Ch 1 Laws, Regulations and Guidelines Overview Flashcards
How is a firm acting if it effects trades on behalf of its customers, without taking the other side of the trade?
Agent or broker
According to the USA, who is included under the term “person?”
Any legal entity, including individuals (clients/agents/IARs), BDs, IAs, issuers, corporations, and partnerships
What is the general definition of an issuer?
Any person who issues or proposes to issue a security, such as government entities and corporations.
Identify two significant creations that are credited to the National Securities Markets Improvement Act (NSMIA).
Federal Covered Advisers and Federal Covered Securities
Identify who IS NOT considered a person under the USA.
Minors, incompetents, securities, and the deceased are NOT considered persons.
True or False: Blue-Sky Laws apply to broker-dealers and agents operating within a state.
True
True or False: The U.S. Virgin Islands are a member of NASAA.
True
Identify the acronym: IA
Investment Adviser
Identify who is considered a person under the USA.
Business entities, issuers, estates, governments, individuals (e.g., clients, IARs and agents)
What are the three components that must be met for a firm to be defined as an IA?
1) Provide advice regarding securities, 2) Do so as a business 3) Receive specific compensation (the ABC test)
What is the general definition of an investment adviser?
A firm that provides advice/analyses regarding securities, as part of a business, and for compensation
True or False: A firm producing investment research for BDs to deliver to clients is considered an IA under the USA.
True. Since advice is being provided, as a business, and compensation is received, the ABC test is met.
A securities firm that executes trades for its own account or the accounts of others is deemed a _______________.
broker-dealer (BD).
True or False: The Uniform Securities Act is exactly the same law in every state.
False. The USA is a model law, not the actual law of any state.
What is a principal trade?
A trade involving a firm (BD or IA) buying or selling securities for its own account at its own risk.
Identify the acronym: NSMIA
National Securities Markets Improvement Act
When acting in an ________ capacity, firms assist customers, but do not assume risk.
agency capacity,
(e.g., a best-efforts underwriting).
Under the provisions of the USA, how is the institutional investor designation made?
An institutional investor is any person designated by rule or order of the Administrator.
True or False: The District of Columbia is a member of NASAA.
True. Washington D.C. is a member of NASAA.
True or False: Puerto Rico is a member of NASAA.
True
What is the ABC Test for investment advisers?
The test that defines an IA as a firm that provides Advice as part of a Business for Compensation
How is a firm acting if it is trading for, or from, its own inventory?
As a principal / dealer
When acting in a ____________ capacity, a firm is assuming risk.
principal capacity,
(e.g., a firm-commitment underwriting).
Who is the official that monitors and administers a state’s securities laws?
The Administrator or Commissioner
List the entities that make up NASAA.
All 50 U.S. states, the U.S. Virgin Islands, Puerto Rico, the District of Columbia, Canada and Mexico
Identify the acronym: USA
Uniform Securities Act
The _____ _________ _________ ______________ __________________ is an organization consisting of state Administrators.
North American Securities Administrators Association (NASAA)
What is the three-pronged test for determining whether a firm meets the IA definition?
A-B-C. A = advice/analyses, B = business, C = compensation
Who enforces the Uniform Securities Act?
The Administrator
True or False: States may make rules that are more restrictive than SEC (federal) rules.
False. NSMIA prohibits states from making laws that are more restrictive than existing federal requirements.
According to the USA, who is included under the term person?
Any legal entity, including individuals (clients/agents/IARs), BDs, IAs, issuers, corporations, and partnerships
Identify the acronym: NASAA
North American Securities Administrators Association
What rules govern the registration of an issue in any state in which it will be offered?
Blue-Sky Laws
