Unit 11 Series 65
Under the Uniform Securities Act, an individual does not meet the definition of an agent if he is employed by a broker-dealer and only: A) represents the broker-dealer in effecting transactions between the issuer and underwriter. B) serves as a partner, officer, or director of the firm with full-time responsibilities in back office management. C) accepts unsolicited orders. D) trades for the firm's market-making account.
Broker-dealer employees who have only administrative or operational duties are not defined as agents under the USA. Any type of sales activity by an employee of a broker-dealer would require that individual to be registered as an agent. LO 11.d B
Under the USA, the Administrator may do all of the following except A) mandate the method used to maintain and file records. B) take jurisdiction over any person who sells or offers to sell either when the offer is made in the state or when an offer to buy is made and accepted in the state. C) conduct hearings in public, unless—at the Administrator's discretion and with agreement of all parties—the Administrator decides otherwise. D) prescribe form and content of financial statements required under the act.
The Uniform Securities Act does not grant the Administrator the power to make any specific bookkeeping method mandatory. The only requirement is that the books and records must accurately reflect the nature of the firm's business. LO 11.e A
Which of the following must register as an agent under the Uniform Securities Act? A) A sales assistant who takes orders on behalf of agents in a branch office B) A broker-dealer with offices in the state C) An individual who sells securities of an issuer to the issuer's employees without earning a commission D) An administrative assistant who provides securities quotes to clients
A sales assistant who takes orders on behalf of agents in a branch office is required to register under the Uniform Securities Act. An administrative assistant who provides securities quotes to clients is not functioning as an agent and need not register. An individual who sells securities of an issuer to the issuer's employees without earning a commission need not register under the terms of the USA. Remember, a broker-dealer is excluded from the definition of an agent under the USA. LO 11.d A
Which of the following statements are true? An agent must register in the state in which he advertises and solicits a security. To make sales, an agent need not register in a state in which the broker-dealer is already registered. Under no circumstances may an agent register with two unrelated broker-dealers. A secretary for a broker-dealer who, as a courtesy, takes orders for the broker-dealer's clients must be registered. A) I and II B) I and IV C) II and III D) III and IV
An agent must be registered in the state in which a security is advertised and solicited. A secretary who takes orders for the broker-dealer's clients must be registered. If the state Administrator specifically grants an exception, an agent may be registered with two unrelated broker-dealers. The fact that a broker-dealer is registered in a state does not qualify the agent for sales unless he is also properly licensed in that state. LO 11.f B
Under the Securities Exchange Act of 1934, which of the following would not be considered associated with XYZ Corp., a broker-dealer? A) Robert, a client who owns 1,000 shares of XYZ's voting stock B) Arvin, one of XYZ's agents C) Paula, who is on XYZ's board of directors but who has no other connection with the firm D) Brian, an XYZ vice president
An associated person of a broker-dealer includes any partner, branch manager, officer, or director of a broker-dealer, including outside directors. It also includes employees such as account executives or sales representatives who are not clerks or ministerial personnel, and anyone who controls, is controlled by, or is under common control with the broker-dealer. Being a client of a broker-dealer or owning shares of the firm's stock does not make one an associated person, unless something in the choice indicated that this ownership put Robert into a position of control. A
Under federal law, an application for becoming an associated person of a broker-dealer would be denied for an individual A) who is not a citizen of the United States. B) convicted of a felony 122 months ago. C) pleading no contest to a misdemeanor involving a financial matter 65 months ago. D) accused of a securities-related felony 110 months ago.
An individual who is convicted of, or has pleaded guilty or no contest to, any felony or certain misdemeanors in the previous 10 years (120 months) is subject to statutory disqualification. Therefore, the misdemeanor involving a financial matter within the past 10 years is a cause for disqualification. A conviction made more than 10 years ago is part of the record but not cause for disqualification. One is presumed innocent until proven guilty, so merely being accused is not the same as being convicted. There is no requirement that a registrant be a U.S. citizen. LO 11.f C
Which of the following persons are excluded from the definition of, or exempt from registration as, a broker-dealer under the Uniform Securities Act? A broker-dealer with no office in the state that effects trades exclusively with other broker-dealers in the state A trust company with an office in the state that deals with the general public A broker-dealer with no office in the state that has no more than five retail clients resident in the state within the past year A broker-dealer with no office in the state that effects securities trades exclusively with trust companies or other broker-dealers A) I, II, and IV B) I and II C) I, II, III, and IV D) III and IV
As long as a broker-dealer does not have an office in the state, it is possible to qualify for exclusion from the definition. The primary requirement for the exclusion is that the broker-dealer confine trading to financial institutions or other broker-dealers. Unlike with investment advisers, there is no de minimis exemption for broker-dealers. Trust companies are excluded from the definition of broker-dealer. LO 11.b A
A Canadian broker-dealer is registered in Province Q. The firm has clients who vacation in several New England states, and they would like to continue to do business with them while on their holidays. Under the Uniform Securities Act, A) this is permissible if the broker-dealer is properly registered in Province Q, deals only with existing clients, and registers in each of the states where their clients are vacationing. B) this is permissible only if the broker-dealer is registered with the SEC. C) the broker-dealer may only accept unsolicited orders from their existing clients while they are vacationing in the United States. D) this would only be permitted if the trades were executed through an affiliated domestic broker-dealer who is licensed in those states.
