Mod 5: Regulatory Requirements and Financial Institutions Flashcards
Requires persons who fall within the definition of investment adviser to register with the SEC or the states in which they do business with clients.
Investment Advisers Act of 1940
Changed the original Advisers Act thresholds for registration with the SEC
Dodd-Frank Wall Street Reform and Consumer Protection Act
What are Small Advisers and how are they regulated?
Those with less than $25M in AUM.
Regulated by one or more states unless the state in which the adviser has its principal office and place of business has not enacted a statute regulating advisers.
What are Midsized Advisers and how are they registered and regulated?
Those with between $25M and $100M of AUM.
Regulated by one or more states if the adviser is registered with the state where it has its principal office and place of business and the adviser is subject to examination by that state authority.
What are Large Advisors and how are they registered?
Those with more than $100M of AUM.
Must register with the SEC (unless an exemption is available), and state adviser laws are preempted for these advisers.
Who must register as an investment adviser?
Think “ABC”
- providing Advice or issuing reports or analysis regarding securities
- being in the Business of providing such services
- being Compensated for such services
What individuals are EXCLUDED from the definition of an investment adviser?
- A lawyer, accountant, teacher, or engineer (LATE) whose performance of advisory services is solely incidental (as separately defined in the SEC regulations) to the practice of her profession
- A broker or dealer whose performance of such services is solely incidental to the conduct of his business as a broker or dealer and who receives no special compensation
- A bank or bank holding company, as defined by the Investment Advisers Act of 1940
- A publisher of a bona fide newspaper or financial publication of general or regular publication
- A person whose advice is limited to securities issued and guaranteed by the U.S. government
Who is EXEMPT from the requirement to register as an investment adviser?
- An intrastate adviser (single-state adviser) for unlisted securities
- An adviser whose only clients are insurance companies
- Foreign private advisers
- Charitable organizations and plans
- Commodity trading advisers
- Private Fund advisers
- Venture capital advisers
- Advisers to Small Business Investment Companies (SBICs)
When must Part 2A of Form ADV be given to customers?
In advance or no later than the time of entering into a contract if rescission is permitted within a specifically allotted time.
Requires registration of initial public offerings
Securities Act of 1933
An emergency response to the collapse of thousands of banks during the Great Depression.
It prohibited financial institutions from consolidating and offering any combination of traditional commercial banking, investment banking (brokerage firms), and insurance.
Glass-Steagall Act of 1933
- Requires companies with previously issued securities to keep information current
- Created the SEC to enforce securities laws
- Requires brokers and dealers to register with the SEC
Securities Exchange Act of 1934
- Brought the over-the-counter (OTC) market under the regulation of the SEC and called for self regulation of OTC securities dealers.
- Created the National Association of Securities Dealers (NASD).
Maloney Act of 1938
A self-regulatory organization of OTC securities dealers.
NASD
National Association of Securities Dealers
As amended in 1978, provides for the liquidation of hopelessly troubled firms and provides for the reorganization of troubled firms that might be able to survive
Federal Bankruptcy Act of 1938
