Chapter 16 - Rules and Regulations Flashcards
Explain the Securities Act of 1933.
Issuers file registration with the SEC, prospectuses must be provided to public that wishes to purchase, and no fraudulent activity in regards to underwriting and issuing securities.
Explain the Securities Act of 1934.
Created the SEC, registration of all persons and firms that trade OTC/Exchanges for the public, regulation of exchanges/OTC, regulation of trading, insider transactions, client accounts, customer protection…
What are three keywords to associate the Act of 1934 with?
Secondary market, outstanding securities, and trading activities.
Explain the Trust Indenture Act of 1939. What is the definition for a trust indenture?
The act applies to corporate bonds that have an issue size of more than $5 million within 12 months, a maturity of 9 months or more. Protects bondholders and appoints a trustee on their behalf. The trust indenture is a series of promises between issuer and trustee FBO bondholders.
Explain the Investment Company Act of 1940.
Defines and regulates investment companies, mutual funds. They must register with the SEC, clearly state investment objectives, networth of $100k, owned by at least 100 shareholders, comply with standards on pricing, sale and reporting.
What is the SIPC?
The securities investor protection corporation, an independent government sponsored corporation that collects annual assessments from B/D, which create a general insurance fund for customer claims.
Is SIPC coverage per customer or per account?
Per customer, they are entitled to $500k of coverage on all accounts combined.
A client not covered by SIPC in a B/D bankruptcy becomes what?
A general creditor
A client has a special cash account with stock at $460k and cash at $40k. The same client has a joint account with a spouse that has stock at $320k and $180k in cash. SIPC is how much?
$500k for the special cash account, and $420k for the joint account. Remember up to $500k per customer but limited to $100k of straight cash.
If a B/D becomes insolvent, SIPC would use which day to value the securities in an account?
The day that the federal court petitioned to appoint a trustee.
Which act requires corporations to issue annual reports?
Securities exchange Act of 1934
What are three ways a state can register a security?
Coordination, Filing, and Qualification
Sometimes there are exempt employees from the fingerprinting process, who are they?
Usually clerical workers that do not trade or have access or handle cash or securities and do not supervise employees in those positions.
What rules are in the NASD manual? Describe them.
Conduct Rules - fair practices to the public, UPC - uniform trade practices, Code of Procedure - how member violations are handled, Code of Arbitration - resolution of disagreements between members.
