1 Uniform Securities Act Definitions Flashcards
According to the Uniform Securities Act, which of the following would be specifically excluded in the definition of a broker-dealer?
[A] Investment Advisers and Investment Adviser Representatives
[B] Accountants
[C] Lawyers
[D] Issuers
[D] Issuers
Of the choices offered the only one that is “specifically” excluded from the definition of broker-dealer is an issuer.
An investment adviser manages a portfolio with AUM of $125 million. Due to significant market disruption the AUM falls to $85 million by the end of the year. As a result, which of the following must the investment adviser do?
[A] Withdraw its federal registration as an investment adviser.
[B] Freeze all customer withdrawals until AUM stabilize.
[C] Solicit new customers until amount of assets under management level reaches at $90 million.
[D] Renew its registration with the SEC.
[A] Withdraw its federal registration as an investment adviser.
An investment adviser that manages an investment portfolio with assets under management (AUM) of $110 million or more must register with the SEC. However, if the AUM falls below $90 million the adviser must withdraw its federal registration unless an exception exists.
According to the Uniform Securities Act, exclusions from the definition of broker-dealer include:
I. an issuer
II. a person that has a place of business in a state and only does transactions in securities with financial institutions
III. agents for the broker-dealer
IV. agent for an issuer
[A] I
[B] I, II, IV
[C] I, III, IV
[D] I, IV
[C] I, III, IV
The definition of a broker-dealer under the Uniform Securities Act specifically excludes choices I, III, and IV. Choice II would have to be registered as a broker-dealer since they have a place of business in the state.
Which of the following falls within the definition of “broker-dealer” for purposes of the Uniform Securities Act?
[A] A person who, for compensation, engages in the business of advising others, either directly or through publications, as to the value of securities and/or the advisability of investing in securities.
[B] An individual who represents an issuer in effecting or attempting to effect purchases and sales of securities.
[C] A person engaged in the business of effecting transactions in securities for the account of others or for his own account.
[D] An individual employed by or associated with an investment adviser who makes recommendations or renders advice regarding securities.
[C] A person engaged in the business of effecting transactions in securities for the account of others or for his own account.
If a person, which includes individuals, is engaged in the business of effecting transactions in securities for their account or for the accounts of others, that person or individual would fall under the definition of a broker-dealer under the Uniform Securities Act.
Which of the following activities may an applicant for registration as an agent of a broker-dealer perform while their application is still pending?
[A] They may engage in unsolicited order execution of securities.
[B] They may engage in the execution of limited partnership orders which are exempt from state registration.
[C] They may engage in the sale of mutual funds as long as it is without compensation.
[D] They may engage in the sale of fixed annuity contracts.
[D] They may engage in the sale of fixed annuity contracts.
An applicant for registration as an agent of a broker-dealer may not perform any of the functions of an agent until the registration is accepted. This applicant may sell fixed annuity contracts because these contracts are issued by insurers and are not considered securities for broker-dealer purposes.
Which of the following are Federal Covered Advisers?
I. An individual registered with the SEC as an Investment Adviser
II. An individual who is an Investment Adviser but is exempt from federal registration
III. An individual who only gives advice about U.S. Government securities
IV. Persons who meet the definition of Federal Covered Adviser but are not registered
[A] II only
[B] I only
[C] II and III
[D] I, II, III, IV
[B] I only
Choices II, III, and IV would NOT be considered Federal Covered Advisers. Investment advisers managing $110 million or more (previously $25 million) must register at the Federal level and are defined as Federal Covered Advisers.
Eric has been acting as an investment advisor and giving investment advice to several individual clients about the securities issued by banks. Eric charges his clients an advisory fee for this advice. Under the definitions of the Uniform Securities Act Eric would:
[A] Be required to register as an Investment Advisor because he is calling himself an investment adviser.
[B] Be exempt from registration as an Investment Advisor since he is only giving advice about bank securities.
[C] Be required to register as an Investment Advisor because he is charging an advisory fee for his advisory services.
[D] Be exempt from registration as an investment advisor since Banks are excluded from the definition.
[C] Be required to register as an Investment Advisor because he is charging an advisory fee for his advisory services.
Banks, publishers, and lawyers whose advice is incidental to the practice of their profession would be excluded from the definition of Investment Advisor but anyone who received compensation for giving advice related to securities would have to be registered as an Investment Advisor. Be careful not confuse the fact that “Banks” are not included in the definition of IA BUT any IA giving advice about investments IN BANKS would have to register if they are receiving compensation.
Any individual, other than a broker-dealer, who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities is:
[A] an agent.
[B] a registered salesman and principal.
[C] a broker-dealer.
[D] an underwriter.
[A] an agent.
By definition an “Agent” is an individual who represents a broker-dealer or issuer in effecting or attempting to effect purchases and sales of securities.
Which of the following are TRUE when it comes to outside parties referring customers to an investment adviser who is registered at the State level under the Uniform Securities Act?
