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Series 66 take 2 > final > Flashcards

final Flashcards

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Series 66 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
Q

notification with state vs federal advisors

A

only state are required to notifiy when employment terminated or begun

fed covered is responsiblity of IAR.

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26
Q

investment advisory contract must include

A

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

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27
Q

term covered account does not apply to

A

institutional customers ike banks pension funds or investment companies

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28
Q

does zero coupon bond usually have higher duration

A

yes unless maturity is really soon

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29
Q

current assets include

A

cash, ar, inventory

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30
Q

current liabilities include

A

ap,wages payable, dividends payable, and short term debt

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31
Q

securities act of 1934 and sales of new issues with credit

A

the act bans the use of credit in purchasing new issues for the first 30 days from the date of issue

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32
Q

disclosure with disiplinary actions and monetary amount

A

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.

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33
Q

a variable life insurance plan may charge a max sales charge of

A

9% over a period not to exceed 20 years

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34
Q

is a warrant a derivative

A

no

35
Q

when are options securies

A

options are always securities regardless of the underlying asset.

36
Q

under USA BDS and agents are not IAS when

A

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
Q

expected return

A

RFR + (Market return- RFR) *beta

38
Q

when an investment advisor ceases to exist whose responsibility is it to preserve docs

A

the original company has to hold for 3 years.

39
Q

how kiddie tax works

A

earned income is on kids tax rate

unearned income(dividends or interest) in excessof 2,100 is taxed at trust rate

40
Q

difference between agents and advisors for de minimus

A

agent must register in the state if they do any business, regardless of the number of investors. Solicited or unsolicited

41
Q

technician looking at volume

A

a price increase on heavy volume is bullish

42
Q

variable life conversion policy

A

anytime during first 24 months, policy can be changed to whole life

using same issue date and age
face amount stays the same

43
Q

SERP

A

nonqualified plan designed to provide additional retirement benefits limited to a select group of management or highly-compensated employees

44
Q

a private foundation must

A

pay out each year an amount equal to 5% of its net investment assets in qualifying distributions

45
Q

what is a covered security

A

anything equal to or senior to common stock

46
Q

working capital=

A

current assets- current liabilities

47
Q

coupon and duration

A

higher coupon, lower duration

low coupon high duration

48
Q

who is considered accredited

A

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
Q

books and records

A

ias - must maintain records for 5 years- 2 in principal office

BDS 3/2

50
Q

exclusions from investment advisors fed or state

A

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
Q

exempt from sec registration

A

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
Q

state exemptions IA

A

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
Q

Sec or state amount

A

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
Q

what is the buffer rule

A

once you are registered with sec, if book goes under 90 million then you need to register with state.

Buffer is 20 million

55
Q

pension consultants rule

A

once they reach 200 million they have to choice to be sec registered

56
Q

federal covered advisors and states

A

don’t have to register but may pay filing fees.

57
Q

ADV part 1 a includes

A

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
Q

exempt reporting advisors (ERAS) does what

A

file a adv part 1 (don’t answer all questions) but do not have to do adv part 2

59
Q

successor firm rule IA

A

new firm because of merger, aquisition or sale

new application filed, effective for remainder of year

no additional filing fees

60
Q

net worth requirements IA

A

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
Q

disclosure of financial impairment IA

A
  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
Q

recordkeeping requirements IA

A

maintain books are records easily accessible for 5 years, first 2 years at principal office

63
Q

partnership agreement, articles of incorp, charters and minute books

A

must be preserved untial at least 3 years after termination of enterprise

64
Q

exclusion for IAR

A

clerical or administrative
impersonal advice
research analyst if no advisory clients

65
Q

exemptions from IAR state

A

de minimus

snowbird

66
Q

covered advisor means

A

federal

67
Q

IARS with federal covered advisors only register in state where

A

IAR maintains place of business

68
Q

IAR registration *

A 
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
Q

Termination procedures IAR

withdraw agent

A

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
Q

BDS usually registers with

A

both sec and state

71
Q

BD Exclusions state and federal law

A

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
Q

BD exemption

A

Canadian broker dealers(soley with existing clients)
can

Intrastrate broker dealers. Only operate in one state and all clients are in one state

73
Q

Agent exclusion

A

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
Q

agent exemption

A

if BD is exempt
snowbird
client moves (if bd is not registered in state) you lost client

NO DEMINIMUS

75
Q

How Bd and agents register procedure

A 
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
Q

Termination for Agent

A

notification by both agent and broker dealer

effective 30 days after , admin maintains jurisdiction for one year

77
Q

record keeping for BDS and agents

A

assessable for 3 years, 2 in principle office

material changes(move to new location) prompt notice(amend BD)

78
Q

financial requirements BDS

A

min net capital

cannot be higher than what sec requires

79
Q

agent registration

A

citizenship
usa does not require fingerprints
if bd gets registration revoked, get new bd by 2 years(new u4)

80
Q

agent registered with multiple bds?

A

only if affiliated or ok by administrator

81
Q

securities exemptions (need to fill in more)

A 
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
Q

exempt transactions (BULL)

A

-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
Q

USA says no person can lawfully offer or sell any security in this state unless

A

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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