General Financial Planning Principles Sections 8 - 10

Question 1

What does the Securities Act of 1933 require?

Answer 1

requires the registration of new issues of securities or issues in the primary market and provides applicable procedures for issuing an initial public offering (IPO)

Question 2

What securities are exempt from the registration requirement from Securities Act of 1933? (4)

Answer 2

1. Intrastate offerings
2. Securities of municipal, state, and federal government
3. Offerings of limited sizes
4. Private offerings to a limited number of persons or institutions

Question 3

Describe the effects of the Glass-Steagall Act of 1933? (3)

Answer 3

1. Prohibited commercial banks from acting as investment bankers
2. Established the Federal Deposit Insurance Corporation (FDIC)
3. Prohibited commercial banks from paying interest on demand deposits.

Question 4

What did the Securities Act of 1934 do? (2)

Answer 4

1. Extended the regulations to securities sold in the secondary market
2. Established the SEC

Question 5

Who is exempt from the Securities Act of 1934?

pg 84

Answer 5

Securities of federal, state, and local governments that are not traded across state lines, and other securities specified by the SEC are exempt from registering with the SEC

Question 6

What does the Investment Company Act of 1940 require?

Answer 6

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

Question 7

What did the Maloney Act of 1938 do?

Answer 7

It brought the OTC market under the regulation of the SEC and called for self-regulation of the OTC securities dealers

Question 8

What does the Federal Bankruptcy Act of 1938 require? (2)

Answer 8

1. As a amended in 1978, it 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 troubled firms and provides for the reorganization of trouble firms that may be able to survive

Question 9

Describe the Investment Advisers Act of 1940? (3)

Answer 9

1. regulates investment advisers
2. requires that firms or sole practitioners compensated for advising other about securities must register with the SEC
3. Generally, only advisers who have at 100 million of asset under management or advise a registered investment company must register with the SEC

Question 10

What did the McCarran Ferguson Act of 1945 do?

Answer 10

It clarified that insurance was to be regulated at the state level

Question 11

What did the Sarbanes-Oxley Act of 2002 do? (2)

Answer 11

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

Question 12

What did the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 do?

Answer 12

1. It reformed the U.S. regulatory system in a number of areas (consumer protection, trading restrictions, credit ratings, regulation of financial products, corporate governance, disclosure, and transparency).
2. It modified the Investment Advisers Act of 1940 thresholds for registration with the SEC (Small Advisers, Mid-size Advisers, and Large Advisers)

Question 13

According the SEC, a person who engages in any of what activities is classified as an Investment Adviser? (3)

Answer 13

1. Provides advice or issues reports or analyses regarding securities
2. Is in the business of providing such services
3. Provides such services for compensation

Question 14

What organizations and individuals are excluded for the SEC’s definition as an Investment Adviser? (5)

Answer 14

1. Banks and holding companies (except as amended by the Gramm Leach-Bliley Act of 1999)
2. Lawyers, accountants, engineers, or teachers if there advisory services is incidental to their jobs
3. Brokers or dealers if there advisory services is incidental to their jobs
4. Publishers of bona fide newspapers or magazines
5. Persons whose advice is related only to securities that are direct obligations of or guaranteed by the US

Question 15

What document is use for Investment Advisers to disclose their background and business practices?

Answer 15

Part 2A of Form ADV

Question 16

When must Part 2A of Form ADV be given to clients according to investment advisory regulations?

Answer 16

It should be given in advance or no later than the timing of entering into a contact

Question 17

When does the Federal Truth-in-Lending Act (Consumer Protection Act) as administrated by the Federal Reserve Board apply? (3)

Answer 17

1. When the debtor is a natural person
2. When the creditor in the ordinary course of its business is a lender, seller, or provider of services
3. When the amount being financed is no more than $25,000 or its secured by real property or personal property

Question 18

Fair Credit Billing Act - Billing Disputes - what must a credit cardholder do if they believe an error has been made by an issuer?

Answer 18

The cardholder may suspend payment but must notify and give an explanation to the card issue concerning an error within 60 days of receipt of the bill

Question 19

Fair Credit Billing Act - Billing Disputes - what must the issuer of a credit card do if one of their customers notifies them of a billing dispute?

Answer 19

They must acknowledge the notification within 30 days and they have 90 days to resolve the dispute

Question 20

What does the Equal Credit Opportunity Act prohibit?

Answer 20

It prohibits discrimination based on race, religion, national origin, color, sex, martial status. age or receipt of certain types of income.

Question 21

The Credit Card Accountability Responsibility and Disclosure Act of 2009 - Credit cardholders must be ______ days notice of any interest rate increases. (and) Credit cards will not be issued to applicant under ……

Answer 21

45 days / under age 21 unless there is a cosigner

Question 22

What debt can’t be discharged under Chapter 7? (6)

Answer 22

1. Back taxes (up to three years)
2. Debts associated with frad activities, embezzlement, or misappropriation
3. Alimony and child support
4. Debt due to intentional torts claims
5. Student loans
6. Consumer debt of more than $650.00 for luxury goods or services owed to a single creditor within 90 days of the order for relief

Question 23

Who can file for Chapter 11 (reorganization)?

Answer 23

Any individual, business firm or corporate debtor is eligible for Chapter 7 liquidation with the exemption of stockbrokers, commodities brokers, and railroads