Unit #3: Regulation of Broker-Dealers and Their Agents

If Brokers, Inc., a broker-dealer registered in this state, refuses to comply with the Administrator's order to retain records for 2 years longer than required by the Securities Exchange Act of 1934, which of the following statements are TRUE? 1. The securities Administrator cannot require registrants to retain books and records longer than required by the SEC. 2. Brokers, Inc., is not in violation of the Securities Exchange Act of 1934. 3. Both the securities Administrator and Brokers, Inc., are in violation of both the Securities Exchange Act of 1934 and the Uniform Securities Act. 4. Brokers, Inc., must comply with orders issued by state securities regulators whether or not the orders are in compliance with the NSMIA. A)I and II B)I and III C)II and III D)II and IV

A) 1 & 2 *The securities Administrator is in violation of the National Securities Markets Improvement Act of 1996 (NSMIA), which prohibits state securities regulators from establishing requirements in addition to those required by the Securities Exchange Act of 1934.

Broker-dealers, investment advisers, agents, and investment adviser representatives who use the internet to distribute information on available products and services that are directed generally to anyone having access to the internet and transmitted through postings on bulletin boards, displays on homepages, or similar methods are not deemed to be transacting business in this state for purposes of the Uniform Securities Act solely on the basis of that fact if which of the following conditions are observed? 1. The internet communication contains a legend in which it is clearly stated that the broker-dealer, investment adviser, agent, or IAR in question may transact business in this state only if first registered, excluded, or exempted from state broker-dealer, investment adviser, agent, or IAR registration requirements, as may be the case. 2. The internet communication contains a legend in which it is clearly stated that follow-up; individualized responses to persons in this state by the broker-dealer, investment adviser, agent, or IAR that involve either the effecting or attempting to effect transactions in securities; or the rendering of personalized investment advice for compensation, as may be, will not be made absent compliance with state broker-dealer, investment adviser, agent, or IAR registration requirements, or an applicable exemption or exclusion. 3. 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 broker-dealer, investment adviser, agent, or IAR is first registered in this state or qualifies for an exemption or exclusion from such requirement. 4. The internet communication does not involve either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, as may be, in this state over the internet, but is limited to the dissemination of general information on products and services being offered. A) I, II, III, and IV B) III and IV C) I, II, and III D) I and II

A) 1, 2, 3, & 4 *With the growth of the internet, NASAA developed an interpretive order concerning broker-dealers, investment advisers, agents, and investment adviser representatives using the internet for general dissemination of information on products and services. The primary focus of this order was to set the parameters under which securities professionals could communicate on the internet or use their websites in states in which they were not registered. Meeting all of the requirements stated in the answer is necessary.

In general, a broker-dealer is required to register with the SEC. An exception to that requirement would apply to a broker-dealer who A) maintains a place of business in a single state, only deals with residents of that states, and does not execute transactions in securities traded on a national exchange. B) is currently registered with the SEC as an investment adviser. C) does not have a place of business in the state and limits its clientele to institutional clients. D) is registered with the Administrator of the states in which it does business and only deals with issuers of the securities it trades.

A)maintains a place of business in a single state, only deals with residents of that states, and does not execute transactions in securities traded on a national exchange. *The only exemption from SEC registration applies to broker-dealers functioning strictly on an intrastate basis. Many broker-dealers are registered with the SEC as both BDs and as IAs - one does not suffice for the other. The exemptions from state registration as a broker-dealer are much broader and would include the cases where the BD does not have a place of business in the state and its only clients are institutions or it effects transactions in this state exclusively with or through the issuers of the securities involved in the transactions.

An agent terminates his association with broker-dealer A and begins to work for broker-dealer B. Under the Uniform Securities Act, which of the following must take place? 1. Broker-dealer A must notify the Administrator. 2. Broker-dealer B must notify the Administrator. 3. The agent must notify the Administrator. 4. The supervisor to which the agent reported must notify the Administrator. A) II, III, and IV B) I, II, and III C) I, III, and IV D) I, II, III, and IV

B) 1, 2, & 3 *In the event an agent transfers from one broker-dealer to another broker-dealer, all three (the former employer, the new employer, and the agent) must report the transfer to the Administrator.

