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79 Cards in this Set
- Front
- Back
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A BD specializing in Canadian government bonds wishes to advertise a new issue to prospective investors. The Administrator will most likely: |
do nothing |
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Securities of foreign governments are exempt under the Uniform Securities Act. As such, the Administrator has |
no authority over their advertisement. |
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How quickly must agents as well as broker-dealers/issuers notify the Administrator when agents begin or terminate employment? |
promptly |
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When a BD withdraws its registration, what happens to the registrations of agents employed by the BD? |
the agents' registrations remain active as long as they register with another broker-dealer within 30 days
The withdrawal itself does not become effective for 30 days. That gives an agent 30 days to find another broker-dealer to move his/her registration. |
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An investment adviser cannot use direct testimonials from customers in its advertisements. It can use testimonials that were |
posted independent 3rd party site as long as all comments about the firm that are posted on the site are included in the advertisement |
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You must also state that past performance does not reflect future performance & have a comparison to the market in general. You also need to state whether the |
performance includes management fees |
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Canadian firm does not have offices in the U.S. state & the client is from Canada & is temporarily in that state & had a relationship with the Canadian BD before entering the state an agent or/& BD may |
use a limited registration. Nigel has a good many hoops to jump through to get that limited registration, but because Beatrice is a big client, you would advise him to do so. |
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Normally, IAs & IARs are prohibited for receiving performance-based fees. But there are exceptions such as |
-high net worth individuals -qualified purchasers -key employees of IA firm: officer directors & IAR companies: -registered investment -business development -private investment |
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Is performance-based compensation acceptable for Wendy because she is an IAR at an advisory firm. |
yes exeption exceptions key employees of an investment advisory firm, such as officers, directors & IAR |
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According to the USA only those partners, officers, & directors who qualify by being actively engaged in the business & performing the functions of an agent would |
automatically become registered as agents. |
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When a BD withdraws its registration, what happens to the registrations of agents employed by the BD? |
agents' registrations remain active as long as they register with another BD within 30 days |
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The Administrator is permitted to summarily(instantly) suspend a registration, which means that |
can take this action without obtaining a court order.
If the administrator does this: must notified agent promptly & reasons for the action & be given the opportunity for a hearing within 15 days of the agent making a written request |
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Order ticket information required for IA is different than that required for |
BDs |
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The IA writes an order & sends it to |
a BD/bank for execution |
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The IA must keep a record of the order as it was sent; the IA does not keep the |
record of the actual execution of the order - this is responsibility of the executing BD |
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The record must contain |
-terms & conditions of the order; -name of the person at the IA who recommended the transaction; -name of the person who placed the order; -date of order entry; -name of account for which order was entered; -name of BD/bank to which the order was sent for execution; -& whether the order was discretionary. Not name of market where trade was executed |
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record must contain |
-whether order was discretionary -terms & conditions of the order; -date -account name -person who recommended the transaction -person who placed the order; -BD/bank order was sent for execution;
Not name of market where trade was executed |
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if there is a surety bond requirement, the Administrator is permitted to accept |
cash/ securities as a substitute. |
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Is it true that, in lieu(substitute) of posting a surety bond, the Administrator must accept a deposit of cash in the appropriate amount/a deposit of securities in the appropriate amount. |
yes |
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the Administrator is permitted to waive the surety bond requirement for |
registrants whose net capital/net worth exceeds a stated dollar amount |
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If the Administrator summarily suspends a registration of an agent, which of the following statements are TRUE?
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The Administrator must notify the agent promptly that the order has been entered An opportunity for a hearing must be given within 15 days of written request The individual is prohibited from acting as an agent in that State
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BD Anon is part of the selling group of a hot new IPO. As such, the firm purchases 50% of the shares for its own portfolio & sells the remainder to the public. allowed? |
Anon is also in violation in A member of the selling group is expected to make bona fide public offerings of the securities allotted him.To purchase some of the securities for itself is prohibited. |
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The IAR recommends the same asset allocation for his client that a buddy of his did after his buddy had done some research for a client with similar characteristics. disclosure needed? |
yes If the representative provides a recommendation to the client based solely on the recommendations provided by others to whom he provided the data, he must disclose this |
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The investment adviser representative submitted his clients information to a data base that provided a recommendation for the asset allocation of the clients investment monies that the adviser deemed was sound and, therefore, recommended it to his client. disclose this |
yes If the representative provides a recommendation to the client based solely on the recommendations provided by others to whom he provided the data, he must disclose this. disclose fact research If the representative provides a recommendation to the client based solely on the recommendations provided by others to whom he provided the data, he must disclose this. |
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IAR submitted his clients information to a data base that provided a recommendation for the asset allocation of the clients investment monies that the adviser deemed was sound & therefore, recommended it to his client. disclose this |
yes If the representative provides a recommendation to the client based solely on the recommendations provided by others to whom he provided the data, he must disclose this. disclose fact research If the representative provides a recommendation to the client based solely on the recommendations provided by others to whom he provided the data, he must disclose this.
