Series 63

Front 1

Administrator

Back 1

The official or agency administering the state Uniform Securities Act.

Front 2

Advertisement

Back 2

Any material designed for use in any public medium to solicit business.

Front 3

Agent

Back 3

An individual who represents a broker-dealer or an issuer when selling or trying to sell securities to the investing public. This individual is considered an agent whether he or she actually receives orders or simply solicits orders. Agents are also known as 'registered representatives'.

Front 4

What is not considered an agent?

Back 4

A salaried (no commissions) individual is not considered an agent if he or she represents issuers in the sale of any securities that are exempt from state registration under the Uniform Securities Act. Also, if he or she represents an issuer in an exempt transaction such as a private placement of normally non-exempt securities. If the partner, officer, or director of a brokerage firm limits his or her activities to managerial functions and does not attempt to affect purchases or sales, that person is NOT considered an agent.

Front 5

Anti-Fraud Rules

Back 5

Although exempt securities sold in exempt transactions are exempt from the registration and advertising filing requirements of the Uniform Securities Act, no security or person is exempt from the Anti-Fraud rules.

Front 6

Associated Person

Back 6

Any employee, manager, director, officer, or partner of a member broker-dealer or another entity (issuer, bank, etc.) or any person controlling, controlled by, or in common control with that member is considered an associated person of that member.

Front 7

Blue Sky Laws

Back 7

A generic term describing the state laws and regulation that govern the securities industry.

Front 8

Broker-Dealer

Back 8

Is defined in the USA so that it can be determined who must register in the state as a broker-dealer. A broker-dealer means any person engaged in the business of effecting transactions in securities for the account of others or for his or her own account. If the person does not fall under the definition of a broker dealer as defined by the law, the registration process is not necessary.

Front 9

The following persons are NOT considered as broker-dealers?

Back 9

Agents, Issuers, Banks, Savings institutions, trust companies and Persons who have no place of business in the state and who: Effects securities in the state exclusively through the issuers of the securities, other brokers, dealers, or financial institutions (banks, savings institutions, trust companies, insurance companies, and investment companies). Also, who are properly licensed in their home state and the only business they do in this state is with an existing customer who is only temporarily in this state.

Front 10

Consent to Service Of Process

Back 10

When applying for registration in a state, agents, brokers, dealers, and investment advisers must agree to respond to all subpoenas served on them in that state even if they do not reside there. The Consent to Service of Process form, which is part of the registration application, creates jurisdiction for the state over any agent, broker, dealer, or adviser registered in that state.

Front 11

Clients seeking to sue an agent, broker, dealer, or adviser need not serve the subpoena directly to the defendant but to?

Back 11

The Administrator. The subpoena (or service or process) need only to be served on the Administrator who now has jurisdiction.

Front 12

Exempt Security

Back 12

A security exempt from the state registration and advertising filing requirements (ALTHOUGH NOT from the anti-fraud requirements) of the USA. Examples of exempt securities include U.S government and municipal securities.

Front 13

Exempt Transaction

Back 13

A transaction exempt from registration and advertising requirements under the USA. Examples of exempt transactions include private placements and fiduciary transactions.

Front 14

Federal Covered Adviser

Back 14

An investment adviser that is regulated by the Securities Exchange Commission (SEC) under the Investment Adviser's Act of 1940 rather than the state. Federal covered advisers are generally those who manage investment company (mutual fund) portfolios or those who have $100 million or more in assets under management.

Front 15

What is required for federal covered advisers?

Back 15

State registration is not required for federal covered advisers, most states do require them to make a notice filing with the Administrator. This consists of copies of the registration forms sent to the SEC, a consent to service of process form and a filing fee.

Front 16

Federal Covered Security

Back 16

Federal Covered Securities are exempt from state registration and advertising filing requirements. They include new securities issued by companies whose securities already trade on a national securities exchange or on the NASDAQ National Market System and any security senior or equal to such securities. Also exempt form state registration are new securities issued by investment companies (mutual funds).

Front 17

Fidelity (Surety) Bond

Back 17

A fidelity bond that indemnifies customers against losses due to check forgery, lost securities, or fraudulent trading may be required of every agent, broker, dealer, and investment adviser at the discretion of the Administrator. The minimum coverage for Fidelity (Surety) Bonds must not be less than $35,000. Broker-dealers with a net capital of $35,000 or more may be exempt from the requirement.

Front 18

Fraud

Back 18

The deliberate concealment, misrepresentation, or omission of material information or the truth in order to deceive or manipulate another party for unlawful or unfair gain.

Front 19

Guaranteed Security

Back 19

Securities that have a guarantee, usually from a source other than the issuer, as to the payment of principal, interest, or dividends.

Front 20

Inside Information

Back 20

Material and non-public information obtained or used by a person for the purpose of trading in securities.

Front 21

Insider

Back 21

Any person who has non-public, material information about a corporation. Insiders include directors, officers, and stockholders who own 10% or more of any class of equity security of a corporation.

Front 22

Institutional Investor

Back 22

An organization that trades large volumes of securities. A mutual fund, bank, or pension fund are examples of institutional investors.

Front 23

Investment Adviser

Back 23

Any person who, for compensation (a flat fee or a percentage of assets managed), offers investment advice either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities; or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities.

Front 24

The term Investment Adviser DOES NOT include:

Back 24

Institutions such as bank, savings institutions, and trust companies. Professionals such as Lawyers, Accountants, Teachers and Engineers whose performance of these services is solely incidental (no separate fee is charged. Broker-dealers that offer investment portfolio advice as part of their business of being broker dealers and that receive no special compensation. Publishers of any financial publication of general, regular, and paid circulation. Persons that have no place of business within the sate and whose activities are limited to other investment advisers, brokers, dealers, banks, savings institutions, trust companies, insurance companies, pension of profit trusts, or other financial or institutional buyers. Most states limit this activity to no more than five clients in any 12 consecutive months. Investment Adviser Representatives are also not Investment Advisers.

Front 25

Investment Adviser Representative

Back 25

Any partner, officer, director, or other individual employed by or associated with an investment adviser who: Gives investment advice or makes recommendations. Manages client accounts or portfolios. Determines which investment recommendations or advice should be given. Offers or sells investment advisory services. Supervises employees involved in any of these activities.

Front 26

Issuer

Back 26

According to the USA, ay person who issues or proposes to issue any security. When a corporation or municipality raises additional capital through an offering of securities, that corporation or municipality is the issuer of those securities. An issuer transaction is also called a primary transaction.

Front 27

(NSMIA) National Securities Markets Improvement Act

Back 27

A federal law designed to restructure the division of responsibilities between federal regulators and state securities administrators especially in the areas of mutual fund regulation and the registration of investment advisers. Mutual funds are now considered to be 'federal covered securities' and advisers who manage their portfolios are considered federal covered advisers.

Front 28

Net Capital

Back 28

Liquid capital (cash and assets readily convertible into cash) maintained by a broker-dealer and investment adviser as required by law for customer protection.

Front 29

Non-Issuer

Back 29

A person other than the issuer of a security. According to the USA, refers to a non-issuer transaction, it is referring to a transaction in which the proceeds of the sale go to the selling stockholder. Most non-issuer transactions also are called 'secondary market transactions.'

Front 30

Offer/Sales

Back 30

An 'offer' includes every solicitation to sell a security for value and every solicitation of an offer to buy a security for value. A "sale" is the act of conveying ownership of a security for money or other value.

Front 31

Sales include the following:

Back 31

Any security given or delivered with or as a bonus for the purchase of securities or merchandise is considered to have been offered and sold for value. A gift of assessable stock is considered to involve an offer and a sale. Every sale or offer of a warrant or right to purchase or subscribe to another security or a security convertible into another security is considered to include an offer of the other security.

Front 32

Sales and offers to sell do NOT include:

Back 32

Bona fide pledges or loans (such as using stock as collateral for a loan). Stock dividends in lieu of cash dividends if nothing of value is given by the stockholders for the dividend. Stockholder-approved mergers or the sale of corporate assets in consideration of the issuance of securities of another corporation. Any consequence of a judicially approved business reorganization. All are NOT sales or offers.

Front 33

Person:

Back 33

Under the USA, a "person" is very broadly defined to include an individual, a corporation, a partnership, an estate, an association, a fund, a joint stock company, an unincorporated organization, a trust in which the interests of the beneficiaries are evidenced by a security, a government, or a political sub-division of a government.

Front 34

Prospectus

Back 34

The legal document that must be given to every investor who purchases registered securities in a primary offering as required by the Securities Act of 1933. It describes the details of the company and the particular offering. The prospectus is a summary of the registration statements as filed with the SEC.

Front 35

Registered Representative (Agent)

Back 35

For FINRA registration, exam, and licensing purposes, a registered representative (agent) refers to any associated person engaged in the investment banking and securities business. Registered Representatives (agents) INCLUDE: Securities sales persons, Individuals who supervise, solicit, or conduct business in securities. Individuals who train people to supervise, solicit, or conduct business in securities. Anyone who is NOT a principal and who is NOT engaged in clerical or brokerage administration is subject to registration and exam licensing as a registered representative.

Front 36

State

Back 36

The term 'state' is defined in the USA as any state, territory, or possession of the United States (such as Guam and America Samoa), the District of Columbia, and Puerto Rico.

Front 37

State securities registration by COORDINATION

Back 37

The state registration becomes effective at the same time the federal registration statement becomes effective. A security is eligible for blue sky registration by coordination in a state if the issuer files for registration of that security under the Securities Act of 1933 and files duplicated of the registration documents with the state administrator.

Front 38

State Securities Registration by NOTICE FILING:

Back 38

This Administrator nearly always requires investments company securities to make a notice filing with the state although issuers of other federal covered securities may or may not be required to do so. A registration by notice filing under state blue sky laws becomes effective at the same time the SEC registration does. If the SEC registration is already effective, the registration becomes effective in the state when all filing requirements are met. Most state blue sky laws allow this type of short form registration, which requires the issuer to file copies of the registration statement filed with the SEC, a consent to service of process, and to pay filing fees.

Front 39

State Securities Registration by Qualification

Back 39

The state securities registration by QUALIFICATION becomes effective when the Administrator so orders. A newly formed company registering securities for the first time in a state would have to register its securities by qualification.

Front 40

Securities Act of 1933

Back 40

The federal law that requires the FULL AND FAIR DISCLOSURE of all material information about the issuance of NEW SECURITIES in the PRIMARY MARKET. The ACT requires issuers to file a registration statement with the SEC and to give prospective purchasers a prospectus.

Front 41

Securities and Exchange Commission (SEC)

Back 41

A federal agency created by Congress to protect investors. The SEC enforces the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and other federal securities laws.

Front 42

Securities Exchange Act of 1940

Back 42

The federal law that regulated those engaged in the exchanges of securities in the SECONDARY MARKET including brokers, dealers, registered representatives (agents), and the various stock exchanges.

Front 43

Security

Back 43

Broadly defined under the USA to include any note, stock, bond, investment contract, debenture, certificate of interest in profit sharing or partnership agreement, certificate of deposit, collateral trust certificate, voting trust certificate, pre-organization certificate, option on a security, or other instrument of investment commonly known as a SECURITY. Also categorized as securities are interests in oil and gas drilling programs, real estate condominiums and cooperatives, farmland or animals, commodity option contracts, warehouse receipts, multi-level distributorship arrangements, and merchandising marketing programs.

Front 44

NASAA Statement of policy on dishonest or unethical business practices:

Back 44

Under NASAA's Statement of Policy, each broker, dealer, adviser, and agent shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of his or her business. Engaging in conduct such as forgery, embezzlement, non-disclosure, incomplete disclosure, misstatement of material facts, or manipulative or deceptive practices shall be grounds for denial suspension, or revocation of registration.

Front 45

A "guaranteed security"

Back 45

Is guaranteed as to payment of dividends, interest, or principal.

Front 46

The word 'person' is broadly defined under the USA but is DOES NOT include?

Back 46

Minors

Front 47

The definition of a broker-dealer does NOT include?

Back 47

Agents, Issuers, Banks, Savings Institutions, or Trust Companies.

Front 48

Limited Partnership Units are considered to be?

Back 48

Securities.

Front 49

Fixed Annuities and Commodity Future Contracts are?

Back 49

Not Securities. Therefore, you do NOT have to register as an agent to sell them.

Front 50

Individual Retirement Accounts (IRAs) are?

Back 50

Not considered to be securities.

Front 51

A blotter?

Back 51

Is a detailed daily record of all purchases and sales of securities, receipt and deliveries of securities, and all money transactions and other debits and credits.

Front 52

Under the USA, a 'broker-dealer' includes?

Back 52

Any person engaged in the business of effecting transactions for the account of others.

Front 53

Under the USA, an 'Agent'?

Back 53

Is defined as any individual other than a broker-dealer who represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities.

Front 54

A security is defined as any instrument that can be?

Back 54

Traded for value. An investment is considered a security if a person invests his or her money in a common enterprise with the expectation of profit from the managerial efforts of a third party. Insurance policies and annuities are NOT considered to be securities UNLESS Variable.

Front 55

Commodity option contracts are?

Back 55

Considered to be securities because it's an option. Commodity futures contracts are NOT a security.

Front 56

Issuer refers to?

Back 56

Any person who issues or proposes to issue any security. Normally, the issuer would be the corporation who issued the securities in the first place (such as General Motors). An issuer transaction is done in the PRIMARY market.

Front 57

A non-issuer transaction?

Back 57

Is done in the secondary market (such as OTC or on an exchange) and does not benefit the issuer.

Front 58

A broker dealer is a securities firm. As a broker dealer, the firm may act in a dual capacity as both a broker and a dealer but not in the same transaction. A broker always acts as a?

Back 58

Agent for the accounts of customers.

Front 59

A dealer always acts?

Back 59

For his or her own account, buying and selling securities for his or her own inventory (such as in the OTC market). A market maker is a dealer.

Front 60

Sale refers to?

