flashcars 2 Flashcards
True or False: The sale of securities to a pension plan is considered an exempt transaction under the USA.
True
Registration by Filing (Notification) requires issuers to be in business at least _____ months preceding registration.
36
An intra-state offering would use which method of state securities registration?
Qualification
What method of state securities registration requires issuers to wait to hear from the Administrator before selling?
Qualification
To use Filing (Notification) to register stock, the offering price must be at least $______ per share.
$5.00
Registration by Filing (Notification) requires that the underwriting commission be no more than _____%.
10%
Registration by Coordination has a minimum cooling-off period of _____ days.
10 days
Which method of state securities registration would likely be used for an IPO being offered in several states?
Coordination
Registration by Coordination requires issuers to meet requirements of the USA as well as what other Act?
The Securities Act of 1933
An electronic system used to register investment advisers is called ____________________
Investment Adviser Registration Depository (IARD).
True or False: A Consent to Service of Process is an example of an exculpatory clause.
False. Exculpatory clauses are waivers absolving agents from wrongdoing. The waivers are null and void under the USA.
A surety bond may be required if an investment adviser has _____________ or __________ of client assets.
discretion or custody
In place of a surety bond, the Administrator will accept a deposit of _______ or _____________.
cash or securities.
True or False: A Consent to Service of Process must be filed by BDs, but not their agents.
False. A Consent to Service of Process is required of all registrants.
True or False: A successor advisory firm must pay a new filing fee, but need not file a new application.
False. The successor firm must update its application, but not pay a new filing fee.
The application for registration of an agent or IAR becomes effective in _____ days.
30
The application for withdrawal of registration of an agent or IAR becomes effective in _____ days.
30
BD records must be kept for at least ____ years.
3
IA records must be kept for at least ____ years.
5 years.
True or False: A state may require a registration fee from the issuer of a Nasdaq security.
False. Nasdaq securities are federal covered securities.
True or False: A state may require notice filing by an issuer of an NYSE security.
True. Notice filing is the requirement to provide the state with the same information that was filed with the SEC.
True or False: An Administrator may not require a sales report from the issuer of an OTC security.
False
What form is used to notify Administrators that an IA is maintaining custody of client assets?
Form ADV
What document, regularly provided to clients, will IAs use to notify clients of the location of their securities?
The client’s account statement
Investment advisers with custody must have an annual audit done by a(n) ____________________.
independent CPA.
If a BD’s net capital falls below the required minimum, it must notify the Administrator within ___ business day(s).
1
A balance sheet is provided with Form ADV if IAs require pre-paid fees of $_____ or more, ___ months or more in advance.
$500 or more, 6
If an IA has custody or discretion, it must include a _________________ with their Form ADV and brochure.
balance sheet
An IA’s Brochure must have the same information that appears in what part of Form ADV?
Part II of Form ADV
True or False: An agent whose client moves to a new state may not contact the client until registered in the new state.
False. The agent may engage in transactions with the client for 60 days if registration is pending in the new state.
May an agent whose client is visiting another state sell securities to the client without being registered in the state?
Yes, provided the client is in the state temporarily.
True or False: Canadian agents are not permitted to effect trades with existing Canadian clients temporarily in the U.S.
False. Provided the relationship with the client existed prior to entering the U.S., trades may be effected.
An IAR has an office in State A and has 4 clients who reside in the state. Is the IAR required to register in State A?
Yes, since the IAR has an office in State A. The client number is not relevant because of the office location.
An IAR of a federal covered adviser has an office in State B with 4 clients who live in State B. Where must he register?
He must register in State B since he has an office in the state. The number of clients is not relevant.
An IAR has no place of business in State A, but has 6 or more individual clients in State A. Where must she register?
She must register in any state where she has 6 or more individual clients (even if she has no office in the state).
An IAR of a federal covered adviser has no office in NY, but has 6 or more clients living in NY. Must he register in NY?
No. IARs of federal covered advisers are only required to register in states in which they have an office.
An IAR of a state-registered IA has no office in NJ, but has 6 or more clients living in NJ. Must she register in NJ?
Yes. IARs of state-regulated IAs register where they have an office and where they have 6 or more individual clients.
An agent whose registration has been revoked must be granted a hearing, if requested, within _____ days of the request.
15
If an agent has withdrawn registration, the Administrator may still take action for ___ year(s) after the withdrawal.
1
Define an investment contract (according to the Howey Test).
An investment of money, in a common enterprise, with expectation of a profit due to efforts of third-party management.
A prospectus mailed by an agent in one state to a client in another state is considered an offer in which state(s)?
Both states
True or False: A gift of assessable stock is considered both an offer and sale.
True
True or False: A gift of non-assessable stock is considered both an offer and sale.
False
Is the payment of a stock dividend considered an offer or sale?
No
Is the conversion of a bond into stock considered an offer or sale?
No
If shares of stock are freely given with the purchase of a bond, is this considered an offer and sale?
Yes
True or False: An Administrator may issue a cease-and-desist order before a violation has occurred
True
True or False: An Administrator may issue an injunction.
False. An injunction may only by issued by a court. (The administrator may request it)
Under the Uniform Securities Act, the statute of limitations for fraud is ____ years.
5
The statute of limitations for criminal violations of the Uniform Securities Act is ____ years.
5
Statue of limitations for USA civil violations is ____ yrs. of occurrence or ____ yrs. of discovery, whichever is first.
3, 2
Maximum criminal penalties under the USA are a $________ fine and/or ____ years in prison
$5,000 fine and/or 3 years in prison.
