Laws & Regulations Flashcards
Uniform Securities Act (USA)
Questions about the USA are state law
National Securities Markets Improvement Act
Federal Act that addresses registration of investment advisers. State law cannot override federal laws
Investment Adviser
A Firm or a person that is registered (usually used to describe a firm/business)
110M+, 110-100M, 90M. Different Registrations.
Is not: Bank, IAR (representatives), LATE (Lawyers, Accountants, Teachers, Engineers) (SEC registration aka Federal Registration)
Broker/Dealer
Firm or individual. Broker: Facilitate trading for others. Dealer: Buying and selling investments for their own accounts.
A person
Is not Deceased, Incapacitated, a Minor
Is: individual, corp, partnership, association, joint venture/stock company, estate, business trust, trust, unincorporated org, gov.
LATE acronym for those not an Investment Advisor
Lawyers, Accountants, Teachers, Engineers. These might have investment advice that is incidental portion of their business.
Notice Filing
Federal advisors don’t need to register at the state level. But sometimes need to file a Notice Filing and pay a fee in each state they do business in. (AKA Consent to Service of Process)
Form ADV (ADViser) part 1
General info on the adviser. Name, address, type of business entity, any past sanctions. Asks questions to determine if granting registration is revoked or approved.
Form ADV (ADViser) part 2A
A written brochure containing 2A info. Given to each client 2 days before signing OR given 5 days to nullify contract. And offered annually. Business practices, fees, conflicts of interest.
Investment Advisors are Exempt from SEC registration if…
They have no place of business in the state.
And
Their only clients are other investment advisers.
OR
They solicit no more than 5 retail clients in that state in the preceding 12-month period.
Investment Adviser Representative (IAR)
Manages accts for clients, makes recommendations/advice, solicits services, supervises employees who do the above tasks.
Form U4
(Uniform Application for Securities Industry Registration or Transfer)
IA’s can file it for their IAR’s to be registered in the correct jurisdiction.
Form U5
(Uniform Termination for Securities Industry Registration)
An IA used this to terminate an IAR’s association with the IA
Continuing Education (CE) Requirements for every reporting period of 12 months
An IAR needs
IAR Ethics and Professional Responsibility Requirement- 6 credits with at least 3 hrs in ethics.
IAR Products and Practice Requirement- 6 credits
Agent
Those who represent a broker/dealer or issuer. Who attempts to affect trades.
Must register with the (USA) Uniform Securities Act
Form U-2
(Uniform Consent to Service of Process)
Registration for IA’s, IAR’s, Broker/Dealer, and agents. Submitted to the administrator in each state they will effect transactions.
Investment Advisors must keep records for…
5 years. (Broker/dealers are 3 years)
List of non-securities
Fixed insurance policies, fixed Annuities, commodities Futures (not including options), pensions, IRA’s, Keoghs, condominium for residence, currency, and Collectibles.
When the sale of a security is for the benefit of the Issuer.
Issuer Transaction or Primary Transaction(Cuz it’s in the Primary market)
When the sale of a security is not directly for the benefit of the Issuer
Non-Issuer Transaction or Secondary Transaction(Cuz it’s in the secondary market)
Sale
Anything with a Contract (Contract for Sale)
Blue-Skying
The process of registering a security before the state.
-Registration by Filing
-Registration by Coordination
-Registration by Qualification
-Least costly and done by corps that are well- established and federally covered.
-If the same offering is to be done with the SEC. Common for IPO’s. Very stringent/difficult.
-Most difficult. For any security that’s not SEC filed IPO and doesn’t meet the usual requirements.
Exempt Securities ( exempt from state registration and advertising filing requirements)
-Issued by U.S. Gov, state or Federal
-Canadian, Mexico (not Mexico City), other diplomatic relations.
-Banks, savings and Loans, trust company, federal credit unions
-Building and loan association issues.
-Public Utility issues
-Securities on the NYSE or Nasdaq that’s registered with SEC already. (Federal covered securities)
-Promissory Notes that mature within 9 months 270 days. Corporate Commercial paper
-Pensions, stock purchase plan securities
-Municipal notes and bonds sold outside the state.