Canadian broker-dealers and their agents must be registered in any state in which they wish to do business with exisiting clients who are temporarily in the state. The Uniform Securities Act provides for a form of limited registration for Canadian broker-dealers wishing to do business with their clients who are vacationing or otherwise traveling through the United States. In order to qualify for the limited registration, the broker-dealer must be properly licensed in its home province and its only dealing in the states is with an existing client. LO 11.f A
Creative Financial Solutions (CFS) is a broker-dealer registered with the SEC. CFS has its principal and only office in State A. CFS also does business with clients in State B. Which of these clients would cause CFS to have to register in State B? A) 4 retail clients residing in State B B) 6 banks doing business in State B C) 15 other broker-dealers D) 1 mutual fund registered with the SEC
Excluded from the definition of broker-dealer under the Uniform Securities Act is a broker-dealer with no place of business in a given state, whose clientele consists exclusively of other broker-dealers, financial institutions (banks, investment companies), or existing customers who are temporarily in the state. However, once the BD has even one retail (noninstitutional) client who resides in the state, registration is required. There is no de minimis exemption for broker-dealers (unlike investment advisers). LO 11.b A
Under the Uniform Securities Act, it is required to file an application with the Administrator to become a registered broker-dealer in the state. Which of these are among the disclosures that must be made on that application? The form of business organization to be used by the firm Any felonies or certain misdemeanors on the records of partners or officers Business history of the principals of the firm Financial information about the firm A) I, II, III, and IV B) I and II C) II, III, and IV D) I and III
Many disclosures have to be made, and this is just a partial list. This would be the same answer if the question asked about an investment adviser. LO 11.e A
Which of the following are required in order to be in compliance with the recordkeeping requirements of the Uniform Securities Act? Broker-dealers must maintain customer ledgers for three years. Investment advisers must keep partnership records for three years after the partnership is terminated. Agents must keep customer records for three years. Investment adviser representatives must maintain records for five years. A) I and II B) I, II, III, and IV C) II and IV D) III and IV
Recordkeeping requirements for broker-dealers are three years, and partnership articles and any amendments, articles of incorporation, charters, minute books, and stock certificate books of an investment adviser and of any predecessor shall be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise. There are no recordkeeping requirements for agents or IARs. LO 11.f A
An individual has been registered in State C and State D as an agent of a broker-dealer for the past three years. Due to a number of this agent's clients moving to State F, the agent registers there in early November. The individual's new registration in State F will expire A) on December 31 of the same year. B) on December 31 of the following year. C) automatically within 30 days after the withdrawal of registration if the state securities Administrator has initiated proceedings against the registrant. D) on every anniversary date of the initial registration.
State registration for all securities professionals expires on December 31 following the date of registration. The next December 31 after a November registration is December 31 of that same year. If the state Administrator initiates a proceeding, the withdrawal is put on hold until the results of the hearing are final. LO 11.f A
Under the National Securities Markets Improvement Act of 1996 (NSMIA), states are prevented from doing which of these? Registering securities Establishing capital and custody requirements that exceed those provided for in the Securities Exchange Act of 1934 Establishing recordkeeping requirements for broker-dealers or investment advisers that exceed those required under federal securities law Registering investment advisers A) III and IV B) I and IV C) II and III D) I and III
The NSMIA streamlined much of federal and state securities law and specifically prevented dual regulation. As a result, states may not impose capital, custody, and recordkeeping requirements that exceed requirements under federal securities law. States can register securities and investment advisers that are not covered by the registration requirements of federal legislation. LO 11.e C
If Brokers, Inc., a broker-dealer registered in this state, refuses to comply with the Administrator's order to retain records for two years longer than required by the Securities Exchange Act of 1934, which of the following statements are true? The securities Administrator cannot require registrants to retain books and records longer than required by the SEC. Brokers, Inc., is not in violation of the Securities Exchange Act of 1934. Both the securities Administrator and Brokers, Inc., are in violation of both the Securities Exchange Act of 1934 and the Uniform Securities Act. Brokers, Inc., must comply with orders issued by state securities regulators, whether or not the orders are in compliance with the NSMIA. A) II and IV B) II and III C) I and II D) I and III
The securities Administrator is in violation of the National Securities Markets Improvement Act of 1996 (NSMIA), which prohibits state securities regulators from establishing requirements in addition to those required by the Securities Exchange Act of 1934. LO 11.e C
Which of the following would be agents as the term is defined in the Uniform Securities Act? An individual representing a registered broker-dealer in the sale of securities to the general public An assistant to the president of a broker-dealer who accepts orders from clients on behalf of the senior partners A subsidiary of a major commercial bank registered as a broker-dealer that sells securities to the public An issuer of nonexempt securities registered in the state and sold to the general public A) I, II, and III B) III and IV C) I and II D) I, II, III, and IV
Under the USA, only individuals can be agents. A person who sells securities for a broker-dealer is an agent. An administrative person, such as the assistant to the president of a broker-dealer, is considered an agent if he takes securities orders from clients. Corporate entities are excluded from the definition of an agent. Broker-dealers and issuers are not agents. LO 11.c C
A broker-dealer registered with State A created a website two years ago to promote its services. Recently, they hired a new media person who totally redesigned the site. Under the recordkeeping requirements of the Uniform Securities Act, A) a copy of the original web page must be maintained for three years from original use. B) a copy of the new web page must be maintained for a period of three years from the first use of the original site. C) copies of both the original and the new web page must be maintained for five years after original use. D) there are no requirements for storage of electronic data.
