Exempt Securities And Transactions

Question 1

• State Securities administrators may require that the proceeds from the offering be held in escrow until a certain amount has been sold
• the administrator may require that the Securities be sold on a specific subscription form

Answer 1

The following apply to registration through coordination and qualification

Question 2

Introduced the notion of “covered securities” for securities that have met the stringent listing requirements of any US Stock exchange, including the NYSC or the NASDAQ Stock Exchange.

These securities are exempt from state registration but not from federal registration.

• designed to reduce overlapping regulation between federal and state securities regulators

Answer 2

The National Securities Market Improvement Act of 1996 (NSMIA)

Question 3

Sales to non-accredited investors are limited to _ in any 12 month period at the state level, and 35 non-accredited investors at the federal level

Answer 3

10

Question 4

All investors in private placements must hold the Securities fully paid for at least ___

Answer 4

6 months

Question 5

The limits on the amount of money that may be raised under the various regulation D offerings are as follows

Regulation 504 D allows issuers to raise up to $10 million

Regulation 5060 allows issuers to raise an unlimited amount of capital

Answer 5

Note

Question 6

True or false

All transactions with financial institutions are exempt from State registration

Answer 6

True. The uniform Securities Act was designed to protect the individual investor, not the sophisticated financial institution which include:

• banks
• insurance companies
• investment companies
• broker dealers
• pension plans with at least $1,000,000 in assets

Question 7

Transactions with any of the following are considered transactions with fiduciaries and are exempt from registration with the administrator

Answer 7

• Trustees
• Executors
• Guardians
• Sheriffs/marshals
• Administrators
• Receivers

Question 8

True or false. Transactions with Underwriters are exempt from State registration

Answer 8

True

Question 9

True or false. If a client were to call you and request to purchase a security from another state this security would be required to register within the client state

Answer 9

False. This would be considered an unsolicited order which are exempt from State registration

Question 10

Should a person pledge a security is as collateral for a loan, does this pledge constitute a sale?

Answer 10

No. Should the borrower default on the loan, the person who now has ownership of the Securities by way of default may sell those Securities without being required to register the Securities to recoup his or her losses

Question 11

Is an agreement to purchase Securities prior to the formation of a corporation

Answer 11

Pre-organization certificates

Question 12

Take note

The offer or sale of the pre-organization certificate is exempt if no commission was received for soliciting the sale

Answer 12

The number of subscribers may not exceed 10, and the subscriber may not make any payments

Question 13

A non issuer transaction is a transaction of publicly traded securities and is exempt if the issuer meets the following requirements

Answer 13

• the issuer has Securities registered under section 12 of the Securities Exchange Act of 1934 and has been reporting for at least 180 days

Or

• the issuer has Securities registered under the Investment Company Act of 1940

Or

• the issuer has filed the information required by the Securities Exchange Act of 1934 with the administrator at least 180 days prior to the transaction

Question 14

Rule 147 pertains to

Answer 14

Offerings of Securities that are limited to one state. Because the offering is being made only in one state, it is exempt from registration with the SEC and is subject to the jurisdiction of the state Securities administrator

Question 15

The three nonpersons are:

Answer 15

• a natural person deemed mentally incompetent
• a minor
• a natural person since deceased

Question 16

Under the uniform Securities act, each of the following is specifically excluded from the definition of a broker-dealer except

• an agent
• an issuer
• an international bank
• an investment adviser

Answer 16

Investment adviser

The USA specifically excludes agent/issuers and Banks, international or domestic, from the definition of a broker dealer. Investment advisors may have to register as BD’s if their method of operation requires it

Question 17

Is a form of insurance policy protecting customers of an investment advisor from losses due to the IA or one of its IARs committing a criminal act, such as theft of a customer’s money. It has nothing to do with losses in the market or the advisory firm losing money.

Answer 17

Surety bond

Question 18

The Limited registration Provisions when a customer moves to the US do not Place limits on the type of securities, only that the transactions must take place in the

Answer 18

Retirement plan (an RRSP)

Question 19

Is a person (an individual) who sells Securities to both retail and institutional members of the public

Answer 19

An agent

Question 20

Is defined as an individual who represents a broken dealer selling any type of security, whether that’s security is exempt or non-exempt

Answer 20

An agent

Remember individualism represent issues and trading certain exempt security or in any exempt transactions are not defined as agents

Question 21

The following apply to what exemption

1. No office in the temporary
2. Clients are existing clients
3. Limited duration
4. Notification requirements

Answer 21

Snowbird exemption

Question 22

True or false. Bonuses based on a broken dealers profits may be payable to non-registered clerical help as long as there’s no direct relationship to any specific sales

Answer 22

True.

Question 23

True or false. Under the uniform securities act, fingerprints for registered individuals, even those who will be setting as offices of a broken dealer, are not required

Answer 23

True

Question 24

True or false. An agent is an individual who represents a broker dealer or issuer in affecting or attempting to affect purchases or sales of securities. Pre-qualifying clients requires registration

Answer 24

True

Question 25

Which type of securities are exempt from registration?

Answer 25

1. government and municipal securities
2. non-profit securities
3. Commercial paper
4. bank and financial institution securities.
   - securities issued by Banks
   - securities issued and guaranteed by Savings and Loan associations or similar institutions
5. Insurance policies and annuity contracts (not including variable contracts)
6. Building and loan securities

Question 26

The three primary methods of registering securities in a state under the Uniform Securities Act are:

Answer 26

1.) Notification (or Notification Procedure):
* Used primarily by large issuers that are already registered with the SEC or are traded on a recognized stock exchange.
* It is essentially a notice filing.
* The issuer notifies the state of their intent to sell securities and provides certain required
documents.

2.) Coordination (or Coordination Procedure):
* Used for securities that are concurrently being registered with the SEC and will be publicly offered.
State registration is coordinated with the federal registration to allow for concurrent registration.
Requires submission of documents filed with the SEC, among other things.

3.) Qualification (or Qualification Procedure):
* Most detailed and comprehensive method.
* Used when neither of the other two methods applies.
* The state securities administrator reviews the merits of the offering.