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The IAR provides a recommendation for his client based on research provided by a BD that provides the IA with its analysts recommendations in return for trades that the IA executes using the services of the BD, as well as a couple of other research sources he finds on the internet. disclosure |
no if the adviser representative has based his recommendations on his own assessment of analysts reports and recommendations, then there is no disclosure requirement. |
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An IA is permitted to be compensated with a share of the capital gains of the clients portfolio if the client is |
mutual fund, credit union, or private client with at least $750,000 invested through the IA |
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the adviser can charge a fee based on the capital appreciation of the portfolio if the client is |
-institutional investor, -private client net worth of at least $1.5 million, or -private client with at least $750,000 invested with the IA |
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the adviser can charge a fee based on the capital appreciation of the portfolio if the client is |
-institutional investor, -private client net worth of at least $1.5 million, or -private client with at least $750,000 invested with the IA |
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BD is required to respond to this complaint in |
writing and keep a record of it. E-mails are treated the same as snail-mails. |
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S. Shyster had his day in court-& lost. His license to do business as an IA in the state has been revoked. What legitimate options does Sam have available to him now? |
Sam has the legitimate option of filing an appeal of the decision in a court of law within 60 days. He will not be able to register as an IA with the SEC/with another state. His application will be denied when it is discovered that Sam has had his license revoked by a state |
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Only a court can issue a Administrator can |
judicial injunction petition court for an injunction |
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Exempt securities include all of the above |
exempt Securities: Government Insurance company financial institution public utility stock exchange listed not-for-profit Commercial paper |
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State' includes any state in the United States of America, Washington DC, and |
the territories and commonwealths which are part of the U.S., including Puerto Rico, Guam, American Samoa, etc. |
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A bank holding company owns a bank and a broker-dealer. Which of the following entities must register as a broker-dealer under the USA? |
only the brokerage firm need register as a B-D |
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A bank holding company owns a bank and a broker-dealer. Which of the following entities must register as a broker-dealer under the USA? |
only the brokerage firm need register as a B-D The broker-dealer cannot operate as such without registering as a broker-dealer. The bank holding company is not a broker-dealer. |
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bank holding company owns a bank & a BD. Which of the following entities must register as a BD under the USA? |
only the brokerage firm need register as a BD
The BD cannot operate as such without registering as a BD. The bank holding company is not a BD. |
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One of your long-time most profitable individual brokerage firm customers has moved from New York to Florida, permanently. Your broker/dealer is not registered in Florida. If you wish to maintain a financial relationship with this client, you have how many days to register in Florida? |
You may continue to conduct business with that client for 30 days, after which registration is required/you must discontinue the business relationship.
The rule is 30 days to register if you wish to retain the client. |
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Municipal bonds issued within the state of New York are not considered |
Federal covered securities inside the state of New York. Similarly, Colorado bonds are considered Fed covered securities everywhere BUT inside the state of Colorado. |
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Custody is not discretion. Discretion is not custody. Being given discretionary power by a client does not in any way imply |
that the firm has custody and control of customer cash and securities. |
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Custody is not discretion. Discretion is not custody. Being given discretionary power by a client does not in any way imply |
that the firm has custody and control of customer cash and securities. |
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only 2 Fed-covered securities which require ‘Notice Filing:’ |
Securities being offered under Regulation D Rule 506 & Investment Company securities |
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Statute of limitations for criminal offenses |
is 5 years. Statute of limitations for civil infractions is no greater than 3 years. Whereas criminal guilt can result in prison, civil liability results in monetary awards...not jail time. |
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Solicitation of a transaction in unregistered non-exempt securities is |
clearly defined in the USA as an unethical act. |
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private placement exemption available to issuers under the USA places conditions on the distribution which include soliciting investors may not |
be compensated for sales of the securities unless the buyer qualifies as an institutional investor. |
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under the USA, non-institutional investors (individuals) must be buying the private placement for investment purposes (long term purposes) institutional investors are |
under no such limitation. |
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bonds issued by the City of London, Ontario, Canada exempt |
Bonds issued by any Canadian province, city or any other political subdivision are considered exempt under the USA. |
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bonds issued by the City of London, Ontario, Canada exempt |
Bonds issued by any Canadian province, city or any other political subdivision are considered exempt under the USA. |
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bonds issued by the City of Ontario, Canada exempt |
yes Bonds issued by any Canadian province, city or any other political subdivision are considered exempt under the USA. |
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bonds issued by the City of London, England exempt |
no bonds issued by England would be exempt securities under the USA, bonds issued by cities or any other political sub-division within England are not. |
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bonds issued by the City of Manhattan, Kansas exempt |
yes All municipal bonds issued within the United States are exempt securities. |
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USA defines a sale as |
when the securities are assessable including ‘a gift of assessable stock.’ Assessable refers to the fact that the issuing corporation can require its stockholders to contribute more capital to the corporation, upon demand, at some point in the future, if the corporation so decides. |
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IAR may borrow money from all of the following with the exception of: client which is a mortgage brokera client which is a bank officer pension fund with a minimum of $ 1,000,000 in assets |
Mortgage brokers do not lend money — mortgage lenders do: bank officers do not lend money — banks do: pension funds are not in the business of lending money. An IAR may not borrow from any of these 3 choices. |
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IAR may borrow money from all: mortgage broker bank officer pension fund assets 1million |
Mortgage brokers do not lend money — mortgage lenders do:
bank officers do not lend money — banks do:
pension funds are not in the business of lending money.
