UNIT 2-STATE REGULATION UNDER USA-2.4 (REVIEW QUESTIONS)
General Registration Procedures- Although certain common stocks, known as federal covered securities, are exempt from state registration, the Administrator has the power to request from the issuer all of the following EXCEPT:
-a contact person located within the state for purposes of legal service. -The consent to service of process eliminates the need for any local representation for legal purposes.
General Registration Procedures-Registration as a broker/dealer under the USA would generally require all of the following EXCEPT:
-agreeing to provide the Administrator with quarterly financial statements. -There is no set schedule regarding financial reporting to the Administrator, who reserves the right to inspect a broker/dealer's books at any time. All of the other choices are usually found in the registration requirements of broker/dealers.
General Registration Procedures States may require a surety bond as a prerequisite to registration under the Uniform Securities Act for each of the following EXCEPT a(n):
-issuer. -The common requirements are to pay filing fees, post a surety bond, and consent to service of process for all three of these designations. For broker/dealers and state registered investment advisers, an additional net capital or net worth requirement has to be met.
General Registration Procedures The Administrator may require registered broker/dealers to comply with all of the following EXCEPT:
-renewal of registration semiannually. -Registrations are renewed annually. The Administrator may require registered broker/dealers to file advertisements, sales literature, and financial reports. The Administrator may require that records created by the broker/dealer be maintained for any period of time; 3 years is the most common requirement for registered broker/dealers.
General Registration Procedures Under the Uniform Securities Act, which of the following statements regarding the consent to service of process are TRUE?
A consent to service of process grants legal authority for the Administrator to receive legal notices on behalf of the registrant. All applicants for registration must file a consent to service of process regardless of whether they are in-state or out-of-state advisers.
General Registration Procedures According to the Uniform Securities Act, a consent to service of process must accompany which of the following?
A broker/dealer, an agent, an investment adviser representative, or a state registered investment adviser must file a consent to service of process with the Administrator upon filing a registration application. The consent to service of process gives the Administrator the right to process legal complaints against the applicant. In some states, a federal covered adviser may also be required to furnish a consent to service of process
General Registration Procedures A consent to service of process required by an Administrator is a(n):
A consent to service is a formal legal agreement whereby a registrant will be bound by a legal action or subpoena served on the Administrator as if it had been served on the registrant. A consent to service is not an authorization to issue an injunction.
General Registration Procedures Which of the following statements relating to the registration requirements of investment advisers is TRUE?
A registration is effective at noon, 30 days after the application has been filed if there is no denial or stop order in process. Registrations of securities professionals expire on December 31, unless renewed. If an amendment to the registration is subsequently filed, the registration becomes effective 30 days, not 15 days, after the amendment is filed; filing the amendment starts the process anew.
General Registration Procedures Under the Uniform Securities Act, the Administrator may NOT do which of the following?
Administrators cooperate with Administrators of other states in conducting investigations.
General Registration Procedures Which of the following is required to effectuate annual renewal of the registration of an investment adviser representative affiliated with a federal covered adviser?
All investment adviser representatives are registered with the states, not the SEC. Renewal requires the payment of the annual renewal registration or licensing fee. The consent to service of process is a permanent document submitted with the initial application for registration.
General Registration Procedures Under the Uniform Securities Act, a state registered investment adviser's records may be examined by the Administrator or his designee:
All records must be available for examination by the Administrator at any time during regular business hours, within or outside the state.
General Registration Procedures- Which of the following statements regarding the Administrator's authority to examine the books and records of registrants is TRUE?
All required records must be made available for examination by a state Administrator, within or outside the state, as is appropriate or necessary in the public interest.
General Registration Procedures Under the USA, agent registrations expire:
Every agent, broker/dealer, investment adviser, and investment adviser representative registration expires each year on December 31.
General Registration Procedures The agreement that the Administrator can receive subpoenas on behalf of a registered agent, broker/dealer, or investment adviser involved in any securities sale that violates the Uniform Securities Act is the:
Every applicant for registration and every issuer must file an irrevocable consent to service of process appointing the Administrator as attorney to receive service of any lawful process in any civil suit, action, or proceeding. It has the same legal effect as if the person had been served personally.
General Registration Procedures- Alex Alexander is planning on registering as an agent for a broker/dealer. Which of the following would be the least likely requirement for a successful application?
Fingerprints are not a specific requirement of the Uniform Securities Act.
General Registration Procedures ABC Advisers, Inc., has made application for registration as investment adviser with state X on April 15, 2014. Assuming there will be no denial or stop order, the registration will become effective:
If no denials or stop orders are in effect and there are no pending proceedings, a registration will automatically take effect at noon on the 30th day after the application was filed.
