Series 66
commercial paper
Commercial paper may qualify as an exempt security if the minimum denomination is $50,000, it has a maturity of not more than 270 days, and it is rated in 1 of the 3 highest rating categories by a nationally recognized rating agency.
discretion
Discretion is the ability to pick the Asset (the specific security), the Action (buy or sell) or the Amount (the number of shares or bonds). Time and price are not discretionary and nothing can take place until the proper papers have been received and documented.
IRA Suitability
Growth stocks provide potentially long-term returns suitable for a retirement account. An individual opening a new IRA won't have sufficient funds to properly diversify other than by purchasing shares of an investment company. IRA distributions are 100% taxable, which makes the investment in tax-exempt securities unsuitable. Insurance is not permitted in an IRA account and speculative options are inappropriate.
Which of the following is responsible for administration of the Bank Secrecy Act?
The Financial Crimes Enforcement Network. Or FinCEN as it is more commonly printed.
Margin regulations are determined by the Board of Governors of the Federal Reserve System. The authority for them to do so is found in the
The Securities Exchange Act of 1934 contains the authorization for the FED to regulate the use of credit in the securities business.
Under the Investment Company Act of 1940, an investment company may initially retain the services of an investment adviser only with approval of:
The investment adviser's contract must be initially approved by a majority vote of the outstanding shares and a majority of the noninterested members of the board of directors. It is renewed annually by either a majority of the board or a majority of the outstanding shares. In addition, as with all contracts, initial and renewal, it requires a majority of the noninterested board members.
Penalty for not taking your RMD
The penalty for failure to make the correct amount of required minimum distribution is 50% of the difference between the minimum required amount and the actual distribution. In this case, this would be 50% of $5,000 ($15,000 − $10,000) or $2,500.
403
filing requirements
SEC has jurisdiction over
finra, stock exchnages and b/ds, the MSRB -- NOT the fed reserve system
Under the provisions of the Securities Exchange Act of 1934, the SEC may suspend trading on a national exchange by notifying the:
he SEC may suspend all trading on a specific exchange for up to 90 days with prior notification to the President of the United States and may summarily suspend securities trading in a registered security that is listed on a stock exchange for up to ten days if it believes such action to be in the public interest.
mutual funds may not
mutual funds may not purchase securities on margin. A fund is not prohibited from buying options, low quality bonds, or other mutual funds, if the purchase is in line with the fund's objectives.
What can the SEC investigate?
the SEC may investigate any situation it believes may have violated federal securities laws, its own rules, and rules of the SROs (i.e., exchanges, FINRA, MSRB). The SEC does not enforce state securities statutes or state or federal banking laws.
In a qualified plan, if the employer makes all of the contributions, the employee's cost basis is:
0 Because the employee has not made any contributions, the cost basis is zero. In any qualified plan, if all of the contributions are in pretax dollars, the cost basis is zero no matter who contributes the money.
403(b) plan
403(b) plan is a special type of tax-favored retirement plan allowed for nonprofit entities. Amounts contributed to 403(b) plans are often invested in annuity contracts, so these plans are sometimes referred to as tax-sheltered annuities.
When is SEC registration optional?
Currently, registration with the SEC is mandatory (not optional) for any investment adviser managing a registered investment company (open or closed-end). It is optional for: pension consultants once their AUM reach $200 million; small and mid-size advisers who would be required to register in 15 or more states; and those advisers with at least $100 million in AUM, but not $110 million in AUM Any of these choosing to register with the SEC are federal covered advisers and do not register with any state, although a notice filing may be required.
Rule 503 of Reg D
Securities sold under Regulation D of the Securities Act of 1933 are private placements and, under the NSMIA, are considered federal covered securities.
The USA empowers Administrators to
The USA empowers Administrators to administer oaths, Sworn oaths typically occur in conjunction with hearings.
roth ira RMD
Unlike the regular or traditional form of IRA, Roth IRAs are not subject to the minimum distribution rules upon the participant attaining age 70½. Rather, distributions need not be made until the death of the owner/participant. For a Roth IRA withdrawal to be entirely tax free, it must be made after a 5-year holding period and after the participant reaches age 59½
Mr. and Mrs. Walker are advisory clients of yours. Each of them is employed and covered by a qualified plan. Are they eligible for a roth IRA
Yes - they can open Roth IRAs and they can rollover distributions from the qualified plan, into the roth. Eligibility for a Roth IRA is not affected by participation in a qualified plan. Effective January 2008, distributions may be rolled over into a Roth in the same manner as they have always been into a traditional IRA.