I. If the outside party does not actively solicit for the investment adviser and does not receive a referral fee from the investment adviser, the outside party typically would not have to register as an investment adviser or investment adviser representative.
II. If the outside party does not actively solicit for the investment adviser and does not receive a referral fee from the investment adviser, the outside party typically does have to register as either an investment adviser or investment adviser representative.
III. If the outside party actively solicits for the investment adviser and/or receives a referral fee from the investment adviser, the outside party typically would not have to register as an investment adviser or investment adviser representative.
IV. If the outside party actively solicits for the investment adviser and/or receives a referral fee from the investment adviser, the outside party typically does have to register as either an investment adviser or investment adviser representative.
[A] I and III
[B] I and IV
[C] II and III
[D] II and IV
[B] I and IV
If an outside party and an investment adviser enter into an agreement to refer clients to one another with no referral fees paid and no active solicitation by the outside party for investment advisory services, then the outside party typically would NOT be required to register as an IA or IAR. If, however, the outside party actively solicits or is paid a referral fee, then the outside party typically would be required to register.
Under the Uniform Securities Act an agent of a broker-dealer would be excluded from the definition of an Investment Adviser if which of the following are true?
I. The advice that is given to clients is incidental to their normal brokerage activities.
II. The advice that is given to clients is not incidental to their normal brokerage activities.
III. If no special or extra compensation is charged to the customer.
IV. If special or extra compensation is charged to the customer.
[A] I & III only
[B] II & III only
[C] I & IV only
[D] II & IV only
[A] I & III only
If the firm or agents activities are solely incidental to its broker-dealer activities and no special or extra compensation is charged or received for the investment advice, the agent would be excluded from the definition of an Investment Adviser under the Uniform Securities Act.
According to the Uniform Securities Act, when an application for registration as an agent is pending, the person may do which of the following?
[A] offer mutual funds but not accept commissions
[B] sell fixed annuity insurance contracts
[C] sell securities when such orders are unsolicited
[D] sell securities which are exempt from registration
[B] sell fixed annuity insurance contracts
Since a fixed annuity is an insurance product and not a security, a person would be allowed to sell those without being registered as an agent.
Under the Uniform Securities Act which of the following would be considered to be defined as an Investment Adviser?
I. A person who provides advice about securities for compensation
II. A person who is in the business of providing advice about securities for compensation
III. A bank who provides advice about securities for compensation
IV. An investment company who provides advice about securities for compensation
[A] I & II only
[B] III & IV only
[C] I, II, & III only
[D] I, II, III, IV
[A] I & II only
Choices I & II are included in the definition of investment adviser but banks and investment companies are exempt from the definition even if they charge a fee.
An individual gives advice to clients regarding fixed annuity contracts. This individual also gives advice related to other fixed insurance products. Which of the following is TRUE of this individual?
[A] The individual would not be required to register under the Uniform Securities Act.
[B] The individual would not be required to register in any capacity with any regulatory body.
[C] The individual would be required to register under the Uniform Securities Act.
[D] The individual would be required to register under the Investment Advisers Act of 1940.
[A] The individual would not be required to register under the Uniform Securities Act.
Individuals who are giving advice on fixed products do not need to register under the Uniform Securities Act, which regulates the securities industry at the State level. For purposes of the USA, fixed annuities and fixed insurance products would not be considered securities.
It is incorrect to state that this individual would not be required to register in any capacity with any regulatory body. A person who is providing advice and selling insurance products generally will be required to complete competency exams in insurance and register at the state level with the insurance commissioner.
Registration under the Uniform Securities Act and the Investment Advisers Act of 1940 would NOT be required with the information provided.
A solicitor receives a call from an Investment Adviser (IA) who wants the non-employee to conduct solicitation activities for the IA. What are the obligations regarding registration according to the Uniform Securities Act?
[A] Since the solicitor is not a registered investment adviser and is not qualified to be a investment adviser representative, the solicitor does not need to register.
[B] Every state requires the solicitor to register whether or not the solicitor conducts business in that state.
[C] The solicitor does not need to register because the solicitor does not work for the investment adviser company.
[D] It is required that the solicitor register in the states in which it conducts its business.
[D] It is required that the solicitor register in the states in which it conducts its business.
A person hired by an investment adviser to perform solicitation activities on behalf of the IA must be registered in each state in which it solicits or transacts business.
You work for the only branch of Johnny’s Broker-Dealer which is located in State X. Several of your agents have accounts in nearby State Y. Johnny’s Broker-Dealer would only have to license its agents in State Y if clients in State Y were
[A] other broker-dealers.
[B] government employees of State Y.
[C] registered investment advisers.
[D] financial institutions or banks.
[B] government employees of State Y.
Other broker-dealers, registered investment advisers, and financial institutions such as banks do not warrant the need for licensing in the outside state, in this case State Y. Regardless of who employs them, individuals not falling into any exclusionary list, must be represented by agents that are properly licensed in their respective states.
