Series 63
liability for someone who violates state securities law
liable for principal, interest, reasonable attorney fees, and court costs
Statute of limitations for criminal violations under the USA
5 years
investment advisory firms are required to keep their books and records for:
5 years
surety bond
A bond may be required by an Administrator to cover possible legal costs arising from violations of the Uniform Securities Act. The Administrator may accept cash or securities in lieu of a bond, but property may not be accepted. A surety bond is not required of all broker-dealers, only those that have custody of or discretionary authority over client funds and securities and do not meet minimum financial requirements. (89623)
registration requirements
an individual who sells securities (exempt or non-exempt) must be registered as an agent in order to sell such securities to the public for a licensed broker-dealer
USA definition of institutional investor
According to Section 201(c) of the Uniform Securities Act, an institutional investor is an investment company, investment adviser, broker-dealer, bank, trust company, savings and loan, insurance company, employee benefit plan with at least $10,000,000 of assets, government entities, or any other entity designated by rule or order of the Administrator. Accredited investors are defined in federal law (Regulation D), not the Uniform Securities Act.
qualified client definition
an institutional or retail client with at least $1 million under management with the adviser or who has a net worth of at least $2 million excluding the primary residence house if the client is an individual
Under the Uniform Securities Act, the Administrator may waive the requirement that a broker-dealer maintain a bond:
Administrators are given flexibility to determine whether a bond is needed. The Uniform Securities Act states that an Administrator may waive the requirement that a broker-dealer maintain a bond if the registrant's net capital exceeds a certain amount. Investment advisers must maintain a minimum net worth
cease and desist orders
Administrators will authorize a cease-and-desist order if they believe a violation of the Act is about to occur or if the Act has already been violated. The order does not need to come from the SEC.
fulcrum fee
increases and decreases proportionately with the investment performance of a client's account, in relation to the investment record of an appropriate index of securities.
inspectorial powers
Inspectorial powers refer to the right of the state Administrator to inspect or review any records, both within and outside the state, in order to carry out the provisions of the Uniform Securities Act. (75527)
the members of the NASAA administrators origin
from: All 50 states The District of Columbia Puerto Rico The U.S. Virgin Islands
Prior felony convictions must be disclosed on Form U4 if the conviction occurred:
This question is an example of a "hair splitter" that sometimes occurs on the real exam. The fine point of the question is whether you must disclose something versus whether or not that situation would affect your employment. Agents are required to disclose all felony charges or convictions on Form U4 regardless of when they occurred. There is no time frame. If an applicant had a felony conviction 20 years ago, it must be disclosed. On the other hand, an agent will be statutorily disqualified if the conviction was within the last 10 years. The agent may be registered if she requests and receives permission at a special hearing. The Administrator may reject the application of anyone convicted of a felony regardless of when it occurred if the Administrator shows it is in the public interest to do so. As a follow-up point, applicants must also disclose all securities-related misdemeanors, charges or convictions, regardless of when they occurred.
An investment adviser is registered in State A and State B. A broker-dealer is registered only in State A. The client of the investment adviser is a resident of State B. The investment adviser asks the broker-dealer to purchase a nonexempt security, which is registered in State B, for the advisory client. The broker-dealer:
This question is very tricky. Here is the point you need to watch for. The business relationship is between the broker-dealer and the investment adviser, not the advisory client. In other words, the investment adviser is the broker-dealer's customer. The transaction is being requested by the investment adviser, who is considered an institution. As a reminder, the term broker-dealer EXCLUDES any person who (1) has no place of business in the state and (2) transacts business with or through a financial institution or institutional buyer, whether acting for itself or as a trustee.
Regulation T of the 1934 Act
provided the Federal Reserve with the power to establish equity requirements when trading on margin. The current initial requirement when purchasing common stock is 50% of the market value of the security at the time of the transaction
bona fide quotes
quotes that are not intended to manipulate the price of a security
Not a security under the USA
treasury bond futures contract
commingling
under the USA, broker-dealers are prohibited from commingling client securities with the firm's securities. BDs may commingle clients' cash with the firm's cash. Investment advisers may not commingle either client's cash or securities with their own.
investment advisory contracts must provide:
-The adviser will not be compensated on the basis of a share of the capital appreciation of the account. -The adviser may not assign client contracts without the consent of the client. -If the adviser is a partnership, clients will be notified of changes in the partnership within a reasonable period of time.
