Chapter 6.6

Question 1

State registration of member firms. States require registration or filing of:

Answer 1

• Resident and non-resident B/D’s doing business in that state
• Resident and non-resident salesmen doing business in that state

Question 2

What are state securities laws referred to as?

Answer 2

“Blue Sky Laws”. These laws attempt to protect the public against fraudulent transactions within a state.

Question 3

Methods that securities can be registered in a state

Answer 3

• Qualification
• Notification
• Coordination

**States do not provide for “indemnification”

Question 4

“Blue skying” the issue

Answer 4

The practice of analysis, investigation, and qualifying a new issue of securities with various state laws.

Question 5

When can a RR execute an order for a customer of a particular state in a security not registered in that state?

Answer 5

If the security is exempt from registration in that state. A state will generally exempt a security from registration if it is listed on a national securities exchange in the United States.

Question 6

Definition of Agents under the USA

Answer 6

• Individuals who act as finders for issuers and underwriters
• Individuals who effect buys and sells of securities for B/D’s
• Individuals who act as a broker in U.S. Government securities.

Question 7

Definition of Security under the USA

Answer 7

• A voting trust certificate
• Investment contracts
• Certificate of interest in a profit-sharing agreement

**Fixed annuity contracts are not defined as a security under the USA.

Question 8

S corporation

Answer 8

Treated like a partnership in that profits and losses are passed through proportionately to the shareholders and are taxed to the shareholders. The S corporation itself does not pay any income tax. The limit is 100 shareholders.

• Partnerships cannot be shareholders
• A husband and wife are treated as a single shareholder

Question 9

C corporation

Answer 9

A business structure that provides limited liability for the owners of the corporation. C corporations pay federal and state income taxes on earnings. When the earnings are distributed to the shareholders as dividends, this income is subject to another round of taxation.

**Subject to double taxation.