Questions To Study

Question 1

What federal law was created to prevent fraud in the sale of new issues?

Answer 1

The Securities Act of 1933 is to prevent fraud in the sale of new issues of securities (primary distributions) by requiring that investors be provided with enough relevant information about the offering to make an informed decision

Question 2

What federal law requires broker-dealers to register with the SEC

Answer 2

The Securities Exchange Act of 1934 established the SEC which requires the registration of broker-dealers, and governs the secondary market for securities in the US>

Question 3

What type of securities are NOT required to be registered with the state Administrator?

Answer 3

Exempt securities

Question 4

What does NASAA do?

Answer 4

1) Writing and updating the USA
*SEC enforces federal securities law
**FINRA is a self-regulatory org (SRO) that regulates broekr-dealers.

Question 5

What is the purpose of the Securities Exchange Act of 1934?

Answer 5

This act established the SEC and requires the registration of certain financial professionals and governs the secondary market

Question 6

What does the Investment Adviser’s Act do?

Answer 6

Requires investment advisers to register with the SEC

Question 7

What does the Securities Act of 1933 do?

Answer 7

Governs the sales of new securities (IPOS)

Question 8

What does the USA do?

Answer 8

It is a model law that’s used to create state securities legislation

Question 9

What does the NSMIA do?

Answer 9

The National Securities Markets Improvement Act of 1996 was created to eliminate the duplication of state and federal regs.

Question 10

Which exemption from the registration requirements of the Securities Act of 1933 permits the sale of up to $20 million of securities in a 12-month period without registration with the SEC?

Answer 10

Regulation A Tier 1- an issuer is permitted to sell up to $20 millions of any securities in a 12-month period without registering securities with the SEC.

Question 11

What is Reg D?

Answer 11

An exemption from the securities Act of 1933 for private placements

Question 12

What is Rule 147?

Answer 12

The intrastate exemption; if the security is only offered in the state. Must register with the state using qualification.
Notice filings are given to the state Administrator(s) by issuers of federal covered securities

Question 13

When does a security registered with the state Administrator under USA expire?

Answer 13

One year from the effective date of the security’s registration

Question 14

USA Exempt Securities include:

Answer 14

1. Canada securities
2. Savings and loans associations
3. Railroad company certs

Question 15

What is registration by qualification?

Answer 15

When an issuer must satisfy requirements that are set by the Administrator. Qualification doesn’t require registration with the SEC.

Question 16

What are federal covered securities?

Question 17

What are federal covered securities exemptions?

Question 18

Viatical investor suitability

Answer 18

1. Minimum net worth of at least $150K (not including their primary residence) and an annual income of $100K
2. Minimum net worth of at least $250K (not including their primary residence)

Question 19

What is an accredited investor ?

Answer 19

1. Net worth of at least 1 million or annual income of $200K.
2. Married couple with an income of $300K.
3. Financial institutions
4. Executives of the issuer

Question 20

Who created the definition of a security?

Answer 20

The Supreme Court

Question 21

What is a non-issuer transaction?

Answer 21

A transaction between two investors where the sale proceeds are not directed to the issuer.

Question 22

What are investment company securities registered under?

Answer 22

Must be registered with the SEC but are exempt from registration with the state Administrators.

Question 23

When can an administrator deny registration of securities?

Answer 23

1. If the issuer fails to pay the filing fee
2. If the issuer’s business is illegal
3. If the seller’s fees are unreasonably large

Question 24

All of the following persons are defined in the USA except:
1) Issuer
2) Broker-dealer
3) Registered Rep
4) IAR

Answer 24

3. Registered Rep

Question 25

Custodians may delegate discretion to whom?

Answer 25

Any competent person

Question 26

Who does not meet the definition of an agent, even if they sell to both institutional and retail investors?

Answer 26

Anyone selling securities from a municipal issuer or a muni bond

Question 27

When can broker-dealers and their agents exercise discretionary authority?

Answer 27

When the customer gives written consent or provides verbal discretion to select the price and/or time of the transaction

Question 28

How long must broker-dealers and IA’s maintain their books and records according to USA?

Answer 28

BDs: 3 years
IAs: 5 years

Question 29

How does sharing in a customer’s account work?

Answer 29

The client and broker-dealer must approve.
The sharing must be proportionate to the capital at risk.

Question 30

Under the USA Act, when is an offer made in a state?

Answer 30

1) When it originates from that state or
2) is directed by the person making the offer (the agent) to a state, and is received in that state in which it is directed.

Question 31

Any person who willfully violate SEC rules an regulations is subject to (Fine and Imprisonment)?

Answer 31

1) Fine 10K
2) Imprisonment 5 years