actions would fall under the jurisdiction of a state securities Administrator? The purchase of options through the Internet by a state resident The sale of long-term certificates of deposit by a bank The delivery of securities to a customer who is a resident of a particular state The offer of securities by an out-of-state broker-dealer to a resident of the state AIII and IV BI and III CI and IV DI and II
State securities Administrators have jurisdiction over securities transactions that are: Originated in their state Directed to and received in their state Accepted in their state Delivery of securities to a particular state does not fall under an Administrator's jurisdiction, nor do general commercial banking transaction
The Administrator may deny the registration of an agent for all of the following reasons, EXCEPT: AOn the basis of lack of training BOn the basis of lack of experience COn the basis of lack of knowledge DFailure to pay the proper filing fee
The Administrator may not enter an order solely on the basis of lack of experience if the agent is qualified by training or knowledge or both
Bruce is an insurance agent. His father John is an investment adviser. Bruce receives 25 basis points for every client he refers to John. Under the Uniform Securities Act, Bruce: AMay need to register as an investment adviser BIs defined as a finder May need to register as an investment adviser representative Is exempt from registration
The USA defines an investment adviser representative as anyone who "solicits, offers, or negotiates for the sale of or sells investment advisory services." Many states require solicitors to register as investment adviser representatives (even though they do not manage assets or provide advice). Some states, however, have special registration provisions just for solicitors
When opening a brokerage account, a customer need not disclose which of the following? ASocial Security number Occupation CDate of birth P.O. Box
When opening a brokerage account, an agent should attempt to obtain all the affirmation information except a P.O. Box. Rather, the actual residence of the customer is required.
Which of the following choices is NOT a security? AA universal life insurance policy BA voting trust certificate CA variable universal life insurance policy DA mining trust
A universal life insurance policy is a type of permanent life insurance policy that is regulated by the insurance commissioner. Variable products, voting trust certificates, and oil, gas, and mining interests are securities according to the Uniform Securities Act
Which of the following securities is NOT federal covered? AA hedge fund that is offered under Section 504 of Regulation D BA REIT that is listed on the Nasdaq Capital Market CA real estate limited partnership that is listed on the Nasdaq Global Market DA fund of funds that is issued by a registered investment company
A. All securities that are listed on Nasdaq (Global Select, Global, and Capital Markets) are federal covered securities. A fund of funds is a type of mutual fund and is also a federal covered security. Regulation D is a group of SEC rules that provide safe harbors for private securities offerings (private placements). Securities that are issued under Section 504 of Regulation D are NOT federal covered securities. However, securities that are issued under Section 506 of Regulation D are federal covered securities. Rule 504 offerings are limited to $5 million. On the other hand, Rule 506 allows an issuer to sell an unlimited amount of securities. Unaccredited investors who purchase securities that are part of a Rule 506 offering must either be sophisticated or have an independent purchaser representative.
Which TWO forms must an agent obtain from a client in order to purchase securities in a margin account? A signed hypothecation agreement A signed loan consent agreement A signed credit agreement A signed new account form AII and IV BI and IV CII and III I and III
An agent of a broker-dealer must obtain from a client written authorization to open a margin account at a broker-dealer. It is considered an unethical business practice for an agent to allow a client to execute transactions in a margin account without the client's written authorization. The client would sign a document referred to as a margin agreement, which would include an hypothecation agreement and a credit agreement. A loan consent agreement is not mandatory. Clients are not required to sign new account forms.
A couple has a 529 College Savings Plan Account for each of their two children. One child is 16-years-old and the other is 2-years-old. How should these accounts be invested? ABoth accounts should be invested primarily in equity securities to provide capital appreciation BThe two-year-old's account should be invested primarily in equity securities while the 16-year-old's account should be invested mainly in municipal securities CBoth accounts should be invested mainly in money-market and fixed-income securities so that the principal is preserved DThe two-year-old's account should be invested primarily in equity securities while the 16-year-old's account should be invested mainly in money-market and fixed-income securities
As a child approaches college age, the investments in a 529 College Savings Plan Account should be shifted from growth-focused investments (e.g., equities) to less volatile, more stable investments (e.g., fixed-income and market-money securities). Therefore, the 2-year-old's account should be allocated mainly to equity securities, while the 16-year-old's account should be invested primarily in fixed-income and money-market securities. One of the main reasons for purchasing municipal securities is the tax-exempt income that they generate. Interest earned from municipal securities is exempt from federal income taxes, and may also be exempt from state income taxes. Investment gains in 529 Savings Accounts are tax-free as long as the money is withdrawn for qualified education expenses. For that reason, municipal securities are not typically the best selection for an account in which the investor is already receiving significant tax advantages
Under the Uniform Securities Act, which of the following sale would be considered a nonissuer transaction? AThe sale of a new issue in a private placement BThe sale of an outstanding security on the New York Stock Exchange CThe sale of a security executed by an agent of the issuer DA primary offering sold by a broker-dealer
B. A nonissuer transaction is a purchase or sale of a security whereby the issuer does not benefit, directly or indirectly. A trade between two investors for IBM stock on the New York Stock Exchange (a secondary market trade) would be an example of a nonissuer transaction.
