4-Q
Which of the following would NASAA consider to be a substantial prepayment of fees?
$600 covering the entire contract year
15 days, noon 30 days, 60 days?
15 days- hearing must be granted within noon 30 days- registration of professionals take place 60 days- Appeal for review of an administrator's order must be filed.
Civil provisions
3,2- 3 year from security sold date, 2 year from found the error.
penalties for violations of the Uniform Securities Act include? Criminal penalties.
5,5,3 Under the Uniform Securities Act, penalties can include fines for up to $5,000 or imprisonment for up to 3 years, or both. No person, however, may be imprisoned for violation if he proves that he had no knowledge of the rule or order, and no indictment can be returned later than 5 years after the alleged violation.
Which of the following would NASAA consider to be a substantial prepayment of fees?
> $500, >6 month in advance.
which of the following is excluded from the definition of investment adviser?
A bank An investment adviser representative A lawyer giving suggestions to a client on where to invest the proceeds of a divorce settlement that he helped her obtain An investment adviser with an office in the state whose only client is a closed-end investment company registered under the Investment Company Act of 1940
Under the Uniform Securities Act, the term "agent" refers to individuals who act on behalf of a broker-dealer or issuer in effecting securities transactions. Which of the following individuals are NOT included in the definition of an agent?
A lawyer acting on behalf of an issuer in preparing documents describing the issuance of nonexempt securities. A lawyer acting on behalf of a broker-dealer who prepares documents describing the sales or purchase of securities to the general public. A partner or officer of a broker-dealer whose only securities activity is the purchase of shares of an issuer for his personal investment account. An officer of an issuer who sells shares of the issuer's stock to employees without receiving any special compensation.
Under which of the following circumstances will a private placement fail to qualify for exemption from registration under the USA?
A modest commission is paid to the agents who sell the offering to noninstitutional clients.A private placement will lose its exemption if those who sell the offering are paid commissions on sales to noninstitutional clients. For a private placement to be exempt, the offer cannot be directed to more than 10 persons during a 12-month period. In the case of noninstitutional buyers, the seller must reasonably believe (nice to have it in writing, but not required), they are purchasing the offering for investment purposes only. Institutional purchasers do not have to purchase the offering for investment purposes.
The term "investment adviser representative" includes which of the following?
A receptionist for an adviser An employee who solicits new business for an adviser A supervisor who oversees employees who manage client portfolios for an adviser An investment advisory firm registered in the state of Texas
order ticket?
Account number, execution price, time of order entry, time of execution or cancellation, and terms and conditions of the order
Nonsecurity Investments
Although collectibles, fixed annuities, precious metals, grains, futures, real estate, and currencies can be attractive investments, they are not securities.
Which of the following statements (is) are TRUE?
An Administrator can suspend a pending registration on a summary basis. An Administrator may not summarily issue a stop order without prior notice and opportunity for a hearing.
investment adviser representative have discretionary authority?
An account in which the investment adviser representative chooses portfolio securities on behalf of the client.An order is discretionary when it is placed for a customer's account by the member firm or its representative, without the customer's express authorization. Also, for the order to be considered discretionary, the firm must choose at least one of the following: size of the trade, whether to buy or sell, or the security. Choosing time and price is not considered to be an exercise of discretion.
investment adviser who has custody of or discretionary authority over client assets or who charges fees of more than $500, six or more months in advance, is required to disclose which of the following to its clients?
An adviser who has control of or discretionary power over client assets or who charges fees of more than $500, six or more months in advance, is required to disclose any condition that might affect its ability to carry out contractual obligations to its clients. Any adviser is also required to disclose almost any legal or disciplinary proceeding that would involve its integrity.
According to North American Securities Administrators Association's (NASAA) Statement of Policy on Dishonest or Unethical Business Practices of Broker/Dealers and Agents, which of the following practices is NOT unethical?
An agent of a broker/dealer exercised discretion in deciding the time that a sale took place during the trading day without expressed written discretionary authority.
Which of the following may be required by the Administrator to post surety bonds?
An agent who has discretion over client funds and securities A broker-dealer who has custody of, or discretion over, client funds and securities An investment adviser who has custody of, or discretion over, client funds and securities
Under the Uniform Securities Act, requirements for registration as an investment adviser may include which of the following?