Which of the following persons are excluded from the definition of, or exempt from registration as, a broker-dealer under the Uniform Securities Act? 1. A broker-dealer with no office in the state that effects trades exclusively with other broker-dealers in the state 2. A trust company with an office in the state that deals with the general public 3. A broker-dealer with no office in the state that has no more than 5 retail clients resident in the state within the past year 4. A broker-dealer with no office in the state that effects securities trades exclusively with trust companies or other broker-dealers A) III and IV B) I, II, and IV C) I, II, III, and IV D) I and II

B) 1, 2, & 4 *As long as a broker-dealer does not have an office in the state, it is possible to qualify for exclusion from the definition. The primary requirement for the exclusion is that the broker-dealer confine trading to financial institutions or other broker-dealers. Unlike with investment advisers, there is no de minimis exemption for broker-dealers. Trust companies are excluded from the definition of broker-dealer.

Which of the following statements referring to renewal of a broker-dealer's registration under the Uniform Securities Act are CORRECT? 1. Annual renewal takes place on the anniversary of the registrant's initial registration. 2. Each renewal application must be accompanied by the appropriate fee. 3. Each renewal application must be accompanied by a consent to service of process signed by an authorized supervisory person of the firm. 4. Registrations expire December 31 unless renewed or canceled. A) I and IV B) II and IV C) I and III D) II and III

B) 2 & 4 *The consent to service of process is filed with the initial application for registration and becomes a permanent part of the registrant's file. The USA states that all registrations of persons expire on December 31 unless renewed, withdrawn, or canceled.

An individual has been hired by a person to assist in the selling of securities it is issuing to residents of State A. The individual would be defined as an agent under the Uniform Securities Act if the issuer is A) issuing commercial paper in minimum denominations of $100,000 with an AA rating and a 6month maturity. B) a credit union organized and supervised under the laws of State A. C) the city of Saskatoon, Saskatchewan (Canada). D) a trust company organized and supervised under the laws of State B.

B) A credit union organized and supervised under the laws of State A. *Please remember the broad definition of person - it does not mean an individual unless preceded by the word, natural. When an individual represents the issuer of certain exempt securities in the sale of those securities to the public, that individual is not included in the USA's definition of agent. Credit unions are not in that list so those individuals are agents and must be registered as such. Individuals representing banks, including savings institutions and trust companies when organized and supervised under the laws of any state (not necessarily the state in which the securities will be sold), are not agents. If the agent represents the issuer of commercial paper meeting the exemption requirements of the USA ($50,000 minimum denomination, top 3 grades, and maximum 9-month maturity), that individual is not an agent. Finally, representing the United States or Canadian federal government, or any of their political subdivisions, excludes one from the definition of agent.

As defined in the Uniform Securities Act, which of the following statements is TRUE regarding an agent? A) An agent may be a broker-dealer. B) An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. C) If someone meets the definition of an agent, that person is exempt from registration requirements. D) An agent may be an individual or a firm.

B) An agent represents a broker-dealer or an issuer if 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.

Under the Uniform Securities Act, which of the following would be considered an agent? A) An individual who represents an issuer of a security issued by a Canadian province B) An individual limiting his sales activity to selling federal covered securities while representing a broker-dealer C) A broker-dealer who buys and sells registered securities with the general public D) An individual who represents an issuer in an exempt transaction

B) 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.

When applying for registration as an agent, which of the following must be disclosed? A) Highest educational level achieved and the institution attended. B) Certain financial information such as any unsatisfied judgments or liens against the applicant. C) Complete employment history for the past 5 years. D) Residential history for the past 3 years.

B) Certain financial information such as any unsatisfied judgements or liens against the application *This question probably contains more detailed information than will be covered on the exam. Negative financial information, such as unsatisfied judgments or liens and bankruptcy filings must be disclosed. Employment history for the past 10 years and residential history for the past 5 years must be shown. If, during the past 10 years, the applicant was a full-time student, then that must be shown, but that is the extent of educational information required.

A sales assistant employed by a full service broker-dealer would be required to register as an agent when accepting orders for A) commodity futures contracts. B) direct participation programs. C) fixed annuities. D) gold coins.

B) Direct Participation Programs. *An individual employed by a broker-dealer who is involved in the sale of securities must register as an agent. The security here is the DPP.

Broker-dealers, investment advisers, and agents must renew their licenses with the state Administrator: A) semiannually B) every December 31, unless otherwise specified by state law C) annually upon the date of original registration D) licenses are permanent unless revoked, suspended, or canceled

B) Every December 31st, unless otherwise specified by state law. *Under the Uniform Securities Act, registrations must be renewed every December 31. Registrations are not permanent and can be denied, revoked, or canceled according to the terms of the act.

