Chapter 3 Part 1 Flashcards
Broker-dealers, agents as well as investment advisers, and investment adviser representatives begin their registration process by filing an application. The initial application includes the following information.
• Applicant’s name and address • Type of business to be conducted • Qualifications and business history of any partner, officer, director, and any other person in a controlling position • Applicant’s financial condition and history • Any injunction, administrative order, felony conviction, or conviction of a securities-related misdemeanor • Details regarding unsatisfied judgments or liens against the registrant • Whether a bonding company has ever denied, paid out on, or revoked a bond for the registrant
If material information provided to the Administrator becomes inaccurate or outdated, an amendment must be filed
promptly (generally within 30 days).
For purposes of announcing a person’s interest in obtaining registration, the Administrator may require a registrant to
publish an announcement of the application in one or more newspapers published in the state in which he is registering.
Consent to Service of Process
Form U2
Consent to Service of Process (Form U2) is a document that
irrevocably appoints the designated officer of each state (the Administrator for purposes of the exam) as the registrant’s attorney for the service of legal notices. Any notice is considered valid and has the same legal force as if served on the registrant personally.
Filing the consent is a convenience for
customers with complaints they wish to pursue in court. Customers may serve notice directly on the Administrator, rather than the registrant. The registrant only needs to file this document once as a part of its initial registration package. The consent becomes a permanent document in the registrant’s file and is not required to be resubmitted upon renewal of registration.
A filingfee must be paid at the time of
initial registration and annually upon renewal
If an application is denied or withdrawn, the Administrator may retain
all, or part, of the fee.
If two or more firms combine to become one firm, the new firm, known as the successor firm, can
fill the unexpired portion of the registration term by filing an application. However, the successor firm is not required to pay a new fee.
The Administrator reserves the right to require applicants to take an
examination, which may be writtcn, oral, or both. However, the Administrator may excuse certain categories of persons from taking an exam.
Simply passing an examination is not sufficient for registration. Applicants must still
register with the state Administrator and are not allowed to engage in business in a state until their registration is considered effective by the Administrator.
A surety bond is
insurance issued by a bonding company that agrees to pay the sum of money awarded by a court up to a certain amount, as a result ofa registrant’s violations of the Uniform Securities Act (USA).
The bond requirement applies to
registered broker-dealers, agents, and investment advisers that have custody of, or discretionary authority over, client funds or securities. The bond must be maintained for as long as the registrant is in business and for three years thereafter.
Bonds will not be required of
broker-dealers whose net capital exceeds specified minimum amounts as set by the SEC, or of investment advisers whose net worth exceeds a specified minimum amount set by the Administrator. (The Administrator may not set an amount that exceeds the federal requirement.) Unlike agents, investment adviser representatives are not required to post bonds.
In lieu of posting a bond, registrants may deposit
cash or securities. If securities are to be deposited, the Administrator must determine the appropriate type and amount.