May an Administrator enter other states to investigate potential violations that occurred in his own state?
Yes, the Administrator has broad inspectorial power, which stretches beyond his own state
True or False: The Uniform Securities Act is exactly the same law in every state.
False. The USA is a model law, not the actual law of any state.
_________________ is an organization consisting of state Administrators.
The North American Securities Administrators Association (NASAA)
Define NASAA
The North American Securities Administrators Association
True or False: Securities issued by registered investment companies are considered federal covered securities.
True
True or False: Issuers of federal covered securities may be required to pay a registration fee to a state Administrator.
True
True or False: Securities traded on the NYSE may be required to pay a registration fee to a state Administrator
False
Administrative cease-and-desist orders may be appealed in a state court if application is made within _____ days.
60
Next week ABC plans to announce its earnings. If ABC’s CEO wants to sell some of her shares now, is the sale restricted?
Yes. Insiders are required to wait until an earnings report is released publicly before selling shares.
After receiving an effective date, what information may an issuer change by amending its registration statement?
The number of shares being offered. A new registration is required to change offering price or underwriter compensation.
The Telephone Consumer Protection Act (TCPA) allows calls from ________ to ________ local time of the called party.
8:00 a.m. to 9:00 p.m
A BD located and licensed in Canada may contact what types of individuals in the U.S.?
Existing clients who are temporarily in the U.S.
Identify 2 significant creations that are credited to the National Securities Markets Improvement Act (NSMIA).
Federal Covered Advisers and Federal Covered Securities
Define NSMIA
National Securities Markets Improvement Act
The ________________ is responsible for administering and enforcing the securities laws of a state.
Administrator
According to the USA, who is included under the term “person?”
Any legal entity, including individuals (clients/agents/IARs), BDs, IAs, issuers, corporations, and partnerships
In state law, individuals representing BDs in effecting securities transactions are referred to as ________.
agents.
True or False: In state law, individuals representing issuers in effecting securities trades are ALWAYS deemed agents.
False. Individuals are not deemed agents if representing issuers of exempt securities or effecting exempt transactions.
What restrictions exist in describing a fund as no-load?
It may have no front-end or deferred sales charge, and a 12b-1 fee may not exceed .25%.
List some of the exclusions from the definition of a BD.
Agent, issuer, bank, or a BD with no office in the state that only deals with institutions or its existing clients
What type of advice may lawyers, accountants, teachers and engineers provide and not be considered an IA?
Advice that is incidental to their profession. If a separate fee is charged for the advice, the exclusion is lost.
List the 4 categories of professionals who are excluded from the IA definition.
Lawyers, accountants, teachers, and engineers (remember L A T E)
An ________ is any attempt or solicitation to acquire or dispose of a security for value.
offer
A _______ is any agreement or contract to dispose of a security for value.
sale
Regarding federal covered securities, may an Administrator cancel a registration?
No
Regarding federal covered securities, may an Administrator prohibit the sale of the security in his state?
No
Regarding federal covered securities, may an Administrator require the issuer to complete the notice filing?
Yes. Notice filing is the process by which information filed with the SEC is also filed/shared with the Administrator.
True or False: Registration may be denied due to ANY misdemeanor convictions.
False. Registration may be denied for ANY felony conviction or securities-related misdemeanor conviction.
How may the failure to pay the proper filing fee be corrected?
By paying the appropriate amount
May the Administrator set minimum net capital requirements for BDs?
Yes, but the requirement on BDs may not exceed the federal (SEC) requirement.
Is there a limit to the amount of net capital the Administrator may require of a BD?
Yes. The Administrator may not set a requirement that exceeds the federal (SEC) requirement.
May the Administrator set minimum net worth requirements for IAs?
Yes, but no state may impose a requirement that exceeds the requirement of the IA’s home state.
May federal covered adviser’s books and records be subject to inspection by an Administrator?
Yes
True or False: An administrator may cancel a registration without the opportunity for a hearing.
True. Cancellation may be due to the death of an agent, or a firm no longer being in business.
If a cease-and-desist order is issued against an agent, the agent must file an appeal within _____ days.
60
If an appeal has been filed by an agent, does the appeal lift (suspend) the order?
No
True or False: A client who receives a letter of rescission after selling the security may still initiate civil action.
True
If an offer is made using television or radio, where is the offer considered to have been made?
In the state in which the broadcast or telecast originated
If an offer is made using the mail, where is the offer considered to have been made?
In the state from which it originated and the state to which it is directed
True or False: Offers made in a newspaper are deemed to have been made in any state in which the paper is circulated.
False. With newspapers, the offer is only considered to be made in the state in which it is published.
With newspaper offers, no offer is made if more than __________ of the circulation is outside of the publishing state.
two-thirds
As it applies to persons and securities, what does the term “exemption” mean in the USA?
Exemption signifies that a person or security is not subject to registration under the USA.
As it applies to a BD or IA, what does the term “exclusion” mean in the USA?
Exclusion signifies that a person does not meet the definition of a BD or IA in the state.
A securities firm that executes trades for its own account or the accounts of others is deemed a _______________.
broker-dealer (BD).
Who manages accounts, solicits services, or makes recommendations on behalf of a registered investment adviser?
An investment adviser representative (IAR)
What are the 3 components that must be met for a firm to be defined as an IA?
1) Provide advice regarding securities, 2) Do so as a business 3) Receive specific compensation (the ABC test)
A _________ bond is posted to cover the potential costs of legal action taken against certain persons.
surety
An individual who represents an issuer in selling registered, non-exempt securities for compensation is an ________.
agent.
