Law, Regulation, & Guidelines

Question 1

What is the definition of “state”?

Answer 1

Uniform Securities Act includes a state, commonwealth, territory
or possession of the United States, including the District of Columbia and the commonwealth of
Puerto Rico.

Question 2

What is the definition of a “security”?

Answer 2

includes, but is not limited to, common stock, bonds, option contracts, and variable annuities

Question 3

What is the definition of a “person”?

Answer 3

any legal entity that is not deceased, is not a minor, and is not mentally incompetent

Question 4

Under the Uniform Securities Act, what is included in the definition of “person”?

Answer 4

individuals, corporations, partnerships, sole proprietorship, issuers, and state administrators (both office and individual)

Question 5

Who is an issuer?

Answer 5

any person who issues or proposes to issue any security - includes US, state, local/foreign governments, corporations, partnerships

Question 6

Who is a broker-dealer?

Answer 6

a person in the business of effecting transactions in the securities for the accounts of others or for its own account

Question 7

When is the firm acting as a broker?

Answer 7

will locate the other side of the trade & charges a commission

Question 8

When is the firm acting as a dealer?

Answer 8

effects securities transactions for its own account, stands ready to take the other side of any transaction, buying inventory with markdown or selling with a markup

Question 9

What is the purpose of a dealer?

Answer 9

provides liquidity by publishing quotes in NASDAQ marketplace (market maker)

Question 10

In the US, what are the two different types of agents?

Answer 10

one who represents a broker-dealer and one who represents an issuer of securities

Question 11

Who is an agent of a broker-dealer?

Answer 11

non-clerical individual who represents a broker-dealer in effecting securities transactions (salespersons)
required to register as an agent

Question 12

Who is an agent of an issuer?

Answer 12

non-clerical individual who represents an issuer in effecting securities transactions involving the issuer’s securities with the public

Question 13

Who is an investment advisor?

Answer 13

any person (usually a firm), for compensation, engages in the business of providing others with securities-related advice, reports, or analysis

Question 14

To meet the definition of an investment advisor, a person must satisfy all three parts of the ABC test by:

Answer 14

1. proving Advice about securities
2. providing these services as a Business
3. receiving Compensation for these services

Question 15

What is an investment advisor representative?

Answer 15

any partner, officer, director, or other individual associated with an investment advisor and

Question 16

Harrison Investment Advisory Services employs several individuals who sell the firm’s
portfolio management services to institutional and non-institutional clients. Last
month, Marti led the team in sales of Harrison’s Advisory Services. Based on Marti’s
activities, would she be defined as an investment adviser? What role does Harrison
play in this scenario?

Answer 16

Since Marti is involved
in soliciting the investment advisory services that Harrison offers, she would be
considered an investment adviser representative. Harrison (the firm) would be
considered an investment adviser.

Question 17

What is another name for investment advisors or investment advisor representatives?

Answer 17

registered investment advisors and registered investment advisor representatives

Question 18

What is the Uniform Securities Act?

Answer 18

not the actual law of any one state, but it is a the blueprint

Question 19

Who is the Administrator?

Answer 19

state securities regulator, person responsible for administrating and enforcing the securities law in a state and educating investors

Question 20

What is the fundamental mission of the administrator?

Answer 20

protect the consumers who purchase securities or pay for investment advice within the state

Question 21

In some states who can carry out the roles of the administrators?

Answer 21

special official - such as the Securities Commissioner or the Secretary of State

Question 22

What is the North American Securities Administrators Association (NASAA) responsible for?

Answer 22

updating the Uniforms Securities Act as well as maintaining content of the Series 66 exam

Question 23

What is the oldest international organization devoted to investor protection?

Answer 23

organized in 1919, NASAA

Question 24

Who currently holds NASAA ‘s current membership?

Answer 24

67 state, provincial, and territorial securities administrators: 50 US states, DC, Puerto Rico, US Virgin Islands, Canada, Mexico

Question 25

What organization released Model Rules and Statements of Policy that serve to clarify parts of the Uniform Securities Act?

Answer 25

NASAA - North American Securities Administrators Association

Question 26

Are Model Rules and Statements of Policy legally binding?

Answer 26

No, they are a template that states can chose to adopt in part or total

Question 27

What did the Securities Act of ‘33 do?

Answer 27

requires certain securities be registered with SEC in order to be offered or sold to the public

Question 28

Which act established the Securities Exchange Commission?

Answer 28

Securities Act of ‘34

Question 29

What is the Securities Act of ‘34?

Answer 29

established the SEC and governs the trading (secondary) market

Question 30

What is the SEC?

Answer 30

federal regulatory agency with the duty to enforce federal rules and regulations, including registration of certain financial professionals

Question 31

What is the Investment Advisors Act of ‘40?

Answer 31

governs investment advisor registration also incorporated into the USA

Question 32

What is the National Securities Markets Improvement Act of of ‘96?

Answer 32

eliminates the duplication of the state and federal securities regulation

Question 33

Securities exempt from formal state registration, classified as federal covered securities by NSMIA are:

Answer 33

Securities on US exchanges,
Certain Regulation D offerings (private placements), Municipal securities issued outside the state, securities issued by registered investment companies (mutual funds)