Financial Services Regulations and Requirements

Question 1

• Registration statements and prospectuses become public shortly after filing with the SEC
• Exempt from registration requirement
  
  • Intrastate offerings
  • Securities of municipal, state and federal government
  • Offerings of limited size
  • Private offerings to a limited number of persons or institutions

Answer 1

Securities Act of 1933

Question 2

1. Prohibited commercial banks from acting as investment bankers
2. Established the FDIC
3. Prohibited commercial banks from paying interest on demand deposits

Answer 2

Glass-Steagall Act (1933)

Question 3

• Premarily concerned with new issues of securities
• Requires that securities sold in the U.S. must be registered
• A registration statement containing a thorough description of the security
• Requires a prospectus be given to any prospective investor

Answer 3

Securities Act of 1933

Question 4

1. Regulates securities sold in the secondary market.
2. Established the SEC
3. Registration of organized exchanges
4. Exemptions
   a. Federal, state and local governments
   b. Securities not traded across state lines
5. Insider trading rules prohibited
6. Proxy solicitation

Answer 4

Securities Exchange Act of 1934

Question 5

Requires registration with the SEC and restricts activities of investment companies (including mutual funds)

Answer 5

Investment Company Act of 1940

Question 6

Brought the OTC market under the regulation of the SEC and called for self-regulation of OTC securities dealers.

Answer 6

Maloney Act of 1938

Question 7

1. As amended in 1978, requires a court-appointed trustee to oversee the affairs of a firm for which bankruptcy charges have been filed
2. Provides for the liquidation of hopelessly troubled firms and provides for the reorganization of troubled firms that may be able to survive

Answer 7

Federal Bankruptcy Act of 1938

Question 8

1. Regulates investment advisors
2. Requires firms or sole practitioners register with the SEC
3. Generally, only advisers who have at least $100 million of assets under management or advise a registered investment company must register with the SEC

Answer 8

Investment Advisers Act of 1940

Question 9

Clarified that insurance was to be regulated at the state level.

Answer 9

McCarran Ferguson Act of 1945

Question 10

Established the Securities Investor Protection Corporation (SIPC) to insure investors against losses arising from the failure of any brokerage firm

Answer 10

Securities Investor Protection Act of 1970

Question 11

1. Repeals sections of the Glass-Stegall Act

2. Amends the Bank Holding Company Act of 1956

Answer 11

Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley Act)

Question 12

1. Includes reforms for corporate responsibility, increased financial disclosure requirements, and reduced corporate and accounting fraud
2. Created the Public Company Accounting Oversight Board to oversee the auditing profession

Answer 12

Sarbanes-Oxley Act of 2002

Question 13

1. Reformed the U.S. regulatory system in a number of areas including consumer protection, trading restrictions, credit ratings, regulations of financial products, corporate governance, disclosure, and transparency
2. Modified the Investment Advisers Act of 1940 thresholds for registration with the SEC
   a. Small advisers - $100 million AUM must register with the SEC

Answer 13

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Question 14

1. Created by consolidating:
   a. National Association of Securities Dealers (NASD)
   b. New York Stock Exchange
2. Must be registered here to sell securities
3. Self regulated organization - Responsibility delegated by SEC

Answer 14

FINRA (Financial Industry Regulatory Authority)

Question 15

a. Banks and bank holding companies
b. Lawyers, accountants, engineers, or teachers if their performance is solely incidental to their professions
c. Brokers or dealers if solely incidental and they do not receive any special compensation for their advisory services
d. Publishers of bona fide newspapers, newsmagazines, or financial publications
e. Persons whose advice is related to obligations or or guaranteed by the United States
f. Incidental practice exception is not available to individuals who hold themselves out to the public as providing financial planning, pension consulting, or other financial advisory services

Answer 15

Persons/organizations excluded for having to register with the SEC

Question 16

Investment advisers who act as an intrastate adviser for unlisted securities and those whose only clients are insurance companies.

Answer 16

Exempt from having to register with the SEC

Question 17

a. Agreement
b. Consideration
c. Contractual capacity
d. Legal purpose

Answer 17

Elements of a contract

Question 18

Which bankruptcy provision provides procedures for voluntary and involuntary liquidation?

Answer 18

Chapter 7

Question 19

Which bankruptcy provision provides procedures for reorganization of persons, firms, and corporations?

Answer 19

Chapter 11

Question 20

Which bankruptcy chapter provides procedures for adjustment of debts of individuals with regular income?

Answer 20

Chapter 13

Question 21

Roth and Traditional IRAs are protected from bankruptcy up to what exemption amount?

Answer 21

$1,245,475 (2015)

SEP, SIMPLE, and rollover accounts have unlimited protection.

Question 22

a. Railroads
b. Banking
c. Insurance
d. Municipal corporations
e. Savings and loan associations
f. Credit unions
g. Non-profit organizations
h. Ranchers and farmers

Answer 22

Organizations exempt from Involuntary liquidation under Chapter 7 bankruptcy

Question 23

a. Back taxes (up to three years)
b. Debts associated with fraudulent activities
c. Alimony and child support
d. Debt due to intentional tort claims
e. Student loans
f. Consumer debt of more than $650 for luxury goods or services owed to a single creditor within 90 days of the order for relief

Answer 23

Examples of debt that cannot be discharged under Chapter 7.