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57 Cards in this Set
- Front
- Back
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Agent |
An agent is an individual NOT a firm. |
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Exempt Transactions |
- Unsolicited transactions - Transactions by a trustee as part of bankruptcy proceedings - Transactions between an issuer and underwriter - Certain non-issuer (secondary market) transactions. |
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An agent has been executing transactions that are not reflected on the books of the broker-dealer. This type of activity requires executing transactions that are not reflected on the books of the broker-dealer. This type of activity requires |
Registration by the agent as a broker-dealer The agent is acting independently of the firm and the state would view the agent as acting as an unregistered broker dealer. The activity may also be considered selling away. The only way this is ok is if the agent receives PRIOR authorization by the broker dealer before execution of the transaction |
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A broker-dealer is registering a new issue with the Administrator of State A. What information must be sent to the Administrator? |
The number of shares
The Articles of Incorporation The financials YOU DO NOT NEED TAX ID NUMBER |
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Which of the following written disclosure statementsis prohibited under NASAA's Model Rule on Unethical Business Practices ofInvestment Advisers? |
If there is a monetary dispute, the client must agree to arbitration to settle the dispute. Unlike a broker-dealer that may have a pre-dispute arbitration agreement, an investment adviser may not compel an investor to settle disputes through arbitration. The client may sue in a court of competent jurisdiction. |
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Selling securities regarding newspaper ads |
Wouldonly be an offer to sell in the state in which the newspaper is published.However!! If more than 2/3 of the newspaper circulation is outside of the stateof publication it's not considered to occur in ANY state |
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Which of the following investors may be chargedperformance fees by investment advisers? |
Qualifiedclients |
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An advisory fee that increases and decreases proportionatelywith the investment record of an appropriatesecurities indexis called a(n) |
FulcrumFee |
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Registration facts |
A person’s registration becomes effective at noon on the 30th day after the filing of the application (or on the 30th day after the filing of an amendment). If Administrators consider it appropriate, they have the authority to grant registration earlier. Issues that impact a person’s registration include denial orders or pending proceedings regarding denial, revocation, suspension, cancellation, or withdrawal. For financial professionals, all registrations expire on December 31. The annual renewal process is as simple as updating the application and paying a new fee. However, Administrators retain the right to suspend or revoke a registration whenever they feel it’s necessary and in the public’s best interest. |
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Advertising Facts |
All advertising, sales literature, and other written materials (prospectuses, pamphlets, circulars, form letters, etc.) intended for distribution to current or potential clients must be filed with the Administrator. For materials relating to exempt securities, exempt transactions, or federal covered securities, filing with the Administrator is not required. |
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When does a broker dealers registration Fee need to bepaid and are there exceptions / prorated |
Everyapplicant whether an agent, broker dealer, investment adviser, or IA Rep mustpay a registration fee. It must be paidend of the year full registration must be paid even if done middle of the year. |
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New Account approvals are required when? |
Priorapproval from a supervisor is NOT required for every order. HOWEVER, asupervisor must approve every new account before the first trade in that thataccount is executed. |
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According to the Uniform Securities Act, which of the following statements is/are NOT TRUE concerning a broker-dealer or investment adviser filing an application for registration as a successor firm? |
The successor firm must be in existence prior to the filing of the application for registration The successor firm must submit a filing fee with the application for registration |
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Which TWO forms must an agent obtain from a client inorder to purchase securities in order to purchase securities in a marginaccount? |
A signed hypothecation agreement A signed credit agreement |
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The withdrawal of an agents registration generallybecomes effective |
30 days after filing The administrator may initiate proceedings against an agent up to 1 year from the effective date of the withdrawal |
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Which of the following statements is NOT TRUEregarding licensing and registration standards for broker-dealers? |
A broker dealer must notify the SEC that it intends doing business in a state before it can transact any business Licensingand registration standards for broker-dealers do not include SEC notificationof intent to transact business in a particular state. |
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The USA excludes the following persons from thebroker-dealer definition: |
§Agents (the employees involved in securities transactions) Issuers Banks, savings and loan companies, savings institutions, and trust companies(Bank holding companies and broker-dealer subsidiaries of banks are notexcluded from the definition.) A person that has no place of business in the state AND only transacts businesswith issuers, other broker-dealers, banks, savings institutions, trustcompanies, insurance companies or other financial institutions, orinstitutional clients§A person that has no place of business in the state AND is registered where theperson maintains its place of business and only conducts business with existingretail clients who are not residents of the state (e.g., clients on vacation,attending school, or working in another state) |
