Series 65 Kyle Dodson
In general, a broker-dealer will disclose its fee schedule
at time opening account
variable annuity
non exempt if says variable = security
If a broker-dealer purchases 100,000 shares of common stock from an individual investor, this is
non issuer transaction
In the investment industry, the term spread has many different meanings. When used in a discussion about bonds, which of the following would be most appropriate?
credit spread
Working Capital
current assets - current liabilities
On a balance sheet, dividends payable would fall under the category of
current liability
Which ratio would be looked at to determine the liquidity of a corporation?
current ratio
regulation D
regulation and exemption for reports and statements required for selling stock to private parties based on the amount of money being raised
The provisions of the Securities Act of 1933 include all of the following EXCEPT
regulation of the secondary market
agent
rep BD
Net income
represents the amount of money remaining after all expenses including taxes
The economic theory that says economic growth results from lower tax rates and lower government spending is
supply-side theory
true
Two investments with the same expected return will not necessarily have the same level of risk and standard deviation.
All the pundits are predicting bad times ahead—not only a recession but a period where prices actually fall (deflation). If they are right, the best place for your client would probably be
U.S. Treasury securities
If the U.S. dollar has fallen relative to foreign currencies, which of the following statements are TRUE?
U.S. exports are likely to rise. Foreign currencies buy more U.S. dollars.
If the U.S. dollar is devalued relative to other world currencies, which of the following will occur with respect to the prices of goods?
U.S. exports will be more price-competitive overseas. Foreign imported goods will be less price-competitive with ours.
nonexempt transactions:
U.S. government and municipal securities; Securities of governments with which the United States has diplomatic relationships; Securities of U.S. 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.
Which of the following would lead to a debit to our foreign account balance?
U.S. residents taking vacations abroad
Under the Uniform Securities Act, which of the following investment advisers with no place of business in the state must register with the state as an investment adviser?
An adviser rendering advice to no more than 10 individual clients within a 12-month period
Which of the following would NOT be considered evidence of custody of a client's funds or securities?
"Custody" means possession (even temporary possession) of a client's funds or securities. It includes authority over a client's bank account for any type of disbursement, but does not include the acceptance by the adviser of prepaid advisory fees or discretionary authority.
A corporation offering securities registered under the Act of 1933 may make which of the following statements?
"The SEC has released our securities for sale to the public." SEC declares prospectus effective
Defalcator Investment Planning (DIP) has $175 million in AUM and has offices in States A, K, and R. DIP would be required to provide a balance sheet as part of its brochure if it charged fees of
$1,500 for the next year's advisory service.Federal covered investment advisers, who charge substantial prepayment of advisory fees, must include a balance sheet with their brochure. The definition of a substantial prepayment is: more than $1,200, 6 or more months in advance.
Under the USA, what are the maximum penalties for a securities-related felony?
$5,000 and 3 years imprisonment
would be required to provide a balance sheet as part of its brochure if it charged fees of
$500+, 6 or more months in advance.
Exempt Transactions
(1) Isolated nonissuer (secondary) transactions, (2) nonissuer transactions by pledgees, (3) transactions with existing security holders (4) unsolicited brokerage transactions, (5) underwriter transactions, (6) bankruptcy/guardian/conservator (7) institutional investor, (8) Limited offerings (private placements), (9) preorganization certificates
All of the following actions will increase the deficit in the U.S. balance of payments EXCEPT
(bingo) purchase by foreigners of U.S. securities B) Americans buying Japanese cars C) investments by U.S. firms abroad D) U.S. foreign aid
cooling-off period
-after the issuer files with the SEC, a 20 day cooling off period occurs before the registration becomes effective. -SEC usually takes longer than the 20 days, however the minimum is 20 calendar days. *no one can solicit sales during the cooling off period, but indications of interest can be solicited with a red herring. *SEC may issue a stop order if the registration has not met requirements, or if fraud is suspected.
Rule 147 Intrastate Offerings
-offerings that take place in entirely one state are exempt from registration when: >the issuer has its principal office and receives at least 80% of its income in the state >at least 80% of the issuer's assets are located within the state >at least 80% of the offering proceeds are used within the state >the B/D acting as underwriter is a resident of the state and has an office in the state >all purchasers are residents of the state
Federally Covered Securities
1 Exchange Listed Securities 2 Securities Sold to Qualified purchasers (>5,000,000 in securities) 3 Investment Companies/Mutual Funds/Closed Ended/Open Ended 4 Securities Issued Pursuant to Reg D Rule 506 - Accredited Investors * muni included unless issuer is located in that state
securities under USA are effective for
1 year form effective date
"investment adviser representative"
1) makes any recommendations or otherwise renders advice regarding securities; (2) manages accounts or portfolios of clients; (3) determines which recommendations or advice regarding securities should be given; (4) solicits, offers, or negotiates for the sale of or sells investment advisory services; or (5) supervises employees who perform any of the foregoing.
SEC Rule 501: Accredited Investors
1. Institutional Investors 2. employee benefit plans over $5 milliion 3. Insider of issuer 4. Invidiaul with one or joint net worth >$1mi & 5. earning over $200k annually or $300k for joint
Under the Investment Advisers Act of 1940, what is the maximum fine that may be imposed for violating the act?
10K
If securities of an issuer registered with the state are outstanding, how long after the effective date of registration must an issuer wait before the registration may be withdrawn?
12 months. Registration statements are usually effective for a period of 1 year from the effective date and may not be withdrawn during this period if any of the securities of the issuer of the same class are still outstanding.
private fund cap
150 million non USA no place of buiness 25 million not more than 100 people
A stock traded on the Nasdaq Stock Market has a beta of 1.20. One could expect that the stock's volatility compared to the S&P 500 would be
20% more volatile
Aaron Jones, a client of XYZ Financial Services, has suspected the possible churning of his account over the past several years but has taken no action. He consults his attorney who informs him that any lawsuit for recovery of damages under the USA must be started within
3 years of occurrence or 2 years of discovery, whichever occurs first
When an individual registered with a broker-dealer has a change of residence, an amended Form U4 must be filed
30 days
u4
30 days
An investment adviser who only serves institutional clients and whose only office is in this state
5 years, the first 2 in the principal office of the adviser
An investor places $10,000 into BCD common stock 12 years ago. Today, that stock has a market value of $20,000. Using the Rule of 72, the internal rate of return on BCD is closest to
6%
If a publicly traded corporation was going to sell a wholly-owned subsidiary, the information would be made available through the filing of a Form
8-k
When a member of the board of directors of a publicly traded company resigns due to a disagreement over an operational matter,
8-k
NSIMA
???
Under the Uniform Securities Act, when an IAR acting in the capacity of trustee of a family trust executes a transaction on behalf of the trust, it is
A NON exempt transaction Among the list of exempt transactions are those made by fiduciaries, including trustees in bankruptcy, but not other trustees. Therefore, this is a nonexempt transaction. The fact that this is an IAR who is the trustee has no bearing on the question.
According to the Investment Advisers Act of 1940, which of the following statements regarding Part 2 of Form ADV are TRUE?
A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, 6 or more months in advance. It may be used to satisfy the brochure requirements of the act.
Which of the following statements is NOT true?
A broker-dealer must be a firm or corporation (legal person) as opposed to a natural person (human being). An investment adviser must be a firm or a corporation as opposed to a natural person. An investment adviser representative (IAR) cannot, under any circumstances, be employed by a registered broker-dealer.
The term "sale" includes which of the following?
A contract of sale A contract to sell The disposition for value of an interest in a security A warrant (for common stock of the issuer) given with the purchase of a bond
Which of the following investment advisers would be permitted to use the term "investment counsel"?
A firm whose exclusive business is placing clients' assets into model portfolio
Which of the following statements regarding an investment adviser's use of a full-service broker for an account over which the adviser has investment discretion is TRUE?
A full-service broker may be used if the charge is reasonable in relation to the advice, analyses, or other services provided.
What does the term "guaranteed" mean when used to describe a security?
A guaranteed security is one that has a third party other than the issuer (such as an insurance company or a parent company) that has guaranteed the payment of principal, interest, or dividends (but not capital gains). A guarantee does not refer to a broker-dealer buying back a security at the same price or higher, or to the retirement income offered by a fixed annuity. In addition, the SEC does not back or guarantee securities.
Which of the following statements regarding the use of a hedge clause by an investment adviser is CORRECT?
A hedge clause that limits the investment adviser's liability for losses caused by conditions and events beyond its control, such as war, strikes, and natural disasters generally would be acceptable to the Administrator.
One of your customers sends you an email with an attachment describing a "can't miss" investment opportunity. Which of the following would be a red flag you should share with the client?
A high return with little or no risk is one of the most obvious red flags; so is payment with a nontraditional and generally nontraceable method, especially offshore. Sure, registration with the SEC, the states, or both is no guarantee, but at least you have some expectation of disclosure being made.
Late
A lawyer charging a separate fee for advice cannot claim that it is incidental.
Which of the following statements are TRUE of a discretionary account at a broker-dealer's?
A new discretionary account must first be approved by the appropriate supervisory person, orders must be approved on the day of the trade, and the account must be reviewed frequently for suitable activity. The written authorization must be in hand before any discretion may be exercised.
Which of the following meets the USA's definition of a broker-dealer?
