Unit 11 : Broker-Dealers and Agents
Under federal law, which act regulates the activities of broker-dealers and associated persons? A) Securities Exchange Act of 1934 B) Trust Indenture Act of 1939 C) Investment Company Act of 1940 D) Uniform Securities Act
A) Securities Exchange Act of 1934 The Securities Exchange Act of 1934 regulates the secondary market and its employees and firms.
Under the USA, which of the following is considered a broker-dealer in a state? A) XYZ broker-dealer with an office in the state whose only clients are insurance companies B) ABC broker-dealer with no place of business in the state who only does business with other broker-dealers in the state C) An agent effecting transactions for a broker-dealer D) First Federal Trust Company, specializing in underwriting new municipal issues
A) XYZ broker-dealer with an office in the state whose only clients are insurance companies Any broker-dealer with an office in the state, regardless of the nature of its clients, is defined as a broker-dealer under the USA. If the firm did not have an office in the state and its only clients were institutions such as insurance companies, or other broker-dealers, it would be excluded from the definition. Banks or trust companies and agents are never broker-dealers.
During the application process for registration as an agent, the Administrator may request information about the applicant's A) citizenship. B) marital status. C) financial condition as disclosed on the agent's most recent balance sheet. D) record involving a non-securities misdemeanor conviction five years ago.
A) citizenship. Individual registrants may be asked about their citizenship but not their marital status. Non-securities misdemeanors are not relevant and financial condition is only a requirement for broker-dealers and investment advisers.
An individual may not act as an agent for more than one broker-dealer A) unless the Administrator, by rule or order, authorizes such employment. B) under any circumstances. C) unless the broker-dealers are unrelated. D) unless the broker-dealers are exchange members.
A) unless the Administrator, by rule or order, authorizes such employment. An individual may only act as an agent for multiple broker-dealers that are affiliated with each other. If the broker-dealers are unrelated, an agent may not work for them unless the state securities Administrator, by rule or order, authorizes such employment.
A publicly traded corporation offers its employees an opportunity to purchase shares of the company's common stock directly from the issuer. A specific employee of the company is designated to process any orders for that stock. Under the USA, the employee A) must register as an agent if sales-related compensation will be received by the employee, either directly or indirectly B) need not register as an agent of the issuer because the offering is limited to current employees of the issuer C) must register as an agent of the issuer whether or not compensation is involved D) may receive commissions, but not a salary, without registration
A. must register as an agent if sales-related compensation will be received by the employee, either directly or indirectly Under the USA, an individual employed by the issuer is an agent when effecting transactions with the issuer's existing employees if sales-related compensation is paid. As a practical matter, the employee would be on straight salary.
As defined in the Uniform Securities Act, which of the following statements is true regarding an agent? A) If someone meets the definition of an agent, that person is exempt from registration requirements. B) An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. C) An agent may be a broker-dealer. D) An agent may be an individual or a firm.
B) An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. The text in Section 401(b) of the Uniform Securities Act reads, "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." There are cases where an individual representing an issuer would not be considered an agent, such as if the transaction is exempt, but that doesn't change the definition.
Which of the following persons are included in the definition of an agent under the Uniform Securities Act? An individual who represents First Securities Brokers, Inc., in selling shares of XYZ Corporation, a New York Stock Exchange-listed company An individual who, as part of the job description, represents the City of Chicago in selling its bonds to the public An individual who represents a corporation traded on the New York Stock Exchange in selling securities to the public An individual who is employed by the Federal Reserve Board to sell Treasury bills to retail investors A) III and IV B) I and III C) II and IV D) I and II
B) I and III Under the USA, an agent is defined as an individual who represents a broker-dealer selling any type of security, whether that security is exempt or nonexempt. Individuals who represent issuers in trading exempt securities or exempt transactions are not defined as agents. An individual who represents an issuer selling nonexempt securities is an agent and must be registered.
