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Series 63 flashcards
1
Q

An ___________________________________ is to an investment adviser what an ________ is to a BD.

A

investment adviser representative (IAR), Agent

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2
Q

Identify who IS NOT considered a person under the USA.

A

Minors, incompetents, securities, and the deceased

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3
Q

True or False: A gift of assessable stock would not be considered a sale.

A

False. A gift of assessable stock is considered both an offer and a sale and is regulated by the USA.

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4
Q

True or False: The tendering of a convertible bond is considered a sale according to the USA.

A

False

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5
Q

True or False: Variable annuities are not securities and are, therefore, not subject to registration.

A

False. Any variable products are considered securities. However, fixed insurance products are not securities.

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6
Q

True or False: IRAs and Keogh plans are considered securities.

A

False. The participation in these plans (what goes in the plan) is considered a security, but the plan itself is NOT.

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7
Q

True or False: Options on commodities are securities.

A

True. Options are always considered securities (e.g., options on futures, a currency, an index, or equities).

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8
Q

May an agent continue to do business in a state if his BD has gone out of business?

A

No. An agent’s registration is only in effect while associated with a BD or issuer.

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9
Q

When an agent ends her association with a BD, who must notify the Administrator?

A

Both the agent and the BD

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10
Q

True or False: A partner, officer, or director of a BD is always considered an agent of the BBD

A

False. A partner, officer, or director is an agent of the BD if she is involved in the purchase/sale of securities.

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11
Q

If a BD is not registered in a state, may an agent of the BD do business in the state without being registered there?

A

Yes, if the agent is dealing with an existing client that is temporarily in the state.

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12
Q

If a client moves to a new state, may the agent continue to do business while applying for registration in the state?

A

Yes, as long as the agent is registered in at least one other state and is not subject to disqualification.

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13
Q

A client of a Canadian BD is visiting the U.S. May the agent do business with her without registering in the state?

A

Yes. Since she is an existing client of the Canadian BD, business may continue in the state.

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14
Q

May an agent of a BD located in Mexico do business with a client in the U.S. without registering in the state?

A

No. BDs of Mexico are required to register in the U.S. to effect securities transactions in a state.

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15
Q

When does the de minimis exemption from registration apply for an IA that has no place of business in a state?

A

When an IA has no more than 5 non-institutional clients in the state in the previous 12 months

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16
Q

Does the de minimis exemption apply to investment adviser representatives?

A

Yes

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17
Q

Does the de minimis exemption apply to BDs that have no place of business in a state?

A

No. The de minimis exemption only applies to IAs and IARs.

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18
Q

IAs with no place of business in a state, and whose clients are ____________ are not required to register in that state.

A

institutions

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19
Q

List some of the different types of institutional clients.

A

IAs, BDs, investment, insurance, or trust companies, banks, savings and loan associations, and pension plans

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20
Q

What is the purpose of a Consent to Service of Process?

A

To appoint the Administrator as the applicant’s attorney to receive and process any non-criminal legal complaints

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21
Q

Who must sign a Consent to Service of Process?

A

Any issuer, BD, IA, IAR, or agent initially registering to engage in business within a state

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22
Q

Must the Consent to Service of Process be renewed each year?

A

No. It is only required at initial registration.

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23
Q

State registration remains in effect for ___ year(s)

A

1

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24
Q

State registration expires annually on ______________.

A

December 31

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25
Q

When does state registration become effective?

A

At noon on the 30th day after filing an application, provided there are no proceedings pending

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26
Q

What requirements may states impose on IAs that are registered with the SEC?

A
  1. File with the state any documents that were filed with SEC, 2. File Consent to Service of Process, 3. Pay state fees
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27
Q

If a BD is registered with the SEC, is registration required in any state in which it intends to do business?

A

Yes. There are no exemptions from registration in the state as a BD.

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28
Q

If an IA is registered with the SEC, is registration required in any state in which it intends to do business?

A

No. The National Securities Markets Improvement Act (NSMIA) exempts federal covered advisers from state registration.

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29
Q

Is being charged with a felony or securities-related misdemeanor grounds for statutory disqualification?

A

No. Statutory disqualification includes conviction for any felony or securities-related misdemeanor in the past 10 yrs.

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30
Q

When may the Administrator cancel a registrant’s registration?

A

If the registrant has died, ceased doing business, been declared mentally incompetent or cannot be located

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31
Q

Regardless of assets under management, IAs must register with the SEC if any client is a _____________

A

registered investment company.

