Financial Services Industry Regulation Requirements Flashcards
The Securities Act of 1933 has two main goals:
ensure investors received information about the security they were purchasing so they could make an informed decision
prevent fraudulent activities in the sale of securities.
The Securities Act of 1934 created the ____ and required certain individuals participating in the securities industry to register with the NASD
SEC
_______ regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public. The goal is to reduce the conflicts of interest that may occur in these organizations.
The Investment Company Act of 1940
_____ is the law that regulates investment advisers.
The Investment Advisers Act of 1940
‘Investment Adviser’’ is defined as:
any person 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 who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities.
______ is the self-regulatory organization of the securities industry responsible for the regulation of The NASDAQ Stock MarketSM, as well as the vast over-the-counter securities market and the many products traded in it.
FINRA
What is the SEC is responsible for?
the registration, regulation, and oversight of brokerage firms, transfer agents, and clearing agencies as well as the nation’s securities self regulatory organizations (SROs).
What type of organization is FINRA?
self-regualting
Each state has its own securities laws called ____ to protect investors from fraudulent sales and activities.
Blue Sky Laws
Broker/Dealer Regulation:
A broker/dealer, registered representative and the security must all be registered in the state where they want to sell. The registered representative must also pass the Series 63 exam.
There are three methods for registering a security at the state level:
Registration by Notification, Registration by Coordination and Registration by Qualification.
_______ required securities to register and provide investors accurate and timely information.
The Securities Act of 1933
______ created the SEC and required certain individuals participating securities industry to register with the NASD, which is now FINRA.
Securities Act of 1934
Registration forms call for:
A description of the company’s properties and business,
A description of the security to be offered for sale,
Information about the management of the company, and
Financial statements certified by independent accountants.
FINRA is responsible for:
Creating rules and regulations for the securities industry.
Constant surveillance of the markets to ensure the fair and orderly conduct of securities transactions.
Examining securities firms and their business activities.
The preliminary prospectus that is used by securities professionals to obtain indications of interest as the SEC reviews a registration statement is commonly referred to as ________________.
a red herring
What is the length of the waiting period that is imposed after the issuer of a new security has filed a registration statement with the SEC.
20 days
To sell securities in states that require state-level representative registration, a registered representative must pass the ___________.
Series 63 Exam
Under the “Advisers Act,” a three-prong test must be met:
The individual or firm advises as to the value of securities, or as to the advisability of investing in or selling securities, through publications or writings and, in fact, they hold themselves out to the general public as providing such advice.
The individual or firm is engaged in the business of advising others, by providing general or specific advice or issues reports about securities.
The individual or firm receives compensation for advisory services.
Rule 204-3 under the Investment Advisers Act of 1940, commonly referred to as the “brochure rule” Requires:
Generally requires every SEC Registered Investment Adviser to deliver to each prospective advisory client a written disclosure statement, or “brochure”, describing the adviser’s business practices and educational and business background.
SEC has broad authority including the power to register, regulate, and oversee:
Brokerage firms:
Transfer agents:
Clearing agencies:
Self Regulatory Organizations (SROs)
Brokerage firms:
Firms that charge a fee or commission for executing buy and sell orders submitted by another individual or firm.
Transfer agents:
Person or company who maintains the records of registered securities.
Clearing agencies:
Facilitate the validation, delivery and settlement of securities transactions