A person who effects transactions for the accounts of others
SEC Rule 506
A private placement where there is no dollar limit on the amount sold
Registration by Coordination
A process that allows A security to be sold in a state. It is available to an issuer that files for the security's registration under the Securities Act of 1933 and files duplicates of the registration documents with the state administrator. The state registration becomes effective at the same time the federal registration statement becomes effective.(public offering more than one state)
Registration by Qualification
A process that allows a security to be sold in a state. It is available to an issuer who files for the security's registration with the state Administrator, meets minimum net worth, disclosure, and other requirements, and files appropriate registration fees. The state registration becomes effective when the Administrator so orders.(registration effective when ordered by the adminstrator in case of registration by0
Registration by Filing
A process that allows a security to be sold in a state. Previously referred to as registration by notification, it is available to an issuer who files for the security's registration under the Securities Act of 1933, meets minimum net worth and certain other requirements, and notifies the state of this eligibility by filing certain documents with the state administrator. The state registration becomes effective at the same time the federal registration statement becomes effective.(commerce offering)
Under the Securities Act of 1933, a registration statement for a security generally becomes effective how many days after it is filed?
A registration statement for a security becomes effective 20 days after it is filed, unless the SEC orders a delay.
If the dollar weakens, which of the following statements is TRUE?
A rise in U.S. interest rates might strengthen the dollar.If U.S. interest rates rise, foreign investors would invest in U.S. dollar-denominated securities, thereby increasing the demand for dollars and causing the dollar to strengthen.
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.Remember, a broker-dealer is excluded from the definition of an agent under the USA.
Which of the following are federal covered securities?
A security quoted on the Nasdaq Stock Market Shares of an investment company registered under the Investment Company Act of 1940 An offering in a security exempt from registration under the Securities Act of 1933 A security that has a federally imposed exemption from state securities registration.
Which of the following are securities under the Uniform Securities Act?
A variable annuity A subscription right to purchase common stock Certificate of interest or participation in an oil, gas, or mining partnership NOT A condominium purchased solely as a place of residence
Any offer or sale to any of the following would be considered exempt from the registration and advertising filing requirements of the USA
A) banks B) broker-dealers C) savings institutions
The Securities Act of 1933
A) prospectus requirements B) liabilities for misleading filings D) full and fair disclosure
A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclosing which of the following fees?
Account closing fees It is very common for a broker-dealer to charge a fee for processing the closing of an account. There are 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are: commissions; markups and markdowns; and advisory fees for those firms that are also registered as investment advisers.
JOBS Act
Act of 2012 eases federal regulations of initial public offerings to promote investment in startup companies
Which of the following would be considered a prohibited practice if performed by an investment adviser representative without appropriate disclosure?
Acting as an agent of the brokerage firm that executes the trades he recommends and receiving commissions on them as a result
An investment adviser representative of a federal covered investment adviser registers with
Administrator
One business succession issue that applies to virtually all investment advisers is
All investment advisers must have a designated regulatory contact person. Only sole proprietorships are affected by the death of that sole person. Disability or death of a member of the board of directors will probably have no effect on succession, and only partnerships are concerned with a partner (of any size) leaving.
venture vs private funds
Although venture capital funds are included in the general definition of private funds, unlike the private equity fund, there is no ceiling on the size of the fund before the adviser loses the exemption. Advisers to VC funds are exempt from registration. The funds themselves do not register with the SEC under the Investment Company Act of 1940 (and don't register with the states as well). These investments do not offer ready liquidity
Which of the following statements regarding unsolicited, nonissuer transactions is TRUE?
An Administrator may require representatives to obtain customer signatures acknowledging that orders were unsolicited.
Which of the following accurately describes a cease and desist order as authorized by the Uniform Securities Act?
An Administrator's order to refrain from a practice of business believed by that Administrator to be unethical
Federal covered IA
An IAR representing a federal covered investment adviser need only register in the state or states in which she (the IAR) has a place of business.
When a bond's NPV is zero, it is usually an indication that
An NPV of zero indicates that there is no difference between the bond's present value and its current market price. That usually indicates a highly efficient market.
In which of the following situations did an agent commit fraud?
An agent knowingly sold a nonexempt, nonregistered security to a retail client who could well afford the risk involved.Fraud requires the intent to deceive. The agent knowingly deceived the client by selling unregistered securities, therefore committing a securities fraud. An agent is not required to discuss all information, only that which is material information. The term retail client refers to individual or noninstitutional clients.
Which of the following activities would NOT be considered a prohibited practice under the NASAA Statement of Policy on Unethical or Dishonest Business Practices of Broker-Dealers and Agents?
An agent shares in the profits and losses in a customer's account without making a financial contribution to the account
Which of the following statements is TRUE?
An agent's registration may never be revoked without the opportunity for a hearing.
If the dollar weakens, which of the following statements is TRUE?
An increase in U.S. interest rates might strengthen the dollar.
agent
An individual who effects securities transactions for commissions
An investment adviser new to the business is engaged by an elderly client who, on the grounds of privacy, refuses to disclose his annual income or net worth. The client merely asks the adviser to establish and manage a $50,000 portfolio. If the client brings a cashier's check for $50,000 to the initial meeting, which choice below reflects the best action on the part of the adviser?
An investment adviser cannot perform effectively for a client who refuses to provide information necessary for determining the suitability of investments or a portfolio. Unlike the broker-dealer, who may act merely as order filler, the investment adviser has a fiduciary responsibility and is obligated to determine suitability.
Which of the following persons must register as an investment adviser under the Uniform Securities Act?
An investment adviser who only serves institutional clients and whose only office is in this state long as there is an office in the state, unless the adviser is federal covered (as described in the previous sentence), there is no exemption from registration in that state
Which of the following is defined as a security under the Uniform Securities Act?
An investment contract
Which of the following accurately describes a cease and desist order as authorized by the USA?
An order by the Administrator to refrain from a practice of business believed by that Administrator to be unfair
Which of the following acts requires publicly traded corporations to issue annual reports?
The Securities Exchange Act of 1934 mandates that public issuers file annual and quarterly reports with the SEC.
A local customer of broker-dealer A is on vacation in Nevada. Broker-dealer A, who is registered in and maintains offices only in Florida, wishes to make the customer aware of an investment opportunity that has just become available. Which of the following is TRUE?
Broker-dealer A may solicit this customer in Nevada.
Which of the following individuals employed by an investment adviser would be required to be registered as an IAR?
Any individual performing the functions of an investment adviser representative must be so registered. Among those duties is supervisory responsibility, and the CCO has the job of ensuring that the firm and all of its employees follow the rules. Although executive officers are generally automatically registered as IARs, that is only the case when the job function is one involving activities relevant to IARs (and human resources is not one of them).
An agent terminates his association with broker-dealer A and begins to work for broker-dealer B. Under the Uniform Securities Act, which of the following must take place?
Broker-dealer A must notify the Administrator. Broker-dealer B must notify the Administrator. The agent must notify the Administrator. The supervisor to which the agent reported must notify the Administrator.
As used in the Uniform Securities Act, which of the following entities would NOT be included in the term "institutional investor"?
Any accredited investor
Which of the following is(are) considered an associated person(s) of a broker-dealer under the Securities Exchange Act of 1934?
Any employee of a broker-dealer, except for clerical or ministerial employees Any officer, partner, or manager associated with the broker-dealer Any employee, other than a clerical or ministerial employee, who is supervised by, supervises, or is under common supervision of the broker-deale
SERCUITY
Any insurance product that includes the word variable is a security. Otherwise, it is not.
When analyzing a security's standard deviation, which of the following statements accurately describes observations according to a normal frequency distribution curve?
Approximately two-thirds, or 68%, of observations will be within one standard deviation on either side of the mean.
Which of the following equations correctly shows the relationship between the items on a company's balance sheet?
Assets = liabilities + stockholders' equity.
To calculate the future value of an investment, which of the following must be known?
Assumed interest rate Duration of investment
The USA considers certain transactions to be exempt from the requirements to register and the filing of advertising material. Included in that group are all of the following
B) any transaction executed by a bona fide pledgee without any purpose of evading the act C) any transaction by an executor, administrator, sheriff, marshal, or guardian D) an isolated nonissuer transaction effected through a broker-dealer
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?
Both Joan and the firmThe 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.
security
The key is the word "variable". Insurance products are excluded from the definition of a security unless the word "variable" is part of the description. So, variable life and variable annuities are securities - the rest are not.
Baird, a registered agent, receives an order from Miller, her customer, for an unusually large order of common stock in XYZ Incorporated. He states that he overheard the CFO of XYZ, Inc., telling his golfing partner that XYZ was close to being acquired by Monolith Communications, Incorporated. In light of ethical standards under the Uniform Securities Act, which of the following actions is most acceptable?
Baird tells her immediate supervisor (principal) of Miller's intent to trade based upon nonpublic (inside) information.
Under the Securities Exchange Act of 1934, which of the following would NOT be grounds for disqualification of a broker-dealer's registration?
Being sued by a client
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. Misleading information can lead to civil and perhaps even criminal liability. The act is federal in scope, whereas blue-sky laws refer to state securities regulations.
Under the Uniform Securities Act, if sent to 2 or more persons, a file must be maintained containing a copy of which of the following?
Bulletins Newspaper articles Notices Websites
agent and BD registration
In general, an agent will only be registered with a single broker-dealer. However, the USA does permit registration with more than one under certain conditions. An agent must submit separate registrations for each broker-dealer with which he is registered, and an agent may be prevented from multiple registration in those states that prohibit dual or multiple registrations.
EMPLOYEE BENEFIT PLAN
In general, the USA does not consider a transaction with an employee benefit plan to be exempt unless the plan has assets of at least $1 million.
excluded from the definition of investment adviser representative.
Clerical and ministerial personnel
A broker-dealer informs a client that it does not intend to abide by all the provisions of the Uniform Securities Act. It has the client sign a waiver that specifically prohibits the client from entering a suit against the firm. The client's signature is properly witnessed and notarized.
