Chapter 11 - Federal Securities Acts

Question 1

All the securities regulations are aimed at 4 things

Answer 1

• all securities are properly registered
• investors have all the information they need to make a decision
• investment professionals and BDs must be properly authorized before working
• outline key ethical standards and practices

Question 2

The Securities Act of 1933

Answer 2

• registration of securities and disclosures

- all issuing rules covered in the 79 (cooling off period, prospectuses, etc)

Question 3

Exemptions to registration under the Act of 1933

Answer 3

• same as 79 list

- gov’t securities, munis, bank securities, nonprofit, Reg A, Reg D, and Rule 147 Intrastate offerings

Question 4

Securities Exchange Act of 1934 (The People Act)

Answer 4

• regulates those who sell securities to the public
• contains trading laws (including insider trading)
• Gives Federal Reserve Board the power to regulate margin requirements
• Created the SEC
• It allows securities exchanges to regulate themselves
• It allows BDs to regulate themselves

Question 5

The Maloney Act of 1938 was an amendment to the Act of 1934, stating that

Answer 5

the OTC would be regulated by a national securities association (FINRA)

Question 6

Trust Indenture Act of 1939

Answer 6

Applies to bond issues of more than $5m maturing in over 270 days

Question 7

Investment Company Act of 1940

Answer 7

• regulates investment companies and their securities
• Covers mutual funds, UITs, and face value certificates
• requires them to register with the SEC
• must prepare a prospectus stating company’s investment objectives and financial condition
• submit annual and semi-annual reports to the SEC
• obey all rules applicable to their fund type

Question 8

An investment company must be _______ and at least ____ of its board must not be interested persons in the investment company

Answer 8

a domestic corporation and at least 40% must not be interested person

Question 9

Investment Advisers Act of 1940

Answer 9

• requires registration of people and companies giving investment advice to the public for a fee

Question 10

To fall under Advisers Act of 1940, must answer yes to the following three questions

Answer 10

1) do they provide investment advice? First and foremost is it advice on purchases, sales or mgmt of securities?
2) are they actually in the business of providing advice?
3) are they compensated for giving advice?

Question 11

Specifically exempt under the Advisers Act of 1940 are

Answer 11

• BDs whose advise is incidental and are paid no additional comp for their advice
• Banks
• Advisers dealing only in gov’t securities
• Publishers of general investment newsletters and books

Question 12

Advisers with ____ or more in AUM must register on a _____ level

Answer 12

$110m in AUM must register on a federal

Question 13

Advisers with less than ______ in AUM must register on the _____ level

Answer 13

$100m or less must register on the state level

Question 14

For advisers with between ____ and ____ in AUM, can choose whether to register on the ____ or ____ level

Answer 14

between $100 and $100m in AUM can choose between state and federal level