Back 60

Every contract to sell a security or interest in a security. This includes a security given as a bonus for the purchase of another security or merchandise or a gift of assessable stock.

Front 61

"Offer to sell" is defined as an?

Back 61

Attempt to solicit a purchase or sale in a security. An offer includes every offer to dispose of a security for a client or solicitation of an offer to buy a security from a client for value. Included in this definition are incentives related to the offer such as: Gifts of assessable stock, Warrants, Securities offered as a bonus for buying another security or merchandise, Rights.

Front 62

What is NOT included within the definition of an offer to sell?

Back 62

Bona fide pledges or loans, Stock dividends, Stockholder approved mergers, Acts incident to approved corporate reorganizations.

Front 63

A non-issuer transaction is just another name for a?

Back 63

Secondary market trade (such as a transaction made by selling stockholders).

Front 64

An issuer transaction is another name for a?

Back 64

Primary market transaction. It will require registration unless it is exempt or an exempt transaction.

Front 65

If an agent represents a broker-dealer, he or she must?

Back 65

Always register regardless of what is being sold.

Front 66

Agents must register in every?

Back 66

State that they sell in; there is NO such thing as an exempt agent.

Front 67

Broker-dealers must register in every state that they sell in unless?

Back 67

Exempt

Front 68

A non-exempt security must be registered in?

Back 68

Every state where it will be sold.

Front 69

An offer and sale does not exist is it is an?

Back 69

Act as result of a class vote by stockholders regarding a merger or consolidation. Bona fide pledge or loan using stock as collateral. Act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding shares. Act as a result of a judicially approved reorganization in which one security is used in exchange for another outstanding security.

Front 70

A sole proprietor incorporates and then sells stock in his or her company. The company would be considered an?

Back 70

Issuer. (The sale of stock is for the benefit of the company. The company is considered the issuer.)

Front 71

All of the following would fall under the definition of person?

Back 71

A government sub-division. A closely held corporation. An individual. A partnership.

Front 72

What is considered sales, offers, or offers and sales?

Back 72

Any security given or delivered with or as a bonus for any purchase for any purchase of securities is considered to have been offered and sold for value. Any gift of assessable stock is considered to involve an offer and sale. Every sale or offer of a warrant or stock right to purchase or subscribe to another security is considered to include an offer of the other security.

Front 73

Under the Uniform Securities Act, what is the elements of the definition of an investment adviser?

Back 73

Advice at to investments can be either in writing or given orally. Advice must relate to the value of securities or recommendations to purchase or sell securities. There must be compensation for services rendered.

Front 74

Under the Uniform Securities Act, broker-dealers?

Back 74

MAY be classified as investment advisers if they provide investment advice for which they are paid a fee separate from any commissions they earn on securities transactions. Employ agents to represent them. Generally need to be registered in each state in which they do business.

Front 75

Under the Uniform Securities Act, what is true of a broker-dealer?

Back 75

The primary business of a broker-dealer may be effecting securities transactions for clients or for his or her own account. A broker-dealer may be either an individual or a firm. A broker-dealer may also be registered as an investments adviser if they provide investment advice for which they are paid a fee separate from any commissions they earn on securities transactions.

Front 76

Under the Uniform Securities Act, and individual representing an issuer is not an agent if the issuer is?

Back 76

A government. An Insurance Company. A bank. (Agents representing broker-dealers or issuers. An individual representing an issuer is not considered an agent if he or she is selling exempt securities and no commissions are paid).

Front 77

Under the Uniform Securities Act, which of the following professionals is excluded from the definition of investment adviser if any investment advice is provided solely incidental to the practice of his or her profession?

Back 77

Lawyer, Accountant, Teacher, Engineer

Front 78

Under the Uniform Securities Act, which of the following is included in the definition of an investment adviser?

Back 78

Financial Planner. (Banks, savings institutions, and trust companies are excluded from the definition of an investment adviser; however, Financial Planners are not excluded. Investment Adviser Representatives must work for an Investment Adviser and must register separately.

Front 79

Under the USA, the term 'person' may refer to?

Back 79

Almost any entity. (The definition of a person is very broad and includes individuals, corporations, partnerships, estates, associations, unincorporated organizations, trusts in which the interests of the beneficiaries are evidenced by a security, a government, or a political sub-division of a government.

Front 80

Options (puts and calls) on futures contracts are considered to be?

Back 80

Securities

Front 81

Under the Uniform Securities Act, which of the following is an investment adviser representative?

Back 81

An associate in an investment advisory firm who manages the account of a single client. A director in an investment advisory firm who determines specific recommendations for clients. A vice president of an investment advisory firm who supervises employees who solicit clients for the firm. (A clerk employed by an investment advisory firm is NOT an investment adviser representative. Clerks and administrative personnel are specifically excluded from the definition of an investment adviser representative. Specifically included in the definition are directors, officers, partners, associates, and employees who carry out investment advisory or solicitation functions or who supervise those functions are ALL considered Investment Adviser Representatives.

Front 82

Under the Uniform Securities Act, which of the following statements is true regarding an agent?

Back 82

An agent is always an individual, not a firm. An agent represents a broker-dealer or an issuer. Agents must register in every state where they solicit securities. Agents are specifically excluded from the definition of a broker-dealer. An agent is NOT a broker-dealer.

Front 83

Under the Uniform Securities Act, which of the following is an issuer?

Back 83

Any person who proposes to issue a security. The manager of a trust agreement under which a collateral trust certificate is issued. A municipality. Anyone who issues or proposes to issue a security is an issuer.

Front 84

Under the Uniform Securities Act, an individual is considered to be an agent if he or she represents an issuer?

Back 84

In the sale of non-exempt securities. (An individual is NOT considered an agent if he or she is representing an issuer in exempt transactions such as transaction with underwriters. Exclusions also apply to individuals representing an issuer with respect to certain other exempt securities or exempt transactions; however, agents representing issuers in the sale of non-exempt securities must register as an agent.

Front 85

All types of stock and bonds are?

Back 85

Securities

Front 86

Precious metals, collectibles and currency are NOT a?

Back 86

Security

Front 87

Secondary market trades are also known as?

Back 87

Non-issuer transactions. (Non-issuer transactions DO NOT benefit the issuer).

Front 88

Private placements and issuer transactions are?

Back 88

Primary offerings.

Front 89

Under the USA, all of the following are true regarding the definition of an offer?

Back 89

It includes the offer to sell a security for value. It includes the solicitation of an offer to buy a security for value. It includes attempts to dispose of the security for value.

Front 90

A guaranteed security is one guaranteed by someone other than the issuer as to the payment of?

Back 90

Interest, Principal and Dividends.

Front 91

A person selling securities on behalf of his or her own account is a?

Back 91

Broker-dealer. (A broker-dealer is any person engaged in the business of effecting transactions in securities for the account of others or for his or her own account).

Front 92

Which of the following are securities?

Back 92

Limited partnership units sold in private placements. Municipal bonds sold by the issuer. Bond issued by a Canadian province. (Commodity futures contracts are NOT a security).

Front 93

Agent

Back 93

Under the USA, an "Agent" is defined as an individual who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities. Agents may represent either a broker-dealer or an issuer of securities.

Front 94

Agents must?

Back 94

Register with the state individually, not as corporations.

Front 95

Most broker-dealers and investment advisers register as corporations instead of as individuals. REMEMBER that the word 'Person'?

Back 95

Is very broadly defined to include individuals, corporations, partnerships, etc.

Front 96

Agents may represent?

Back 96

Either a broker-dealer or an issuer of securities. Agents must register in every state in which they solicit or sell securities. An agent cannot register in a state unless his or her broker-dealer firm is registered there first. Agents may only transact business in the states in which they are registered.

Front 97

Agents may register in other states simply by?

Back 97

Filing an application, paying a registration fee, and providing a consent to service of process form.

Front 98

Agents representing issuers of non-exempt securities or non-exempt transactions must?

Back 98

Register as an Agent.

Front 99

If an individual represents an issuer of exempt securities or an issuer selling securities in an exempt transaction?

Back 99

Registration as an agent is not required as long as no commissions are paid.

Front 100

If you represent a BROKER-DEALER firm in the sale of securities "exempt or non exempt" you must register?

Back 100

As an agent no matter what you sell. For example, an agent selling new securities in a private placement on behalf of a broker-dealer would have to register even though private placements are considered to be exempt transactions under the Act. It is the private placement that is exempt, not the Agent.

Front 101

If you sold new stock in a private placement on behalf of the ISSUER of the stock?

Back 101

Registration as an agent would not be necessary as long as no commissions were paid.

Front 102

An agent DOES NOT include?

Back 102

A person who represents an ISSUER selling securities in exempt transactions in which no commissions are paid (such as a private placement of the issuer's own stock). A person who represents an issuer selling exempt securities in which no commissions are paid (such as the placement of municipal bonds on behalf of the issuer). A bank, savings institution, or trust company (such as selling securities on behalf of the bank's trust department). A clerical or administrative person without authority to solicit or accept orders. An officer of a broker-dealer who does not affect or supervise the purchase or sale of securities (such as a person engaged in management only with no sales responsibilities). An officer of the issuer selling the issuer's stock to employees of the issuer as long as no commissions are paid.

Front 103

An applicant who has passed the exam does NOT have the right to transact business until he or she has been granted registration by the state administrator. No broker-dealer or issuer can lawfully employ an agent unless that agent is?

Back 103

REGISTERED. An agent is not effectively registered unless he or she is employed by a broker-dealer or issuer.

Front 104

Whenever an agent begins or terminates employment with an employer?

Back 104

The agent as well as the employer must notify the Administrator.

Front 105

When an agent transfers his or her employment from one broker-dealer or issuer to another?

Back 105

All three persons- the agent, the old employer, and the new employer must notify the Administrator.

Front 106

Broker-Dealer

Back 106

Is any person engaged in the business of effecting transactions in securities for the account of others or for his or her own account.

Front 107

Remember the word 'person'?

Back 107

Is broadly defined and includes most any business entity, individual, partnerships, or corporations. Most broker-dealers are set up as corporations but a sole proprietor or partnership could also register as a broker-dealer.

Front 108

Agents are NOT considered?

Back 108

Broker-dealers. (Meaning agents must register separately). The registration of a broker-dealer automatically constitutes the registration of any agent who is also a partner, officer, or director of the broker-dealer firm.

Front 109

Issuers of securities and banks, savings institutions, or trust companies are also exempt from the definition of a broker-dealer under the Act AND NEED NOT REGISTER. Further,?

Back 109

Firms with no place of business in this state (non-resident broker-dealers) need not register in this state if they effect transactions exclusively with or through issuers, other brokers, dealers, banks, savings institutions, trust companies, insurance companies, investment companies, pension or profit sharing trusts, or other institutional buyers. In summary, if a securities firm has a place of business in this state, it must register in this state, however, if it does NOT have an office here and does business only with institutional investors, registration in NOT required.

Front 110

An exception to registration under the Act if an existing customer of a non-resident broker-dealer is temporarily in this state, that is, if he or she is not a resident. For example, a broker-dealer properly registered in Colorado could transact business with a customer who is on vacation in California; however, a?

Back 110

Broker-dealer based in Canada who does not have an office in this state may NOT effect securities transactions with an existing Canadian client who is temporarily in this state unless such a broker-dealer is registered in this state.

Front 111

Whenever a broker-dealer changes the character of its business organization, he or she may file an application with the Administrator for registration as a (successor) broker-dealer for the unexpired portion of the year?

Back 111

Without paying any filing fee.

Front 112

At the time a broker-dealer is registered, anyone who is then a partner, officer, or director of the broker-dealer is?

Back 112

Automatically registered as an agent. (If that person acts in the capacity of an agent and not otherwise. Silent partners are NOT considered agents because they do NOT act in the capacity of agents).

Front 113

Once the "consent to service of process" has been filed by the applicant?

Back 113

This is required to create jurisdiction in a state. Any complaint presented to the Administrator has the same force and validity as if it had been served personally on the applicant.

Front 114

An application for any registration must contain whatever information the Administrator requires, such as?

Back 114

Form and place of business organization. Proposed method of doing business. Qualification and business history. History of injunctions, conviction of any felony, or conviction of any misdemeanor involving any aspect of the securities business. Financial condition and history.

Front 115

He or she must be registered under the Uniform Securities Act to?

Back 115

Transact business in this state as an investment adviser or investment adviser representative. (You do not have to register under the USA if during any period of consecutive months, he or she do not direct communications in this state in any manner to more than five clients. In other words, if an IA has a place of business in this state, he or she must register in this state.

Front 116

If he or she does not have a place of business in this state and his or her only clients are institutional clients or he or she does NOT direct business communications to more than?

Back 116

Five public clients (also known as de minimus exemption) in 12 consecutive months, registration is NOT necessary.

Front 117

An Investment Adviser Representative (IAR) means any partner, officer, director, or other individual employed by an investment adviser who makes recommendations or otherwise renders advice regarding securities, manages accounts or portfolios of clients, determines which advice should be given, solicits, offers, or sells investment advisory services, or supervises employees , except?

Back 117

Clerical and administrative personnel.

Front 118

It is unlawful for any investment adviser to employ an investment adviser representative unless he or she is registered. Whenever an IAR begins or terminates employment with an IA, either the?

Back 118

IA or the IAR must promptly notify the Administrator.

Front 119

If the IA is federally registered, then the IAR is responsible for?

Back 119

Notifying the Administrator.

Front 120

If the IA is state registered, they the?

Back 120

IA is responsible for notify the Administrator.

Front 121

When an agent BEGINS or TERMINATES employment with a broker-dealer?

Back 121

Both the agent and the broker-dealer must notify the Administrator.

Front 122

The National Securities Markets Improvement Act of 1996 (NSMIA)?

Back 122

Eliminates duplicate registration requirements for investment advisers. An adviser is either regulated by the SEC or by the state in which he or she conducts business in but not both.

