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Series 66 take 2 > final > Flashcards

final Flashcards

1
Q

brochure rules

A

2a(describes firm)
2b(Personal)

delivered with in 48 hours before or at time of contract which allows for 5 days of penalty free withdrawal(client)( state law)

(Fed)brochure updated annually within 120 days after fiscal year

if any changes- you need deliver in 120 days free brochure or summary of changes

if no changes no need to send.

prepayment- more than 1200 for federal

more than 500 for state.

Must include balance sheet with brouchure if these 2 ^ apply

Balance sheet required for state if custody
not federal

in brocuhure you have to disclose legal or disiplanary action within the past 10 years

exemptions- if client is investment company
impersonal investment advise

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2
Q

part 1a annual amendment must be sent to the sec or administrator with in

A

90 days after the end of the fiscal year

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3
Q

Third-party solicitors must provide a copy of the

A

copy of the investment adviser’s brochure (Form ADV Part 2A), as well as a copy of the solicitor’s brochure.

The solicitor’s script must be approved by the IA, and only the SEC receives a copy of the Form ADV Part 1.

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4
Q

private fund exemption state law

A

no more than 100 investors

all investors must be qualified(1 million in assets management or nw of 2.1 mill)

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5
Q

private fund exemption foreign

A

no place of business in united states
fewer than 15 clients in the us
less than 25 mill in assets
does not hold oneself out to the public as IA

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6
Q

exemption for investment advisors to venture capital funds

A

limited leverage
no redemption rights
represents itself as venture capital fund
not registered under Investment co act of 1940

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7
Q

positive margin

A

The rate of return on the investment exceeds the interest cost on the borrowed money.

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8
Q

The yield to call computation involves knowing

A

the amount of interest payments to be received, the length of time to the call, the current price, and the call price.

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9
Q

family balance sheet includes

A

assets and liabilities, not income

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10
Q

family income statement includes

A

income and expenses

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11
Q

The longer the duration of a bond

A

the more volatile (sensitive to interest rate changes) it will be.

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12
Q

When a partial withdrawal is made from an annuity, the earnings are considered to be taken out

A

LIFO

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13
Q

bonus annuity

A

offer a bonus

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14
Q

What is the purpose of the Securities Exchange Act of 1934?

A

It regulates the persons involved in the secondary market.

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15
Q

what dividends are not considered qualified

A

reit

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16
Q

when a policy is sold through the life settlement process, what happens

A

the insured receives more than the cash value, but less than the face amount of the policy

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17
Q

are lottery winnings considered earned income

A

no

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18
Q

sec has jurisdiction over

A

exchanges, sros

bds, IAS and associated persons

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19
Q

who may be required to by the administrator to post surity bonds

A

agent with discretion
bd with custody discretion
IA with custody or diescetion

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20
Q

are wills estates and trusts securities

A

no

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21
Q

administrator can determine min or max net worth requirements for IAs and bds

A

min

if the ia does not exercise discretion or maintain custody, no surity bond is required

Agent who exercise discrtion may need a surety bond but not a min net worth

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22
Q

form adv E

A

must be completed by investment advisors tht have custody of client funds or securities and that are subject to an annual surprise examination.

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23
Q

loaning money to a client is prohibited unless

A

the IA is a financial institution engaged in the business of loaning funds or the client is an affiliate of the IA.

