Uniform Securities Act I

Under the Uniform Securities Act, a "natural person" includes a(n): A. agent B. investment adviser C. broker-dealer D. issuer

A. agent The best answer is A. Here you must know a bit of legalese. A "natural person" is a human being. Since agents are human, they are natural persons. In contrast, a "person" is any legally created entity for business or charitable purposes. For example, corporations, partnerships, or sole proprietorships are all "persons" in the legal sense.

"Persons," as defined under the Uniform Securities Act, include which of the following? I Joint Ventures II Individuals III Unincorporated businesses IV Municipalities

Correct Answer D. I, II, III, IV The best answer is D. "Persons," as defined under the Uniform Securities Act, include Joint Ventures, Individuals, Unincorporated Businesses, and Municipalities. It is important to know who are defined as "persons," since these entities may then be further defined as "agents" (which can only be individuals), "broker-dealers" (which can be incorporated or unincorporated businesses); or "issuers" (which can be incorporated or unincorporated businesses, joint ventures, municipalities etc.).

Under NASAA rules, investment advisers must annually: Correct Answer A. update the Form ADV disclosure document and send it to existing customers if there is a material change Incorrect Answer B. compute the total fees charged to each customer and disclose them in writing StatusC C. send customers account statements, if the adviser takes custody, or intends to take custody, of client assets StatusD D. update customer account profiles and suitability information and change investment allocations accordingly

The best answer is A. Under NASAA rules, investment advisers must update their Form ADV annually within 90 days of fiscal year end to reflect current and accurate information, and must send the updated Form ADV to its existing clients, if there is a material change. The Form ADV is stored in the IARD (Investment Adviser Registration Depository) system. It is used to register both State registered advisers and Federal covered advisers, and to send notice filings to States by Federal covered advisers. Account statements must be sent quarterly if the adviser takes custody. Annual updating of suitability information makes sense, but is not a rule.

All of the following persons are excluded from the definition of a broker-dealer or are exempt from registration as a broker-dealer under the Uniform Securities Act, EXCEPT a firm: Correct Answer A. with an office in the State that effects trades exclusively with other broker-dealers StatusB B. with no office in the State that effects trades exclusively with trust companies and other financial institutions StatusC C. with no office in a State with a broker-dealer "de minimis" exemption that has a few clients in the State in the preceding 12 months Incorrect Answer D. with an office in that State that is a trust company that deals with the public

The best answer is A. A firm is not defined as a broker-dealer if it has no place of business in the State and transacts solely with issuers, other broker-dealers, and financial institutions. However, if a firm that effects securities trades has an office in a State, it is defined as a broker-dealer and must register in the State. Thus, the broker-dealer in Choice A must register and the broker-dealer in Choice B is not required to register. The "de minimis" exemption for broker-dealers is only offered in a minority of States, and typically applies to out-of-state broker-dealers who only have 3 or fewer clients in that State. In Choice C, the State has a broker-dealer "de minimis" exemption and would not be required to register. Banks, S&L's, and trust companies are also excluded from the definition of a broker-dealer, so no registration as a broker-dealer is required in Choice D.

An investment adviser is exempted from registering in a State if the firm has no place of business in the State and has no more than: StatusA A. 1 client in the State in the preceding 12 month period Correct B. 5 clients in the State in the preceding 12 month period StatusC C. 10 clients in the State in the preceding 12 month period StatusD D. 15 clients in the State in the preceding 12 month period

The best answer is B. An investment adviser is exempted from registration in a State if the firm has no place of business in that State; and the adviser has no more than 5 clients in that State (other than financial or institutional investors) within a 12 month period. This is known as the "de minimis" exemption.

A firm is retained by a company that wishes to make acquisitions of other companies to act as a finder. The finder can be considered to be a broker-dealer: StatusA A. under no circumstances Correct B. if it receives compensation contingent on the closing of a deal StatusC C. if it receives a flat fee for services rendered StatusD D. if it signs a written contract with the company

The best answer is B. "Finders" operate in a grey area, which may, or may not, require registration as a broker-dealer. First of all, if the acquisition transaction only involves the sale of assets, as opposed to the sale of securities, then there is no requirement to be registered as a broker-dealer. Second, if the finder receives a retainer fee or flat compensation, then the finder is not considered to be a broker-dealer. If the finder receives transaction-based compensation, such as compensation contingent of the closing of the deal, the finder can be considered to be a statutory broker-dealer that must register. This question is not clear as to whether the transaction involves the sale of assets or securities, but it always best to go with the choice that is the most restrictive!

An agent is not yet registered with his broker-dealer. Until registration is effective, the agent is permitted to: StatusA A. sell limited partnership units to accredited investors Correct B. process client paperwork in an administrative office on behalf of a registered representative StatusC C. accept unsolicited customer orders StatusD D. solicit the sale of variable annuities to customers

The best answer is B. An unregistered individual can perform clerical duties. This person cannot solicit customers to buy securities; and cannot sell securities to customers. To accept customer orders (whether solicited or unsolicited), the agent must be registered.

Under the Uniform Securities Act of 1956, as amended, an issuer is defined as any person: A. engaged in the sale of new issue offerings to the public B. who issues or proposes to issue a security. C. engaged in the sale of non-exempt securities offerings to the public D. engaged in the sale of secondary offerings to the public

The best answer is B. Under the Uniform Securities Act of 1956, as amended, an issuer is defined as any person who issues or proposes to issue a security. This is just a pure regurgitation of the definition.

Under the Uniform Securities Act, the annual renewal of an agent's registration must occur: StatusA A. within 15 days after the agent's initial 12-month registration date StatusB B. within 15 days of January 1st Correct C. no later than December 31st StatusD D. on January 1st

The best answer is C. Every registration under the Uniform Securities Act "expires December 31st unless renewed."

An investment adviser with no place of business in the State is exempt from registration if it renders advice solely to employee benefit plans with assets of at least: StatusA A. $100,000 StatusB B. $500,000 Correct C. $1,000,000 StatusD D. $5,000,000

The best answer is C. An investment adviser with no place of business in the State that renders advice solely to employee benefit plans with at least $1,000,000 of assets is exempt from registration under the Act.

The Administrator defines the "completion" of the registration application process as the receipt of the: StatusA A. proper documents Incorrect Answer B. filing fee Correct Answer C. proper documents and the filing fee StatusD D. consent to service of process

The best answer is C. The State will define a registration application as "complete" when the proper documents and payment are received (not sent). Remember, they want their money!!!

Which of the following is (are) defined as a "broker-dealer" under the Uniform Securities Act? I A person who effects securities transactions for its own account II A person who effects securities transactions for the account(s) of others III An agent of a broker-dealer who effects securities transactions IV An agent of a broker-dealer who effects securities transactions that are not recorded on the books of the broker-dealer StatusA A. II only Incorrect Answer B. I and II only Correct Answer C. I, II and IV only StatusD D. I, II, III, IV

The best answer is C. Under the Uniform Securities Act, a "broker-dealer" is defined as a person that engages in the business of effecting securities transactions for the account of others; or a person that engages in the trading of securities for its own account. Thus, Choice I and Choice II are correct. An "agent" of a broker-dealer (Choice III), is an individual associated with a broker-dealer, who represents the broker-dealer in effecting securities transactions. An agent is not a broker-dealer, making Choice III wrong. If an agent of a broker-dealer engages in so-called "private securities transactions." a prohibited practice has occurred. All securities transactions effected by agents must be known to the broker-dealer; must be recorded on the books of the broker-dealer; and must be supervised by the broker-dealer. If the agent performs a "private securities transaction" that is not known to the broker-dealer, then that agent has, himself, become a broker-dealer under this definition (a so-called "statutory" broker-dealer). As such, he would have to register in the State as a broker-dealer before effecting such a transaction. Thus, Choice IV is correct.

Under the Uniform Securities Act, a consent to service of process is filed for each initial: I Agent registration II Broker-dealer registration III Investment adviser registration IV Securities registration Incorrect Answer A. I only StatusB B. II only StatusC C. II and III Correct Answer D. I, II, III, IV

The best answer is D. The "consent to service of process" appoints the Administrator as attorney for the registrant so that any legal papers can be properly served. It is required for all initial registrations with the Administrator.

Under the Uniform Securities Act, an investment adviser may be formed as any of the following EXCEPT a(n): A. corporation B. partnership C. association D. broker-dealer

Correct D. broker-dealer The best answer is D. Investment advisers (and broker-dealers) can be formed as any legal operating entity, such as a corporation, partnership, sole proprietorship, association, etc. Investment advisers cannot be formed as broker-dealers; nor can broker-dealers be formed as investment advisers. Each is a legally separate entity, and each is regulated separately.

An officer of an issuer is engaged in the sale of that issuer's securities to the public. The issuer's securities are federal covered. The officer is: Incorrect Answer A. excluded from the definition of an agent because the securities involved are federal covered StatusB B. not defined as an agent because officers of issuers are excluded Correct Answer C. defined as an agent who must register in the State StatusD D. defined as an issuer and is not required to register in the State Record your answer Review this concept Print this question

Individuals representing issuers in the sale of certain "specified" securities are excluded from the definition of an agent. These include individuals who represent issuers selling: •Treasury, Agency and Municipal securities; •Bank issues; •Money market instruments; •Contracts issued in connection with pension plans; •To employees of that issuer if no compensation is paid; and •To qualified (wealthy) purchasers. In these transactions, either the security being sold is extremely safe (such as governments, agencies or municipals); or the sale is not being made to the general public. Note that there is no exclusion for the sale of federal covered securities by an individual. An individual who sells either federal or non-federal covered securities for an issuer is defined as an agent who must register in the State. This makes sense because the State wants to "capture" and register as many agents as it can! (Remember, it gets an annual fee for each registered agent.)

A person with no office in a State would be required to register as an investment adviser in that State if that individual: Correct Answer A. has been qualified as a Chartered Financial Analyst and sells securities analyses to customers in the State StatusB B. only deals with other investment advisers in that State StatusC C. only deals with existing customers that are briefly vacationing in that State Incorrect Answer D. makes solicitations to no more than 5 clients in that State in any 12 month period

The best answer is A. If an investment adviser with no office in a State only deals with institutional investors, broker-dealers, or other investment advisers, then it is not required to register in that State (it would be required to register in the State where it did have an office, however). If an adviser with no office in the State only deals with customers who are vacationing in that State; or solicits fewer than 6 clients in that State; then it is exempt from registration. Just because a person has a CFA certification does not exempt him or her from registration if advisory services are offered to customers in that State.

