Chapter two

Question 1

IAR registration

Answer 1

Only at the state level

Question 2

IA registration

Answer 2

either SEC or states where they have a place of biz or have six or more retail clients

Question 3

Five client exemption to register

Answer 3

Does NOT apply to BD or agents

Question 4

To work as IAR or IA:

Answer 4

1. Registered
2. Exempt from registration exempt b/c no place of biz in state AND only clients are institutional OR IA/IAR do biz with 5 or less retail clients (6 or more clients require registration)
3. Federally covered advisers

Question 5

When agent Begins/Terminates connection

Answer 5

Agent and BD must prompty notify adminstrator when agent terminated
IAR begin or termination, prompt notifican
if IA registered with state, IA responsbile for notifcaiton
Fed Cov advisor: IAR responsible
Termination of agent and IAR on U-5

Question 6

BD and agent to do biz

Answer 6

Both need to be registered in the state

Question 7

CAD BD and agents renewal time

Answer 7

December 1st, filed annual

Question 8

surety bonds

Answer 8

BD amount must not exceed fed law. Bond must be kept in force for as long as registrant is in biz and 3 years after
IAR no surety bonds
Formal proof of loss required to support

Question 9

Agents discretionary authority MAY

Answer 9

Surety bonds, qualifications exams

No minimum capital requirements

Question 10

Min capital requirements

Answer 10

Apply at firm level. BD and inv adivisory firms may need.
Agents and IAR would NOT have minimum capital requirements
Amount determined by administrator

Question 11

Examinations

Answer 11

Administrator can authorize

May be written, oral or both

Question 12

Initial Registration included in filing

Answer 12

Application for registration, registration fee, consent to service of process, bond or surety bond

Question 13

Does not have to be disclosed on application for registration

Answer 13

Salaries of officers, partners as well aneams and SSNs of all empolyes (fingerpitnts not automatically required)

Question 14

Reasons administrator may deny, suspend or revoke registration

Answer 14

In public interest and:

1. convicted within ten years of any misdemeanor involving securities
2. convicted any felony at any time,
3. willfully violated any security or commodity law within the last ten years
4. willfully violated foreign laws over 5 years
5. insolvent (applies to firm, NOT principal)
6. Failed to pay proper fees
7. Subject by order of administrator

Question 15

Registration requirement

Answer 15

Registered under act, security or transaction exempt, fed covered security

Question 16

3 Ways to satisfy state requirements

Answer 16

Notice Filing (Fed covered) , Coordination (new issues, state registration effective when fed effective, IPO new NASDAQ stock )or Qualification (only in the state of issuance, distribution of prospectus may be required by adminstiror, effective when administrator orders ie. small company making intrastate offering)  
Registration effective for a year

Question 17

Conditions for filing (notice filing)

Means satisfying state registration requirements

Answer 17

Engaged in biz in US at least 36 months
Class of securites held by >= 500 people
Must have net worth of $4M OR
Net worth $2M and net pretax income from operations for at least 2 of 3 proceeding fiscal years
Generally used federally covered employees, registration on file wit hSEC
Used for established companies

Question 18

Administrator stop order

Answer 18

According to the Uniform Securities Act, “No stop order may be entered … without:
1. Appropriate prior notice to the applicant or registrant, the issuer, and the person on whose behalf the securities are to be or have been offered,
2. Opportunity for a hearing, and
3. Written findings of fact and conclusions of law.
The Uniform Securities Act does NOT require the Administrator to provide appropriate prior notice to Federal Regulators and SROs such as FINRA.

Question 19

May not issue stop orders

Answer 19

Fact known to advminstrator, simply b/c company is new company and has no operating history

Question 20

Amendment after registration effective

Answer 20

Can change # of securities offered or sold, (price syndication cannot be changed)

Question 21

Timing of final prospectus

Answer 21

Not later than their purchase confirmation

Question 22

Pending underwriting

Answer 22

Agent cannot sell securities in this situation

Question 23

Exemption limitations (securities and transactions)

Answer 23

registration requirements and filing of advertising and sales literature (not anti fraud security. If security, subject to)

Question 24

Exempt securities from state registration requirements AND filing of advertising and sales literature

Answer 24

1. US Gov securities, (agencies too),
2. Muni securities,
3. Securities issued or guaranteed by CAD (CAD exchange and insurance NOT part of exclusion)
4. US banks/savings institutions or trust companies (NOT bank holding companies)
5. Securities issued by fed savings and loan association, 6. credit unions
6. Insurance companies (US only)
7. security listed on registered stock exchange (or secured bonds, preferred, etc)
8. , non profit issues
9. promissory note (paid within 9 months, does NOT have to to be issued by federally chartered bank)
10. Public utility and common carrier (railroad)
11. , investment contracts in connection with employee stock purchase option (savings, pension or profit sharing)

Question 25

Exempt transactions state registration requirements AND filing of advertising and sales literature