An agent who is registered in State A contacts a client in State B. The broker-dealer is registered in State B but not the agent. The agent may: ASell the security if it is a federal covered security BSell the security upon notification to a superior CSell the security because this is an exempt transaction DNot sell the security
In order to sell a security in a state, the broker-dealer and the agent must both be registered in the state. Therefore, the agent may not sell the security.
An accountant in State A regularly refers his clients to an investment adviser whose practice is in State A. If the accountant is being paid a referral fee, which of the following statements is TRUE regarding this situation? AThe accountant is required to register as an investment adviser in all states. BThe accountant is not required to register since he's not providing any investment advice. CThe accountant is required to register as an investment adviser in State A. The accountant is considered to be a solicitor and must register as an investment adviser representative (IAR).
In order to solicit business for or be paid referrals by an investment adviser, the accountant must be registered as an investment adviser representative under the USA
Which of the following choices does not meet the definition of a security under the Uniform Securities Act? AVariable life insurance policies BRights received due to a corporate rights offering CParticipation in multilevel marketing arrangements DWhole life insurance policies
Life insurance generally does not meet the definition of a security. This is true because traditional insurance policies such as whole life promise to pay a fixed sum of money. Since variable life insurance policies do not pay a fixed sum of money they meet the definition of a security. The other two choices listed are defined as securities under the Act.
A hedge fund is being sold to investors as a private placement under Regulation D. An agent believes that this fund would be an excellent investment opportunity for several of his clients. The agent may discuss the fund with which of the following clients? AA newly retired man, whose annual income last year was $200,000 BA young, aggressive investor with a net worth of $500,000 and an annual income of $150,000 CA couple that just won the lottery, which made this year's annual income $500,000, and whose net worth is $550,000 A middle-aged couple who are both physicians with a joint annual income of $400,000
Many hedge funds are issued as private placements under Regulation D. In order to qualify for the exemption, they must be offered only to accredited investors and/or no more than 35 non-accredited investors. Accredited investors include: Individuals who have an annual income of at least $200,000 during the last two years who reasonably expect to continue to earn that much in the future A married couple with a joint income of at least $300,000 who reasonably expect their income to continue at the same level in the future An individual or a couple with a net worth of at least $1 million The best answer is couple who are both middle-age doctors who can reasonably expect to continue making the same level of income. Although the newly retired person meets the income requirement, it may be assumed that his income is likely to drop during retirement. The young investor does not meet either the income or the net worth requirements. The couple that won the lottery have income that is probably much higher this year than normal, and it is unlikely to remain at the same level
Which of the following documents must be filed with the state Administrator for registration of all broker-dealers, investment advisers, agents, and investment adviser representatives? AForm ADV Parts 1 and 2 Fingerprint cards for all registered employees The Consent to Service of Process DForm U4
The Consent to Service of Process appoints the state Administrator to serve as the applicant's attorney for the purpose of receiving and processing noncriminal complaints. It is required of all registrants when they file for registration in a state. The other forms listed may or may not be filed by certain persons, but the Consent to Service of Process is the only form that is required of ALL persons
A woman owns a very successful bike shop and plans to conduct a public offering of shares in order to expand her business. She will assist in marketing the shares, but will not receive direct compensation for her efforts. According to the Uniform Securities Act, the owner must: ARegister as a broker-dealer BRegister as a solicitor CRegister as an investment adviser DRegister the securities
The question states that the owner is conducting a public offering of securities. All securities offerings must be registered unless they qualify for an exemption. There is nothing in the stem to indicate that the offering qualifies for an exemption. The owner does not meet the definition of a broker-dealer and therefore is not required to register as one. She is not "in the business of effecting securities transactions." Instead, she is an issuer— and issuers are specifically excluded from the definition of a broker-dealer. In addition, she is not in the business of providing investment advice or soliciting clients for an investment adviser; therefore, she is not required to register as an investment adviser
An IA would like to change the method it uses to calculate the fees it charges for certain clients. The new fee would be performance-based and would be calculated over a specified period. According to the NASAA Model Rule, which of the following statements is TRUE? AThis type of fee arrangement is permitted only for clients that are business development companies or private funds This type of fee arrangement is permitted for qualified clients CThis would be allowed if the state securities Administrator approved the method of calculating the fee prior to any contracts being signed DThis type of fee arrangement is not permitted and would be a violation