The instrument that permits aggrieved parties to serve legal documents to the Administrator in lieu of serving them directly to the party that is the object of the lawsuit is called a: StatusA A. writ of mandamus StatusB B. surety bond StatusC C. offer of rescission Correct D. consent to service of process

The best answer is D. To register in the State, broker-dealers, investment advisers, and agents must give the Administrator consent to service of process. If anyone wants to sue, they do not have to locate the address of these persons. They can serve the legal papers to the Administrator; who in turn, will forward them to the party being sued (since he has the registrant's address on file). A writ of mandamus is an order from a superior court ordering a lower court to take some action. An offer of rescission can be made by a person who sold securities in violation of State law - he or she can offer to rescind the sale - that is, refund the money paid to the buyer (plus court costs and interest). A surety bond can be required to be posted by a registrant in the State as a condition of registration. The registrant posts a substantial sum of money (minimum of $10,000) to be registered in the State. If the registrant is found to have violated State law, this bond can be seized by the State.

An agent of a broker-dealer, both of whom are located in State A, accepts an order from a customer located in State B where they have no offices. Who must register in State B? StatusA A. The broker-dealer StatusB B. The agent StatusC C. Neither the broker-dealer nor the agent Correct D. Both the broker-dealer and the agent

This question isn't very clear, but here goes. We don't know if the customer located in State B is an existing customer that is vacationing in State B or a new customer in State B. So let's assume that he is a new customer. We also don't know if the broker-dealer is doing only a few transactions in State B, and qualifies for a "de minimis" exemption (and this is only offered by a minority of States), so let's assume that this also is not the case. The exemption given to "unsolicited customer transactions" only applies to the requirement for the securities to be registered in the State - it has nothing to do with the requirement that broker-dealers and agents that are doing business in the State must be registered in the State. So, the broker-dealer located in State A and its agent, even though they have no office in State B, are doing business in State B, and must register in State B.

Uniform Securities Act: Registration / Licensing: Requirements: Broker-Dealers and Agents: Dual Registration

•As a general rule, an agent can only be associated with one broker-dealer at a time. •So-called "dual registration" (being registered with more than 1 broker-dealer) must be disclosed on an agent's registration application. •Most States do not permit "dual registration". However, an agent may be associated with a number of broker-dealers that are under "common control" - that is, the broker-dealers are owned by the same entity.

Uniform Securities Act: Registration / Licensing: Requirements: Investment Advisers: Persons Not Exempted from IA Registration •Excluded from the definition of an investment adviser are: ◦Investment Adviser representatives (agents) ◦Depository Institutions (banks, savings and loans, trusts) ◦Professionals (accountants, lawyers, teachers, engineers, whose performance of these services is wholly incidental to their professional practice) ◦Broker-dealers ◦Newsletters that give general investment advice ◦Persons who give advice solely about U.S. Government guaranteed obligations ◦Federal covered advisers

•The Act EXEMPTS investment advisers from the licensing and registration requirements if they have no place of business in the State, whose only clients in the State consist solely of: ◦Other Investment Advisers; ◦Broker-Dealers; ◦Banks, Trust Companies and Savings and Loan Institutions; ◦Insurance Companies; ◦Investment Companies as defined under the Investment Company Act of 1940; ◦Employee Benefit Plans with Assets of at least $1,000,000; ◦Governmental Agencies; ◦Anyone so designated by the Administrator. In these cases, the general public is not receiving the investment advice, so the protection afforded by registration is not needed. •The Act EXEMPTS advisers from registration who have no place of business in the State, who have no more than 5 clients (except financial or institutional investors) in that State within a 12 month period. •The Act EXEMPTS advisers from registration when they contact existing contact customers who are vacationing in another State - the adviser only has to be registered in its "home" State. •There is no exemption available to advisers who only give advice on public utility issues; nor is there a State exemption from registration available for persons who only give advice about municipal securities.

Which of the following individuals would be defined as an agent under the Uniform Securities Act? I An insurance salesperson who sells variable annuities to customers II A sales assistant at a broker-dealer who only accepts unsolicited orders III A salaried employee of an issuer that handles the sale of the issuer's securities to its employees through the issuer's ESOP IV A Chief Financial Officer of the issuer that negotiates with an investment banker to set the terms of an additional share offering Correct Answer A. I and II only StatusB B. III and IV only Incorrect Answer C. II and IV only StatusD D. I, II, III, IV

The best answer is A. An "agent" is an individual (not a "person" as defined by the Uniform Securities Act) who represents a broker-dealer or issuer in effecting securities transactions. An insurance sales person who sells variable annuities is an agent because variable annuities are defined as a security. A sales assistant at a broker-dealer who only accepts unsolicited orders is also an "agent," since the definition does not distinguish between solicited or unsolicited transactions. Employees of issuers who deal only with the issuer's employees in sales of that issuer's securities are exempt as long as no special remuneration is paid to the employee. This employee is salaried and is handling the sale of the issuer's securities to its employees in its ESOP - Employee Stock Option Plan - so it meets the exemption. Finally, an officer of the broker-dealer is only considered to be an "agent" if he or she is representing the issuer in effecting securities transactions. The CFO negotiating the terms of a proposed underwriting with an investment banker is not effecting a securities transaction (however, the underwriter's employees that will sell the issue to the public are defined as "agents.")

Which of the following would be defined as an "issuer" transaction? A. An initial public offering of common stock by a corporation B. The sale of closed-end fund shares in the NASDAQ market C. The sale of a security effected on the New York Stock Exchange floor D. The resale of limited partnership interests originally offered in a private placement

The best answer is A. An issuer transaction is one where the proceeds go the issuer. An initial public offering is such an "issuer" transaction. A "non-issuer" transaction is one where the proceeds do not go to the issuer; this is a normal secondary market trade, such as a trade performed on the NYSE floor or in the NASDAQ stock market. The initial placement of limited partnerships is an "issuer" transaction; however, the resale of partnership units takes place in the secondary market and thus is a "non-issuer" transaction.

Under Uniform State Law, as adopted in most states, an agent may be affiliated with more than one broker-dealer at the same time: Correct A. if both broker-dealers are under common control StatusB B. if each broker-dealer has consented to the arrangement in writing StatusC C. if the Administrator consents to the arrangement in writing StatusD D. under no circumstances

The best answer is A. As a general rule, an agent cannot be affiliated with more than 1 broker-dealer at the same time (through a few States do permit so-called "dual registration"). However, it is permitted for an agent to be affiliated with more than 1 broker-dealer when both broker-dealers are under "common control." For example, an insurance company may have a mutual fund broker-dealer and a separate general securities broker-dealer. An agent of the insurance company could be affiliated with both broker-dealers without violating the Act.

The State Administrator has the power to do which of the following to a federal covered adviser? Correct A. Increase the number of audits that the Administrator makes of the adviser StatusB B. Establish minimum financial requirements that are more stringent than the requirements of the Investment Advisers Act of 1940 StatusC C. Require the adviser to file financial reports other than those filed under the Investment Advisers Act of 1940 StatusD D. Require the adviser to keep records other than those required under the Investment Advisers Act of 1940

The best answer is A. Because of federal supremacy, the State Administrator cannot require anything of a federal covered adviser that is already covered under the Investment Advisers Act of 1940. The State Administrator can, however, audit any adviser, federal covered or not, who does business in the State.

An agent of a broker-dealer effects a securities trade for a customer privately, where the transaction is neither known to the broker-dealer nor is it recorded on the books of the broker-dealer. This individual is defined as a: Correct A. statutory broker-dealer StatusB B. statutory issuer StatusC C. statutory investment adviser StatusD D. statutory administrator

The best answer is A. If an agent of a broker-dealer engages in a securities transaction that is not known to the broker-dealer (a so-called "private securities transaction"), a prohibited practice has occurred. All securities transactions effected by agents must be known to the broker-dealer; must be recorded on the books of the broker-dealer; and must be supervised by the broker-dealer. If the agent performs a "private securities transaction" that is not known to the broker-dealer, then that agent has, himself, become a broker-dealer under this definition. As such, he would have to register in the State as a "statutory" broker-dealer before effecting such a transaction.

An investment adviser headquartered in State A wishes to solicit customers in State B. Which statements are TRUE? I If the investment adviser has an office in State B, it must register in State B II If the investment adviser has an office in State B, it need not register in State B III If the investment adviser has no office in State B, it must register in State B IV If the investment adviser has no office in State B, it need not register in State B Correct A. I and III StatusB B. II and IV StatusC C. I and IV StatusD D. II and III

The best answer is A. If an investment adviser has an office in a State, it must be registered in that State. If an investment adviser has no office in a State, but solicits customers in that State, it must register in that State as well.

To be exempt from registration in a State, an investment adviser must: I be registered with the SEC under the Investment Advisers Act of 1940 II be registered in another State III have at least $100,000,000 of assets under management IV have less than $100,000,000 of assets under management Correct A. I and III StatusB B. I and IV StatusC C. II and III StatusD D. II and IV

The best answer is A. Investment advisers with at least $100,000,000 of assets under management must register with the Securities and Exchange Commission but are exempt from state registration (to avoid duplicate regulation). Advisers with less than $100,000,000 under management must register with the State, but are not required to be registered with the SEC. The idea is that the big advisers are regulated by the Feds; while the little advisers are regulated by the local police. Note that, in contrast, broker-dealers that are registered with the self-regulatory organization under the Securities Exchange Act of 1934, such as FINRA, must still register in each State.

Registration of an investment adviser in a State automatically registers any investment adviser representative that is a: Correct A. partner of the investment adviser StatusB B. sales employee of the investment adviser StatusC C. solicitor of the investment adviser StatusD D. clerical employee of the investment adviser

The best answer is A. Named in the registration statement for an investment adviser are the partners, officers, and directors of the adviser. These persons do not have to make a separate investment adviser representative filing in the State. However, any person who sells advisory services; or who solicits the purchase of advisory business; must register as an IA rep. Clerical or ministerial employees do not have to be registered with the State.

