1-Uniform Securities Act

Question 1

DEFINITION: Broker-Dealer

Answer 1

person (i.e. brokerage firm) engaged in the business of effecting transactions in securities for the accounts of others or for the firm’s own account.
Broker - buying and selling securities for the accounts of others
Dealer - buying and selling securities for or from the firm’s own account

Question 2

Broker-Dealer IS NOT…

Answer 2

Agent - they represent the B/D
Issuer - IPO’s
Banks - Savings Inst, Trust Co’s
Person with no place of business in a state

Question 3

Definition of PERSONS

Answer 3

An individual or a legal entity
legal entity = corporations, partnerships, associations, trusts, unincorporated organizations and government or gov sub-divisions.
NOT minors

Question 4

DEFINITION of Agent

Answer 4

Any individual who represents a B/D OR an Issuer in effecting or attempting to effect purchases or sales of securities.

Includes:
Registered Representatives (RR)
Rep of an issuer of a Limited Partnership
Does not include the receipt of commissions as a definition (though most Agents receive them)
If an RR represents more than one B/D that would require Dual registration.

Question 5

Agent definition…

Agent does not include an individual who represents an issuer in effecting (Issuer Exclusions).

Answer 5

Exempt Securities

• US Government securities
• Municipal Securities
• Canadian Government Securities (including all Provinces of Canada)
• Banks
• Promissory Notes and Investment Contracts

Exempt Transactions

• Non-issuer transactions (secondary market)
• Covered securities (qualified purchasers or private placements)
• employees of Issuers - partners, directors, employees if no commission or remuneration is paid.

Question 6

Require Registration as an Agent for these 2 categories

Answer 6

• Insurance Company Securities

* Federal Savings and Loans

Question 7

Investment Advisory Registry Exclusions

Answer 7

Banks
Savings Institutions
Trust Companies
Investment Companies
Even if they charge a fee for advisory services

Question 8

Professions excluded from registration as an Investment Advisor

Answer 8

Be L.A.T.E.
Bankers
Lawyers
Accountants
Engineers

Question 9

Investment Contracts (e.g. Company issues for employee stock purchase plan)
Four elements of a Contract:

Answer 9

1) Investment of money
2) Common enterprise
3) Expectation of profits
4) Management by a third party

Question 10

DEFINITION: Solicitation

Answer 10

any oral, written, or other communication used to offer or sell investment company shares.
NOT including: proxy statement, report to shareholders, or other disclosure document

Question 11

DEFINITION: State

Answer 11

Any state, territory, or possession of the United States, DC and Puerto Rico

Question 12

Exempt Securities from Registration with States

Answer 12

1) U.S. Government Securities - T-Bonds, Notes and Bills AND Government Agency Issues.
2) Municipal Securities - State; Local; General and Revenue Bonds
3) Country of Canada; provinces (NOT Canadian securities)
4) Banks; Savings institutions, Trust Companies
5) Federal Savings and Loan Association issued securities (including Building and loan)
6) Credit Unions (Federal or State chartered)
7) Insurance Company securities (NOT including Canadian banks)
8) Securities listed on a registered stock exchange (e.g. NYSE/NASDAQ)

Question 13

Registration:

Exempt Securities

Answer 13

U.S. Government securities
Municipal Securities (Gen Obl; Revenue Bonds)
Guaranteed Securities of Canada; provinces
U.S. banks, Savings inst, trust companies
Federal savings and loan assoc.
Credit Unions
Insurance company securities (NOT Canadian)
Listed stock exchange securities (including their issues like secured bonds, mortgage and equipment debt, Unsecured Bonds like debentures, Preferred Stock.
Non-Profit Issues (charitable, Educational, chamber of commerce, trade assoc. church bonds.
Promissory Notes/Commercial Paper/bills - denominations of $50k (do not have to be issued by a Federally Chartered Bank
Public Utility; Common Carrier (e.g. RR)
Investment contracts (employee stock purchase)

General Rules - OTC’s who do not qualify, Limited Partnerships, Intrastate offerings of more than 10 investors.

Question 14

Exempt Transactions (do not include issuers or Underwriters = exempt from registration and advertising filing requirements)

Answer 14

1. Isolated non-issuer transactions (secondary mkt, don’t benefit issuer)
2. Non-issuer by registered agents at registered B/D IF:
   Issuer is in business and not in organizational or bankruptcy
   Blank check, blind pool, or shell company

Security is Senior in rank to CS and issuer is outstanding for 3 years w/o default

3. Non-issuer transactions by a B/D for an unsolicited order or offer to buy
4. Fiduciary Transactions
5. Bona Fide Pledges of securities
6. Underwriter Transactions - between Issuer - U/W; U/W and members of U/W syndicate (not public sales)
7. Transactions with Financial Institutions - sales to banks, etc or to a B/D whether acting for itself or other fiduciary capacity
8. Private placements sold to not more than 10 persons (other than institutional investors) over a 12-month period
9. Pre-organization subscription transactions of fledgling companies - 4 conditions
   1) no more than 10 subscribers
   2) No commissions paid
   3) Payments made after registration
   4) Advertising allowed
10. Rights, Warrants and Convertible Securities transactions

Question 15

Investment products excluded from definition of securities

Answer 15

1) Fixed life insurance policies
2) Endowment policies
3) Fixed annuity contracts
4) Commodity futures contracts
5) Collectibles, including antiques
6) Precious metals (gold, silver, diamonds)
7) Real estate

Question 16

DEFINITION: Security

Excluded from the definition of a security

Answer 16

1) Fixed life insurance policies
2) Endowment policies
3) Fixed annuity contracts
4) Commodity futures contracts
5) Collectibles, including antiques
6) Precious metals
7) Real estate