Answer 25

1. Isolated non issuer transaction (secondary market with no benefit to issuer 2. Non issuer by registered agents at registered BD if: not: organizational stage, in bankruptcy, blank check blind pool or shell company, Must be senior security 3. Non issuer transaction unsolicited orders 4. fiduciary transactions 5. Bona fide pledges, 6. underwriter transactions 7. Transactions with financial institutions 8. , private placements (not sold to more than 10 retail), 9. mortgage transactions issued at unit 10. , Preorganizational subscription transactions (certain requirements) 11. Rights warrants and convertible securities,

Question 26

Preorganization subscription transactions conditions to be exempt transaction from state registration and filing of advertising

Answer 26

1. Subscriber cannot exceed 10, 2. no commissions may be paid 3. Payments only made after security registered 4. advertising is acceptable

Question 27

Administrator ability to revoke exemptions

Answer 27

1. Exempt transactions 2. exempt listed securities 3, securities of non profit organization 4. investments contracts issued by employee benefit plan No denying or revoking an exemption retroactively

Question 28

Exempt securities and transactions (what exempt from)

Answer 28

Exempt from registration requirements and filing of advertising and sales literature but ALL securities subject to anti-fraud provisions

Question 29

BD renewal time for registration

Answer 29

Annually

Question 30

Agent begins or terminates relationship with BD

Answer 30

Whenever an agent begins or terminates a relationship with an issuer or broker/dealer, the Uniform Securities Act requires that the agent as well as the issuer or broker/dealer firm, promptly notify the Administrator. Notification should be filed by each entity (broker/dealer firm, issuer, and agent). If agent joins other BD, old and new BD must notify administrato

Question 31

Limitation on administrator power

Answer 31

An Administrator is not permitted to revoke a registration without providing appropriate prior notice, the opportunity for a hearing, and written findings, facts, and conclusions related to the alleged violation.

Question 32

Admin may ask issuer on prospectus

Answer 32

The administrator may require that an issuer deliver a prospectus with every offer, rather than the usual requirement of no later than the completion of the purchase. (prior to sale of security)

Question 33

Agent registration

Answer 33

Under the Uniform Securities Act, an Administrator may deny an Agent’s registration if the Administrator finds that it would be in the best interest of the public. An Agent’s registration must be renewed by December 31st each year.

Question 34

Amendments to registration statement

Answer 34

Amendments to a registration statement that is beyond its effective date are generally limited to modifications to the amount of securities that are to be sold/offered to the public. Generally-speaking, other amendments are not permitted, such as amendments to syndicate fees, discounts, organization, as well as changes to the actual pricing of the security to the public.

Question 35

Consent to service / automatic registration

Answer 35

The consent to service is a permanent document that remains on file with the Administrator; it need not be resubmitted for yearly renewal. The initial application for registration must include a consent to service of process along with a completed application and the appropriate fees. If the investment adviser is not an individual, all officers or partners of the business entity that play an active role in the giving or supervision of giving advice (IARs)are automatically registered as IARs.

Question 36

BD or IA firms registration

Answer 36

Must renew by Dec 31

Question 37

BD fee schedule

Answer 37

Disclosed time opening account

Question 38

When registration becomes effective

Answer 38

If no denials or stop orders are in effect and no proceedings are pending to do so, registration automatically takes effect at noon on the 30th day after the application was filed.

Question 39

BD/IA automatic registration

Answer 39

BD- Agent partner officer or director | IA: IAR whos is partner officer or directo

Question 40

Limitation of CAD BD and agnets

Answer 40

CAD work with snowbirds okay | CAD with in US with self directed tax advantaged retiremetn plan and keep in CAD okay

Question 41

Agent beings or terminates employment

Answer 41

Agent and BD must notify adminstrator promplty

Question 42

When IAR begins or terminates employement

Answer 42

if IA registerede iwht state, IA must promptly tell admin | for fed cover advisro: IAR responsbile

Question 43

How termination of agent and IAR reported

Answer 43

form U-5

Question 44

Registration may be canceled

Answer 44

1. Person no longer in existancfe/cannot be located 2. Ceased doing biz as IA, BD or agent 3. Individual found mentally competent

Question 45

Withdrawl from registration

Answer 45

30 days after reiver

Question 46

When registration become effective

Answer 46

1. When determined by adminstrator | 2. If no denial in effect no proceedingp enindg, at noon on 30th day after applicaiton filed

Question 47

Advisory contracts

Answer 47

Written advisory contracts must disclose services provided; the term of the contract; the amount of the fee or the formula used to compute it; the amount of fee to be refunded, if any, if the advisory fee is prepaid and the contract is terminated; and provisions as to whether the adviser has discretionary authority and to what extent.

Question 48

Margin account

Answer 48

Written approval promptly after the initial transaction

Question 49

limitation on adiminstrator

Answer 49

No injunctions

Question 50

Criminal penalites

Answer 50

5-5-3 5 year statue of limitation $5,000 max fine Can't be imprisoned more than 3 years

Question 51

Successor Firm

Answer 51

Application may be made to register a successor firm whether or not the firm is then in existence. The filing fee is waived. The successor firm's registration will be effective for the unexpired portion of the year.