If an adviser's registration filing is made electronically with the State, the requirement to affix a signature to an application is met by the applicant: Correct A. typing his or her name in the appropriate fields and submitting the filing electronically to IARD StatusB B. signing a separate written document in the presence of a notary public, evidenced by the notary's seal StatusC C. faxing an application that has been signed by the applicant in ink, with the same return fax phone number as that given on the application StatusD D. validating his or her identity by telephoning the State Securities Administrator's office and answering questions correctly

The best answer is A. The States are attempting to streamline the registration process by requiring electronic registration filing and payment of fees. They don't want any more paper! Paper forms are only accepted for reasons of "hardship." Typing of one's name into the required field on the electronic form constitutes a proper filing. The electronic database for investment adviser filing at the State level is "IARD" - Investment Adviser Registration Depository.

An individual acts as a finder, facilitating mergers and acquisitions of companies that are both publicly and privately held. The individual searches for companies that appear to be compatible and that will either enjoy a revenue enhancement or cost reduction benefit from the transaction. The individual just introduces the parties to the proposed transaction, but has no involvement in the agreements or valuation. Upon the closing of the deal, the individual is paid a percentage of the transaction. Under NASAA rules, this individual Correct A. needs to register as a broker-dealer in the State because he or she is receiving transaction based compensation StatusB B. needs to register as an investment adviser in the State because he or she is giving advice about investing in securities StatusC C. does not need to register as a broker-dealer in the State because the clients involved are institutional investors StatusD D. does not need to register as an investment adviser in the State because he or she has no involvement in the agreements or valuation

The best answer is A. This is a bit vague, but NASAA's (and the SEC's) stance on finders is that if they receive compensation that is "transaction based" - such as in this case because the finder will be paid a fee contingent on the closing of the deal - then the finder is a "statutory broker-dealer" that must be registered. This individual is not an investment adviser, because investment advisers do not earn transaction-based compensation. They earn an advisory fee, that is either a flat fee or a percentage fee - but they cannot earn a fee on each transaction (otherwise they become broker-dealers).

Which of the following individuals is EXCLUDED from the definition of an "agent" under the Uniform Securities Act? I An individual who represents a broker-dealer selling exempt securities to the public II An individual who represents a broker-dealer selling securities listed on a national stock exchange III An individual who represents an issuer in an exempt transaction IV An individual who represents an issuer in a transaction with existing employees without accepting a commission

The best answer is B. An agent is an individual who represents a broker-dealer selling any type of security - whether it is exempt or non-exempt. Individuals who represent issuers in trading exempt securities are excluded. For example, an employee of GNMA who markets GNMA securities to investors, is excluded from the definition of an agent, because these are very safe securities and State Administrators are not worried about these being sold to State residents. Individuals who represents issuers in specified exempt transactions are excluded. For example, an employee of the issuer who negotiates the sale of the issuer's securities to an underwriter or to an institutional investor is not defined as agent. The idea here is that the purchaser is sophisticated and the State protection of agent registration is not required. An individual who represents an issuer in a transaction with existing employees without taking a commission is engaging in an exempt transaction (since no commission is taken) and therefore is excluded from the definition of agent. The example here is an issuer-employee that works in the pension department of the company and who places employee purchases of company shares into employee 401(k) accounts.

Which of the following are EXCLUDED from the definition of a broker-dealer? I Any person who effects securities trades for the account of others II Any person who effects securities trades for his own account III Any person with no place of business in the state who only deals with financial institutions IV Issuers of securities StatusA A. I and II Correct B. III and IV StatusC C. I, II, III StatusD D. I, II, III, IV

The best answer is B. Any person who effects securities trades for the account of others or for the firm's account is defined as a broker-dealer. Persons with no place of business in a State who only deal with institutional investors are excluded from the definition - this exclusion is given because these are sophisticated investors who "know what they are doing" - the intent of the law is to protect the general public. Finally, issuers are excluded from the definition of a broker-dealer.

Under the Uniform Securities Act, which of the following are defined as federal covered investment advisers? I Investment advisers managing assets of $100,000,000 or more II Investment advisers to investment companies registered under the Investment Company Act of 1940 III Investment advisers to insurance companies StatusA A. I only Correct Answer B. I and II StatusC C. II and III Incorrect Answer D. I, II, III

The best answer is B. Federal covered investment advisers are defined under the Investment Advisers Act of 1940 (Federal law). They are advisers managing $100,000,000 or more of assets; and advisers to investment companies. It is not a coincidence that the Investment Advisers Act of 1940 and the Investment Company Act of 1940 were written at the same time. One of the main intentions of the Investment Advisers Act of 1940 was to regulate advisers to investment companies and limit their compensation (for example, advisers to investment companies cannot be compensated based on gain or loss) Investment advisers to insurance companies are not defined as federal covered advisers. This is the case because regulators were not worried about insurance companies being overcharged by their investment adviser, since insurance companies are very cost conscious. Federal covered advisers need only register with the SEC; they are not required to register with the State; though they may be required to file notice with the State.

An investment adviser representative of a Federal Covered adviser with no office in the state only has non-institutional clients. Where must the investment adviser representative register? StatusA A. SEC Correct B. State StatusC C. Both the SEC and the State StatusD D. Neither the SEC nor the State

The best answer is B. Since the adviser is federal covered, that firm is only required to register with the SEC. It must give a notice filing to any State where it has a physical presence or where it offers advisory services. As far as the investment adviser representative is concerned, there is no registration of IARs with the SEC. They are only registered in the State where they are physically located and in each State where they solicit advisory business. For the IAR to be able to register in the State, the IA must have completed a notice filing in the State. The fact that the IAR only has non-institutional clients means that the IAR is dealing with the general public and this is kind of individual that the State wants registered!

Under the Uniform Securities Act, which of the following persons must register as a broker-dealer in a state? I A firm with no place of business in the state that has no clients in the state II A firm with no place of business in the state that has 25 clients in the state over the preceding 12 months III A firm with no place of business in the state that deals exclusively with issuers IV A firm with no place of business in the state that deals exclusively with financial institutions StatusA A. I and II only Correct B. II only StatusC C. II, III, IV StatusD D. I, II, III, IV

The best answer is B. The Act excludes from the definition of a "broker-dealer" any firm that has no place of business in the State that does not have clients in the State; or that deals solely with issuers, broker-dealers, or financial institutions. Note that if a broker-dealer has an office in a State, then it must register in that State, regardless of who its customers may be. The "de minimis" exemption for broker-dealers is only offered in a minority of States, and typically applies to out-of-state broker-dealers who only have 3 or fewer clients in that State, so Choice II does not qualify for the exemption and must register.

A Registered Investment Adviser is the beneficiary in the liquidation of a partnership investment that it made years ago and in settlement, receives the assets of an existing broker-dealer. As a result of this, the directors of the RIA: Incorrect Answer A. are required to register in the State as directors of the broker-dealer Correct Answer B. are not required to register in the State as directors of the broker-dealer, nor take qualification exams, as long as they are not involved in overseeing the sales or operations of the broker-dealer StatusC C. must register in the State as directors of the broker-dealer but are not required to take qualification exams StatusD D. are not required to register in the State as directors of the broker-dealer

The best answer is B. The question is, typically, not very clear on what is going on here. What is happening is the RIA now owns a broker-dealer. We don't know if the broker-dealer is operating with its own officers; or whether it is just a dormant "shell." If it has its own officers, they would already have been registered with both FINRA and the State. If not, then the RIA that now owns the broker-dealer would have to appoint officers and register them in the State. It is not true that the directors of the RIA would be required to be registered in the State. Only those RIA directors that were appointed directors of the broker-dealer would be required to register (of course, this is not a choice!). Of the choices offered, Choice B is the best one. Only those directors of the RIA that are involved in overseeing the sales or operations of the broker-dealer must be registered in the State and must take the proper licensing exams.

person who renders investment advice relating solely to municipal securities is: StatusA A. exempted from the definition of an investment adviser, and is not required to register under the Act Correct Answer B. defined as an investment adviser and must register under the Act StatusC C. defined as a broker-dealer and must register under the Act Incorrect Answer D. defined as an agent and is required to register under the Act

The best answer is B. A person who gives investment advice relating solely to municipal securities is not exempted from registering as an investment adviser under State law. (Please note, however, that a person who gives advice solely about U.S. Government guaranteed securities is excluded from the definition of an investment adviser under the Investment Advisers Act of 1940. This is another type of federal covered adviser, for which there is no state registration.)

An issuer has filed a registration statement in the State proposing to offer 500,000 shares in a combined primary and secondary distribution, consisting of 300,000 newly issued shares and another 200,000 shares being offered by the officers of the firm. Under Uniform State Law, the: A. 500,000 shares being sold is an issuer transaction B. 300,000 shares being sold is an issuer transaction and the 200,000 shares being sold is a non-issuer transaction C. 300,000 shares being sold is a non-issuer transaction and the 200,000 shares being sold is an issuer transaction D. 500,000 shares being sold is a non-issuer transaction

The best answer is B. An issuer transaction is one where the proceeds of the offering go to the issuer - the primary distribution of 300,000 shares meets this definition. A "non-issuer" transaction is one where the proceeds of the offering go to someone other than the issuer. The secondary offering of 200,000 shares where the proceeds are going to selling shareholders (officers of the company) meets this definition.

A Registered Investment Adviser enters into an agreement with a Certified Public Accountant, where the CPA will refer clients that need the services of an investment adviser. For each client referral, the CPA will be paid a fee. The CPA is: StatusA A. required to register in the State as an agent Correct B. required to register in the State as an investment adviser representative StatusC C. not required to register in the State because he already has an independently conferred professional designation StatusD D. not required to register in the State because he is regulated by the AICPA

The best answer is B. Any person retained by an investment adviser to "find" new clients, if he or she is paid for doing so, is defined as an IAR who must be registered in the State. Choice C gets at the exemption provided under the Investment Advisers Act of 1940, where professionals such as lawyers or CPAs that do not separately charge for advice are excluded from the definition of an adviser. However, this does not apply here because the CPA is getting separate compensation for each referral made to the investment adviser.

