63 Ch 3

Front 1

what 4 pieces of information are required by ALL securities professionals in their application?

Back 1

1. proposed method of doing business
2. qualifications and business history
3. financial condition and history
4. injunctions or admin orders, convictions of ANY felony or securities misdemeanor

Front 2

what 2 additional pieces of information are required by B/Ds in regards to the application process?

Back 2

1. place and form of business organization
2. qualifications and history of any partner, officer, director, and/or controlling person (PODC)

Front 3

what 3 additional pieces of info are required by INVESTMENT ADVISERS in regards to the application process?

Back 3

1. place and form of business organization
2. qualifications and history of any PODC
3. any info for clients or prospective clients

Front 4

The states require _______ to use form ____ to register. Most also require this to be done ______ through the ______system.

Back 4

Advisers
ADV
Electronically
Investment Adviser Registration Depository (IARD)

Front 5

what is Consent to Service of Process?

Back 5

document that appoints the Administrator as the registered person's attorney for the service of legal papers.
Any notice is valid and is the same as if served to the registrant personally

Front 6

True or False

the Consent to Service of Process must be renewed annually

Back 6

False

the Consent to Service of Process must only be filed as part of the INITIAL registration package

Front 7

True or False

The client must know what state an agent is registered in for legal action

Back 7

False

client need not know, clients can choose to file in THEIR home state

Front 8

If an Admin in state A accepts notice on behalf of a client who has a legal issue with an agent registered in state B, what is that called?

Back 8

Substituted Consent to Service of Process

Front 9

Every applicant must pay a _____ when its application is _____ filed and ______. If an application is denied/withdrawn the Admin may retain_____ of the _____

Back 9

Filing Fee
Initially
Renewed
Part
Fee

Front 10

If a B/D or IA that is already registered names a successor firm to fill an unexpired portion of its registration term, what must the successor firm do?

Back 10

File a new application

*note* successor will NOT have to pay another fee

Front 11

what is a Surety Bond?

Back 11

an obligation posted by a registrant to cover the costs of possible legal action arising from violations of the USA

Front 12

BAI

*hint* surety bonds

Back 12

3 entities that may be required to file a Surety Bond
Broker-Dealers
Agents
Investment Advisers

*note* DO NOT CONFUSE INVESTMENT ADVISER WITH INVESTMENT ADVISER "REPRESENTATIVE"

Front 13

when are Surety Bonds needed?

When the ___, ___, or ___,have ____or discretionary authority over accounts
If___ net capital does not meet ___amounts
If ___financial requirements ___specified amounts

Back 13

When the B/D, Agent, or IA have custody or discretionary authority over accounts
If B/Ds net capital does not meet minimum amounts
If IAs financial requirements exceed specified amounts

Front 14

True or False

In regards to Surety Bonds, B/Ds, Agents, and IAs can only post the bond?

Back 14

False

B/Ds, Agents, and IAs can also deposit cash or securities if deemed appropriate by the Admin

Front 15

when do advertisements need not be filed with the Admin?

Back 15

if they security transactions are EXEMPT or if they refer to FEDERAL covered securities

Front 16

when does registration become effective?

when do they expire?

Back 16

at noon on the 30th day after filing the application or amendment (Admin can grant earlier registration date)

annually on December 31st

Front 17

True or False

Admin may require B/D to maintain a specified minimum amount of net capital and set a net capital level that exceeds the amount established by the SEC

Back 17

False

Although the Admin can require the B/D to maintain a minimum amount of net capital, they CANNOT set a level that EXCEEDS the amount established by the SEC.

Front 18

COACSA

Back 18

records needed to be kept by B/Ds for 3 years

Client accounts
Order tickets
Agreements (signed)
Correspondence (incoming/outgoing, originals)
Sales lit (originals)
Advertisements (originals)

Front 19

if a firm notices an inaccuracy or incompleteness to financial records sent to the Admin... when must they correct it?

Back 19

Promptly

Front 20

True or False

the registration of an agent is only in effect while the agent is associated with a registered B/D or issuer

Back 20

True

Front 21

When can an agent split commission

Back 21

if they are splitting with:
Another registered agent, employed by the same B/D (or affiliated B/Ds), who is registered in the state in which the transaction took place

Front 22

What 2 situations allow an agent to conduct business with EXISTING clients without registration in that state?

Back 22

1. If agent's registration is pending, in which the agent may engage transactions for 60 days
2. If the agent is accepting orders from an existing client who is in another state temporarily

Front 23

IJTM

Back 23

accounts that can be opened once an agent is properly registered in that state.

Individual
Joint (JTWROS, TIC)
Transfer On Death (aka pay-on-death)
Margin

Front 24

AREE

Back 24

things needed on order ticket

Account #
time order was Received
time order was Entered
time order was Executed

Front 25

under the USA, there are 2 situations where an IA who has no place of business in a state need to register in that state

Back 25

1. clients are institutional
2. does not do business with more than 5 retail clients within 12 consecutive months

Front 26

what are considered institutional clients?