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24
Q

interest on foreign is taxed

A

fed
state
local

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25
notification with state vs federal advisors
only state are required to notifiy when employment terminated or begun fed covered is responsiblity of IAR.
26
investment advisory contract must include
serivce to be provided Term of contract amount of advisor fee or foruma used amount of any prepaid fee to be returned if terminated whether contract grants discretionary power no assignment must notify if minority change in partnership
27
term covered account does not apply to
institutional customers ike banks pension funds or investment companies
28
does zero coupon bond usually have higher duration
yes unless maturity is really soon
29
current assets include
cash, ar, inventory
30
current liabilities include
ap,wages payable, dividends payable, and short term debt
31
securities act of 1934 and sales of new issues with credit
the act bans the use of credit in purchasing new issues for the first 30 days from the date of issue
32
disclosure with disiplinary actions and monetary amount
legal and disciplinary action successfully brought against an IA must be disclosed as well as disciplinary actions that resulted in a fine in excess of 2500. convictions for a misdemeanor or felony involving securities or money within the past 10 years must also be disclosed.
33
a variable life insurance plan may charge a max sales charge of
9% over a period not to exceed 20 years
34
is a warrant a derivative
no
35
when are options securies
options are always securities regardless of the underlying asset.
36
under USA BDS and agents are not IAS when
if their performance is soley incidental to the conduct of the brokerage business and no special compensation is received for advisory services recommendations of securities purchases are indiental. and don't qualify unless fees are charged for advice. investment research is not indicental
37
expected return
RFR + (Market return- RFR) *beta
38
when an investment advisor ceases to exist whose responsibility is it to preserve docs
the original company has to hold for 3 years.
39
how kiddie tax works
earned income is on kids tax rate unearned income(dividends or interest) in excessof 2,100 is taxed at trust rate
40
difference between agents and advisors for de minimus
agent must register in the state if they do any business, regardless of the number of investors. Solicited or unsolicited
41
technician looking at volume
a price increase on heavy volume is bullish
42
variable life conversion policy
anytime during first 24 months, policy can be changed to whole life using same issue date and age face amount stays the same
43
SERP
nonqualified plan designed to provide additional retirement benefits limited to a select group of management or highly-compensated employees
44
a private foundation must
pay out each year an amount equal to 5% of its net investment assets in qualifying distributions
45
what is a covered security
anything equal to or senior to common stock
46
working capital=
current assets- current liabilities
47
coupon and duration
higher coupon, lower duration | low coupon high duration
48
who is considered accredited
institutional investors (insurance companies, bank person or married net worth excluding house exceeds 1 mill individual with income 200 k single or 300k joint employee benefit plancharity/corp/partnership exceeding 5 mill
49
books and records
ias - must maintain records for 5 years- 2 in principal office BDS 3/2
50
exclusions from investment advisors fed or state
bank, savings, trust companies (both) Bank owned subsidiary is not excluded (both) incidental advise(LATE) (BOTH) Broker dealers if no special compensation(fees). They can make recommendations. They only get paid if they make a trade. Can't be paid for advise(wrap fee program) (BOTH) Publishers of general and regular circulation(can't be based on market events) (b0th) Advise soley on government securites(IA of 1940) Investment advisor rep(USA) Federal covered investment advisors(USA)
51
exempt from sec registration
1.intrastate advisors-all clients and offices in one state 1a no advise on listed securities on national exchanges 1.b not clients are private funds 2.only clients are insurance companies
52
state exemptions IA
de minimus- no office in state and fewer than 6 clients in 12 month no place of business and only deals with institutions(banks, insurance cos, investment cos,employee benefit plans with at least 1 million in assets, BDS, other investment advisors snowbird
53
Sec or state amount
110 or more-sec less than 100- state (unless required to register in 15 or more states, manage registered investment co) expect to reach 100 million within 120 days. between 100 and 110, you have choice
54
what is the buffer rule
once you are registered with sec, if book goes under 90 million then you need to register with state. Buffer is 20 million
55
pension consultants rule
once they reach 200 million they have to choice to be sec registered
56
federal covered advisors and states
don't have to register but may pay filing fees.
57
ADV part 1 a includes