FinCEN Form 112, the Currency Transaction Repor
is filed with the department of treasury. Currency transactions in excess of $10,000 are reported electronically on FinCEN Form 112 to the Department of the Treasury.
According to the Uniform Securities Act, an offer or a sale does not exist if it is a(n):
reclassification of the issuer's securities. bona fide pledge or loan. act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding shares. stock dividend of stock other than the issuer's for which nothing of value was given
The issuance of a stop order by a state securities Administrator requires:
the subject of a stop order must be given the opportunity for hearing. As long as the stop order is in effect, the security subject to the order may not be sold to the public or the proscribed activity may not continue. Stop orders do not require an injunction by a court and the Administrator does not have authority to issue criminal charges.
Exempt from registration provisions of the Securities Act of '33
-commercial paper, bankers acceptances (<270 days) -national and state bank securities -state and municipal bonds
top heavy 401(k) plan
A plan is considered top heavy when more than 60% of the plan assets are held in the accounts of employees meeting the definition of key employee.
Security (Definition)
A security is any note, stock, bond, certificate of interest, or participation in any profit sharing arrangement, investment contract, certificate of deposit for a security, interest in oil, gas, or mining rights, or any investment commonly considered a security. (Generally, it is an investment contract wherein the investor is passive and expects a return on the investment through the efforts of others.) The definition of a security does not include direct ownership of real estate, commodities futures contracts (e.g., corn, wheat), collectibles, precious metals, or life insurance or annuity contracts that have fixed payouts.
an advisor who has custody of a clients fund must"
Advisers who have custody must segregate a client's securities and keep them in a safe place, deposit client funds in bank accounts which contain only client funds (may be combined in one account, but complete records must be kept), report to clients at least every three months with a statement, and annually arrange for an unannounced audit by an independent accountant that will report the audit results to the SEC. All clients must be notified in writing of the location of their securities or funds and of any changes to the location. It is not necessary to notify the client before the move to obtain the client's specific written authority to move the fund. The original custodial agreement includes that authority at the discretion of the adviser.
Which of the following securities issues must be registered with the SEC under the Securities Act of 1933? Publicly traded DPPs. Variable annuities. Open-end funds. Closed-end funds.
All of them! All of these are NONEXEMPT. In general, exempt issues include municipal securities, U.S. government securities, bank issues, and nonprofit organization securities. The securities in this question are all nonexempt.
custody
"Custody" means possession (even temporarily) 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.
How quickly must you roll over a lump sum from a plan into an IRA
60 days of the distribution date
what is a benefit to an employee of a business offering a safe harbor 401(k) using a non-elective formula?
A safe harbor 401(k) with a non-elective formula is one in which the employer must contribute a minimum of 3% of each employee's earnings, whether or not the employee participates in the plan. Furthermore, those contributions are immediately vested. As a result, these plans offer a safe harbor from being tested for being top heavy, but this is a benefit for the employer, not the employee.
accredited investors
Accredited investors are financial institutions, wealthy persons meeting specific requirements, and (for a particular issue) persons involved in the management of the issuer.
Affiliated Persons
Affiliated persons are any investment company directors, officers, employees, or owners of 5% or more of the voting shares of stock, and/or any persons controlling or controlled by such persons.
Affiliated persons under the investment company act of 1940
Affiliated persons may not have any dealings with the investment company (outside of contractual obligations and the purchase or redemption of shares of the investment company), such as buying securities, furniture, real estate, or other property from the company or selling such property to the company.
Early distributions from a 401(k) plan
Although individuals can make penalty-free withdrawals from an IRA to purchase a principal residence, this exception does not apply to withdrawals from a 401(k) plan. The penalty for withdrawals from a 401(k) plan taken before age 59½ is waived only in the cases of death, disability, qualified domestic relations orders (QDROs), medical expenses, certain period payments, and corrections of excess contributions.