Front 123

Advisers managing $100 million or more in assets and those managing investment companies (mutual funds) must?

Back 123

Register with the SEC (FEDERALLY) instead of the state under NSMIA. Advisers registered with the SEC are known as 'federal covered advisers'.

Front 124

Federal covered advisers are EXEMPT from STATE registration but may still have to pay?

Back 124

State filing fees and file a consent to service of process form.

Front 125

Under the USA, it is illegal for anyone to transact business in a state as an IA or and IAR UNLESS?

Back 125

They are either registered with the state or exempt.

Front 126

FORM ADV

Back 126

Form ADV is the uniform form used by Investment Advisers (IAs) to register with either the SEC or state securities administrators.

Front 127

Form ADV Part 1?

Back 127

Requires information about the adviser's business, ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees. The SEC reviews Part 1 of the form to process registrations and to manage its regulatory and audit programs. Although designed for regulatory purposes, Part 1 investment adviser filings are available to the public on the SEC's Investment Adviser Public Disclosure website.

Front 128

Form ADV Part 2?

Back 128

Is the primary disclosure document that investment advisers provide their clients. Part 2 requires investment advisers to prepare narrative BROCHURES written in plain English that contain information such as the types of advisory services offered, the adviser's fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel of the adviser.

Front 129

Investment advisers are required to provide ANNUALLY to clients a summary of?

Back 129

Material changes to the brochure and either deliver an updated brochure or offer to make available an updated brochure. In addition, an IA must deliver to clients a BROCHURE SUPPLEMENT ANNUALLY that provides information about the specific employees (IARs) that, acting on behalf of the adviser, actually provide the investment to the client. The supplement must also contain contact information for the IARs' supervisor in case the client has concerns about them.

Front 130

The BROCHURE SUPPLEMENT must be delivered either before or?

Back 130

At the time that the IAR begins to provide investment advice to a client. An updated supplement must be delivered to clients when there is a new disclosure of a disciplinary event or a material change to disciplinary information that has already been disclosed.

Front 131

Federal covered advisers file Part 1 of Form ADV with the SEC and keep Part 2?

Back 131

In their files.

Front 132

State covered advisers must file both Part 1 and Part 2 with the Administrator of each?

Back 132

State in which they are registering.

Front 133

While investment advisory firms (IAs) must file Form ADV with either the SEC or the state Administrator, their Investment Adviser Representatives (IARs) must register with?

Back 133

State Administrator by filing form U-4.

Front 134

The minimum NET CAPITAL requirement is?

Back 134

$35,000. If the firm cannot meet this requirement, the Administrator will require the firm to post a SURETY BOND in an amount not less than $35,000. Appropriate deposits of cash or securities shall be accepted instead of a bond and no bond is required of firms whose net capital exceeds that which is required by the SEC.

Front 135

Investment advisory firms (IAs) who have discretionary authority or custody of client funds or securities may also be required to post a?

Back 135

SURETY BOND. These SURETY BONDS are typically in the amount of $10,000 for those firms who have discretion and $35,000 for those firms who have custody.

Front 136

Surety bond amount for an IA firm with discretion?

Back 136

$10,000

Front 137

Surety bond amount for IA firm with custody?

Back 137

$35,000

Front 138

Registration Application becomes effective THIRTY DAYS after the registration application has been filed or?

Back 138

Sooner at the Administrator's discretion.

Front 139

Every broker, dealer, investment adviser, and agent registration expires?

Back 139

December 31st unless renewed.

Front 140

An Administrator may deny, suspend, or revoke any registration if he or she finds that the order is in the public interest and that the applicant, registrant , or issuer of a security is guilty of any of a specified list of securities, including being convicted of a misdemeanor involving any aspect of the securities business or being convicted of any felony within?

Back 140

The past 10 years. Also WILLFULLY violating any provision of the Uniform Securities Act.

Front 141

The lack of experience cannot be the sole factor for?

Back 141

Denying registration.

Front 142

The Administrator may issue a cease and desist order without a prior hearing if?

Back 142

He or she suspects a person is about to violate the act, he or she must provide an opportunity for a FUTURE HEARING for the persons affected.

Front 143

The USA authorizes an Administrator to proceed with legal action against an entire?

Back 143

Brokerage firm or Investment Advisory firm if any one of that firm's officials has been disqualified as long as the action is in the public interest. Also, the Administrator may cancel the registration if he or she finds that the registrant has ceased to do business or CANNOT BE LOCATED.

Front 144

The Administrator may require the FILING of any informational materials or advertisements that are distributed to clients or prospective clients, UNLESS?

Back 144

The security or transaction is exempted under the Act. It is unlawful for any person subject to the Act to file any material that is misleading or fraudulent.

Front 145

Broker-dealers must keep all records, written or electronic, for?

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THREE years.

Front 146

Investment Advisers must keep all records for?

Back 146

FIVE years, unless the Administrator rules otherwise.

Front 147

As long as the broker-dealer or advisory firm complies with the record keeping requirements of its home state,?

Back 147

It will not have to meet the requirements of any other state. However, the Administrator of any state in which the firm is registered may conduct an audit of the firm's records relating to securities transactions that were originated, directed to, or accepted in their state.

Front 148

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?

Back 148

Correcting Amendment promptly.

Front 149

If you represent a broker-dealer in the sale of a security?

Back 149

You must register as an agent. There are NO exceptions to this even if you only sell exempt securities.

Front 150

If you represent an ISSUER selling exempt securities or in exempt transactions, you DO NOT need to?

Back 150

Register as an agent.

Front 151

Just because your broker-dealer is registered in all states does NOT mean?

Back 151

That you have to be.

Front 152

You can NOT sell securities to a customer out of state unless?

Back 152

Both you and your broker-dealer are registered in that state.

Front 153

You can ONLY represent ONE broker-dealer at a time.

Back 153

Only one!

Front 154

If you terminate employment,

Back 154

both you and your broker-dealer must notify the ADMINISTRATOR.

Front 155

Although you will pass your exam, you cannot sell securities in a state until?

Back 155

Your registration is effective in that state.

Front 156

If you are selling securities issued by a US bank as a representative of that bank, you?

Back 156

Do NOT need to register as an agent.

Front 157

Registration of a firm as an investment adviser (IA) automatically registers the firm's?

Back 157

Partners, Officers, or Directors as IARs (Investment Adviser Representatives).

Front 158

An agent selling securities on behalf of a broker-dealer who gives incidental (no separate advisory fee) investment advice to his or her clients does?

Back 158

Not need to register as an investment adviser.

Front 159

If you only give advice on fixed annuities?

Back 159

You do NOT need to register as an IA.

Front 160

If an IA firm is a partnership, it must notify clients whenever it is merged with another firm, a partner leaves, or a new partner is added.

Back 160

No notification is required when a clerical person leaves.

Front 161

The Administrator may NOT deny a registration based solely on the lack of?

Back 161

Experience.

Front 162

You can state that you are "registered" and that you "represent a broker-dealer," but you CAN NOT state?

Back 162

That "The Administrator approves of your abilities".

Front 163

Upon termination of an investment adviser representative, either the IA firm or the IAR must?

Back 163

Notify the Administrator.

Front 164

Registration as a broker-dealer firm automatically registers the firm's owners as agents, thus, the term 'broker-dealer agent'.

Back 164

Registration as a broker-dealer firm automatically registers the firm's owners as agents

Front 165

A college professor who sells investment advice for a fee must register as an?

Back 165

Investment Adviser.

Front 166

Publishers of market letters whose advice does NOT relate to specific investments are NOT required to?

Back 166

Register as Investment Advisers.

Front 167

The Administrator may require agents, advisers and broker-dealers to post a?

Back 167

Surety bond.

Front 168

Broker-dealers must keep blotters, ledgers, and customer order tickets for?

Back 168

Three years.

Front 169

Federal covered advisers, such as those who advise mutual funds, must register with the?

Back 169

SEC

Front 170

Under the USA, broker, dealer, investment adviser, agent, and investment adviser representative registrations expire annually on?

Back 170

December 31st unless renewed.

Front 171

When an agent BEGINS or TERMINATES a connection with a broker-dealer or issuer, both the agent and the broker-dealer or issuer must?

Back 171

Promptly notify the Administrator.

Front 172

When an agent terminates with one broker-dealer firm and re-registers with another broker-dealer firm, all three parties- ?

Back 172

The old firm, the new firm and the agent- must notify the Administrator.

Front 173

In order for a CPA to be compensated by an IA firm, the CPA must be registered as an?

Back 173

IAR

Front 174

Broker-dealers are NOT required to obtain a copy of a customer's tax return in order to open a new account or to?

Back 174

Establish suitability.

Front 175

An IA who does NOT have an office in this state does NOT need to register in this state as long as he or she has five or less non-institutional customers in this state. This is known as the?

Back 175

De Minimums Expemtion.

Front 176

If a broker-dealer firm hires an agent to sell securities of an issuer, the agent represents the broker-dealer firm, NOT the?

Back 176

Issuer

Front 177

An individual hired by the issuer to sell the issuer's new stock on a COMMISSION basis is considered to be an?

Back 177

Agent of the issuer.

Front 178

An attorney who advertises his or her investment advisory services in the yellow pages would have to register as an?

Back 178

IA (Investment Adviser).

Front 179

A federal covered adviser who hires individuals to sell advice for him or her in a state must register such individuals as?

Back 179

IARs in that state.

Front 180

When an IA firm registers in a state, its officers and directors are?

Back 180

Automatically registered as IARs.

Front 181

An order ticket must contain the NAME of the CUSTOMER, the ACCOUNT NUMBER, the NAME of the AGENT, a DESCRIPTION of the SECURITY, the QUANTITY of the SECURITY, the TIME of ORDER ENTRY, the EXECUTION PRICE, and any APPLICABLE CONDITIONS.

Back 181

An order ticket must contain

Front 182

Broker-dealers or IA firms may be required to be bonded in every state in which they are?

Back 182

Registered.

Front 183

Bonds (SURETY BONDS)

Back 183

are designed to provide protection for customers against losses due to check forgery, lost securities, and/or fraudulent trading. If a broker-dealer should cease to do business, the bond must be maintained for a period of THREE year.

Front 184

A lawsuit for civil liability may be brought forth by the client within THREE years of the date of sale or?

Back 184

TWO years of discovery of the violation, whichever occurs first.

Front 185

Under the USA, a Canadian broker-dealer who does NOT have an office in this state may affect transactions with a person from Canada who is temporarily a resident of the state and who is already a client of the broker-dealer if the broker-dealer?

Back 185

Files an application for registration with the state, files a CONSENT TO SERVICE OF PROCESS, provides evidence that he or she is in good standing in his or her home jurisdiction, and is a member of a SRO (Self Regulatory Organization) or stock exchange in Canada.

Front 186

If an IAR who represents a STATE registered IA terminates employment, the IA must notify the?

Back 186

State. (The IA must notify the state if working for a State registered covered IA).

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If an IAR who represents a FEDERAL covered IA terminates employment, the IAR must notify the

Back 187

State. (The IAR must notify the state if working for a FEDERAL covered IA).

Front 188

Federal covered investment advisers must register with the _____ and must make a notice filing and pay a filing fee with the state.

Back 188

SEC

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An "IAR" is an individual who makes?

Back 189

Recommendations, manages accounts, solicits investment advisory services, or supervises others who perform these duties.

Front 190

Although any person who meets the definition of a broker, dealer, agent, IA, or IAR must register with the Administrator by submitting an application, providing a consent to service of process, paying fess, and passing an exam,

Back 190

fingerprints are NOT required.

Front 191

The CONSENT OF SERVICE OF PROCESS filed with an initial application for registration remains in effect?

Back 191

Permanently and need not be re-filed upon renewal.

Front 192

Regardless of when a person initially registers, renewal always occurs on?

Back 192

December 31st

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While the registration of an agent or an IAR is pending, the individual may NOT taken part in any activity that would require registration; he or she may perform only during the pending period?

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Clerical duties and conduct research.

Front 194

Although IARs may supervise other IARs, they may NOT supervise the IA firm's?

Back 194

Accounting department

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Although federal covered advisers need NOT register in the state, they are still subject to the state's?

Back 195

Anti-fraud regulations.

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A SALARIED individual who works for a real estate company that issues real estate limited partnerships could sell units to other employees of the issuer without?

Back 196

Registering as an agent.

Front 197

During the period of time that an agent is NOT affiliated with a broker-dealer or an issuer, his or her registration is?

Back 197

NOT Effective.

Front 198

A voluntary withdrawal of registration is effective?

Back 198

30 days after the Administrator receives it provided no proceeding are pending against making the request.

Front 199

A federal covered IA must register with the?

Back 199

SEC; IARs must register with the state.

Front 200

A broker-dealer, agent, or investment adviser may obtain an initial or renewal registration with the state by filing an "an application, a consent to service of process, and paying a filing fee with the Administrator. A CONSENT TO SERVICE OF PROCESS gives the state the irrevocable right to process legal complaints against the applicant. It also creates?

Back 200

Jurisdiction for the state over licenses.

Front 201

If the registration of a broker-dealer is revoked or suspended, the registration of all agents associated with that broker-dealer?

Back 201

are also revoked or suspended.

Front 202

If an adviser or a broker-dealer has net capital (net worth) of $35,000 or more, the Administrator may?

Back 202

Waive the requirement for posting a surety bond.

Front 203

If the president of a corporation or a member of the Board sells stock of that corporation to the public and earns a commission for doing so,?

Back 203

He or she must register as an agent of the issuer (the corporation issuing the stock).

Front 204

You can NOT make any solicitations or sales unless?

Back 204

You are registered as an agent.

Front 205

If an unregistered agent of a broker-dealer sells a security, both?

Back 205

The agent and the broker-dealer have violated the law.

Front 206

Persons representing issuers in the sale of exempt securities or exempt transactions need NOT?

Back 206

Register as agents.

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Persons representing broker-dealers must ALWAYS register as agents even if all they sell is exempt securities and exempt transactions?