All order tickets must contain:
-The terms and conditions of the order (e.g., limit order, market order, etc.) -Whether the order is solicited or unsolicited -The account name or designation for which the order is entered -The identity of the registered representative (if any) responsible for the account -The identity of anyone else who accepted or entered the order for the client -Whether the order involved the exercise of discretionary authority -The time at which the firm received the order -The time and price at which the order was executed, or modified or cancelled (to the extent possible)
Form U4 Disclosures
-alias used -personal bankruptcies or bankruptcies of entities that he controlled during the last 10 years -unsatisfied judgments
what must be readily available at a branch office
-customer account information -suitability information -customer complaints -order tickets -sales blotters -personnel and compensation records of the agents assigned to that office
the withdrawal of an agent's registration becomes effective
30 days after filing
marketing brochure requirements
A marketing brochure that contained only the positive facts from the prospectus and none of the negative ones (risk factors) would be considered misleading and deceptive. A broker-dealer may execute an initial transaction in a margin account as long as a properly executed (signed) written margin agreement is obtained promptly afterward. A broker-dealer may charge a client a higher-than-normal commission under certain circumstances, such as when a security is particularly difficult to obtain, as long as this is disclosed to the client. An agent may open a joint account with a client as long as she has the written permission of both the broker-dealer and the client.
Complaints and the State Administrator
According to the Uniform Securities Act, neither the Administrator nor any of his officers or employees may disclose nonpublic information obtained in the course of performing their duties, except among themselves or when it is necessary as part of a proceeding or investigation.
networking arrangement
A networking arrangement is an agreement between a broker-dealer and a bank (or a savings and loan or credit union) under which the broker-dealer does business at a retail banking location. According to the NASAA Model Rules, these agreements must be in writing and must specify how both the bank and the broker-dealer will be compensated. The agreement must also state the duties and responsibilities of both the broker-dealer and the bank, and must provide that the broker's supervisory personnel and state regulators will have access to the bank to examine the records maintained there. (89527)
Speculator's goals
A speculator's goal is to produce short-term trading profits and one would expect a high degree of turnover in this account. Such activity would generally not be considered excessive trading (churning) since it is consistent with this investor's objectives.
Which of the following choices is NOT a security?
A universal life insurance policy is a type of permanent life insurance policy that is regulated by the insurance commissioner. Variable products, voting trust certificates, and oil, gas, and mining interests are securities according to the Uniform Securities Act. (75442)
prospectus filing requirements
All investors who purchase new issues must receive prospectuses, which may be made available electronically. A firm that sells a new issue in the aftermarket shortly after it begins trading may also be required to give prospectuses to its customers. This obligation to provide a prospectus continues for 25 days after the effective date for securities that will be listed on a national exchange. For secondary offerings of securities that will trade over-the-counter (securities that are not eligible to be listed), this obligation lasts for 40 days. In this question, the offering is an IPO that will not be listed, which means the prospectus must be available for 90 days.
soft-dollar practices
An adviser is permitted to use a broker-dealer to execute transactions in exchange for certain services. This practice is referred to as soft dollars and it is defined as a means of paying brokerage firms for their services through trade commissions. The key here is that the services that the adviser receives as part of a soft-dollar arrangement must benefit its clients. Some examples of allowable services would include traditional and third-party research reports and other related publications, discussions with research analysts concerning the securities they cover, portfolio analysis software, attendance at a conference or seminar where corporate executives discuss their company's performance, market and economic data services, and certain trading software. The permissible uses of soft dollars do not include compliance or administrative assistance, advertising and marketing, the adviser's travel expenses, meals or entertainment, overhead and administrative expenses, employee salaries, marketing, professional licensing fees, computer terminals, or the correction of trading errors.
In order for an investment adviser to maintain custody of funds and securities:
An adviser must notify the Administrator of its intention to maintain custody of client funds and securities. In some cases, an Administrator may adopt a rule prohibiting an investment adviser from taking possession.
custodian for customers money or securities
An agent may not take custody of a customers money or securities. Only a broker-dealer may act as a custodian for customers money or securities
An agent opening a brokerage account on the premises of a bank should:
An agent opening a brokerage account on the premises of a bank should disclose that security products are not insured by FDIC, nor are they guaranteed by the bank and they are subject to possible loss of principal. FDIC only insures bank deposits, not the principal or any loss incurred in owning securities.
what actions accomplish the renewal of an agent's license?