Clients cannot waive their legal rights.
Rule 503: Commissions and Referral Fees
Commissions: recommending the products or services of clients or third parties (non-CPA) permitted for non-attest, if disclosed prohibited for attest engagements Referrals: recommending the services of CPAs permitted for any engagement, if disclosed
Which of the following is NOT classed as a security under the Uniform Securities Act?
Commodity futures on items such as gold, silver, wheat, heating oil, and pork bellies are not securities. Options on stocks, and stocks and bonds are securities.
compensation
Compensation may take the form of, but is not limited to, fees, payments for subscriptions, salaries, or commissions. Compensation does not have to be direct. The commission on the insurance policy is considered indirect compensation covering the investment advice given by the insurance agent. The same logic holds for the real estate agent—she doesn't give advice unless you list your home with her. Nothing in the neighbor's advice involves compensation.
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
Conduct business with client
FinCEN Form 112, the Currency Transaction Report, is filed with
Currency transactions in excess of $10,000 are reported electronically on FinCEN Form 112 to the Department of the Treasury.
FinCEN Form 112
Currency transactions in excess of $10,000 must be reported within 15 days on this form. Also known as a Currency Transaction Report (CTR).
The Uniform Prudent Investor Act identified a number of fundamental changes in the former criteria for prudent investing. Which of the following incorrectly states one of these changes?
The standard of prudence is applied to each investment individually.
When does a deliberate omission of a fact in a securities sale constitute fraud?
Deliberate omission of a fact constitutes fraud if the omitted information is material in nature (i.e., if a reasonable investor would use the information in making an investment decision). This is true whether the information is made in connection with a primary offering or a secondary market transaction.
Interstate
Doing business in more than one state
An agent is registered with a broker-dealer whose principal office is located in State X, but who also does business in State Y. However, the agent is only licensed in State Y and confines her business to residents of that state. The Administrator of State X has what kind of authority over this agent?
Even though the broker-dealer is registered in State X, the agent in question is not; she is only registered in State Y. Therefore, the Administrator has no jurisdiction over the activities of this agent in a state other than his own.
rule 147
Exemption from the registration requirements of the Securities Act of 1933 for intrastate offerings. 100% of purchasers must be within one state. 80% for rest of requirements i.e. gross revenue derived from state, assets in state, proceeds of offering in state. No out of state resale for nine months.
An issuer properly files Form D in accordance with Rule 503 of Regulation D of the Securities Act of 1933. As such, the securities that are the subject of any transaction are
Federal covered securities
All of the following may be required of a federal covered security EXCEPT
Federal covered securities may be required to pay a filing fee, provide a consent to service of process, and if requested, submit copies of any and all documentation filed with the SEC. However, requiring a legend or other similar statement is beyond the jurisdiction of the state on a federal covered security.
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following statements about an investment adviser's fees is (are) TRUE?
Fees that are excessive compared to fees charged by other advisers for comparable services are unethical. The Administrator may investigate excessive fees by a comparison of services offered and fees charged.
exempt transaction
Fiduciary transactions and unsolicited orders, regardless of the security being purchased or sold, are always exempt transactions under the USA. Preorganization certificates are limited to a maximum of 10 subscribers, whether individuals or institutions. A gift of securities is not a sale, so no transaction has taken place.
surety bonds
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.
investment consul
First, the principal business of the adviser must be the rendering of investment advice. Second, the nature of the advice must meet the definition of investment supervisory service.
Under the Securities Act of 1933, commercial paper is exempt from the prospectus delivery requirements or registration, unless its maturity is more than how many months?
For exemption under the Securities Act of 1933, commercial paper must mature in 9 months or less.
An upward sloping yield curve represents all of the following EXCEPT
Foreign interest rate differentials are not reflected in an upward sloping yield curve. Interest rate differentials between countries reflect differences in domestic monetary and fiscal conditions
to register as an investment adviser in a state,
Form ADV is filed with the Administrator or with a central registration depository designated by the Administrator. The application must include, among other things, a consent to service of process, appropriate fees, and the brochure or any other information that will be used to solicit clients.
Form PF must be filed by
Form PF is the form used by those private fund managers who are registered with the SEC and whose private fund AUM reaches or exceeds the $150 million threshold. Exempt reporting advisers are, as the term implies, exempt from reporting. State-registered advisers don't report on the form because, among other things, if they reached the $150 million mark, they'd have to register with the SEC.
cash dividend
From an accounting standpoint, once a corporation declares a cash dividend, it becomes a current liability on the company's balance sheet. When that dividend is paid, cash, a current asset, is decreased by the amount of the dividend. Payment of the dividend removes it from the balance sheet as a current liability. Therefore, there is no change to the company's working capital (current assets minus current liabilities) because they are both reduced by the same amount. The total assets (of which cash is one) and the total liabilities (of which the dividend payable is one) both decrease. Because assets and liabilities are changed by an identical amount, there is no change to shareholders' equity (net worth).
Three Prongs
Gives advice about securities does so as part of regular business activity Receives compensation for preforming activity
clerical work
Graphic design would be considered a clerical function.
FedIAR
IARs associated with federal covered advisers are only required to register in a state in which they (the IAR) have a place of business. Although federal covered advisers are generally exempt from state regulation, the USA does give the Administrator the power to investigate when there is a suspicion of fraud. Even though the USA sets certain standards for performance-based fees, there is a provision that grants the Administrator the authority to waive those limits when deemed appropriate. Unless the federal covered adviser has no office in the state and only deals with institutional clients or other federal covered advisers, the Administrator has the power to demand to see relevant information that has been filed with the SEC.
An investment adviser is eligible to register with the SEC if it
IAs must have at least $100 million in AUM in order to register with the SEC. If it is reasonable to expect reaching that level within the next 120 days, SEC registration is allowable now. One of the exceptions that would permit small and mid-size advisers to register with the SEC is if they would have to register in at least 15 states, not 10.
The difference between present value and net present value represents
INITAL cash outlay
Under the USA, each of the following is specifically excluded from the definition of a broker-dealer EXCEPT an
INVESTMENT ADVISOR 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.
A measurement of investment return that takes the time value of money into consideration is
IRR
When, if ever, would a broker-dealer be required to register as an investment adviser?
If it charges distinct fees for investment advice or management
Which of the following statements regarding a state-registered investment adviser's registration is true?
If the investment adviser ceases to act as an adviser or goes out of business, the Administrator will cancel the registration.
If a party is acting as a solicitor for a federal covered investment adviser, which of the following statements are TRUE?
If the solicitation is for other than impersonal services, then the solicitor must give the client a disclosure document. If the solicitation is for other than impersonal services, the solicitor must receive a signed statement from the client that the investment adviser's brochure and the disclosure document have been received.
If the value of the U.S. dollar were to increase with respect to other currencies, it would make
If the value of the U.S. dollar were to increase with respect to other currencies, it would make foreign imports into the United States, such as cars, more competitive in U.S. markets
inertial inflation
Inertial inflation is an economic condition where the rate of price increases reaches a stable equilibrium and stays there until a shock to the system occurs, at which time, the rate of inflation changes. It is true that most economists view the core inflation rate as a more accurate measure of true inflation than the CPI, but that has nothing to do with inertial inflation.
Under the Uniform Securities Act, which of the following must register with the state securities Administrator?
Investment advisers with a place of business in the state and less than $100 million in assets under management
ALPHA / BETA
It is alpha, not beta, that is used when looking at the performance of a fund or portfolio. Alpha refers to the extent of any outperformance of a portfolio against its benchmark. Standard deviation is used for measuring volatility, not performance.
All of the following practices are unethical under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents EXCEPT
It is not an unethical practice to charge higher commissions for trades that are difficult to execute, such as trading a thinly traded foreign security. The other activities are unethical business practices prohibited by the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents.
A client who has a margin account is out of town for a week. The securities in the client's account fall dramatically, which requires the client to make immediate deposits into the account. Which of the following can the agent do to assist the client?
Make every reasonable attempt to contact the client
Jefferson, Adams, and Washington (JAW) is a pension consulting firm whose only office is on Constitution Avenue in Washington, D.C. JAW has only one advisory client—a U.S. government employees pension fund with assets of $4 billion. What are this firm's registration requirements?
It may choose to register with either the D.C. Administrator or the SEC.
Which of the following statements are TRUE of a discretionary account at a broker-dealer?
It must be approved by a designated supervisory individual of the firm. It must be reviewed frequently to minimize the chances that the account has been churned.
An individual or a firm may be registered as an investment adviser, but only an individual can be an investment adviser representative.
KEY FACT
Long-Term Financial Solutions, Inc. (LTFSI), an investment adviser registered in five states, files a Form ADV-W indicating the business is closing. It is being acquired by another federal covered adviser, Gold and Sylver Advisers, LLC. Which of the following statements is correct?
LTFSI is responsible for ensuring that a copy of the LTFSI corporate charter is preserved for at least three years after the acquisition.
Which of the following statements is most accurate regarding the net present value (NPV) and internal rate of return (IRR) on a bond?
NPV assumes the cash flows can be reinvested at market interest rates.
NPV AND NFV
Net present value (NPV) is the difference between the initial cash outflow (investment) and the present value of discounted cash flows (NPV = PV of CF − cost of investment). That is why it is called net present value instead of net future value.
An investment adviser is preparing an advertisement. Which of the following would be acceptable?