An individual sells the securities of a federal chartered bank. This individual will be EXCLUDED from the definition of an agent if the individual: StatusA A. is the employee of a broker-dealer Correct Answer B. is the employee of the bank Incorrect Answer C. only offers the securities to 5 or fewer investors StatusD D. only offers the securities in 5 or fewer states

The best answer is B. Employee of ISSUERS (not employees of broker-dealers) that sell specified exempt securities, are excluded from the definition of an agent. These include employees of the U.S. Government selling Treasury securities; employees of municipalities selling municipal securities; and employees of banks, savings institutions and trust companies, selling that depository institution's securities. For example, the employee of a bank selling that bank's CDs (which are defined as a security) is excluded. The offer of advisory services (and in most States, securities as well) to 5 or fewer investors in a State is an exemption from investment adviser (or broker-dealer) registration, not agent registration. Finally, Choice D tries to confuse you with a variation on this "de minimis" exemption. It is only available to investment advisers (and in many States to broker-dealers as well) with no office in a State, that have 5 or fewer clients in the State in a year. It does not apply if offers are made in 5 or fewer States.

Federal covered advisers are required to: I register with the Securities and Exchange Commission II file notice with the Securities and Exchange Commission III register with the State IV file notice with the State StatusA A. I and III Correct B. I and IV StatusC C. II and III StatusD D. II and IV

The best answer is B. Federal covered advisers are required to register with the SEC under the Investment Advisers Act of 1940. They are not required to register in the State. They can also be required by the State Administrator to file notice in each State where they conduct business.

An existing customer of a broker-dealer registered in State "A" is vacationing in State "B." Which statement is TRUE? StatusA A. The broker-dealer may only solicit the customer in State "B" if it has been registered in State "B" Correct B. The broker-dealer may solicit the customer in State "B" without registering in State "B" StatusC C. The broker-dealer is prohibited from making any communication into a State unless it has a branch office in that State StatusD D. The broker-dealer must notify the Administrator in State "B" prior to any solicitation in that State

The best answer is B. If a broker-dealer effects a transaction in a State, unless an exemption is available, the broker-dealer must be registered in that State. One of the exemptions available covers the instance where an existing customer of a registered broker-dealer is vacationing in another State. That customer may be contacted while on vacation in the other State, without the broker-dealer being required to register in that State.

An agent for a broker-dealer, both of which are registered in the State of Illinois, receives a telephone call from an existing customer who is on a layover in the airport in Atlanta, Georgia. The customer directs the agent to buy 1,000 shares of ABCD stock at the market. Which statement is TRUE? StatusA A. In order to accept this order, the agent must be registered in the State of Georgia only Correct B. In order to accept this order, the agent must be registered in the State of Illinois only StatusC C. In order to accept this order, the agent must be registered in both the State of Georgia and the State of Illinois StatusD D. The agent can accept this order without needing registration in any jurisdiction because it was unsolicited

The best answer is B. Since the agent and broker-dealer are physically located in Illinois, they must be registered in the State of Illinois. This is an existing customer who is calling from an airport in Georgia. There is no requirement for the agent or the broker-dealer to be registered in Georgia to take this order. If the State of Georgia inquired about this transaction, the agent and broker-dealer could claim the exemption available when an existing customer is temporarily located in another State.

Which term is NOT defined under the Uniform Securities Act? StatusA A. Broker-dealer Correct B. Registered representative StatusC C. Investment Adviser StatusD D. Investment Adviser Representative

The best answer is B. The Uniform Securities Act defines a "broker-dealer," it defines an "agent" of a broker-dealer (which is a registered representative, but this is the federal name, not the State name); it defines an "investment adviser;" and it defines an "investment adviser representative" (the agent of an investment adviser). Note the inconsistency here!

Under the Uniform Securities Act, the term "broker-dealer" includes which of the following? StatusA A. Savings institutions regulated under State and Federal banking laws Correct B. A person in the business of trading securities for his own account or for the account of other persons StatusC C. Banks regulated under State and Federal banking laws StatusD D. Agents who represent broker-dealers when performing securities transactions

The best answer is B. The term "broker-dealer" is defined as a person who: •Engages in the business of effecting securities transactions for the account of others •Engages in the business of trading for his own account (known as "proprietary trading") Persons NOT considered to be "broker-dealers" include: •Agents: These are individuals who represent the broker-dealer when performing securities transactions, basically sales representatives •Banks, Savings Institutions, and Trust Companies: These firms are separately regulated under State and Federal banking laws. •Issuers: (except when an issuer effects transactions other than with respect to its own securities)

Under the Uniform Securities Act, a person who has no place of business in a State, and who transacts securities business only with financial institutions in that State, is: StatusA A. defined as a broker-dealer and must register Correct B. excluded from the definition of a broker-dealer and need not register StatusC C. defined as an investment adviser and must register StatusD D. excluded from the definition of an investment adviser and need not register

The best answer is B. Under the Uniform Securities Act, a "broker-dealer" is defined as a person that engages in the business of effecting securities transactions for the account of others; or a person that engages in the trading of securities for its own account. However, firms that have no place of business in the State, and who only deal with professional investors, are excluded from the definition and do not have to register. Note that this person does not fall under the definition of an investment adviser, since to be an investment adviser, one must render advice about securities for a fee.

To register a successor firm with the State Administrator for the unexpired portion of the current license year, which statement is NOT true? StatusA A. The predecessor firm must have ceased business operations and can only conduct winding down transactions Correct B. The successor firm must continue business operations through the end of that license year StatusC C. The successor firm must file a Form BD or ADV amendment with the Administrator StatusD D. The filing becomes effective on the date designated by the licensee

The best answer is B. Uniform State law does not require the filing of a new registration application for a successor firm. The successor firm files a registration amendment with the State, that takes its registration through the end of that year, without having to pay a new filing fee. The effective date of the successor firm's registration is the date indicated on the amendment. The "old" firm must have ceased business operations for the "new" firm to be registered in the State. Whether or not the successor firm continues in operation through the rest of that year is irrelevant.

An investment adviser has determined that it MUST register as a federal covered adviser. This means that the adviser: StatusA A. solicits clients on behalf of other investment advisers StatusB B. currently operates in at least 10 States Correct C. has at least $110,000,000 of assets under management StatusD D. provides financial planning to customers for compensation as a regular business

The best answer is C. Advisers with $100,000,000 or more of assets under management must register with the SEC as "Federal Covered Advisers" and cannot be required to be registered in each State (though each State can require a notice filing). The SEC then issued an interpretation regarding this requirement. It states that advisers that have between $100,000,000 and $110,000,000 of assets under management have the choice of registering either at the State or Federal level. Thus, SEC registration as an adviser is truly only required once an adviser has $110,000,000 or more of assets under management. Another SEC interpretation allows any adviser that has at least $25 million of assets under management and that operates in 15 or more States to register with the SEC. Since Choice B is an adviser operating in 10 States, this rule does not apply.

A Canadian broker-dealer has some clients who are "snowbirds" who spend their winters in State Z, which is one of the southernmost States. The broker-dealer does not have an office in State Z and it is not registered there. The clients wish to effect securities transactions while they are residing in State Z. Does this broker-dealer have to register in State Z? StatusA A. No - the broker-dealer can effect securities transactions in State Z without registering there as long as the firm has 5 or fewer clients in the State StatusB B. No - the broker-dealer can effect securities transactions in State Z for existing customers who are temporarily residing in the State Correct C. Yes - because the broker-dealer's customers are physically present in State Z StatusD D. Yes - because the customers are being solicited by the broker-dealer to effect securities transactions while they are in State Z

The best answer is C. Canadian broker-dealers with no office in a State are allowed to effect securities business with existing customers who are "vacationing" in a State, without having to be registered in that State. The Uniform Securities Act does not specify the maximum time frame for this, but it is typically 2 weeks or less. Also note that the Canadian broker-dealer cannot be soliciting new customers in that State under this exemption. However, in this case, the Canadian customers are spending the whole winter living in State Z - this is not a case of the customer temporarily vacationing in State Z. In this case, State Z requires both the Canadian broker-dealer and agent to register in the State. To make this easier, the Uniform Securities Act provides that as long as the Canadian broker-dealer and agent are only contacting existing customers in the State, and as long as they are properly registered in Canada, they can use their Canadian registration documents to register in the State. (Also note that Choice A could also be correct, but this provision is not consistently applied in all States for broker-dealers (in contrast, it is consistently applied for investment advisers) and the question does not detail how many existing clients the broker-dealer has in State Z.)

An Investment Adviser Representative is employed by ECCO Advisers, a Federal Covered adviser. ECCO Advisers has its only office in State Y, and has made a notice filing the State Y's Administrator. The IAR gives seminars to potential clients in State Z, which is only 5 miles from the ECCO's offices in State Y. The IAR is: StatusA A. required to be registered in State Y only StatusB B. required to be registered in State Z only Correct C. required to be registered in both State Y and State Z StatusD D. not required to be registered in either State Y or State Z

The best answer is C. Even though a Federal Covered adviser is not required to register in a State, its IARs can be required to register (because there is no Federal registration of IARs - only of IAs). Because the IAR is physically located in State Y, he or she must be registered in State Y. Because the IAR is soliciting clients in State Z, he or she must be registered in State Z. (The IAR would be exempt from registration in State Z only if he or she had no office there and solicited institutional clients only; or deals with no more than 5 retail clients in a year.) Furthermore, though the question does not address this, the IA with which the IAR is associated would be required to complete a notice filing in State Z.

Under the Uniform Securities Act, all of the following are defined as an investment adviser EXCEPT a(n): StatusA A. broker-dealer firm that charges for investment advice StatusB B. publisher of a stock market newsletter that makes recommendations based upon the specific investment situation of each specific client Correct C. accountant who recommends types of investments to his clients as part of his accounting services StatusD D. research firm that sells an analysis of securities to each customer as part of an individualized financial plan

The best answer is C. Professionals such as accountants and lawyers who give investment advice as an incidental part of their normal practice are excluded from the definition of investment adviser. A broker-dealer can also be registered as an investment adviser and can charge for this advice through its "investment adviser subsidiary." A stock market newsletter that makes recommendations based upon the specific situation of each client is defined as an investment adviser. Please note that if the newsletter gives general recommendations, then it would not be defined as an investment adviser.