An announcement of the application for registration in one or more newspapers in the state Minimum financial requirements for advisers who do not have custody of client securities or funds A surety bond for advisers who exercise discretion and HAVE custody of client funds or securities
securities under the Uniform Securities Act?
An investment in a managed pool of rental condominiums Unsecured debentures sold in a private placement only to accredited investors Bills, notes, and bonds issued by the US Treasury
Which of the following statements best describes rights of rescission under the USA?
An investor who believes he has been wronged in conjunction with a violation of the USA may be entitled to restore his former financial condition as if the transaction had not occurred.
Securities?
Any bond is a security, regardless of who the issuer is. Collectibles, precious metals, and currency or checks are not considered securities.
agent solicit business outside the state where he did not register?
As long as the agent is properly registered in the customer's state of residence, (and he must be if this is an "EXISTING" customer, transactions made in another state being VISITING by the client do not require the registration of the agent. A customer living in State B can only be called by an agent registered in that state, whether or not the securities are exempt. There is no de minimis exemption for broker-dealers or agents.
Which of the following securities is (are) NOT subject to state registration under the Uniform Securities Act?
Bank issues, savings and loan issues, and common carriers or public utilities regulated by the U.S, Canadian fed government. Bank holding companies that trade on SEC are fed covered securities and are not subject to state registration.
exempt from registration at the state level?
Bonds issued by the American Red Cross United States Treasury bonds American Advisers Unit Investment Trust Common Stock in AAA Commercial Bank, member of the FDIC.
Under the Uniform Securities Act, if an investment adviser takes custody of client assets, which of the following statements are TRUE?
Clients must receive quarterly statements. The adviser must be audited at least annually.
excluded from the definition of agent
Commercial banks are included in that group of issuers of exempt securities whose individuals representing them in the sale of their securities are excluded from the definition of agent.
investment adviser with custody of customer assets？
Customer assets held in custody by an investment adviser must be segregated, and the adviser must send a statement every 3 months. The Administrator does not approve custodial accounts. If there is no rule prohibiting custody, the Administrator must be notified that the adviser has custody. Advisers with custody of customer assets have a higher net worth requirement than advisers with discretionary authority, not the other way around.
Before taking any disciplinary action with respect to a registration under the Uniform Securities Act, the Administrator must always do which of the following?
Find that the action is in the public interest Cite a cause listed in the act
State laws provide for exclusions from the definition of investment adviser. Which of the following persons is specifically excluded under the Uniform Securities Act?
Investment adviser representatives
Which of the following statements concerning an agency cross transaction for an advisory client is (are) TRUE?
It is a transaction in which a person acts as an investment adviser in relation to a transaction in which the adviser or related person acts as a broker-dealer for both the advisory client and another person on the other side of the transaction. An advisory client must provide prior written consent for the adviser to be able to engage in agency cross transactions. An adviser must make prior written disclosure to the advisory client that it will act as broker-dealer for, have a potential conflict of interest with, and may collect commissions from both parties.
an offer to sell would NOT include?
Merger, bona fide loans, stock dividends
agent?
Mr. Blodgett, an employee of XYZ Manufacturing Corporation, receives commissions when he represents XYZ in the issuance of securities exclusively to existing employees, partners, and directors of the corporation.
While several methods of registration are described under the Uniform Securities Act, which of the following would be most appropriate for federal covered securities?
Notice filing, are lower than any other state registration fees.
An investment adviser is preparing an advertisement. Which of the following would be acceptable?
Offering to provide his investment recommendations for the past 12 months Promoting his system of charts and formulas while mentioning their limitations and difficulties
Under the Uniform Securities Act, as a result of a hearing, the disciplinary actions that may be taken by the Administrator include which of the following?
Permanent revocation of a registration Bar from employment with any registrant Restriction on a registrant's performance of any activity in the advisory or brokerage business
Which of the following is commingling?
Placing the broker-dealer's funds in the same account with nondiscretionary customers
Certain securities transactions are considered exempt from the registration and advertising filing requirements of the Uniform Securities Act. Included in that group would be all of the following EXCEPT?
Private placements are exempt under the USA if they are offered to no more than 10 retail investors in any consecutive 12-month period, not calendar year. Transactions involving issuers and underwriters are also exempt. The sale of preorganization certificates is exempt if there is no commission for solicitation or payment by subscribers and no more than 10 subscribers; there is no limit to the number of offers that may be made. Institutional investors (and pension plans with at least $1 million in assets meet that definition) are not included in the numerical limitations.
