65-Chapter 2 and 3
Under the Uniform Securities Act, if the Administrator does not deny an application for registration and no disciplinary proceeding is underway in regard to it, how many days after filing the application as an investment adviser representative does registration generally become effective?
30 days - Registration becomes effective 30 days after the application is filed unless the Administrator begins a proceeding or issues a stop order before that time. The Administrator may specify an earlier date, or if an application must be amended, the Administrator may extend the date to 30 days after the amendment was filed.
During the application process for registration as an agent, the Administrator may request information about the applicant's A)
citizenship
Which of the following meets the USA's definition of a broker-dealer?
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.
Under the Uniform Securities Act, which of the following would be included in the definition of an investment adviser representative?
A solicitor for an investment advisory firm who is compensated for the service rendered
As the use of social media has mushroomed, most firms in the securities business have created and maintain websites. In addition to password-protected areas for existing clients, these websites generally have pages accessible to anyone. Which of the following statements could be on an investment adviser's website that would not be on that of a broker-dealer?
A statement that the firm is registered with the SEC under the Investment Advisers Act of 1940 - Investment advisers register with either the SEC or the state(s). Those who are registered with the SEC do so in compliance with the Investment Advisers Act of 1940. Broker-dealers cannot make that statement because they are registered with the SEC as required by the Securities Exchange Act of 1934. Neither can state that the website has been approved and FINRA membership is for broker-dealers only. Here is where a problem arises. Many of our students will be representing firms that are registered as broker-dealers and investment advisers. That is why it is so important to read the question carefully. It specifically refers to an investment adviser and makes no implication that the firm is also a broker-dealer.
Because of failing economic conditions, KAPCO Advisers, an adviser with slightly less than $120 million in assets under management, lays off a registered investment adviser representative. In this case, who would notify the state Administrator of the termination?
IAR - With more than $110 million in assets under management, KAPCO is a federal covered adviser. In that case, the IAR is the one who notifies the Administrator of being terminated.
As defined in the Uniform Securities Act, which of the following statements is TRUE regarding an agent?
An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities.
As defined in the Uniform Securities Act, which of the following statements is TRUE regarding an agent?
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
Under the Uniform Securities Act, which of the following would be included in the definition of an investment adviser representative?
An employee whose only role is soliciting new investment advisory clients for the firm. - Soliciting for advisory clients on behalf of an investment adviser is considered 1 of the functions describing an investment adviser representative under the Uniform Securities Act. An employee who performs only clerical or administrative functions is not an investment adviser representative. Precious metals are not securities and, therefore, a person advising on them is not considered an investment adviser representative. An agent is a representative of a broker-dealer, and as long as the only form of compensation is sales commissions based upon transactions, registration as an investment adviser representative is not required.
Under the Uniform Securities Act, which of the following would be considered an agent?
An individual limiting his sales activity to selling federal covered securities while representing a broker-dealer
According to the Investment Advisers Act of 1940, which of the following is always a natural person?
An investment adviser representative
Which of the following is not included in the definition of broker-dealer as found in the Uniform Securities Act?
Banks
The Administrator, with proper notice, may examine the financial records of which of the following persons registered in his state? A)
Broker-dealers and investment advisers
Which of the following persons is defined as an agent by the Uniform Securities Act?
Clerk at a broker-dealer who is authorized to take orders
KAPCO Advisers is registered as an IA with the SEC. Their only office is in New Jersey and all IARs are registered there. IAR Claire has 10 clients who reside in Ohio; IAR Sean has 6 clients who live in Kentucky; and IAR Felicia has 3 clients who are Georgia residents. In addition, Felicia conducts a quarterly presentation at the Augusta, Georgia National Golf Club where she discusses current market developments. The seminar is restricted to club members only. Which of the following is CORRECT?
Felicia must register in Georgia. Under Section 203A of the Investment Advisers Act of 1940, any IAR with a federal covered adviser who has no place of business in a state is not required to register in that state even when the number of clients they have in a state exceeds the de minimis level. Holding a public seminar on a quarterly basis in the same location would be considered having a place of business in Georgia (even though attendance is limited to club members only—they are still members of the general public).
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,
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.
Under the Uniform Securities Act, it is required to file an application with the Administrator to become a registered broker-dealer in the state. Among the disclosures that must be made on that application are
I.the form of business organization to be used by the firm II. any felonies or certain misdemeanors on the records of partners or officers III.business history of the principals of the firm IV. financial information about the firm
Which of the following statements is NOT true?