Which of the following statements are true? An agent must register in the state in which he advertises and solicits a security. To make sales, an agent need not register in a state in which the broker-dealer is already registered. Under no circumstances may an agent register with two unrelated broker-dealers. A secretary for a broker-dealer who, as a courtesy, takes orders for the broker-dealer's clients must be registered. A) I and II B) I and IV C) III and IV D) II and III
B) I and IV An agent must be registered in the state in which a security is advertised and solicited. A secretary who takes orders for the broker-dealer's clients must be registered. If the state Administrator specifically grants an exception, an agent may be registered with two unrelated broker-dealers. The fact that a broker-dealer is registered in a state does not qualify the agent for sales unless he is also properly licensed in that state. LO 11.f
It would not be a violation of the Uniform Securities Act for an applicant for registration as an agent to do which of the following while the application is pending? A) Limit his sales activity to immediate family members only B) Sell fixed annuities C) Use a preliminary prospectus to obtain indications of interest for a new issue but wait until he is registered before accepting any orders D) Conduct seminars on asset allocation
B) Sell fixed annuities While registration as an agent is pending, the applicant can take no active role in the sale or offering of securities. However, because fixed annuities are not securities, registration as an agent is not required. Yes, we know that an insurance license would be required, but apparently NASAA doesn't care about that.
Under the USA, each of the following is specifically excluded from the definition of a broker-dealer except A) an issuer. B) an investment adviser. C) an international bank. D) an agent.
B) an investment adviser. The USA specifically excludes agents/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.
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 A) only accept unsolicited orders. B) conduct business with the client as usual. C) not conduct any business with the client. D) not deal with the client until the broker-dealer registers in Pennsylvania.
B) conduct business with the client as usual. Even though the college program is called a resident program, that does not mean that the client has changed his state of residence. Although neither the firm nor the agent is registered in Pennsylvania, the agent may continue to conduct business with the client. This is because both the agent and his firm are properly registered in the client's state of permanent residence.
Section 401(b) of the Uniform Securities Act defines an agent as an individual who represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. However, the term agent would not include an individual A) representing a non-exempt issuer in the sale of the issuer's securities in a non-exempt transaction. B) employed by an issuer to research industry trends. C) employed by a broker-dealer selling securities on behalf of an issuer. D) employed by the investment banking firm engaged to underwrite a new issue of nonexempt securities.
B) employed by an issuer to research industry trends. Employees of issuers who are not involved with the sale or purchase of their employer's securities are never agents. When individuals represent an issuer in the sale of its securities, they are agents, unless it is one of a small group of exempt securities (e.g. US and Canadian government or municipal securities), or the transaction is exempt. On the other hand, there is almost no case where an individual active in the securities business of a broker-dealer is not an agent.
When a broker-dealer registers with the state Administrator, which of the following persons are automatically registered as agents of the broker-dealer in the state? A) Persons employed by the broker-dealer who are residents of the state but employed in a state other than that of the Administrator B) Those persons employed at the broker-dealer prior to its registration in the state C) Any agent who is a partner, officer, or director, or a person occupying a similar status or performing similar functions D) Agents registered in another state who are employed by the broker-dealer
C) Any agent who is a partner, officer, or director, or a person occupying a similar status or performing similar functions Registration of a broker-dealer automatically constitutes registration of any agent who is a partner, officer, or director, or a person occupying a similar status or performing similar functions.
Under the Uniform Securities Act, it is required to file an application with the Administrator to become a registered broker-dealer in the state. Which of these are among the disclosures that must be made on that application? 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 A) I and II B) II, III, and IV C) I, II, III, and IV D) I and III
C) I, II, III, and IV Many disclosures have to be made, and this is just a partial list. This would be the same answer if the question asked about an investment adviser.
Those persons meeting the Uniform Securities Act's definition of a broker-dealer in a state must, unless otherwise exempted, register in that state. Which of the following is correct regarding the initial registration and expiration of the registration of a broker-dealer? A) The effective date of an initial registration is when ordered by the Administrator, and the same is true of the expiration date. B) The effective date of an initial registration is when ordered by the Administrator, and the expiration, unless renewed, is each December 31st. C) The effective date of an initial registration is at noon on the 30th day after receipt of a completed application; expiration, unless renewed, is each December 31st. D) The effective date of an initial registration is at noon on the 30th day after receipt of a completed application; expiration, unless renewed, is on the anniversary date of the initial registration.
C) The effective date of an initial registration is at noon on the 30th day after receipt of a completed application; expiration, unless renewed, is each December 31st. Under the USA, it states, "If no denial order is in effect and no proceeding is pending under section 204, registration becomes effective at noon of the thirtieth day after an application is filed." Further, it states, "Every registration or notice filing under this section expires December 31st unless renewed."