Great Research & Analysis Brokers (GRAB) is an SEC registered broker-dealer with its principal office in State X. One of GRAB's clients vacations for 3 months during the winter in State Y. Under the registration requirements of the Uniform Securities Act, A) GRAB is only permitted to accept unsolicited orders from the client in order to be exempt B) GRAB is not defined as a broker-dealer in State Y if it does not have a place of business in the state C) GRAB is not defined as a broker-dealer in State Y due to the de minimis exemption D) the presence of a single client in State Y requires GRAB to register in that state

B) 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. There is no de minimis exemption for broker-dealers and agents.

If ABC Brokers, Inc., has its registration as a broker-dealer canceled, individuals registered as agents of ABC may A) continue to sell only exempt securities until employed by a properly registered broker-dealer B) not sell any securities because their registrations are only effective when associated with a registered broker-dealer C) continue to conduct business because ABC's registration was canceled, not theirs D) continue to conduct business until employed by another broker-dealer, who will then renew their registrations

B) Not sell any securities because their registrations are only effective when associated with a registered broker-dealer. *Individuals functioning as agents must be registered with an active broker-dealer in order for their registrations to be valid.

With regard to the state registration requirements of agents of registered broker-dealers, all of the following statements are correct except A) registration is required if they solicit the sale of securities by telephone to fewer than 6 individuals residing in that state B) registration is required in each state in which the employing broker-dealer has a place of business C) registration is not required in a state where the agent has no place of business and only deals with existing clients who are vacationing in that state D) registration is required when they limit their activity to the sale of exempt securities

B) Registration is required in each state in which the employing broker-dealer has a place of business. *The fact that the broker-dealer does business in a state has nothing to do with a specific agent. Many broker-dealers are registered in all states; very few agents are. Agents must register in each state where they are selling or offering securities, even if the security or the transaction is exempt. That exemption only applies to the need for the security to be registered, not the agent. Soliciting the sale of securities by telephone is considered making an offer, and there is no de minimis exemption available. Finally, registration is not required when making use of the "snowbird" exemption.

Under the Uniform Securities Act, the definition of a broker-dealer includes A) an agent handling principal transactions with major institutional clients B) a person in the business of making trades in his own account or for the accounts of others C) an authorized representative of the issuer who receives a commission D) a trust company when executing transactions in accounts in which it does not act in a fiduciary capacity

B)a person in the business of making trades in his own account for the accounts of other *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.

One of the terms defined in the Uniform Securities Act is "broker-dealer." Which of the following is NOT included in that definition? 1. An individual employed by a corporate entity to open new customer accounts for the purpose of trading securities 2. A business entity seeking to raise additional capital using the regulated securities markets 3. A person whose primary function is buying securities for his own account and for the accounts of others 4. A person whose primary function is providing advice on what assets belong in clients' investment portfolios A) III and IV B) I, II, III, and IV C) I, II, and IV D) II and III

C) 1, 2, & 4 *A broker-dealer is defined as a person in the business of effectuating securities transactions for its own account or the account of others. Those employed to open new accounts are defined as agents. Those seeking to raise new capital are issuers, and a person who provides investment advice is an investment adviser.

The Administrator, with proper notice, may examine the financial records of which of the following persons registered in his state? A) Only investment advisers B) Broker-dealers, agents, and investment advisers C) Broker-dealers and investment advisers D) Only broker-dealers

C) Broker-dealers and investment advisers *Only broker-dealers and investment advisers are required to maintain financial records. There are no financial inspections of agents or investment adviser representatives as there are with broker-dealers and advisers.

What document must accompany an initial registration application for those individuals required to register as agents under the Uniform Securities Act? A) A birth certificate confirming the registrant is over 18 years of age B) State photo identification C) Consent to service of process D) Proof of U.S. citizenship

C) Consent to service of process *The USA requires that a consent to service of process accompany an application for registration. Although the Administrator will generally request information about the applicant's citizenship, it is not necessary to be a U.S. citizen. Proof of age is not a requirement.

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.

Both state and federal law have record keeping requirements for broker-dealers. When it comes to email correspondence, the requirements are A) only that the correspondence be reviewed by a principal. B) the firm must keep the correspondence in cloud storage for three years. C) the same as they would be for written correspondence. D) that a receipt that the email has been read is sufficient.

C) The same as they would be for written correspondence *Email correspondence is treated the same as written correspondence. The records must be kept for three years. One method is "the cloud", but there are other acceptable methods as well.

