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Series 63 flashcards
1
Q

True or False: The sale of securities to a pension plan is considered an exempt transaction under the USA.

A

True

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2
Q

Registration by Filing (Notification) requires issuers to be in business at least _____ months preceding registration.

A

36

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3
Q

An intra-state offering would use which method of state securities registration?

A

Qualification

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4
Q

What method of state securities registration requires issuers to wait to hear from the Administrator before selling?

A

Qualification

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5
Q

To use Filing (Notification) to register stock, the offering price must be at least $______ per share.

A

$5.00

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6
Q

Registration by Filing (Notification) requires that the underwriting commission be no more than _____%.

A

10%

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7
Q

Registration by Coordination has a minimum cooling-off period of _____ days.

A

10 days

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8
Q

Which method of state securities registration would likely be used for an IPO being offered in several states?

A

Coordination

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9
Q

Registration by Coordination requires issuers to meet requirements of the USA as well as what other Act?

A

The Securities Act of 1933

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10
Q

An electronic system used to register investment advisers is called ____________________

A

Investment Adviser Registration Depository (IARD).

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11
Q

True or False: A Consent to Service of Process is an example of an exculpatory clause.

A

False. Exculpatory clauses are waivers absolving agents from wrongdoing. The waivers are null and void under the USA.

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12
Q

A surety bond may be required if an investment adviser has _____________ or __________ of client assets.

A

discretion or custody

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13
Q

In place of a surety bond, the Administrator will accept a deposit of _______ or _____________.

A

cash or securities.

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14
Q

True or False: A Consent to Service of Process must be filed by BDs, but not their agents.

A

False. A Consent to Service of Process is required of all registrants.

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15
Q

True or False: A successor advisory firm must pay a new filing fee, but need not file a new application.

A

False. The successor firm must update its application, but not pay a new filing fee.

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16
Q

The application for registration of an agent or IAR becomes effective in _____ days.

A

30

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17
Q

The application for withdrawal of registration of an agent or IAR becomes effective in _____ days.

A

30

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18
Q

BD records must be kept for at least ____ years.

A

3

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19
Q

IA records must be kept for at least ____ years.

A

5 years.

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20
Q

True or False: A state may require a registration fee from the issuer of a Nasdaq security.

A

False. Nasdaq securities are federal covered securities.

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21
Q

True or False: A state may require notice filing by an issuer of an NYSE security.

A

True. Notice filing is the requirement to provide the state with the same information that was filed with the SEC.

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22
Q

True or False: An Administrator may not require a sales report from the issuer of an OTC security.

A

False

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23
Q

What form is used to notify Administrators that an IA is maintaining custody of client assets?

A

Form ADV

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24
Q

What document, regularly provided to clients, will IAs use to notify clients of the location of their securities?

A

The client’s account statement

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25
Q

Investment advisers with custody must have an annual audit done by a(n) ____________________.

A

independent CPA.

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26
Q

If a BD’s net capital falls below the required minimum, it must notify the Administrator within ___ business day(s).

A

1

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27
Q

A balance sheet is provided with Form ADV if IAs require pre-paid fees of $_____ or more, ___ months or more in advance.

A

$500 or more, 6

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28
Q

If an IA has custody or discretion, it must include a _________________ with their Form ADV and brochure.

A

balance sheet

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29
Q

An IA’s Brochure must have the same information that appears in what part of Form ADV?

A

Part II of Form ADV

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30
Q

True or False: An agent whose client moves to a new state may not contact the client until registered in the new state.

A

False. The agent may engage in transactions with the client for 60 days if registration is pending in the new state.

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31
Q

May an agent whose client is visiting another state sell securities to the client without being registered in the state?

A

Yes, provided the client is in the state temporarily.

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32
Q

True or False: Canadian agents are not permitted to effect trades with existing Canadian clients temporarily in the U.S.

A

False. Provided the relationship with the client existed prior to entering the U.S., trades may be effected.

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33
Q

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?

A

Yes, since the IAR has an office in State A. The client number is not relevant because of the office location.

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34
Q

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?

A

He must register in State B since he has an office in the state. The number of clients is not relevant.