General Registration Procedures Under the Uniform Securities Act, if not denied, an application for registration as investment adviser will generally become effective how soon after filing?
If not denied and no disciplinary proceedings are instituted, an application for registration becomes effective at noon on the 30th day after being filed
General Registration Procedures How quickly must a broker/dealer notify the Administrator if material information relating to that broker/dealer's registration should change?
If the information contained in any document filed with the Administrator is or becomes inaccurate or incomplete in any material respect, the registrant must file a correcting amendment promptly.
General Registration Procedures Under the Uniform Securities Act, it is required to file an application with the Administrator to become a registered broker/dealer in the state. Among the disclosures that must be made on that application are:
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.
General Registration Procedures According to the Uniform Securities Act, after an agent passes the Series 66 exam and the Series 7 exam, asset-based compensation is permitted
Passing the Series 7 licensing exam qualifies an individual to solicit securities but not to receive asset-based compensation. Once the Series 66 has been passed, the state Administrator must actually issue a registration, and the individual must be associated with an investment adviser before engaging in asset-based compensation in a particular state.
General Registration Procedures Under the Uniform Securities Act, if no denial or proceedings are pending, when does an investment adviser registration become effective?
Registrations become effective at noon on the 30th calendar day after the date of filing if there are no denial orders or pending proceedings.
General Registration Procedures- XYZ Securities Co. is simultaneously registering as a broker-dealer with the SEC and several states. Which of the following statements regarding its registration under the Uniform Securities Act is CORRECT?
State registration for all categories of securities professionals expires on December 31 of each year. It is securities that register using coordination, not securities professionals.
General Registration Procedures During the application process for registration as an agent, the Administrator may request information about the applicant's:
The Administrator asks all registrants about their proposed method of doing business. Individual registrants may be asked about their citizenship. Non-securities misdemeanors are not relevant and financial condition is only a requirement for broker/dealers and investment advisers.
General Registration Procedures- Except as limited by the Securities Exchange Act of 1934, the state securities Administrator may require, by rule or order, that broker/dealers make or maintain which of the following records?
The Administrator may require broker/dealers to keep and maintain account ledgers, correspondence, papers and memoranda, and blotters and books provided the state requirements do not exceed federal requirements under the Securities Exchange Act of 1934.
General Registration Procedures- The Uniform Securities Act does NOT require registered broker/dealers to:
The USA specifies that most broker/dealer records must be maintained for three years.
General Registration Procedures Broker/dealers, investment advisers, and agents must renew their licenses with the state Administrator:
Under the Uniform Securities Act, registrations must be renewed every December 31. Registrations are not permanent and can be denied, revoked, or canceled according to the terms of the act.
General Registration Procedures Unless renewed, registrations of associated persons of a broker/dealer under the Uniform Securities Act expire:
Registrations under the Uniform Securities Act expire every December 31 unless they are renewed.
General Registration Procedures All of the following statements regarding the registration of an investment adviser in a state are true EXCEPT:
- the annual renewal process involves payment of the appropriate fees and refiling of the consent to service of process. -The consent to service is a permanent document that remains on file with the Administrator; it need not be resubmitted for yearly renewal. The initial application for registration must include a consent to service of process along with Form ADV and the appropriate fees. If the investment adviser is not an individual, all officers or partners of the business entity that play an active role in the giving or supervision of giving advice are automatically registered as IARs.
General Registration Procedures- Each of the following statements about postregistration provisions is true EXCEPT:
- the securities Administrator does not have the authority to conduct an on-site examination of an investment adviser registered in his state if the adviser does not have an office in that state. -Administrators have the authority to conduct an on-site examination of a registered investment adviser even if there is no place of business maintained in the Administrator's state. Under the Act, Administrators may require the filing of advertising used by broker/dealers and investment advisers, who must also comply with certain recordkeeping requirements and file correcting amendments.
General Registration Procedures- Having received an offer of a large hiring bonus, an agent of XYZ Securities, a broker/dealer registered in the state, wishes to terminate her registration and register with ABC Investments, Inc., a different broker/dealer in her state. Under the requirements of the Uniform Securities Act, which of the following statements regarding notification to the Administrator is NOT true?
-Only the agent needs to notify the Administrator. -Termination of an agent's registration with the state requires both the agent and the employing broker/dealer to notify the Administrator. When going to a new firm, the new employer must give notice as well. An agent can rely on the firms to give notification because failure to do so is a prohibited practice on their part and can lead to disciplinary action. Unlike a successor firm, any time an agent changes broker/dealers, a new licensing fee is due.