Under the NASAA Model Rule and the Investment Advisers Act of 1940, performance fees generally, are prohibited. Exceptions include clients who have at least $1,000,000 under management with the adviser or who have a net worth in excess of $2,100,000. They would be defined as qualified clients. Clients who are not U.S. residents and certain employees of the adviser may also be charged performance-based fees. The Administrator does not need to approve the method used to calculate the fee, but it must be disclosed to clients
A person working for a broker-dealer gives information relating to prices and sales of securities but receives no direct compensation related to these activities. This individual: AMust be licensed as an agent Does not need to be licensed CMust be licensed as a broker-dealer Must be licensed as an investment adviser representative
An individual employed by a broker-dealer who gives information relating to prices and sales of securities, but who does not receive transaction-related compensation, does not need to be licensed as an agen
Which of the following activities does NOT meet the definition of an exempt transaction under the Uniform Securities Act? AAn agent sells a client shares in a Canadian venture capital fund after the client signs a form stating that the transaction was unsolicited BAn issuer of an IPO distributes shares to the lead underwriter CAn agent sells units in a Canadian limited partnership to several of her clients DA bankruptcy trustee liquidates a debtor's securities and divides the proceeds among its creditors
C. This is an example of a question where the answer is determined based on the word "NOT." Since this is typical of regulatory examinations, it's important to understand what the question is actually asking. In this question, the answer revolves around determining which is not exempt. This means that three of the answers are examples of exempt transactions and one is not. If the exempt transactions can be identified, the answer will be obvious. To identify the exempt transactions, there are certain key terms or concepts to remember, including unsolicited transactions, transactions by a trustee as a part of bankruptcy proceedings, transactions between an issuer and underwriter, and certain non-issuer (secondary market) transactions. An example of an exempt, non-issuer transaction is the sale of Canadian securities that are (1) issued by an entity that files reports with the Canadian regulators and (2) listed on the Toronto Stock Exchange. There is no indication in the sale of units in a Canadian limited partnership to several clients that an exemption is available.
According to the Uniform Securities Act, which of the following statements is NOT correct regarding an Administrator's authority over the books and records of an IA? AThe state securities Administrator may indicate the time periods for the preservation of books and records of investment advisers that have their principal place of business in the state. BThe state securities Administrator is allowed to inspect the books and records of any investment adviser both inside and outside its state. CThe state securities Administrator may indicate the types of books and records that are required to be kept by an investment adviser that's registered with the SEC. DThe state securities Administrator may indicate the types of books and records that are required to be kept by an investment adviser in its principal place of business.
Investment advisers that are registered with the SEC are referred to as federal covered advisers (FCAs). FCAs are required to follow federal (SEC) rules regarding books and records; therefore, state Administrators don't determine the requirements.
An agent wants to open an account at another broker-dealer in order to purchase securities that the agent cannot purchase through the agent's employer. In order to open the outside account, the agent must: AArrange for a supervisor to review his confirmations and statements BAgree in writing to restrict the transactions in the outside account to mutual funds, unit investment trusts and variable products CNotify his employer verbally DNotify his employer in writing
The agent must notify his employer in writing that he intends to open an account at another brokerage firm. An agent that is opening up an account at another firm only to buy and sell mutual funds, variable products or unit investment trusts does not need to notify his employer. (Accounts that are opened for these purposes do not present the same kind of compliance and supervisory issues that a general securities account does.) The agent does not need to get a supervisor to agree to review his confirmations and statements. However, a broker-dealer that opens an account for an agent affiliated with another firm must send these documents to the agent's employer if his employer requests them. The choice is left to the broker-dealer that employs the agent. (88916)
An investment adviser is managing a trust that is scheduled to terminate in 50 years. The beneficiaries will receive the income that the trust generates until that time. Once the trust terminates, the corpus will be distributed among the remaining beneficiaries. According to the Uniform Prudent Investor Act, which of the following investment strategies is NOT suitable for this trust? AInvesting in Treasuries and money-market securities BAllocating the portfolio between stocks, fixed-income securities, and cash equivalents CReallocating the portfolio on an annual basis DDividing the trust assets among several different mutual funds
The question states that the trust will be in existence for 50 years. Due to its long length, inflation could significantly erode the trust assets over this period. According to the commission that drafted the Uniform Prudent Investor Act, "By far the most insidious damage to trust assets comes from inflation." This is the reason that investing in Treasury securities and money-market securities is an inappropriate strategy for this trust. The real value of a portfolio invested solely in these securities is likely to decline over the long term. However, if the trust is going to be in existence for only a short time (one to two years), then these conservative investments may be more suitable.