Back 207

They must ALWAYS REGISTER AS AN AGENT when working for a broker-dealer.

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Your registration as a securities sales agent is effective?

Back 208

When the administrator say so. There is no specific waiting period.

Front 209

Form ADV is the uniform form used by IAs to register with?

Back 209

Either the SEC or the State Securities Administrator.

Front 210

Federal Covered advisers must file Part 1 of Form ADV with the?

Back 210

SEC

Front 211

State covered advisers must file both?

Back 211

Part 1 and Part 2 of Form ADV with the Administrator of each state in which they are registering.

Front 212

Part 1 of Form ADV

Back 212

Requires information regarding the IA's business, ownership, clients, employees, business practices, affiliations, and disciplinary events.

Front 213

Part 2 of Form ADV is a narrative?

Back 213

BROCHURE written in plain English that describes the IA's services, fee schedule, disciplinary information, conflicts of interest, and the educational and business backgrounds of management and key advisory personnel.

Front 214

At or before the time that IARs begin to provide investment advice to clients, they must deliver a supplement to the?

Back 214

Brochure (Part 2) that provides specific information about them and how to contact their supervisor.

Front 215

IAs are required to provide annually to clients?

Back 215

A summary of material changes to the brochure (Part 2) and either deliver an updated brochure or offer to make available an updated brochure.

Front 216

Investment Adviser Representatives (IARs) must register with the state administrator by filing ?

Back 216

Form U-4

Front 217

In individual representing an issuer in the sale of a non-exempt security must register as an?

Back 217

Agent

Front 218

An individual representing an issuer in the sale of three month commercial paper?

Back 218

Does not have to register as an Agent because commercial paper is obligated to pay cash within nine months NOT three. Commercial paper is also issued in denominations of at least $50,000.

Front 219

Under the USA, which of the following would prevent an agent from claiming an exclusion to the definition of an Investment Adviser?

Back 219

Receiving any compensation for investment advice other than commissions on securities transactions. Providing investment advice beyond the scope of his or her employment with a broker dealer.

Front 220

Under the USA, what is a broker-dealer?

Back 220

A firm in the business of effecting securities transactions for its own account. (A broker-dealer is a person (individual or firm) in the business of affecting securities transaction for the accounts of others or for its own account).

Front 221

Under the USA, an agent who offers a non-exempt, unregistered security for sale:

Back 221

May be civilly liable to the purchaser if the transaction is not exempt. (An unregistered, non-exempt security may only be offered or sold in an exempt transaction. If the transaction is exempt, however, no violation of the Act has occurred and therefore, no civil liability or criminal penalties could be imposed).

Front 222

Under the Uniform Securities Act, which of the following would prevent an agent from claiming an exclusion to the definition of an investment adviser?

Back 222

Receiving any compensation for investment advice other than commissions on securities transactions. Providing investment advice beyond the scope of his or her employment with a broker-dealer.

Front 223

Under the USA, which of the following statements regarding the consent to service process are true?

Back 223

A consent to service of process makes legal process served on the Administrator as legally binding as process served on the registrant personally. Broker-dealer and agents must file a consent to service of process to become registered. All applicants for registration must file a consent to service of process regardless of whether their offices are in state or out of state.

Front 224

Under the USA, the registration requirements for agents may include all of the following?

Back 224

A consent to service of process, an examination, surety bonding. "Minimum net capital is NOT required for the registration requirements for agents." Minimum net capital may be required of broker-dealers and investment advisers but NOT agents.

Front 225

To register as an agent, an agent must submit?

Back 225

A completed application for registration, a filing fee, and a signed consent to service of process.

Front 226

Once registration has been revoked, the Administrator can bar the registrant from?

Back 226

Ever again being involved in the securities business.

Front 227

What is an example of a broker-dealer?

Back 227

A non-issuer corporation selling interests in an oil and gas limited partnership. A broker-dealer is defined as any person who engages in securities transactions for the accounts of others or for his or her own account. (Agents, Issuers, Insurance companies, trust companies, investment companies and Banks are NOT broker-dealers)!

Front 228

You are not an agent is you are?

Back 228

n employee of an issuer selling investment contracts issued in connection with employee benefit plans. (An exception to the definition of an agent is for individuals who represent the issuer in selling investment contracts issued in connection with EMPLOYEE BENEFIT PLANS.

Front 229

A non-issuer corporation uses its employees to sell non-exempt securities. The corporation receives a commission on the sale of the securities. Some of the commission is then paid to the employees. The corporation is a?

Back 229

Broker-dealer that must be registered. (A broker-dealer is in the business of effecting transactions in securities for his or her own account of for the accounts of others. Under the USA, a broker-dealer must register in the state where business is transacted.

Front 230

A corporate officer of an issuer sells new, non-exempt securities of that corporation for a commission. What is true of the officer?

Back 230

He or she must be licensed as an agent.

Front 231

Under the USA, what meets the definition of an Investment Adviser?

Back 231

Financial Planner. (Financial planners sell advice for a fee and would have to register with the state as an investment adviser. An IAR represents an adviser and is a separate category of registration. Federal covered advisers register with the SEC, not the state. Agents of broker-dealers often give advice but it is considered incidental unless they charge a separate fee.

Front 232

The President of bank sells shares of the bank without compensation.

Back 232

Securities of a bank are exempt and a person who transacts business only in exempt securities is, by definition, not an agent or a broker-dealer as long as he or she represents the issuer.

Front 233

What must both broker-dealers and investment advisers file with the Administrator?

Back 233

Financial statements and Update of information promptly. (Broker-dealers and investment advisers must meet the appropriate net worth requirements (financial statements) of the state and update all information promptly. A surety bond of at least $35,000 may be required and sales literature must be filed unless the security or transaction is exempt.

Front 234

An issuer employs its officers and directors to sell non-exempt shares of the company and compensates them for the sales. The officers and directors would have to be registered as agents of the?

Back 234

Issuer. (The definition of an agent would include an individual representing the issuer in a transaction for the benefit of the issuer unless the securities sold are either exempt or being sold in an exempt transaction).

Front 235

An issuer uses its directors to sell the issuer's non-exempt stock to the public. In exchange, the directors receive a commission. The directors:

Back 235

Are agents of the issuer and must be licensed.

Front 236

After an agent passes the Series 63 exam, when can he or she begin to sell?

Back 236

When he or she is affiliated with a broker-dealer. When he or she has been granted registration from the state administrator.

Front 237

An employee of a licensed broker-dealer firm is allowed to sell exempt securities as an unregistered agent in which of the following cases?

Back 237

Under no circumstances! You can not sell as a unregistered agent. Even if the securities are exempt, it is unlawful for a person to transact business for a broker-dealer unless that person is registered.

Front 238

Under the USA, which of the following are true regarding the withdrawal of a registration?

Back 238

Generally, withdraw becomes effective 30 days after the application for withdrawal is filed. If a disciplinary proceeding is underway or is instituted, the Administrator may determine when and under what circumstances withdrawal shall become effective. Once withdrawal becomes effective, the Administrator has the power to institute disciplinary proceedings against the registrant. (Even after withdrawal becomes effective automatically, the Administrator has the power to institute proceedings against the registrant for one year following the date that the withdrawal became effective).

Front 239

Under the Act, any note, stock, bond, investment contract, debenture, certificate of interest in a profit sharing or partnership agreement, certificate of deposit, collateral trust certificate, pre-organization certificate, option on a security, or other instrument is considered a?

Back 239

Security.

Front 240

Also categorized as securities are interests in? Exempt?

Back 240

Oil and gas drilling or mineral lease programs. Real estate condominiums used for investment purposes. Farmland or animals. Options on futures contracts. Limited partnerships.

Front 241

Exceptions to the definition of security include? Non-exempt?

Back 241

Insurance policies unless variable. Life Insurance endowment contracts. Fixed Annuities. Retirement Plans. Checking, savings and passbook accounts (currency) . Futures contracts (commodities).

Front 242

According to the USA, no person can lawfully offer or sell any security in a state unless?

Back 242

The security is registered under the Uniform Securities Act. The security is designated by the Act as exempt from the registration requirement, or. The transaction is designated by the Act as exempt from the registration requirement. If a security is not exempt from the registration requirement, the security is called a non-exempt security. A non-exempt security must be registered.

Front 243

Types of Securities Registrations: The Uniform Securities Act provides for three types of registrations for non-exempt securities?

Back 243

Registration by notice filing. Registration by coordination. Registration by qualification.

Front 244

Registration Period: A securities registration is effective for?

Back 244

One year from its effective date unless the underwriters are still attempting to distribute unsold shares.

Front 245

Prospectus Delivery Requirements: For securities registered by QUALIFICATION, the prospectus must be delivered?

Back 245

Prior to or at the time of sale.

Front 246

For securities registered by Coordination or Notice Filing?

Back 246

The prospectus must be delivered no later than the time of trade confirmation (usually the day after the trade date).

Front 247

The Administrator may issue a?

Back 247

Stop order. Denying, suspending, or revoking the effectiveness of any securities registration whether by notice filing, coordinating, or qualification if: It is the public interest to do so, The registration statement is misleading or incomplete, Any officer of the issuer has been convicted of a securities crime, The security is subject to court injunction, The offering is fraudulent, There are excessive or unreasonable offering expenses or promoter's fees.

Front 248

No security is exempt from the?

Back 248

Anti-fraud provisions.

Front 249

All securities issued or granted by the government of the United States are exempt including?

Back 249

Series EE and Series HH savings bonds are exempt from the registration requirements of the Uniform Securities Act.

Front 250

Municipal Securities: Securities issued or granted by any state or political sub-division of any state or any agency or sub-division of any state are exempt since they are considered to be federal securities.

Back 250

Although municipal securities are exempt under the USA, the state administrator may require that they be registered in his or her own state since they do not meet the definition of a federal covered security as defined in the NSMIA (National Securities Markets Improvements Act).

Front 251

Any recognized foreign government security is exempt. All securities issued by a recognized foreign government (that is, a government with which the United States currently maintains diplomatic relations) are exempt.

Back 251

All securities issued by the national government of Canada, any of the Canadian provinces, or any political sub-division of any of those provinces also are exempt. ( Securities issued by foreign corporations are non-exempt, in which they have to register.)

Front 252

Financial Institutions are exempt. All securities issued by and representing an interest in or a debt of any national bank or federal savings and loan association including CDs are exempt. Securities issued by banks, savings institutions, and trust companies organized under the laws of any state also are exempt.

Back 252

Securities issued by credit unions and industrial loan associations are exempt.

Front 253

Insurance Companies are EXEMPT!

Back 253

Any security that represents an equity interest in or a debt of or is guaranteed by an insurance company is exempt.

Front 254

Public Utilities and Common Carries are exempt! Any security issued or guaranteed by a railroad, a trucking company, or another common carrier, a public utility, or a holding company that is subject to the jurisdiction of the Interstate Commerce Commission (ICC) or

Back 254

the Public Utility Holding Company Act of 1935 is exempt.

Front 255

Religious and Charitable Organizations are all exempt.

Back 255

Any security issued by a religious or charitable non-profit organization is exempt. Individual state statues vary widely, but educational, benevolent, and fraternal associations are other types of organizations most usually included in this category.

Front 256

Commercial Paper is exempt!

Back 256

Commercial paper: promissory notes or bankers' acceptances that evidence an obligation to pay cash within NINE months after the date of issuance are exempt as long as they are issued in minimum denominations of $50,000 and are rated in one of the three highest rating categories by a nationally recognized rating service like Standard and Poor's or Moody's.

Front 257

Employee Pension and Profit Sharing or Savings Plans are exempt!

Back 257

Investment contracts issued in connection with employee profit sharing, savings, or similar benefit plans are exempt if the state administrator is notified in writing at least 30 DAYS before commencement of such a plan.

Front 258

Federal Covered Securities are exempt such as NASDAQ, OTC securities and?

Back 258

Under the National Securities Markets Improvement Act, new securities of corporations already listed or authorized for listing on the NYSE, the American Stock Exchange, the Midwest Stock Exchange, and new securities of corporations already trading on the National Association of Securities Dealers National Market System (NASDAQ-NMS) including any securities of an issuer equal or senior to that of its common stock (for example, preferred stock and bonds) are exempt from state registration.

Front 259

Although federal covered securities are exempt from state registration, the Administrator may require?

Back 259

The issuer to make a notice filing of all documents filed with the SEC, A REPORT OF THE VALUE OF THE SECURITIES TO BE OFFERED, A CONSENT TO SERVICE OF PROCESS, AND PAY A FILING FEE BEFORE THE SECURITIES MAY BE INITIALLY OFFERED IN THE STATE.

Front 260

In an 'exempt transaction' it is not the security that is exempt- it is the method by which the security is sold. For example:

Back 260

Most new stock is non-exempt and would have to be registered with the state; however, if the new stock is offered to 10 investors or less in a private placement, the public is not involved and state registration is not required.

Front 261

The following TRANSACTIONS are exempt from the registration and advertising filing requirements of the USA?

Back 261

Isolated Non-issuer Transactions. Non-issuer Transactions in Outstanding Securities. Unsolicited, Non-Issuer Transactions. Issuer Transactions (Transaction between issuers and underwriters are exempt). Transactions by a fiduciary. Transactions with Financial Institutions. Pre-Organization Certificates (No commission or other remuneration is provided for soliciting prospective subscribers, the number of subscribers does not exceed 10 and no payment is made by any subscriber). Transactions with existing security holders are ALL EXEMPT TRANSACTIONS!

Front 262

Isolated Non-Issuer Transaction are exempt?

Back 262

All isolated non-issuer transactions whether affected through a broker-dealer or not are exempt. A non-issuer transaction is any transaction that does not directly or indirectly benefit the issuer. Initial (primary) offerings are considered issuer transactions. Transactions in the secondary market are considered non-issuer transactions. (Isolated) means one of very few transactions per year. For example:, John Smith sells his IBM stock directly to his brother, Tom. This is an isolated, non-issuer transaction.