Offering to provide his investment recommendations for the past 12 months Promoting his system of charts and formulas while mentioning their limitations and difficulties
XYZ Corporation is registering a new issue of common stock. A final prospectus must be delivered within the statutory time limits to
any person who purchases shares of the issue
publications
One thing to look for on the exam is if the publication is market-event driven. That is, publication is not regular and is based on current events affecting the securities markets. In that case, the exclusion does not apply
state IA
Only state-registered investment advisory firms are required to notify the appropriate state Administrator when employment is terminated or begun
Which of the following statements regarding an agent's authority to place orders for a client's account under NASAA's Statement of Policy on Unethical or Dishonest Business Practices of Broker-Dealers and Agents is TRUE?
Oral approval from the client authorizing a stated amount of a specified security is sufficient to place an order. An agent must receive authority to place orders for a client whether or not there is a conflict of interest. Written approval from the client authorizing a stated amount of a specified security is not required before placing the order. However, written authority is necessary for the agent to exercise discretion in the account.
Moonglow Specialties, Inc., is currently trading at $20 per share. Recently, the company reported net income of $1 million. The company is capitalized with 200,000 common shares and $5 million of 20-year debentures with a coupon of 4%. Given the data, Moonglow's price-to-earnings (P/E) ratio is closest to
P/E = 20 ÷ 5 = 4.
Among the many exempt transactions under the Uniform Securities Act are the private placement and the preorganization certificate or subscription. While these two exemptions have several requirements in common, they have which of the following differences?
Payment for the purchase may be made in the case of a private placement, while no money changes hands in a preorganization subscription. It is expected that noninstitutional buyers of the private placement are purchasing for investment only, while no such requirement exists for the investors in a preorganization certificate.
ABC Manufacturing Company is in the business of making high quality machine tools. Which of the following would be included in ABC's cash flow from financing activities?
Payment of cash dividends
Although generally prohibited, there are conditions under which a state-registered investment adviser is permitted to charge performance-based fees. Which of the following meets the necessary criteria?
Performance fees may be charged, regardless of the client's age, to anyone with a net worth in excess of $2.2 million or with at least $1.1 million under management with the firm. This client with $2.3 million in net worth meets the qualification. An individual reaches accredited investor status with a net worth of at least $1 million, not enough to qualify. Additionally, one way in which the states differ from federal law is the requirement to disclose the incentive to take greater risks.
There are certain circumstances under which clients might wish to give their agents discretionary power over their account. An agent empowered to do which of the following would be considered using discretion?
Picking the specific security
The Investment Advisers Act of 1940 addresses the issue of investment advisers (IA) maintaining custody of client funds and/or securities. In which of the following cases would that act consider the IA to have custody?
Possession of client funds or securities Any arrangement under which the IA is authorized or permitted to withdraw client funds or securities maintained with a custodian upon the IA's instruction to the custodian Any capacity that gives the IA or a supervised person legal ownership of or access to client funds or securities
Nobody Walks Motor Company, a licensed automobile dealer, is running a promotion offering anyone who purchases a car over the weekend to receive a $1,000 corporate bond at no additional cost. Under the Uniform Securities Act, in order to make this offer,
Reg. as BD. The USA states that "any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing is considered to constitute part of the subject of the purchase and to have been offered and sold for value." Therefore, Nobody Walks Motor Company would have to be registered as a broker-dealer in this state.
unsolicited order to agent
Regardless of whether the security is exempt or the transaction is exempt, one must be licensed in any state that 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.
If a nonexempt issuer wants to register simultaneously with the state and the SEC, which method would be used?
Registration by coordination
The federal law dealing with privacy matters for financial institutions is
Regulation S-P
true
Revocation of the registration of that agent's broker-dealer will result in that agent's effective registration being put "on hold."An agent of a broker-dealer is active only when that broker-dealer's registration is in force. The exam may refer to the agent's registration being placed into suspense or canceled; any of these has the same effect.
Rule 506 (Reg D)
Rule 506: Unlimited deal size, < 35 Non-Accredited, no limit on Accredited
Washington, Adams, and Jefferson, Inc. (WAJI) is a broker-dealer whose principal and only office is in Alexandria, VA. WAJI's sole business is trading in securities issued by the U.S. Treasury. Rutherford Buchanan is employed by the firm in the main office and has the responsibility of servicing the firm's bank and insurance company clients. Which of the following statements is correct regarding Rutherford's licensing requirements?
Rutherford must register as an agent of WAJI with the State of Virginia. The fact that WAJI only trades in U.S. Treasury securities is irrelevant. Perhaps you were thinking of an investment adviser who, under these circumstances, would be excluded from the definition of IA under the Investment Company Act of 1940.
Under federal law, which act regulates the activities of broker-dealers and associated persons?
Securities Exchange Act of 1934
Which of the following industries would tend to be the most cyclical?
appliance manufacture
securities USA
Securities include stocks, bonds, notes, certificates of interest in any profit-sharing agreement or participation plan (oil, gas, mining, lease, or real estate partnerships), preorganization certificates or subscription agreements, certificates of deposit for a security, evidence of indebtedness, warrants, rights, or options, variable annuities, commodity options, and multi-level distributorships. Excluded from the definition are insurance contracts, endowments with fixed benefits, fixed annuities, Keogh or IRA plans, written confirmations of a trade, futures contracts, real estate held as a personal residence, currencies, precious metals, and collectibles.
SRO
Self Regulated Organization
sharholder capital
Shareholders' equity is only affected by gains, losses, new invested capital, and the declaration of cash distributions (dividends) to shareholders.
Which of the following statements regarding the economics of fixed-income securities are TRUE?
Short-term interest rates are more volatile than long-term rates.and move more quickly than long-term rates. Long-term bond prices react more than short-term bond prices given a change in interest rates.
Which of the following practices is considered unlawful under the Uniform Securities Act?
Soliciting orders for unregistered, nonexempt securities
Investment risk may broadly be categorized as either unsystematic or systematic risk; both types of risk together constitute total, or absolute, risk. Total risk is measured by
Standard deviation
Blue Sky Laws
State laws that regulate the offering and sale of securities for the protection of the public.
Which of the following statements regarding the USA are TRUE?
State securities Administrators may deny, by rule or order, an exemption to an exempt transaction under the USA, if the security involved is not covered by federal exemption. State securities Administrators may not deny, by rule or order, an exemption to a federal covered security.
It would be permissible for an investment adviser to make which of the following statements?
Stating past performance that is factual is not a violation of the act. However, this statement would probably also be accompanied by another saying that past performance is no assurance of future performance. Any type of guarantee, even related to government securities, is prohibited by the act.
An agent sells his client 10 U.S. government bonds due to mature in 30 years. According to NASAA's Statement of Policy on Unethical or Dishonest Business Practices of Broker-Dealers and Agents, which of the following statements may the agent legally make?
Stating that the bonds are guaranteed as to principal and interest payments by the U.S. government is an accurate statement of fact. A client can lose money on government bonds should interest rates rise after he purchases the bonds. The government does not guarantee that the principal and interest will keep up with inflation.
rise in IR
Strengthen US dollar
IRR
TIME Value of money
Which of the following statements regarding a state-registered investment adviser's registration is true?
Termination of an investment adviser's registration by cancellation will generally occur when the adviser goes out of business (mail is returned with no forwarding address) or ceases performing the functions of an investment adviser. It is registration on a federal level where the 45 days applies for initial registration and 60 days for withdrawal. On the state level, annual renewal is December 31, regardless of when the IA's fiscal year ends.
testimonials
Testimonials are prohibited under any circumstances for investment advisers and their representatives. Agents and broker-dealers are permitted to use testimonials if they meet FINRA standards.
An Administrator has specific authority under the USA to
The Administrator may impound the proceeds of an offering in an escrow account until the issuer receives a specified amount. The Administrator may also suspend a security's registration if excessive fees or commissions are charged as part of the offering. State Administrators have the authority to cooperate with each other in enforcing the provisions of USA by ensuring that the subpoenas from other states are enforced. Injunctions are judicial orders that can only be issued by a court of law, not by an administrative agency such as a state securities Administrator.
Which of the following is (are) TRUE regarding violations of the Uniform Securities Act?
The Administrator may issue a cease and desist order with or without a prior hearing. The statute of limitations on criminal violations is 5 years, not unlimited. Regarding the criminal penalties described, the amounts are correct—a $5,000 fine, 3 years in prison—but violators may face both, not just one or the other.
The SEC requires that reporting companies (those registered with the SEC) file certain information within specified time limits. Which of the following reports carries the shortest time limit?
The Form 8-K is used to report newsworthy events to the SEC, thereby making them available to the public. These reports must be filed within four business days of the event. The Form 10-Q is a quarterly report and, depending on the size of the company, is filed within 40 or 45 days of the end of the quarter. The Form 10-K is the annual report and, once again, the filing time depends on the size of the company and ranges from 60 to 90 days after the end of the fiscal year. The annual report is technically the Form 10-K, although most major corporations publish an additional expanded document with pretty pictures and other information about the company.
LMN Manufacturing Company, listed on the NYSE, is an SEC reporting company. Each of the following would require the filing of a Form 8-K EXCEPT
The Form 8-K is used to report significant events that could affect the price of the company's stock. The SEC does not consider a relocation of a subsidiary to be of significant magnitude. would have to file a change in top management B) a change in external CPA firm engaged to perform the annual audit C) acquisition of a major asset
The definition of a federal covered security excludes which of the following securities?
The NSMIA created a second type of exemption by declaring that any company that is listed on certain exchanges, such as the NYSE, the NYSE American LLC (formerly known as the American Stock Exchange [AMEX]), and the Nasdaq Stock Market, or any company registered under the Investment Company Act of 1940 are exempt from state registration requirements.