business name and form of organization past 5 years of control persons(25% or greater voting) educational background nature of business Balance sheet discretion how do you get paid criminal record portion of business devoted to providing investment advise consent to service of process form adv part 1 b(state advisors only) pay filing fee registration effective noon 30th day(USA) Registration effective 45 day (SEC) State expires every dec 31rst unless you renew it 2.annual update adv- 90 days fiscal years end both pay renewal fee with this amended adv promptly if change in management state of location change of form of business Withdrawl adv w (30 day state 60 day sec)
58
exempt reporting advisors (ERAS) does what
file a adv part 1 (don't answer all questions) but do not have to do adv part 2
59
successor firm rule IA
new firm because of merger, aquisition or sale new application filed, effective for remainder of year no additional filing fees
60
net worth requirements IA
only for state 1. Discretion only, no custody- 10000 2. custody of dunds-35,000 unless having custody due to direct fee deduction or advising pooled investments subject to surprise annual audit. you can put up surety bond or marketable securites of 35k instead of net worth Notify admin when below req net worth by end of next business day file financial report with admin within one business day of giving notice including statement of number of accounts only need to meet requirements of the state where principal office located Sec meets sec requirements
61
disclosure of financial impairment IA
1. has discretion or custody prepayment more than 500 six months more in advance(state) prepayment 1200 fees six months or more in advance (SEC)
62
recordkeeping requirements IA
maintain books are records easily accessible for 5 years, first 2 years at principal office
63
partnership agreement, articles of incorp, charters and minute books
must be preserved untial at least 3 years after termination of enterprise
64
exclusion for IAR
clerical or administrative impersonal advice research analyst if no advisory clients
65
exemptions from IAR state
de minimus | snowbird
66
covered advisor means
federal
67
IARS with federal covered advisors only register in state where
IAR maintains place of business
68
IAR registration *
``` U4- felony or securities related misdemeanor consent service of process filing fee/renewal pass test effective 30th non expire every dec 31 ``` no new no bonding no recordkeeping except amend u4 if change in address
69
Termination procedures IAR withdraw agent
IAR with state , IA notifies administrator IAR fed- IAR notifies administrator Effective 30 days after withdraw- state has one year jurisdiction agent and bd must notify promptly
70
BDS usually registers with
both sec and state
71
BD Exclusions state and federal law
agents issuers bank ,savings, trust co internet broker dealers-only general information No office in the state and limit clients to issuers of security, other bds, or institutional investors no office in state who directs offers to existing clients who are not residents of the state
72
BD exemption
Canadian broker dealers(soley with existing clients) can Intrastrate broker dealers. Only operate in one state and all clients are in one state
73
Agent exclusion
clerical silent partner outside associated person representing issuers in effecting transactions that are exempt(USA) effecting transactions issued by exempt issuers(banks,governments, and 3 others(lem) work for company where employees can purchase stock of co. Agents help with that but they arent agents as long as they are not paid for sale.
74
agent exemption
if BD is exempt snowbird client moves (if bd is not registered in state) you lost client NO DEMINIMUS
75
How Bd and agents register procedure
``` form BD form U4 method of business background and history convictions 10 years felonies and securities related misdemeanors financial condition\ consent to service of process ``` pass exam effective noon 30 day expires dec 31
76
Termination for Agent
notification by both agent and broker dealer effective 30 days after , admin maintains jurisdiction for one year
77
record keeping for BDS and agents
assessable for 3 years, 2 in principle office material changes(move to new location) prompt notice(amend BD)
78
financial requirements BDS
min net capital | cannot be higher than what sec requires
79
agent registration
citizenship usa does not require fingerprints if bd gets registration revoked, get new bd by 2 years(new u4)
80
agent registered with multiple bds?
only if affiliated or ok by administrator
81
securities exemptions (need to fill in more)
``` us government and agency state and local municipal bonds intrastrate(147) short term debt- max maturity 270 days exempt issuer securities like 1. us gov muni canadian gov foreign national gov banks avings trust cos insurance cos public utility charitible fed coverned(exchange listed) nasdaq traded, invest cos, private placement ```
82
exempt transactions (BULL)
-private placements 2.accredited investor 2a institutional investor 2b employee benefit plan(state law 1mill, fed 5 million 2c insider of the issuer 2d individual or joint with net worth greater than 1 million, excluding house or earnings 200k single 300k joint for past 2 years must file form d within 15 days of sale preorganization certificates(usa) private restricted to 10 offers in any 12 consecutive month.
83
USA says no person can lawfully offer or sell any security in this state unless
security is registered under USA Security or transaction is exempt from registration security is federally covered

Series 66 take 2 (28 decks)

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