I. A broker-dealer must be a firm or corporation (legal person) as opposed to a natural person (human being). II. An investment adviser must be a firm or a corporation as opposed to a natural person. III. An investment adviser representative (IAR) cannot, under any circumstances, be employed by a registered broker-dealer.
Under the Uniform Securities Act, unless renewed, the registration of which of the following securities professionals expires on December 31?
I. Agents II. Broker-dealers III. Investment advisers IV. Investment adviser representatives
According to the Uniform Securities Act, which of the following is an investment adviser representative?
I. An employee of AAA Investment Management Company who is properly registered under the USA and supervises analysts who provide research to clients II. An employee of a federal covered adviser with an office in the state who offers investment advice to the public
Which of the following would be an agent as the term is defined in the Uniform Securities Act?
I. An individual representing a registered broker-dealer in the sale of securities to the general public II. An assistant to the president of a broker-dealer who accepts orders from clients on behalf of the senior partners - Under the USA, only individuals can be agents. A person who sells securities for a broker-dealer is an agent. An administrative person, such as the assistant to the president of a broker-dealer, is considered an agent if he takes securities orders from clients. Corporate entities are excluded from the definition of an agent. Broker-dealers and issuers are not agents.
Under the Uniform Securities Act, which of the following statements regarding the employment of investment adviser representatives by a state-registered investment adviser is (are) true?
I. The investment adviser must notify the Administrator whenever an investment adviser representative is terminated. II. The registration of an investment adviser representative is effective only as long as the individual is employed by a registered investment adviser.
Under the Uniform Securities Act, which of the following statements is (are) TRUE regarding registration of broker-dealers and agents?
I. Those defined as broker-dealers must be registered with the state before transacting any securities business. II. An agent of a broker-dealer must become registered with the state before transacting business.
Which of the following statements are TRUE?
II. An agent must submit separate registrations for each broker-dealer with which he is registered. III. Certain states prohibit agents from dual or multiple registration.
If XYZ is a registered broker-dealer with its lone office located in State T, under which of the following circumstances must it also register in State L?
III. XYZ routinely sells nonexempt securities to extremely high net-worth residents of State L. IV. XYZ purchases exempt securities from extremely high net-worth residents of State L for resale to residents of State T.
What is the purpose of the Securities Exchange Act of 1934?
It regulates the persons involved in the secondary market.
Mountain High Securities is a broker-dealer registered in Wyoming and Colorado with its principal office located in Colorado. With reference to the Uniform Securities Act, it would be correct to state that
Mountain High Securities must meet the recordkeeping requirements of the SEC
How quickly must a broker-dealer notify the Administrator if material information relating to that broker-dealer's registration should change?
Promptly
An individual with a place of business in State A manages client assets on behalf of a covered investment adviser. This individual wishes to expand his client base by working 1 day per week out of the firm's office in State B. Which of the following actions must this individual take to practice within that particular state?
Register as an investment adviser representative in State B
An investment adviser representative of a federal covered investment adviser registers with
Registration of IARs is done solely on the state level. IARs register with the Administrator of each state in which they are required to be registered.
Which of the following statements regarding an agent's registration is most accurate?
Revocation of the registration of that agent's broker-dealer will result in cancellation of that agent's effective registration.
Which of the following statements regarding an agent's registration is CORRECT?
Revocation of the registration of that agent's broker-dealer will result in that agent's effective registration being put "on hold." - An agent of a broker-dealer is active only when that broker-dealer's registration is in force. The exam may refer to the agent's registration being placed into suspense or canceled; any of these has the same effect.
Alex Alexander is planning on registering as an agent for a broker-dealer. Which of the following would be the least likely requirement for a successful application?
Submitting fingerprints
Alex Alexander is planning on registering as an agent for a broker-dealer. Which of the following would be the least likely requirement for a successful application?
Submitting fingerprints - Fingerprints are not a specific requirement of the Uniform Securities Act.
If an investment adviser representative of a federal covered adviser that transacts business in a state terminates employment with that investment adviser, which of the following statements is TRUE?
The representative must notify the Administrator.
Which of the following people would not meet the definition of a person associated with an investment adviser?
The typist responsible for operating the desktop publishing system that prepares the investment adviser's weekly research bulletins - People in strictly clerical or administrative positions are not considered to be associated persons of an investment adviser. Expect to see several variations of this theme on the exam.
