Chapter 2 Flashcards
According NASAA, an I/A shouldn’t exercise discretionary power in placing an order for the purchase or sale of securities without obtaining what?
Written discretionary authority from the client within 10 business days after the first transaction.
According to NASAA, should an I/A place an order without the authority to do so if a client is unavailable to authorize it?
No.
According to NASAA, when can an I/A borrow money or securities from a client?
If the client is a B/D, affiliate of the I/A, or financial institution engaged in the business of loaning funds. Even if clients are close relatives, if they do not meet any of the 3 criteria listed, borrowing is not permitted.
According to NASAA, should an I/A loan money to a client if they are a relative?
No, unless the investment advisor is a financial institution engaged in the business of loaning funds or the client is an affiliate of the investment advisor.
According to NASAA, what would an I/A need to include on a memorandum to buy or sell orders of securities?
The name of the B/D who executed the order, the person who recommended the trade, and the person placing the order.
If an I/A fails to maintain net worth requirements, would the ever need to submit information regarding a custodian?
No.
According to NASAA, when can a B/D exercise discretionary power in effecting a transaction for a customer’s account?
Need to first obtain written discretionary authority from the customer, unless the discretionary power relates solely to the time and/or price for the executing orders. Written discretionary authorization is good until revoked in writing.
According to NASAA, when can a B/D execute a transaction in a margin account?
After securing a margin agreement at least promptly after the initial transaction in the account.
According to NASAA, when does a B/D need to furnish a customer purchasing securities in an offering with either a final prospectus or preliminary prospectus?
No later than the due date of confirmation of the transaction. This requirement doesn’t apply to secondary market trades.
According to NASAA, can a B/D make a bona fide offering of just part of the securities allotted to them for distribution?
No, it must be all of the securities allotted to them.
According to NASAA, when can an agent share, directly or indirectly, in profits and losses?
Only with written authorization of the customer and B/D which the agent represents.
How was NASAA created and what was is its role?
NASAA was created to protect investors and consists of the Administrators of the United States. The role of NASAA is to protect investors on multiple levels, including regulations geared toward investment advisors, B/D’s and the individuals who work for these organizations.