Websites are treated as would be any other advertisement. So, the original site design is kept for three years, and whenever revised, the new copy is maintained and starts a new retention requirement for that copy. Therefore, you will likely have several different versions in your advertising file at the same time. LO 11.e A
If Wallace resigned his position as an agent with Rockland Securities to work for Gibraltar Securities, which of the following parties must notify the Administrator of Wallace's move? A) Rockland and Gibraltar B) Rockland, Gibraltar, and Wallace C) Wallace and Rockland D) Gibraltar and Wallace
When an agent with one broker-dealer resigns and affiliates with another, both broker-dealers and the agent must notify the Administrator of the change in registration. Notification is accomplished by filing Forms U5 and U4 with FINRA's CRD. LO 11.f B
GEMCO Securities, a registered broker-dealer, has a policy of hiring unpaid interns from top business schools. GEMCO is currently the lead underwriter on a new issue and has assigned three of its interns to specific tasks. One is entering the data as indications of interest are received, the second is calling clients to offer to deliver their prospectus via email instead of mail, and the third is calling clients to describe the new issue and accept indications of interest. Which of the interns would need to register as agents? A) The second and third interns would be required to register. B) Because they are not being compensated, none of the interns need to register. C) Only the third intern would have to register. D) All of the interns would need to register.
When an individual representing a broker-dealer contacts clients to obtain indications of interest for a new securities offering, that person is performing a function requiring registration as an agent. Employees of a broker-dealer, permanent or temporary, compensated or not, do not have to register if their only function is clerical or administrative. Compiling data is clerical, and following up with clients to determine how they wish to receive documents for a purchase they've already made is simply an administrative task. LO 11.d C
Anyone who represents an issuer in effecting transactions between the underwriter and the issuer A) is excluded from the definition of agent under the Uniform Securities Act. B) must be registered as an investment adviser. C) must be registered as an agent. D) must be registered as an administrator.
When an individual represents an issuer (not a broker-dealer), the Uniform Securities Act provides several exclusions from the definition of an agent. One of those is representing the issuer in an exempt transaction. LO 11.d A
All of the following statements regarding registration of broker-dealers under the Uniform Securities Act are true except A) a successor firm is exempt from paying registration fees until the renewal date. B) a successor firm is exempt from filing a consent to service of process until the renewal date. C) broker-dealers with discretion over client accounts may be required to post a surety bond. D) no broker-dealer can be required to meet financial requirements in excess of those of the SEC.
When one firm succeeds another, no fees are due until the renewal date. However, the successor firm must file a consent to service of process at the time it registers. Broker-dealers with discretionary authority may be required to post a surety bond or maintain minimum net capital. However, no state can impose financial or recordkeeping requirements that exceed those of the SEC. LO 11.e B
Included in the Uniform Securities Act's definition of broker-dealer would be A) issuers of securities. B) individuals who are registered as agents. C) savings institutions. D) a broker-dealer with a place of business in the state whose only clients are insurance companies.
When the firm has a place of business in the state, regardless of its clientele, it is a broker-dealer. Exclusions from the definition include agents, issuers, and most financial institutions, such as banks and savings institutions. Also excluded are broker-dealers with no place of business in the state who only deal with institutional clients, such as banks and insurance companies. LO 11.b D
As defined in the Uniform Securities Act, which of the following statements is true regarding an agent? A) An agent may be an individual or a firm. B) An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. C) If someone meets the definition of an agent, that person is exempt from registration requirements. D) An agent may be a broker-dealer.
The text in Section 401(b) of the Uniform Securities Act reads, "Agent means any individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities." There are cases where an individual representing an issuer would not be considered an agent, such as if the transaction is exempt, but that doesn't change the definition. LO 11.c B