Which of the following broker-dealers is (are) NOT required to register in a State? I A firm with no place of business in the state that has no clients in the state II A firm with no place of business in the state that has 25 clients in the state over the preceding 12 months III A firm with no place of business in the state that deals exclusively with issuers IV A firm with no place of business in the state that deals exclusively with financial institutions StatusA A. I and II only StatusB B. II only Correct C. I, III, IV StatusD D. I, II, III, IV

The best answer is C. The Act excludes from the definition of a "broker-dealer" any firm that has no place of business in the State that does not have clients in the State; or one that has no office in the State that deals solely with issuers, broker-dealers, or financial institutions. Note that if a broker-dealer has an office in a State, then it must register in that State, regardless of who its customers may be. In addition, the "de minimis" exemption for broker-dealers is only offered in a minority of States, and typically applies to out-of-state broker-dealers who only have 3 or fewer clients in that State, so Choice II does not qualify for the exemption. (In contrast, the investment adviser "de minimis" exemption" is offered by most of the States for out-of-state investment advisers who only have 5 or fewer clients in that State.)

An institutional buyer is defined under the Uniform Securities Act as: StatusA A. an institution with at least $100 million of assets available for investment StatusB B. an accredited investor as defined under Rule 506 of Regulation D of the Securities Act of 1933 Correct C. any person defined by the Administrator by rule or order StatusD D. any institution that is regulated by the Federal Reserve, SEC, or State Insurance or Banking Commissioners

The best answer is C. The Uniform Securities Act exempts from registration in a State, any broker-dealer or investment adviser that does not have an office in the State and that only deals with "institutional buyers." These institutional buyers include banks, savings and loans, trust companies, insurance companies, investment companies, pension and profit sharing plans, other financial institutions, and anyone so defined by the State Administrator by rule or order. The Uniform Securities Act does not set minimum capital standards to be defined as an institutional buyer.

Which of the following is a federal covered adviser? StatusA A. An investment adviser with $10,000,000 of assets StatusB B. An investment adviser with $50,000,000 or less of assets Correct C. An investment adviser with $100,000,000 of international assets StatusD D. An investment adviser to individuals that are accredited investors under Regulation D Record your answer

The best answer is C. A "Federal covered investment adviser" is one that must register with the SEC only; and that is not required to register with the State (though the State can still require a notice filing). These are the larger investment advisers and include any adviser to an investment company; and any adviser with $100,000,000 or more of assets under management. In this question, the best choice offered is the adviser with $100,000,000 of assets under management must register with the SEC. It makes no difference if the assets are international securities - if the adviser is based in the U.S., which we must assume, and meets the minimum asset test, then it must register with the SEC.

Under the Uniform Securities Act, which of the following would be defined as a "non-issuer" transaction? A. An initial public offering of common stock by a corporation B. The sale of open-end mutual fund shares C. The sale of a security effected on the New York Stock Exchange floor D. The sale of limited partnership interests in a private placement

The best answer is C. A "non-issuer" transaction is one where the proceeds do not go to the issuer; this is a normal secondary market trade, such as a trade performed on the NYSE floor. An issuer transaction is one where the proceeds go to the issuer. Initial public offerings; mutual fund offerings, and private placements of limited partnerships are all "issuer" transactions, since the proceeds of the sale go to the issuer.

Under the Uniform Securities Act, all of the following are defined as "persons" EXCEPT: A. General partner in a limited partnership B. Public utility selling to public investors C. Administrator of the State D. Municipality selling industrial development bonds

The best answer is C. A "person," as defined under the Act, can be just about anyone who has legal authority to issue or trade securities. A general partner in a limited partnership makes all decisions for the limited partners, including whether securities will be issued or traded, and hence, is a "person." Issuers of securities (e.g., corporations, governments, etc.) are also defined as "persons." The State Administrator is not defined as a "person"; rather, he or she is defined as the "administrator" - that is, the State securities commission, commissioner, or secretary empowered to carry out the Act's provisions.

Which of the following would be required to register as an investment adviser in a State? Incorrect Answer A. A person with no office in the State that only renders investment advice to insurance companies for compensation StatusB B. A person who gives investment advice to charitable organizations on a "pro bono" basis Correct Answer C. A person who has no current advisory customers, but who is seeking clients by newspaper advertising StatusD D. A person who gives advice about investing in securities only as an incidental part of his accounting practice

The best answer is C. A person who renders advice to insurance companies is giving advice to an institutional investor and is exempt from registration in the State, as long as the adviser does not have an office in the State. In order to be defined as an "investment adviser," that person must be compensated for giving investment advice. Someone who gives investment advice to a charity pro bono ("pro bono" means "for the public good") is not compensated and thus does not fall under the definition. A professional such as an accountant or lawyer who only gives incidental advice about investing in securities without separately charging for the advice is excluded from the definition. A person who is advertising for advisory customers is holding himself out as an investment adviser, and would fall under the definition.

An agent's license remains in effect: StatusA A. for 30 days from application date StatusB B. for 6 months from application date Correct C. until December 31st of that year StatusD D. for 5 years from application date

The best answer is C. Agent, broker-dealer, investment adviser, and investment adviser representative registrations expire on December 31st of each year, unless the Administrator designates another date.

In order to make an offer of a non-exempt security, an agent of a broker-dealer: StatusA A. must be registered in the State in which he or she resides and the broker-dealer is located StatusB B. must be registered in the State where he or she is offering the security Correct C. must be registered in the State in which he or she resides and the broker-dealer is located and must be registered in the State where he or she is offering the security StatusD D. need not be registered

The best answer is C. Agents of broker-dealers must register in the State where they are physically located; and also must register in each State in which they make offers of securities. Also note that the fact that the security involved is non-exempt (such as common stock) has no bearing. To offer any security in a State, whether exempt or non-exempt, the agent must be registered in the State.

Under NASAA rules, the Form ADV filed with the State must be: I updated quarterly II updated annually III sent to customers if the update is material IV sent to other investment advisers if the update is material StatusA A. I and III StatusB B. I and IV Correct C. II and III StatusD D. II and IV

The best answer is C. Under NASAA rules, investment advisers must update their Form ADV (State registration form) annually within 90 days of fiscal year end, to reflect current and accurate information, and must send the updated Form ADV to its clients within 120 days of year end if there is a material change. The Form ADV is stored in the IARD (Investment Adviser Registration Depository) system. It is used to register both State registered advisers and Federal covered advisers, and to send notice filings to States by Federal covered advisers.

Under the Uniform Securities Act, registration as an investment adviser is required for a(n): I broker-dealer who renders advice on securities for a fee II broker-dealer who makes recommendations of securities to customers III investment newsletter of a general circulation IV financial planner who creates an investment plan for a fee StatusA A. I and II only StatusB B. III and IV only Correct C. I and IV only StatusD D. I, II, III, IV

The best answer is C. An "investment adviser" is defined as a person who gives advice about securities for compensation. If a broker-dealer receives no special compensation for making a recommendation (in other words, any charge for the recommendation is included in the broker's commission), then the broker-dealer is excluded from the definition of an "investment adviser." However, if the broker-dealer were to charge a separate fee for giving investment advice, then the firm is defined as an "investment adviser" and must register. Investment newsletters that do not render advice based upon the specific investment situation of a client are also excluded from the definition of an "investment adviser." Financial planners who give investment advice for a fee clearly fall under the definition.

Which of the following is NOT allowed under the Uniform Securities Act? StatusA A. An agent registered with a broker-dealer also is a licensed insurance agent at a life insurance company Incorrect Answer B. An agent registered with a broker-dealer also is a licensed real estate agent at a real estate company Correct Answer C. An agent registered with a broker-dealer also is licensed as an agent for a mutual fund dealer StatusD D. An agent is registered with two affiliated broker-dealers who have an office in the same location

The best answer is C. As a general rule, an agent cannot be registered with two different broker-dealers at the same time under the Uniform Securities Act. (Please note, however, that a few States still permit so called "dual registration" but this is the exception to the general pattern). Since an insurance company or a real estate company is not defined as a broker-dealer, there is no problem with an agent working for either of these firms. A mutual fund dealer is defined as a broker-dealer since the firm effects securities transactions. An agent cannot be registered at the same time with one broker-dealer and another mutual fund dealer. Two "affiliated" broker-dealers at the same location are treated as one broker-dealer, since they are under common control. Thus, an agent could be registered with both affiliated broker-dealers without a problem.

Which of the following would be defined as a broker-dealer in State A? Incorrect Answer A. The municipal bond department of a bank located in State A StatusB B. A person who gives advice about investing in securities in State A Correct Answer C. A broker-dealer located in State B who has an existing active customer who moves to State A StatusD D. An agent of a broker-dealer who effects trades in securities in State A

The best answer is C. Banks are excluded from the definition of a broker-dealer, making Choice A incorrect. Choice B defines an investment adviser; not a broker-dealer. Choice D defines an agent of a broker-dealer; not the broker-dealer itself. Choice C gets at an interesting point. Because the customer has moved and is now located in another State (State A), and the customer is "active" -meaning the customer is trading securities, then the firm must be registered as a broker-dealer in State A (and the agent servicing the customer account must be registered in State A as well).

A Registered Investment Adviser with 25 clients in State A is expanding its operations to States B, C, and D. It currently has 6 clients in State B, but has not opened an office in that State. It currently has 3 clients in State C, where a small office has been opened. It has 5 clients in State D, and is considering opening an office there. In which States is the RIA required to register? StatusA A. State A only StatusB B. States B and C only Correct C. States A, B, and C StatusD D. States A, B, C and D

The best answer is C. Because the RIA has offices in States A and C, it must register in those States. The "de minimis" exemption from registration only applies to advisers with no office in the State that have 5 or fewer clients in that State. Since the adviser has 6 clients in State B, it must register in State B. The fact that it has no office there has no bearing on this. On the other hand, the "de minimis" exemption applies to State D, since the adviser has no office there and has the maximum permitted number of clients (5) before registration is required.