A broker-dealer having no place of business in a state is not required to be registered in that state if the broker-dealer A) is a member of FINRA. B) is a member of the New York Stock Exchange. C) does no business in that state other than with institutional clients. D) is licensed/registered in its state of residence.
C) does no business in that state other than with institutional clients. A broker-dealer must be registered in every state where it sells or offers to sell securities, unless an exemption is available. If a broker-dealer has no office in a particular state and no business is done in that state other than with institutional clients, registration there is not required.
Broker-dealers who use the internet to distribute information on available products and services are not deemed to be transacting business in this state for purposes of the Uniform Securities Act and are, therefore, exempt from registration, if A) the broker-dealer does not maintain a place of business in the state and uses encrypted passwords for access B) the internet communication contains a legend in which it is clearly stated that the broker-dealer in question is exempt from state broker-dealer registration requirements C) the internet communication does not involve either effecting or attempting to effect transactions in securities in this state over the internet, but is limited to the dissemination of general information on products and services being offered D) the internet communication contains a mechanism, including and without limitation, technical firewalls or other implemented policies and procedures, designed reasonably to ensure that before any subsequent, direct communication with prospective customers or clients in this state, the client is first registered in this state or qualifies for an exemption or exclusion from such requirement
C) the internet communication does not involve either effecting or attempting to effect transactions in securities in this state over the internet, but is limited to the dissemination of general information on products and services being offered The internet exemption applies to broker-dealers when the firm limits its communications to the dissemination of general information. Were you able to get through that very long choice and see that it requires clients to register? NASAA hopes you will get tired of reading and fall for nonsense like that.
Under the Uniform Securities Act, which of the following is a broker-dealer? A) An issuer B) An agent C) A credit union that sells its own stock D) A corporation that sells interests in an oil and gas limited partnership to investors, with the proceeds going to the issuer
D) A corporation that sells interests in an oil and gas limited partnership to investors, with the proceeds going to the issuer A broker-dealer is any person that buys or sells for the accounts of others or for his own account. In this case, an entity structured as a corporation is selling, on behalf of the issuer, a security in the form of limited partnership units and is therefore a broker-dealer. A broker-dealer is not an issuer or an agent.
Which of the following meets the USA's definition of a broker-dealer? A) A trust company B) A savings and loan association C) A bank D) A person who effects transactions for the accounts of others
D) A person who effects transactions for the accounts of others A person buying and selling securities for customers' accounts is deemed a broker-dealer under the Uniform Securities Act. Specifically excluded from the definition of a broker-dealer are banks, trust companies, and savings and loan associations.
As defined in the Uniform Securities Act, which of the following statements is true regarding an agent? A) An agent may be an individual or a firm. B) An agent may be a broker-dealer. C) If someone meets the definition of an agent, that person is exempt from registration requirements. D) An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities.
D) An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. The text in Section 401(b) of the Uniform Securities Act reads, "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." There are cases where an individual representing an issuer would not be considered an agent, such as if the transaction is exempt, but that doesn't change the definition.
Great Research & Analysis Brokers (GRAB) is an SEC registered broker-dealer with its principal office in State X. One of GRAB's clients, a resident of State X, vacations for three months during the winter in State Y. Under the registration requirements of the Uniform Securities Act, A) GRAB is not defined as a broker-dealer in State Y due to the de minimis exemption B) GRAB is permitted to accept only unsolicited orders from the client in order to be exempt C) the presence of a single client in State Y requires GRAB to register in that state D) GRAB is not defined as a broker-dealer in State Y if it does not have a place of business in the state
D) GRAB is not defined as a broker-dealer in State Y if it does not have a place of business in the state The "snowbird" exemption provides that if a broker-dealer does not have a place of business in a state and only deals with existing clients who are temporarily in a state, the firm is exempt from registration. That means the BD can engage in any business with the existing customer; it is not limited to exempt transactions such as unsolicited orders. There is no de minimis exemption for broker-dealers and agents.
