KP1: Definitions Under the Uniform Securities Act

Question 1

Who drafted the original Uniform Securities Act (USA) ?

Answer 1

The National Conference of Commissioners on Uniform State Laws (NCCUSL)

Question 2

What is a cease and desist order?

Answer 2

This order is used by the Administrator whenever it appears that any registered person has
engaged,
or is about to engage
in any act or practice constituting a violation of any provision of the USA

Question 3

When may the Administrator issue a cease and desist order?

Answer 3

The Administrator can issue the order with or without a prior hearing, against the person or persons engaged in prohibited activities.
This directs them to cease and desist from any illegal activity
(this only applies to registered persons, not securities)

Question 4

What is a stop order?

Answer 4

This is used to deny effectiveness to, or suspend or revoke the effectiveness of any registration statement
(this only applies to securities and not professionals)

Question 5

Summary Order (Acting Summarily)

Answer 5

The administrator has the power to “act without prior notice” with regard to the registration of both persons and securities.
There are three cases where this power applies in the USA

Question 6

What are the three cases that the Administrator may act Summarily

Answer 6

Postponing or suspending the registration of any

securities professional pending a final determination of a proceeding related to a problem
a Security pending a final determination of a proceeding relating to a problem
Denying or revoking a specific security or transaction exemption

Question 7

What must the Administrator do upon the entry of a Summary Order?

Answer 7

The Administrator must promptly notify all interesting parties that the order has been
Entered
The Reason for the Order
and that within 15 days after the receipt of a written request, a hearing will be granted

Question 8

What is a Final Order?

Answer 8

No Final order may be entered without:
Appropriate prior notice to the interested parties
the opportunity for a hearing
written findings of fact and conclusions of law

Question 9

What are blue sky laws?

Answer 9

This term is used to refer to state securities laws

Question 10

what is the primary function of a broker dealer?

Answer 10

Their primary function is making SECURITIES transactions

Other types of investments (i.e real estate and commodities do not apply)

Question 11

Unless otherwise stated, all broker deals must register with?

Answer 11

All broker dealers must register with both the SEC and the state(s)

Question 12

Define an Agent

Answer 12

This is any individual who represents a broker-dealer or issuer in
Effecting
or
ATTEMPTING
to effect purchases or sales of securities

Question 13

What is the function of an Agent?

Answer 13

Their function is to be involved in securities sales or SUPERVISE those who do
Clerical or ministerial functions are EXCLUDED from the definition

(most cases they represent BD, but can sell securities on behalf of the issuer)

Question 14

Define an Investment Adviser

Answer 14

They are any person:
Who for COMPENSATION
engages in the business of advising others, either directly or indirectly through
Publications or Writings
as to the value of securities or advisability of investing in, purchasing or selling securities

or for COMPENSATION and as part of regular business
issues or promulgates analyses or reports concerning securities

Question 15

Under the NSMIA of 1996 where do investment advisers register?

Answer 15

IAs register with EITHER the SEC (Federal Covered Advisers)
or the state (state-registered)
but NEVER both!

Question 16

Define Investment Adviser Representative

Answer 16

They are any INDIVIDUAL who represents an Investment Adviser performing duties related to the giving of or soliciting for advisory services.
These are always individuals (natural persons)

Question 17

What is an associated person?

Answer 17

An associated person is any partner, officer, or director of the BD or IA
including any employees of the BD or IA

Question 18

What is the function of an Associated Person

Answer 18

Their functions are solely clerical or ministerial, and are not included in the meaning of the term

Question 19

Define an issuer

Answer 19

An issuer is any person who issues or PROPOSES to issue an security
They primarily included corporations and governments

Question 20

In issuer transactions who receives the proceeds

Answer 20

The issuer of the security receives the proceeds of a securities offering

Question 21

What is a de minis?

Answer 21

This term means “about minimal things”
It describes an exemption available to IAs and IARs
Applies to when they have
No place of business in a state
&
The number of retail investors is a small number (five or fewer on the exam)

Question 22

What is included in the term institution

Answer 22

Banks
Trust Companies
Savings Institutions
Savings and Loans Associations
Insurance Companies 
Investment Companies 
Employee Benefit Plans (not less the 1MM) 
Governmental Agencies or Instrumentalities