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Non-issuer transactions in outstanding shares?

Back 263

Non-issuer transactions in outstanding securities (securities that are already traded in the secondary market) by a registered agent or a registered broker-dealer are exempt provided the security has been outstanding in the hands of the public for at least 90 days and that: A nationally recognized securities manual or a document filed with the SEC which is publicly available contains a description of the business and operations of the issuer, the names of the issuer's officers and directors, an audited balance sheet dated within 18 months, and an audited income statement. The issuer has a class of equity securities listed on a national securities exchange or designated for trading on the NASDAQ system unless the issuer has been in continuous business for at least three years or has total assets of at least $2,000,000.

Front 264

Unsolicited, Non-Issuer Transactions:?

Back 264

Unsolicited, non-issuer transactions affected through a broker-dealer are exempt. State laws or a state administrator my dictate what securities transactions an agent may not solicit; however, this same limitation cannot be placed upon the general public. A registered representative's client may purchase any security he or she chooses in the secondary market. The state administrator may require the client to sign an acknowledgment that the order was unsolicited. Unsolicited orders are exempt transactions but the agent must be prepared to carry the burden of proof.

Front 265

Issuer transactions?

Back 265

Transactions between issuers and underwriters are exempt transactions.

Front 266

Transactions by certain persons are exempt transactions?

Back 266

A "fiduciary" refers to a person who is responsible for something held in trust for another person. Any transaction by a fiduciary is exempt from state security regulations. Fiduciary transactions include those by an executor, an administrator, a sheriff, a marshal, a receiver, a trustee in bankruptcy, a guardian, or a conservator.

Front 267

Transactions with Financial Institutions are exempt transactions.

Back 267

The USA is designed to protect the general public, not to limit the activities of informed professional investors, institutional buyers, and broker-dealers. Any offer or sale to a bank, savings institution, trust company, insurance company, investment company, pension or profit sharing trust, other financial institution or institutional buyer, or to a broker-dealer whether the purchaser is acting for itself or in some fiduciary capacity is an exempt transaction.

Front 268

Private Placements is an exempt transaction?

Back 268

A private placement is a simply a sale of non-exempt securities that is not made to the general public (private). In a private placement, registration of the security is NOT necessary; however, the Uniform Securities Act does stipulate the following requirements for private placements: The number of people receiving offers must be restricted to no more than 10 in any 12 month period. All sales must be made to buyers who are purchasing for the purpose of investment, and No commissions or fees may be paid directly or indirectly.

Front 269

Pre-organization certificates are exempt transactions?

Back 269

An offer or a sale of pre-organization certificate is exempt if it meets all of the following conditions: No commission or other remuneration is provided for soliciting prospective subscribers. The number of subscribers des not exceed 10 and. No payment is made by any subscriber. Newly formed companies often use a pre-organization certificate to solicit indications of interest form possible future investors.

Front 270

Transactions with Existing Security Holders are exempt transactions?

Back 270

A transaction made under an offer to existing holders of the issuer (including person who hold convertible securities, rights, or warrants) is exempt as long as no commission is paid for soliciting that security holder.

Front 271

Although the Administrator can deny or revoke any exempt transaction, he or she may only deny or revoke the registration exemption for two types of securities?

Back 271

1.Securities sold by religious and charitable organizations. 2. Securities sold in connection with employee pension, profit sharing, or saving plans. In other words, most registration exemptions may never be revoked by the Administrator including the exemptions for government and municipal securities, bank securities, insurance company securities, and railroad and public utility securities. The Administrator may, however, revoke the exemption of any security sold in an exempt transaction (such as a private placement).

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It is unlawful to make misleading statements to customers concerning the status of a security's or transaction's registration or exemption including:

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Telling customers that a security with the SEC or a state securities administrator has been approved by such regulators. Implying to customers that regulation by any authority (including listing on a registered stock exchange) enhanced the safety or performance of a security.

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The Administrator has the authority to inspect a broker-dealer and to conduct investigations to determine whether persons have violated or are about to violate the conditions of the Uniform Securities Act. These investigations may be?

Back 273

Private or public and they may take place in the Administrator's state or in another state.

Front 274

National Securities Markets Improvements Act of 1996 (NSMIA)?

Back 274

Under NSMIA, the states are no longer involved in the regulation of disclosure documents (such as prospectuses) or the registration of federal covered securities.; however, they are still responsible for the enforcement of all anti-fraud regulations that may apply. Further, although federal covered securities need not be registered with the state, issuers of federal covered securities may be required to provide the Administrator with a notice filing consisting of copies of all documents filed with the SEC, a consent to service of process form, and the proper fees.

Front 275

The federal securities law that related to state registration by COORDINATION is the?

Back 275

Securities Act of 1933

Front 276

If a security is to be registered in ONE STATE ONLY, it would have to be registered by?

Back 276

QUALIFICATION. This is known as an "intrastate offering."

Front 277

Under the USA, every securities registration, whether by filing, coordination, or qualification, is effective for?

Back 277

One year from its effective date.

Front 278

A "non-issuer transaction" is a?

Back 278

Secondary market trade done by a selling shareholder.

Front 279

When you purchase stock in a private placement, you are buying?

Back 279

Unregistered Securities. Private placements are an exempt transaction under the USA.

Front 280

If a broker-dealer receives a complaint that his or her agent is selling unregistered securities, the broker-dealer?

Back 280

Must be able to prove that the securities are exempt from registration.

Front 281

A person claiming an exemption must be able to prove that he or she is?

Back 281

Entitled to it.

Front 282

Securities must be registered in this state unless?

Back 282

They are exempt, are sold in an exempt transaction, or are considered to be federal covered securities.

Front 283

A federal covered security includes securities sold in the secondary markets (such as)?

Back 283

Mutual fund shares and those securities listed on national exchanges or on the NASDAQ National Market.

Front 284

The Administrator may require the issuer of federal covered securities (such as a mutual fund) to file?

Back 284

A consent to service of process form in case a lawsuit is filed for fraud in this state.

Front 285

Each broker-dealer and agent shall observe high standards of ?

Back 285

Commercial honor and just and equitable principles of trade in the conduct of his or her business.

Front 286

Securities for customers must be delivered and monies due to customers must be disbursed on the?

Back 286

Settlement date without unjustifiable or unreasonable delays.

Front 287

A broker-dealer may NOT trade in a customer's account which is excessive in size or frequency in?

Back 287

View of the financial resources and character of the account.

Front 288

Excessive trading is unethical and used in

Back 288

order to generate commissions without regard to the customer's best interests is an unlawful practice known as 'churning.'

Front 289

A broker-dealer may NOT recommend to a customer the purchase or sale of any security without reasonable grounds to believe that such transaction is suitable for?

Back 289

The customer based upon the customer's investment objectives, financial situation, and needs. The most important criteria in establishing suitability is the customer's investment objectives.

Front 290

If a customer has NOT furnished the information needed to determine suitability, no recommendations may be made and?

Back 290

Only unsolicited orders may be executed.

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A broker-dealer may NOT execute a transaction on behalf of a customer without

Back 291

the authorization to do so. Orders may never be taken from anyone other than the customer. For example, although a customer is married, orders may not be taken from the customer's spouse unless it is a joint account or the customer has granted third party trading authority to his or her spouse.

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A broker-dealer may NOT exercise any discretionary power in effecting a transaction for a customer without first obtaining written discretionary authority from the customer unless?

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The discretionary power relates SOLELY TO THE TIME AND OR PRICE FOR THE EXECUTING OF ORDERS.

Front 293

Discretionary authority requires the firm to first have a WRITTEN POWER OF ATTORNEY from the customer unless?

Back 293

The discretion exercised is relating ONLY to the timing or price of the trade. In other words, the firm needs written discretionary authority for the amount and type of security purchased or sold on behalf of a customer but NOT FOR TIMING OR PRICE. For example, if a customer advises his or her firm to sell all of his or her GM stock whenever it is best, NO discretionary authority is needed since the customer's order specified the amount (all) and the type (GM).

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A broker-dealer may NOT execute any transaction in a margin account without securing from the customer a properly executed, written margin agreement?

Back 294

Promptly after the initial transaction in the account. A margin agreement is a document that spells out the rules governing a margin account including the hypothecation of securities, how much equity the customer must keep in the account, and the interest rate charged on margin loans. For example, a customer has a cash account with a broker-dealer firm and elects to buy some securities on margin. The firm can execute the margin transaction right away; however, the customer is required to submit a written margin agreement promptly after the initial margin transaction.

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A broker-dealer may NOT co-mingle a customer's securities with those owned by the firm.

Back 295

A customer's free securities (meaning those securities that are NOT required as collateral for a margin loan) and securities belonging to customers that are held in safekeeping by the firm MUST BE SEGREGATED and kept separately from those securities owned by the firm.

Front 296

A broker-dealer MAY NOT HYPOTHECATE a customer's securities without having a lien thereon unless the firm secures from the customer a properly executed?

Back 296

Written consent promptly after the initial transaction. To "hypothecate securities" means to PLEDGE THEM AS COLLATERAL FOR A LOAN in a margin account. Broker-dealers may not pledge (or re-hypothecate) a customer's securities to a bank as collateral for a loan without the written consent of the customer, which is a standard provision in a margin agreement.

Front 297

A broker-dealer may NOT enter into a transaction with or for a customer?

Back 297

At a price NOT reasonable related to the current market price of the security or receive an unreasonable commission or profit. Broker-dealers must make every effort to execute transactions on the behalf of customers at the best possible price available and MAY NOT CHARGE excessive commissions or mark-ups. For example, if a broker-dealer firm is acting as a market maker in an OTC stock, its bid and ask prices should be reasonably related to the current market prices quoted by other dealers in that stock. Dealers must disclose their COMPENSATION to customers both AT THE TIME OF THE SALE and with the CONFIRMATION.

Front 298

A broker dealer may NOT fail to furnish a customer purchasing securities in an offering either a final prospectus or a preliminary prospectus and an additional document, which together include all information set forth in the final prospectus,?

Back 298

No later than the DUE DATE OF THE CONFIRMATION OF THE TRANSACTION. The latest time a final prospectus may be delivered is with the CONFIRAMTION, which is mailed out the NEXT BUSINESS DAY following the TRADE DATE.

Front 299

A broker dealer may NOT charge unreasonable fees for services performed including the collection of dividends or interest, the transfer of securities, or the safekeeping and custody of customer's securities.

Back 299

Customers often elect to keep their fully paid securities in "street name" or the name of the broker-dealer in order to expedite trading. Broker-dealers may NOT charge excessive fees for such services.

Front 300

A broker dealer may NOT offer to buy from or sell to any person at a stated price?

Back 300

Unless the firm is prepared to do so. Firms acting as market makers in the OTC market must honor their published bid and ask price quotations, which are normally for at least 100 share round lots f stock. The failure to honor published prices is known as "backing away."

Front 301

A broker dealer may NOT represent that a security is being offered to a customer at the market unless the broker-dealer knows that a market for such security exists other than the market made, created, or controlled by such broker-dealer.

Back 301

If a broker-dealer is the only market maker for a security, he or she cannot offer to buy or sell securities from customers at the market price since he or she controls it. The broker-dealer can only buy and sell at the market if other market makers exist. Dealers in the secondary market are also known as 'market makers' since they control inventories of particular stocks.

Front 302

A broker-dealer may not effect or induce any transaction in any security by means of any manipulative, deceptive, or fraudulent device including but not limited to?

Back 302

1. Effecting any transaction in a security which involves no change in beneficial ownership. 2. Entering orders for the purchase or sale of any security for the purpose of creating a false or misleading appearance of active trading in the security; or. 3. Effecting alone or with one or more persons a series of transactions in any security raising or depressing the price of such a security for the purpose of inducing its purchase or sale by others. All of the above are considered to be form of unlawful MARKET MANIPULATION.

Front 303

A broker dealer may NOT guarantee a customer against loss in any securities account or in any securities transaction.

Back 303

For example, a broker dealer firm cannot sell a customer a security and promise to buy it back at the price the customer paid if it goes down in value.

Front 304

A broker dealer may not use any advertising or sales presentations in such a fashion as to be deceptive or misleading.

Back 304

Broker-dealers MAY NOT distribute any non-factual data that is DESIGNED TO SUPERSEDE OR DEFEAT THE PURPOSE OF ANY PROSPECTUS OR DISCLOSURE. Information in a prospectus may NOT be highlighted to imply that some information is more important than the other information.

Front 305

A broker dealer may NOT fail to disclose that the broker-dealer is controlled by, affiliated with, or under common control of the issuer of any security before entering into any contract with a customer for the purchase or sale of such issuer's securities.

Back 305

If such disclosure is verbal instead of written, it shall be supplemented by the sending of a WRITTEN disclosure at or before the completion of the transaction. For example, a customer enters an order with a broker-dealer to buy or sell stock of a particular corporation. If the broker-dealer firm is owned by or controlled by that corporation, that fact must be disclosed to the customer in WRITING due to the conflict of interest involved.

Front 306

A broker dealer may NOT fail to make a bona fide public offering of all of the securities allotted to the broker-dealer for distribution whether acquired as an underwriter, syndicate, or selling group member.

Back 306

Hot issues of new securities must be sold to the public and may not be withheld for the purpose of obtaining a free ride. A "restricted person" is defined as the broker-dealer firm, other brokers, dealers, agents, registered representatives, or immediate family members of a restricted person if the restricted person materially supports them.

Front 307

A broker-dealer may not fail or refuse to furnish a customer, upon reasonable request, information to which he or she is entitled or fail to respond to a written request or complaint.

Back 307

Broker dealers must respond to all written complaints and reasonable request. A "complaint" is defined as any written grievance.

Front 308

Agents may NOT engage in the practice of lending or borrowing money or securities from a customer or acting as a custodian for money, securities, or an executed stock power of a customer.

