Ch 3 State Regulations Governing Broker-Dealers and Agents Flashcards
The USA refers to an individual who represents a BD in the sale of securities as an ________.
agent.
A client of a Canadian BD is visiting the U.S. May the agent do business with her without registering in the state?
Yes. Since she is an existing client of the Canadian BD, business may continue in the state.
Is there a limit to the amount of net capital the Administrator may require of a BD?
Yes. The Administrator may not set a requirement that exceeds the federal (SEC) requirement.
True or False: BDs must file retail communication with the Administrator.
True
Is an individual who represents the issuer of a private placement considered an agent?
No, since the individual is involved in an exempt transaction.
Identify the acronym: CRD
Central Registration Depository
True or False: On Form U4, a person must disclose any aliases or previously used names.
True. An alias or previously used name could simply include a person’s maiden name.
A _________ bond is posted to cover the potential costs of legal action taken against certain persons.
surety bond
Is a firm considered a BD if it has no office in a state and only deals with institutional clients in the state?
No. The firm is excluded from the BD definition.
A BD must maintain its books and records for a minimum of ____ years.
3 years.
Is an individual who represents a BD in the sale of stock to a bank considered an agent?
Yes, since anyone representing a BD in the sale of securities is an agent.
If a BD is registered with the SEC, is registration required in any state in which it intends to do business?
Yes. There are no exemptions from registration in the state as a BD.
May an agent of a BD located in Mexico do business with a client in the U.S. without registering in the state?
No. BDs of Mexico are required to register in the U.S. to effect securities transactions in a state.
If a client moves to a new state, may the agent continue to do business while applying for registration in the state?
Yes, as long as the agent is registered in at least one other state and is not subject to disqualification.
If a firm meets the BD definition in the state, are there any exemptions from registration under the USA?
No. Firms that meet the BD definition are required to register in the state.
What is a consent to service of process?
A document that appoints the Administrator as attorney for any non-criminal legal complaints issued against a registrant
True or False: A partner, officer, or director of a BD is always considered an agent of the BD.
False. A partner, officer, or director is deemed an agent of a BD if she is involved in the purchase/sale of securities.
If a BD or an IA ceases operations, how long must it maintain a surety bond?
three years after the firm ceases operations.
True or False: In state law, individuals representing issuers in effecting securities trades are ALWAYS deemed agents.
False. Individuals are not deemed agents if representing issuers of exempt securities or effecting exempt transactions.
An _______of an ________ is an individual who represents an issuer in effecting transactions with the general public.
agent of an issuer
An individual who represents an issuer in selling registered, non-exempt securities for compensation is an ________.
agent.
True or False: An agent whose client moves to a new state may not contact the client until registered in the new state.
False. The agent may engage in transactions with the client for 60 days if registration is pending in the new state.
Is Jim an agent if he works in ABC’s retirement dept. and, once a year, places ABC stock in employees’ accounts?
No, Jim is representing the issuer in an exempt transaction.
True or False: A Consent to Service of Process must be filed by BDs, but not their agents.
False. A Consent to Service of Process is required of all registrants.
Under the USA, is a bank holding company that occasionally executes securities trades excluded from the BD definition?
No. Under the USA, bank holding companies are not excluded from the BD definition.
True or False: A Consent to Service of Process is an example of an exculpatory clause.
False. Exculpatory clauses are waivers absolving agents from wrongdoing. The waivers are null and void under the USA.
If the Administrator requires an IA, BD, or agent to post a bond, is a deposit of cash or securities acceptable?
Yes. However, the Administrator determines the amount and types of securities that are appropriate.
True or False: If a BD registers in a state on March 3, it must pay a registration fee for the full year.
True
With whom may an agent split commissions?
Another agent who is registered with the same BD, or another BD that is under common control
Is an individual who represents an issuer in the sale of registered stock considered an agent?
Yes. An individual who represents an issuer of securities being offered publicly must register as an agent.
BD records must be kept for at least _____ years.
three years.
Is a firm considered a BD if it has an office in a state, but only deals with institutional clients in the state?
Yes, because the firm established an office in the state.
If a registrant wishes to withdraw her registration, when does the withdrawal become effective?
If no action is pending, it is effective 30 days after filing the withdrawal request with the Administrator.
May an agent continue to do business in a state if his BD has gone out of business?
No. An agent’s registration is only in effect while associated with a BD or issuer.
True or False: Under the USA, a Canadian BD may solicit a Canadian client to open up an account while he is in the U.S.
