Lecture Review Flashcards
State Laws
Uniform Securities Act (USA)
NASAA Statements of Policy and Model Rules
Federal Law
Investment Advisers Act 1940
National Securities Markets Improvements Act of 1996 (NSMIA)
NOT a person
Minors
Deceased
Mentally incompetent
Broker-Dealer MUST register in the state when:
- Office in the state
or - 1 resident retail client in state
Not BDs:
Agents, Issuers, Banks, savings institutions, Trust companies
individuals trading their personal accounts, out of state BDs
BD Registration
- Submit app (Form BD)
- Pay filing fees)
- Publish an announcement
- Meet record keeping requirements
Effectiveness: Noon 30 days post filing
Renewal: Every Dec 31st
Agent MUST register in the state when:
- Originates
- Directs
- Receive and Accept
based on offers, not retail vs institutional
Exempt Agents:
Admin, clerks
employees of Issuers
Agent Registration
- submit U-4
- Consent to service
- Pay fees
- may require bonding
Effectiveness: Noon 30 days post filing
Renewal: Every Dec 31st
Agent Termination
Form U-5
ALL PARTIES NOTIFY: agent, old firm, new firm
Canadian Agents
Renew Dec 1st
When does a natural person register as an IA?
Sole Proprietor
Exclusions from IA
LATE professionals: laywers, accountants, teachers, engineers
Banks, BDs, publications, IARs
Where do IA Firms Register?
- Office in State
- More than 5 retail clients in state
IA Firms Register with SEC when:
- AUM > $100m
- 15 or more states
- Advise investment companies
Notice of file required in states with office and more than 5 retail clients
Investment Advisor state level register through:
- Form ADV
- Pay filing fees
- Record keeping reqs
Effectiveness: Noon, 30 days after filing
Renewal: Dec 31st
Federal-Covered Advisor
firms with $100 million or more AUM
Above $110 must be SEC
Below $90 must be state
IARs always register at the…
state level
State Registered IARs must register when:
- place of business
- More than 5 retail clients
Federal Covered IAR must register when:
Place of business
IAR Registration
- Form U-4
- Consent to service of process
- Pay fees
Effectiveness: Noon 30 days post filing
Renewal: Dec 31st
IAR Termination (who sends notice)
State registered: IA Firm
Federal Covered: IAR
NOT Securities
DO NOT REQUIRE Registration
Commodities
Personal Residence
Currencies
Collectibles
Retirement Plan
Fixed Annuity
How are Securities registered?
- Coordination: SEC filing (state and Fed)
- Qualification: file with individual state
- Notice of Filing: provide states with SEC filed docs (for-covered securities)
Exempt Securities
- Govt securities
- Foreign securities
- Munis
- Banks.
- Commercial paper
- Retirement plans
- FEDERAL-COVERED Securities: nationally listed, mutual funds, out of state munis, Reg D
Exempt Transactions
- Unsolicited
- Underwriters
- Fiduciary
- Institutions
Exempt Securities and Transactions can be sold…
in the state WITHOUT REGISTRATION and need not file ads
Admin has Jurisdiction if an offer:
Originates or Directed or Accepted in the state
EX: Agent in NY, Client lives in FL, Client accepted in TX
Jurisdiction for TV or Radio
Originating State Only
Jurisdiction for Newspaper
State of publication only
Jurisdiction for national newspaper (general circulation)
No Jurisdiction
Administrator’s Actions:
- Make, amend or rescind rules (everyone) or orders (specific)
- Conduct investigations and issue subpoenas
- Issue cease and desist orders
- Deny, suspend, cancel or revoke registrations
Findings of Facts for Terminations requires TWO findings:
- Public’s best interest
and - The violation/bad action
The following within the past 10 years result in statutory disqualification:
- Securities-related misdemeanor
- Any felony
10 years pass - No SD
NOT non-securities misdemeanor
Withdrawal registration
Termination by request - No violation
Effective after 30 days, admin jurisdiction 1 year
Cancel registration
no longer exist or ceased doing business:
Dissolution of business, death or legal incompetency
Civil Lawsuit
Files Lawsuit: Investor
Penalty: make whole
Statue of Limitations: earlier of 3 years from violation or
2 years from discovery
Criminal Lawsuit
Files Lawsuit: State prosecutor
Penalty: $5k or Jail 3 years
Statue of Limitations: 5 years from violation
Does plantif or defendant need to be alive for a civil lawsuit to proceed?
No, neither
Civil Lawsuit: customer recovers the securities at
original purchase price
Civil Lawsuit: interest is
paid from payment date
Civil Lawsuit: attorney fees and cost paid by
defendant
Civil Lawsuit: income received from the investment is
subtracted from the recovery
NOT “account fees” that need disclosures
commissions
mark ups/downs
Advisory fees
Testimonials vs Endorsements
Testimonials: current client’s experience
Endorsements: Not a current client
Entanglement
BD/Agent/IA/IAR is involved in the perpetration of content
Adoption
BD/Agent/IA/IAR endorses or approves of content
Soft Dollar items
research reports, industry journals, software, seminar fees
- things that benefit IA’s clients
Custody requires
- Notice to Admin
- Quarterly Statements to Client
