Broker Dealers (9 Questions On The Test) Flashcards
The following four classes of persons are included under the jurisdiction of state securities
Broker dealers (generally legal persons)
Agents(always individuals)
Investment advisor (generally legal persons)
Investment advisor representatives (always individuals)
TTA!
How to broker dealers make a profit?
They earn a spread(difference between the public offering price and what they pay the issuer) or receive a commission on the sales, which they use to pay their agents who actually made the sales
Persons not included in the definition of a broker dealer
Agents
Issues
Banks, savings institutions, trust companies
TTA!
The phrase the test will use to imply an entity that will have to register
Wholly owned subsidiary
Broker dealer does not include a person who has no place of business in the state if:
-it effects transactions in this state exclusively with or through the issuers of the securities involved in the transactions, other broker dealers, banks, trust companies, savings institutions, insurance companies, investment companies, pension/profit sharing plans
Or the person is licensed under the securities act of a state in which the person maintains a place of business, and the person offers and sells securities to a person who is an existing client of the person whose residence is not in this state (snowbird exemption)
Under the USA, you ARE a BD if:
You have a place of business in the state OR you have even one retail client in the state
Under the USA you are NOT a BD if:
You have no place of business in the state AND your clients are other BDs, institutions, and issuers of the security involved in the transaction, and/or your only business in the state is with existing clients who are temporarily in the state
Registration procedure for BDs
Submit and application
Provide consent to service process
Pay filing fees
Post a bond (if required by the administrator)
Take and pass an examination
*fingerprints don’t have to be submitted
U4 May include:
Form and place of business
Proposed method of doing business
Qualifications and business history (and qualifications of leadership and officers)
Disclosure of if they been subject to court issues injunctions
Disclosures of any charge, convictions, or guilty plea to a misdemeanor involving investments
Disclosure to any charge of felony
Financial condition and history
Agent registration requires citizenship info
Consent to service process
Appoints administrator as the applicants attorney to receive and process non criminal securities related complaints.
All legal documents - subpoenas or warrants - recurved by the administrator have the same legal effect as if they had been served personally on the applicant
If the securities professional is registering in 6 states, the administrator of each state must receive a consent to service process
Filing fees for broker dealers
May file without a fee, an application for registration of a successor firm, whether or not the successor is then in existence for the unexpired portion of the year
Renewal date is the December 31 and there is not proration of fees - successor firm pays no fees until the renewal date
TTA
Broker dealers who meeting SECs net capital or bonding requirements….
CANNOT be required to meet higher ones in any state in which they do business
*in lieu of a surety bond, the administrator will accept deposits of cash or securities
Effectiveness of registration
Unless a legal proceeding is instituted or the applicant is notified that the application is incomplete, the license of a BD, agent, IA or IAR becomes effective at noon, 30 days after the later of the date an application for licensing is filed and is complete or the date an amendment to an application is filed and is complete
TTA
the administrators authority does not…
Stop at state lines.