The directors of a company decide to offer shares of the company from the company's unissued stock directly to company employees. The proceeds of the sale go to the company, but the directors take a commission from the employees on these sales. Which of the following statements are TRUE? I This is a non-issuer transaction II The directors are defined as agents of the issuer III The directors must be registered IV The securities must be registered StatusA A. I and II only StatusB B. III and IV only Correct C. II, III, IV StatusD D. I, II, III, IV

The best answer is C. Because the company is issuing these shares and the proceeds are going to the issuer, this is an issuer transaction. Because an agent is defined as an individual who effects securities transactions for either a broker-dealer OR an issuer, the directors are considered to be agents of the issuer and must be registered. Since common stock is a non-exempt security, it also must be registered to be sold in the State.

An individual who previously worked as an agent at a broker-dealer leaves the employ of that firm and wishes to start his own broker-dealer as a sole proprietorship. In order to register in the State, the Administrator will require the filing of a(n): StatusA A. income statement StatusB B. federal tax return Correct C. statement of financial condition StatusD D. W-2

The best answer is C. Each applicant for initial registration as either an investment adviser or broker-dealer must file an original statement of financial condition (a balance sheet) with the Administrator, along with an oath or affirmation made by the applicant that the financial statement is true and current.

Which of the following information is included on an applicant's registration application? I Business history of applicant II Educational history of applicant III Financial condition of applicant IV Conviction record of applicant StatusA A. I and II only StatusB B. III and IV only Correct C. I, III, and IV StatusD D. I, II, III, IV

The best answer is C. Educational history is not part of a registration application. The applicant's business history, financial condition, and record of any convictions for securities law violations are part of the application.

All of the following are EXCLUDED from the definition of an investment adviser under the Uniform Securities Act EXCEPT a(n): Incorrect Answer A. federal covered adviser StatusB B. broker-dealer Correct Answer C. adviser with no place of business in the State whose only clients are broker-dealers StatusD D. investment adviser representative

The best answer is C. Excluded from the definition of an investment adviser are investment adviser representatives; depository institutions; broker-dealers; professionals who only give incidental advice; publishers of general circulation periodicals that do not give investment advice about specific client situations; and federal covered advisers. In contrast, an adviser with no place of business in the State whose only clients are broker-dealers is included in the definition of an investment adviser, but is exempt from registration in the State. This is an extremely picky question!

Which of the following statements are TRUE regarding Federal Covered Advisers and their representatives that have a place of business in a state? I Federal Covered Advisers must register in the State II Federal Covered Advisers are not required to register in the State III Representatives of Federal Covered Advisers must register in the State IV Representatives of Federal Covered Advisers are not required to register in the State StatusA A. I and III StatusB B. I and IV Correct C. II and III StatusD D. II and IV

The best answer is C. Federal Covered Advisers are excluded from the definition of an investment adviser under State law and they are not required to register in the State (though they must file notice in the State if they transact business in the State). However, representatives of federal covered advisers are still required to register in the State if they transact business in the State. Of course, non-Federal covered investment advisers and their representatives must register in a State if they transact business in a State.

A Federal Covered Adviser discovers a material error in its Form ADV. When must Form ADV be amended with the State to correct the error? StatusA A. Never Incorrect Answer B. Within 5 business days Correct Answer C. Within 30 calendar days StatusD D. On the SEC filing anniversary

The best answer is C. Form ADV is filed through the IARD Investment Adviser Registration Depository) system run by FINRA - this is used by both Federal Covered and State-registered advisers. In IARD, the adviser details whether this is a Federal or State registration and IARD reports to the correct regulator. In addition, for Federal Covered Advisers, the adviser details which States get "notice" filings. When a Form ADV is filed or updated by a Federal covered adviser, this is reported to the SEC, and at the same time, this is also reported to the designated States that get notice filings. The annual updating amendment to Form ADV must be filed within 90 calendar days of the adviser's fiscal year end - note that this is the same rule for both NASAA (State registered advisers) and the SEC (Federal Covered Advisers). For material changes that occur during the year, an "other than annual amendment" must be filed via IARD. Here, the SEC states that it must be filed "promptly" for Federal Covered Advisers, while NASAA requires that it be filed within 30 days of the change for State registered advisers and for notice filings made by Federal Covered Advisers. (Yes, it would be nice if NASAA and the SEC "got together" on their rule writing, but they don't!)

An individual is being paid to sell securities and is being compensated on a commission basis. The commissions are being paid by both the broker-dealer and the issuer. This person is defined as a(n): StatusA A. agent of the issuer only StatusB B. agent of the broker-dealer only Correct C. agent of both the issuer and the broker-dealer StatusD D. none of the above

The best answer is C. If an individual works for either a broker-dealer or an issuer and sells securities of that issuer, that individual is defined as an agent under the Act. In this case, because he is being compensated by both the issuer and the broker-dealer, he or she would be an agent of both. An individual is excluded from the definition of an agent of an issuer only if that person effects transactions with existing employees or officers of the issuer and no commissions are paid; or that individual represents an issuer in either selling exempt securities or exempt transactions; or that individual only offers or sells securities to institutions.

An agent of a broker-dealer registered in all 50 States is located in the State of Missouri, where the broker-dealer maintains a call center. The agent is only registered in the State of Missouri. A new customer that is a resident of Florida has seen one of the broker-dealer's television advertisements and calls the "800" number in the advertisement, reaching this agent. The customer states that she wants to "Buy some good stocks - what do you recommend?" Under the Uniform Securities Act, the agent: StatusA A. can recommend securities to the customer because the broker-dealer is registered in the State of Florida StatusB B. can recommend securities to the customer because the call was received in the State of Missouri where the agent is registered Correct C. cannot recommend securities to the customer because the agent is not registered in the State of Florida StatusD D. cannot recommend securities to the customer unless the securities recommended are exempt from registration

The best answer is C. In order to recommend securities to a customer or to accept and unsolicited trade from a customer, both the broker-dealer and the agent must be registered in the State where the customer resides (in addition to being registered in the State where the agent resides). Note that the unsolicited customer exemption cannot be used because this exemption only applies to registration of securities. It does not apply to registration of broker-dealers and agents.

Under the provisions of the Uniform Securities Act, all of the following statements are true EXCEPT a(n): StatusA A. agent must register in the State in which the agent resides StatusB B. agent must register in each State in which the agent directs offers of securities Correct C. agent must register in each State in which the employing broker-dealer is registered StatusD D. broker-dealer must register in each State in which its agents are registered

The best answer is C. It is incorrect to say that each agent must register in each State in which the employing broker-dealer is registered. Each agent must register in each State into which the agent will direct offers; or from which the agent will receive offers (unless an exemption is available). Furthermore, the broker-dealer must also be registered in those States. A broker-dealer might be registered in all 50 States, but each agent will probably only be registered in the States in which he or she transacts business. It would be very costly to register each agent in every State, since each State has an annual registration fee (though a few States have bi-annual renewals). The other statements are true. An agent must register in the State in which he or she resides; an agent must register in each State into which that agent directs offers; and each broker-dealer must be registered in each State where its agents direct offers.

ACME Securities is a registered broker-dealer in State A. ACME is soliciting individuals to work for the firm in their spare time, from a home office. For selling ACME's products to customers, these individuals will be paid 25% of commissions generated. Since these individuals are not working in ACME's office, ACME has classified them as independent contractors. Which statement is TRUE? StatusA A. These individuals are not required to be registered as representatives in State A because they are not ACME employees StatusB B. These individuals must register themselves as representatives in State A because they are not ACME employees Correct C. These individuals must be registered as representatives in State A by ACME Securities StatusD D. These individuals only need to be registered in State A by ACME if they become full-time representatives

The best answer is C. Just because an individual is an independent contractor and not an employee does not mean that they are not required to be registered in the State. Any individual who represents a broker-dealer selling securities is an agent who must be registered (unless an exemption is available). Note that many brokerage firms and broker-dealers that have agents that work out of their homes, legally structure these arrangements as "independent contractor" relationships and not as employment relationships. Then the employing firm is not responsible for health and pension benefits that are given to employees. However, these independent contractors are still defined as "agents" that must register in the State. And, of course, the agent's broker-dealer must be registered in the State.

A person makes an initial application for State registration on April 30th. Which statement is TRUE regarding the filing fee? StatusA A. The fee will be pro-rated and only 4/12ths of the annual fee must be paid StatusB B. The fee will be pro-rated and only 8/12ths of the annual fee must be paid Correct C. The annual fee is not pro-rated and the full year filing fee must be paid StatusD D. No filing fee is due until the annual December 31st renewal

The best answer is C. Registration applications for broker-dealers, investment advisers, and agents expire on December 31st of each year, unless the Administrator changes that date. If a new application is filed at any point during the year, there is no pro-rating of the annual filing fee amount.

A Registered Investment Adviser uses a solicitor to refer clients and pays the solicitor for each client referred. Under the Uniform Securities Act of 1956 as amended, the solicitor: Incorrect Answer A. must register as an agent in the State StatusB B. is not required to register as an agent in the State Correct Answer C. must register as an investment adviser representative in the State StatusD D. is not required to register as an investment adviser representative in the State

The best answer is C. The Act defines an "investment adviser representative" as any partner, officer, director, or other individual employed by an investment adviser, who: •Makes recommendations or renders advice regarding securities; •Manages accounts or portfolios of clients; •Determines which recommendations or advice regarding securities should be given; •Solicits, offers, or negotiates for the sale of investment advisory services; or •Supervises employees who perform any of the functions listed above. This individual is selling advisory services for the investment adviser and must register in the State as an IAR (Investment Adviser Representative).