Opening an IRA
An IRA contribution can only be made by someone who has earned or otherwise eligible income. Earned income is defined as salary, wages, commissions, and tips. Alimony, (but not child support) is considered eligible income for an IRA. Individuals can contribute to an IRA even if they are covered by a corporate pension plan or Keogh plan. Although a contribution can be made, it may or may not be deductible depending on the individual's income. Dividends and capital gains are not considered earned income.
Investment Policy Statement
An Investment Policy Statement (IPS) is designed to describe the plan's investment goals and investment strategies. It typically identifies levels of risk acceptable in the construction of a portfolio. An IPS establishes the strategic framework utilized by the fiduciary to manage a portfolio.
Which issues require a prospectus
Any primary offering, unless the security is exempt, requires timely delivery of a prospectus. Treasury notes and private placements are exempt. Open-end investment companies are a continuous primary offering.
Who is covered by the Securities Exchange Act of 1934?
B/D & Transfer Agents - NOT investment advisers The Securities Exchange Act of 1934 regulates broker/dealers and transfer agents. Investment advisers are regulated under the Investment Advisers Act of 1940 (and, to a certain extent, the Investment Company Act of 1940), whereas pension plans in the private sector are regulated under ERISA.
Bank holding company securities
Bank holding company securities are not exempt from registration requirements under the Securities Act of 1933. Treasury securities, agency securities (such as GNMA-pass through certificates), and municipal securities (such as revenue bonds) are exempt from registration requirements under the act.
Starflier Mutual Fund, regulated under the Investment Company Act of 1940, wishes to change its investment policy. It may do so with approval of:
Changes in investment policy require a vote of the majority of outstanding shares for approval
Who is not eligible to contribute to a traditional IRA
Individuals who are age 70½ or older may not contribute to a traditional IRA. They are required to begin taking withdrawals at that time. However, there is no age limit on the Roth IRA.
Section 13(d) of the Securities Exchange Act of 1934
Section 13(d) of the Securities Exchange Act of 1934 requires filing of a Schedule 13D once a person becomes an owner of more than 5% of the outstanding voting shares of a reporting company. Form 144 is only filed when securities are sold.
performance based fee requirements
Under federal (and state) law, in order to qualify for a performance-based compensation program, the client must have either $1 million in assets managed by the adviser or a net worth of $2 million. This requirement is described in Rule 205-3 of the Investment Advisers Act of 1940 and the NASAA Model Rule makes reference to the federal rule. If using joint assets, only those with a spouse are allowed. Please note: This differs from meeting the net worth standard as an accredited investor. Under Rule 501 of Regulation D of the Securities Act of 1933, one can use assets owned jointly with persons other than a spouse to qualify as an accredited investor, but only to the extent of his or her percentage ownership of the account or property.
What can the state administrator require from federal covered advisers
a copy of the IA's Form ADV and a filing fee
Money Purchase Plan
a money purchase plan is a defined contribution plan established by the employer employee participation by making voluntary contributions to the plan is optional. Employees who contribute to the plan usually contribute a percentage of their income.
Under the USA, any individual used as a solicitor for an investment adviser is considered to be an employee ...
and thus requires registration as an IAR of that IA
Becky Biggins has an executive position with a large corporation that covers her under its defined benefit pension plan. This year, Becky's salary will top $235,000. Becky has no dependents and wishes to maximize funds that she can accumulate for her retirement. Becky coul
open a traditional IRA but would not be able to deduct her contributions not open a roth IRA Anyone with earned income can open a traditional IRA. Deductibility of contributions may be disallowed if the individual is covered under a corporate plan and has earnings in excess of a certain level. Becky's salary exceeds the maximum permitted for a single person so her contributions would be made with after-tax dollars. In the case of a Roth, nothing is deductible, so it doesn't matter if you are covered at work. However, Becky's salary is far in excess of the maximum permitted for a single person to contribute to a Roth IRA.
payroll deduction plan
payroll deduction plan is a retirement plan not subject to eligibility, vesting, or funding standards as required by ERISA plans. A payroll deduction plan is a nonqualified retirement plan. Profit-sharing, pension, and Keogh plans must have established standards.