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32
Q

Under the USA, the de minimis exemption limits an IA to no more than ____ clients within the previous _____ months.

A

5, 12

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33
Q

True or False: A stock dividend is considered a sale.

A

False

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34
Q

True or False: The exercise of convertible securities would constitute a sale under the USA.

A

False

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35
Q

True or False: A warrant attached to the sale of a bond would constitute a sale of the warrant.

A

True

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36
Q

True or False: Two friends, anticipating a rise in value, purchase property. The property is considered a security.

A

False

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37
Q

Identify the three forms of state securities registration.

A

Notification (filing), coordination, qualification

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38
Q

How would a well-established corporation register a subsequent offering to be sold in multiple states?

A

Notification (filing)

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39
Q

True or False: Paperwork related to coordination is filed with the Administrator at the same time as the SEC filing.

A

False. Registration will become effective simultaneously with SEC registration, but need not be filed at the same time.

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40
Q

What is the minimum cooling-off period for registration by notification?

A

5 days

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41
Q

Do the anti-fraud provisions of the USA apply to exempt securities?

A

Yes. Nothing is exempt from fraud.

42
Q

True or False: A trade of unregistered, non-exempt securities between two BDs would be a violation of the USA.

A

False. This is an exempt transaction.

43
Q

True or False: If a BD registers in a state on March 3, it must pay a registration fee for the full year.

A

True

44
Q

The rule governing the disclosure requirement of an IA to its clients is called the __________ Rule.

A

Brochure

45
Q

May the Administrator levy fines on a registrant?

A

No

46
Q

May the Administrator initiate criminal or civil liability action against a registrant?

A

Yes

47
Q

If a firm meets the BD definition in the state, are there any exemptions from registration under the USA?

A

No. Firms that meet the BD definition are required to register in the state.

48
Q

If an IA meets the IA definition in a state, are there any exemptions from registration under the USA?

A

Yes, no office in the state and a) its clients are institutions or b) 5 or fewer retail clients in the last 12 months

49
Q

Is there an exemption for agents conducting business in a state? If so, what are the guidelines?

A

Yes, no place of business in state and a client visits the state or existing client moves to the state (regist. pending)

50
Q

Is there a registration exemption for IARs doing business in a state if employed by an IA registered in another state?

A

Yes, if the IAR has no office in the state and has 5 or fewer retail clients in the state in the past 12 months.

51
Q

Does an IA have custody when it is in possession of checks drawn by its client and made out to third parties?

A

No

52
Q

When will an offer fall under an Administrator’s jurisdiction?

A

If the offer originated in, was directed in, or was accepted in the Administrator’s state

53
Q

If the Administrator believes a person has violated or is about to violate the USA, may a stop order be issued?

A

Yes

54
Q

Does the Administrator require proof of wrongdoing to initiate an investigation?

A

No, but she does need to be able to refer to a rule or order when starting the investigation.

55
Q

When conducting an investigation of wrongdoing, is the Administrator limited to state boundaries?

A

No. The Administrator may subpoena books, records, and witnesses from inside and outside the state.

56
Q

If found civilly liable for violating the USA, what is the penalty?

A

The original amount paid, plus the legal rate of interest, attorney fees, and court costs, minus any cash received

57
Q

NSMIA indicates that securities listed on the NYSE, AMEX, NASDAQ and Toronto Exchange are _________________ securities.

A

federal covered securities

58
Q

True or False: An IA with 5 or fewer retail clients in the state in the past 12 months need not register under the USA.

A

True

59
Q

True or False: If an IA’s clients are institutions (e.g., banks, BDs), it is exempt from registration under the USA.

A

True

60
Q

Under the USA, are banks and bank holding companies excluded from the IA definition?

A

No. Banks, savings institutions and trust companies are excluded, but bank holding companies are not.

61
Q

For how long does the registration of a state-registered adviser remain in effect?

A

Until December 31, unless renewed by the adviser

62
Q

Who is the official that monitors and administers a state’s securities laws?

A

The Administrator or Commissioner

63
Q

The USA refers to an individual who represents a BD in the sale of securities as an ________.

A

agent.

64
Q

Identify who is considered a person under the USA.

A

Business entities, issuers, estates, governments, individuals (e.g., clients, IARs and agents)

65
Q

Is there a limit to the amount of net worth the Administrator may require of an IA?

A

Yes. The Administrator may not set a requirement that exceeds the IA’s home state.

66
Q

s an IAR who is employed by a federal covered adviser required to register in the state?

