Law, Regulation, & Guidelines Flashcards
Chapter 1
What is the definition of “state”?
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.
What is the definition of a “security”?
includes, but is not limited to, common stock, bonds, option contracts, and variable annuities
What is the definition of a “person”?
any legal entity that is not deceased, is not a minor, and is not mentally incompetent
Under the Uniform Securities Act, what is included in the definition of “person”?
individuals, corporations, partnerships, sole proprietorship, issuers, and state administrators (both office and individual)
Who is an issuer?
any person who issues or proposes to issue any security - includes US, state, local/foreign governments, corporations, partnerships
Who is a broker-dealer?
a person in the business of effecting transactions in the securities for the accounts of others or for its own account
When is the firm acting as a broker?
will locate the other side of the trade & charges a commission
When is the firm acting as a dealer?
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
What is the purpose of a dealer?
provides liquidity by publishing quotes in NASDAQ marketplace (market maker)
In the US, what are the two different types of agents?
one who represents a broker-dealer and one who represents an issuer of securities
Who is an agent of a broker-dealer?
non-clerical individual who represents a broker-dealer in effecting securities transactions (salespersons)
required to register as an agent
Who is an agent of an issuer?
non-clerical individual who represents an issuer in effecting securities transactions involving the issuer’s securities with the public
Who is an investment advisor?
any person (usually a firm), for compensation, engages in the business of providing others with securities-related advice, reports, or analysis
To meet the definition of an investment advisor, a person must satisfy all three parts of the ABC test by:
- proving Advice about securities
- providing these services as a Business
- receiving Compensation for these services
What is an investment advisor representative?
any partner, officer, director, or other individual associated with an investment advisor and
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?
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.
What is another name for investment advisors or investment advisor representatives?
registered investment advisors and registered investment advisor representatives
What is the Uniform Securities Act?
not the actual law of any one state, but it is a the blueprint
Who is the Administrator?
state securities regulator, person responsible for administrating and enforcing the securities law in a state and educating investors
What is the fundamental mission of the administrator?
protect the consumers who purchase securities or pay for investment advice within the state
In some states who can carry out the roles of the administrators?
special official - such as the Securities Commissioner or the Secretary of State
What is the North American Securities Administrators Association (NASAA) responsible for?
updating the Uniforms Securities Act as well as maintaining content of the Series 66 exam
What is the oldest international organization devoted to investor protection?
organized in 1919, NASAA
Who currently holds NASAA ‘s current membership?
67 state, provincial, and territorial securities administrators: 50 US states, DC, Puerto Rico, US Virgin Islands, Canada, Mexico
What organization released Model Rules and Statements of Policy that serve to clarify parts of the Uniform Securities Act?
NASAA - North American Securities Administrators Association
Are Model Rules and Statements of Policy legally binding?
No, they are a template that states can chose to adopt in part or total
What did the Securities Act of ‘33 do?
requires certain securities be registered with SEC in order to be offered or sold to the public
Which act established the Securities Exchange Commission?
Securities Act of ‘34
What is the Securities Act of ‘34?
established the SEC and governs the trading (secondary) market
What is the SEC?
federal regulatory agency with the duty to enforce federal rules and regulations, including registration of certain financial professionals
What is the Investment Advisors Act of ‘40?
governs investment advisor registration also incorporated into the USA
What is the National Securities Markets Improvement Act of of ‘96?
eliminates the duplication of the state and federal securities regulation
Securities exempt from formal state registration, classified as federal covered securities by NSMIA are:
Securities on US exchanges,
Certain Regulation D offerings (private placements), Municipal securities issued outside the state, securities issued by registered investment companies (mutual funds)