Which of the following may be required by the Administrator to post surety bonds? An agent who has discretion over client funds and securities A broker-dealer who has custody of, or discretion over, client funds and securities An investment adviser who has custody of, or discretion over, client funds and securities A) I only B) I and III C) III only D) I, II, and III
D) I, II, and III A broker-dealer, investment adviser, or agent who has discretion over or, in the case of broker-dealers and advisers, custody of funds or securities may be required to post a bond. LO 11.f
Which of the following statements is true? An agent may never be simultaneously employed by more than one broker-dealer. An agent must submit separate registrations for each broker-dealer with which she is registered. Certain states prohibit agents from dual or multiple registration. An agent who sells securities in several states must be registered with different broker-dealers in each state. A) I only B) II, III, and IV C) IV only D) II and III
D) II and III 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 she is registered, and an agent may be prevented from multiple registration in those states that prohibit dual or multiple registration.
Which of the following statements best describes the record-keeping requirements of broker-dealers? A) Records shall be maintained and preserved in an easily accessible place for a period of not less than two years from the end of the fiscal year during which the last entry was made on record, the first three of those years in the principal office of the broker-dealer. B) Records shall be maintained and preserved in an easily accessible place for a period of not less than five year from the end of the fiscal year during which the last entry was made on record, the first three of those years in the principal office of the broker-dealer. C) Records shall be maintained and preserved in an easily accessible place for a period of not less than five year from the end of the fiscal year during which the last entry was made on record, the first two of those years in the principal office of the broker-dealer. D) Records shall be maintained and preserved in an easily accessible place for a period of not less than three years from the end of the fiscal year during which the last entry was made on record, the first two of those years in the principal office of the broker-dealer.
D) Records shall be maintained and preserved in an easily accessible place for a period of not less than three years from the end of the fiscal year during which the last entry was made on record, the first two of those years in the principal office of the broker-dealer. Broker-dealer recordkeeping under the Uniform Securities Act is similar to, but slightly different from that for investment advisers. In the case of BDs, the time period is three years with the first two of those being in the principal office of the firm. The five year and two year requirement is for investment advisers.
Under the Uniform Securities Act, the definition of a broker-dealer includes A) an authorized representative of the issuer who receives a commission B) an agent handling principal transactions with major institutional clients C) a trust company when executing transactions in accounts in which it does not act in a fiduciary capacity D) a person in the business of making trades in his own account or for the accounts of others
D) a person in the business of making trades in his own account or for the accounts of others A broker-dealer is defined as any person in the business of making trades in its own account or for the accounts of others. Agents and banks, including trust companies, are specifically excluded from the definition of broker-dealer.
All of the following statements regarding broker-dealers are true except A) they act in an agency capacity when executing orders to buy and sell securities on the various stock exchanges in the secondary market. B) they are regulated by the SEC as well as individual stock exchanges. C) they may act as dealers who buy and sell securities for their own accounts. D) they employ only registered investment adviser representatives.
D) they employ only registered investment adviser representatives. Agents work for broker-dealers, while investment adviser representatives work for investment advisers. The term broker-dealer is used because they sometimes act in an agency capacity (brokers) and other times in a principal capacity (dealers).
Which of the following are required in order to be in compliance with the recordkeeping requirements of the Uniform Securities Act? Broker-dealers must maintain customer ledgers for three years. Investment advisers must keep partnership records for three years after the partnership is terminated. Agents must keep customer records for three years. Investment adviser representatives must maintain records for five years. A) I and II B) II and IV C) I, II, III, and IV D) III and IV
A) I and II Recordkeeping requirements for broker-dealers are three years, and partnership articles and any amendments, articles of incorporation, charters, minute books, and stock certificate books of an investment adviser and of any predecessor shall be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise. There are no recordkeeping requirements for agents or IARs.
Included in the Uniform Securities Act's definition of broker-dealer would be A) issuers of securities. B) a broker-dealer with a place of business in the state whose only clients are insurance companies. C) individuals who are registered as agents. D) savings institutions.
B) 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.
Under the USA, the Administrator may do all of the following except A) take jurisdiction over any person who sells or offers to sell either when the offer is made in the state or when an offer to buy is made and accepted in the state. B) mandate the method used to maintain and file records. C) prescribe form and content of financial statements required under the act. D) conduct hearings in public, unless—at the Administrator's discretion and with agreement of all parties—the Administrator decides otherwise.
B) mandate the method used to maintain and file records. The Uniform Securities Act does not grant the Administrator the power to make any specific bookkeeping method mandatory. The only requirement is that the books and records must accurately reflect the nature of the firm's business.