An agent renews his license by paying a fee designated by the Administrator. Passing an examination is generally only required for an agent's initial registration. (FINRA does impose a mandatory Continuing Education on all registered personnel, but this is not a state requirement.)
application for withdrawal
An application for withdrawal generally becomes effective 30 (not 60) days after it was filed. However, the withdrawal will not become effective until the Administrator declares whether there are proceedings pending or instituted against the firm at the time the application for withdrawal was filed. (This is also true if the Administrator institutes proceedings within 30 days after the application was filed.) The Administrator has one year (not two) after the registration is withdrawn to begin revocation or suspension proceedings against the firm. In practical terms, the reason for this is because if violations have occurred in a state and the broker-dealer (B/D) withdraws, the Administrator can still bring a cause of action against the B/D for up to one year after the withdrawal. The cause of action may carry over to other states. This prevents a B/D from avoiding the consequences of rule violations. (89521)
investment adviser's compensation could be based on:
An investment adviser's compensation could be based on a percentage of the value of the fund averaged over a prescribed period. An investment adviser may not receive compensation on the basis of sharing in capital gains or a percentage of the appreciation in the account, even if the client signed an agreement to do so.
no-load mutual fund
An investment company (mutual fund) may be called a no-load fund only if it has no front-end or back-end sales charges, no contingent deferred sales charge, and a 12b-1 fee that is equal to or less than .25% of the fund's average asset value. (89632)
registration by coordination
An issuer that uses registration by coordination must also register the same offering with the SEC under the Securities Act of 1933.
Not a security
Any insurance policy, endowment policy, or annuity contract, under which an insurance company promises to pay a fixed sum of money either in a lump sum or periodically, is not considered a security
definition of an investment adivser
Any person engaged in the business of advising others as to the value of securities, for compensation, would be considered an investment adviser and generally would be required to be registered.
stock offering under the USA
Choice (c) describes an offering of stock rights, which is defined as an offer, or offer to sell, under the USA (sometimes called a rights offering). Choice (a) refers to a situation in which the issuer is bankrupt and the creditors receive stock as part of the reorganization plan. Any securities received as a result of a reorganization plan approved by the bankruptcy courts are not an offer or an offer to sell (and neither is stock that is received as a result of a merger or acquisition, or other corporate reorganization). Stock dividends, choice (b), are not defined as sales or as offers to sell. Choice (d) describes a situation where securities are being pledged as collateral for a loan, which also is not a sale or an offer to sell. (89647)
registration by coordination 2
Choices (a) and (b) describe offerings of securities that are listed or authorized for listing on a national stock exchange. These are examples of federal covered securities that are generally exempt from state registration and notice filing. However, other issuers may be required to notice-file by the states. This means that they will need to file copies of the prospectus and other documents that they file with the SEC, with the states as well. Since choice (d) will be distributed only in one state, the issuer would probably use registration by qualification.
Classes of shares in mutual funds
Classes of shares in mutual funds are distinguished by their sales charges. Generally, Class A shares have front-end sales charges and low or no 12b-1 fees. Class B shares have contingent deferred sales charges and higher 12b-1 fees and often convert to Class A shares after a set number of years. Class C shares have a higher 12b-1 fee than Class A shares and they might also have a small front-end load or a small contingent deferred sales charge if the investor sells the shares within 12 to 18 months.
disclosure of affiliation
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 all accounts of a broker-dealer. (75725)
front-running
Front-running is the prohibited practice of a broker-dealer or agent buying or selling stock before the public release of proprietary information concerning a large block order. In this question, another form of front-running is exemplified by the agent buying a stock and then recommending that her clients buy the same stock. After the recommendation to her clients, the agent would likely benefit from the potential increase in the stock's price. Even if the client recommendations are suitable, it is unethical for the agent to put herself before her clients
exemption from the definition of a broker dealer
If a broker-dealer has no office in a state and effects transactions only with institutional clients, it would be exempt from the definition of a broker-dealer. An institutional broker-dealer cannot qualify for this exemption if it has an office in the state, even if it avoids holding customer funds and securities. (75478)
prohibited business practices
If a broker-dealer has no office in a state and effects transactions only with institutional clients, it would be exempt from the definition of a broker-dealer. An institutional broker-dealer cannot qualify for this exemption if it has an office in the state, even if it avoids holding customer funds and securities. (75478)
According to the Uniform Securities Act, which of the following statements is/are NOT TRUE concerning a broker-dealer or investment adviser filing an application for registration as a successor firm?