SEC Commissioners
policies of the SEC are determined by 5 commissioners. They are appointed by the President of the US with the advice and consent of the Senate to staggered 5 year terms (1 expires each year). NO 3 commissioners may belong to the same party and they may not engage in outside employment
order tickets do not have
the customers name
Under the Securities Act of 1933, a registration statement of an issue must contain
-the business of the issuer -the identity of the officer and directors and the extent of their holdings in the issuer -the current balance sheet and profit/loss statements
To enforce the Securities Act of 1933, the SEC may: conduct formal investigations. issue cease and desist orders. refer evidence to the attorney general for possible criminal prosecution.
A difference between the Uniform Securities Act and the Securities Act of 1933 is who enforces them. The Uniform Securities Act is enforced by the state Administrators, while the federal acts are enforced by the SEC. In complying with its enforcement responsibilities, the SEC may make, amend, and rescind rules, issue cease and desist orders, administer oaths, conduct investigations, take evidence, and subpoena witnesses, books, and records. The SEC may also seek temporary or permanent injunction from the courts, file civil suits, and refer evidence to the attorney general for criminal prosecution.
associated persons
An associated person is either an officer or a broker/dealer employee who represents the broker/dealer in soliciting the purchase or sale of securities. Associated person also includes any individual authorized to accept customers' orders for the broker/dealer.
Define: Investment Advisers
An investment adviser representative is any partner, officer, director, associate, or employee who participates in or supervises the advisory functions of the adviser. Thus, anyone who decides what advice should be given, those who supervise investment adviser representatives, and those who seek out business for an advisory firm are considered investment adviser representatives. Third-party solicitors may or may not be considered adviser representatives, but this solicitor is an employee. Remember, an investment adviser can be either an individual or a company. An investment adviser representative must always be an individual.
An offer to sell
An offer to sell is any activity in an effort to dispose of a security for value. The issuance of warrants or convertible securities to anyone or stock rights to existing shareholders is considered an offer to sell the underlying security because, unlike stock dividends, mergers, and bona fide loans, they involve the payment of money to acquire the stock, thereby making them an offer to sell.
ABC Advisers, a federal covered investment adviser, is moving the firm's headquarters to a new office park in the suburbs. ABC is required to file this change with the SEC:
Any material change that affects an investment adviser's ADV must be filed promptly with the SEC (or Administrator if state covered) and a change of address would certainly be material.
A state registered investment adviser with discretionary authority over client accounts discovered on Monday, that the firm's net worth is below the required amount. He must notify the administrator and then file a report no later than the:
Close of business Tuesday and close of business wednesday. 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.
ERISA 404 (c)
ERISA Section 404(c) relieves the employer of fiduciary responsibility for investment decisions made by employees. To qualify for this protection, employees must enjoy the benefits and risks of their decisions (individual accounts), have the right to exercise independent control over the account, and have a sufficiently broad range of choices to make the right of control meaningful. Section 404(c) has nothing to do with the employee's length of employment.
When must an IA send clients his/her brochure?
Each client must receive the brochure no later than entering into the advisory contract SEC rules require that a brochure, or summary of material changes, if any, must be delivered to all clients within 120 days of the end of the adviser's fiscal year. If there are no material changes, a brochure does not have to be sent. The summary includes an offer to provide a copy of the updated brochure and information on how the client may obtain it. There is no 48-hour rule under federal law as there is for state law and, in any event, that law has a 48-hour in advance requirement. Only when the charge for the impersonal advice is $500 per annum or more is there a requirement to deliver the brochure.
Exempt or not exempt? An agent sells U.S. Treasury notes to an individual client.
Even though the bonds are an exempt security, the sale to an individual client is not an exempt transaction. Sales to institutions, sales by fiduciaries, or unsolicited transactions are all exempt.
The Administrator may: I. deny a registration if the registrant does not have sufficient experience to function as an agent. II. limit a registrant's functions to that of a broker/dealer if, in the initial application for registration as an investment adviser, the registrant is not qualified to act as an adviser. III.take into consideration that the registrant will work under the supervision of a registered investment adviser or broker/dealer in approving a registration. IV. deny a registration, if it is prudent in view of a change in the state's political composition.
II and III The Administrator may deny, suspend, or revoke a registration for many reasons, but they must be in the interest of the public. The Administrator may determine that an applicant, in his initial application for registration for an investment adviser, is not qualified to act as an adviser and thus limit the registration to that of a broker/dealer. The Administrator can also take into consideration whether the registrant will work under the supervision of a registered investment adviser or broker/dealer when approving an application. Lack of experience is insufficient reason for denial.
what describes a person who provides investment advice on a regular basis but does not charge fees, yet would be considered an adviser under Release IA-1092?