If Somerville Discount Securities has its principal office in New Jersey and recently registered a branch office in Minnesota, which of the following statements is true? A) Agents working in the branch office that are licensed only in Minnesota may take unsolicited orders from New Jersey residents. B) Agents working in the principal office that are licensed only in New Jersey may take unsolicited orders from Minnesota residents. C) Each agent must be registered in the appropriate state before soliciting or taking orders. D) Each agent is automatically registered in both states.
C) Each agent must be registered in the appropriate state before soliciting or taking orders. Agents must be registered in every state in which they do business. An agent is not automatically registered in a state just because his employer is registered in that state.
An agent is registered in Illinois and Ohio. One of her substantial clients has just moved from Ohio to Arizona, and the agent would like to continue to do business with her. Under the Uniform Securities Act, which of the following statements are true? The agent's broker-dealer must already be registered in Arizona or complete the Arizona registration process within a time period specified by the act. The agent must complete the Arizona registration process within a time period specified by the act. The agent must ask the Ohio Administrator to request reciprocal registration from the Arizona Administrator. The agent must suggest that the client maintain a mailing address, such as a post office box, in Ohio. A) I and IV B) III and IV C) I and II D) II and III
C) I and II The USA permits broker-dealers and their agents to continue to do business with existing customers who change their state of residence, as long as registration in the new state takes place within a reasonable period of time. This time period varies from state to state but is generally 30 days. Because an agent's registration is not valid without a broker-dealer, the agent and the agent's broker-dealer must be registered in Arizona for the relationship with this customer to continue. There is no such thing as reciprocal registration.
Which of the following would be agents under the terms of the Uniform Securities Act? A sales representative of a licensed broker-dealer who sells securities traded in the secondary markets to the general public An assistant to the president of a broker-dealer who, for administrative purposes, accepts orders on behalf of senior partners A subsidiary of a major commercial bank registered as a broker-dealer that sells securities to the public An issuer of nonexempt securities that are registered in the state and sold to the general public A) II and IV B) I and IV C) I and II D) II and III
C) I and II Under the USA, only an individual can be an agent (a person who sells securities for a broker-dealer). An administrative person, such as the assistant to the president of a broker-dealer, is considered an agent if that individual takes securities orders from the public. Corporate entities, broker-dealers, and issuers are all excluded from the definition of an agent.
Under the Uniform Securities Act, unless renewed, the registration of which of the following securities professionals expires on December 31? Agents Broker-dealers Investment advisers Investment adviser representatives A) I and II B) III and IV C) I, II, III, and IV D) II and III
C) I, II, III, and IV State registration of any securities professional expires on December 31, unless renewed.
Except as limited by the Securities Exchange Act of 1934, the state securities Administrator may require, by rule or order, that broker-dealers make or maintain which of the following records? Account ledgers Correspondence Papers and memoranda Blotters and books A) III and IV B) I and II C) I, II, III, and IV D) II and III
C) I, II, III, and IV The Administrator may require broker-dealers to keep and maintain account ledgers, correspondence, papers and memoranda, and blotters and books, provided the state requirements do not exceed federal requirements under the Securities Exchange Act of 1934.
The Uniform Securities Act authorizes the state Administrator to require which of these? Either oral or written qualification examinations of investment adviser representatives and officers of investment adviser partnerships or corporations Officers of investment advisers to pass a qualification examination An applicant for initial registration to publish an announcement of the application in one or more specified newspapers published in the state Investment adviser representatives to pass a qualification examination A) I only B) I and II C) I, II, III, and IV D) III and IV
C) I, II, III, and IV The state Administrator may require qualification examinations for officers of investment advisers, as well as its representatives, and may require them to publish an announcement in one or more newspapers published in the state. The Administrator may also require either an oral or written examination.
The Uniform Securities Act authorizes the state Administrator to require which of these? Either oral or written qualification examinations of investment adviser representatives and officers of investment adviser partnerships or corporations Officers of investment advisers to pass a qualification examination An applicant for initial registration to publish an announcement of the application in one or more specified newspapers published in the state Investment adviser representatives to pass a qualification examination A) I only B) III and IV C) I, II, III, and IV D) I and II
C) I, II, III, and IV The state Administrator may require qualification examinations for officers of investment advisers, as well as its representatives, and may require them to publish an announcement in one or more newspapers published in the state. The Administrator may also require either an oral or written examination.