In response to an evolving marketplace, the SEC, through Release IA-1092, expanded the coverage of the definition of investment adviser to include?
SEC Release IA-1092 added financial planners, pension consultants, and sports and entertainment representatives to the list of potential IAs. Unless the life insurance agent is offering investment advice, the agent does not meet the definition of investment adviser. The Release did not address wrap fee programs because the exclusion for broker-dealers is part of the Investment Advisers Act of 1940; once special compensation in the form of wrap fees is received, the exclusion is lost.
Sharon Smith is an agent for Highwater Securities, a broker-dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act?
Sharon must be registered in State X in order to accept the order
State laws provide for exclusions from the definition of investment adviser?
Teacher, lawyer, Economists whose advice is strictly incidental to their professional activity and dose not charge for advise with investment decision. Broker-dealers receiving special compensation A wholly owned subsidiary of a commercial bank that is in the business of offering investment advice
Under the Uniform Securities Act, which of the following is required to be in writing in an advisory contract?
That if the firm is a partnership, clients will be notified of any change in the partnership within a reasonable time after the change The method used for computing the adviser's compensation That no assignment of rights or ownership of the contract will be made without the client's consent
Which of the following statements regarding broker-dealer registration under the Uniform Securities Act are TRUE?
The Administrator may request that the broker-dealer furnish a statement of assets and liabilities. If, before the effective date of the registration, the Administrator requires amendments to the application, the registration will be considered to have first been filed upon filing of those amendments.
Which of the following investment adviser compensation arrangements is (are) permitted under the Uniform Securities Act?
The adviser charges a fee of 1% of the average value of the account portfolio during the year. The adviser charges a flat fee of $1,000 if the client's portfolio assets are $100,000 or more or $2,000 if the client's assets increase to $200,000 or more.Unless the question states that it relates to the exception for wealthy investors ($1 million under management of the adviser or $2 million in net worth), always assume that performance-based compensation is not permitted. Flat fees and fees based on total portfolio value are permitted.
Under the Uniform Securities Act, which of the following would cause an agent's registration to be canceled by the Administrator?
The agent has died. The agent is found by a court to be mentally incompetent. The agent cannot be located after reasonable search.
An individual living in this state would like to become registered as an agent for a broker-dealer. Which of the following conditions must be met?
The applicant must be eligible to register in this state. The broker-dealer selected must be registered in this state. An agent may only be registered with a broker-dealer that is also registered in this state.
A broker-dealer is registered in all 50 states. Which of the following statements is correct regarding the firm's obligations regarding maintaining of books and records?
The broker-dealer need only satisfy the requirements of the SEC.
an investment adviser who has custody of or discretionary authority over client assets or who charges fees of more than $500, six or more months in advance, is required to disclose which of the following to its clients?
The financial condition of the adviser that could impair its ability to meet contractual commitments to clients A legal or disciplinary event that would be material to evaluating the adviser's integrity or ability to meet its contractual commitments to clients That the adviser was convicted of or pleaded no contest to a felony within the past ten years or is currently subject to a criminal proceeding involving a felony That the adviser was found to have violated SRO rules which resulted in suspension, expulsion, or a fine of more than $2,500
Administrator has powers?
The power to seek court orders for the payment of restitution against any violators of the act The power to issue a cease and desist order with or without prior hearings
When an Administrator acts summarily to postpone or suspend a registration of a security, which of the following statements is (are) TRUE under the Uniform Securities Act?
The registrant must be promptly notified of the action and given an opportunity for a hearing. A hearing must be held within 15 days of written request of the registrant.
registration of a successor firm
The successor firm need not be in existence when the application for registration is filed. A filing fee is WAIVED. The successor firm's registration will be effective for the unexpired portion of the year.
Exempt transaction?
Transactions by executors, the sheriff, marshals, receivers, trustees, guardians, or conservators are exempt. Sales to financial institution, such as mutual funds and insurance companies, are also exempt.
