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Question 1

Is a firm that has an office in a state, but only deals with institutional clients in the state, considered a BD?

Answer 1

Yes, because the firm established an office in the state.

Question 2

Is a bank whose trust department occasionally executes securities transactions considered a BD?

Answer 2

No. Banks are excluded from the BD definition.

Question 3

If a corporation raises capital by selling new shares of its stock to the public, is it considered a BD?

Answer 3

No. The corporation is an issuer and issuers are excluded from the BD definition.

Question 4

Is a firm with no office in a state that only deals with institutional clients in the state considered a BD?

Answer 4

No. The firm is excluded from the BD definition.

Question 5

Is a firm with no office in Ohio that effects trades in Ohio with 6 clients residing in Iowa considered a BD?

Answer 5

No. The firm is excluded from the BD definition in OH (no office in OH and only deals with existing Iowa clients).

Question 6

Is an individual who represents a BD in the sale of Treasury bonds considered an agent?

Answer 6

Yes, since anyone representing a BD in the sale of securities is an agent.

Question 7

Is a sales assistant for a BD who accepts unsolicited orders from clients considered an agent?

Answer 7

Yes, since anyone representing a BD in the sale of securities is an agent.

Question 8

Is an individual who represents a BD in the sale of municipal bond considered an agent?

Answer 8

Yes, since anyone representing a BD in the sale of securities is an agent.

Question 9

Is an individual who represents a BD in the sale of a private placement considered an agent?

Answer 9

Yes, since anyone representing a BD in the sale of securities is an agent.

Question 10

Is an individual who represents a BD in the sale of a bank’s stock considered an agent?

Answer 10

Yes, since anyone representing a BD in the sale of securities is an agent.

Question 11

Is an individual who represents a BD in the sale of stock to a bank considered an agent?

Answer 11

Yes, since anyone representing a BD in the sale of securities is an agent.

Question 12

True or False: A Consent to Service of Process is an example of an exculpatory clause.

Answer 12

False. Exculpatory clauses are waivers absolving agents from wrongdoing.

Question 13

True or False: A Consent to Service of Process must be filed by BDs, but not their agents.

Answer 13

False. A Consent to Service of Process is required of all registrants.

Question 14

BD records must be kept for at least ____ years.

Answer 14

3 years

Question 15

True or False: An agent whose client moves to a new state may not contact the client until registered in the new state.

Answer 15

False. The agent may engage in transactions with the client for 60 days if registration is pending in the new state.

Question 16

May an agent whose client is visiting another state sell securities to the client without being registered in the state?

Answer 16

Yes, provided the client is in the state temporarily.

Question 17

True or False: Canadian agents are not permitted to effect trades with existing Canadian clients temporarily in the U.S.

Answer 17

False. Provided the relationship with the client existed prior to entering the U.S., trades may be effected.

Question 18

A BD located and licensed in Canada may contact what types of individuals in the U.S.?

Answer 18

Existing clients who are temporarily in the U.S.

Question 19

In state law, individuals representing BDs in effecting securities transactions are referred to as ________.

Answer 19

agents

Question 20

True or False: In state law, individuals representing issuers in effecting securities trades are ALWAYS deemed agents.

Answer 20

False. Individuals are not deemed agents if representing issuers of exempt securities or effecting exempt transactions.

Question 21

List some of the exclusions from the definition of a BD.

Answer 21

Agent, issuer, bank, or a BD with no office in the state that only deals with institutions or its existing clients

Question 22

A _________ bond is posted to cover the potential costs of legal action taken against certain persons.

Answer 22

surety bond

Question 23

May an agent continue to do business in a state if his BD has gone out of business?

Answer 23

No. An agent’s registration is only in effect while associated with a BD or issuer.

Question 24

When an agent ends her association with a BD, who must notify the Administrator?

Answer 24

Both the agent and the BD

Question 25

True or False: A partner, officer, or director of a BD is always considered an agent of the BBD

Answer 25

False. A partner, officer, or director is an agent of the BD if she is involved in the purchase/sale of securities.

Question 26

If a BD is not registered in a state, may an agent of the BD do business in the state without being registered there?

Answer 26

Yes, if the agent is dealing with an existing client that is temporarily in the state.

Question 27

If a client moves to a new state, may the agent continue to do business while applying for registration in the state?

Answer 27

Yes, as long as the agent is registered in at least one other state and is not subject to disqualification.

Question 28

A client of a Canadian BD is visiting the U.S. May the agent do business with her without registering in the state?

Answer 28

Yes. Since she is an existing client of the Canadian BD, business may continue in the state.

Question 29

May an agent of a BD located in Mexico do business with a client in the U.S. without registering in the state?

Answer 29

No. BDs of Mexico are required to register in the U.S. to effect securities transactions in a state.

Question 30

Does the de minimis exemption apply to BDs that have no place of business in a state?