Each of the following would be excluded from the definition of agent except A) a partner in a broker-dealer whose only connection with the firm is her contribution of capital. B) the president of the state university who sits on the broker-dealer's board of directors. C) a sales assistant who is authorized to take orders from existing clients only. D) an individual who is the secretary of a broker-dealer's largest branch office.
C) a sales assistant who is authorized to take orders from existing clients only. It doesn't make any difference if the clients are new or existing—anyone accepting orders must be registered as an agent. Silent partners and outside directors are not included in the definition of agent. The size of the branch office is irrelevant; as long as the individual's function is limited to clerical activity, registration as an agent is not required.
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 A) will have to receive only nominal commissions. B) will have to be an employee of a broker-dealer registered in Nebraska. C) cannot sell without being an agent. D) will have to be an employee of a broker-dealer registered in Texas.
C) cannot sell without being an agent. It is unusual to have an answer set up this way, but it does happen sometimes on the exam—"to comply with"—and then there is no way to comply. First of all, the USA's exclusions from the definition of agent only apply to individuals working for the issuer, never broker-dealers. Then, the exclusion only applies when selling the following exempt securities in 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 Investment contracts issued in connection with employees' stock purchase, savings, pensions, or profit-sharing plans Selling other exempt securities, such as those issued by a federally chartered credit union, on behalf of the issuer, requires one to become registered as an agent of the issuer. Don't confuse this with the exemption offered in the case of exempt transactions. In that case, regardless of whether the security is exempt or not, if an individual's only sales activity while representing an issuer is in exempt transactions, then the exclusion from the definition of an agent applies. It is obviously a much broader exemption than when selling exempt securities.
A person who has no place of business in this state would not be considered a broker-dealer if he effects transactions in this state exclusively with all of the following except A) insurance companies. B) other broker-dealers. C) investment advisers. D) the issuers of the securities involved in the transaction.
C) investment advisers. The Uniform Securities Act excludes from the definition of broker-dealer, a person who has no place of business in this state if he effects transactions in this state exclusively with or through the issuers of the securities involved in the transactions, other broker-dealers, or banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers. Please note that investment advisers are not included in this list. What is confusing is that the USA offers almost the exact same exclusion for investment advisers and that list includes other investment advisers as well as broker-dealers.
David is registered as an agent in States H and M with Stanley Securities, a broker-dealer registered in every state. He would now like to register in State W. In order to do so, all of the following would be required except A) filing an application for registration with State W. B) paying the appropriate fee to State W. C) passing State W's qualification exam. D) filing a consent to service of process with State W.
C) passing State W's qualification exam. Many years ago, applicants for registration as an agent in a state had to pass that state's exam. Now, because the NASAA exams are uniform exams, they are accepted in every state that requires passage of an exam. A consent to service must be filed with every state in which the person intends to register and, of course, the application must be accompanied by the proper fee.
Affray Compassionate Finance Company (ACFC) is offering $100 million of 150-day commercial paper for sale in State L. The paper is available in minimum denominations of $100,000 and has been rated AA by a leading rating organization. Whom of the following would be required to register as an agent in State L in order to legally sell this security in the state? A) None of these (Because this security is exempt from registration, offers and sales can be made without registration as an agent.) B) An investment adviser who recommends this security to clients C) An employee of ACFC who receives a 1% commission on sales D) An agent of a broker-dealer registered in the state
D) An agent of a broker-dealer registered in the state Those individuals who represent broker-dealers registered in the state must register as agents in that state if they wish to sell securities to that state's residents. It makes no difference what kind of security it is or to whom the security is being sold. Yes, this is an exempt security (less than 270 days' maturity; minimum $50,000 denomination; rating in the top three grades), but that only means that the security does not have to register. An exclusion from the definition of agent is given to those who represent issuers of certain exempt securities. Commercial paper is one of the five cases where this exclusion applies, so ACFC's employee would not be defined as an agent. This is true even though compensation is being received. Investment advisers don't register as agents if all they do is give investment advice.