Under the USA, which of the following is considered a broker-dealer in a state? A) An agent effecting transactions for a broker-dealer B) ABC broker-dealer with no place of business in the state who only does business with other broker-dealers in the state C) XYZ broker-dealer with an office in the state whose only clients are insurance companies D) First Federal Trust Company, specializing in underwriting new municipal issues

C) 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.

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 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 B) the broker-dealer does not maintain a place of business in the state and uses encrypted passwords for access 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.

KAPCO Securities is a broker-dealer registered with the SEC doing business throughout the Midwest. KAPCO must meet the net capital requirements of A) each state in which they do business B) the state with highest net capital requirements of the states in which it does business C) the SEC, even if one or more of the states in which they are registered has a higher net capital standard D) the state in which its principal office is located

C)the SEC, even if one or more of the states in which they are registered has a higher net capital standard *SEC rules preempt those of the states. As long as the broker-dealer complies with the SEC's net capital rule, all state requirements are satisfied. It is state-registered investment advisers who must meet the net worth (or capital) requirements of the state in which their principal office is located.

Which of the following persons are included in the definition of an agent under the Uniform Securities Act? 1. An individual who represents First Securities Brokers, Inc., in selling shares of XYZ Corporation, a New York Stock Exchange listed company 2. An individual who, as part of the job description, represents the City of Chicago in selling its bonds to the public 3. An individual who represents a corporation traded on the New York Stock Exchange in selling securities to the public 4. An individual who is employed by the Federal Reserve Board to sell Treasury Bills to retail investors A) II and IV B) III and IV C) I and II D) I and III

D) 1 & 3 *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 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 effect 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.

During the application process for registration as an agent, the Administrator may request information about the applicant's A) record involving a non-securities misdemeanor conviction 5 years ago B) financial condition as disclosed on the agent's most recent balance sheet C) marital status D) citizenship

D) 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.

Which of the following persons is defined as an agent by the Uniform Securities Act? A) Broker-dealer executive who does not solicit or transact business B) Secretary of a branch office sales manager C) Silent partner of a broker-dealer D) Clerk at a broker-dealer who is authorized to take orders

D) Clerk at a broker-dealer who is authorized to take orders *Anyone who solicits or receives an order while representing a broker-dealer is an agent. Silent partners, administrative personnel, and executives of broker-dealers with no sales responsibilities are not agents under the terms of the USA because they do not solicit or receive orders.

Seven years ago, Ivan was found guilty of embezzling securities from clients. He now wishes to join another brokerage firm. Which of the following statements is TRUE regarding this situation? A) He may be employed in a sales position, provided the firm agrees to be liable for any losses due to his misconduct. B) He may be employed by a brokerage firm, provided he is not involved directly in any dealings with clients. C) There are no provisions restricting his employment because the restriction time period has elapsed. D) He cannot be employed because he is still subject to statutory disqualification provisions.

D) He cannot be employed because he is still subject to statuary disqualification provisions. *Under the Securities Exchange Act of 1934, there are a number of items that disqualify a person from becoming a member of, or from associating with, a member of a self-regulatory organization (SRO). The items include being currently under suspension, revocation, or injunction by any court, regulatory authority, or SRO (foreign or domestic); currently employing a person statutorily disqualified; having been convicted in the past 10 years of a felony or a securities- or financially related crime; or falsifying an application for registration. Ivan cannot be employed by a brokerage firm, because he was convicted 7 years ago. Because the Securities Exchange Act of 1934 requires a broker-dealer to join one or more SROs, being statutorily disqualified eliminates the possibility of employment.

An individual has been employed by a broker-dealer to solicit new subscriptions for the firm's free monthly stock market report. The individual is paid a salary plus bonus based on his success rate with signing up subscribers. Under the USA, this person would A) have to be registered as an investment adviser representative B) only be allowed to contact existing clients of the broker-dealer C) have to be registered as an agent of the broker-dealer D) not have to be registered as an agent of the broker-dealer

D) Not have to be registered as an agent of the broker-dealer. *Agents of broker-dealers are in the business of securities-related transactions on behalf of clients of the firm. A free-market report is not a security, so this individual is not soliciting securities business.