General Registration Procedures- Which of the following statements is NOT true regarding the authority of the Administrator under the Uniform Securities Act?
-The Administrator may not examine the records of a broker-dealer without seeking a court order from a federal court. -The Administrator has inspection power to view all records within or outside the state as is appropriate or necessary in the public interest, without seeking court approval Administrators may require minimum capitalization as a condition of registration. The Uniform Securities Act states that the Administrator may, by rule, provide for an examination, which may be written or oral or both, to be taken by any class of or all applicants. As a practical matter, an oral examination would apply to the business entity (broker-dealer or investment adviser) while written examinations are taken by agents and investment adviser representatives. The Administrator is also given the authority by the act to require the filing of financial reports regarding the net worth of the firm.
General Registration Procedures Each of the following requirements is common to the registration of agents, investment adviser representatives, state registered investment advisers, and broker/dealers under the Uniform Securities Act EXCEPT:
-the registration for all is two years in length. -Registrations of persons renew annually each December 31st.
General Registration Procedures Under the USA, a person who has passed the appropriate NASAA examination but whose license is pending may participate in:
A person who has passed the NASAA exam cannot transact business until the Administrator notifies the employer that the registration is effective.
General Registration Procedures Which of the following are required to provide a consent to service of process to the Administrator in a state in which registration is sought?
Every legal or natural person seeking registration or making a notice filing must supply a consent to service of process with their registration applications. For example, a federal covered investment company, while covered under federal law, need not register with the state administrator but must submit notice filings materials that include a consent to service of process.
General Registration Procedures- An individual wishing to register as an agent with a broker/dealer may have to:
In almost all cases, an individual wishing to register as an agent must pass an examination. Many Administrators require that all agents post a bond, whereas others only require bonding for those with investment discretion in customer accounts. Minimum net capital requirements apply to broker/dealers, not agents.
General Registration Procedures- Under the Uniform Securities Act, which of the following is TRUE regarding registration of investment adviser representatives?
In general, representatives are not automatically registered when they become employed by an adviser. To register, they must file an application, a consent to service of process, and a filing fee. Registration is not effective during any period when the representative is not employed by a registered adviser, and the Administrator must be notified when a representative's employment begins or ends. Representatives must be registered in each state in which they do business.
General Registration Procedures An agent terminates his association with broker/dealer A and begins to work for broker/dealer B. Under the Uniform Securities Act, which of the following must take place?
In the event an agent transfers from one broker/dealer to another broker/dealer, all three (the former employer, the new employer, and the agent) must report the transfer to the Administrator.
General Registration Procedures Under the Uniform Securities Act, when must a consent to service of process be filed with the Administrator?
Initial applications for registration must be accompanied by a consent to service of process. This document becomes a permanent part of the application and appoints the Administrator to accept subpoenas on behalf of the applicant.
General Registration Procedures- It is a violation of the Uniform Securities Act if an agent:
It is a violation of the Uniform Securities Act to file a fraudulent or misleading application for registration as a securities industry professional (agent, broker/dealer, or investment adviser). An agent may always make material representation in the sale of a security; it is a material misrepresentation that is not permitted. An unregistered security may be sold in an exempt transaction and an exempt security does not need registration. One of the few things that does not have to be disclosed to clients is a commission sharing arrangement with another agent in the office.
General Registration Procedures Which of the following statements regarding agent registration under the Uniform Securities Act are TRUE?
Normally, registration of persons becomes effective at noon of the 30th day following filing. If the Administrator requires the filing of amendments, the clock starts over again with the filing of those amendments. Agents do not have financial requirements and the Administrator has a maximum of one year after termination to initiate any actions.
General Registration Procedures- Which of the following statements regarding broker/dealer registration under the Uniform Securities Act are TRUE?
Normally, registration of persons becomes effective at noon of the 30th day following filing. If the Administrator requires the filing of amendments, the clock starts over again with the filing of those amendments. Broker/dealers have financial requirements, and the Administrator has a maximum of 1 year after termination to initiate any actions.
General Registration Procedures A broker/dealer registered in multiple states must meet the record retention requirements of:
One of the effects of the NSMIA was to establish the pre-emption of federal law over state law. A broker/dealer registered in multiple states is going to be registered with the SEC as well. NSMIA amended the Securities Exchange Act of 1934 (the 34 Act) to add section 15(h)(1) which reads as follows: "No law, rule, regulation, or order, or other administrative action of any State or political subdivision thereof shall establish capital, custody, margin, financial responsibility, making and keeping records, bonding, or financial or operational reporting requirements for brokers, dealers, municipal securities dealers, government securities brokers, or government securities dealers that differ from, or are in addition to, the requirements in those areas established under this title." However, had this question been dealing with an investment adviser registered on the state level, then it would have been the requirements of the state where the principal office of the adviser is located.