A registered investment adviser has been investigated by the Administrator for fraudulent misrepresentations purportedly made to several clients. If the IA is found to have been in violation of the Uniform Securities Act, this may result in?
a $5,000 fine per violation a receiver being appointed over the adviser's assets a prison term of 3 years per violation the requirement that the investment adviser make restitution to the victims
All of the following statements are consistent with the Uniform Securities Act ?
a security for which a registration statement is filed under the Securities Act of 1933 may simultaneously register with the state by the procedure known as registration by coordination any security may be registered with the state by the procedure known as registration by qualification state Administrators do require consent to service of process to be submitted with notice filings for covered securities state Administrators may require federal covered investment companies to file documents with the Administrator using a procedure known as notice filing
investment advisory contracts?
all advisory contracts must be in writing and contain descriptions of how fees are determined. Contracts are valid upon signing, need not list all states in which an adviser is registered, and cannot be assigned without the client's approval. However, if the brochure is not delivered at least 48 hours before the signing of the contract, the client has the right to withdraw without penalty for 5 business days. Administrator approval is not required.
An Administrator may deny or revoke a security's exemption?
an administrator may deny or revoke a security's exemption without a hearing if the issuer is given an opportunity for a hearing after the revocation.
Under the Uniform Securities Act, a person whose business model is selling reports concerning specific securities to investors on a subscription basis will be defined as
an investment adviser
Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, a broker-dealer may charge a reasonable fee for?
appraisals transfers collection of dividends safekeeping
An Administrator may summarily suspend a registration pending final determination of proceedings under the USA. However, the Administrator may NOT enter an order without?
appropriate prior notice to the registrant an opportunity for a hearing findings of fact and conclusions of law
The president of a manufacturing company sells his or her company's common stock to the public and receives a commission substantially lower than others selling that stock. Under the USA, the president is acting?
as an agent of the issuer
An investment adviser would be exempt from registration under the Uniform Securities Act if it had no place of business in this state and its only clients were？
banks insurance companies registered investment companies other investment advisers
Under the USA, all of the following statements are true regarding investment advisory contracts?
can only allow fees to be performance related under certain limited circumstances must be in writing cannot be assigned without customer approval
The National Securities Markets Improvement Act of 1996 (NSMIA)?
defined the term "federal covered adviser"
agency cross transactions?
disclosures must be made as least Annually.
Under the National Securities Markets Improvement Act of 1996 (NSMIA), states are prevented from?
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
A consent to service of process allows the Administrator to
exercise the power of attorney on behalf of the registrant
If you are registered as an agent for a broker-dealer in State Y and you conduct business as an agent of theirs in State Z, a state in which you are not registered as their agent, you？
expose yourself and your employer to disciplinary action by State Z expose yourself to a possible fine may obligate your broker-dealer to offer your client the right to rescind the sale may have your registration in State Y revoked
A Canadian broker-dealer with no offices in this state has a Canadian client who is on a temporary work assignment in this state. To accept orders from this client, the broker-dealer must?
file an application for limited registration with the Administrator in the form required by the jurisdiction in which it has its head office file a consent to service of process provide the Administrator with evidence that it is currently in good standing as a broker-dealer in the jurisdiction from which it is effecting securities transactions be a member of a recognized self-regulatory association or stock exchange in Canada
Penalties for violations of the Uniform Securities Act include?
fines of up to $5,000 and/or imprisonment for up to 3 years.Under the Uniform Securities Act, penalties can include fines for up to $5,000 or imprisonment for up to 3 years, or both. No person, however, may be imprisoned for violation if he proves that he had no knowledge of the rule or order, and no indictment can be returned later than 5 years after the alleged violation. Remember the distinction between criminal penalties and civil liability.
An Administrator may deny or revoke a security?
for a federal covered security if its issuer is in violation of state law by providing the burden of proof that the exemption is not deserved if the Administrator determines that an exemption applicable to federal covered securities is inconsistent with state securities law
Sales?
involve any Contract or Disposition for value; solicitations and attempts to dispose are offers.
Administrator may?
limit a registrant's functions to that of a broker-dealer if, in the initial application for registration as an investment adviser, the registrant is not qualified to act as an adviser take into consideration that the registrant will work under the supervision of a registered investment adviser or broker-dealer in approving a registration.
A client is unsure of her financial objectives and does not give you any personal financial information. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, you?
may only accept unsolicited orders until suitability has been established, unsolicited order.