Back 308

Agents may NEVER lend money to or borrow money from a customer. Of course, a broker-dealer may lend money to customers in margin accounts and may also hold customer funds or securities in the firm's account on behalf of beneficial owners. A "stock power" is a written power of ownership of stock certificates to others in order to expedite trading.

Front 309

An AGENT MAY NOT effect securities transactions not recorded on the regular books or records of the broker-dealer which the agent represents unless the transactions are?

Back 309

Authorized in writing by the broker-dealer prior to the execution of the transaction. When an agent engages in securities transactions outside the broker-dealer firm that he or she represents without prior authorization, it is a violation known as "selling away." For example, an agent who wants to capitalize his or her new firm by selling stock outside his or her broker-dealer and then notifying the broker-dealer that he or she did so would be in violation since prior authorization IS REQUIRED.

Front 310

An agent may NOT establish or maintain an account containing fictitious information in order to execute transactions which would otherwise be prohibited.

Back 310

For example, if a customer resides out of state, an agent could not use the customer's vacation home address in this state on the new account form. In order for an agent to do business with a customer who is a resident of another state, the agent must be registered in the customer's home state. Agents must be registered in every state in which they transact securities. Of course, an agent cannot register in a state unless his or her broker-dealer is also registered in that state.

Front 311

An agent may not share directly or indirectly in the profits or losses in the account of any customer without the written authorization of the customer and their employing broker-dealer firm.

Back 311

For example, you may elect to open a joint account with your brother and share the profits and/or losses proportionately based upon you invested capital. This is permitted as long as you have the proper authorizations.

Front 312

An agent may NOT divide or otherwise split commissions from the purchase or sale of securities with any person not ALSO registered as an agent for the same broker-dealer or for a broker-dealer who is under direct or indirect common control.

Back 312

An agent could not split commissions with a CPA unless the CPA was also registered as an agent for the same broker-dealer firm or another broker-dealer firm who is under the same direct or indirect common control. An agent may never split commissions with customers. For example, many large broker-dealer firms also own and control smaller broker-dealer firms. Agents of these firms could share commissions since they are under common control directly or indirectly.

Front 313

A person who is an investment adviser, an investment adviser representative, or a federal covered adviser is a fiduciary and has a duty to act primarily for the benefit of his or her clients. An IA, IAR or a federal covered adviser shall NOT engage is unethical business practices including:

Back 313

Recommending to a client the purchase or sale of any security without reasonable grounds to believe that such a recommendation is suitable based upon the client's investment objectives. Recommendations must be suitable for the client on the basis of information furnished by the client after reasonable inquiry concerning the client's investment objectives, financial situation, needs, and any other information known by the adviser. Most suitability information is contained in the new account form.

Front 314

Exercising any discretionary power in placing an order for a client without first obtaining written discretionary authority from the client within?

Back 314

10 business days after the date of the first transactions placed pursuant to oral discretionary authority unless the discretionary power related to solely to the price at which the time when an order involving a definite amount of a specified security shall be executed.

Front 315

An advisor does NOT need discretionary authority relating to the timing or price of a trade as long as the client specifies the amount (number of shares) and the type (name of the issuer) of stock to be purchased or sold.

Back 315

Excessive trading (churning) is a breach of an adviser's fiduciary duty to clients since it is not in their best interest.

Front 316

You may NOT place an order to purchase or sell a security for the account of a client upon the instruction of a third party without first?

Back 316

Having obtained a WRITTEN third party trading authorization from the client. A client may give a limited power of attorney (also known as 'third party trading authority') to someone who is authorized to make trades on the client's behalf; however, in the absence of such authorization, an adviser may not take orders from anyone other than his or her client.

Front 317

Remember, advisers cannot be compensated based only upon the capital gains or appreciation of the funds under management. Most advisory fees are based upon a percentage of the amount of assets under management for a definite period of time as disclosed in the advisory contract.

Back 317

This method takes into account both profits and losses.

Front 318

You can provide a report or recommendation to any client prepared by someone other than the adviser

Back 318

without disclosing that fact. This prohibition does not apply to a situation in which the adviser uses published research reports to render services or in which an adviser orders such a report in the normal course of providing services.

Front 319

Financial planners are considered to be Investment Advisers since?

Back 319

They sell advice for a fee. Any compensation arrangements must be disclosed to clients in writing before the advice is given.

Front 320

You can NOT GUARANTEE a client that a specific result will be achieved (a gain or no losses) with the advice which will be rendered.

Back 320

You can not guarantee to a client regarding gains or losses.

Front 321

You can not disclose the identity, affairs, or investments of any client unless required by law to do so or?

Back 321

Unless consented by the client. Client information must be kept confidential!

Front 322

You can not enter into, extend, or renew any advisory contract unless such contract is in

Back 322

writing and discloses the services to be provided, the term of the contract, the advisory fee, the formula for computing the fee, the amount of the pre-paid fee to be returned in the event of contract termination for non-performance, whether the contract grants discretionary power, and that no assignment of the contract may be made by the adviser WITHOUT THE CONSENT OF THE CLIENT.

Front 323

You may not use any advertising that does any of the following:

Back 323

1. Refers to any testimonial of any kind concerning the investment adviser, the IAR, or his or her services. 2. Refers to past specific recommendations that were or would have been profitable to any person unless the adviser or IAR furnished or offers to furnish a list of all recommendations made within a preceding period of not less that one year and the advertisement includes the name of each security recommended, its market price at that time, and a legend that states that the reader should not assume that recommendations made in the future will be profitable or will equal the performance of the securities listed. 3. Represents that any graph, chart, or formula can in and of itself be used to determine which securities to buy or sell without prominently disclosing in such advertisement the limitations thereof and the difficulties related to its use.

Front 324

Advertisement not allowed continued?

Back 324

4. Represents that any report, analysis, or any other service will be furnished for free unless such report or analysis or service actually is or will be furnished entirely for free and without any obligation. 5. Represents that the Administrator has approved any advertisement or 6. Contains any untrue statement of material fact or that is otherwise false or misleading.

Front 325

You may not fail to adequately disclose to a customer all sales charges including asset-based and contingent deferred sale charges, which may be imposed with respect to the purchase, retention, or redemption of shares.

Back 325

You may state or imply to a customer that the shares sold are without a commission are "no load" or have "no sales charge" if there is such a load or charge associated with the purchase of the shares: a front-end load; a contingent-deferred sales load; a SEC Rule 12b-1 fee or a service fee if such fees in total exceed 0.25% of average fund assets per year; or in the case of closed-end funds, the underwriting fees, commissions, or other offering expenses.

Front 326

Failing to disclose to any customer any relevant sales charge discount on the purchase of shares in dollar amounts at or above a breakpoint; or a letter of intent feature, if available, which will reduce the sales charge.

Back 326

Recommending to a customer the purchase of a specific class of shares in connection with a multi-class sales charge or fee arrangement without reasonable grounds to believe that the sales charge or fee arrangement associated with such class of shares is suitable and appropriate based upon the customer's investment objectives, financial situation, and other securities holdings.

Front 327

You may not recommend to a customer the purchase of investment company shares which results in the customer simultaneously holding shares of different investment company portfolios having similar investment objectives without reasonable grounds to believe that such a recommendation is suitable and appropriate based upon the customer's investment objectives, financial situation, and other securities holdings.

Back 327

You may not recommend to a customer the liquidation or redemption of investment company shares for the purpose of purchasing shares in a different investment company portfolio having similar investment objectives and policies without reasonable grounds to believe that such recommendation is suitable and appropriate.

Front 328

You may not state or imply to a customer the fund's current yield or income without disclosing the fund's most recent average annual return calculated for

Back 328

one, five and ten years periods and fully explaining the difference between current yield and total return.

Front 329

You may not state or imply to a customer that the investment performance of an investment company portfolio is comparable to that of a savings account, CD, or other bank deposit without disclosing to the customer that the shares are not insured or guaranteed by the FDIC and the relevant differences regarding risk, fluctuation of principal and/or return, and any other factors necessary to ensure that such comparisons are fair, complete, and

Back 329

NOT misleading.

Front 330

You may state or imply to a customer the existence of insurance, credit quality, guarantees, or similar features regarding securities held in the investment company's portfolio without disclosing to the customer other kinds of relevant investment risks including ?

Back 330

Interest rate risk, market risk, political risk, liquidity risk, or currency exchange risk, which may adversely affect investment performance and result in a loss and or fluctuation of principal.

Front 331

You may not state or imply to a customer that the purchase of such shares shortly before an ex-dividend date is advantageous to such a customer unless there are specific, clearly described tax or other advantages to the customer or that a distribution of long-term capital gains is part of the income yield from an investment in such shares.

Back 331

You may not make projections of future performance, statements not warranted under existing circumstance, or statements based upon non-public information.

Front 332

Broker-dealers shall not conduct broker dealer services on the premises of a financial institution where retail deposits are taken unless they comply with the following requirements:

Back 332

Setting, Customer Disclosure and Written Acknowledgment, Communications with the public ad Notification of Termination.

Front 333

Setting

Back 333

Wherever practical, broker-dealer services shall be conducted in a physical location distinct from the area in which the financial institution's retail deposits are taken. In all situations, the broker-dealer has a heightened responsibility to distinguish its services from those of the financial institution. The name of the broker-dealer shall be clearly displayed in the area in which it conducts its services.

Front 334

Customer Disclosure and Written Acknowledgment

Back 334

At or prior to the time that a customer's securities brokerage account is opened by a broker-dealer on the premises of a financial institution where retail deposits are taken, the broker-dealer shall disclose, orally and in writing, that the securities products sold by the broker-dealer are not insured by the FDIC, are not deposits or other obligation of the financial institution, are not guaranteed by the financial institution, and are subject to investment risks including the possible loss of the principal invested. the broker-dealer shall make a reasonable effort to obtain from each customer during the account opening process a WRITTEN ACKNOWLEDGMENT of these disclosures.

Front 335

Communications with the Public

Back 335

All broker-dealer confirmations and account statements must indicate clearly that the broker-dealer services are provided by the broker-dealer. Broker-dealer advertising and sales literature must disclose in a conspicuous manner that its investment products are not FDIC insured, and not guaranteed by the bank, and may lose value.

Front 336

Notification of Termination

Back 336

The broker-dealer must promptly notify the financial institution if any agent of the broker-dealer who is employed by the financial institution is terminated for cause by the broker-dealer.

Front 337

Engaging in conduct such as forgery, embezzlement, non0disclosure, incomplete disclosure or misstatement of material facts, or manipulative or deceptive practices shall be grounds for

Back 337

DENIAL, SUSPENSION, OR REVOCATION OF REGISTRATION.

For example, brokers, dealers, agents and investment advisers may NEVER make recommendations to customers on the basis of material inside information. If the information has not been made public, it cannot be used in the solicitation or sale of a security.

Front 338

MATERIAL INSIDE INFORAMTION must always be kept CONFIDENTIAL!

Back 338

If overhear, an agent should report it to his or her registered principal or branch manager. It should NOT be reported to the firm's trading desk or shared with customers. Broker-dealers must adopt safeguards to assure that material inside information is not used to make gains or to avoid losses. REMEMBER, a person who fails to properly supervise an agent or adviser who improperly uses material inside information may be found to be just as guilty as the person who used it.

Front 339

If you receive a written complaint from a customer, refer it to?

Back 339

Your supervisor.

Front 340

Investment advisory fees cannot be based on gains over a period of time; they can, however

Back 340

be based upon total performance over a definite time.

Front 341

You can omit a fact in your sales presentation if a

Back 341

reasonable person would not consider it to be important.

Front 342

Failing to segregate client funds and securities from your own is an illegal practice known as

Back 342

co-mingling.

Front 343

A discretionary account requires the prior approval of your

Back 343

principal.

Front 344

An investment adviser may have custody of client funds if there is no rule against it and her or she advises the

Back 344

Administrator

Front 345

Inside information may not be used as the basis of

Back 345

transactions.

Front 346

A client who has $200,000 to invest but needs the money in two years is most suitable for short term U.S government securities such as

Back 346

T-Bills

Front 347

Advising your client to buy securities on one exchange and simultaneously sell the same security on another exchange is not a violation

Back 347

it is known as market "arbitrage"

Front 348

In order to make a sale, you cannot guarantee a profit or offer to buy back the securities if they lose value. You can make the sale based upon the fact that the securities are

Back 348

suitable for the client, if that is the case.

Front 349

An investment adviser may receive commissions from a broker-dealer if he or she is properly registered as an

Back 349

agent and it is properly disclosed or sold.

Front 350

Written discretionary authority is not needed for the timing or price of a trade. It is needed for the

Back 350

amount and type of security to be purchased or sold.

Front 351

Churning is defined as making excessive trades solely to

Back 351

generate commissions.

Front 352

Agents may not deliberately omit material facts clients need to make informed

Back 352

investment decisions.

Front 353

If true, agents may state that a security is

Back 353

registered with the state (Uniform Securities Act).

Front 354

Conflicts of interest, such as the financial relationships between a broker-dealer firm and the issuer, must be

Back 354

disclosed to customers.

Front 355

Commissions may not be shared with CPAs in return

Back 355

for client referrals.

Front 356

Commissions can only be shared between agents that are registered with the same broker-dealer or agents of

Back 356

broker-dealers under the same direct or indirect common control.

Front 357

The Administrator can revoke a securities registration if the offering has been or would be made with unreasonable amounts of underwriter's and seller's discounts, commissions or other compensation, or

Back 357

promoter's profits or participation.

Front 358

It is an unlawful soft money arrangement for a broker-dealer to rent space to a hedge fund at discounted rates in return for executing

Back 358

the fund's securities transactions.

Front 359

A client tells his or her agent to sell all of his or her ABC stock if it ever goes up to $50 a share. Although the agent does not have discretionary authority, if the stock hits $50 a share, he or she can

Back 359

process the order since the name of the issuer and the amount to be sold are known.

Front 360

If a client calls and puts in a large sell order that he or she known will drive the price of the stock down, the agent should

Back 360

NOT process the order since it is a form of market manipulation.

