Definitions Under The USA Flashcards
is a template or guide, not actual legislation, that each state uses in drafting its securities legislation.
- updated to adjust to developments in the securities industry through the passage of Model Rules
Uniform Securities Act (1956)
has jurisdiction over virtually all securities activity that emanates from his state, as well as that which is received in his state.
- jurisdiction over the registration of securities professionals and securities
- power to make rules and issue orders
- can deny, suspend, or revoke registrations
Administrator
used to deny effectiveness to, or suspend or revoke the effectiveness of, any registration statement.
- this applies to securities only, not professionals such as BDs, agents, IAs, and IARs
Stop order
acting without prior notice
Acting Summarily
No Final Order may be entered without?
- appropriate prior notice to the interested parties
- the opportunity for a hearing
- written findings of fact and conclusions of law
any individual (sometimes known as a natural person), or a legal person.
corporation, partnership, association, trust, an unincorporated organization, a government, or a political subdivision of a government.
Test Topic Alert
what are 3 types of nonperson?
- minors (anyone unable to enter into contracts under the laws of their state)
- deceased individuals (but their estate would constitute a person)
- individeals legally declared mentally incompetent
True or False
All Broker-Dealers must register with both the states and the SEC
True
any individual who represents a BD or issuer in effecting or attempting to effect purchases or sales of securities.
- always individuals (natural persons)
- job is to be involved in securities sales or supervise those who do.
- aka “registered representatives”
Agents
Under the NSMIA, are registered with either the SEC or the state, but never both.
Investment Adviser
those registered with the SEC are called federal covered advisers
issuers primarily include:
Corporations and Governments
is one where the issuer does not receive the money because the seller of the security is someone other than the issuer.
Nonissuer transaction
means to be excused from certain requirements
Exempt
True or False
when a security is exempt under the USA, it does not have to be registered in order to be sold, and there are no requirements to file advertising about the security with the Admin.
True
the term guaranteed security means
guarenteed as to payment of principal, interest, or dividends, but not capital gains.
when used on the exam it means a guarantee from a third party other than the issuer
the _ is the attempt; the _ is when its successful.
the offer is the attempt; the sale is when its successful.
Define when one has Discretion over a clients account?
the sole or shares authority to determine any one of the following
- Whether to buy or sell (Action)
- the quantity to buy or sell (Amount)
- the specific security to buy or sell (Asset)
is a person in whom another has placed trust or confidence to manage and protect property or money
Fiduciary
Examples: Trustees, guardians, and in most cases, investment advisors.
denotes that an individual may be subject to disqualification under the USA an/or the Exchange Act of 1934.
Statutory Disqualification
All felony convistions, and certain misdemeanor convictions within the last 10 years, certain investment related temporary or permanent injunctions, as well as a variety of other investment-related legal or regulatory actions/sanctions may lead to ?
Statutory Disqualification
any individual who, for compensation, acts on behalf of an investment advisor in referring potential clients.
- must be registered as IARs in most cases.
Solicitor
the _ exemption generally states that an out-of-state investment adviser does not need to register if:
- The adviser does not have a place of business in the state, and
- The adviser only deals with a limited number of clients from that state, usually five or fewer during a 12-month period.
de minimis exemption
means an individual or a family business that has over $5 million in investments or an individual/entity that invests over $25 million on their own account or on others’ behalf.
Qualified purchases
I.C.P.A.J.T.U.G. is an easy way to remember what constitutes a “person” under the USA but what does it stand for?
Individual
Corporation
Partnership
Association
Joint-stock company
Trust (specifically, where interests are evidenced by a security)
Unincorporated organization
Government (or its political subdivision)
B.I.I.P.P.S.S. is an easy way to remember who consitutes an “institution” but what does it mean?
Banks
Insurance companies
Investment companies
Pension trusts
Profit-sharing trusts
Savings Institutions
Savings and loan associations
Also included: employee benefit plans with assets of not less than $1 million, Trust companies, and governmental agencies
note
A surety bond is a contractual agreement where a surety company guarantees that a principal (typically a business or individual) will fulfill specified obligations to a obligee (often a government entity). If the principal fails to meet these obligations, the bond provides financial compensation to the obligee.
How it works:
- The obligee requires the principal to purchase a surety bond as a condition of a license, contract, or other arrangement.
- If the principal fails to meet their obligations, the obligee can make a claim on the bond.
- The surety company will pay valid claims.
- The principal is then responsible for reimbursing the surety company for the claim amount plus any associated costs
In essence, a surety bond protects the obligee from financial loss due to the principal’s failure to meet their obligations.
Test topic alert
You need to know that individuals who meet the standard of accredited investor are still retail, rather than institutional clients.
remember, retail clients need far more protection than insitutional ones.
means excluded from, or not included in, a defintion.
Exclusion
Test topic alert
if a person is excluded from the definition of an agent, that person is not subject to provisions of state law that refer to agents.
for one fee combine investment advisory services and execution of client transactions
Wrap fee program
Define “investment adviser (firm)” under state law and federal law.
Any person
a. who, for compensation, engages in the business of advising others, either directly or
through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities
OR
b. Who, for compensation and as a part of a regulation business, issues or promulgates analyses or reports concerning
securities.”
what are the 3 prongs of three-prong test to see if investment adviser (firm)?
- gives advice to others on securities
- does so as part of a regular business activity
- receives compensation for performing this activity
Are you an investment adviser if you are giving advice on commodities, collectibles, precious metals, or real estate?
Nope! Only advice on securities (e.g. common stock, bonds)