Answer 30

No. The de minimis exemption only applies to IAs and IARs.

Question 31

What is the purpose of a Consent to Service of Process?

Answer 31

To appoint the Administrator as the applicant’s attorney to receive and process any non-criminal legal complaints

Question 32

Who must sign a Consent to Service of Process?

Answer 32

Any issuer, BD, IA, IAR, or agent initially registering to engage in business within a state

Question 33

Must the Consent to Service of Process be renewed each year?

Answer 33

no, only required at initial registration

Question 34

State registration remains in effect for ___ year(s).

Answer 34

1 year

Question 35

State registration expires annually on ______________.

Answer 35

December 31

Question 36

When does state registration become effective?

Answer 36

At noon on the 30th day after filing an application, provided there are no proceedings pending

Question 37

If a BD is registered with the SEC, is registration required in any state in which it intends to do business?

Answer 37

Yes. There are no exemptions from registration in the state as a BD.

Question 38

True or False: If a BD registers in a state on March 3, it must pay a registration fee for the full year.

Answer 38

True

Question 39

If a firm meets the BD definition in the state, are there any exemptions from registration under the USA?

Answer 39

No. Firms that meet the BD definition are required to register in the state.

Question 40

Is there an exemption for agents conducting business in a state? If so, what are the guidelines?

Answer 40

Yes, no place of business in state and a client visits the state or existing client moves to the state (registration pending)

Question 41

The USA refers to an individual who represents a BD in the sale of securities as an ________.

Answer 41

agent

Question 42

If the Administrator requires an IA, BD, or agent to post a bond, is a deposit of cash or securities acceptable?

Answer 42

Yes. However, the Administrator determines the amount and types of securities that are appropriate.

Question 43

A BD must maintain its books and records for a minimum of ____ years.

Answer 43

3 years

Question 44

If a registrant wishes to withdraw her registration, when does the withdrawal become effective?

Answer 44

30 days after filing the withdrawal request with the Administrator, provided there is no action pending

Question 45

What is a consent to service of process?

Answer 45

A document appointing the Administrator as attorney for any non-criminal legal complaints issued against a registrant

Question 46

Identify the acronym: NAFTA

Answer 46

North American Free Trade Agreement

Question 47

True or False: The USA requires all employees of a BD to register.

Answer 47

False. Only those representing a BD in effecting transactions (as an agent) must register.

Question 48

Can a BD punish one of its agents for responding to a subpoena?

Answer 48

no

Question 49

A registration withdrawal is effective ____ days after filing.

Answer 49

30 days

Question 50

A BD in New York gets an order from a client who is on vacation in Florida. Does the firm need to register in Florida?

Answer 50

no

Question 51

True or False: BDs must file advertising and sales literature with the Administrator.

Answer 51

True

Question 52

If an agent has applied for registration, but has not yet heard back from the Administrator, what may she sell?

Answer 52

The agent is not permitted to sell securities. If she were properly licensed, she could sell life insurance or fixed annuities.

Question 53

True or False: An agent may sell limited partnerships if he is not yet registered with the Administrator.

Answer 53

False. Limited partnerships are securities and an individual must be properly registered to sell them.

Question 54

True or False: An agent may sell fixed annuities if she is not yet registered with the Administrator.

Answer 54

True. Since fixed annuities are not securities, registration with the Administrator would not be required.

Question 55

An underwriter would most likely be registered as a _____________.

Answer 55

broker-dealer

Question 56

True or False: A person being compensated for providing clients with advice about securities is a broker-dealer.

Answer 56

False, this is an investment adviser

Question 57

If a firm wants to register as both a BD and an IA, with whom would it register?

Answer 57

With the Administrator in the state in which its office is located and with the SEC

Question 58

True or False: An employee who is hired to assist in selling IPO shares is required to be registered.

Answer 58

True

Question 59

If a person works for a federally chartered bank, is he required to register with the SEC or a state Administrator?

Answer 59

No

Question 60

True or False: On Form U4, a person must disclose any aliases or previously used names.

Answer 60

True. A maiden name is an example

Question 61

True or False: A BD’s Firm Element Continuing Education program offers employees both job and product-related training.

Answer 61

True

Question 62

To apply for a securities license, a person must file Form ___ with FINRA.

Answer 62

U4

Question 63

True or False: Under the USA, a Canadian BD may solicit Canadian clients to open up an account while they’re in the U.S.

Answer 63

False. Canadian BDs may service existing accounts of Canadians who are in the U.S., but cannot open new accounts.

Question 64

Is a broker-dealer required to publicize its recommendations before disclosing them to clients?

Answer 64

No. Recommendations are not required to be made public.

Question 65

Is a bank holding company that occasionally executes securities transactions considered a BD?

Answer 65

Yes. Under the USA, bank holding companies are not excluded from the BD definition.