registration and licensing requirements

Question 1

agency capacity

Answer 1

a firm that is in the business of effecting transactions for the accounts of others and charges a commission

Question 2

inspection of records (BDs and IAs)

Answer 2

The administrator may audit or examine records at any time if its in the public’s best interest or for the protection of the investors. Records can be examined in the Administrator’s state or out of state.

Question 3

issuer

Answer 3

any person who issues or proposes to issue a security in a primary offering.

Question 4

investment adviser representative (IAR)

Answer 4

any partner, officer, director of, or individual employed by or associated with an IA that is registered in the state or federal covered

Question 5

Recordkeeping Requirements (investment adviser)

Answer 5

records must be readily accessible for 5 years and kept in the principal office for 2 years.

Question 6

non-resident customer

Answer 6

a BD does not have to register in a state when dealing with an existing customer in the state temporarily for 30 days or less.

Question 7

central registration depository (CRD)

Answer 7

Form BD or broker-dealers and form U4 agents are filed through this system

Question 8

market maker

Answer 8

a firm that publishes quotes and stands ready to buy stock into, and sell stock form, its inventory

Question 9

North American Securities Administrators Association (NASAA)

Answer 9

a representative body made up of securities regulators from the 50 states and the territories of the U.S. They create Model Rules under the USA, issue Statements of Policy to help interpret the Act, and are responsible for amendments to the USA.

Question 10

Form ADV

Answer 10

the standardized/uniform application for registration as an IA. The administrator is authorized to accept this application, which is filed through the IARD.

Question 11

record amendment

Answer 11

the administrator must be notified promptly if any information or document filed with the administrator becomes inaccurate or incomplete in any material respect.

Question 12

broker-dealer (exclusions)

Answer 12

under the USA, agents, banks, savings institutions or trust companies, and issuers are excluded from the definition and are NOT considered BDs.

Question 13

Expiration and Renewal (persons)

Answer 13

A person’s registration with a state expires on December 31st unless renewed. A person renews state registration by paying the renewal fee on time.

Question 14

State Administrator

Answer 14

The official who is responsible for the supervision and enforcement of the state securities laws within a given state.

Question 15

issuer transaction

Answer 15

a primary transaction taking place in the primary or new issue market. the issuer receives the proceeds

Question 16

principal capacity

Answer 16

when a firm trades out of its own account, as a dealer

Question 17

broker - dealer

Answer 17

firms who effect transactions in securities for their own account or the accounts of others.

Question 18

broker - dealer exemption

Answer 18

Canadian firms doing business with Canadian residents who are in the state temporarily. An exemption also exists for firms who only effect transactions in Canadian self-directed tax advantage retirement accounts for persons residing in a state that holders or contributors to those accounts. The firm must be registered in Canada and cannot have a place of business in that state.

Question 19

non-issuer transaction

Answer 19

a secondary transaction taking place in the secondary market. The purchase or sale of securities benefits other than the issuer.

Question 20

Release IA-1092

Answer 20

clarified the ABC test. The advice can be about specific securities, general classes of securities about investing in general, or on which investment manager a client should choose.

Question 21

Stipulations of Release of IA-1092

Answer 21

Providing advice does not have to be the primary activity. Compensation of any economic benefit falls under the new definition. Pension consultants and sports or entertainment representatives are included,

Question 22

Financial Reports Broker-Dealers and Investment Advisers

Answer 22

BD & IA file balance sheets, income statements, net capital reports, and other report the Administrator may require.

Question 23

Broker - Dealer (retail exclusion)

Answer 23

A firm that has no place of business in a state and who offers and sells securities to existing customers who are in that state temporarily need not register.

Question 24

De Minimus Exemption (IA)

Answer 24

A firm that has no office in the state and has fewer that 6 (no more than 5) retail customers in the state over the last 12 months does not have to register in that state.

Question 25

Consent to Service of Process

Answer 25

This required form appoints the Administrator as a person’s POA to be served legal papers in ant non-criminal legal matter. This is completed with the first registration application and is irrevocable.

Question 26

Institutional Exclusion (BD)

Answer 26

Firms with no place of business in the state and who effects transactions in the state with only institutional investors would would not have to register in that state.

Question 27

Private Fund Advise (PFA)

Answer 27

Advisers and their representatives whose only customers are qualifying private funds that are exempt from state registration requirements if their AUM is $150 million or more. They must register with the SEC.