Under the Uniform Securities Act, which of the following would be considered an agent? A) A broker-dealer who buys and sells registered securities with the general public B) An individual who represents an issuer of a security issued by a Canadian province C) An individual who represents an issuer in an exempt transaction D) An individual limiting his sales activity to selling federal covered securities while representing a broker-dealer
D) An individual limiting his sales activity to selling federal covered securities while representing a broker-dealer An individual employed by a broker-dealer who sells securities to the public is an agent under the Uniform Securities Act. The USA defines an agent as, "any individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities." The law excludes those individuals from the definition of an agent who represent an issuer in exempt transactions, selling certain exempt securities (Canadian provincial securities are on that list), and transactions with issuers' employees when no commission is paid. There is virtually no case in which a salesperson representing a registered broker-dealer is not an agent.
Under the Uniform Securities Act, which of the following is an agent? A) An individual who is in the business of providing investment advice on behalf of his employer B) A clerical person who files trade confirmations for the firm C) A broker-dealer that charges a commission as a regular part of its business D) An individual who effects securities transactions for commissions
D) An individual who effects securities transactions for commissions The Uniform Securities Act defines an agent as any individual (other than a broker-dealer) who represents a broker-dealer in effecting securities transactions.
Which of the following statements is 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. The SEC has jurisdiction over banks and savings and loans regarding their securities activities. A) II only B) I, II, and III C) I only D) I and II
D) I and II The SEC was created by the Securities Exchange Act of 1934 and has the responsibility of administering all federal securities laws. 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.
Quick and Fast Executions, Inc., a broker-dealer registered with the Administrator, maintains a website describing the services offered by the firm. Which of the following statements would be in compliance with the requirement to maintain certain books and records? A) Because websites tend to be fluid, Administrators only require that they be available for spot-checking. B) Retention of any revised design must be kept for a period of at least three years after the initial design's retention period ends. C) The original website design must be retained for a period of at least five years from initial use. D) The original website design must be retained for a period of at least three years from initial use.
D) The original website design must be retained for a period of at least three years from initial use. Websites, like any other advertisement, must be retained for a period of at least three years from initial use. Because they are fluid (frequently changing), each design change must be filed after first use beginning a new 3-year holding period.
A broker-dealer registered with State A created a website two years ago to promote its services. Recently, they hired a new media person who totally redesigned the site. Under the recordkeeping requirements of the Uniform Securities Act, A) copies of both the original and the new web page must be maintained for five years after original use. B) there are no requirements for storage of electronic data. C) a copy of the new web page must be maintained for a period of three years from the first use of the original site. D) a copy of the original web page must be maintained for three years from original use.
D) a copy of the original web page must be maintained for three years from original use. Websites are treated as would be any other advertisement. So, the original site design is kept for three years, and whenever revised, the new copy is maintained and starts a new retention requirement for that copy. Therefore, you will likely have several different versions in your advertising file at the same time.
Under the Securities Exchange Act of 1934, the term associated person would include each of the following except A) a person who is associated with a broker-dealer as a branch office manager. B) a person who is associated with a broker-dealer in the capacity of a partner solely by virtue of a contribution of capital. C) a person who is associated with a broker-dealer as an agent. D) a person who is associated with a broker-dealer and whose functions are solely ministerial.
D) a person who is associated with a broker-dealer and whose functions are solely ministerial. According to the act, the phrases "person associated with a broker or dealer" and "associated person of a broker or dealer" mean any partner, officer, director, or branch manager of such broker or dealer (or any person occupying a similar status or performing similar functions); any person directly or indirectly controlling, controlled by, or under common control with such broker or dealer; or any employee of such broker or dealer. However, a person who is associated with a broker or dealer but whose functions are solely clerical or ministerial shall not be included in the meaning of such term.
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 A) issued or guaranteed by any federal credit union or any credit union, industrial loan association, or similar association organized and supervised under the laws of this state. B) issued by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes, or as a chamber of commerce or trade or professional association. C) issued by and representing an interest in or a debt of, or guaranteed by, any federal savings and loan association, or any building and loan or similar association organized under the laws of any state and authorized to do business in this state. D) 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.
D) 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. An individual representing an issuer in the sale of that issuer's security is not defined as an agent if the security is 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; 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 banker's acceptance that evidences an obligation to pay cash within nine months after the date of issuance, is issued in denominations of at least $50,000, and receives a rating in one of the three highest rating categories from a nationally recognized statistical rating organization; or any investment contract issued in connection with an employee's 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 here. A confusing point is that the individual is not an agent when the sales are made in any exemption transaction with no exceptio
