Chapter 8 - Missed Questions - 75%

Bill is an agent of a broker-dealer and, after a hearing is held, he has been found guilty of selling securities that were not properly registered. As a consequence, the Administrator may take all of the following actions, EXCEPT: 1) Seize Bill's personal property 2) Revoke Bill's registration 3) Bar Bill's registration 4) Impose a prison sentence on Bill that cannot exceed five years

I and IV only The key to this question is that it is essentially asking about what an Administrator CANNOT do to Bill. The Administrator cannot seize his personal property and it cannot impose a prison sentence on him. However, the powers of the Administrator do include denying, suspending, barring, or revoking a person's registration. (89060)

Which of the following statements are TRUE regarding the administrative proceedings under the Uniform Securities Act? 1) Denial orders issued by the Administrator are final, binding, and may not be appealed 2) Administrators are not permitted to retroactively enforce orders and revocations 3) Administrators are permitted to issue summary orders denying certain exemptions 4) The burden of proof for qualifying for an exemption is on the party claiming the exemption

II, III, and IV only Choice (I) is not true since orders issued by the Administrator may be appealed within 60 days. All of the other choices are true statements. (67588)

If FINRA disqualifies a broker-dealer or agent, may the Administrator overrule FINRA?

No, not under any circumstances. The Administrator has no jurisdiction beyond enforcing state securities laws. (63103)

A broker-dealer advertises on a radio program that is broadcast from a bank. Which of the following would be prohibited by the Administrator?

Omitting the name of the broker-dealer in any 30-second ads during the show. Broker-dealers and agents are not allowed to publish a blind ad unless it is a recruiting advertisement for a new hire. The name of the broker-dealer that approved the ad is generally required on all advertisements. Broker-dealers are allowed to mention that they are affiliated with or subsidiaries of banks. They must make the distinction that the products they offer are neither deposits nor are they guaranteed. (89669)

A state securities Administrator has decided that a broker-dealer is in danger of becoming insolvent. The Administrator orders the broker-dealer to maintain a minimum net capital of 200% of the federal minimum. How would this be viewed under NSMIA?

State Administrators are not allowed to impose requirements that are more stringent than SEC regulations. Under NSMIA, state securities Administrators are not allowed to impose requirements that are more stringent than SEC regulations. (62458)

All the following statements apply to a rule of the Administrator, EXCEPT:

The Administrator is not required to publish rules. All rules of the Administrator must be published. The rules of the Administrator are not part of the law, but interpret the state's laws. To change a state's securities laws, approval from the state legislature (Congress) is required. (62963)

An investment adviser's application for registration indicates that it will base its investment decisions on non-financial criteria, including psychic readings. According to the Uniform Securities Act, which of the following statements BEST describes the Administrator's power?

The Administrator may deny or postpone a registration only for the reasons that are specified in the law. The state Administrator may only cite reasons that are found in state law to disqualify a person from registration (e.g., a felony conviction, violation of commodities laws, misleading statements, etc.). The law does not make reference to the specific analytical methods that IAs may use to determine their investment decisions. Instead, an Administrator's requirement is for investment advisers to disclose the methods that they will use. (89058)

While a customer who resides in State A is traveling through State B, he is solicited to purchase a security by an agent who is registered in both State A and State B. The customer pays for the security while he is in State B, but then later, the agent sends the confirmation to the customer's home address in State A. Which Administrator(s) has/have jurisdiction over the transaction?

The Administrator of State B only. Under the Uniform Securities Act, an Administrator has jurisdiction over any offer to buy or sell that is made and/or accepted in its state. In this question, the customer was solicited while he was in State B (i.e., the offer was made in State B) and the offer was also accepted while the customer was in State B. For those reasons, the Administrator in State B has jurisdiction over the transaction. (89111)

Which of the following would NOT be considered a reason to suspend or revoke an investment adviser's registration under the Uniform Securities Act

The adviser was sued by a client and lost the case. Any violation of federal or state securities laws or any conviction in the last 10 years for a felony or securities-related misdemeanor is justification for the Administrator to take action against a registration. An investment adviser losing a lawsuit that was brought on by a client is not cause for the immediate revocation of registration, provided the registrant had not violated industry rules. (67708)

Under the Uniform Securities Act, which of the following BEST describes the term INSPECTORIAL POWER?

The state Administrator's power to subpoena records inside and outside of the state. INSPECTORIAL POWER refers to a state Administrator's ability to inspect or review any records that are located both inside and outside of the state in order to carry out the provisions of the Uniform Securities Act. (89139)

Broker-Dealer A is a publicly traded company listed on the New York Stock Exchange. Which of the following statements is TRUE regarding an agent of Broker-Dealer A who wants to sell securities of his company to a client?

This is acceptable if the agent discloses the relationship verbally prior to the transaction and in writing before the settlement date. Failing to disclose that a broker-dealer is affiliated with or controlled by an issuer of securities is considered a dishonest and/or unethical business practice. The agent would need to disclose the affiliation before entering into any contract with a customer to buy or sell securities. The disclosure may be made verbally prior to the trade if written disclosure is made at or before the completion of the transaction (usually the settlement date). The disclosure would need to be made to any account of a broker-dealer. (62934)

According to the Uniform Securities Act, sales literature is required to be filed with the Administrator if it relates to:

Variable annuities Sales literature that relates to exempt securities, exempt transactions, and federal covered securities (e.g., an exchange-listed security) is NOT subject to the filing requirements of the USA. In this question, only the sales literature that relates to variable annuities (considered a security under the USA) is subject to filing requirements under the Act. Since fixed annuities are not securities, they are not covered under the USA. (32502)