Hermon Industries is operating in a sector where the average prospective price-to-earnings ratio is currently eight times. If Hermon's earnings per share (EPS) are expected to be $0.30 per quarter, the implied value of a Hermon share is closest to
The P/E ratio is the relationship between the market price and the annual earnings per share. Because this question stated the quarterly earnings, they must be multiplied by 4 to get to the $1.20 annual rate. Therefore, the shares should be selling at 8 × expected EPS = 8 × $1.20 = $9.60.
Which of the following statements is (are) TRUE regarding the jurisdiction of the SEC under the Securities Exchange Act of 1934?
The SEC has jurisdiction over exchanges and SROs. The SEC has jurisdiction over broker-dealers, investment advisers, and associated persons that are required to be registered under federal law.nhe SEC does not enforce state securities statutes, nor does it have jurisdiction over banks or savings and loans regarding their securities activities.
Under the Securities Exchange Act of 1934, which of the following statements is NOT true about the authority of the SEC to investigate violations of securities laws?
The SEC may investigate violations of the Uniform Securities Act.
Wealth Creation Advisers (WCA) is a federal covered investment adviser specializing in consulting to pension plans. WCA's principal office is located in State L. The governor of State L is running for re-election. If WCA were to make a $350 contribution to the campaign, under the SEC's pay-to-play rule,
The SEC's pay-to-play rule prohibits investment advisers from receiving compensation for advisory services to a government entity (any agency, authority, or instrumentality of a state or political subdivision), for 2 years after the advisory firm or any covered employee makes a political contribution to a public official or candidate who is or would be in a position to influence the award of investment advisory business by public retirement funds. Please note that the advisory relationship can continue, just without any compensation. The de minimis exemption of $350 applies to an individual, as long as that person is eligible to vote for the candidate ($150 if he is not), but it never applies to the firm.
Under the Investment Advisers Act of 1940, which of the following are excluded from the definition of an investment adviser?
The act excludes the following from the definition: banks or trust companies; publishers of bona fide publications of general circulation (newspapers and magazines); persons advising about certain securities (U.S. government or agency issues); broker-dealers not receiving special compensation for giving advice; and persons whose advice is incidental to their profession, such as lawyers, accountants, engineers, and teachers
A client approaches an agent about investing in a risky security and insists on doing so, even when told by the agent that the security is not suitable for that client. What should the agent do?
The agent should explain the risks of investing and, if the client still insists, place the order and mark it unsolicited.
When would an individual employed by an issuer to sell its stock to the public have to register as an agent?
The first is when the issuer is one of 5 specific named cases. That list includes savings institutions (banks), and the federal governments of the United States and Canada, as well as any of their political subdivisions. The list does not include insurance companies. The second case is when the securities are being sold in an exempt transaction. From a practical standpoint, the most common case where this occurs is when the issuer makes a private placement of its shares.
A company's current ratio is .5:1. This could be an indication
The formula for current ratio is the current assets divided by the current liabilities. A .5:1 ratio means that the company has current liabilities that are twice its current assets. This would also mean a negative working capital (current assets minus current liabilities) and would probably mean that the company is going to have a difficult time paying its bills.
Under the Securities Act of 1933, when registering securities with the SEC, who must sign the registration statement?
The chief executive officer (CEO) The chief operating officer (COO) The chief financial officer (CFO) NOT majority of board
reg of IA in state
The consent to service is a permanent document that remains on file with the Administrator; it need not be resubmitted for yearly renewal. The initial application for registration must include a consent to service of process along with Form ADV and the appropriate fees. If the investment adviser is not an individual, all officers or partners of the business entity that play an active role in the giving or supervision of giving advice are automatically registered as IARs.
Which of the following best describes net present value?
The difference between the sum of the discounted cash flows that are expected from an investment and its initial cost
Last year, ABC Corporation had earnings per share of $5 and paid a quarterly dividend of $.75 per share. It has a current market value of $75. What is its price-earnings ratio?
The dividend information is irrelevant. The price-earnings ratio is the price of the stock ($75) divided by the earnings of the stock ($5), or 15:1.
Which of the following statements about the federal government's fiscal policy is TRUE?
The federal government's fiscal policy is its policy for managing taxation, spending, and debts. The federal government's fiscal policy can have a great impact on the securities markets. The federal government finances its deficit spending by selling bonds.
An agent for a broker-dealer receives a buy order from an investment advisory firm on behalf of its clients. The order is to purchase 5,000 shares of XYZ common stock at the market. The adviser informs the agent that once the purchase is completed, the account numbers and quantities for each individual client will be supplied. The buy is completed, but at various prices. How is the order allocated to the adviser's accounts?
The order is reallocated to the investment adviser's clients by using the average cost basis.
Under the Uniform Securities Act, an Administrator has which of the following powers?
The power to seek court orders for the payment of restitution against any violators of the act The power to issue a cease and desist order with or without prior hearings not imprison
The terms "offer," "offer to sell," "sale," and "sell" include which of the following?
The preemptive right frequently given to common stockholders allowing them to purchase shares of a forthcoming issue is considered to be an offer of that upcoming issue. The terms "sale" or "sell" include every contract of sale, contract to sell, or any disposition of a security for value. A gift of a security is not considered a sale. The terms "offer" and "offer to sell" represent any effort to dispose of a security for value. This does not include bona fide loans, stock dividends, or dispositions pursuant to corporate statutes.
Which of the following would be excluded from the definition of investment adviser under the Uniform Securities Act?
The publisher of a weekly newsmagazine, sold on newsstands, that contains at least 5 stock recommendations per issue(general)
One of your clients has called you to discuss an interesting investment opportunity discovered on one of the LinkedIn groups she participates in. Which of the following factors might increase the likelihood that this is a scam?
The purchase money must be wired to an offshore account One of the members of the group is a principal in the company being offered Bonus shares are offered for recruiting friends into the deal
An agent may accept indications of interest for securities during the registration process
The red herring prospectus is used during this period, and neither offers to sell nor orders to buy may be accepted prior to the effective date.
Transactions meeting certain conditions are exempt from the Uniform Securities Act's registration and advertising filing requirements. Which of the following transactions does NOT meet those conditions to qualify as an exempt transaction?
The sale of U.S. government securities to a retail client's IRA by a registered government securities dealer.In the sale of U.S. government securities to a retail client, the security is exempt, but the transaction is not. Had the sale been to an institutional client, it would have been exempt. An offer is not a transaction.
If Brokers, Inc., a broker-dealer registered in this state, refuses to comply with the Administrator's order to retain records for 2 years longer than required by the Securities Exchange Act of 1934, which of the following statements are TRUE?
The securities Administrator cannot require registrants to retain books and records longer than required by the SEC. Brokers, Inc., is not in violation of the Securities Exchange Act of 1934.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 addition to those required by the Securities Exchange Act of 1934.
There are three requirements for a preorganization subscription to qualify as an exempt transaction. A preorganization subscription may be advertised.
There may be no more than 10 subscribers. B) No commission may be paid to anyone for soliciting potential subscribers. C) The offer of the security may be advertised. D) No payment may be made by any subscribe
A federal covered investment adviser employs the services of a third-party solicitor. The Investment Advisers Act of 1940 would require the solicitor to deliver
Third-party solicitors must provide a copy of the investment adviser's brochure (Form ADV Part 2A), as well as a copy of the solicitor's brochure. The solicitor's script must be approved by the IA, and only the SEC receives a copy of the Form ADV Part 1.
If you were using the discounted cash flow method to determine the appropriate value of a security, you would want to purchase that security when
Those who use the DCF to value a security would recommend purchasing when the current market price is below the PV—that is, when the NPV is positive.
TRUE regarding registration of investment adviser representatives
To register, a representative must submit a completed application for registration, a filing fee, and a signed consent to service of proces
Which items change when a company pays a cash dividend?
Total assets Total liabilities
The issuance of a long-term debt instrument, such as a bond, by a company would have an immediate effect on which of the following balance sheet items?
Total assets Total liabilities Working capital
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?
Under no circumstances is an employee of a licensed broker-dealer in a state allowed to sell exempt securities as an unregistered agent.
private placement
Under state law, a private placement can be offered to no more than 10 noninstitutional investors in 12 consecutive months.
A pension consultant who advises corporate retirement plans with assets of $135 million must register with which of the following?
Under the Dodd-Frank Bill, until a pension fund manager has at least $200 million in AUM, registration with the states is required. Once the $200 million level is reached, SEC registration becomes an option.
record keeping 5 years 2 years principal office
Under the Investment Advisers Act of 1940
Twelve years ago, an investor placed $2,500 into an account. The account is now worth $10,000. Using the Rule of 72, you can determine that the approximate annual return was
Under the Rule of 72, we can determine an earnings rate by dividing 72 by the number of years it takes for money to double. In this case, the money had quadrupled. That means it has doubled twice in 12 years or, every 6 years. Dividing 72 by 6 years results in an annual return of 12%.
Under the Uniform Securities Act, a client who purchased securities from a broker-dealer may request the trade be rescinded if
Under the USA, a client who purchased securities from a broker-dealer may request the trade be rescinded if the security was sold in violation of the USA. In such a case, the purchaser is entitled to compensation for the original purchase price, plus interest and reasonable attorney's fees.
If an investment can be expected to return 8%, using the rule of 72, what is the present value needed to have $50,000 for a child's education in 18 years?