Under the National Securities Markets Improvement Act of 1996, which statement is FALSE? StatusA A. Federal covered advisers cannot be required to be registered in the State Incorrect Answer B. Federal covered securities cannot be required to be registered in the State Correct Answer C. Federal covered advisers cannot be investigated by the State Administrator StatusD D. Federal laws supersede State laws covering the same actions

The best answer is C. The National Securities Markets Improvement Act of 1996 (NSMIA) was passed to reduce the overlap of Federal and State securities regulation. As a general rule, States have jurisdiction over securities transactions that occur within the State; while Federal legislation applies to "interstate" transactions. In addition, Federal securities law supersedes State securities law - since under the Constitution's "Supremacy Clause," if any State law impedes Federal legislation, the Federal law prevails. NSMIA formalized this structure by defining: •Federal Covered Securities - securities registered with the SEC that cannot be required to be registered with the State (but the State can require a "notice" filing). Essentially, these are exchange and NASDAQ listed issues. •Federal Covered Advisers - investment advisers that are registered with the SEC that cannot be required to be registered with the State (but the State can require a "notice" filing). These are investment advisers to investment companies and advisers with $100,000,000 or more of assets under management. •Activities That State Law Cannot Preempt - broker-dealer net capital requirements, custody rules, margin rules, financial responsibility rules and recordkeeping rules (all set by the SEC or FRB) cannot be preempted by State rules. However, States are specifically permitted to retain the right to require notice filings; require registration of broker-dealers and their agents; require the registration of advisers with less than $100,000,000 of assets under management; require the registration of all investment adviser representatives (whether the investment adviser is "federally covered" or not); and the State is empowered to "investigate and bring enforcement actions with respect to fraud or deceit; or any unlawful conduct by a broker or dealer or investment adviser; in connection with securities or securities transactions."

Under the Uniform Securities Act, an unregistered agent would be permitted to sell: I ownership interests in real estate limited partnerships II fractional ownership interests in a mining company III certificates of deposit issued by a federally chartered bank IV shares of a federally chartered credit union StatusA A. I and II only StatusB B. III and IV only Correct C. III only StatusD D. I, II, III, IV

The best answer is C. The question does not say whether this is an unregistered agent of a broker-dealer or of an issuer, but we presume that since this is a broker-dealer agent's exam, that this is where the question is directed. To sell a "security," the agent must be registered in the State. It makes no difference if the security is exempt or non-exempt. Choices I and II are non-exempt securities, while Choice IV is an exempt security. Even though shares of a federally chartered credit union are exempt from State registration, the agent selling them must still be registered. Choice III is NOT a security - it is a bank product. There is no licensing requirement to offer bank certificates of deposit, since their purchasers are protected by the banking laws.

An investment adviser in State A has an investment adviser representative who gives advice to his client, a bank, in State B. When would the investment adviser representative (IAR) be required to be registered in State B? StatusA A. The investment adviser representative would never be required to register in State B because the investment adviser representative is already registered in State A StatusB B. The investment adviser representative would have to register in State B when the firm has 3 other clients in State B Correct C. The investment adviser representative would have to register in State B when the investment adviser opens an office in State B StatusD D. The investment adviser representative would have to register in State B if he or she has 3 clients in State A and 3 clients in State B

The best answer is C. This IAR is physically in State A, so he or she must be registered there. Since the investment adviser (the firm) has no office in State B, and the IAR's client is a bank (an institutional investor), neither the IA nor the IAR are required to register in State B. If the IA opens an office in State B, then it has a physical presence there and both the IA and IAR would be required to register. The "de minimis" exemption allows an adviser with no office in a State, that has 5 or fewer non-institutional clients in a State, to do business without registration. Thus, this IA and IAR would also be required to register in State B if the firm had no office in the State, but the adviser had more than 5 non-institutional clients in State B. In both Choices B and D, this threshold is not met.

Which of the following persons would be defined as "sales representatives"? I A clerical employee of a broker-dealer who does not effect securities trades and does not receive commissions II A clerical employee of a broker-dealer who effects securities trades and receives commissions III A partner of a broker-dealer who does not effect securities trades and who receives commissions IV A partner of a broker-dealer who effects securities trades and who does not receive commissions StatusA A. I and II only StatusB B. III and IV only Correct C. II and IV only StatusD D. II and III only

The best answer is C. To be defined as an "agent" under the Uniform Securities Act, an individual must take, or solicit, orders from the public. Individuals who do not solicit the public or who solely perform clerical or managerial duties, do not fall under the definition. It makes no difference how that person is compensated, when determining if they fall under the definition of an "agent."

Under the Uniform Securities Act, a person is excluded from the definition of an investment adviser if he or she gives advice solely about: StatusA A. stocks StatusB B. municipal bonds Correct C. fixed annuity contracts StatusD D. variable annuity contracts

The best answer is C. To be defined as an investment adviser, one must give advice about securities for a fee. A fixed annuity contract is not defined as a security - rather, it is an insurance product. Thus, a person who gives advice about insurance products is not defined as an investment adviser. In contrast, stocks, municipal bonds, and variable annuities are all defined as securities. Anyone who gives advice about these for compensation is defined as an investment adviser. (Also note, however, that if a person gives advice only about U.S. Government obligations, they are a Federal covered adviser that is excluded from registration at both the Federal and State level.)

A director of a broker-dealer that is registering for the first time in a State: StatusA A. is not permitted to register as an agent in that State StatusB B. must apply separately for registration as an agent StatusC C. must request that the broker-dealer file a registration for the individual to be agent Correct D. will be automatically registered as an agent at the time that the broker-dealer is registered

The best answer is D. Included in a State registration application are the names, addresses and background of the officers of the broker-dealer, and these individuals become automatically registered when the broker-dealer entity becomes registered in the State. This is part of State law because the qualifications and business history of the officers and directors is disclosed in the application for the BD registration, so there is no need to have the same information filed twice with a separate registration for these persons to be agents of the BD. The way that most States handle this is when the registration application for the BD is processed, the officers are automatically registered as agents at the same time in CRD (Central Registration Depository); the fees for registration as an agent in the State are automatically deducted; and a window is opened for them to take the appropriate exams as needed (e.g., #63 or #66). Thus, the State gets its money up front! If the officer or director will not be acting as an agent of the BD (e.g., that person has no sales responsibility), he or she can "opt out" of automatic registration (which happens after the fact) and the BD will be refunded the fee.

States are NOT permitted to require the registration of a person: I who is excluded from the definition of an investment adviser under the Investment Advisers Act of 1940 II who is registered with the Securities and Exchange Commission as an investment adviser III with no place of business in the State who gives investment advice to fewer than 6 clients who are residents of the state during the preceding 12 months StatusA A. I only StatusB B. I and II StatusC C. II and III Correct D. I, II, III

The best answer is D. The intent of the National Securities Markets Improvement Act of 1996 was to eliminate duplicate registration of investment advisers at both the Federal and State levels. Thus, any federal covered adviser is exempt from State registration - only Federal registration with the SEC is required under the Investment Advisers Act of 1940. Federal covered advisers are defined as investment advisers managing $100,000,000 or more of assets; investment advisers to investment companies; and any person who is excluded from the definition of an investment Adviser under the 1940 Act. Thus, Choice I is not required to register in the State since it is excluded from registration with the SEC as a federal covered adviser. Choice II is not required to register with the State since it is already registered with the SEC. Choice III is not required to register with the State under the Uniform Securities Act's "de minimis" exemption.

Under the Uniform Securities Act, a sole proprietor who provides advice for compensation about fixed income annuity contracts: StatusA A. must register as an agent Incorrect Answer B. must register as an investment adviser StatusC C. must register as a broker-dealer Correct Answer D. need not register

The best answer is D. A person who gives advice about securities for a fee must register as an investment adviser in a State. Since this person is giving advice about fixed annuity contracts (which are an insurance product - they are NOT a security) - there is no requirement for this person to register as either an investment adviser, broker-dealer, or agent, in the State.

Under the Uniform Securities Act, a person could give advice about all of the following securities without having to register in the State as an investment adviser EXCEPT: StatusA A. Treasury Bonds StatusB B. Ginnie Mae Pass-Through Certificates StatusC C. Fannie Mae Debentures Correct D. State General Obligation Bonds

The best answer is D. A person who gives investment advice relating solely to U.S. Government securities (including Agency securities), is excluded from Federal registration under the Investment Advisers Act of 1940. Any person excluded from registration with the SEC under the Investment Advisers Act of 1940 is a "federal covered adviser" and cannot be required to register in the State. Note that if the person gives advice about municipal bonds (Choice D), that person is not excluded and must register.

Which of the following persons is required to register as an investment adviser under the Uniform Securities Act? StatusA A. An attorney who writes a legal opinion included in the registration statement filed with the State for a new non-exempt securities offering StatusB B. A broker-dealer who gives investment advice in the regular course of business executing transactions for customers StatusC C. An agent of a broker-dealer who gives investment advice as part of his or her regular duties and who charges a fee for such advice Correct D. A broker-dealer that charges an annual flat fee to customers for both investment advice and portfolio trade executions

The best answer is D. An attorney that renders a legal opinion is not giving advice about investing in securities - the opinion covers the validity and legality of the securities offering. A broker-dealer is not considered to be an investment adviser unless it charges separately for advice. If the broker-dealer's compensation comes solely from commissions, then the broker-dealer does not fall under the investment adviser definition. On the other hand, if a broker-dealer offers an account that charges a flat fee or a fee as a percentage of assets - this is a "wrap" account that is an advisory product and registration at the State level as an adviser is required (thus, Choice D would have to register in the State as an investment adviser). Regarding Choice C, be careful! Choice C defines an "investment adviser representative" that would have to register at the State level - it does not define an "investment adviser."

Under the Uniform Securities Act, all of the following statements are true EXCEPT an individual: StatusA A. representing an issuer in an exempt transaction is not defined as an agent StatusB B. who is a clerical employee in a broker-dealer is not defined as an agent StatusC C. who is a silent partner of a broker-dealer is not defined as an agent Correct D. representing a broker-dealer in an exempt transaction is not defined as an agent

The best answer is D. An individual who represents a broker-dealer in effecting any trade (whether exempt or non-exempt) falls under the definition of an "agent" and therefore must register. Excluded from the definition of "agent" are individuals who represent ISSUERS in trading exempt securities; clerical employees of broker-dealers with no sales function; and silent partners of broker-dealers (who have no active business role and don't solicit).

