Laws, Regulations, and Guidelines

Question 1

Definition: Administrator

Answer 1

Office or agency that has complete responsibility for administering the securities laws of the state.

Question 2

Definition: Person

Answer 2

Individual, corporation, partnership, association, joint-stock company, trust, unincorporated org, government, or political subdivision. (Easier to remember ‘non-person’: 1) minor, 2) deceased individual, 3) individual declared mentally incompetent).

Question 3

Uniform Securities Act of 1956 (USA)

Answer 3

USA is a law created as a starting point for state-level securities regulation. The purpose of the USA is to deal with securities fraud at the state level and to assist the SEC in enforcement and regulation.

Question 4

Investment Advisor

Answer 4

Three prong test: 1) gives advice to others on securities, 2) does so as part of a regular business activity, 3) receives compensation for performing this activity.

Question 5

Compensation

Answer 5

Includes advisory fees, commissions, or other types of fees relating to the service rendered. Can be directly or indirectly paid.

Question 6

Definition: Institution

Answer 6

Includes banks, trust companies, S&L associations, insurance cos., investment cos., employee benefit plans ($1 million or more), and gov agencies or instrumentalities. Included in the term ‘person’.

Question 7

Large Investment Advisers

Answer 7

At least $100 million or more in assets under management, eligible for SEC registration; once AUM reaches $110 million, SEC registration is mandatory. State registration is not required.

Question 8

dividend

Answer 8

A distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders.

Question 9

Small Investment Advisers

Answer 9

AUM of less than $25 million. Registration with SEC is prohibited (unless adviser to investment co. registered under the Investment Co. Act of 1945). Registration is usually required with the state. If required to register in 15 or more states, prohibition is lifted, and SEC registration is permitted.

Question 10

Registration Process

Answer 10

With state securities Administrator: 1) submit an application, 2) provide a consent to service of process, 3) pay filing fees, 4) post a bond (if required), 5) pass examination (if required). Use Form ADV to register with SEC; register with states; amend registrations.