Chapter 6-10 flashcards
Under the Uniform Securities Act, all of the following are exempt transactions except
a sale of a primary offering registered with the SEC. In almost every instance, an issuer transaction—that is, one for the benefit of the issuer—will not be considered an exempt transaction.
Exempt transactions include isolated nonissuer transactions; transactions between an issuer and an underwriter; transactions by an executor, Administrator, sheriff, marshal, trustee in bankruptcy, guardian, or conservator; any sale or offer to a bank, savings institution, investment company, or other financial institution; and private placements.
Long-Term Financial Solutions, Inc., (LTFSI) an investment adviser registered in five states, files Form ADV-W indicating the business is closing. It is being acquired by another federal covered adviser, Gold and Sylver Advisers, LLC. Which of the following statements is correct?
When an investment adviser ceases to exist, either through going out of business or being succeeded by another firm (as is the case here), it is their responsibility to ensure that articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor be preserved until at least three years after termination of the enterprise. Although it is true the contracts have been assigned to the successor firm (Gold and Sylver), the consent for that had to be obtained by LTFSI. A change of this nature requires prompt amendment to Form ADV Part 1.
Under SEC Release IA-1092, who of the following would be considered to be in the business of rendering investment advice?
A financial planner who takes commissions from a broker-dealer on recommended trades is considered to be compensated for giving advice and is therefore in the business of rendering investment advice. Agents and broker-dealers who do not charge separately for advice are excluded from the definition of investment adviser. Lawyers, accountants, teachers, and engineers are not considered to be in the business of rendering investment advice, as long as any advice given is incidental to the practice of the profession.
Net worth is
Owners equity
An investment adviser (IA) has its primary office in State A. It has branches in States B and C, and it advertises in States D, E, and F. What net capital requirements must it meet
Where its principal office is located
What is a covered security
Covered Securities generally means stocks, bonds and options, including warrants and rights.
Stocks are considered noncovered if sold by foreign intermediaries and foreigners (i.e., individuals absent from the country for at least 183 days of the calendar year).
Investment sales are also divided into covered and noncovered securities using Form 8949.
Transactions between issuers and broker-dealers
Transactions between issuers and broker-dealers (but not investment advisers) are exempt transactions.
As long as the sale is to the public, regardless of commissions charged (or not charged), the transaction is nonexempt.
Form 8-k
Form 8-K is known as a “current report” and it is the report that companies must file with the SEC to announce major events that shareholders should know about.
These include: a change in the external CPA firm engaged to perform the annual audit, a change in top management, acquisition of a major asset.
The SEC does not consider relocation of a subsidiary to be of significant magnitude.
Which of the following terms pertains to registration with the Administrator of a mutual fund, closed-end investment company, or unit investment trust that is registered under the Securities Act of 1933 and also registered as an investment company under the Investment Company Act of 1940?
Notice filing
Examples of exempt transaction(s)
The term” exempt transaction” includes sales by fiduciaries, private placements and isolated nonissuer transactions. Any solicited sale to an individual client, even of a properly registered security, is not an exempt transaction.
The final responsibility for ensuring that investment adviser representatives are adequately supervised is that of
It is the CCO who has the ultimate responsibility for ensuring that the firm has, and properly implements, adequate supervisory procedures. The immediate supervisor has the “first-line” responsibility, but the “buck stops” with the CCO.
Cash flow from operations
Cash flow from operations is computed by adding the year’s depreciation deduction to the net income.
A consent to service of process required by an Administrator is
an agreement whereby a registrant will be bound by any legal action or subpoena served on the Administrator as if it had been served on the registrant.
An exemption from state registration is granted under the specific authority of the Uniform Securities Act to securities issued by which of the following entities?
State of Georgia
City of London, Ontario
City of London, England
Kapco Income Fund, an open-end investment company registered with the SEC
Any state, Canadian province, or political subdivision thereof is considered an issuer of exempt securities. The exemption also applies to securities issued by foreign governments with whom the United States has diplomatic relations—but not their political subdivisions, such as the City of London, England. Although securities issued by investment companies registered with the SEC are exempt from state registration, the authority for that exemption is found in the NSMIA of 1996 (federal covered securities) rather than the Uniform Securities Act.
Preorganization certificates are limited
to a maximum of 10 subscribers, whether individuals or institutions.
Fiduciary transactions and unsolicited orders
regardless of the security being purchased or sold, are always exempt transactions under the USA.