Under the Uniform Securities Act, which of the following statements is TRUE regarding the registration of investment advisers (IAs) and investment adviser representatives (IARs)? AIARs are not required to be registered in a state as long as the IA is registered there. BIARs that are giving advice about exempt securities don't need to be registered even if the IA is required to be registered. CIARs are required to register in a state even if the IA is provided an exemption from registration there. IARs are required to be registered in a state even if the IA is registered there.
Under the USA, it's unlawful for any registered investment adviser to employ an investment advisor representative unless the IAR is also registered
The Administrator of State X has declared the registration statement of a company effective. What part of its registration statement may the issuer change by amendment without being required to file a new registration statement with the state? AThe underwriting discount BThe price of the securities CThe reallowance being paid to the selling group The number of shares
Under the Uniform Securities Act, an issuer may amend its registration statement after it becomes effective to change the number of shares in the offering. The issuer is not required to file a new registration statement to effect this change
An investment adviser representative was the subject of a customer complaint two years ago in the state of Idaho and resigned his position as a result. The Administrator conducted an investigation, the results of which were not made public. He is currently applying for a mortgage for a new home in Boise. The bank where he is applying requests his employment history and contacts the investment adviser for verification. The personnel manager at the firm is reluctant to give the bank any information about its former employee and directs the bank to contact the state Administrator. When the bank calls the Administrator, what information can it expect to receive? AThe Administrator will provide the details of the complaint since it was securities-related BThe Administrator will not release any details of the complaint CThe Administrator will contact the investment adviser for authorization to release the information DThe adviser must contact the Administrator for approval to release the information to the bank
According to the Uniform Securities Act, neither the Administrator nor any of his officers or employees may disclose nonpublic information obtained in the course of performing their duties, except among themselves or when it is necessary as part of a proceeding or investigatio
A broker-dealer that is registered in State A is underwriting the IPO for a local company, which will not be listed. As required, the broker-dealer is making the final prospectus available electronically to all purchasers. How long does the broker-dealer need to keep the prospectus on file electronically? 90 days B40 days C270 days D25 days
All investors who purchase new issues must receive prospectuses, which may be made available electronically. A firm that sells a new issue in the aftermarket shortly after it begins trading may also be required to give prospectuses to its customers. This obligation to provide a prospectus continues for 25 days after the effective date for securities that will be listed on a national exchange. For secondary offerings of securities that will trade over-the-counter (securities that are not eligible to be listed), this obligation lasts for 40 days. In this question, the offering is an IPO that will not be listed, which means the prospectus must be available for 90 days.
An apparent violation of the Uniform Securities Act has occurred. Which of the following is NOT included in the list of possible actions that may be taken by the Administrator? AWithout providing for a hearing, the Administrator can immediately revoke the suspected violator's registration. BWithout providing prior notice, the Administrator can force the registrant to halt the activities in violation by issuing a cease and desist order related to the violation. CWithout providing prior notice, the Administrator can start a civil suit against the registrant which alleges wrongdoing and forces compliance with existing regulations. DWithout providing prior notice, the Administrator can begin investigating the situation and the registrant.
An Administrator is not permitted to revoke a registration without providing appropriate prior notice, the opportunity for a hearing, and written findings, facts, and conclusions related to the alleged violation. The Administrator can initiate an investigation, issue a cease and desist order, or initiate civil proceeds without prior notice. However, firms and individuals who are subject to these actions have an opportunity to appeal.
