IAs, IARs, Broker Dealers, & Agents Flashcards
What is the definition of a broker-dealer?
Person engaged in business of effecting transactions in securities for the account of others or for his own account
For broker-dealers, who specifically is excluded from registration?
Agents, Issuers, banks,
Canadian (limited registration)
Institution rule (doesn’t need to register if only engaging institutions)
Vocation Rule (No registration if engaging current clients visiting a state)
“V-I” not “V-I-D”
What is the institution rule?
A person is exempt from registration if they are only engaging institutions (and no office in state)
What is the vocation rule?
A person is exempt from registration if engaging current clients visiting a different state (and no office in state)
What is an Investment Adviser? (Hint: ABC)
It is a person offering securities Advice as a regular Business for Compensation
Who is excluded from having to register at the state level as an Investment Adviser?
Banks, Savinfs and Loans, LATE (lawyers, accountants, teachers, engineers),
BDs and agents if they do not charge advisory fees, Media programs if just general advice, Federally-covered advisers
In what situations is a person exempt from registering? (Think rules)
Vocation rule (no registration if engaging CURRENT clients visiting a different state)
Institution Rule (no registration if only engaging institutions
De Minimis Rule (no registration if 5 or feeeer retail clients in a state within a 12 month period
(V-I-D)
Think EXEMplary, like our VIDeo from senior year
For how long must IAs retain records?
How about broker dealers? And how long must those records be readily available (for both of them)?
5 years for IAs
3 years for BDs
2 years readily accessible
What is the definition of an Agent?
An individual representing a broker-dealer or issuer in effecting securities transactions
VID applies to _____ and _____
But VI applies to ____ and ______
vocation rule, institutions rule, and de Minimis exemption apply to IAs and IARs
The de Minimis exemption does not apply to broker-dealers or agents
What form do IARs and agents have to fill out in order to register at the state level ? Who files it for IARs and who files it for Agents?
U4
For IARs, at the state level, the IA files it
For AGENTS, both the agent and BD file it
Who files form U4 for IARs if the IA they work for is federally covered?
The IAR does it themselves
For civil liabilities under the USA, what is the statute of limitations ?
3 years from occurrence, 2 years from discovery
What is the maximum penalty for willfully violating the law under USA?
3 years in jail, 5k fine
What is the right of rescission? How long does the client have to accept?
an IA/IAR that unknowingly broke the law when effecting a transaction can offer to repurchase the security at original cost + interest and legal fees, minus income.
30 days
Who is a person, and who is a non-person
A person is anyone who can enter into a legally-binding contract.
A non-person are minors, dead people, and incapacitated
At what point (AUM) does an Adviser become eligible for being Federally covered? And what point is it mandatory for them to register at the federal level with SEC
At 100 million, you become eligible
At 110 million you have to register with SEC (you also have to register with the SEC if you advise registered investment companies)
What are federally covered securities?
Describe what they are, and then name the 3
They are securities that are subject to SEC regulation and are exempt from state registration
Exchange listed securities
Investment company securities
Regulation D offerings (private placements)
What is an offer?
It is an ATTEMPT to dispose of, or solicitation of an offer to buy, a security for value
What is a sale?
A sale is a contract to sell or dispose of a security
What are considered offers and/or sales?
Bonus offer of securities
Gift of assessable stock
Offer of warrants, rights, derivatives, or convertibles
What are not considered offers and/or sales?
Bona Fide pledges or loans
Gift of non-assessable stock
Stock dividends or corporate actions
What is the net worth requirement for investment advisers to have in order to maintain custody of client funds?
35,000 net worth
What securities are exempt from state registration?
In addition to SIDDEE-OE, securities listed on common stock exchanges are exempt from registering (NYSE, NASDAQ for example)
SISDEE-OE
-Securities sold to qualified purchasers
-Investment company securities
-securities and transactions exempt from federal registration
- debt securities with maturities of less than 270 days and sold in denominations of 50k or more
- exempt issuers
-employee benefit plans
- option contracts
- equipment trust securities issued by a federally covered or exempt issuer
Who are exempt issuers
US federal government, state government, and municipal government
Foreign National governments
Canadian federal and municipal governments (NOTE: NOT Canadian BANKS)
Insurance companies
Banks and trusts
Credit unions and savings and loans
Common carriers (railroad, trucking airlines
Public utility securities
UFC- IB-CCP + religious and charitable orgs lol
List some of the exempt transactions:
Private placements/ Regulation D offerings
Reg A offerings
Transactions with financial institutions (including pension plans with at least 1 milly in assets)
Transactions with Fiduciaries (trustees, executors, guardians, sheriffs, administrators, receivers)
Transactions with underwriters
Unsolicited orders (administrator may require proof)
Transactions in MBSs,
Pledges
Offers to Existing Securities Holders
Pre-organization Certificates
Isolated non-issuer transactions
Non-issuer transactions
What securities are exempt from registration requirements of the Securities Act of 1933?
Securities issued by exempt issuers
Short term debt instruments with less than 270 days to maturity
Exempt issuers include
US federal, state, municipal governments
Foreign National governments
Canadian federal and municipal governments
Insurance companies
Banks and trusts
