Unit 2 and 3
By SEC rules, the minimum net capital for full-service(carrying) broker-dealer is...
$250k
What determines a IAR?
- passing the Series 66 - performing duties of IAR
When is an issuer's agent exempt from registration?
- sells exempt securities - sells securities in exempt transaction - sells securities to existing directors, officers, or employees of the issuer and receives no additional comp for such sales
What type of transactions will exclude an individual from the term agent?
1. Any security issued/guaranteed by the Us govt 2. Foreign securities that have diplomatic relations with the US 3. Any security issued/guaranteed by a US bank 4. A top 3 rated commercial paper 5. Investment contracts issued in connection with employee's stock purchase
An agent sends a mass mailing offer to buy securities to clients who live in 10 different state. None of these are the state in which the agent is registered. The number of states in which the agent must be registered is...
11. An offer sent via mail is considered an offer made in both the origin and destination states.
Websites are treated as advertisements and the site design is kept for...
3 years
What are notable exclusions from the definition of a broker dealer?
Agents (those who rep a broker-dealer), issuers, and banks, savings institutions, and trust companies
An individual who works for an Investment Adviser firm and manages client portfolios must register as...
An IAR
A telemarketer in a brokerage firm calls prospective clients and offers them the firm's portfolio management services for a fee. This person must register as...
An IAR. Anyone who sells investment advisory services or solicits, offers, or negotiates for these services must register
An individual who works for a state-registered IA and receives referral fees from the Adviser is required to register as...
An investment adviser rep
What is an "agent"?
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.
Broker-dealer J does not have an office in State P and deals exclusively with resident financial institutions in State P. Which of the following statements regarding BD J are TRUE?
BD J is exempt from the definition and registration requirements of a broker-dealer in State P.
If the agent lives and works in New York and sends an offer to buy securities to a client in NJ, the agent must be registered in...
Both states.
Who are not typically included in the definition of an agent?
Clerical and administrative employees of broker-dealers
Definition of prequalifyiing
Communicating with customers or potential customers to determine if they are qualified or have interest in securities offerings. Individuals who prequalify must be registered.
Broker dealers have to submit what form and to who for the initial application?
Form BD submitted to state securities Administrator
Agents have to submit what form and to who for the initial application?
Form U4 to state securities Administrator
Henry, an employee of a state-registered adviser, has had 5 retail clients during the prior 12 months. What is Henry's current status?
He is considered an investment advisor rep (IAR) not subject to registration at this time.
What is the main broker dealer exemption from SEC registration?
If a broker-dealer conducts all of its business in one state
What is the main broker dealer exemption from state registration?
If a broker-dealer does not have a place of business in a state if its only transactions effected in the state are with the issuer of the securities in the transaction
What is the definition of broker-dealer?
Is defined as any person with an established place of business in the state that is in the business of buying and selling securities for the accounts of others and/or for its own proprietary account
How does an investment adviser registered in State A expand its business, and become registered in State B?
It must file Form ADV in State B to register in the new state.
The execution of trades is...
NOT amongst the standard activities of an investment advisor rep (IAR) This would be more of an agent function.
The situation in which as individual must register as an investment adviser rep with the SEC, rather than the state is...
Never. IARs only register on the state level.
Are there financial requirements to register as an agent?
No
Does an applicant for registration as an investment advisor rep (IAR) need to satisfy bonding requirements of the state?
No, although the employing investment advisor must comply with bonding and financial requirements
May an individual register as an agent for more than one broker dealer?
No, but an agent may be registered with multiple broker dealers that are affiliated by direct or indirect common control.
An investment advisor rep (IAR) has a colleague who assists with managing the rep's business. Activities include helping to prepare client statements and arranging client meetings and virtual visits. Does the colleague need to be registered as an IAR as well?
No, provided the colleague is not providing investment advisory services directly to clients.
A broker dealer's application for securities registration must disclose these employees salaries?
None. The application does not need the salaries of officers, directors, or employees
An agent may offer to sell a security that is not registered in Nebraska only if...
The agent is state registered in the state and the order is not solicited. An unsolicited order permits an unregistered security to be sold in a state. But it does not permit unregistered agents to do business there.
An individual is a IAR if...
They make recommendations or otherwise render advice regarding securities Manage accounts or portfolios of clients determine which security rec should be given Solicits, offers, or negotiates for the sale of IA services Supervises employees who do any of these things
The registration requirements for an investment advisor rep (IAR)associated with a state-registered advisor are promulgated under the...
Uniform Securities Act (USA).
A broker dealer has a single retail client in the state. Does it have to register in the state?
Yes
Broker-dealer T is hiring several summer interns to assist with administrative tasks during peak season for the firm. Each intern will have an opportunity to 'pre-qualify' clients and suggest model portfolios. Are these interns considered 'agents' of BD T?
Yes, as part of their role will extend beyond purely administrative tasks (prequalifying clients).
Joe works for a federal advisor and is registered as an investment advisor rep (IAR) in one state only. May Joe conduct advisory activities in other states without registration in those states?
