unit 1 series 63

true or false: new applicants for registration must provide administrator of every state in which they intend to register w/ consent to service of process

true. the consent to service process appoints administrator as applicants attorney to receive and process noncriminal securities related complaints against applicant

are individuals who are accredited investors still con derided retail investors ?

yes

do administrators have the ability to withdraw registration earlier than 30 days?

yes

are cold callers working for a BD consider agents ?

yes, would have to register as an agent if they did any more than ask if client wanted to receive information

does federal law supersede state?

yes. power of the securities exchange commission supersedes state

what SRO does the administrator relinquish most control to ?

SEC

is it the title or the function that determines if your registration ?

function

if an agent wishes to affiliate with a second firm what must he/she have to do?

go through registration process w/ second firm in the same manner as original application (U4)

what is the IA-1092?

interprets the definition of investment adviser under the investment advisers act of 1940 to include finical planners, pension consultants, and others who offer investment advice as part of their financial practices

how may records be kept by a broker-dealer?

paper/hard copy, micrographic media(microfilm, microfiche, or any similar medium), electronic storage media (including digital storage)

what is a holding company ?

primary business is holding a controlling interest in the securities of other companies -control differentiates it from investment companies -ex:bank holding company. generally controls one or more banks and may also have subsidiaries as broker-dealers and investment advisors

what are blue sky laws?

state security laws

if an application is withdrawn or denied can the administrator keep the filing fee?

-entitled to retain a portion of the fee

how are website advertisements treated as far as record keeping?

-original site design is kept for three years -whenever revised, new copy is maintained and starts a new retention requirement for that copy

what are the registration asset thresholds?

-$110 million plus = large registration -$100 million but not $110 = sec or state registration -$25 but not $100 = mid-size-state registration -less than $25 million = small adviser-state regulation

how long do keep email records?

-3 years for BDs -5 years for investment advisors

what records must be kept for at least 3 years by broker-dealers?

-account records, blotters (records of original entry), correspondence (including emails), memoranda, papers, books, advertisements, and other records -must be readily available (in principal office) for the first two years

how long does it take for registration to become effective for representative?

-effective at noon, 30 days later of the date an application for licensing is filed and complete or the date an amendment to an application is filed and is complete

what is a summary order (acting summarily)?

-acting without pro notice -power of administrator -postponing/suspending rep of any security professional pending final determination of proceed related to problem, postponing/suspending rep of A security pending final determination of relating to problem, and denying/revoking specific security or transaction exemption -PROMPTLY NOTIFY within 15 days after receipt of written request

what is a pension consultant ?

-advises employee benefit plans on how to fund their plans -performs analyses that concern securities (makes them IA) -advise employee benefit plans on selection, performance and retention are IA -considered IA

what is considered compensation ?

-advisory fees, commissions, and other types of fees related to the service rendered -all compensation must be disclosed -fee can be paid by third party on behalf of beneficiary of advice -Ex: advice given to corp used for corp's employee are considered compensation

what is the application for BDs and agents?

-agents = u4 -BDs = form BD

what is a broker-dealer?

-any person engaged in the business of effecting transactions in securities for the account of others or for its own account -dealers when acting for itself -broker when acting for others -deal with SEC and securities -sometimes refer BD

what is the consent to service of process?

-appoints administrator as applicants attorney to receive and process noncriminal securities related complaints against applicant -submitted w/ initial application -remains in force permanently no renewal needed of a registration

are broker-dealer subsidiaries that engage with bank/institution security purchases excluded from the broker-dealer definition ?

-are not excluded and are subject to the same security regulations as other broker-dealer -eliminates need for bank holding company to register as broker-dealers

what qualifies an employee being exempted?

-as long as no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state - if only paid salary and no commission still exempted and not qualified as agent

characteristic of large investment advisers?

-at least $100 million -eligible for SEC registration -after $110 must be SEC registered -state registration not required

what is an institution ?

-banks, trust companies, savings and loan associations, insurance companies, employee benefit plans with assets of not less than one million dollars ($1,000,000) and government agencies or instrumentalities

what are the four classes of security professionals ?