A

Yes. IARs of federal covered advisers must register in any state in which they have a place of business.

67
Q

What is the 3 pronged test for determining whether a firm meets the IA definition?

A

A-B-C. A = advice/analyses, B = business, C = compensation

68
Q

What type of advice may lawyers, accountants, teachers, and engineers provide and not be considered an IA?

A

Advice that is incidental to their profession. If a separate fee is charged for the advice, the exclusion is lost.

69
Q

True or False: A gift of non-assessable stock would constitute a sale.

A

False. However, the gift of assessable stock IS considered both an offer and a sale.

70
Q

If registering an IPO, an issuer would most likely use what form of state registration?

A

Coordination

71
Q

What form of state registration is not available in all states?

A

Notification (filing)

72
Q

True or False: Securities issued by municipalities of Mexico are exempt under the USA.

A

True. An exemption applies to securities issued by foreign governments with whom the U.S. has diplomatic relations.

73
Q

True or False: Securities issued by municipalities of Canada are exempt under the USA.

A

True

74
Q

Transactions between the issuer and its underwriter are considered ________ transactions.

A

exempt

75
Q

A BD must maintain its books and records for a minimum of ____ years.

A

3

76
Q

An IA must maintain its books and records for a minimum of ____ years.

A

5

77
Q

If employed by a federal covered IA, is an IAR required to register in all states in which she is conducting business?

A

No. If the IAR has no place of business in the state, no state registration is required.

78
Q

If the Administrator believes a person has violated or is about to violate the USA, may an injunction be issued?

A

No. The Administrator may not issue an injunction. Injunctions may only be issued by a court of competent jurisdiction.

79
Q

The appeal of an administrative order is made before a court of __________________

A

competent jurisdiction (state court).

80
Q

Does the appeal of an administrative order act as a stay of the order?

A

No. The order remains in effect until the outcome of the hearing.

81
Q

The maximum criminal penalty for violations of the USA is ____ years in prison and/or up to a $______ fine.

A

3 years, $5,000 fine

82
Q

What is a letter of rescission?

A

An offer to buy back a security from a client when that security was sold in violation of the USA

83
Q

A customer must respond to a letter of rescission within _____ days or lose the right to sue.

A

30

84
Q

May a state prevent the sale of a federal covered security in its state?

A

No. Federal covered securities are not regulated by the state.

85
Q

True or False: An IA with fewer than 15 retail clients in the past 12 months is exempt from registering under the USA.

A

False. The USA de minimis exemption for advisers is 5 or fewer individual clients.

86
Q

What type of information will be found in an investment adviser’s ADV Part I?

A

Firm name, # of employees, nature of business, history of officers/directors, legal/disciplinary action in past 10 years

87
Q

Is an IA always required to include a balance sheet in its ADV Part II?

A

No. A balance sheet is required if the IA has custody of the client’s funds or if the IA requires prepayment of fees.

88
Q

Any material changes to Form ADV must be filed ___________.

A

promptly (within 30 days).

89
Q

What types of changes would be considered material changes that require prompt amendment of an adviser’s ADV?

A

Significant items, such as a name or location change

90
Q

When are non-material (routine) changes to Form ADV required to be filed?

A

Routine items require an amendment within 90 days after the end of the IA’s fiscal year.

91
Q

What is the purpose of Schedule I of Form ADV and when is it filed?

A

Used to determine if IA is eligible for continued SEC registration; filed 90 days from the end of the IA’s fiscal year.

92
Q

When is Form ADV-W filed?

A

When an adviser withdraws its registration

93
Q

What is the general definition of an investment adviser?

A

A firm that provides advice/analyses regarding securities, as part of a business, and for compensation

94
Q

According to the USA, who is included under the term person?

A

Any legal entity, including individuals (clients/agents/IARs), BDs, IAs, issuers, corporations, and partnerships

95
Q

With what system do IAs file their registration applications?

A

The Investment Adviser Registration Depository (IARD)

96
Q

ADV Part I is a disclosure document for use by the _____ and the ________________.

A

SEC and the Administrator.

97
Q

What types of changes would be considered significant changes to the adviser’s ADV?

A

Change in fees, custody, and the name or location of adviser

98
Q

What is a consent to service of process?

A

A document appointing the Administrator as attorney for any non-criminal legal complaints issued against a registrant

99
Q

What is Part II of Form ADV?

A

The portion of an IA’s application that may be used to satisfy the Brochure Rule

100
Q

Identify the acronym: USA

A

Uniform Securities Act

Series 63 (4 decks)

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