A president of a bank sells shares of the bank to public investors. Under the Uniform Securities Act, he or she is
not defined as an agent under the Uniform Securities Act
It would be correct to state that SIPC?
offers protection for the current account value in the event of a broker-dealer's insolvency, bankruptcy.
federal covered adviser?
pension consultant must have $200 million,As long as the assets under management are $110 million or more,
Administrator may not require?
post a surety bond if they do not have investment discretion over client accounts or do not maintain custody of customer funds and/or securities
Under the Uniform Securities Act, investment advisers will generally NOT be required by the Administrator to?
post a surety bond if they do not maintain custody or do not have investment discretion over client accounts
Administrator may require?
promptly file a correcting amendment to any document on file with the Administrator which becomes inaccurate or incomplete in any material respect file various financial reports publish an announcement of the application for registration in a newspaper
The Administrator may do all of the following with respect to an issuer of federal covered securities?
require the payment of a filing fee to the state require submission of a consent to service of process initiate enforcement action in the case of fraud committed in the Administrator's state
First Growth Securities, Inc., a member of the Financial Industry Regulatory Authority (FINRA), has its main office in Illinois and is therefore?
required to register as a broker-dealer in the state of Illinois
Under the Uniform Securities Act, a client who purchased securities from a broker-dealer may request the trade be rescinded if the
security was sold in violation of the USA
An investment adviser representative may perform which of the following functions?
solicit for advisory business manage advisory accounts supervise those who render advice
A discussion referring to blue-sky laws would include all of the following ?
state laws that are designed to protect the public against fraud in securities sales within a state forms requiring issuers selling securities in the state to comply with state securities laws a state securities law that grants state securities Administrators the power to deny or revoke a broker-dealer's or an agent's registration within its state
Under the USA, all of the following issues would be exempt from registration EXCEPT
stock issued by an insurance company not offering policies in this state. This company is not authorized to do business in this state.
Under the USA, all of the following issues would be exempt from registration EXCEPT?
stock issued by an insurance company not offering policies in this state.Had the insurance company been authorized to do business in this state, its securities offering would be exempt.
GENERAL REGISTRATION PROCEDURES
submit an application; provide a consent to service of process; pay filing fees; post a bond (if required by the Administrator); and take and pass an examination if required by the Administrator, which may be written, oral, or both.
State securities law generally limits agents to employment with a single broker-dealer unless?
the Administrator, by rule or order, authorizes employment with more than one broker-dealer
The Administrator could deny or revoke the registration of a broker-dealer if
the CEO has intentionally failed to file advertising material with the Administrator
Under the Uniform Securities Act, any securities registration statement must include?
the amount of securities to be offered in that state a list of the other states in which the security will be registered a copy of the prospectus or offering circular
application for registration as an agent may deny?
the applicant has been convicted of a misdemeanor involving securities fraud within the past 120 months the applicant is insolvent the applicant has been convicted of a felony within 10 years of the date of application the applicant has filed an incomplete application
In order to function as a broker-dealer on the premises of a financial institution?
the broker-dealer must clearly distinguish between the operations of the broker-dealer and the retail banking operation
A client wants to purchase commercial paper. The licensed agent may indicate to the client that the security need not be registered if?
the minimum denomination is $50,000 the maximum maturity is 270 days it is rated in 1 of the 3 highest rating categories by a recognized rating agency
An applicant for registration as an IAR in this state was convicted 4 years ago of a nonfinancially related crime in another state. Under that state's laws, the crime was a misdemeanor, but under this state's laws, it is a felony. When viewing this IAR's application, the Administrator will?
treat the crime as a nonfinancial misdemeanor
An Administrator has jurisdiction over an offer to sell securities if it is made in a newspaper published out of state?
under no circumstances, Administrator only have jurisdiction over a security that has more than 2/3 of the paper's circulation is in his state.
a person who is registered investment adviser?
under usa, advice must be given on securities and receive compansation, the act specifically excludes commodities from the definition of security.
an offer to sell?
warrants or convertible securities, stock rights to existing shareholders,bonus on account, gift of assessable stock
exclusions from Investment Adviser
■ Investment adviser representatives (the business entity is the investment adviser, not the representative) ■ Banks, savings institutions, and trust companies ■ Lawyers, accountants, teachers, and engineers (LATE) ■Broker-dealers whose investment advisory services are incidental to their brokerage busi- ness and who receive no special or separate compensation ■A publisher, employee, or columnist of a newspaper, news magazine, or business or finan- cial publication of regular and general circulation; or an owner, operator, producer, or employee of a cable, radio, or television network, station,
