Ch. 2 Flashcards
Is a futures contract considered a security?
No, but an option on a futures contract is a security.
State registration remains in effect for ______ year(s)
One
According to NSMIA, when is an investment pool considered a federal covered security?
When it registers as an investment company under the Investment Company Act of 1940
T/F: IRAs and Keogh plans are considered securities.
F; the participation in these plans (what goes in the plan) is considered a security, but the plan itself is not.
T/F: Agents selling unregistered, non exempt securities to banks and trust companies are violating the USA.
F; transactions with banks and trust companies are considered exempt transactions
Is an endowment life insurance policy a security?
No
Is a Keogh plan considered a security?
No, but Keogh plan participation is considered a security
Do the anti fraud provisions of the USA apply to exempt securities?
Yes, nothing is exempt from fraud
Are securities issued by a software company exempt from state registration?
No
Under the USA, is stock issued by an electric company an exempt security or an exempt transaction?
Securities issued by public utilities are considered exempt securities
T/F: A trade of unregistered, non exempt securities between two BDs is a violation of the USA.
F; this is an exempt transaction
NSMIA indicates that securities listed on the NYSE and Nasdaq are _______ _______ securities.
Federal covered
Are bonds issued by the City of New York exempt from state registration?
Yes
T/F: Two friends, anticipating a rise in value, purchase property. The property is considered a security.
F
What is the minimum cooling off period for registration by notification?
Five days
To use Filing (Notification) to register stock, the offering price must be at least $_____ per share.
$5
Is a limited partnership a security?
Yes
T/F: Securities issued by municipalities of Mexico are exempt under the USA.
T; An exemption applies to securities issued by foreign governments with while the US has diplomatic relations.
Transactions between the issuer and its underwriter are considered _______ transactions.
Exempt
Is a whiskey warehouse receipt considered a security?
Yes
For certain federal covered securities, may an Administrator require the issuer to complete the notice filing?
Yes. Notice filing is the process by which information filed with the SEC is also filed/shared with the Administrator
Is a pre organization certificate a security?
Yes
T/F: Paperwork related to coordination is filed with the Administrator at the same time as the SEC filing.
F; registration will become effective simultaneously with SEC registration, but need not be filed at the same time
Non issuer trading of securities subject to reporting requirements of the Act of 1934 are __________ transactions.
Exempt
Are securities that are traded on the Toronto Stock Exchange subject to state registration requirements?
No. These secondary market transactions are considered exempt from registration according to the USA
An executor of an estate sells a block of securities that are not registered. Is this a violation?
No. This is an example of an exempt transaction.
If an Administrator was aware of facts before a registration became effective, a stop order may be issued if done within ___ days.
30
Regarding federal covered securities, may an Administrator cancel a registration?
No
A car dealer gives 100 shares of stock to all new car buyers. Is this considered a sale of securities?
Yes. Since the gift is contingent on a purchase being made, it is considered a sale of the security
List the securities that are exempt from registration.
Government/municipal bonds, commercial paper, BA, bank issues, non profit and small business issues
As it applies to persons and securities, what does the term “exemption” mean in the USA?
Exemption signifies that a person or security is not subject to registration under the USA.
Give one examples of insurance company offerings that are exempt from the anti fraud provisions of the USA.
Life insurance policies and fixed annuities are exempt from the provisions since they are not securities
Is a debenture considered a security?
Yes. A debenture is an unsecured corporate bond.
List some of the different types of institutional clients.
IAs, BDs, investment, insurance, or trust companies, banks, savings and loan associations and pension plans
T/F: Soliciting orders for unregistered, non exempt securities is prohibited.
T
T/F: According to the USA, debt issued by a fraternal organization would not be considered exempt.
F; securities issued by non profit organizations are exempt from state registration
T/F: Under the USA, municipal bonds are federal covered securities.
F; municipal bonds are exempt securities. Federal covered securities include listed stocks and mutual fund shares.