Under the rule of 72, dividing 72 by the expected return shows the number of years it will take for a deposited sum to double. 72 divided by 8 equals 9 years. Over an 18-year period, there will be 2 doublings. So, dividing the future value ($50,000) by 4 solves for the present value required.
fall below net capital
Unless otherwise exempted, every investment adviser registered or required to be registered under the Act shall by the close of business on the next business day notify the Administrator if such investment adviser's net worth is less than the minimum required. After transmitting such notice, each investment adviser shall file by the close of business on the next business day a report with the Administrator of its financial condition.
exempt transaction
Unsolicited customer orders, regardless of the type of security involved, are always exempt transactions as are sales by fiduciaries. The private placement exemption is limited to 10 noninstitutional offerees, so 14 purchasers would certainly be over the limit. While a security issued by a foreign government with which we have diplomatic relations is an exempt security, a solicited sale by an agent to an individual client is not an exempt transaction.
When the USA refers to unsolicited orders, which of the following is TRUE?
Unsolicited orders are defined as exempt transactions under the USA.
insurance of bond
When a company issues a bond, it receives cash, but does not have to pay the money back until maturity, a number of years in the future. Extending credit means waiting a longer period to receive the cash from sales. Increasing inventory means spending money for raw material and waiting for it to be sold. The company would want to increase sales to bring in more cash, not decrease them.
If a client has 100 shares of XYZ publicly traded stock and it undergoes a split, afterward the client will have:
When a stock splits, the number of shares each shareholder holds increases. However, the value of each share decreases proportionately. The client experiences no effective change in the value of his ownership share.
insurance of bond
When bonds are issued, cash is received (thus increasing current assets) and long-term debt increases (increasing total liabilities). Because there is no corresponding increase in current liabilities, working capital increases. There is no effect on shareholders' equity because the increased liability is offset by the asset (cash) received.
Under which of the following circumstances would it most likely be presumed that an adviser holds custody of client property?
When fees are automatically withdrawn from the client's account, custody of client funds can be presumed. Merely handing an adviser a check payable to a third party, such as a retirement account custodian, does not represent custody, nor are direct payments of advisory fees to the adviser considered custody. In the context of this question, account statements are considered to be information rather than property. Stock and bond certificates, as well as cash, are examples of client property.
Under what conditions may an unregistered employee of a broker-dealer receive bonuses or incentives?
When such bonuses or incentives are not tied to transactions, commission activity, or referrals generated by the unregistered personUnregistered persons are regarded as employees of the member and should not be compensated on any basis other than a salary or hourly wage. However, the payment of performance bonuses or other forms of incentive compensation, such as through participation in a member's profit-sharing plan, are permitted as long as such bonuses or incentives are not tied to transactions, commission activity, or referrals generated by the unregistered person.
The key is that Sharon is an IAR for a covered IA.
When that is the case, the IAR is only required to register in states where she (the IAR) maintains a place of business. Sharon does not have a place of business in State X so no registration is required there. The fact that the client is a bank is of no relevance nor is the location of her employer's principal office.
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following must be included in an advisory contract?
Whether the contract grants discretionary power to the adviser The term of the contract A clause preventing assignment without consent The formula used for computing the fee
Which of the following persons are required to register in a particular state?
With certain exceptions not mentioned in the choices, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, advisers who manage clients with a total of less than $100 million under management are required to register with the state Administrator. Under Dodd-Frank, those who advise registered investment companies are required to register with the SEC and are exempt from state registration. Those who manage at least $100 million, but not $110 million, have the choice of registering with either the state or the SEC. Investment adviser representatives with a place of business in the state register with the state. It makes no difference if they represent a federal coverered or a state-registered investment adviser.
Which of the following is TRUE regarding a state Administrator's authority?
With certain limited exceptions, a state Administrator has jurisdiction over securities transactions conducted in the officiating state. The Administrator may issue subpoenas or otherwise conduct inspections of records in states other than where officiating if circumstances warrant. Such inspections may be made if the Administrator deems doing so to be in the public's interest. A person's license can only be suspended when it is in the public interest AND a specific provision of the act or rules has been violated. Only in the case of a transaction involving a federal covered security does the Administrator not have the power to void the exemption.
Which types of accounts are billed a single fee that includes a group of services, such as execution of transactions and advice?
Wrap fee accounts are accounts for which firms provide a group of services, such as asset allocation, portfolio management, executions, and administration, for a single fee. Wrap fee accounts are generally considered investment advisory accounts.
If XYZ is a registered broker-dealer with its lone office located in State T, under which of the following circumstances must it also register in State L?
XYZ routinely sells nonexempt securities to extremely high net-worth residents of State L. XYZ purchases exempt securities from extremely high net-worth residents of State L for resale to residents of State T.Under the Uniform Securities Act, broker-dealers must register in any state where 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.
Included in the Uniform Securities Act's definition of broker-dealer would be
a broker-dealer with a place of business in the state whose only clients are insurance companies.When the firm has a place of business in the state, regardless of its clientele, it is a broker-dealer. Exclusions from the definition include agents, issuers, and most financial institutions, such as banks and savings institutions. Also excluded are broker-dealers with no place of business in the state who only deal with institutional clients, such as banks and insurance companies.
Although certain common stocks, known as federal covered securities, are exempt from state registration, the Administrator has the power to request from the issuer all of the following EXCEPT
a contact person located within the state for purposes of legal service
To register a sole proprietorship as an investment adviser in a state, the application for initial registration (Form ADV) must be filed with the appropriate party. This application must include all of the following except
a copy of the articles of incorporation for the business.
registration statement
a long, complex document that firms must file with the SEC when they sell securities through a public offering
An elderly widower explains to his investment adviser representative that he requires his investments to provide the maximum current income. The IAR should recommend
a mutual fund that matches the investor's stated objective
An investment advisory contract is considered assigned if an adviser formed as
a partnership with 2 partners and adds five partners.If an advisory firm is formed as a partnership and there is a change in the majority of partners, this is considered to be an involuntary assignment to the new partnership. In this case, client approval is required.
Under the Uniform Securities Act, the definition of a broker-dealer includes
a person in the business of making trades in his own account or for the accounts of others
With regard to a broker-dealer's use of social media, static content would be considered as
a planned communication to a target audience that is generally not altered communication that does not provide for interaction with the author once published
private placement
a primary market issue that is negotiated between the issuing corporation and a small group of accredited investors
Under which of the following cases could an agent offer a security for sale?
a registration statement has been filed with the SEC and has become effective.
All of the following statements regarding registration of broker-dealers under the Uniform Securities Act are true EXCEPT
a successor firm is exempt from filing a consent to service of process until the renewal dateWhen 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.
The Uniform Securities Act requires that a consent to service of process be filed by each of the following EXCEPT
a trustee operating in a fiduciary capacity in the state. tRUSTEE not registered under act
In general, the business continuity plan of an investment adviser should provide for all of the following EXCEPT
assuring that the securities in client portfolios will not decrease in value
Under the Uniform Securities Act, a state-registered investment adviser's records may be examined by the Administrator or his designee
at any time during regular business hours
Current liabilities on a company's balance sheet would include
accounts payable
Registration with the SEC as an investment adviser would be required for a person who
acts as the investment adviser to an investment company registered under the Investment Company Act of 1940
One of your clients owns shares of the NERP Corporation's senior preferred stock. He is concerned about NERP's financial solvency and wonders where he would fall in the event of NERP declaring bankruptcy. The proper response is, the client's claim is
after the creditors, but ahead of the common stockholders.
According to the USA, the sale of a security to an insurance company is
an exempt transaction
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
an individual investor
Under the USA, all of the following issues would be exempt from registration EXCEPT
an investment contract issued in connection with an employee stock purchase plan C) bonds issued by the city of New Orleans D) stock issued by savings and loan association authorized to do business in this state Not stock issued by an insurance company not offering policies in this state (would be if intrastate)
Under the Securities Exchange Act of 1934, the term associated person would include each of the following EXCEPT a person who is associated with a broker-dealer
and whose functions are solely ministerialbut whose functions are solely clerical or ministerial shall not be included in the meaning of such term
Fraud would include the willful omission of
any material facts
investment adviser i
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.
A corporate executive decides that it is in the company's best interest to purchase a yacht. Over the years, the company has built up substantial retained earnings and will use accumulated funds to make the purchase. An analyst interested in how this purchase will affect the company's debt-to-asset ratio would examine
balance sheet
If an investor wanted to verify a company's working capital, she would do so by reviewing their
balance sheet Working capital, current assets minus current liabilities, is determined from numbers found on the balance sheet.
In general, the Administrator would require that a broker-dealer's social media policies
be committed to writing and communicated firmwide
Under both federal and state law, an exemption from registration is granted to municipal bonds. Qualifying for that exemption would be all of the following EXCEPT
bonds issued by the U.S. Treasury.Municipal bonds are those issued by any governmental unit from the state level on down. This would include political subdivisions and local entities such as school, park, and road districts. Treasury bonds are government, not municipal, bonds.
A frequently-used metric by analysts is the yield, or credit spread. Common methods of computing this would be comparing
bonds of similar quality and different maturities. bonds of different quality and similar maturities.
When viewing a corporation's balance sheet, you would expect to see all of the following included in owner's equity except
cash
An analyst comparing revenues with expenses is most likely analyzing
cash flow
An analyst who wants to examine a firm's financing transactions during the most recent period is most likely to evaluate the firm's statement of
cash flow
When an analyst adds back the current year's depreciation to the net income, she is computing the company's
cash flow from operation
An investment adviser representative is prohibited from
charging a fee for investment advice and then earning commissions on recommended trades without disclosing the nature of the dual relationship
Your high-net-worth advisory client has a large cash position in his money market account and is considering using the cash to purchase an investment property. You believe that the real estate investment will not provide the same returns that can be realized by investing in bonds, so you prepare a proposal that estimates the income stream and potential capital growth of a portfolio of convertible bonds currently in the firm's inventory. The recommendation is quite suitable for the client based on his current objectives. If the transaction is completed and you fail to disclose that the bonds were sold in a proprietary transaction and receive client consent, you would have
committed a prohibited practice
Final approval of the annual operating budget for the United States is given by
congress
A client asks her investment adviser representative what footnotes to the financial statements are for. The best reply would be that footnotes
contain information that doesn't have a place in the main body of the financial statements.