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Ifasked to identify whether a firm is considered a broker-dealer in a state: |
(1) Identify theactivity in which the firm is involved (2) Determinewhether the firm has an office in the state §If YES, the firm must register §If NO, identify the type of client -If all clients are institutional clients, the firm is NOT required to register. -If one or more clients are retail clients who are residents of the state, thenthe firm must register. |
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An agent inadvertently sold an unregistered, nonexemptsecurity to a client. Under the Uniform Securities Act, which of the followingactions may be taken? |
Buying the security back from the customer Paying the customer the maximum legal rate of interest, less dividend or interest income received from the date of purchase |
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If an agent violates the uniform securities act, theadministrator may |
Arrestsuspects if they refuse to cooperate with an investigation |
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If and advisory firm has contacted the administratorof state A about a violation of USA even though the firm has a home office instate B BUT is registered in both state A and B what is not likely to happen? |
Takeno action. The administrator has theauthority to begin an investigation if a violation has occurred or is about tooccur. The investigation may take place inside or outside of the state asdeemed necessary. |
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Minimum financial requirements of an investmentadvisor under USA? |
AnIA that maintains custody of client assets has a minimum requirement of $35,000 |
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Which of the following choices is considered afraudulent act? |
Omittinga fact that is relevant to making an investment decision |
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Under an underwriting agreement, the syndicate will begiven warrants as part of its compensation package. The warrants can beexercised at any time in the next two years. Under the Uniform Securities Act,which TWO of the following statements are TRUE regarding the issuer of thisstock? |
The issuer must register the stock or distribute it under an exemption before the warrants can be issued The issuer is subject to state reporting requirements until the warrants expire |
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Which of the following individuals would NOT beconsidered an agent under the act? |
Aperson representing an issuer who does not receive commissions in effectingtransactions with the issuers existing employees. |
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Regulation D, Rule 504 Offering |
AreNOT federally covered securities. They must be registered in every state inwhich they are sold, unless they qualify for another exemption. |
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According to the USA an administrator is NOT allowedto demand that broker dealers do which of the following? |
File their advertising related to federal covered securities with their state admin prior to use. The admin does not regulate advertising that addresses only federal covered securities. |
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According to the Uniform Securities Act, which TWO ofthe following statements are TRUE? |
When an investment adviser's licenseis suspended, the investment adviser representative's license is no longer ineffect When a broker-dealer is suspended,the agent's license is no longer in effect Under the USA an issuer may amend itsregistration statement to increase the number of shares being sold after thestatement has been declared by the administrator |
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Under the Uniform Securities Act, which of thefollowing choices is NOT a security? |
Stock Futures- Under the USA futures, forwards, currencies, and commodities are not considered securities. |
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Under the Uniform Securities Act, a person who sellssecurities in violation of state securities law is civilly liable for which ofthe following penalties? |
All These: Interest Attorney Fees Principal Court Costs |
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When must action be taken for recovery on atransaction made in violation of a registration provision? |
Withinthree years of occurrence or two years of discovery, whichever occurs firs |
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According to the Uniform Securities Act, which of the following investment advisers would be exempt from registration? |
Anadviser with no place of business in the state and fewer than six retail clients |
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State securities Administrators have jurisdiction oversecurities transactions that are: |
Originated in their state Directed to and received in their state Accepted in their state |
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What action may the state securities Administratortake without giving the registrant an opportunity for a hearing? |
Cancel a registration Can be done if registrant is deceased, judged mentally incompetent, or is missing and cannot be located after a reasonable search. |
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A broker-dealer has been selling unregistered, nonexempt securities in nonexempt transactions without the permission of the state securities Administrator. What action would the state Administrator most likely take? |
Require the broker dealer to offer letters of rescission T his would require the BD to offer to repurchase the securities at their original cost plus interest |
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Surety Bond |
Asurety bond is insurance which is issued by a bonding company that agrees topay the sum of money awarded by a court up to a certain amount. The need for asurety bond may arise as a result of a registrant’s violations of the USA. Thebond must be maintained for as long as the registrant is in business and for three years thereafter. |