Is an unsolicited, non issuer transaction in an OTC stock exempt from state registration?
Yes, because it is unsolicited.
Is a multi level distributor ship considered a security?
Yes
T/F: Charitable organizations may issue securities.
T; the securities issued by charitable organizations are exempt from registration
What type(s) of transaction(s) are exempt from the anti fraud provisions of the USA?
None
Is a 401k plan considered a security?
No
What four elements are required for an investment contract to be considered a security?
- An investment of money
- A common enterprise
- Efforts made by a third party
- An expectation or profits
What does the USA consider a security issued by an investment company that is registered under the Investment Company Act of 1940?
The securities are considered federal covered
Describe what it means for a security to be registered.
The security may be legally offered or sold in the state
T/F: A transaction by an executor is exempt.
T; any transaction by an executor, administrator, trustee in bankruptcy, or conservator is considered exempt
T/F: Precious metals are not considered securities.
T
T/F: Securities issued by municipalities of Canada are exempt under the USA.
T
___________ issued by insurance companies are exempt from state registration.
Bonds
Is a universals life insurance policy considered a security?
No
Who must prove that an exemption exists?
The party claiming the exemption
T/F: Securities that are issued by registered investment companies are considered federal covered securities.
T
Is Keogh plan participation considered a security?
Yes, but the Keogh plan itself is not a security.
Are securities that are traded on the Pink Market exempt?
No
Is a voting trust certificate a security?
Yes
Is an option on a commodity futures contract a security?
Yes. Options are securities, but futures contracts alone are not. Options may be tied to an equity, index, or currency
Name some of the federal covered securities.
Securities listed on an exchange, issued by an investment company, and sold as a private placement (Reg. D Rule 506)
Regarding federal covered securities, may and Administrator prohibit the sale of the security in his state?
No
The solicitation of buyers for unregistered, non exempt securities is __________.
Prohibited
Which Act regulated UITs?
The Investment Company Act of 1940
What criteria must be met for commercial paper to be exempt from registration?
A 270 day maximum life, minimum denomination of $50,000, rated in one of the top three categories according to NRSRO
T/F: Options on commodities are securities
T; options are always considered securities
Registration by Coordination has a minimum cooling off period of ______ days.
10
Accepting orders for unregistered, non exempt securities is allows if clients attest that the trade was ___________.
Unsolicited
T/F: Securities that are listed on the NYSE are exempt from state registration.
T
In order to qualify for an exemption, who bears the burden of proof?
The person claiming the exemption
Registration by Coordination regulates issuers to meet requirements of the ISA as well as what other Act?
The Securities Act of 1933
T/F: An Administrator may not require a sales report from the issuer of an OTC security.
F
What’s an issuer transaction?
A transaction in which the issuer received the proceeds
T/F: Occasional, secondary market transactions in OTC stocks are considered exempt transactions.
F; only non recurring secondary market transactions are considered exempt transactions.
T/F: Variable annuities are not securities and are, therefore, not subject to registration.
F; any variable producers are considered securities. However, fixed insurance products are not securities
Is a variable life insurance policy a security?
Yes, but a term or universal life insurance policy is not considered a security
T/F: Securities issued by the states and municipalities of Mexico are exempt from registration under the USA.
T; an exemption is provided to securities issued by foreign governments with whom the US has diplomatic relations
T/F: An ADR is a security.
T
Is a warrant a security?
Yes. Warrants are financial instruments that allow investors to acquire stock at a preset price.
What form of state registration is not available in all states?
Notification (filing)
T/F: A state may require a registration fee from the issuer of a Nasdaq security.
F; Nasdaq securities are federal covered securities
What instruments are used to facilitate trading of foreign securities in the US?
ADRs
T/F: The sale of securities to a pension plan is considered an exempt transaction under the USA.
T
Which method of state securities registration would likely be used for an IPO being offered in several states?