A client of a broker-dealer calls his agent and submits an order to purchase 1,000 shares of a Peruvian copper mining company. As the order ticket is being prepared, the agent notices that this is a nonexempt unregistered stock. The agent should
continue to process the order because this is an exempt transaction
A manufacturing company is in the process of registering a securities issue with the SEC. In order to make the shares available for sale in this state, the method of registration that would most likely be used is
coordination
effective date
coordination becomes effective same time federal registration becomes effective no stop orders 10-20dyas range for file statments of min and max offering price
Which of the following would probably NOT be an attractive investment during periods of rising inflation?
corprate bond
Your client has $10,000 to invest and expects to earn an after-tax return of 8% to send his daughter to college in 12 years. Which of the following items will help determine whether the investment is likely to satisfy the client's goal?
cost of college
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
could not sell without being an agent
XYZ Aircraft Manufacturing Corporation, based in the United States, announces a multibillion dollar order for its new jumbo jet from Fly Airlines, a Japanese-based carrier. When the sale is completed, there will be
credit
An analyst attempting to determine the extent to which financial leverage is being employed by a company would examine the company's
debt to equity ratio
As current interest rates go up, the market price of existing corporate bonds bearing lower interest rates will
decrease
An investor's portfolio has a beta coefficient of 0.85. If the overall market declined by 10% over the course of a year, the portfolio's value has likely
decrease by 8%
An Administrator may take disciplinary action against a broker-dealer or its agents when the Administrator
determines that the action is in the public interest suspects that the registrant's action violated a rule, order, or the USA
A federal covered investment adviser may enter into a contract with a client that provides for performance-based compensation under all of the following conditions EXCEPT
disclosure that the performance compensation may create an incentive for the adviser to take greater risks
When a bank's reserve account is running low, it might choose to borrow from the Fed. When doing so, the bank will be charged
discount rate
Your client has given you discretionary authority to trade her account with a beginning balance of $100,000. Market conditions have been volatile for the past 6 months, and her primary objective is long-term growth with low to moderate risk. A review of the account at the end of that period shows that while the Dow Jones Industrial Average has dropped by 2.2%, the client's account value is $105,300. During the period, if commissions from trading totaled a bit over $6,000, it is likely that your principal will
discuss the possibility that you may have been churning the account
Under the Uniform Securities Act, the requirements for filing of advertising and sales literature dealing with an exempt security with the Administrator
do not apply
prospectus
document issued to possible buyers of a stocks and bonds outlining the financial condition of the company issuing those securities
not a Teacher
does not include an economist
The de minimis exemption applies when
during the preceding twelve-month period, the IAR has had no more than 5 retail clients. There are 3 ways of stating that: No more than 5 Five or fewer Fewer than 6
According to the Uniform Securities Act, the investment adviser brochure must include the business backgrounds of
each member of the investment committee or group that determines general investment advice to be given to clients
excluded vs exempt
exclusion =excluded from or not included in defintion exempt = not being subject to registration of act
Statutory disqualifcation
expelled from mebership or associate of SRO subject to an order of sec or other agency suspension expulsion while associated with BD 10 YEARrs convived misdemondor replated to secutiy
The fact that the broker-dealer does business in a state has nothing to do with a specific agent
fact
Under the Uniform Securities Act, all of the following are exempt from state registration as investment advisers EXCEPT
financial planners who provide fee-based investment advisory services to clients.Financial planners who provide fee-based investment advisory services to the public generally must register with their state securities Administrator, as long as their total assets under management are less than $100 million. Investment advisers with no office in the state, who only advise employee benefit plans with assets of more than $1 million, need not register with state securities Administrators. Investment adviser representatives do not register as investment advisers but as investment adviser representatives. Financial publishers who do not publish specific investment advice are exempt from state registration.
If an investor wished to compute the mean return of her portfolio, she is going to
find the arithmetic mean
Alex Alexander is planning on registering as an agent for a broker-dealer. Which of the following would be the least likely requirement for a successful application?
fingerprints not required under USA
Many businesses choose to use a date other than December 31 to close out their financial year for accounting purposes. When this is done, it is said that the entity is reporting on
fiscal year calendar
What is the term given to that item, typically found at the bottom of a corporation's balance sheet, that describes such things as significant accounting policies, commitments made by the company, and potential liabilities and potential losses?
footnote
clerical function
graphic design
A foreign private adviser is defined in the Dodd-Frank Act as any investment adviser that
has no place of business in the United States. has, in total, fewer than 15 clients and investors in the United States in private funds advised by the adviser. has aggregate AUM attributable to clients in the United States and investors in the United States in private funds advised by the adviser of less than $25 million.Does not holds itself out to the public in the United States as an investment adviser or acts as an investment adviser to an investment company registered under the Investment Company Act of 1940
It is not uncommon to find financial planners who use their home as the base of their operations. When a financial planner who works from home is also registered as an agent of a broker-dealer, she must
have cybersecurity policies and procedures in place to protect customer data
TRY TO FOLLOW
higher rate of return will require a lower present value
During an economic downturn, one would expect to see
higher unemployment
Under the Uniform Securities Act, an investment adviser may legally have custody of money or securities belonging to a client
if the Administrator has not prohibited this practice if the investment adviser has notified the Administrator that it has custody
If a country's current account shows a trade deficit, it is most likely that
imports are greater than exports.
A portfolio that has a negative correlation coefficient relative to the market will
increase in value as the market declines decrease in value as the market goes up
An economic condition where the rate of price increases reaches a stable equilibrium and stays there until a shock to the system occurs, at which time, the rate of inflation changes is known as
inertial inflation.
Real return rate
inflation
To reflect a more accurate picture of economic results, gross domestic product is adjusted
inflation
Which of the following would have the effect of increasing a company's cash flow?
insurance of bond
IA-1092
interprets definition of investment advisor. Financial planner, pension consultant, and other who offer investment advice as part of their financial practice
Any security equal or senior to one listed on the NYSE is a covered security
interstate and NYSE
147
intrastate
A bond analyst is plotting a yield curve and notices that short-term maturities have higher yields than intermediate and long-term maturities. This is an example of
inverted yield curve
Foreign currencies buy more U.S. dollars.
investors buying long-term bonds and selling short-term bonds
exempt secutiy
issued by US securites of foreign gov any guarnteed by bank comerical paper investment contract issued by stock empyee options
Under the Uniform Securities Act, the sale of an unregistered nonexempt security
is permissible if the order was unsolicited may subject the agent to civil liability
Which of the following would meet the USA's definition of federal covered adviser?
is registered under section 203 of the Investment Advisers Act of 1940
exempt transaction
isolated non issuer transaction unsolicited brokerage transaction underwritten transaction bankruptygy,guardian, convertor transaction intsitutional investor transaction limited offering transction preorganization certficate non issuer transaction transaction with existing secuity holder
After conducting an investigation, if the Administrator believes that a violation of a rule issued under the Uniform Securities Act is about to occur, she may
issue a cease and desist order without prior hearing
A state securities Administrator may do all of the following EXCEPT
issue an injunction after a hearing
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
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
exempt securities under 1933
issued by us or gov canadian secuties not inclueded commerical paper non profit railroad fed or state bank saving and loan association
form d
issuing secuites in reliance on regulation d must file form D elctronically with the sec no later than 15 days after first sale of secuites in offering
In general, one would prefer to purchase a bond when its current market price is
less than its present value
private placement
limited to 10 offerers not purchasers
One of the prohibited practices under the Uniform Securities Act is market manipulation. Which of the following are examples of a broker-dealer engaging in that practice?
matched orders and washed trades Matched orders occur when one or more broker-dealers engage in buying and selling between themselves for the purpose of creating the misleading appearance of increased activity in a security. A wash trade is an attempt to manipulate a security's price by creating an apparent interest in the security that really does not exist. Arbitrage is the simultaneous buying and selling of the same security in different markets to take advantage of different prices. It is not a form of market manipulation. Churning is a prohibited activity, but has nothing to do with the market, just a client's account.
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.
standard deviation
measure volatility of investments projected return computed by using historical performance data
large cap, mid cap ,small cap
mid cap 2-10 billion large cap 10 billion plus small cap 300 million - 2 billion
Individuals functioning as agents
must be registered with an active broker-dealer in order for their registrations to be valid.