If an individual is in the business of providing advice and receives any economic benefit, such benefit is considered compensation under Release IA-1092. Since the financial planner is in the business of giving advice to pension plans, actually provides that advice, and is compensated for it, he meets all three elements in the definition of an adviser. The noncash benefit, as in this case, need not come directly from the beneficiary of the services to be considered compensation. The college professor, the chief investment officer, and the Secretary of the Treasury do not receive separate compensation, nor are they in the business of providing investment advice.
Under the Investment Advisers Act of 1940, which of the following powers does the SEC have at its disposal to enforce the act?
In enforcing the Investment Advisers Act, the SEC may investigate, administer oaths, subpoena witnesses, books, and records, issue and make rules, issue stop orders, hold hearings, and seek court injunctions against persons who have violated or are about to violate any provisions of the act. The SEC may also file civil actions in the federal court system in enforcing the provisions of the act, or refer information to the U.S. Justice Department for criminal prosecution
Under federal law, the statute of limitations for civil liability is:
In the federal regulations, the statute of limitations for a civil action is the sooner of one year after discovery or three years after the action. Under the USA, it is the sooner of two years after discovery or three years after the action.
Performance fee eligible
It is not permissible to trade this account on a performance basis; the investment adviser representative must be paid on commission or through a fixed fee arrangement. Under the Investment Advisers Act of 1940, performance fees are allowed only for clients with a minimum of $1 million invested or a minimum net worth of $2 million.
Which of the following are NOT investment advisers under the Uniform Securities Act? Joe advises customers regarding the value of gold and silver coins. The trust department of ABC Bank provides investment advice to its clients. Tammy writes a newspaper column in which she analyzes and recommends securities. Jack is an investment adviser representative.
Joe's advice does not concern securities. Banks are exempt from the definition. Tammy's advice is neither specific nor based on the situation of each client (impersonal advice). An adviser representative is specifically excluded from the definition of an investment adviser.
defined contribution plans
Money-purchase pension plans, 401(k) plans, and qualified profit-sharing plans are all examples of defined contribution plans.
Under the USA, what are the requirements for a preorganization subscription to be exempt?
No payment may be made by any subscriber. No commission may be paid to anyone for soliciting potential subscribers. There may be no more than ten subscribers.
Discretion orders
Nothing other than oral permission is necessary in order for an agent to use discretion as to time and or price. owever, time and/or price discretion are only good for that day - those are considered "day" orders, so the agent is able to use judgment, but the order must be placed during the day it was received.
Securities Information Processor
Persons in the business of providing information on securities transactions or quotes of securities prices on a continuing basis through a computer network, wire service (ticker tape), or other publications, such as The OTC Markets Group Inc (Pink Sheets) are considered securities information processors. Excluded are newspapers, magazines, or other publications of a general and regular circulation, SROs, banks, broker/dealers, or others who provide such information as part of their normal activities.
How does a person who only advises investment companies need to register?
Persons that act as advisers to investment companies registered under the Investment Company Act of 1940, regardless of their size, are required to register with the SEC. At $100 million, advisers are eligible to register with the SEC; at $110 million, they must. Persons who only give advice related to U.S. government securities are specifically excluded from the definition of investment adviser under the Investment Advisers Act of 1940.
Rule 482
Rule 482 describes a form of allowable mutual fund advertising, commonly referred to as an omitting prospectus.
Sale of an exempt security to an individual, exempt?
Solicited trades with individuals are not exempt transactions, even when the security being traded is exempt. Transactions between issuers and underwriters or between underwriters are exempt from registration and advertising filing requirements. A bona fide pledge of securities is not a transaction and this question is looking for a nonexempt transaction. Transactions with banks, savings and loan associations, and other financial institutions are exempt from registration and advertising filing requirements.
Which of the following meet(s) the compensation test for defining investment advisers under SEC Release 1A-1092?
Subscription payments received by the publisher of an investment newsletter, available by subscription only, that provides impersonal securities related advice. An insurance agent sells a life insurance policy and receives a commission on that sale. As a result, the agent agrees to provide advice on structuring the insured's investment portfolio at no additional cost.