-broker-dealers -agents -investment advisers -investment adviser representatives

can a agent or IAR is pending, can the individual part take in any activity that would require registration?

-cannot -clerical work or assisting with research would be permitted

individual representation an issuer are excluded from the definition of agent when?

-certain exempt listed securities -exempt from registration -if no commission or other remuneration is paid/given for soliciting any person in this stat e

what is a wrap fee program ?

-charged a specified fee or fees; not based on transactions -single fee (typically % of clients total assets held within the account) - fee covers mgmt, brokerage commission, custody and other services provided

what can an individual do while registration is pending?

-clerical functions (posting trade details), or administrative activities like assisting with research. -cant involve customer contact relating to selling or offering securities or opening accounts

internet communication rules?

-communication states person may only do business in this state if properly registered or exempted -any follow up w/ prospects that involved in transaction or investment advice will not be made w/out compliance with one of the 4 classes of security professionals -only general information -agent or IAR: affiliation must be prominently disclosed with/ the communication. IA and BD also have to review/approve any internet content by an IAR or agent -***if advertising on internet is in state and has no advice no need for registration

what is an investment advisor ?

-compensated for engagement in business of advising others, either directly or through publications or writings, as to the value securities or as to the advisability of investing in, purchasing or selling securities -compensation and as part of regular businesses, issues or promulgates analyses or reports concerning securities -either registered with SEC(federal covered advisors) or state(state-registered) but never both -also called 1A

what is a solicitor ?

-compensation for acts on behalf of an investment advisor in referring potential clients -most cases solicitors must be registered as investment advisors reps

what is the renewal date for all registrations ?

-december 31st -no proration of fees -successor firms pay no fees until renewal date

what is a stop order?

-deny, suspend or revoke effectiveness of any registration statement -applies only to securities, not professionals (not the 4 classes of security professionals)

purpose of uniform securities act?

-designed to guide each state in drafting its state securities law -referred to as blue sky law -model legislation for separate states to adopt

what was the purpose of the national securities markets and improvements act?

-designed to integrate securities markets and eliminate conflicting state and federal securities legislation

how do broker-dealers pay their agents in regards to underwriting shares of new securities ?

-earn a spread or receive commissions on sales, which they use to pay their agents who made the sale to the client

what is no place of business in the state exemption (not a broker-dealer)?

-excludes broker-dealers with no place of business in the state to make transaction with other broker-dealers, issuers, and financial institutions to operate without registration -allows BDs to do business with clients who travel out of state but didn't legally change residence -when client legally changes residence, 30 days still applies -change of driver license address/voter registration make change of residency official

agent representing a Canadian broker-dealer who registers under these provisions may effect transactions in securities in this state on the same basis are permitted for the broker-dealer

-file application required by jurisdiction where principal office in Canada -file a consent to service of process -provide evidence that registered in good standing in its home jurisdiction -be member of SRO or stock exchange in Canada

what is a sports/entertainment representatives ?

-financially related services to entertainers and athletes that include advice related to investments, tax planning, budgeting, and money management are also investment advisors has to give security investment advise -consider IA

person is in the business of providing advice and subject to regulation as an investment advisor if

-gives advise on regular basis -advertises investment advisory services and presents himself to the public as an investment advisor or as one who provides investment advise -ex: allocation of assets into highly rated bonds, tech, or growth mutual funds meets definition of investment adviser

exclusions from being registered as an investment advisor ?

-investment advisor representatives (business entity is the investment advisor not the rep) -banks, savings, institutions and trust companies -any lawyers, accountants, teachers or engineers (L.A.T.E) whose advise is solely incidental to the practice of their professional -BD advisory services are incidental to their brokerage businesss and who receives no special compensation (wrap fees) for advice -published newspaper, magazine, cable, radio made available to the general public and content does not consist of rendering advice made on a specific investment of each client -fed covered investment advisors (over $110million in assets)

what are exempt securities ?