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35
Q

An IAR has no place of business in State A, but has 6 or more individual clients in State A. Where must she register?

A

She must register in any state where she has 6 or more individual clients (even if she has no office in the state).

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36
Q

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?

A

No. IARs of federal covered advisers are only required to register in states in which they have an office.

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37
Q

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?

A

Yes. IARs of state-regulated IAs register where they have an office and where they have 6 or more individual clients.

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38
Q

An agent whose registration has been revoked must be granted a hearing, if requested, within _____ days of the request.

A

15

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39
Q

If an agent has withdrawn registration, the Administrator may still take action for ___ year(s) after the withdrawal.

A

1

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40
Q

Define an investment contract (according to the Howey Test).

A

An investment of money, in a common enterprise, with expectation of a profit due to efforts of third-party management.

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41
Q

A prospectus mailed by an agent in one state to a client in another state is considered an offer in which state(s)?

A

Both states

42
Q

True or False: A gift of assessable stock is considered both an offer and sale.

A

True

43
Q

True or False: A gift of non-assessable stock is considered both an offer and sale.

A

False

44
Q

Is the payment of a stock dividend considered an offer or sale?

A

No

45
Q

Is the conversion of a bond into stock considered an offer or sale?

A

No

46
Q

If shares of stock are freely given with the purchase of a bond, is this considered an offer and sale?

A

Yes

47
Q

True or False: An Administrator may issue a cease-and-desist order before a violation has occurred

A

True

48
Q

True or False: An Administrator may issue an injunction.

A

False. An injunction may only by issued by a court. (The administrator may request it)

49
Q

Under the Uniform Securities Act, the statute of limitations for fraud is ____ years.

A

5

50
Q

The statute of limitations for criminal violations of the Uniform Securities Act is ____ years.

A

5

51
Q

Statue of limitations for USA civil violations is ____ yrs. of occurrence or ____ yrs. of discovery, whichever is first.

A

3, 2

52
Q

Maximum criminal penalties under the USA are a $________ fine and/or ____ years in prison

A

$5,000 fine and/or 3 years in prison.

53
Q

May an Administrator enter other states to investigate potential violations that occurred in his own state?

A

Yes, the Administrator has broad inspectorial power, which stretches beyond his own state

54
Q

True or False: The Uniform Securities Act is exactly the same law in every state.

A

False. The USA is a model law, not the actual law of any state.

55
Q

_________________ is an organization consisting of state Administrators.

A

The North American Securities Administrators Association (NASAA)

56
Q

Define NASAA

A

The North American Securities Administrators Association

57
Q

True or False: Securities issued by registered investment companies are considered federal covered securities.

A

True

58
Q

True or False: Issuers of federal covered securities may be required to pay a registration fee to a state Administrator.

A

True

59
Q

True or False: Securities traded on the NYSE may be required to pay a registration fee to a state Administrator

A

False

60
Q

Administrative cease-and-desist orders may be appealed in a state court if application is made within _____ days.

A

60

61
Q

Next week ABC plans to announce its earnings. If ABC’s CEO wants to sell some of her shares now, is the sale restricted?

A

Yes. Insiders are required to wait until an earnings report is released publicly before selling shares.

62
Q

After receiving an effective date, what information may an issuer change by amending its registration statement?

A

The number of shares being offered. A new registration is required to change offering price or underwriter compensation.

63
Q

The Telephone Consumer Protection Act (TCPA) allows calls from ________ to ________ local time of the called party.

A

8:00 a.m. to 9:00 p.m

64
Q

A BD located and licensed in Canada may contact what types of individuals in the U.S.?

A

Existing clients who are temporarily in the U.S.

65
Q

Identify 2 significant creations that are credited to the National Securities Markets Improvement Act (NSMIA).

A

Federal Covered Advisers and Federal Covered Securities

66
Q

Define NSMIA

A

National Securities Markets Improvement Act

67
Q

The ________________ is responsible for administering and enforcing the securities laws of a state.

A

Administrator

68
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

69
Q

In state law, individuals representing BDs in effecting securities transactions are referred to as ________.

A

agents.

