Regulation of Persons

Question 1

The responsibility for administering the Uniform Securities Act (USA) falls under the Jurisdiction of the…

Answer 1

Administratior

Question 2

Who is not a Person?

Answer 2

A minor, a dead person. or someone declared mentally incompetent.

Question 3

Who is included in the term “Institutional Investor”

Answer 3

Banks, savings institutions, trust companies, insurance companies, investment companies., and employee benefit plans with at least $1 Millions in assets such as a pension or profit-sharing trusts.

Question 4

Who is a “Retail Client”?

Answer 4

An individual

Question 5

Term: Issuer

Answer 5

Any person who issues or proposes to issue any security.

Question 6

What is an offer or offer to sell?

Answer 6

Every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.

Question 7

What is the definition of sale or sell?

Answer 7

Every sale or disposition of a security or interest in a security for value.

Question 8

What is the definition of State?

Answer 8

Any of the 50 states, any territory or possession of the United States (such as American Samoa and Guam), the District of Columbia, and Puerto Rico.

Question 9

What are the 4 categories of securities professionals:

Answer 9

Broker-dealers, agents, investment advisers, and investment adviser representatives.

Question 10

Definition of Broker-dealers (BD)

Answer 10

are in the business of buying and selling securities for their own account and/or for the account of others.

Question 11

Where must a BD who has an office in this state register?

Answer 11

With the Administrator of this state

Question 12

Who is not included in the term “Broker-dealer”?

Answer 12

an agent, a bank, savings institution, trust company, or an issuer

Question 13

When is a person not considered a BD?

Answer 13

If there is no place of business in the state, and the transactions effected in the state are exclusively with other broker-dealers, the issuer of the securities in the transactions, and institutions.

Question 14

Excluded under the Snowbird exemption is

Answer 14

A BD who is licensed under the securities act of a state in which the BD maintains a place of business, and the BD offers and sells in this state to a person who is an existing customer of the BD and whose residence is not in this state.

Question 15

Term: Agent

Answer 15

any individual other than a BD who represents a BD or issuer in effecting or attempting to effect purchases or sales of securities. Register with Form U4

Question 16

Clerical and administrative employees of a BD are NOT agents if they….

Answer 16

do not partake in any sales-related activities. However, an intern who is paid $10 for each existing client solicited regarding a new issue would be required to register as an agent.

Question 17

Splitting commissions

Answer 17

may only be done between agents of the same or affiliated BDs’ and they don’t have to inform clients of the split.

Question 18

Term: Investment Adviser

Answer 18

any person who, for compensation, engages in the business of advising others, either directly of publications or writings, on the value of securities or on the advisability of investing in, purchasing, or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities.

Question 19

Term: Investment Adviser

Answer 19

any person who, for compensation, engages in the business of advising others, either directly of publications or writings, on the value of securities or on the advisability of investing in, purchasing, or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities.

Question 20

SEC Release IA-1092

Answer 20

investment advisers also include financial planners and other persons such as pension consultants and sports representatives who, as an integral component of other financially related services, provide investment advisory services to others for compensation and as part of a business.

Question 21

The 6 exclusions from the definition of Investment Adviser (IA)

Answer 21

1. Lawyers, accountants, teachers, and engineers (LATE) are excluded from the definition only if their advise is incidental to the practice of their profession and they receive no compensation for it. 2. Federal covered investment advisers are excluded from the definition of IA under the USA and generally register with the SEC. 3. The National Securities Markets Improvement Act of 1996 (NSMIA)

Question 22

The 6 exclusions from the definition of Investment Adviser (IA)

Answer 22

1. Lawyers, accountants, teachers, and engineers (LATE) are excluded from the definition only if their advise is incidental to the practice of their profession and they receive no compensation for it. 2. Investment adviser representatives (the business entity is the investment adviser, not the representative) 3. Banks, savings institutions, and trust companies 4. Federal covered investment advisers 5. Any broker-dealer whose investment advisory services are incidental to their brokerage business and who receive no special or separate compensation (wrap fees) for offering advice. This exclusion also applies to agents of these broker-dealers. 6. A publisher, employee, or columnist of a newspaper, news magazine, or business or finan- cial publication of regular and general circulation

Question 23

The National Securities Markets Improvement act of 1996 (NSMIA)

Answer 23

is the law that created the federal and state separation of Its. Then, further modified by the Dodd-Frank Act of 2010.

Question 24

Dodd-Frank Act of 2010 requirements:

Answer 24

-AUM of $110 million or more: SEC registration as federal covered adviser -AUM< $100 million: state registration -AUM between $100 million and $110 million: choose registration -Once SEC registered, can remain with AUM of at least $90 million

Question 25

IAs exempt from registration under the USA are

Answer 25

IAs with no office in the state who only deal with other IAs, BDs, and institutions, or who meet the snowbird rules.

Question 26

De minims rule for IAs

Answer 26

applies when they have no office in the state and deal with no more than 5 non institutional clients in any 12-month period

Question 27

Investment adviser representatives (IARs)

Answer 27

an employee of an IA who do any of the following: -Make any recommendations or otherwise render advice regarding securities -Manage accounts or portfolios of client -Determine which recommendation or advice regarding securities should be given -Solicit, offer, or negotiate for the sale of investment advisory services -Supervise employees who perform any of the above

Question 28

When do IARs have to register with a state?

Answer 28

Only if they have a place of business in the state.

Question 29

Registration of a BD or investment adviser leads to automatic agent or IAR registration of

Answer 29

partners, officers, or directors active in the business and anyone else performing a similar function.

Question 30

Under the USA, when do all registrations/withdrawals of professionals take place?

Answer 30

At noon of the 30th day after the completed application is submitted.

Question 31

When is the renewal of all securities professionals?

Answer 31

on an annual basis commencing with the first December 31 after the initial registration-pay appropriate fee.

Question 32

When is the renewal of all securities professionals?

Answer 32

on an annual basis commencing with the first December 31 after the initial registration-pay appropriate fee.

Question 33

Successor firm to BD or IA

Answer 33

pays no fee util renewal. However, if an agent or IAR changes firms, a new fee must be paid when registering

Question 34

Consent to service of process

Answer 34

required with all initial applications of securities professionals and issuers and does not have to be renewed annually. Fingerprints not required on state level.

Question 35

What would the administrator accept in lieu of the surety bond?

Answer 35

Cash or securities

Question 36

What would the administrator accept in lieu of the surety bond?

Answer 36

Cash or securities

Question 37

BD record keeping requirements:

Answer 37

Three years. This includes electronic communications such as emails. Records may be kept on a computer disk that cannot be altered. They can use electronic storage systems as long as they are organized, indexed, and retrievable in a manner described by the administrator.

Question 38

Blotter:

Answer 38

A record that must be kept. A Blotter is a record of all activity at the BD, including money in and out, and buys and sells.

Question 39

SIPC coverage

Answer 39

Protects clients of a BD that goes bankrupt (insolvent); it does not protect against decline in stock prices.