If a registered broker-dealer's or investment adviser's ownership structure is changed (from a partnership to a corporation, for example), or is bought or sold by another person, it is permitted to file an application for registration as a successor firm. According to the Act, this can be accomplished whether or not the successor firm was in existence prior to the filing and is effective for the unexpired portion of the year. A filing fee is not required when the application is submitted.
When must action be taken for recovery on a transaction made in violation of a registration provision?
If an agent sells a security in violation of a registration provision, a client must take action for recovery within three years of the occurrence of the sale or two years of the discovery of the violation, whichever occurs first.
summary prospectus
In the case of mutual funds, clients may be given a copy of a summary prospectus instead of the entire (statutory) prospectus, provided the whole prospectus is available free of charge on the fund's Web site. A copy of the statutory prospectus (electronic or paper) must be made available to any investor that wants this document at no charge and within three business days of the request.
penalties under insider trading regulation
Insider traders face SEC civil penalties of up to three times the amount gained or loss avoided (treble damages). Criminal penalties for individuals can be as much as a $5,000,000 fine and 20 years in prison. In addition, private individuals who believe their investments were harmed by the actions of an insider trader may file a civil lawsuit to recover damages. However, FINRA fines may be assessed only against FINRA members and their associated persons. FINRA has jurisdiction only over members while anyone can be held civilly or criminally liable for insider trading. FINRA may not take action against someone who is not a FINRA member.
An investment adviser must maintain a record of any communication including that which appears on its social media site for what period of time?
Investment advisers are required to maintain books and records for at least five years from the date of the last entry. The first two years, records must be maintained in the principle office of the adviser, after which they may be stored in an easily accessible location for three years. (88930)
characteristics for investment recommendations
Investment advisers should consider all relevant information about a customer when making specific investment recommendations. The educational background of a client and her professional experience (work history) are not as important as understanding her investing experience, attitudes, and values (for example, risk tolerance and social standards, such as a client who would not invest in tobacco stocks). (89565)
material fact disclosure rules
Material facts are the facts that investors need in order to make informed investment decisions. Agents should make a good faith effort to fully and fairly disclose all material facts during sales presentations. While it may not be possible to disclose every fact, omitting a material fact in order to make an investment appear more attractive is a violation. (67641)
State securities Admins have jurisdiction over securities transactions that are:
Originated in their state Directed to and received in their state Accepted in their state Delivery of securities to a particular state does not fall under an Administrator's jurisdiction, nor do general commercial banking transactions.
how many days of the agents written request must a hearing be scheduled by the Administrator?
The Administrator may suspend or postpone an agent's registration. Upon entering the order, the Administrator will notify the registrant as well as that person's employer (or potential employer) of the order. The Administrator will also send notification that the person has a right to a hearing within 15 days of a written request. (75523)
The Administrator may take administrative action against an agent who willfully violates any provision of which of the following acts?
The Securities Act of 1933 The Securities Exchange Act of 1934 The Investment Advisers Act of 1940 The Investment Company Act of 1940
Cease and desist order
The USA gives the administrator the power to issue a cease-and-desist order anytime he believes that anyone has violated the securities laws of his state or believes someone is about to do so.
splitting of commissions
The Uniform Securities Act allows for the splitting of commissions provided that the agents involved are employed by the same firm and are registered in the same state
How long does a broker-dealer need to maintain records of customer suitability information?