-issued/guaranteed by united states, any state, any political subdivision of any such province -issued/guaranteed by any foreign government in which US has diplomatic relations -issued/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 -commercial paper rated in the top 3 categories by major rating agencies w/ denominations of $50,000 or more maturities of nine months or less -investment contracts issued in connection w/ an employee's stock purchase, savings, pensions, or profit-sharing plans

what is a non-issuer ?

-issuer doesn't receive money bc seller of security is someone rather the issuer -your everyday trade on the stock market

what's an issuer?

-issues or proposes any security -corporations and governments -no issuer with certificates or interest or participation in oil, gas, or mining titles or leases, or payments out of production under such titles or leases

how do large and small firms register with SEC and state's securities departments?

-largest firms register w/ SEC -smaller firms register with states -**investment advisors are registered w/ one or the other. NEVER BOTH

what is the general minimum finial standards for BDs?

-minimum net capital (liquid net worth) -net capital requirements of states may not exceed those required by federal laws -may have to post surety bonds unless net capital exceeds amounts required by SEC

what are investment advisors allowed to give advice on?

-must be related to securities

what is the national conference of commissioners on uniform state laws

-national organization of lawyers devoted to unifying state laws -drafted uniform securities act

person registers in november, when doe registration come up for renewal?

-next December 31st -first year is always a short one

are there financial requirements for agents

-no -administrator might require agent to be bonded, particularly if the agent has discretion over a client's account -agent never maintain custody of money

can an individual act as an agent at any one time with multiple broker-dealers?

-no -only be agent for one issue at a time as well -unless agent acts are affiliated by direct or indirect common control or administrator grants exception

do agents have to maintain records?

-no -only possible finical requirement is surety bonds if the agent will be exercising discretion in client accounts

if there is no place of business in the state are there registration requirements ?

-no registration requirements if the only securties transactions are with issuers, other BDs, and institutional clients -same goes with domestic BDs

are clerical and administrative (ministerial) employees of a broker-dealer consider agents?

-no, cold caller would have to register as an agent however

can a corporation be an agent ?

-no, has to be an individual -cant be brokerage firm, legal entity, or corporation

what is an administrator?

-office or agency that has complete responsibility fro administering the securities laws of the state -jurisdiction over virtually all securities activity that emanates from his state as well as that which is received in his state -jurisdiction over registration of securities professionals and securities -power to make rules and issue orders -can deny, revoke and suspend registrations

when a BD expands it's business out of state, which of the four security professionals are automatically registered when the firm's registration becomes effective ?

-partners, officers, or directors who are already acting as agents (IAR) -it is not any agent (or IAR); it is only those listed or as the rule states, those occupying a similar status who receive this treatment -others who don't qualify must amend U$ w/administrator and wait for effectiveness

guaranteed transaction?

-principal, interest, or dividends guaranteed -capital gains not guaranteed

What is the national securities markets improvements act of 1996 (NSMIA)?

-promote efficiency in capital formation in the financial markets -generally preempts states blue sky laws, eliminating dual system and federal registration and federal of certain securities and investment advisors -created fed covered advisor

when must an agent and BD notify the administrator of an agents terminating his employment with a BD?

-promptly -if leaves to join another BD, all three must notify administrator

to be an investment advisor, person must?

-provide advice about securities -provide advice as part of an ongoing business on a regular basis -receive compensation

the IA-1092 identifies an investment adviser who?

-provides investment advice, reports or analysis w/ respect to securities -is in the business of providing advice or analyses -receives compensation, directly or indirectly for these services -*** sometimes called three pong test

what are financial planners?

-recommendations on person's financial resources -real estate, intangibles or other assets considered investment adviser -performs analyses that concern securities (makes them IA)

what is an exempt transaction?

-registration w/ administrator and filing of advertising material is not required in order -no advertising requirements

what is an agent?

-represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities -always individuals -supervise and be involved with securities sale

what is an investment advisor representative?

-represents an investment advisor performing duties related to the giving go or soliciting for advisory services - also called IAR

federal covered advisors are?