*hint*
IC, IA, B, BTS, I, EB, GE

Back 26

Investment companies
Investment Advisers (IAs)
B/Ds
Banks, Trust Companies, Savings Institutions (BTS)
Insurance companies
Employee benefit plans w/at least $1MM of assets
Government Entities

Front 27

There is no _________ exemption for B/Ds. If a B/D wants to do business with _______ clients in another state, they must _______ regardless of whether they have ________ in that state.

Back 27

de minimis
Retail (non-institutional)
Register
An Office

Front 28

Generally speaking, _______ IAs must register with the SEC only and _______IAs register with the states only

Back 28

Larger
Smaller

Front 29

what are the 2 parts of Form ADV

Back 29

1. (for the regulators) asks questions about the adviser's business
2. (aka the adviser's brochure) designed to provide prospective clients with info about the adviser

Front 30

Custody

Back 30

legal responsibility for, or control over someone's assets

Front 31

federal covered advisers that must register with the SEC and not with the states include the following:

*hint*
IA 30MM
IA RIC
NON REG A HQ
MOODY
PENSION 50MM
FRIEND OF FED SAME AS FED
NEWADVISER 120

Back 31

1. IAs with $30MM or more in assets under management
2. IAs who are advisers to registered investment companies
3. Non-regulated advisers in the state in which they have their principal office and place of business
4. Nationally recognized statistical rating organization
5. Pension consultants having a value of at least $50MM
6. Affiliates of fed-covered advisers whose office and place of business is the same as the SEC registered adviser
7. new advisers that reasonably believe they will be eligible for federal registration within 120 days

Front 32

according to the NASAA Custody Requirements for the Investment Advisers Model Rule (IAMR), an IA with custody of client funds must do what 4 things

Back 32

1. Notify the Admin with Form ADV
2. Hold funds in a with a Qualified Custodian
3. Notify clients of the custodians name, address, and manner of fund maintenance
4. Send account statements every quarter

Front 33

who must submit a balance sheet to the Admin along with Form ADV

___with ___of client assets, ___over client accounts, and ___that require prepayment fees of $1200 at least ___months in advance

Back 33

Advisers with custody of client assets, discretion over client accounts, and advisers that require prepayment fees of $1200 at least 6 months in advance

Front 34

when should an adviser return client securities or funds it inadvertently acquired before he/she is considered to have custody.

Back 34

within 3 days

Front 35

when should an adviser, who receives a third party check forward it to avoid having custody?

Back 35

within 1 day

Front 36

according to the NASAA Minimum Financial Requirements for the IAMR...

Advisers with custody over client accounts must maintain a minimum net worth of _________

Advisers with discretionary authority over client accounts must maintain a minimum net worth of ______

Advisers that require its clients to prepay fees of $500 more more at least 6 months in advance must maintain _________

Back 36

$35,000
$10,000
positive net worth at all times

Front 37

when must an adviser notify the Admin if the net worth drops below the minimum

Back 37

within 1 business day

Front 38

an adviser is required only to satisfy the minimum net worth requirements of the state in which....

Back 38

its principal office is located

Front 39

what records must be kept by registered IAs and for how long?

CAB

Back 39

correspondence, account records, and books

3 years by B/Ds and 5 years by IAs

Front 40

The Brochure Rule requires advisers to disclose what information?

*hint* there are 6
SERVICE FEES
CONDITIONTYPE
B/D?
DISCRETION?
SECURITYTYPE
OTHERBUS.

Back 40

1. various services offered by RIA and fees
2. types of clients and conditions imposed on clients
3. whether the RIA is a B/D
4. whether the RIA exercises discretion, suggests brokers, reveives additional compensation
5. types of securities and types of analyses used
6. RIAs affiliations and other types of business

Front 41

Adviser Brochure or Form ADV part II must be received by client....

Back 41

at least 48 hours before they sign or at the time the account is opened

*note* if disclosure is not received, advance must be given 5 days to cancel the contract without penalty

Front 42

True or False
an Investment Adviser Representative of a Fed-covered advisers are excluded from registration

Back 42

False

Although the Fed-Covered advisers are excluded, their IARs are not.

Front 43

ACEF

Back 43

registration requirements of all securities professionals

Application
Consent to Service of Process
Examination
Filing fee

Front 44

MNC
SB

Back 44

additional registration requirements for B/Ds

Minimum net capital
Surety bond (sometimes)

Front 45

SB

Back 45

additional registration requirements of agents

Surety bonds (sometimes)

Front 46

MFR
SB

Back 46

additional registration requirements of investment advisers

Minimum Financial requirements
Surety bond (sometimes)