A broker-dealer has filed an application to withdraw its registration. Which of the following statements is TRUE? AThe Administrator has two years after the date the firm's registration is withdrawn to initiate a proceeding for revocation of its license The withdrawal will become effective when the Administrator determines whether there is an action for revocation of the firm's license pending at the time the application was filed CThe withdrawal will become effective within 60 days after the application is received by the Administrator DBy filing an application to withdraw, the firm agrees to settle all charges currently pending without admitting or denying them
An application for withdrawal generally becomes effective 30 (not 60) days after it was filed. However, the withdrawal will not become effective until the Administrator declares whether there are proceedings pending or instituted against the firm at the time the application for withdrawal was filed. (This is also true if the Administrator institutes proceedings within 30 days after the application was filed.) The Administrator has one year (not two) after the registration is withdrawn to begin revocation or suspension proceedings against the firm. In practical terms, the reason for this is because if violations have occurred in a state and the broker-dealer (B/D) withdraws, the Administrator can still bring a cause of action against the B/D for up to one year after the withdrawal. The cause of action may carry over to other states. This prevents a B/D from avoiding the consequences of rule violations.
An investment adviser is registered in many states, including the state in which its principal place of business is located. Which of the following statements is TRUE concerning the IA's obligation to maintain a minimum financial requirement? AThe IA must satisfy the requirements of the SECA. BThe IA must satisfy the requirements of the state in which it has the largest number of clients. CThe IA must satisfy the requirements of only the state in which its principal place of business is located. DThe IA must satisfy the requirements of the state.
An investment adviser is only required to maintain the minimum financial requirement that established by the state in which it maintains its principal place of business.
Micro Manager Partners is an investment advisory firm. Micro is creating a new standard contract for its advisory clients. Which of the following clauses should NOT appear in the contract? AThe Adviser [Micro] will provide the following services to the Client: management of the Client's portfolio on a discretionary basis, quarterly written summaries of account activity, and quarterly personal review of the Client's assets under management of the Adviser If any partner leaves the business of the Adviser, or if the Adviser adds any partner, the Adviser will notify the Client within a reasonable period, but not more than ten business days after any such change The Client agrees to pay a quarterly fee to the Adviser consisting of (i) .25% times the value of the portfolio at the end of each quarter, plus (ii) 2% of any increase in the value of the portfolio compared to the end of the previous quarter. Part (ii) of the fee will not be assessed if the portfolio declines in value DThe Adviser may not assign this contract to another party without the prior written consent of the Client
An investment adviser may not charge a fee which is based on a share of the capital gains in the account or a share in the capital appreciation of the funds in the account. The part of Micro's fee that consists of 2% of any increase in the value of the portfolio each quarter would not be permitted
According to the USA, which of the following statements is NOT TRUE regarding investment advisory contracts? Compensation of the investment adviser can be based on a share of capital appreciation of the client's funds as long as the period occurs between defined dates. BIf the IA is a partnership, clients must be notified of any changes in the ownership of the partnership. CAs long as the basis for such values is calculated between designated dates, the IA may be compensated based on the average total value of the client's funds. DThe contract may not be assigned without the client's consent.
As a general rule, the USA prohibits an IA from being compensated based on a performance basis. In other words, the IA's compensation cannot be based on capital appreciation. Instead, IAs may be compensated on the value of the assets in the client's portfolio. Provisions regarding the assignment of contracts or notification regarding change of ownership are required to be included in investment advisory contracts
Which of the following investment advisory practices are permitted? AAn investment advisory firm is purchased by a large broker-dealer and all client contracts will remain in force as long as the terms of the contracts are not altered BAn investment advisory firm appoints three new senior partners and, for competitive reasons, it does not disclose this to anyone CA client's portfolio increases in value from $100,000 to $150,000 over a one-year period and the adviser charges the client a fee of only 1% of the $50,000 increase DA client terminates an advisory relationship with an investment adviser halfway through the contract and the advisory firm refunds 50% of all prepaid fees, as called for in the contract
Investment advisory contracts must provide that: The adviser will not be compensated on the basis of a share of the capital appreciation of the account. The adviser may not assign client contracts without the consent of the client. If the adviser is a partnership, clients will be notified of changes in the partnership within a reasonable period of time.
Which of the following securities offerings would use registration by coordination? AAn offering of preferred stock by an issuer whose stock currently trades on the Nasdaq Global Market BAn IPO that will be distributed to the residents of one state only An IPO that will be listed on the New York Stock Exchange An IPO that will be distributed in 12 states and not listed on any of the national exchanges
Registration by coordination is typically used by an issuer that is conducting an IPO of securities that will not be listed on an exchange and that needs to register its securities at both the state and federal level (the two registrations are coordinated). Securities that are listed or authorized for listing on a national stock exchange (e.g., the NYSE or Nasdaq) are examples of federal covered securities and are generally exempt from state registration and notice filing. An issuer of securities that are being distributed to residents of one state will typically use registration by qualification. (32369)
