Regulation of Persons Flashcards
USA of 1956
With enactment of numerous state securities laws, known as blue-sky laws, USA is a model legislation for the separate states to adopt. Will be tested on the 1956 USA used by NASAA (North American Securities Administrators Association).
Administrator
Office or agency that has complete responsibility for administering the laws of the state. Has jurisdiction over virtually all securities activity that emanates from his state.
Has jurisdiction over the registration of securities professionals and securities.
Cease and Desist Order
Used by administrator when it appears that any registered person has engaged is about to engage in any act or practice constituting a violation of any provision of the Uniform Securities Act or any rule or order thereunder.
Stop Order
Used to deny effectiveness to, or suspend or revoke the effectiveness of, any registration statement. This applies only to securities, not any professionals.
Summary Order (Acting Summarily)
A power of the administrator to act without prior notice, with regard to registration of both securities and security professionals. 3 cases where this applies to the Uniform Securities Act:
1) Postponing or suspending the registration of any securities professional pending a final determination of a proceeding related to a problem
2) Postponing or suspending the registration of any security pending a final determination of a proceeding related to a problem
3) Denying or revoking a specific security or transaction exemption
Final Orders
Whether referring to persons, exemptions, or registrations, other than the case of a summary order, no final order may be entered without
1) Appropriate prior notice to the interested parties
2) The opportunity to a hearing
3) Written findings of fact and conclusions of law
Person
Any individual, corporation, association, joint stock company, or trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government.
Nonpersons
1) Minors
2) Deceased individuals (estate is a person)
3) Individuals legally declared mentally incompetent
Broker Dealer
Any person engaged in the business of effecting transactions in securities for the account of others or for its own account.
Acting on behalf of:
others = broker
self = dealer
Agent
Any individual who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.
Investment Adviser
Any person who, for compensation, engages in the business of advising others in the value, advisability of investing in, purchasing or selling securities or promulgates analyses or reports concerning securities.
Investment Adviser Representative (IAR)
An individual who represents an investment adviser performing duties related to the giving of or soliciting for advisory services.
Issuer
Any person who issues or proposes to issue any security. Primarily include governments and corporations.
Nonissuer
Not directly or indirectly for the benefit of the issuer. Nonissuer transaction is one where the issuer does not receive the money because the seller of the security is someone other than the issuer.
Security
In S063 includes investment contracts, pre-organization certificates and others.
Exempt Security
A security does not have to be registered in order to be sold and there are no requirements to file advertising about the security with the Administrator.
Exempt Transaction
Nature of the sale is such that registration with the Administrator and filing of advertising material is not required in order for that transaction to take place.
Guaranteed
Payment of principal, interest, or dividends, but not capital gains, are guaranteed. Refers to a security with a guarantee from a third party other than the issuer of the security.
Offer/Offer to Sell
Includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.
Sale
Includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value. In other words, the offer is the attempt; the sale is when it is successful.
Fraud
Intentional effort to deceive someone for profit; this is not limited to common-law deceit.
SRO
Self-Regulatory Organization: FINRA, MSRB, CBOE (Chicago Board Options Exchange), IIROC (Investment Industry Regulatory Organization of Canada)
Solicitor
Any individual who, for compensation, acts on behalf of an investment adviser in referring potential clients.
Accredited Investor
Rule 501 of the federal Securities Act of 1933. It refers to a person who is not counted when computing the number of investors purchasing a private placement under Regulation D of that act.
Registrant
Used in legal circles to refer to those securities professionals (BDs, IAs, IARs) or securities issuers who are in the process of registering or who have registered with the Administrator.
Institution
Includes banks, trust companies, savings and loan associations, insurance companies, employee benefit plans with assets of not less than one million dollars, and governmental agencies or instrumentalities.
National Securities Markets Improvements Act of 1996 (NSMIA)
Enacted by congress to promote efficiency in capital formation in the financial markets. In effect, the act generally preempts states’ blue-sky laws, eliminating the dual system of state and federal registration of certain securities and investment advisers.
State
Any of the 50 states, any territory or possession of the United States, District of Columbia, and Puerto Rico.
Retail Client
Very Important: A few questions use the term retail client instead of non-institutional client. Look for it and remember that retail clients need far more protection than institutional ones. Also, individuals who meet the standard of accredited investor are still retail, rather than institutional, clients.
Holding Company
A company whose primary business is holding a controlling interest in the securities of other companies. It is that element of control that differentiates holding companies from investment companies.
Exclusion from a Definition
Excluded from, or not included in, a definition. For the purposes of the Uniform Securities Act, a person may be excluded from a definition and not subject to the provisions of state law that refers to the term.
Exemption from Registration Under the Act
Not subject to a registration provision of the act.
Wrap Fee Program
Program under which any client is charged a specified fee or fees, not based directly on transactions in the client’s account, for investment advisory services and execution of client transactions.