An IAR may not borrow from any of these 3 choices. |
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Commission splitting is only permitted |
between 2 agents employed by the same broker-dealer. |
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the conservator for a person declared mentally incompetent is |
person under the USA |
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Securities sold through a private placement are |
unregistered and are an exempt transaction. |
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Under Uniform State Law, a private placement is defined as an offer to |
no more than 10 persons in a 12 month period. |
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Unsolicited customer orders in the secondary market by/through a BD are considered |
to be exempt transactions under the Act whether the securities involved are exempt or non-exempt. |
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Limited partnership interests are defined as |
a security under the Act and are non exempt |
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Under the USA, U.S. government bonds, securities issued by an exchange/NASDAQ-NMS listed companies & securities issued by charitable organizations are |
exempt |
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Under the USA, registration of a security under the Securities Act of 1933 means that State registration by ______ may be available |
notice filing/coordination |
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The record keeping requirements set by the state administrator may not exceed those required under the federal Securities Exchange Act of The record keeping requirements set by the state administrator may not exceed those required under the federal Securities Exchange Act of |
1934 |
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The record keeping requirements set by the state administrator may not exceed those required under the federal Securities Exchange Act of |
1934 |
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Under the USA, if an agent refuses to comply with a subpoena, the state administrator may: |
Petition the court to require that the agent produce the requested records |
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Under the USA, if an agent refuses to comply with a subpoena, the state administrator may: |
Petition the court to require that the agent produce the requested records |
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Under the USA, if an agent refuses to comply with a subpoena, the state administrator may: |
Petition the court to require that the agent produce the requested records |
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Administrator may require issuers of mutual fund shares to file a copy of the registration statement filed with the SEC, a consent to service of process & to pay fees. This procedure is called: |
notice filing |
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Federal covered securities need not be registered with the state administrator. Although investment company securities (open-end and closed-end mutual funds and units investment trusts) are federally covered, the Administrator may require them to make a notice filing at the state level. This consists of |
the payment of fees, filing copies of the documents filed with the SEC, and filing a consent to service of process form. |
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Federal covered securities need not be registered with the state administrator. Although investment company securities (open-end & closed-end mutual funds & units investment trusts) are federally covered, the Administrator may require them to make a notice filing at the state level. This consists of |
the payment of fees, file copies documents filed SEC file consent to service of process form |
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Unsolicited, non-issuer transactions are |
exempt under the USA, not issuer transactions |
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Remember, the issuer of securities sold in a private placement must be able to prove that |
is entitled to the exemption. If they violates the rule & makes more than 10 offers in a 12 month period Administrator may revoke the exemption & find the issuer guilty of offering unregistered securities to the public |
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The purpose of the private placement exemption is to |
allow small companies to raise capital by selling their new securities privately without registration, which is very expensive. |
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IA firm that is state registered notifies |
Administrator |
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If the IA firm is federally covered, then who must notify who |
IAR who must notify the state. |
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Although securities issued by recognized foreign governments & their sub-divisions are considered to be exempt from state registration under the USA securities issued by foreign corporations are |
non-exempt |
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Custody is not discretion. Discretion is not custody. Being given discretionary power by a client does not in any way imply |
that the firm has custody & control of customer cash & securities. |
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Under the USA, if an agent refuses to comply with a subpoena(summon) the state administrator may: |
Petition the court to require that the agent produce requested records |
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the adviser can charge a fee based on the capital appreciation of the portfolio if the client is |
-institutional investor, -private client net worth of at least $1.5 million, or -private client with at least $750,000 invested with the IA |