Washington, Adams, and Jefferson, Inc. (WAJI) is a broker-dealer whose principal and only office is in Alexandria, VA. WAJI's sole business is trading in securities issued by the U.S. Treasury. Rutherford Buchanan is employed by the firm in the main office and has the responsibility of servicing the firm's bank and insurance company clients. Which of the following statements is correct regarding Rutherford's licensing requirements? A) Rutherford is exempt from registration because his only clients are institutions. B) Rutherford is exempt from registration because he only deals with securities issued by the U.S. Treasury. C) Rutherford cannot register as an agent of WAJI because dealing exclusively with U.S. Treasury securities removes the firm from the definition of a broker-dealer. D) Rutherford must register as an agent of WAJI with the State of Virginia.

D) Rutherford must register as an agent of WAJI with the State of Virginia. *Rutherford represents a broker-dealer in dealing with clients and that requires registration as an agent in any state in which he maintains a place of business. The fact that WAJI only trades in U.S. Treasury securities is irrelevant. Perhaps you were thinking of an investment adviser who, under these circumstances, would be excluded from the definition of IA under the Investment Company Act of 1940. That has nothing to do with broker-dealers. Even if WAJI's only clients were banks and insurance companies, it would still have to register in the state where it is headquartered; the "institutions only" exemption applies when the broker-dealer does not have a place of business in the state.

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) an individual who is the secretary of a broker-dealer's largest branch office C) the president of the state university who sits on the broker-dealer's board of directors D) a sales assistant who is authorized to take orders from existing clients only

D) Sales assistance 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.

USATrade Securities, a FINRA member broker-dealer, is registered in 10 Midwest states. Regarding financial requirements, USATrade must meet those of A) the state in which the principal office of the member is located B) FINRA C) the state with the most stringent financial requirements D) the SEC

D) The SEC *It may be assumed that a broker-dealer member of FINRA is also registered with the SEC. As such, when it comes to financial requirements, bonding, recordkeeping, and so forth, the SEC's requirements always trump those of the states.

It has been a great year at Capital Funding, Inc., an SEC-registered broker-dealer that is also registered in 22 states. The company decides to share its good fortune with employees by paying a year-end bonus equal to 31% of annual salary. In order for clerical personnel to receive this bonus, A) they must be licensed as agents B) they must be licensed as investment adviser representatives C) the bonus must be sales related D) they must be employees of the broker-dealer

D) They must be employees of the broker-dealer. *Unregistered personnel may be paid a bonus as long as it is not directly related to any specific sales activity.

Under the Uniform Securities Act, the Administrator may require a broker-dealer to post a surety bond of A) $10,000.00 B) $50,000.00 C) $25,000.00 D) an amount not in excess of that set by the SEC

D) an amount no tin excess of that set by the SEC *Unlike investment advisers where the USA specifies posting a surety bond in the amount of $35,000, the Uniform Securities Act does not specify an amount for broker-dealers. However, the NSMIA states that the Administrator may not require a broker-dealer be bonded in an amount above that set by the SEC. Furthermore, bonds will not be required of broker-dealers that maintain a specified net capital.

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) Agents registered in another state who are employed by the broker-dealer D) Any agent who is a partner, officer, or director, or a person occupying a similar status or performing similar functions

D)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, a broker-dealer is defined as any person who A) buys securities B) is registered with the SEC C) sells securities D) is in the business of effecting securities transactions for its own account or for the accounts of others

D)is in the business of effecting securities transactions for its own account or for the accounts of others *A broker-dealer is any person, partner, officer, director, or securities firm engaged in the business of effecting securities transactions for the accounts of others (broker) or for its own account (dealer).

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) need not register as an agent of the issuer because the offering is limited to current employees of the issuer B) may receive commissions, but not a salary, without registration C) must register as an agent of the issuer D) must register as an agent if sales-related compensation will be received by the employee, either directly or indirectly

D)must register as an agent if sales-related compensation will be received by the employee, either directly or indirectly *Under the USA, an individual is an agent when effecting transactions with an issuer's existing employees if sales-related compensation is paid. As a practical matter, the employee would be on straight salary.

If Wallace resigned his position as an agent with Rockland Securities to work for Gibraltar securities, which of the following parties must notify the Administrator of Wallace's move? A) Rockland and Gibraltar B) Rockland, Gibraltar, and Wallace C) Gibraltar and Wallace D) Wallace and Rockland

b) Rockland, Gibraltar, and Wallace *When an agent with one broker-dealer resigns and affiliates with another, both broker-dealers and the agent must notify the Administrator of the change in registration. Notification is accomplished by filing Forms U5 and U4 with FINRA's CRD.

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) not conduct any business with the client B) not deal with the client until the broker-dealer registers in Pennsylvania C) conduct business with the client as usual D) only accept unsolicited orders

c) 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.