70
Q

True or False: In state law, individuals representing issuers in effecting securities trades are ALWAYS deemed agents.

A

False. Individuals are not deemed agents if representing issuers of exempt securities or effecting exempt transactions.

71
Q

What restrictions exist in describing a fund as no-load?

A

It may have no front-end or deferred sales charge, and a 12b-1 fee may not exceed .25%.

72
Q

List some of the exclusions from the definition of a BD.

A

Agent, issuer, bank, or a BD with no office in the state that only deals with institutions or its existing clients

73
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.

74
Q

List the 4 categories of professionals who are excluded from the IA definition.

A

Lawyers, accountants, teachers, and engineers (remember L A T E)

75
Q

An ________ is any attempt or solicitation to acquire or dispose of a security for value.

A

offer

76
Q

A _______ is any agreement or contract to dispose of a security for value.

A

sale

77
Q

Regarding federal covered securities, may an Administrator cancel a registration?

A

No

78
Q

Regarding federal covered securities, may an Administrator prohibit the sale of the security in his state?

A

No

79
Q

Regarding federal covered securities, may an Administrator require the issuer to complete the notice filing?

A

Yes. Notice filing is the process by which information filed with the SEC is also filed/shared with the Administrator.

80
Q

True or False: Registration may be denied due to ANY misdemeanor convictions.

A

False. Registration may be denied for ANY felony conviction or securities-related misdemeanor conviction.

81
Q

How may the failure to pay the proper filing fee be corrected?

A

By paying the appropriate amount

82
Q

May the Administrator set minimum net capital requirements for BDs?

A

Yes, but the requirement on BDs may not exceed the federal (SEC) requirement.

83
Q

Is there a limit to the amount of net capital the Administrator may require of a BD?

A

Yes. The Administrator may not set a requirement that exceeds the federal (SEC) requirement.

84
Q

May the Administrator set minimum net worth requirements for IAs?

A

Yes, but no state may impose a requirement that exceeds the requirement of the IA’s home state.

85
Q

May federal covered adviser’s books and records be subject to inspection by an Administrator?

A

Yes

86
Q

True or False: An administrator may cancel a registration without the opportunity for a hearing.

A

True. Cancellation may be due to the death of an agent, or a firm no longer being in business.

87
Q

If a cease-and-desist order is issued against an agent, the agent must file an appeal within _____ days.

A

60

88
Q

If an appeal has been filed by an agent, does the appeal lift (suspend) the order?

A

No

89
Q

True or False: A client who receives a letter of rescission after selling the security may still initiate civil action.

A

True

90
Q

If an offer is made using television or radio, where is the offer considered to have been made?

A

In the state in which the broadcast or telecast originated

91
Q

If an offer is made using the mail, where is the offer considered to have been made?

A

In the state from which it originated and the state to which it is directed

92
Q

True or False: Offers made in a newspaper are deemed to have been made in any state in which the paper is circulated.

A

False. With newspapers, the offer is only considered to be made in the state in which it is published.

93
Q

With newspaper offers, no offer is made if more than __________ of the circulation is outside of the publishing state.

A

two-thirds

94
Q

As it applies to persons and securities, what does the term “exemption” mean in the USA?

A

Exemption signifies that a person or security is not subject to registration under the USA.

95
Q

As it applies to a BD or IA, what does the term “exclusion” mean in the USA?

A

Exclusion signifies that a person does not meet the definition of a BD or IA in the state.

96
Q

A securities firm that executes trades for its own account or the accounts of others is deemed a _______________.

A

broker-dealer (BD).

97
Q

Who manages accounts, solicits services, or makes recommendations on behalf of a registered investment adviser?

A

An investment adviser representative (IAR)

98
Q

What are the 3 components that must be met for a firm to be defined as an IA?

A

1) Provide advice regarding securities, 2) Do so as a business 3) Receive specific compensation (the ABC test)

99
Q

A _________ bond is posted to cover the potential costs of legal action taken against certain persons.

A

surety

100
Q

An individual who represents an issuer in selling registered, non-exempt securities for compensation is an ________.

A

agent.

Series 63 (4 decks)

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