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Which investors are considered accredited under Reg Dof the securities act of 1933? |
Banks Individuals with a net worth of $1M or more or annual income of $200k |
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Persons who violate federal insider trading regulations are subject to all of the following penalties, EXCEPT: |
Finra Fines |
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What business practices are prohibited? |
Not identifying a client's objectives Borrowing funds or securities from a client Overstating the value of a client's account Guaranteeing a client against a loss. |
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Registration by coordination is used in conjunction with which of the following acts? |
The securities act of 1933 |
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Which of the following entities is NOT considered a person according to the Uniform Securities Act? |
An individual who has been deemed mentally incompetent. A person can be an individual as well as legal entities. |
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What do you do if an investment advisors net worth drops below the required minimum (as set by the administrator?) |
Notify the administrator within 1 business day and file a statement of financial condition. |
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An agent receives a letter from an irate client. The letter is the fifth in the last six months and the language is abusive. The agent forwards it to his supervisor. The supervisor decides against a reply and discards the letter. In this instance, what must happen? |
The Uniform Securities Act requires that a response be made to all written complaints |
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The Administrator has the right to deny, revoke, or suspend the registration statement of an issuer of securities. Under the Uniform Securities Act, which issuer(s) may be subject to this action? |
1) A company whose securities are listed on the Canadian National Exchange 2) A nonprofit corporation 3) A credit union 4) A municipality Answer is 1 only because other 3 are exempt from registration |
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All of the following documents may need to be filed with the Administrator, EXCEPT: |
A) A pamphlet for an oil and gas program B) A prospectus for a limited partnership C) An offering circular for an endowment policy D) A brochure for a mining company The Administrator may require the filing of sales and advertising literature for securities investments. Limited partnerships, oil and gas programs, and mining companies issue securities. Endowment policies are insurance products, not securities. |
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Max violation for violating a rule not knowingly |
$5,000 |
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Which of the following firms would NOT be required to register as a broker-dealer in State P |
A firm without a place of business in State P that does business only with institutional clients in State P would not be required to register as a broker-dealer in State P. |
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An IA would like to change the method it uses to calculate the fees it charges for certain clients. The new fee would be performance-based and would be calculated over a specified period. According to the NASAA Model Rule, Is this allowed? |
This type of fee arrangement is permitted for qualified clients Under the NASAA Model Rule and the Investment Advisers Act of 1940, performance fees generally, are prohibited. Exceptions include clients who have at least $1,000,000 under management with the adviser or who have a net worth in excess of $2,100,000. They would be defined as qualified clients. Clients who are not U.S. residents and certain employees of the adviser may also be charged performance-based fees. The Administrator does not need to approve the method used to calculate the fee, but it must be disclosed to clients. |
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When opening an account what are two things that must happen |
A qualified principal of the firm must approve all new accounts, and the customer's new account information must be kept for at least 6 years after it is last updated, or the account is closed. |
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Which of the following brochure delivery periods applies to investment advisers under the Uniform Securities Act |
If an ADV or brochure is not provided at least 48 hours prior to signing the contract, clients must be given five days to rescind without penalty |
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An Administrator can take which of the following actions if an agent violates the USA? |
Revoke the agent's registration |
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If an investment adviser is currently advising a mutual fund, how must it be registered? |
As a federal covered adviser with the SEC |
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Under what circumstances may the Administrator of State X issue a cease-and-desist order on behalf of the Administrator of State Y? |
Never |
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The Uniform Securities Act requires investment advisory firms to keep their books and records for: |
Five years |
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In order for an investment adviser to maintain custody of funds and securities: |
The investment adviser must notify the Administrator and there must be no rule against custody |
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Under the Uniform Securities Act, an investment adviser who has no place of business in a state is exempt from registration in that state if the adviser provides advice in which of the following situations? |
The adviser had no more than five clients in that state within the last 12 months The adviser provided advice only to investment companies in that state The adviser provided advice only to insurance companies in that state |
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According to the NASAA Model Rule on the Ethical Business Practices of Investment Advisers, which of the following statements is TRUE regarding investment advisory fees charged to customers? |
Advisers may not charge fees that are unreasonably high in relation to fees charged by other advisers for similar services |