Senior Wealth Advisers (SWA) is registered as an investment adviser in North and South Carolina with offices in Charlotte, North Carolina and Charleston, South Carolina. On occasion, 1 of their investment adviser representatives meets with clients who reside in North Augusta, South Carolina in a hotel room in Augusta, Georgia. The registration requirements of the Uniform Securities Act would
not require registration of either person with the Georgia Administrator
If ABC Brokers, Inc., has its registration as a broker-dealer canceled, individuals registered as agents of ABC may
not sell any securities because their registrations are only effective when associated with a registered broker-dealer
Which of the following statements are TRUE?
When an investment adviser representative begins or terminates employment with a state-registered investment adviser, only the investment adviser must notify the Administrator.
Under what conditions may an unregistered employee of a broker-dealer receive bonuses or incentives?
When such bonuses or incentives are not tied to transactions, commission activity, or referrals generated by the unregistered person
Under the USA, which of the following is considered a broker-dealer in a state?
XYZ broker-dealer with an office in the state whose only clients are insurance companies
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 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.
Under the Uniform Securities Act, the definition of a broker-dealer includes
a person in the business of making trades in his own account or for the accounts of others
Under the Uniform Securities Act, the definition of a broker-dealer includes
a person in the business of making trades in his own account or for the accounts of others. - A broker-dealer is defined as any person in the business of making trades in its own account or for the accounts of others.
Under the Uniform Securities Act, the term broker-dealer would include
a person with no office in the state who directs offers to no more than 5 individual residents of the state in any 12-month period - Although a person has no office in the state, offers are directed to residents of the state. Under the USA, this person is defined as a broker-dealer. There is no de minimis exemption for broker-dealers. A person is exempt from the definition of broker-dealer if there is no office in the state and offers are directed to institutional clients or existing individual clients who are not residents of that state. The agent is merely selling his own stock as would any other individual; that does not make one a broker-dealer.
Each of the following would be excluded from the definition of agent EXCEPT
a sales assistant who is authorized to take orders from existing clients only
All of the following statements regarding registration of broker-dealers under the Uniform Securities Act are true EXCEPT
a successor firm is exempt from filing a consent to service of process until the renewal date - When one firm succeeds another, no fees are due until renewal date. However, the successor firm must file a consent to service of process at the time it registers. Broker-dealers with discretionary authority may be required to post a surety bond or maintain minimum net capital. However, no state can impose financial or recordkeeping requirements that exceed those of the SEC.
Each of the following persons would meet the definition of a person associated with an investment adviser who needs registration as an investment adviser representative excep
a typist responsible for operating the desktop publishing system that prepares the investment adviser's weekly research bulletins
Under the Uniform Securities Act, the Administrator may require a broker-dealer to post a surety bond of
an amount not in 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.
As written in the Investment Advisers Act of 1940, a "person associated with an investment adviser" is any partner, officer, or director of such investment adviser (or any person performing similar functions), or any person directly or indirectly controlling or controlled by such investment adviser, including any employee of such investment adviser. Persons associated with an investment adviser whose functions are clerical or ministerial are not included in this definition. Based on that definition, all of the following would be associated persons EXCEPT
an employee of the firm with a degree in communications whose job is the graphic design of the investment adviser's research publications.
A broker-dealer having no place of business in a state is not required to be registered in that state if the broker-dealer
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.
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
must register as an agent if sales-related compensation will be received by the employee, either directly or indirectly
Broker-dealers and investment advisers must keep all of the following records EXCEPT
records of incoming and outgoing telephone calls - The company is not required to keep a record of telephone calls unless the Administrator specifically rules that it do so; however, memoranda, correspondence (whether electronic or paper), and account books must be kept.
An investment adviser hires 2 individuals to solicit new customers for the firm's wealth management service. Under the USA,
registration as investment adviser representatives is required
First Growth Securities, Inc., a member of the Financial Industry Regulatory Authority (FINRA), has its main office in Illinois and is therefore
required to register as a broker-dealer in the state of Illinois
The Uniform Securities Act provides for a number of cases where an investment adviser representative is not defined as such in a specific state. One of those cases is when
the individual is registered in State A as a representative of a state-registered adviser, has no place of business in any other state, and has fewer than six retail clients in State B.
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
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
An individual has been employed by a broker-dealer to make cold calls to solicit prospects for the firm's new wrap fee program. Under the USA, it is true to state that this individual
would be defined as an investment adviser representative