Front 361

If a customer has a cash account and wants to open a margin account,

Back 361

he or she must return a properly executed margin agreement to his or her broker dealer promptly after the initial transaction in the margin account.

Front 362

An agent of a broker-dealer firm may not effect transactions not recorded on the regular books or records of his or her broker-dealer unless the transactions are authorized in

Back 362

writing by the broker dealer prior to execution.

Front 363

On an offering of new securities, a prospectus must be delivered

Back 363

no later than the date of the confirmation of the transaction.

Front 364

Under the NASAA's Statement of Policy, broker-dealer firms may not use any advertising that is designed

Back 364

to detract from, supersede, or defeat the purpose of the prospectus.

Front 365

If an agent does not have the required suitability information from a customer, he or she can process

Back 365

unsolicited orders only.

Front 366

If a client opens a new account but needs more time to decide upon an investment objective, an agent

Back 366

may not make any recommendations.

Front 367

Agents may NOT compensate a CPA for referrals by

Back 367

sending referrals back to the CPA.

Front 368

It is a conflict of interest for n agent to sell stock owned by his or her spouse without

Back 368

full disclosure.

Front 369

A customer's stock that is delivered to a broker-dealer firm by certificate must be segregated

Back 369

from the firm's own stock.

Front 370

When an agent tells a client that he or she has inside information but makes trades without using it,

Back 370

no insider trading violation has occurred; however, the agent is guilty of making false statements.

Front 371

Front running

Back 371

is an unethical practice that occurs when an agent places a personal order ahead of an order previously received from his or her customer.

Front 372

An agent may not share in the profits or losses of any customer account without the

Back 372

written authorization of the customer and the broker-dealer firm that the agent represents.

Front 373

An agent may not engage in the practice of lending or borrowing money of securities from a customer or

Back 373

act as a custodian for money, securities, or an executed (signed) stock power of a customer.

Front 374

Any condition binding any person acquiring any security or receiving any investment advice to waive compliance with any provision of the USA or any rule or order is

Back 374

null and void.

Front 375

When selling mutual funds, agents must disclose to customers

Back 375

any sales charge discount on the purchase of shares in dollar amounts at or above a breakpoint or letter of intent features which will reduce sales charges.

Front 376

If an agent is on vacation, orders from his or her customers should be referred

Back 376

to another agent who is registered in that state.

Front 377

When selling non-NASDAQ OTC securities, compensation must be disclosed to the customer both at

Back 377

the time of the sale and on the confirmation.

Front 378

There are no expectations to the

Back 378

anti-fraud provisions of the Uniform Securities Act.

Front 379

If a customer calls to complain that the stock he or she purchased has lost value, the agent cannot buy it back for what the customer paid;

Back 379

he or she can only sell it for the customer at its current market value.

Front 380

Agents may not make blanket recommendations to a group of clients

Back 380

since individually suitability has not been determined.

Front 381

Broker-dealers must make a bona fide public offering of all of the securities allotted to them for distribution whether acquired as an underwriter, syndicate, or selling group member. This means that they

Back 381

cannot withhold shares of a hot issue for their own account.

Front 382

It would be unethical to engage in excessive trading on behalf of a client who has a

Back 382

small account and a long-term investment objective.

Front 383

If your client is in an accident and goes into a coma,

Back 383

you cannot accept orders from his or her attorney unless he or she has a power of attorney or third party trading authority.

Front 384

A broker-dealer firm cannot fail to segregate a customer's

Back 384

free securities or securities held in safekeeping.

Front 385

No later than the due date of a confirmation, a broker-dealer cannot fail to furnish to a customer purchasing securities in an offering either a

Back 385

final prospectus or a preliminary prospectus and an additional document, which together include all information set forth in the final prospectus.

Front 386

Broker-dealers may not charge unreasonable fees for

Back 386

the safekeeping or custody of securities.

Front 387

Broker-dealers cannot offer to buy from or sell to any person any security at a stated price unless

Back 387

they are prepared to purchase or sell at such price.

Front 388

Broker-dealers cannot effect any transaction by means of any manipulative device, such as

Back 388

effecting any transaction in a security which involves no change in beneficial ownership.

Front 389

Broker-dealer cannot trade ahead of

Back 389

customer orders.

Front 390

Broker dealers cannot

Back 390

guarantee a customer against loss.

Front 391

Broker-dealers may not fail to respond to a formal written request or complaint

Back 391

from a customer.

Front 392

Engaging in a pattern of unjustifiable delays in the delivery of securities is an

Back 392

unethical business practice.

Front 393

Broker-dealers and agents may not use discretionary power in effecting a transaction for a customer's account without first obtaining

Back 393

written discretionary authority from the customer.

Front 394

A broker-dealer sales at financial institutions shall disclose orally and writing, that the securities

Back 394

products purchased or sold in a transaction with the broker-dealer: are not insured by the (FDIC) Federal Deposit Insurance Corporation. Are not deposits or other obligations of the financial institution and are NOT guaranteed by the financial institution. Are subject to investment risks including possible loss of the principal invested. The broker-dealer must make reasonable efforts to obtain a written acknowledgment of the above disclosures during the account opening process for each customer.

Front 395

Broker-dealers may charge reasonable fees for services performed including miscellaneous services such as the collection of monies due for principal, dividends or interest, exchange or transfer of securities, appraisals, safekeeping, custody of securities, and/or other services

Back 395

related to its securities.

Front 396

Recommendations should be based upon the agent's reasonable belief that it is suitable after considering the customer's

Back 396

financial status and investment objectives.

Front 397

Unless prior written discretionary authority has been received, agents may not execute orders for customers without their consent even

Back 397

if it is in the customer's best interest, you still must have the customers consent.

Front 398

Agents may take verbal orders from customers without

Back 398

discretionary authority.

Front 399

Market participants who agree to buy and sell securities among themselves in order to create the appearance of active trading in a security or influence its price are engaging in

Back 399

market manipulation.

Front 400

It is a violation to prepare a sales brochure that includes only the

Back 400

positive information in a prospectus.

Front 401

It is prohibited to highlight or to make any other marks on a

Back 401

prospectus in order to draw attention to key points.

Front 402

When selling the securities of an issuer that owns the broker-dealer firm where the agent works, the

Back 402

agent must disclose that the broker-dealer is under the control of the issuer.

Front 403

When a customer files a written complaint and then withdraws it,

Back 403

the broker-dealer will keep a copy of the complaint and return the original to the client.

Front 404

Agents may not use fictitious information to open an account

Back 404

which could otherwise be prohibited.

Front 405

Agents must disclose the compensation that they and their broker-dealer firm will receive from the sale of non-listed, non-NASDAQ OTC securities

Back 405

prior to the sale and at the time of the confirmation.

Front 406

If a customer makes his or her check payable to an agent , the agent should

Back 406

return it and have it made payable to the broker-dealer instead.

Front 407

Agents may not act as a custodian for money, securities, or an executed (signed) stock power

Back 407

of a customer.

Front 408

It is unlawful to solicit orders for unregistered,

Back 408

non-exempt securities

Front 409

It is prohibited to effect transactions for a client without his or her

Back 409

specific authority to do so. It is also prohibited to make unsuitable recommendations, to repeat rumors, or to act on insider information.

Front 410

Under the USA, investment advisers may not enter into advisory contracts that provide specifically for their compensation (fees) to be based upon a share of the

Back 410

capital appreciation of client funds.

Front 411

Excessive trading in a customer's account is known as

Back 411

churning and is prohibited.

Front 412

To omit material facts that are essential for making an investment decision is

Back 412

fraud.

Front 413

The main factor in determining suitability is determining the customer's

Back 413

investment objectives.

Front 414

All written complaints received from a customer by an agent must be

Back 414

forwarded to the agent's broker-dealer.

Front 415

An agent may only accept orders from his or her customer unless

Back 415

third party trading authorization has been obtained.

Front 416

Matching orders and wash sales distort the actual trading activity in a security and are prohibited forms of market manipulation. Examples:

Back 416

Phony quotes, material misrepresentations, and untrue facts are also prohibited form of market manipulation.

Front 417

If you hear a rumor or inside information,

Back 417

keep it confidential.

Front 418

Giving an inaccurate market quotation or misrepresenting to customers the status of their account is considered

Back 418

making misleading or untrue statements.

Front 419

Agents do not have to disclose all investment facts, just those that are

Back 419

material.

Front 420

The anti-fraud rules apply to all securities,

Back 420

both exempt and non-exempt, and exempt transactions.

Front 421

Investment advisers must disclose to clients that they also receive commissions for making trades related

Back 421

to the advice they give.

Front 422

If a broker, dealer, agent, issuer, and adviser all conspire to defraud the public,

Back 422

all four have violated the Act.

Front 423

If an agent receives inside information , he or she cannot use it

Back 423

or refer it to his or her firm's trading department.

Front 424

If the Administrator thinks that a person has engaged in or is about to engage in an activity that violates the Act, the Administrator may issue a

Back 424

cease and desist order (without a prior hearing) or may bring an action against that person in an appropriate court.

Front 425

The Administrator may also make public or private investigations

Back 425

within or outside the state if he or she believes it necessary to determine whether the Uniform Securities Act has been violated. If the Administrator so desires, he or she may require persons to file statements in writing under oath as to the facts and circumstances concerning a matter under investigation.

Front 426

If a person fails to obey a subpoena, the Administrator may petition the appropriate court to order the person to appear and to produce the requested evidence. The Administrator may also ask the court to

Back 426

grant an injunction or a restraining order and to appoint a receiver or conservator for the defendant's assets.

Front 427

Any person aggrieved by a final order of the Administrator may appeal the order in the appropriate court by filing a written petition with the court requesting that the order be modified or set aside within

Back 427

60 days after the entry of the order. The court may order additional evidence be submitted and may or may not modify the Administrator's order.

Front 428

CRIMINAL PENALTIES: Persons found guilty of willful violations of the Uniform Securities Act are subject to criminal penalties. Upon conviction, a person may be fined up to

Back 428

$5,000, imprisoned not more than THREE years, or both. In criminal matters, the STATUTE OF LIMITATIONS runs for FIVE years. No person may be imprisoned for a violation if he or she proves that he or she had no knowledge of the rule or order.

Front 429

CIVIL LIABILITIES: Any person who offers or sells a security by means of any untrue statement of material facts or the omission of material facts necessary to make statements made not misleading is subject to civil liabilities.

Back 429

Further, the Administrator may impose civil liabilities on persons who violate specified sections of the Uniform Securities Act or rules relating thereto.

Front 430

A person who is subject to civil liabilities is liable to

Back 430

the person buying the security from him or her. The buyer may bring a civil lawsuit to recover the amount of money paid together with interest at a rate specified by the Administrator, court costs, and reasonable attorney's fees LESS ANY INCOME (dividends or interest) received from the security during the time that it was owned.

Front 431

Those persons subject to civil liabilities include not only the person selling the security but also

Back 431

every person who controlled the person selling the security, including a registered principal or a broker-dealer firm who failed to properly supervise such a person. These persons are liable UNLESS they can prove that they DID NOT KNOW and could not have known of the existence of the facts relating to the violation.

Front 432

A person MAY NOT SUE under the civil liability section of the Uniform Securities Act more than

Back 432

THREE years after the contract of sale or the giving of investment advice or TWO years after discovery of the violation, WHICHEVER COMES FIRST.

Front 433

RIGHT OF RECISSION: A person may NOT SUE under the civil liability section of the Act if he or she received a written offer from the person selling the security, before any lawsuit was filed, to refund the amount of money paid for the security plus interest at the state-stipulated interest rate less any income received on the security and did not accept the offer

Back 433

within 30 DAYS of its receipt. (In other words, if a person selling a security discovers that he or she violated the Act while doing so, he or she can make an offer to "rescind" rescission or "void" the contract within 30 DAYS od its receipt. The person who purchased the security has 30 days to accept or reject the offer of rescission. If no response is provided, he or she may no longer file a lawsuit. Of course, the right of rescission does not apply to willful violations of the Act, which may be criminal. The Administrator may refer evidence concerning willful violations to the state attorney general or district attorney who may bring the appropriate criminal proceedings.

Front 434

The Uniform Securities Act applies to offers to buy or sell and acceptances of offers to buy or sell securities provided that they

Back 434

originate in this state and that they are directed to anyone in this state or are accepted in this state. The entire transaction will be subject to the Act if any part of an offer is considered to have occurred in this state. In other words, MORE THAN ONE STATE ADMINISTRATOR COULD HAVE JURISDICTION over a person violating the Act.

Front 435

Under the Uniform Securities Act, an advertisement of securities in a regular newspaper is

Back 435

NOT considered to be an offer in any state other than the state of publication. A person could place an advertisement in the Los Angeles Times without it being considered to be an offer of securities in states other than California even though the Times may be regularly circulated in other states.

Front 436

If a newspaper has national circulation, such as USA Today, and TWO THIRDS of circulation is outside the state of publication, it is

Back 436

NOT considered to have any state of offer. For example, even though USA Today may be published in New York, its advertisements are not considered to be directed to New York residents, therefore, the New York administrator WOULD NOT HAVE JURISDICTION.

Front 437

Television and radio advertisements relating to securities are also

Back 437

NOT considered to be offers in any state OTHER THAN the state from which the broadcasts originated.

Front 438

GENERAL PROVISIONS OF THE ACT: It is unlawful for y person to file any statement or document with the Administrator that is

Back 438

false or misleading in any material respect.

Front 439

The USA empowers the Administrator to MAKE ADMINISTRATIVE RULES as necessary to carry out the provisions of the Act; however, the Administrator may NOT make a rule unless it is necessary to protect the public and the Administrator will make every effort to cooperate with the administrators of other states and the SEC to achieve

Back 439

uniformity in rules. All rules of the Administrator must be PUBLISHED and are available from the Secretary of State.