Who does ERISA cover?
The Employee Retirement Income Security Act (ERISA) protects employees in the private sector of the economy. It does not cover public sector employees. Traditional and Roth IRAs are not covered under ERISA - there is no employer/employee relationship.
Under the Securities Exchange Act of 1934, which body regulates the extension of credit for nonexempt securities?
The Federal Reserve Board.-The Securities Exchange Act of 1934 empowered the Federal Reserve Board (FRB) to set margin requirements and regulate the use of credit to purchase securities. The FRB determines what issues may be purchased on margin and what percentage of the purchase price must be deposited by the purchaser.
Under the Insider Trading and Securities Fraud Enforcement Act of 1988, a person who has violated the prohibition against insider trading is liable for a civil penalty of:
The Insider Trading and Securities Fraud Enforcement Act of 1988 provides that the SEC may seek triple damages through the courts for violations of the insider trading rules. This means that the SEC may seek court action that imposes civil penalties of 3 times the profit gained or 3 times the loss avoided as a result of inside information.
Securities Act of 1933
The Securities Act of 1933 regulates new issues of corporate securities sold to the public. The act is also referred to as the Full Disclosure Act, the Paper Act, the Truth in Securities Act, and the Prospectus Act. The purpose of the act is to require full, written disclosure about a new issue. The Securities Exchange Act of 1934 requires registration of exchanges with the SEC and enabled the FED to set margin requirements.
When must a final prospectus be delivered to the purchaser
The Securities Act of 1933, sometimes referred to as the "paper act", requires that an effective, or final prospectus be delivered to all purchasers of a new offering no later than with confirmation of the sale. It is not required that purchasers receive a red herring prospectus and only the SEC gets copies of the registration statement. Yes, they must be properly registered to make the offer (and sale), but that comes under the "people act", the Securities Exchange Act of 1934.
Under the USA, a person who is in the business of providing advice on trading futures contracts in addition to advising clients on securities issued or guaranteed by the U.S. government is:
This question is referring to a federal covered adviser. The futures contracts are not securities, but, of course, the U.S. government securities are. However, the Investment Advisers Act of 1940 specifically excludes from the definition of investment adviser a person whose securities advice is confined to securities issued or guaranteed by the Treasury. The fact that this person is excluded under the Investment Advisers Act of 1940 makes that person federal covered and not subject to state regulation as an investment adviser.
statutory disqualification reasons
Under the Securities Exchange Act of 1934: Loss of a civil lawsuit, lack of experience, or being registered as an investment adviser does not cause statutory disqualification to be associated with a member of a self-regulatory organization such as FINRA. However, administrative sanctions, findings of criminal wrongdoing, court injunctions, etc., are cause for statutory disqualification.
Which of the following securities is NOT exempt from the registration procedures of the Uniform Securities Act? A) General obligation bonds issued by a city located in this state. B) Variable annuities issued by an insurance company authorized to do business in this state. C) Bonds issued by a church operating as a nonprofit organization under IRS Code Section 501(c)(3). D) Common stock issued by a public utility company whose rates are subject to state regulation.
Variable annuities are not exempt from state registration because the payments from the annuity are dependent on the performance of a segregated fund invested in securities. Municipal securities and regulated public utilities are exempt from registration. Securities issued by religious and charitable organizations are exempt from registration under the USA.
The Investment Company Act of 1940 allows a majority vote of outstanding shares of a registered investment company to authorize the fund to:
borrow money from a commercial bank. change the objectives of the fund. change the nature of its business and cease to be an investment company.
on determining that a registrant or applicant for registration is no longer in existence or has ceased doing business as either an agent or a broker/dealer, the Administrator may:
cancel the registration or application. A registration may be canceled if the registrant cannot be located, is found mentally incompetent, or has disbanded. This is known as non-punitive termination of registration. Suspension, revocation, and a cease and desist order are for violations of the Uniform Securities Act.