The broker-dealer must keep records of customer suitability information for at least six years from the time the information was last updated or the account is closed. (88929)
maximum criminal penalty for agents under USA
The maximum criminal penalty is a $5,000 fine and three years in prison. Under the Act, there can be no prison sentence imposed if the person can prove she had no prior knowledge of the rule. (75654)
burden of proof for establishing an exemption from registration
The person claiming the exemption has the burden of proof for the exemption. (75615)
engaging in breakpoint sales
The registered representative should advise the client that she could save money because of the quantity discount option on large purchases available through purchases at sales charge breakpoints. Failure to notify a client that they would be eligible for a breakpoint could be considered a breakpoint sale
automatic registration of an individual of the firm as an agent
The registration of a broker-dealer in a state will automatically constitute the registration of an individual as an agent if this person is actively engaged in the business of the firm and is a partner, director, officer, or occupies a similar status.
state administrator may require the filing of which documents
The state Administrator may require all of these items to be filed as long as the do not involve federal covered securities, exempt securities, or securities sold as part of an exempt transaction
Administrators requirements for new issues
This is an example of the detailed nature of the examination. You are expected to know that the number of shares, the issuer's financial information, and Articles of Incorporation (the charter) generally are all required by the states. A tax identification number is not required by the Administrator.
performance fees
Under the Investment Advisers Act of 1940 and the NASAA Model Rules, advisers are prohibited from charging performance fees—fees that are tied to the account's performance. There is an exception for qualified clients. A qualified client is an institutional or retail client with at least $1,000,000 under management with the adviser or who has a net worth in excess of $2,000,000. If the client is an individual, then the net worth calculation may NOT include the value of the client s primary residence. An accredited investor under Regulation D is not the same as a qualified client, choice (a). For example, someone with a total net worth of $1,000,000 excluding their home, would be an accredited investor according to Regulation D, but not a qualified client.
definition of a person under the USA
Under the USA, a person is defined as a legal entity, which would include individuals (natural persons) and business entities such as corporations, broker-dealers, partnerships, and investment advisers. It also includes trusts and estates.
brochure delivery periods
Under the Uniform Securities Act, all clients must receive the adviser's brochure or ADV Part 2 no later than the time they enter into an agreement with the adviser. If the client is not given an ADV Part 2 or brochure at least 48 hours before signing the contract, then the contract must specify that the client has five days to rescind the contract. (8
An employee of XYZ Corporation is selling common stock to the public but is not being paid a commission. Under the Uniform Securities Act, which of the following statements is TRUE?
Under the Uniform Securities Act, an individual representing a nonexempt issuer in sales to the public is defined as an agent of the issuer (XYZ Corporation) and must register as such whether or not compensation has been paid. Conversely, if the transactions are with existing employees, directors, or partners of the issuer, and no compensation is paid for soliciting any person in the state, then the employee is not required to register. (89525)
Securities Exchange Act of 1934 Rules 17a-3 and 17a-4
a broker-dealer must keep all these records except for Form ADV. Investment advisers who have custody of client assets must place these assets with a qualified custodian for safekeeping (such as a broker-dealer) and must notify the regulators that it has custody using Form ADV.
complaint rules
When an agent receives a complaint in writing, it must be forwarded to a designated supervisor. The complaint must be kept on file, along with any action taken to remedy the complaint. The fact that the complaint was the fifth in the last six months and the language abusive has no bearing on how the complaint should be handled. By discarding the letter, the supervisor acted in a prohibited and improper manner.
Which TWO forms must an agent obtain from a client in order to purchase securities in a margin account?
When opening a margin account, a customer must sign both a hypothecation agreement and a margin account form. The loan consent form is used when a customer authorizes the member to lend his securities, and is not required. Trading authorization is also not required. (89654)
Which of the following statements is TRUE regarding an options account?
When opening an options account, the customer must receive the Options Disclosure Document. This document must be sent to the customer no later than the time the Registered Options Principal approves the account for trading. The firm may not enter an order for the customer until the account is approved for trading. Thus, the firm must send the document to the customer before the customer's first options order is entered. The customer has 15 days to return the options account agreement.