General Registration Procedures When an individual has successfully passed the Series 66 examination, he can:
Passing an exam is a prerequisite to a license, not a license in and of itself. To be licensed, an individual must also file a Form U-4, pay a state licensing fee, and pass a background check. This individual can only solicit investment advisory services when these additional requirements have been met and the Administrator has actually issued the individual a license.
General Registration Procedures- An individual who has passed the NASAA examination for registration as an investment adviser representative may begin soliciting advisory clients:
Passing the exams does not automatically give one an effective investment adviser representative's license. Notice is received by the investment adviser from the appropriate state and/or federal authorities and then, in accordance with that firm's procedures, advisory activity may start. The Administrator does not have direct contact with the individual.
General Registration Procedures- Kapco Advisers registers with the Administrator on April 1. Pete Patel, an IAR with Kapco, registers on the same day. Both of them file renewal papers, accompanied by the appropriate fees, on March 31 of the following year. Which of the following statements are TRUE?
Regardless of when initial registration occurs, the renewal date for all professionals is December 31.
General Registration Procedures Under the Uniform Securities Act, if the Administrator does not deny an application for registration and no disciplinary proceeding is underway in regard to it, how many days after filing the application as an investment adviser representative does registration generally become effective?
Registration becomes effective 30 days after the application is filed unless the Administrator begins a proceeding or issues a stop order before that time. The Administrator may specify an earlier date, or if an application must be amended, the Administrator may extend the date to 30 days after the amendment was filed.
General Registration Procedures- Advanced Wealth Management, Inc., (AWM) is a new investment adviser that registers with the Administrator on February 1, 2011. Sarah Sawyer registers as an IAR of AWM also on February 1, 2011. Both AWM and Sarah renew their registrations on January 31, 2012. Which of the following statements properly describes their registration status?
Registration of all securities professionals expires on December 31. Failure to renew by that time leads to a lapse. Once a registration lapses, a new registration is required.
General Registration Procedures Under the Uniform Securities Act, an agent's license is effective for:
Registrations expire annually on December 31 unless renewed. The initial license will, obviously, be for less than one year.
General Registration Procedures A registration of an agent of a broker/dealer is in effect until:
Registrations for broker/dealers, agents, investment advisers, and investment adviser representatives expire on December 31 of each year unless renewed.
General Registration Procedures An investment adviser is registered in States A and B with their principal office in State B. The Administrator of State A can request to see:
The Administrator of State A can request that advertisements placed in his state be filed because that is business relating to his state. As long as the IA meets the "home" state's financial and recordkeeping requirements, that is good everywhere.
General Registration Procedures What document must accompany an initial registration application for those individuals required to register under the Uniform Securities Act?
The USA requires that a consent to service of process accompany an application for registration. Although the Administrator will generally request information about the applicant's citizenship, it is not necessary to be a US citizen. Proof of age is not a requirement.
General Registration Procedures During the registration process, an investment adviser representative must provide the state Administrator with which of the following?
The application process for an agent's registration requires the agent to provide a Form U4 application, a consent to service of process, and a filing fee. Tax returns and business plans are not required.
General Registration Procedures The document that gives the Administrator the right to process complaints against a registrant is known as a(n)
The consent to service of process gives the Administrator the right to process legal complaints against the applicant.
General Registration Procedures Which of the following statements referring to renewal of a broker/dealer's registration under the Uniform Securities Act are CORRECT?
The consent to service of process is filed with the initial application for registration and becomes a permanent part of the registrant's file. The USA states that all registrations of persons expire on December 31 unless renewed, withdrawn, or canceled.
General Registration Procedures A consent to service of process must be filed for registration of:
The consent to service of process is required for all initial registrations with the Administrator. It appoints the state Administrator as attorney for the registrant so that legal papers may be properly served. On the exam, the consent to service of process is considered to be a permanent document not subject to annual renewal.
General Registration Procedures When filing the consent to service of process, which of the following is TRUE?
The consent to service of process is supplied with the initial registration and remains on file permanently.
General Registration Procedures A consent to service of process allows the Administrator to:
The consent to service of process provides the Administrator with power of attorney to accept legal papers on behalf of registrants. This power of attorney does not grant the Administrator the authority to terminate the registration at will nor does it empower the Administrator to verify information or expedite the registration process.