Yes, if Joe does not have a place of business in those other states.
Who can be a IAR
a individual - a natural person
An individual would likely act as BOTH an investment advisor (IA) and an investment advisor rep (IAR) if they are...
a sole proprietor, and therefore the only employee of the business.
There is no de minimis exemption for...
agents and broker dealers
Do investment advisors representatives register at the state or federal level?
always register at the state level, even if working for registered IAs at the federal level
Agents must register with a state if they offer or sell securities to these types of customers...
any customer residing or located in the state, including retail and institutional customers
An Investment Adviser Representative (IAR) is...
any partner, officer, director (or an individual occupying a similar status or performing similar functions)
A person associated with a broker-dealer is...
any partner, officer, or director of the broker-dealer (or any individual performing similar functions) or any person directly or indirectly controlling or controlled by the broker-dealer, including any employees of the broker-dealer
A securities firm is said to be dually registered when it is...
both a securities broker-dealer and an IA
An agent sends an offer to buy securities to a customer who lives in Michigan. The agent is registered only in Illinois, and the customer travels to Illinois to complete the sale. The agent must be state registered in...
both states. An offer sent via mail is considered an offer in both the origin and destination.
When a securities offer is made via mail and the mail travels across state lines, the state in which the agent who sends the offer must be registered in...
both the origin and destination state of the mailed offer.
An agent is not a...
broker dealer.
An individual who is providing advice about securities as part of a regular business for compensation, but is exempt from the registration requirements of the Uniform Securities Act (USA) is...
conducting business as an investment advisor rep (IAR).
ABC is a "person" in State X engaged in the business of effecting securities transactions for the accounts of people residing in State X. According to the USA, ABC is...
considered a broker-dealer, and subject to registration in State X.
An individual who is 'excluded' from the definition of an investment advisor rep (IAR) is...
engaging in activities that are incidental to the investment advisory services offered by their employer
The state administrator may require a broker-dealer to maintain a surety bond...
equal to, or less than that required by the SEC.
Clerical and administrative (aka ministerial) are...
exempt from agent registration
Securities exempt from registration are called...
exempt securities
Transactions exempt from registration are called...
exempt transactions
An IAR of a federal covered advisor would be required to register...
in those state (s) where they conduct business.
Who is an agent of an issuer?
is an employee of an issuer who sells the issuer's securities in the marketplace
Define investment advisor representative
is an individual who solicits or renders advice regarding securities or manages the accounts or portfolios of clients
An individual employed with a federal covered advisor provides impersonal advisory services to clients of the firm. This individual...
is not required to register as an investment advisor rep (IAR) of the firm.
An individual who is not excluded from the definition of an investment advisor rep (IAR) and does not qualify for an exemption,
must register as an investment advisor rep (IAR) with the appropriate state(s).
State registration requirements for fingerprints and character affidavits consists of...
no requirements. Fingerprints and character affidavits are not required at the state level.
The state registration requirement for individuals whose work consists solely of providing investment research is...
none. An unregistered individual can provide research.
The jurisdiction of FINRA in registering IAs is..
none. The SEC and states register and regulate IAs.
The administrator of a state may require those broker-dealers that have custody of, or discretionary authority over, clients funds or securities to...
post surety bonds
For a state-registered adviser, an IAR must...
register in any state where he/she has more than 5 retail clients
Agents are also referred to as...
registered representatives
State securities Administrators cannot impose recordkeeping requirements
that are in excess of those prescribed by the SEC.
Agents are permitted to accept unsolicited securities from customers living in Virginia only if they are state registered in...
that state. Agents must be registered in all states in which they conduct securities transactions, including execution and unsolicited orders
If an agent only offers securities in Georgia but does not complete any sales in Georgia, the requirement for Georgia securities registration is...
the agent must be registered in the state to make either offers or sales to any customers in the state
The max net capital or surety bond that a state administrator can require a broker dealer to post is...
the amount required under federal law, the Securities Exchange Act of 1934
The termination of an investment advisor rep (IAR) from a federal covered advisor requires that...
the departing IAR notify the state Administrator.
A broker-dealer can charge a client for a service only when..
the service has been performed, not when it is promised, requested or contracted
IARs only register with...
the state
A person who solicits clients for a federally covered investment adviser must register as an IAR if...
they are compensated based on a percentage of assets. Individuals paid a flat fee per client are not required to register
The primary reason why an individual will become registered as an investment adviser rep (IAR) in a state is because...
they provide recommendations on the appropriate allocation of resources within client security portfolios.
The "automatic registration" provision applies to...
those officers, partners, and directors who are currently engaged as IARs in at least one other state.
As a reminder, the USA (Uniform Securities Act) uses the term "person" to...
to denote many different legal entities, including broker-dealers.
When a broker-dealer's net capital exceeds the amount required under fed law, the max surety bond that a state administrator may require is...
zero. The administrator cannot require the firm to post a bond.