All of the following are EXCLUDED from the definition of an agent EXCEPT an individual who represents the issuer in the: StatusA A. sale of municipal securities to the public StatusB B. private placement of common stock StatusC C. sale of common stock to the issuer's employees Correct D. sale of federal covered common stock to the public

The best answer is D. Excluded from the definition of an agent are individuals who represent issuers (not broker-dealers) in: •Sales of specified exempt securities such as Treasury, Agency and Municipal debt (but not all exempt securities); •Exempt transactions, such as the sale of securities only to institutions or underwriters or private placements as defined under State law; •Sales of specified covered securities (basically private placement issues and sales to persons with investment assets of at least $5,000,000 and investment managers handling assets of at least $25,000,000) - however if the individual is selling federally covered "nationally traded" securities or investment company securities, he or she must register as an agent; and •Sales of securities to employees of that issuer if no remuneration is paid - (the example here is a corporate employee who places company stock into employee 401(k) accounts). In these transactions, either the security being sold is extremely safe (such as governments, agencies or municipals); or the sale is not being made to the general public. If the individual is representing an issuer selling a security that must be registered, including federal covered "nationally traded" stocks and investment company issues, that person must be registered in the State as an agent.

Under the Uniform Securities Act, which of the following persons with no place of business in a State is EXCLUDED from the definition of an "Investment Adviser"? StatusA A. A person who gives advice for a fee about public utility mortgage bond issues StatusB B. A person who gives advice for a fee about municipal securities StatusC C. An insurance company that renders advice about securities for a fee to its clients Correct D. A trust that receives special compensation for rendering advice about securities

The best answer is D. Excluded from the definition of an investment adviser are: •Investment Adviser representatives (agents) •Depository Institutions (banks, savings and loans, trusts) •Professionals (accountants, lawyers, teachers, engineers, whose performance of these services is wholly incidental to their professional practice) •Broker-dealers •Newsletters that give general investment advice •Federal covered advisers Thus, the trust company (Choice D) is excluded from the definition of an investment adviser. Note that none of the other choices fits the definition of a Federal covered adviser, and that insurance companies that give advice (Choice C) are not afforded an exclusion.

For initial registration as an agent in a State, all of the following are required EXCEPT: StatusA A. Consent to Service of Process StatusB B. Filing Fee StatusC C. Registration Application Correct D. Government Issued Photo I.D.

The best answer is D. In an initial registration with the State, a consent to service of process must be filed, in addition to the registration application (which can include fingerprints) and any filing fees designated by the Administrator. There is no requirement for a Government issued photo ID to be registered.

Which of the following investment advisers are NOT required to register in a State? I An investment adviser with at least $100,000,000 of assets under management registered with the SEC under the Investment Advisers Act of 1940 II An investment adviser with no place of business in the State who deals solely with financial and institutional investors III An investment adviser with no place of business in the State who deals solely with broker-dealers IV An investment adviser with no place of business in the State who has no more than 5 clients in that State over the last 12 months StatusA A. II and III only StatusB B. I, II, and III only StatusC C. II, III and IV only Correct D. I, II, III, IV

The best answer is D. Investment advisers that are exempt from registration include advisers with no place of business in the State who deal solely with other advisers, broker-dealers, insurance companies, investment companies, financial and institutional investors, and government agencies. Also, advisers with no place of business in the State that have no more than 5 clients in a 12 month period are exempt. Investment advisers with at least $100,000,000 of assets under management must register with the Securities and Exchange Commission but are excluded from state registration (to avoid duplicate regulation). Advisers with less than $100,000,000 under management must register with the State, but are not required to be registered with the SEC. The idea is that the big advisers are regulated by the Feds; while the little advisers are regulated by the local police. Note that, in contrast, broker-dealers that are registered with the self-regulatory organization under the Securities Exchange Act of 1934, such as FINRA, must still register in each State.

Which of the following would be defined as an "agent" under the Uniform Securities Act? I A firm that only sells municipal securities of that State to residents of that State II A salesperson who only sells federal covered securities to residents of that State III A wholly owned subsidiary of a bank that is registered as a broker-dealer in the State IV A sales assistant who takes orders from clients when the agent is unavailable

The best answer is D. To cut through the clutter here, an agent is always an individual, whereas a firm is always a broker-dealer (or an investment adviser). In Choices I and III, the firms are broker-dealers, In Choices II and IV, the individuals are agents who effect securities transactions (it makes no difference if the securities involved are federal covered). Regarding the sales assistant, once he or she takes orders for securities, he or she is an agent.

Under the Uniform Securities Act, which of the following are EXCLUDED from the definition of an investment adviser? I Teacher II Engineer III Lawyer IV Accountant StatusA A. I and II only StatusB B. III and IV only StatusC C. II, III, IV Correct D. I, II, III, IV

The best answer is D. Specifically excluded from the definition of an investment adviser under the Uniform Securities Act are lawyers, accountants, teachers, and engineers who give advice about securities that is incidental to their professional practice.

State "blue sky" laws provide for registration of: I broker-dealers II agents III investment advisers IV investment adviser representatives StatusA A. I only StatusB B. I and III StatusC C. II and IV Correct D. I, II, III, IV

The best answer is D. State blue sky laws provide for registration of broker-dealers and agents; registration of investment advisers and investment adviser representatives; and registration of securities issues.

Which individual would NOT be exempt from the definition of an "agent" under the Uniform Securities Act? StatusA A. An employee of a corporation who processes 401(k) contributions, issuing shares of the company's stock to the company's employees StatusB B. An issuer official of the City of Pittsburgh who authorizes the sale of a new issue of general obligation bonds to the public StatusC C. An officer of a privately held company who authorizes the sale of shares of the company to an underwriter Correct D. An officer of a publicly held company who offers the company's bonds, which are rated AA by an NSRO, to the public

The best answer is D. The Act defines individuals who represent issuers effecting securities transactions with the public as "agents" who must be registered. Thus, Choice D meets this definition. The Act exempts from licensing as an "agent," those individuals who do not deal with the public. Thus, individuals representing issuers who deal solely with underwriters or financial institutions are not defined as "agents" who must be registered. Also, individuals who represent issuers of exempt securities (governments, agencies, municipals) offering these securities to the public, are exempt from State registration. Finally, an individual who represents an issuer in selling securities of that issuer to that issuer's employees (as long as no commissions are paid) is not considered to be an agent. This would be the company employee that processes 401(k) contributions and distributions.

registration application is considered to be "complete" when the proper documents: StatusA A. are sent to the Administrator StatusB B. and the filing fee are sent to the Administrator StatusC C. are received by the Administrator Correct D. and the filing fee are received by the Administrator

The best answer is D. The State will define a registration application as "complete" when the proper documents and payment are received (not sent). Remember, they want their money!!!

The Uniform Securities Act covers: I Registration of securities in each State II Registration of broker-dealers in each State III Registration of investment advisers in each State IV Registration of agents of broker-dealers and investment advisers in each State StatusA A. I and II StatusB B. III and IV StatusC C. II, III, IV Correct D. I, II, III, IV

The best answer is D. The Uniform Securities Act, as adopted in each State, covers the registration of broker-dealers and their agents; investment advisers and their agents; and securities that are sold in the State.

At the initial registration of a broker-dealer, which of the following individuals would automatically be registered as an agent of that broker-dealer? I Officer of the broker-dealer II Director of the broker-dealer III Partner of the broker-dealer StatusA A. I only Incorrect Answer B. III only StatusC C. I and II Correct Answer D. I, II, III

The best answer is D. The registration of a broker-dealer automatically constitutes the registration of that firm's officers, partners, and directors as agents since all of these individuals are named in the registration document.

Under the provisions of the Uniform Securities Act, all of the following statements are true about an investment adviser's initial registration EXCEPT: StatusA A. if no denial order is in effect and no proceeding is pending, registration becomes effective at noon of the thirtieth day after an application is filed StatusB B. the Administrator may, by rule or order specify an earlier effective date than the thirtieth day after an application is filed StatusC C. the Administrator may, by order defer the effective date until noon of the thirtieth day after the filing of any amendment Correct D. if no denial order is in effect and no proceeding is pending, the Administrator must give immediate effectiveness to the application if the registrant is transacting business in the state as a registered broker-dealer

The best answer is D. The wording in the Uniform Securities Act is that: "If no denial order is in effect and no proceeding is pending, registration becomes effective at noon of the thirtieth day after an application is filed." It then goes on to say that: "The Administrator may by rule or order specify an earlier effective date and may by order defer the effective date until noon of the thirtieth day after the filing of any amendment." Choice D is a bunch of nonsense!

All of the following investment advisers with no office in a State are exempt from registration in that State under the Uniform Securities Act EXCEPT an adviser StatusA A. that has 1 or 2 customers in that State StatusB B. whose only customers in that State are trust companies StatusC C. whose only customers in that State are insurance companies Correct D. whose only customers in that State are investment clubs

The best answer is D. Under the Uniform Securities Act, an adviser with no office in the State that only communicates with investment clubs in a State is not exempt. Investment clubs are composed of individual investors - and these are the people that the law seeks to protect by requiring adviser registration. If an adviser with no office in the State has 5 or fewer clients in the State within a year, it is exempt. If the adviser, who has no office in the State, only deals with investment professionals, such as insurance companies, investment companies, banks, trusts, etc., it is exempt as well.

Which of the following individuals would NOT be defined as an investment adviser representative? StatusA A. An independent contractor hired by the advisory firm that is not an employee of the adviser who is being paid to solicit clients for the adviser StatusB B. A partner in the advisory firm that has no role in the management of customer accounts, but who heads up research at the firm and regularly meets with sales employees to discuss the firm's latest recommendations that could be made to clients StatusC C. A compliance officer of the investment adviser who is responsible for supervising the legal aspects of the sales activities of the firm's representatives Correct D. A supervising financial officer of the investment adviser that is responsible for supervising the preparation of the firm's financial statements and the firm's customer account statements

The best answer is D. Under the Uniform Securities Act, an investment adviser representative is any partner, officer, director or other individual employed by an investment adviser who: •Makes recommendations or renders advice regarding securities; •Manages accounts or portfolios of clients; •Determines which recommendations or advice regarding securities should be given; •Solicits, offers, or negotiates for the sale of investment advisory services; or •Supervises employees who perform any of the functions listed above. Note that it makes no difference if the individual employed is an "employee" or an "independent contractor." Clearly, both Choices A and B fit the definition. Choice D clearly does not meet the definition - the financial officer does not perform any of the functions listed - and is the correct answer. Choice C is "iffy" but since the compliance officer is supervising the legal aspects of sales activities, we will include him or her in the definition of investment adviser representative (though a good argument can be made that this person is not included). However, Choice D is clearly the best of the choices offered.