In an effort to further protect the interests of clients, the Investment Advisers Act of 1940, as amended, contains recommendations for implementing a Code of Ethics. This code
must reflect the nature and scope of the business done by the firm
IAR
must reg where they have place of buiness regarless of clients
Creating financial plan
must register as IAR
Gross Profit
net sales - cost of goods sold
A firm is registered as an investment adviser under the Investment Advisers Act of 1940. It has decided to raise its annual management fee from $1,500 to $1,800 and require that it be paid 1 year in advance instead of quarterly. The firm would
now come under the requirement to include a balance sheet as part of its brochure
Transparent Investment Advisers (TIA) is registered in 3 states and has $55 million in assets under management. TIA maintains custody of customer securities. TIA's chief financial officer reports that the net worth of the firm has suddenly fallen to $28,000. This would require TIA to
obtain a surety bond in the amount of $10,000.State-registered investment advisers who maintain custody of customer funds or securities must have a minimum net worth of $35,000. If the net worth should fall below that amount, the firm must immediately obtain a surety bond rounded to the next $5,000 to meet that level. In this case, the firm's deficiency is $7,000, and the next $5,000 that will cover that is a bond for $10,000. Borrowing money does not increase net worth and, even if TIA is a corporation, it would probably take too long to issue additional stock.
partner, officer, or director of a registered investment adviser is an investment adviser representative if a function of the position involves
offering advice concerning securities managing client accounts or portfolios determining securities recommendations for representatives to disseminate supervising personnel engaged in advisory activities but not directly dealing with the public
A term used to describe the results of subtracting a corporation's liabilities from its assets is
owners equity
balance sheet under owner's equity are the:
par value of the outstanding preferred stock; par value of the outstanding common stock; any excess paid in over the par value of the common stock at issuance, known as paid-in capital or paid-in surplus; retained earnings (years ago referred to as earned surplus); and if the company has re-acquired any of its common stock (Treasury stock), the cost of that purchase is subtracted from retained earnings.
preliminary prospectus (red herring)
part of the registration statement prepared by a company prior to an IPO that is circulated to investors before the stock is offered
person responsible for proving exemption
person requesting exemption
must register
place of business
Which of the following would appear as assets on a corporation's balance sheet?
prepaid expense and notes receivable Prepaid expenses, such as advertising, rent, or insurance, are listed as assets on the balance sheet. All receivables are assets, while payables are liabilities. Under current accounting practice, deferred tax credits are treated as a liability.
Under the concept of inertial inflation,
prices tend to increase at a steady rate until the system receives an economic shock.
In the event that a filing with the state securities Administrator is found to have material misstatements or omissions, a correcting amendment must be filed
promptyly
If the required rate of return is higher than anticipated in a present value calculation, the effect would be that
pv LOWER
During the past 2 quarters, the GDP declined by 3%, unemployment rose by 0.7%, and the Consumer Price Index fell off by 1.3%; this economic condition is called
reccesion
The economy has gone through 3 consecutive quarters of economic decline with no immediate end in sight, and therefore could be said to be
recession
Broker-dealers and investment advisers must keep all of the following records EXCEPT
records of incoming and outgoing telephone calls
Under the Uniform Securities Act, before a corporation can issue a security in a state, that security must be
registered in the state or exempt from registration in the state
unlawful for person to sell secuity unless
registered, exempt, federally covered
Under the Uniform Securities Act
registration of an investment adviser in a state automatically constitutes registration of any investment adviser representative who is a partner, officer, or director, or a person occupying a similar status or performing similar functions.
Escrow
registration under cordination or qulaifcation admisntrator require secuites to be within the past three years promoter at a price substantially diffrent than offering price to any person for consideration other than cash
The Administrator may, as a condition of registration by qualification or coordination,
require the security to be deposited in escrow and the proceeds to be impounded until the issuer receives a specified amount.It is true that every registration must specify the amount of securities to be sold in the state, the states in which offering is to be made, and any adverse order or judgment of a regulatory authority. The Administrator may by order permit omission of any item of information or document from a registration statement. The Administrator may, as a condition of registration by qualification or coordination, rule that the securities may only be sold on a specified form of subscription and that a signed copy be filed with the Administrator.
cease and desist order
ruling requiring a company to stop an unfair business practice that reduces or limits competition
The Uniform Securities Act defines an investment adviser representative
s anyone who is a partner, officer, director, or other employee or person associated with an investment adviser other than clerical or ministerial personnel who (1) make recommendations or provide advice regarding securities; (2) manage accounts or portfolios of clients; (3) determine which recommendations or advice should be given; (4) solicits, offers, or negotiates for the sale of, or sells, advisory services; or (5) supervises any such persons. An individual or a firm may be registered as an investment adviser, but only an individual can be an investment adviser representative.
Beta is most frequently measured against which of the following?
s%p
A broker-dealer would most likely hire an agent to
sell securities to clients
8-k
selling subsidary report moving dont report
An investment adviser with $20 million under management exercises investment discretion over client portfolios. If the firm's accounting manager were to discover that the firm's net worth was only $8,500, the USA would require the firm to
send notice to the Administrator before the close of business on the day following discovery send a financial report to the Administrator before the close of business on the day following the sending of notice
If a corporation issues mortgage bonds, all of the following would be affected EXCEPT
shareholder equity
Which of the following is NOT affected by the issuance of a bond?
shareholder equity
econ
spend money in US credit spend money aboard debit ?
econ
spend move out of country increase deficit foreign spend in country improve deficit
An individual representing an issuer in the sale of that issuer's security is not defined as an agent if the security is:
ssued 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 30 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.
The statistical measurement that indicates how much an investment's returns have fluctuated compared with its average return over a period of time is known as
standard deviation
Once the broker-dealer decides to offer wrap fee programs,
t is no longer excluded from the definition of an investment adviser and would become required to register on either the state or federal level. The agent would now become an IAR of the firm and, as such, would now carry the additional fiduciary responsibility incurred in the advisory business.
It is unlawful for a state-registered investment adviser to do any of the following EXCEPT
take custody of a client's securities and funds, in the absence of a rule on custody by the state Administrator
An investment adviser registered in State A decides it wishes to maintain custody of customer assets. As long as the securities laws of State A do not prohibit custody, the investment adviser would have to promptly notify
the Administrator by filing an amended Form ADV that it is going to maintain custody.
Great Western Securities, Inc. (GWSI), a registered broker-dealer, is also the distributor for the Westcore Value Fund. When an agent registered with GWSI recommends the purchase of the Westcore Value Fund,
the agent shall disclose the potential conflict of interest to the client.
When an agent transfers employment from a broker-dealer registered with the SEC to a broker-dealer registered solely in this state
the agent, the former broker-dealer, and the current broker-dealer must all notify the Administrator
A business reporter claims that we are suffering from inertial inflation. This means
the current rate of inflation will remain at this level until economic shocks cause it to change.
Working Capital
the difference between current assets and current liabilities
Your manager is reviewing the activity in your customer accounts to detect trading irregularities. Among the factors the manager will look for to determine if churning is occurring are
the financial resources of the account the objectives of the account
Under the Uniform Securities Act, it is required to file an application with the Administrator to become a registered broker-dealer in the state. Among the disclosures that must be made on that application are
the form of business organization to be used by the firm any felonies or certain misdemeanors on the records of partners or officers business history of the principals of the firm financial information about the firm
An agent omits certain details about an issue during a sales presentation. This omission would be fraudulent if
the information was material and was necessary to make other statements not misleading
As a measure of central tendency
the mean
The total of the cash from operations, investing, and financing, as reported on the statement of cash flows, is
the net change in the cash position of the firm for the reporting period
Because, under the USA, many different securities qualify for an exemption from registration, proof of qualification for an exemption is the responsibility of
the person requesting the exemptionThe USA provides for exemption from registration in a number of cases. If the exemption is challenged by the Administrator, it is up to the person, usually the issuer, requesting the exemption to prove that it is merited.
One of the surest ways to explain to a client that an investment opportunity presented via social media is likely to be a scam is
the promise of high returns with low risk
Under the Uniform Securities Act, a nonissuer transaction is
the purchase and sale of shares of common stock on the CHX.In a nonissuer transaction, the proceeds do not flow to the issuer; rather, the proceeds are credited to selling shareholders. A secondary market trade, such as a transaction executed on the floor of an exchange, is a nonissuer transaction. An IPO, the purchase of mutual fund shares, and the purchase of limited partnership interests all benefit the issuer and are called issuer transactions.
If a broker-dealer's (or investment adviser's) registration is revoked by a state,
the registrations of all its agents (or IARs) are suspended. That is, those individuals can no longer function in a registered capacity until they register with another active firm.
Under the USA, a private placement is considered an exempt transaction when directed
to no more than 10 noninstitutional persons in 12 consecutive months
The revocation or suspension of a federal covered investment adviser's registration under the Investment Advisers Act of 1940 may be appealed
to the U.S. Court of Appeals serving the district where the order was issued within 60 days of its issuance
Country A develops a new product that is in high demand around the world. The likely effect of this would be
trade surplus
exempt transaction under 1933
tranasaction by issuer underwritter or dealer tranasaction by usser do not involve public offer private placemetn and reg D
One of the components of a cash flow statement is cash flow from investing activities. Included would be
transactions and events involving the purchase and sale of land, buildings, and equipment.
An individual may NOT act as an agent for more than one broker-dealer
unless the Administrator, by rule or order, authorizes such employment
exempt transaction
unsolicited brokerage transaction transaction between issuer and underwritten transaction with finacnial institutions private placements
Exempt Securities
us and canadian gov and muni secuities foreign gov secuirtes depository institutions isnsurance company secuites public utility and common carrier secuties federal covered secuites secuties issued by non profit secuites of empyee benefit non profit certain money market -commerical paper us treasury not canadian stock exchange
If an agent recommends the purchase of a technology company with an impressive growth record, but fails to inform the client that the company's technology will become obsolete pending the approval of a competitor's patent, the agent has
violated the NASAA Statement of Policy of Dishonest or Unethical Business Practices of Broker-Dealers and Agents
An individual who has passed the NASAA examination for registration as an investment adviser representative may begin soliciting advisory clients
when informed by the investment adviser that the representative's registration is effective
exempt transaction
who the transaction in with
NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents would likely consider which of the following to be prohibited activities?
An agent takes an order from the client's attorney without written trading authorization. An agent takes an order from the secretary of a nondiscretionary client who is too busy to give the order herself.
