Ch. 1 Securities Registration and Licensing

What are the three investment products specifically excluded from the definition of a security?

1) Insurance or endowment policies or contracts/ fixed annuity contracts 2) Ownership interests in Credit Unions (which are non-profits) 3) Commodities Futures Contracts

What are the three methods to register securities?

1) Registration by Filing 2) Registration by Coordination 3) Registration by Qualification

Which of the following would cause the Administrator to deny a registration resulting rom the non-payment of the filing fee? A) If not paid at the time of original application and renewal B) If not paid by December 31 in the year of application C) If not paid within 30 days of application D) If paid by money order

A) If not paid at the time of original application and renewal Applicants are required to pay a fee with application and renewal. And, although the Administrator may deny the registration due to non-payment, the registration may be reinstated once payment is made. There is no stipulated time frame beyond this.

What securities are required to be registered with the State?

Any OTC issues (penny stocks) must be registered with the state.

If the Administrator denies or suspends a registration, the registrant has a right to a hearing within: A) 15 days of the denial or suspension B0 15 days of submission of a written request for a hearing C) 30 days of the denial or suspension D) 30 days of submission of a written request for a hearing

B) 15 days of submission of a written request for a hearing Any registrant that is notified of a suspension or denial of registration must be granted a hearing within 15 days of submitting a written request to do so.

Which of the following would be defined as either an :offer to sell" or a "sale" of a security? I) The gift of an assessable security II) The gift of a non-assessable security III) The giving of a security as a bonus in consideration for the purchase of securities IV) The pledge of securities, creating a security interest as collateral for a loan A) I and II only B) I and III only C) II and IV only D) I, III, and IV

B) I and III only The gift of an assessable security or the giving of a security as a "bonus" in consideration for buying another security are both defined as "offers to sell" under the Act. The gift of a non-assessable security is simply a gift - it is not an offer to sell. The pledge of securities for a loan is also not defined as an offer to sell.

All of the following securities are considered to be federally covered and therefore exempt from state registration except: A) Mutual fund and UIT issues B) Securities sold in an intra-state offering C) Municipal Securities sold outside the issuer's state D) Securities listed on the NYSE

B) Securities sold in an intra-state offering Federal covered securities include: - nationally traded securities - investment company securities - securities sold to qualified purchasers - securities sold to qualified purchasers- securities sold in certain exempt offerings securities sold in an intra-state offering would not be federally covered and would need to register with the state.

Under Uniform State Law, all of the following statements about an Administrative order denying or revoking registration of securities are true EXCEPT: A) the burden of proof of showing that a security is exempt is on the person claiming the exemption if the issue is registered by qualification B) An order revoking registration usually cannot be made retroactive by the Administrator C) A summary order issued by the Administrator is final and cannot be appealed D) A person cannot be found in violation of a summary order if he did not know, and in the exercise of reasonable care, could not have known, about the order

C) A summary order issued by the Administrator is final and cannot be appealed An order issued by the Administrator revoking a securities registration, can be appealed to that State's court. These orders cannot be made retroactive. If the person who is the subject of the order never receives the order from the Administrator, then that person cannot be found in violation of the order. So if the order is mailed by the Administrator by certified mail, and the post office loses it and it is never delivered, then that person cannot be found in violation. Finally, to et the order reversed, the burden of proof is on the person claiming the exemption, not the Administrator

Which of the following securities are exempt under Uniform State Law? I) Bank Stock II) Bank holding company stock III) NYSE listed stocks IV) NASDAQ listed stocks A) I and II only B) III and IV only C) I, III, and IV D) I, II, III, IV

C) I, III, and IV Exempt securities under State law include bank stocks but not bank holding companies, which are publicly traded and must be registered.

Which of the following securities is/are EXEMPT under the Uniform Securities Act? I) Savings and loan association stock II) Municipal industrial revenue bonds III) Bonds issued by a company listed on the Midwest (Chicago) Stock exchange A) I and II B) I and III C) II only D) I, II, III

D) I, II, III Exempt securities under the Act include securities issued by Savings and Loans; municipal bonds, including industrial revenue bonds; and the securities of companies listed on stock exchanges (a "blue chip" exemption). Also, note that the securities of issuers listed on the major exchanges (NYSE, AMEX (NYSE American) and NASDAQ) are now federal covered securities and cannot be required to be registered in the State.

Who is the "administrator" of the state?

The Uniform Securities Act provides that each State has an administrator who "administrates" the Act. The Administrator can be the State Securities Commission, commissioner, or secretary

What is the registration requirements for "Federal Covered Securities"?

They are required to only be registered with the SEC, they don't have to register with the State.

What is the definition of a "Federal Covered Security"?

This is a security that is: - listed on the NYSE, NASDAQ or other exchanges (or is a senior security (preferred stock &bonds) of such an issuer. - Issued by a registered investment company - Sold to Qualified Purchasers ( a person who owns investments of at least $5,000,000 or investment managers with at least $25,000,000 in Investment AUM). - Sold in exempt transactions specified by the Securities Act of 1933, such as Regulation D private placements.

Under the provisions of the Uniform Securities Act: - unless an exemption is available; or - unless the security is a "federal covered security" the act requires what of the security

Unless an exemption is available or unless the security is a "federal covered security" then the Act requires that the security be registered in the State