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Series 63 > Chapter 1 - Regulation of Persons > Flashcards

Chapter 1 - Regulation of Persons Flashcards

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Series 63 flashcards
1
Q

What is the Template of Rules for State Securities

A

Uniform Securities Act (USA)

the USA is not state legislation, it is a template

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2
Q

What are the 4 classes of securities professionals?

A

Broker Dealers
Agents
Investment Advisors
Investment Advisor Representatives

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3
Q

What year was the USA established?

A

1956

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4
Q

What is the role of the Administrator?

A

It is the most powerful person in the State regarding securities business.
Has the power to:
- make rules and issue orders
- Deny, suspend or revoke registrations

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5
Q

Cease and Desist Orders apply to who/what?

A

Only apply to registered individuals

can be issued with or without a prior hearing against the person

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6
Q

Stop Orders are applied to who/what?

A

Stop Orders only applies to securities, not professionals such as broker-dealers.

Used to Deny Effectiveness or Stop Effectiveness

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7
Q

Where ‘Persons’ can mean many things, what are the 3 Non-Persons?

A

Minors
Deceased
Individuals legally declared mentally incompetent

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8
Q

What is the primary function of a Broker-Dealer?

A

To make securities Transactions

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9
Q

How is the term Agent Used?

A

Agent means any individual who represents a broker-dealer or issuer in effecting sales of securities.

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10
Q

Can Investment Advisers register with both the SEC and the STATE?

A

NO - Investment Advisors can only register with either State or SEC

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11
Q

What is a Non-Issuer

A

it means not directly or indirectly for the benefit of the issuer. Nonissuer transaction is one where the issuer does not receive the money because the seller of the security is someone other than the issuer (every day transactions)

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12
Q

What is the purpose of the NSMIA

National Securities Market Improvement Act

A

to eliminate the dual system of state and federal registration of certain securities and investment advisers.

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13
Q

What 3 entities are not included in the definition of a broker dealer?

A

Banks, Savings & Loan Companies, Trust companies.

as well as issuers and agents

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14
Q

A broker dealer with no place of business in the state - are they included or excluded from the definition of a Broker Dealer?

A

The USA excludes Broker Dealers with no place of business in the state from the definition.

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15
Q

Where an existing client legally changes residence from one state to another - how many days does the BD have to continue dealing with them?

A

30 Days

It is only when official residency is changed (Drivers License or Voter Registration Card)

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16
Q

Under USA - are you a broker-dealer if:

- you have even one client in the state?

A

YES
it is an either or
- you have a place of business in the state (or)
- you have even one retail client in the state

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17
Q

Under USA - are you a broker-dealer if:

- you have a place of business in the state

A

YES
it is an either or
- you have a place of business in the state (or)
- you have even one retail client in the state

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18
Q

What is the Consent of Service of Process?

A

New applicants for registration provide this to the Administrator. it appoints the Adm as the applicant’s attorney to receive and process noncriminal securities-related complaints against the applicant.

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19
Q

Where a BD has met SEC’s net capital or bonding requirements, can the BD be required to meet higher limits by any one state?

A

NO - under The ACt of 1934 - a BD cannot be asked to meet any limits higher than those of the SEC.

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20
Q

When does the license for a BD, Agent, IA, IAR become effective?

A

at Noon - 30 Days after the later:

a) the date an application for licensing is filed and is complete… or
b) the date an amendment to an application is filed and is complete.

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21
Q

who can approve a Rush order for Licensing?

A

Only the Administrator.

22
Q

How long does the withdrawal of registration take?

A

30 Days - but the administrator can speed this up.

23
Q

While a registration is pending - can an Agent or IAR conduct clerical work or assit with research?

A

YES -

They cannot conduct or take part in any activity that would require registration.

24
Q

Statutory disqualifications from registration include all Felonies for how many years?

A

10 years

felonies or securities related misdemeanor convictions

25
Q

When completing Agents registration, does the U4 need to report misdemeanor convictions?

A

Only securities related misdemeanor convictions need to be reported and are statutory disqualifications

form mc-400 is used to apply to FINRA for exemption.

26
Q

For individual registration, what is the timeline for disclosure of Residency and Employment?

A

5 year Residency

10 years of Employment

27
Q

What are 3 requirements of an Agency Cross Transaction for an Investment Advisor Representative

A
  1. An advisory client must provide prior written consent for an adviser to be able to do agency cross transactions as part of his operating plan.
  2. An adviser must make written disclosure to the advisory client that it will act as broker-dealer for, have a potential conflict of interest with, and may collect commissions from both parties.
  3. The adviser may not recommend the transaction to both parties.
28
Q

Under what circumstances does an Administrator have jurisdiction over a news paper publishing an offer to sell securities?