Securities and Exchange Act of 1934
created the SEC and regulates the secondary market. (this may include extension of credit to customers)
certified financial planners are...
investment advisers! Under the Uniform Securities Act, an investment adviser is a person, corporation, partnership, or sole proprietorship who, in the regular course of business, advises others as to the advisability of selling securities. Harrison holds himself out as a financial planner and normally includes a section on investments in his plans. Furthermore, Harrison is compensated for his services-yet another standard of the definition, investment adviser. Under the USA, certain recognized professional designations are exempt from having to qualify by passing the licensing exam but not from registration.
Under the NASAA Model Custody Rule, an investment adviser would be permitted to take or have custody of any securities or funds of any client if:
notification was given to the Administrator that he has or may have custody and custody was not prohibited by that state's rules. It is unlawful for any investment adviser to take or have custody of any securities or funds of any client if The Administrator, by rule, prohibits custody; or in the absence of rule, the investment adviser fails to notify the Administrator that he has or may have custody. It is true that there is a minimum net worth or bond required, but that is not part of NASAA's Custody Rule - those requirements are found in Model Rule 202(d)-1, NASAA's Minimum Financial Requirements For Investment Advisers.
Who must sign the registration statement when registering securities with the SEC
principal executives of the company involved with money and a majority of the board of directors are required to sign the registration statement attesting to the facts presented as being true to the best of their knowledge and belief. This includes the chief executive officer, chief financial officer, and a majority of the board, but not the chief operating officer.
Which one, if any, of these transactions will be treated as a prohibited transaction under the provisions of the ERISA legislation? A) An investment adviser using the interest from plan assets to cover the adviser's office expenses. B) The plan fiduciary permitting a plan participant to use part of his vested interest to purchase commercial real estate. C) A loan between a 401(k) plan and plan participant. D) The furnishing of office space to a plan trustee for reasonable compensation and fair rental value.
(A) An investment adviser, as a fiduciary and disqualified person under the plan, is prohibited from using plan assets in payment of personal obligations (such as outstanding office expenses). Loans from a 401(k) plan to a participant are not prohibited transactions. The plan trustee may rent space from the plan (one of the plan's assets is an office building). Speaking of real estate, participants in a retirement plan may purchase real estate with their funds provided that the real estate is not used for the benefit of any related person.
USAAdvisers is registered in 10 midwestern states. Regarding financial requirements, USAAdvisers must meet those of A) the state with the most stringent financial requirements B) each state in which it has a place of business C) the state in which its principal office is located D) the SEC
(C) Unlike broker-dealers, investment advisers register with either the SEC or the state(s), but never both. Therefore, we know this must be a state-registered adviser not under the jurisdiction of the SEC. Under the Uniform Securities Act, when it comes to financial requirements, bonding, recordkeeping, and so forth, as long as the adviser meets the requirements of the state in which the principal office is located the other states have no further claim.
what is would be considered when determining whether excessive trading has occurred in a client's account?
An agent is engaging in unethical conduct if she induced a client to trade securities too frequently in view of the financial resources, investment objectives, and character of the client's account. Frequent trading and trading in large amounts is not necessarily wrong. It is only wrong if the trades are not suitable for a particular client. Thus, the only factor listed that must be considered in determining whether trading is excessive is the nature of the client's financial objectives.
A state-registered investment adviser with $18 million under management is preparing a new registration application seeking federal registration with SEC. She may do so if she expects the funds under management to grow to $100 million within how many days?
An existing investment advisory firm registered on the state level may apply for registration with SEC as a federal covered adviser if the firm expects to be eligible for federal registration within 120 days. In the reverse situation, a firm that drops below the $90 million minimum has 180 days to withdraw from SEC registration and register with the state(s).
Prospectus definition
Any written communication that offers a security for sale-including a newspaper and media communications, such as radio and television offers-is considered a prospectus. This definition excludes individual offers made orally and discussions between an agent and a customer. A publicity release that describes a security, a newsletter from a brokerage firm announcing the availability of a security, and an advertisement in a newspaper describing the benefits of a certain mutual fund may be considered prospectuses. A telephone call from an agent to a client advising the purchase of a security is not considered a prospectus because it involves an individual telephone solicitation between an agent and a client.
A broker/dealer is registered in State W, but its principal, and only place of business, is in State L. What can each administrator do?
As long as a broker/dealer is registered in a state, the Administrator of that state has the jurisdiction to perform an onsite unannounced (surprise) examination (audit). In those cases where there is no place of business in the state, as in this question, the examination takes place at the principal office where the Administrator will view records pertaining to clients residing in State W.