non-issuer transaction
a purchase or sale of a security whereby the issuer does not benefit, directly or indirectly. Ex: a trade between two investors for IBM stock on NYSE
sharing commissions
agents employed by the same firm are permitted to share commissions on a trade
Not a broker-dealer
agents, issuers, and banks are not broker-dealers. Also, a person with no place of business in a state, and who deals only with institutional investors, is not a broker-dealer
discretionary authority
an agent may buy or sell securities in the account wihtout consulting the customer and withdraw money from the account An agent holding full discretionary authority over a customer's account may buy or sell securities in the account without consulting the customer and may withdraw money from a client's account. An agent may not receive a fee for using his discretion in trading a customer's account. Borrowing client assets is never allowed. (75880)
A new client approaches an agent regarding opening a new account but refuses to discuss his financial status. The agent should:
an agent may not solicit orders from a client when no information about the client's financial status is known
common carrier
an entity that moves people or products between states, and is regulated by the ICC (railroads, freight, and airlines)
USA Rule 203
an investment adviser must give a client or prospective client a disclosure document (usually Form ADV Part 2) either 48 hours before or at the time of opening the account. Exceptions to this rule include an adviser whose clients are only investment companies or where the contract is for impersonal services for which the client pays a fee of less than $500. Please note, while an investment company is an institutional investor, not all institutional investors are investment companies. An investment adviser is required to provide the brochure to institutional investors other than investment companies. While there are many exemptions regarding institutional investors, this rule is NOT one of them.
investment adviser representative
anyone who "solicits, offers, or negotiates for the sale of or sells investment advisory services."
agent definition
anyone who represents a broker-dealer in a securities transaction is an agent
consent to service of process
appoints the state Administrator to serve as the applicant's attorney for the purpose of receiving and processing noncriminal complaints. It is required of all registrants when they file for registration in a state.
fingerprints
are not required for a broker-dealer's registration.
impersonal advisory services
are those activities of an investment adviser that do not meet the specific needs or objectives of a client, or that do not render an opinion of the investment merits of a particular security.
Telephone Consumer Protection act
bans all cold calls except during the hours of 8 am to 9 pm. an agent may not call a prospective client before 8 am or after 9 pm. She may, however, call an existing client after 9 PM or before 8 AM to service the account
waiving of the surety bond requirement
can be waived if the investment adviser has a net worth of $35,000 and does not maintain custody of client assets
surety bond
guarantees that funds are available so that legal fees and fines can be met, if assessed against a broker-dealer or investment adivser
minimum financial requirements of the state
here an investment adviser maintains its principal place of business sets its registration requirements. No other state may impose higher requirements than the adviser's home state. Since Allied is already registered in Virginia, it is assumed that is its principal state, and that it has already met the net worth requirements ($50,000). As a result, Allied cannot be forced to meet Maryland's requirement of $100,000.
The Administrator may deny, revoke, cancel, or withdraw registration of any person:
if he has been convicted within the past 10 years of any felony or any misdemeanor involving a security
investment adviser fee rules
investment advisers may not charge a fee that is based on a share of the capital gains in the account or a share in the capital appreciation in the account to charge a performance fee-the client must be qualified meaning that they must either have $1 million managed by the IA or a net worth $2 million
Consent to Service of Process
is an irrevocable appointment of the Administrator as the applicant's attorney to receive and process any noncriminal legal complaints. This instrument must be provided when applying for registration as an agent, broker-dealer, investment adviser, or investment adviser representative.
a person effecting transactions in commodities
is not an agent
agent without discretionary authority
may only decide the price and time of the transaction and not the security choice
trustee managing an account that has multiple beneficiaries
must act impartically and weigh everyones interests when making investment decisions
referral compensation
only individuals who are registered agents may receive $ comp from a BD based on the sale of a security.
NASAA Model Rules for Sales of Securities at Financial Institutions
state that a broker-dealer must make a reasonable attempt to obtain written acknowledgement from a customers that he has received the disclosures required under these rules. Under Nasa rules, a client who opens a brokerage account at a bank must be informed both orally and in writing, that securities: Are NOT insured by the FDIC (Federal Deposit Insurance Corporation) Are NOT the same as bank deposits or obligations and are not guaranteed by the bank Have risks—the investor may lose her principal A networking arrangement means a contractual or other arrangement between a broker-dealer and a financial institution pursuant to which the broker-dealer conducts broker-dealer services on the premises of the financial institution where retail deposits are taken. A copy of this document does not need to be provided to clients. There is no requirement that a client be verified as a qualified investor. There are no qualifications to be an investor. An agent may notify the client of the address and telephone number of the state securities Administrator where the client can lodge complaints, but it is not a requirement. (89650)