General Registration Procedures Under the Uniform Securities Act, agent's registrations expire:
The expiration date for the registration of agents, broker/dealers, investment advisers, and investment adviser representatives under the Uniform Securities Act is December 31. Note that the question asks for the expiration date under the Uniform Securities Act, which is December 31. Do not be confused by actual practice, which may vary in some states.
General Registration Procedures- 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 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.
General Registration Procedures Which of the following statements is TRUE?
The state Administrators are permitted to establish the requirements for broker/dealer, agent, investment adviser and investment adviser representative registrations, including testing, filing, and fee regulations. The Uniform Securities Act is model legislation for state regulation (not federal regulation) that each state may adapt to its own needs. The state Administrator does not have authority to amend federal law to meet special circumstance in his state. Each state can model its legislation on the Uniform Securities Act, but a state cannot change federal law and must abide by federal securities legislation. The USA provides for both civil and criminal penalties for persons involved in illegal securities transactions in their state.
General Registration Procedures- The Uniform Securities Act requires that a consent to service of process be filed for the registration of:
The state securities Administrator has jurisdiction over investment advisers, broker/dealers, and any who are associated with those entities. Issuers don't register, it is their securities that do. The Administrator may have jurisdiction over securities offered for sale by a company in the Administrator's state and generally requires a consent to service of process for a securities registration.
General Registration Procedures- Broker/dealers are not required to keep:
There is no requirement for broker/dealers or their agents to maintain copies of client's tax returns. A firm's blotter is its record of original entry for all money and securities transactions.
General Registration Procedures To register a sole proprietorship as an investment adviser in a state, the application for initial registration (Form ADV) must be filed with the appropriate party. This application must include:
To register as an investment adviser in a state, Form ADV is filed with the Administrator or with a central registration depository designated by the Administrator. The application must include, among other things, a consent to service of process, appropriate fees, and the brochure or any other information that will be used to solicit clients. Sole proprietorships are not incorporated.
General Registration Procedures To transact business in a state as an investment adviser representative, a person must:
To transact business in a state as an investment adviser representative, a person must be registered as a representative of an investment adviser and have passed either the NASAA Series 65 or Series 66 exam. One is not considered a registered investment adviser representative as a result of passing the Series 6 or 7 registered representative exam, or by virtue of employment with a bank.
General Registration Procedures- GEMCO Advisers has $18 million in assets under management and is currently registered in 3 states. To reach their goal of becoming a federal covered investment adviser, GEMCO employs 2 individuals to solicit prospective clients. These 2 individuals would be permitted to solicit for GEMCO:
Under the USA (GEMCO is a state registered adviser), any individual used as a solicitor for an investment adviser is considered to be an employee requiring registration as an IAR of that IA.
General Registration Procedures A broker/dealer registered with State A created a website 2 years ago to promote their services. Recently, they hired a new media person who totally redesigned the site. Under the recordkeeping requirements of the Uniform Securities Act,
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.
General Registration Procedures- If information filed with the Administrator by a broker/dealer as part of its registration changes in a material way, the registrant must:
When material information changes, the registrant must promptly amend or update the information regardless of the renewal date. The requirement to amend a registration applies to investment advisers, broker/dealers, and securities. However, the Uniform Securities Act does not define the term "promptly".
General Registration Procedures Which of the following statements regarding registration of securities professionals under the Uniform Securities Act are TRUE?
When one firm succeeds another, no fees are due until renewal date. However, the successor firm must file a consent to service of process at the time it registers. When an agent terminates or is terminated, both the agent and the broker/dealer notify the Administrator. Investment advisers with discretionary authority must maintain minimum net worth of $10,000 - did you catch the not in choice III?
General Registration Procedures Prompt notification to the Administrator must be made when:
Whenever there is a material change to the information contained in the registration application of a securities professional, the Administrator must be promptly notified. Marital status is not included on the Form U-4. Federal covered investment advisers are not under the Administrator's jurisdiction.
General Registration Procedures- If an investment adviser files an initial registration with a state on June 30, which of the following statements regarding the filing fee to be paid is TRUE?
While some states make exceptions for filings late in the year, under the USA there is no pro-rating of filing fees. The full year's fee must be paid with the initial registration request.
General Registration Procedures Under the Uniform Securities Act, which of the following statements is TRUE regarding registration of an investment adviser if the application has not been amended?
While the Administrator may specify an earlier date, absent any denial orders or pending proceedings, registrations become effective at noon on the 30th calendar day after the date of filing. The application is considered to be filed on the date received in the offices of the Administrator, not the date of mailing by the applicant.