False. Canadian BDs may service existing accounts of Canadians who are in the U.S., but cannot open new accounts.
If an agent has applied for registration, but has not yet heard back from the Administrator, what may she sell?
The agent is not permitted to sell securities. If she is properly licensed, she may sell life insurance or fixed annuities.
Is a sales assistant for a BD who accepts unsolicited orders from clients considered an agent?
Yes, since anyone representing a BD in the sale of securities is an agent.
Is an individual who represents the issuer in the sale of Treasury bonds considered an agent?
No, since the individual is involved in the sale of exempt securities.
When an agent ends her association with a BD, who must notify the Administrator?
Both the agent and the BD
Is an individual who represents a BD in the sale of a private placement considered an agent?
Yes, since anyone representing a BD in the sale of securities is an agent.
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?
No. Registration is not required since the client is an existing client who is temporarily in Florida.
If a BD is not registered in a state, may an agent of the BD do business in the state without being registered there?
Yes, if the agent is dealing with an existing client that is temporarily in the state.
Is an individual who represents an issuer in the sale of the issuer’s stock to its underwriter considered an agent?
No, since the individual is involved in an exempt transaction.
To apply for a securities license, a person must file Form ___ with FINRA.
U4
If a person works for a federally chartered bank, is he required to register with the SEC or a state Administrator?
No. Only non-clerical employees of broker-dealers and investment advisers are required to register.
May the Administrator set minimum net capital requirements for BDs?
Yes, but the requirement on BDs may not exceed the federal (SEC) requirement.
Who must sign a Consent to Service of Process?
Any issuer, BD, IA, IAR, or agent initially registering to engage in business within a state
If a firm wants to register as both a BD and an IA, with whom must it register?
With the Administrator in the state in which its office is located, FINRA, and with the SEC
Is an individual who represents an issuer in the sale of municipal bonds considered an agent?
No, since the individual is involved in the sale of exempt securities.
A BD that is located and licensed in Canada may contact what types of individuals in the U.S.?
Existing clients who are temporarily in the U.S.
Is a bank whose trust department occasionally executes securities transactions considered a BD?
No. Banks are excluded from the BD definition.
When does state registration become effective?
At noon on the 30th day after filing an application, provided there are no proceedings pending
Is an individual who represents a BD in the sale of a bank’s stock considered an agent?
Yes, since anyone representing a BD in the sale of securities is an agent.
True or False: An employee who is hired to assist in selling IPO shares is required to be registered.
True
What is the purpose of a Consent to Service of Process?
To appoint the Administrator as the applicant’s attorney to receive and process any non-criminal legal complaints
List some of the exclusions from the definition of a BD.
Agent, issuer, bank, or a BD with no office in the state that only deals with institutions or its existing clients
Is an individual who represents a BD in the sale of municipal bonds considered an agent?
Yes, since anyone representing a BD in the sale of securities is an agent.
True or False: The USA requires all employees of a BD to register.
False. Only those representing a BD in effecting transactions (as an agent) must register.
May an agent whose client is visiting another state sell securities to the client without being registered in the state?
Yes, provided the client is in the state temporarily.
Must the Consent to Service of Process be renewed each year?
No. It is only required at initial registration.
Is an individual who represents a bank in the sale of its bond offering considered an agent?
No, since the individual is representing the issuer in the sale of exempt securities.
True or False: An agent may sell fixed annuities if she is not yet registered with the Administrator.
True. Since fixed annuities are not securities, registration with the Administrator is not required.
Is an individual who represents a BD in the sale of Treasury bonds considered an agent?
Yes, since anyone representing a BD in the sale of securities is an agent.
True or False: An agent may sell limited partnerships if he is not yet registered with the Administrator.
False. Limited partnerships are securities and an individual must be properly registered to sell them.
Is there a registration exemption for agents who conduct business in a state? If so, what are the guidelines?
Yes, no place of business in state and a client visits the state or existing client moves to the state (regist. pending)
May the Administrator set net capital requirements for BDs?
Yes
State registration expires annually on ______________.
December 31.
Who must file Form U4 in order for an agent to register in a state?
Both the agent and the employing broker-dealer
Is a corporation considered a BD if it raises capital by selling new shares of its stock to the public?
No. The corporation is an issuer and issuers are excluded from the BD definition.
Is an individual who represents an issuer in the sale of stock to a bank considered an agent?
No, since the individual is involved in an exempt transaction.