When shares of a closed-end investment company are purchased by an investor, the investor pays...
Closed-end investment company shares are priced based on supply and demand. The ask is the price that investors will pay for purchasing shares and the bid is what investors receive when selling. Investors will also pay a commission as this is what the broker charges for executing the transaction. Shares of open-end investment companies are bought and redeemed based on NAV, but that is not so of closed-end companies.
A closed-end investment company is registered under the Investment Company Act of 1940. Its shares trade on the Nasdaq Stock Market. To qualify their shares for sale in the state, they would probably use:
Notice Filing: Regardless of where shares of this closed-end investment company trade, like all investment companies registered under the Investment Company Act of 1940, it is a federal covered security. The company is basically exempt from state registration and is only required to follow a procedure known as notice filing.
If a broker dealer offers wrap accounts, do they need additional registration
Once a broker/dealer handles wrap fee accounts, it loses the exclusion from the definition of investment adviser. Therefore, the firm must be registered with either the state or the SEC. Any agents handling these accounts would be registered as investment adviser representatives.
IA disclosures
SEC Release 1A-1092 requires certain disclosures under the antifraud provisions of the Investment Advisers Act. They must disclose an affiliation with a securities broker/dealer if the advisory service is independent of the broker/dealer; the adviser only recommends products offered by the broker/dealer; the adviser will be compensated by the broker/dealer for the transaction; or the products recommended by the adviser are available from other broker/dealers. The adviser must also disclose personal securities transactions if they are designed to take advantage of the market impact caused by recommendations to clients or if personal transactions are inconsistent with the advice given to clients. Advisers must disclose the amount of compensation received from transactions through any broker/dealer, from any issuer, and from sales of nonsecurities products. They are not required to disclose all personal transactions.
An insider is
Securities Exchange Act of 1934 defines an insider as an officer, director, or stockholder owning more than 10% of a company's outstanding voting equity. The definition also includes anyone else who has or could have access to insider information, such as immediate family members. Merely being someone's neighbor does not automatically classify someone as an insider. Any professional who takes part in preparing the registration statement is automatically considered to have insider information.
Investment Company Act of 1940 prohibits
The Investment Company Act of 1940 generally prohibits mutual funds from making purchases on margin. There are exceptions to this rule, such as in the case of hedge funds. A fund is not prohibited from buying options or low-quality bonds. A mutual fund may invest in other mutual funds so long as it does not acquire more than 3% of the outstanding shares of the other fund.
Who determines the effective date if a security is registered by coordination?
The SEC A security is registered by coordination when there is a simultaneous federal and state registration. Under normal circumstances, once the SEC has declared the registration effective, it is also effective in those states where the registration was coordinated.
Who does the SEC have jurisdiction over?
The SEC has jurisdiction over exchanges, SROs, and all persons required to be registered under federal law. The SEC does not enforce state securities statutes, nor does it have jurisdiction over banks or savings and loans regarding their securities activities. Banking authorities, such as the Federal Reserve Board, the Federal Deposit Insurance Corporation, and others, regulate banks and savings and loans.
which act 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.
If an investment adviser representative is engaged in criminal activity while violating a rule under the Uniform Securities Act, but had no knowledge of the rule violated, the maximum penalty that may be imposed is a:
The maximum penalty for criminal violations is $5,000 and/or 3 years imprisonment. However, no prison sentence can be imposed if the person can prove he had no knowledge of the rule being violated.
Third-party solicitors must provide a copy of the investment adviser's brochure (Form ADV Part 2), 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.
Third-party solicitors must provide a copy of the investment adviser's brochure (Form ADV Part 2), 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.
Under the USA, a person who is in the business of providing advice on trading futures contracts in addition to advising clients on securities issued or guaranteed by the US government is
not required to be a registered investment adviser in the state.-- This question is referring to a federal covered adviser. The futures contracts are not securities, but, of course, the U.S. government securities are. However, the Investment Advisers Act of 1940 specifically excludes from the definition of" investment adviser" a person whose securities advice is confined to securities issued or guaranteed by the Treasury. The fact that this person is excluded under the Investment Advisers Act of 1940 makes that person federal covered under the NSMIA and not subject to state regulation as an investment adviser.
