Laws, Regulations and Guidelines Overview Flashcards
What rules govern the registration of an issue in any state in which it will be offered?
Blue-Sky Laws
True or False: Blue-Sky Laws apply to broker-dealers and agents operating within a state.
True
How is a firm acting if it is trading for, or from, its own inventory?
As a principal / dealer
How is a firm acting if it effects trades on behalf of its customers, without taking the other side of the trade?
Agent or broker
True or False: A firm producing investment research for BDs to deliver to clients is considered an IA under the USA.
True. Since advice is being provided, as a business, and compensation is received, the ABC test is met.
True or False: The Uniform Securities Act is exactly the same law in every state.
False. The USA is a model law, not the actual law of any state.
According to the USA, who is included under the term “person?” 6
Any legal entity, including
- individuals (clients/agents/IARs),
- BDs,
- IAs,
- issuers,
- corporations, and
- partnerships
A securities firm that executes trades for its own account or the accounts of others is deemed a _______________.
A securities firm that executes trades for its own account or the accounts of others is deemed a broker-dealer (BD).
Who is the official that monitors and administers a state’s securities laws?
The Administrator or Commissioner
Identify who is considered a person under the USA.
Business entities, issuers, estates, governments, individuals (e.g., clients, IARs and agents)
What is the general definition of an investment adviser?
A firm that provides advice/analyses regarding securities, as part of a business, and for compensation
According to the USA, who is included under the term person?
Any legal entity, including individuals (clients/agents/IARs), BDs, IAs, issuers, corporations, and partnerships
When acting in a ____________ capacity, a firm is assuming risk.
When acting in a principal capacity, a firm is assuming risk (e.g., a firm-commitment underwriting).
When acting in an ________ capacity, firms assist customers, but do not assume risk.
When acting in an agency capacity, firms assist customers, but do not assume risk (e.g., a best-efforts underwriting).
Identify the acronym: USA
Uniform Securities Act
Identify the acronym: IA
Investment Adviser
Identify the acronym: NSMIA
National Securities Markets Improvement Act
Identify the acronym: NASAA
North American Securities Administrators Association
What is the ABC Test for investment advisers?
The test that defines an IA as a firm that provides Advice as part of a Business for Compensation
Who enforces the Uniform Securities Act?
The Administrator
What is the general definition of an issuer?
Any person who issues or proposes to issue a security, such as government entities and corporations.
What is a principal trade?
A trade involving a firm (BD or IA) buying or selling securities for its own account at its own risk.
True or False: The U.S. Virgin Islands are a member of NASAA.
True
True or False: Puerto Rico is a member of NASAA.
True
Under the provisions of the USA, how is the institutional investor designation made?
Under the USA, an institutional investor is any person designated by rule or order of the Administrator.
True or False: States may make rules that are more restrictive than SEC (federal) rules.
False. NSMIA prohibits states from making laws that are more restrictive than existing federal requirements.
List the entities that make up NASAA. 6
- All 50 U.S. states,
- the U.S. Virgin Islands,
- Puerto Rico,
- the District of Coloumbia,
- Canada and
- Mexico
What are the three components that must be met for a firm to be defined as an IA?
1) Provide advice regarding securities,
2) Do so as a business
3) Receive specific compensation (the ABC test)
Identify who IS NOT considered a person under the USA. 4
- Minors,
- incompetents,
- securities, and
- the deceased are NOT considered persons.
What is the three-pronged test for determining whether a firm meets the IA definition?
A-B-C. A = advice/analyses, B = business, C = compensation
True or False: The District of Columbia is a member of NASAA.
True. Washington D.C. is a member of NASAA.
Identify two significant creations that are credited to the National Securities Markets Improvement Act (NSMIA).
Federal Covered Advisers and Federal Covered Securities
The _____ _________ _________ ______________ __________________ is an organization consisting of state Administrators.
The North American Securities Administrators Association (NASAA) is an organization consisting of state Administrators.
What are some examples of federally covered sercurities? 4
- Securities listed on the U.S. exchanges (NYSE, Nasdaw, etc)
- Certain Regulation D offerings (private placements)
- Municipal securities issued outside the state
- Securities issued by registered investment companies (e.g. mutual funds)