-required to be registered as investment adviser w/SEC bc they meet mini threshold of assets ($110) -registered w/ -not registered bc they give advice, analyses or reports on securities related to US, guaranteed, or treasury securities (GNMA, FNMA)

what is a registrant ?

-securities professionals -BDs, IAs, IARs -or securities issues who are in the process of registering o who have registered with the administrator

what are the registration procedures ?

-submit application -provide a consent to service of process -pay filing fees -post a bond (if required vy the administrator) -take and pass an examination (written, oral or both) -***may require applicant publish a notice of registration in one or ore newspapers in the state

how may a Canadian BD with no office in state purchase/sale a security ?

-temporarily resident in state and already a client of the BD -person from Canada who is resident in this state whose transaction are self directed tax advantage retirement plan in Canada (RRSP, same as IRA)

what's a sale?

-the sale is when it is successful -not the attempt

how do independent financial planners sell/buy securties?

-they affiliate w/ broke-dealer (register as agent of that BD) -indicate relationship on their business cards w/ a statement to the effect of "......"

small investment adviser characteristics?

-under $25 million -SEC registration is prohibited -if registered in 15or more states, SEC would be permitted instead -has principal office in a state that does not call for registration (Wyoming exception)

what qualifies as an exempt transactions ?

-unsolicited brokerage transactions (client initiates the trade) -transactions between issuers and underwriters -transactions w/ financial institutions, such as banks or trust companies, insurance companies or investment -offerings to a limited number of investors, usually referred to as private placements

what is Cease and Desist order?

-used by administrator when registered has engaged, about to engage in any practice constituting a violation of any provision of uniform securities act -directs rep to cease and desist from any further illegal activity -only applies to registered reps not securities

three person excluded from the definition of a broker-dealer?

1)agents (work for BDs) 2)issuers 3)banks, saving institutions, and trust companies

no final order may be entered without what three features?

1)appropriate prior notice to the interested parties 2)opportunity for hearing and 3)written finding of fact and conclusions of law

what are the three nonpersons?

1)minors (anyone unable to enter in contracts) 2)deceased individuals (but their estate would be a person) 3)individuals legally declared mentally incompetent

for records created/maintained on electronic storage media, the firm must?

1)preserve the records 2)limit access to the records to properly authorized personnel and administrator 3) reasonably ensure that any reproduction of a non-electronic original record on electronic storage media is complete, true and legible when retrieved

how long does the administrator have to notify all interest parties that order has been entered, reasons for the order regarding summary orders?

15 days after receipt of a written request hearing will be granted

what is state?

any of the 50 states and territory or possession of united states -samoa, Guam, district of columbia and puerto rico

what is a rush order?

authorizing effectiveness of of license can be expedited. when everything is completed, including passing exam, administrator will notify the employing firm of the effectiveness of registration. final step is notification to the firm

in lieu of a surety bonds, administrator will accept what other two forms of safety ?

cash or securties

one item that is on an agent's application that does not apply to a broker-dealer is ?

disclosing citizenship

are filing fees the same for all 4 classes of security professionals?

do NOT need to be identical

go memorize page 14 (1.2.2) too much to write down

don't be lazy

what are advisor known as who register with the SEC?

federal covered investment advisers or covered advisers

what is the snowbird exemption?

licensed in state which person maintains place of business and person offers and sells in this state to person who is an existing customer of the person and whose residence is NOT in this state

are there requirements ti keep copies of tax records?

no

can a representative place trades for a client if the rep is not registered in state for an unsolicited trade?

no

if BD is terminated is the BD still considered licensed ?

no

if person whose business is to offer only nonspecific investment, through publication of a general newsletter. is this consider to bean investment adviser ?

no

are "wholly owned subsidaries" exempted from registration?

no. engaged in security transactions. commercial banks however that that are subsidiaries of holding companies would be exempted (not making the transaction)

are fingerprints required for BD registration?

nope

when does a request to withdraw registration also become effective ?

on the 30th day after submission unless legal proceedings hold up process