A

Only if the newspaper is published in the administrators stated

Except where the newspaper has 2/3 of its publication /circulation outside of the state then it does not.

29
Q

Is a Partner in a Broker Dealer required to register as an Agent?

A

No - a partner of a broker-dealer with no securities sales functions needs not register as an agent.

An employee of a BD who accepts unsolicited or solicited orders would be required to register as Agent.

30
Q

When must a Margin Account agreement be received ?

A

Margin account agreements must be received ‘Promptly AFTER the initial margin trade in the account.

31
Q

When must the Option account agreement be received after the customer account has been approveD?

A

Options account agreement must be received within 15 days after the customer’s account has been approved.

32
Q

Are commodity future contracts considered a security under the USA?

A

No they are Not considered a Security

USA excludes: whole insurance policies, commodity futures contracts and collectibles.

33
Q

What are the statue of limitations for civil liability?

A

Earlier of 3 years ‘after the date of the sale’ or

2 years after discovery of the violation.

34
Q

An agent in Illinois, Missouri, and Iowa has a client move from Chicago to Detroit on July 1, 2015. On September 1 of that year, he buys 100 shares of a nonexempt security in a nonexempt transaction. On August 1, 2017, the client discovered that the agent’s firm never licensed him in Michigan and therefore, he is subject to civil liability to the purchaser. The statute of limitations for this sale runs out

A

earlier of 3 years from date of sale or
2 years from Discovery

Sep -2018 - 3 years from sale (this one)
Aug -2019 - 2 years from discovery

35
Q

What is the maximum fine for a violation of the USA? and maximum prison term?

A

$5000

3 year maximum prison term

36
Q

What is the frequency with which an Advisor must re-verify all the KYC information

A

Every 36 months / 3 years

37
Q

Media that can only be changed by the Originator would be considered what kind of Media?

A

Static

38
Q

Does Static Retail Communication require pre or post approval?

A

Pre-Approval

Blog Posts, Websites,

39
Q

Are Testimonials permitted for Investment Advisers or Investment Advisor Representatives?

A

NO - only permitted for Broker Dealers

You’re not even allowed to have a ‘Like’ on an IA facebook page.

40
Q

What are 3 pieces of PII? As far as Reg S-P goes?

A

Personal Identifiable Information

Name and Address
Age (not date of birth)
Telephone Number

41
Q

How does SPII differ from PII?

A

Sensitive PII which could lead to the compromization of an individuals Identity. Higher Risk and Stricter Guidelines in handling.

Drivers License
Social Security Number
Bank Accounts

42
Q

When does an Investment Advisory Firm need to file their annual update ADV?

A

Update Form ADV within 90 days of Fiscal year end.

AUM is what is being disclosed - under 110m must register with SEC

100-110 - can register either SEC or States

43
Q

AT what point must an IA deregister with the SEC and move to the State Level Registration

A

90million - you must move to State Registration.

44
Q

To be exempt from Investment Advisor state registration, what is the maximum number of clients to meet the Safe Harbor rule?

A

5 clients in a 12 month period

A person with no place of business in the state and only gives advice to:
- other IA, Broker Dealers, Banks/Insurance/Invest. Companies
Max 5pp in 12 months, need to register in the state.

45
Q

Are Fingerprints required to be submitted at the state level registration?

A

NO

Unlike FINRA registration requirements - fingerprints do not have to be submitted at the state level.

46
Q

For Civil Liability Claims what are

  • statue of limitations
  • max $ Fine
  • time in prison
A

5-5-3

5 years statue limitations
$5000 max fine
3 years in prison

47
Q

What are the delivery requirements for an Investment Adviser Brochure to a prospect/client?

A

Must be delivered to a prospect

  • not less than 48hrs prior to entering into an advisory contract with such client or prospective client ‘Or’
  • at the time of entering inot any such contract, if the advisory client has a right to terminate the contract without penalty within 5 business days after entering into the contract.
48
Q

If securities are discovered missing as a result of a securities count, a report must be made to the Securities Information Center

A

within 10 business days of the count, if not resolved

When securities are discovered missing after a broker/dealer conducts a physical securities count (required quarterly), the broker has 10 business days in which to resolve the difference before reporting it.

49
Q

What is the Minim Balance to Open a Margin Account and or a Day Trader Account

A

The minimum required to open an account for a regular margin customer is $2,000, compared to $25,000 for a pattern day trader. The maintenance percentage is the same (25%) for both.

50
Q

A person who owns 4% of the equity in a failed firm, would his accounts be covered by SIPC?

A

YES - 5% is the cut off for ownership.

  • Officers or Partners are not covered
  • Other members with Prop Accounts are not covered.

Series 63 (1 decks)

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