Front 440

All documents are considered

Back 440

"filed" under the Uniform Securities Act when they are received by the Administrator . The Administrator must keep a register of all registrations that have ever been effective and of all suspension and revocation orders issued. Such register must be available for PUBLIC INSPECTION.

Front 441

The Administrator may issue a cease and desist order

Back 441

with or without a prior hearing to a person engaged in a prohibited activity.

Front 442

Conviction of a securities related crime more

Back 442

than 10 years ago is not grounds for the denial of your registration.

Front 443

You cannot lose your license

Back 443

just because you are being investigated by FINRA, you have been accused of violating a securities law, or you were convicted of a securities related crime 15 years ago (10 is the maximum).

Front 444

You can lose your license if you are

Back 444

subject to an injunction issued by a regulatory authority.

Front 445

The state administrator may inspect the records of a broker-dealer anywhere (in or out of state) and anytime.

Back 445

He or she does not need to give advance notice of inspection.

Front 446

The state administrator regulates the securities business by

Back 446

issuing orders.

Front 447

Conviction of a misdemeanor is not grounds for license suspension, denial, revocation; being convicted of any felony within the past

Back 447

10 years IS! Even if not related to the securities business.

Front 448

The Uniform Securities Act contains both

Back 448

civil (fines) and criminal (jail) penalties.

Front 449

Agents are required to update changes to data filed with the Administrator

Back 449

promptly.

Front 450

Death of a client will NOT affect the client's pending lawsuit against

Back 450

a broker-dealer firm.

Front 451

Under the USA, the Administrator may require broker-dealers to make and keep all books and records except as provided by

Back 451

Section 15 of the Securities Exchange Act of 1934.

Front 452

The state administrator may not impose stricter record keeping and financial requirements on SEC registered broker-dealers or IA's than those required by

Back 452

federal law.

Front 453

As long as a state covered IA complies with the record keeping requirements of his or her home state, he or she will not have to meet the requirements of any other

Back 453

state.

Front 454

A customer cannot sue more than THREE years after the contract of sale or the rendering of investment advice or more than TWO years after the discovery of a violation,

Back 454

whichever occurs first.

Front 455

A customer cannot sue if he or she received a written offer to refund the consideration paid together with interest less any income received on the security and he or she failed to accept the offer within

Back 455

30 days of its receipt.

Front 456

When a broker-dealer firm that is registered in all states is audited by the Administrator of state Z, the firm need only produce records related to

Back 456

state Z.

Front 457

Should a client discover a violation of the USA and wish to sue the agent, every civil cause of action survives the death of any person who might have been a plaintiff or defendant.

Back 457

Surety bonds must provide coverage for a lawsuit brought for the specified two year period even though the person who is bonded may die before the expiration of that period.

Front 458

Although broker-dealer firms and IA firms must keep required customer records, there is no

Back 458

requirements to keep customer tax returns.

Front 459

Email and other forms of electronic communications are subject to the same record retention requirements that apply to other

Back 459

types of communication.

Front 460

The Administrator may conduct investigations both in and out of this state without

Back 460

prior announcement or notice.

Front 461

The Administrator may cancel a person's registration if he or she cannot be located, has ceased to do business, has dies, or has become

Back 461

mentally incompetent.

Front 462

The purchaser of securities sold in violation of the USA may sue the seller to recover financial losses but not for

Back 462

"treble" or triple damages.

Front 463

The purchases of securities sold in violation of the USA may sue the seller to recover the consideration paid for the security including the "disgorgement" or refund of commissions, interest from the date of purchase, court costs, and

Back 463

reasonable attorney fees less any income received.

Front 464

The Administrator may not seize bank accounts or issue injunctions.

Back 464

Injunctions may only be issued by the court.

Front 465

The Administrator may issue a cease and desist order without a prior hearing in order to

Back 465

prevent potential violations from occurring.

Front 466

The Administrator may deny, suspend, or revoke a registrant's registration for violating the Uniform Securities Act but NOT for

Back 466

violating FINRA rules.

Front 467

An Administrator may suspend or revoke any registration if he or she finds that the order is in the

Back 467

public interest and the agent is guilty of a violation of state securities laws.

Front 468

An administrator may not deny, suspend, or revoke a registration soley on the basis of

Back 468

lack of experience as an agent.

Front 469

A rescission right of the buyer of an illegally sold security is to recover the

Back 469

purchase price and interest from the date of purchase. If an agent discovers that he or she sold the security illegally, he or she may offer to repurchase the security. After receiving a rescission letter, the buyer has 30 DAYS to accept the offer to refund the money and interest OTHERWISE THE SALE STANDS.

Front 470

A buyer who rejects an offer of rescission within 30 days may file a lawsuit; however,

Back 470

a buyer who does not respond to such an offer within 30 days MAY NOT. It has to be rejected by the buyer within the 30 DAY time frame in order to file a lawsuit.

Front 471

Under the scope of the Uniform Securities Act, the state administrator has jurisdiction over transactions that originated in the Administrator's state,

Back 471

were directed to that state, or were accepted in that state. More than one state may have jurisdiction.

Front 472

Persons found guilty of violating the USA may be subject to criminal penalties, civil liabilities, and/or

Back 472

the denial, suspension, or revocation or registration.

Front 473

A willful violation, upon conviction, may lead to a fine of not more than $5,000 and imprisonment of not more than THREE years.

Back 473

No indictment may be returned more than FIVE years after the violation.

Front 474

Everyone who violated the Uniform Securities Act comes under the jurisdiction of even if they are

Back 474

not registered as an agent, adviser, or broker-dealer.

Front 475

The state administrator may conduct an examination (audit) of a broker-dealer anytime

Back 475

he or she feels it appropriate to protect the public.

Front 476

The Administrator may conduct investigations in hi

Back 476

in other states.

Front 477

SIPC (Securities Investment Protection Corporation)

Back 477

covers broker-dealer insolvency (bankruptcy).

Front 478

Under the USA, waivers signed by customers to hold agents or broker-dealers harmless from liability for their unlawful activities are considered

Back 478

"null and void".

Front 479

The Uniform Securities Act gives the Administrator the power to examine the business records of a broker-dealer?

Back 479

At any time and across state lines. There are no limitation on the Administrator's authority to examine the records of a broker-dealer.

Front 480

An agent executes a transaction that the customer known is illegal but enters into willingly by signing a waiver. The agent is relieved of?

Back 480

Civil liabilities, Criminal penalties, and Administrative censure. (Regardless of what the customer signs, the agent is responsible for executing an illegal transaction. The agent is liable for criminal, civil, and administrative action).

Front 481

An agent representing a broker-deer in Arizona wishes to do business in California exclusively in the trading of certain exempt securities. The agent would:

Back 481

Have to register in California. (Although the securities are exempted from registration, the agent must register in every state where business is transacted).

Front 482

Mary Jones works for a broker-dealer that is registered in all 50 states. Mary is a registered representative in Arizona. John Smith is a customer living in Nevada. John calls Mary at her office in Arizona and offers to purchase securities. Mary should:

Back 482

Reject the order unless she is registered in Nevada as an agent. (Both the broker-dealer and the agent must be registered in each state in which they plan to do business. In order for Mary to accept the order, she would have to be registered in Nevada).

Front 483

Which of the following would be considered a willful violation of the Uniform Securities Act?

Back 483

An agent recommends the purchase of a stock he or she knows is not properly registered but no sale results. (The standard for WIIFUL violations is the knowledge that you have done something improper. Willful=knowing that it's wrong before you do it.

Front 484

Which of the following would NOT be considered a willful violation of the USA?

Back 484

An agent recommends the purchase of a non-exempt, unregistered stock after being incorrectly informed by a reliable source that the stock was properly registered. An agent recommends the purchase of a stock he or she believes is exempt prior to the time he or she discovers that the Administrator has revoked the stock's exemption.

Front 485

Which of the following are true regarding investigations conducted by the Administrator under the Uniform Securities Act?

Back 485

Investigations may be conducted across state lines, Information regarding violations DOES NOT have to be kept confidential, The Administrator may obtain a court order to have a receiver appointed over a violator's assets. The Administrator is empowered to publish information regarding violations found in the investigation.

Front 486

Under the Uniform Securities Act, which of the following is true regarding the civil liability of agents?

Back 486

Persons who control a civilly liable person may also be sued to recover damages. Persons may be sued only up to three years following the sale of a security; however, it is the investor who has been damaged, not the Administrator, who files the lawsuit against his or her agent and/or registered principal charging civil liability. A purchaser may recover costs and attorneys' fees in addition to the amount paid for the security plus interest minus any amount received on tender.

Front 487

Under the Uniform Securities Act, an offer is made in a state when?

Back 487

It originates in that state. (An offer is also considered to be made in a state when it is directed to that state and is received at the place to which it is directed. Offers received via a TV or radio broadcast that originated out of state are not considered an offer and or offers contained in a newspaper published out of state are not considered an offer.

Front 488

Under the Uniform Securities Act, the Administrator is given the power to?

Back 488

Examine files of registered persons who have their offices out of state. Designate an officer who will then have the power to conduct formal investigations. (The Administrator does NOT have the power to sentence willful violators to up to three years in prison, ONLY a court may sentence a convicted person. The Administrator may examine the files of any registered person whether located in the state or out of state. The Administrator may invest a designated officer with the power to conduct formal investigations: subpoena witnesses, compel testimony, etc. But while the Administrator may refer evidence to the state attorney general or district attorney for criminal prosecution, only a court may sentence a person convicted of a violation, not the Administrator).

Front 489

Under the Uniform Securities Act, the statute of limitations on criminal indictments is?

Back 489

5 years. (The STATUTE OF LIMITATIONS on returning criminal indictments is FIVE years).

Front 490

Under the Uniform Securities Act, violations of the Act may result in what?

Back 490

A receiver being appointed over the violator's assets. A court order requiring the violator to make restitution to others. A bar from employment in the securities business.

Front 491

Under the Uniform Securities Act, the disciplinary actions that may be taken by the Administrator include which of the following.

Back 491

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.

Front 492

Under the Uniform Securities Act, disciplinary proceedings generally require the Administrator to provide which of the following?

Back 492

Written findings of fact and conclusions of law. Appropriate prior notice. Opportunity for a hearing. (In general, the Administrator must provide appropriate prior notice, opportunity for a hearing, written findings of fact, and conclusions of law).

Front 493

Under the Uniform Securities Act, the Administrator has the power to?

Back 493

Administer oaths, Subpoena witnesses, Take evidence. (The Administrator has the power to administer oaths, subpoena witnesses, and take evidence. The Administrator also has the power to compel testimony and require the production of books and records. However, while the Administrator is authorized to refer violations for possible criminal prosecution, the actual powers of criminal prosecution such as indicting offenders belong to the district attorney or attorney general).

Front 494

Which of the following is/are true regarding violations of the Uniform Securities Act?

Back 494

The Administrator may issue a cease and desist order without a prior hearing. Violators may incur a criminal penalty of a $5,000 fine or three years in jail that may include both, The statute of limitations for indictments relating to criminal violations is FIVE years. (The Administrator may issue a cease and desist order with or without a prior hearing. Regarding the criminal penalties, the amounts are a $5,000 fine and three years in prison, violators may face both. The statute of limitations for indictments relating to criminal violations is five years.

Front 495

Under the USA, a civil suit to recover damages may not be brought by a purchaser of a security if?

Back 495

The purchase was made more than three years ago. (Neither the death of the seller nor the purchaser removes a cause of action for civil liability. Waivers signed by purchasers absolving agents of liability for unlawful acts are null and void. Customers cannot sue MORE THAN THREE YEARS after the contract of sale or the rendering of investment advice or the expiration of TWO YEARS after the DISCOVERY of a violation, whichever occurs first.

Front 496

All of the following is true regarding criminal penalties under the Uniform Securities Act?

Back 496

The statute of limitations on criminal indictments is 5 years. Criminal penalties may be incurred by willfully violating any provision of the Act. The Administrator does NOT have the power to pursue criminal prosecution; he or she may only refer evidence to the attorney general or appropriate district attorney.

Front 497

Under the USA, a purchaser of a security that was sold in violation of the Act is entitled to recover?

Back 497

The price of the security plus interest, costs, and attorneys' fees minus any income received on the security. (Persons damaged as a result of a security sold in violation of the Act are entitled to their losses plus interest, costs, and attorneys' fees minus any income received on the security.

Front 498

An agent discovers that he or she has sold an unregistered, non-exempt security that he or she thought was exempt to a customer. If the agent offers to buy it back, what is true?

Back 498

This is legal and is called rescission. The offer also must include the price of the security plus interest, costs, and attorneys' fees minus any income received on the security.

Front 499

A customer living in Colorado receives a phone call from an agent in Arizona. The two parties meet in Las Vegas to finalize the transaction. Under whose jurisdiction does the transaction fall?

Back 499

Colorado, Arizona and Nevada. (Under the scope of the Uniform Securities Act, if any part of a transaction occurs in a state, the entire transaction is under the jurisdiction of the state administrator in that state.

Front 500

The state securities administrator can check the financial records of a broker-dealer?

Back 500

Whenever and wherever it is in the public interest. (The Administrator can demand to see any records of a broker-dealer at any time that it is in the public interest either within or outside this state).

Front 501

Violations of securities laws can be punishable by?

Back 501

Civil liabilities, Criminal penalties, License suspension. (Under the USA, violations of state securities laws may lead to civil liabilities, criminal penalties, and or license suspension or revocation).

Front 502

If convicted of a willful violation of the Uniform Securities Act, an agent may be subject to a maximum of?

Back 502

A fine of $5,000 and or imprisonment for THREE years. (These penalties may be in addition to civil penalties).

Front 503

Ads appearing in USA Today would not be considered to have any state of offer since more that?

Back 503

Two thirds of their readers are out of state.

Front 504

The buyer of a security may not sue for compensation over a violation of the Uniform Securities Act after?

Back 504

Three years after the sale or two years after the discovery of the violation, whichever occurs first.