Coordination
T/F: A state Administrator may require notice filing by an issuer of an NYSE security.
F; Notice filing is required for mutual funds and Reg D offerings, but not exchange listed securities
How would a well established corporation register a subsequent offering to be sold in multiple states?
Notification (filing)
Though some securities are exempt from registration, nothing is exempt from the _______ provisions of the Act.
Anti fraud
Is a fixed annuity a security?
No, but variable contracts are considered securities
An intrastate offering may use which method of state securities registration?
Qualification
Under the USA, private placements are exempt if securities are offered to _____ or fewer retail clients over ____ months.
10; 12 months
T/F: Bonds issued by a railroad are exempt from state registration.
T; securities issued by a railroad, common carrier, or public utility are exempt at the state level
What method of state securities registration requires issuers to wait to hear from the Administrator before selling?
Qualification
T/F: Securities of a Canadian company, but listed on the NYSE, are exempt from state registration.
T
Is an isolated, non recurring, non issuer transaction in OTC stock subject to registration?
No it is considered an exempt transaction.
Lost some securities that are considered federal covered and exempt from registration.
Those listed on national exchanges and investment company securities
Registration by Filing (Notification) requires issuers to be in business at least ______ months preceding registration.
36 months
Is treasury stock considered a security?
Yes. Treasury stock is stock that was issued and subsequently repurchased by the company.
T/F: Securities issued by the US Treasury and US Agencies are deemed exempt securities under the USA.
T
If an IPO is being registered, an issuer is most likely using what form of state registration?
Coordination
Define an investment contract (according to the Howey Test)
An investment of money, in a common enterprise, with expectation of profit due to efforts of a third party management
T/F: A certificate of interest in a mining title is a security under the USA.
T; certificates of interest in mining or drilling titles are securities under the USA
Is an investment interest in livestock considered a security?
Yes
T/F: An issuer whose securities trade on the NYSE must pay a registration fee to a state Administrator.
F
If a Nasdaq stock trades in the secondary market, does the USA consider it an exempt security or exempt transaction?
Exempt security
T/F: Securities issued by provinces and municipalities of Canada are subject to state registration.
F; securities issued by Canadian provinces or municipalities are exempt from registration.
T/F: Under the USA, debentures issued by a Canadian bank are exempt from registration.
F
Is a preemptive right considered a security?
Yes
The USA considered pre-organization certificates, prime bank notes, and voting trust certificates to be _______.
Securities
Under the USA, is a federal covered security trading in the secondary market an exempt security or an exempt transaction?
Exempt security
May a state prevent the sale of a federal covered security in its state?
No. Federal covered securities are not regulated by the state.
T/F: Federal covered securities issuers may be required to pay a filing fee to an Administrator.
T; certain types of federal covered securities issuers may be required to pay a filing fee
Is an interest in oil and gas drilling program considered a security?
Yes
An ___________ policy is a type of life insurance that pays face value at the end of a period.
Endowment
T/F: BAs rated AAA, maturing in 6 months, and issued in $25,000 denominations are exempt.
F; because the BAs were not issued in at least denominations of $50,000, registration is required
Registration by Filing (Notification) requires that the underwriting commission be no more than ____%
10
Is a private placement considered an exempt transaction or an exempt security under the USA?
Exempt transaction
Is an IRA account considered a security?
No
Is a certificate of interest in a mining lease a security?
Yes
Are bonds issued by a charitable organization subject to state registration?
No. Securities issued by non profit organizations are exempt from registration
Securities issued by any government with whom the US has _______ relations are exempt from state registration.
Diplomatic
The only form of state registration that has its effective date set by the Administrator is ____________.
Qualification
Identify the three forms of state securities registration.
Notification (Filing), coordination, qualification.
Is an interest in a real wastage condo development considered a security?
Yes
T/F: Exchange listed futures contracts are securities.
F; futures and forward contracts are not securities
