Securities Flashcards
What is a security?
An investment in an organization (common enterprise) managed by a third party with an expectation of a profit
What is an exempt security?
A security that does not need to be registered on the state level to be issued publically
What is a non-exempt security?
A security that needs to be registered on the state level to be issued publically
What is a guaranteed security?
A security where dividends, interest, and/or principal payments are guaranteed by a person other than the issuer.
Capital gains may not be guaranteed since no one may guarantee that the price of a security will increase.
What is on the list of exempt securities?
- US and Canadian government & municipal/political subdivisions securities
- Recognized Foreign government securities (not political subdivisions)
- Depository institutions
- Insurance company securities
- Public utility securities
- Federal covered securities
- Securities issued by nonprofit organizations
- Securities issued by cooperatives
- Securities of employee retirement plans
- Certain money market instruments
Also exempt from state filing of sales literature
If not federal covered, must be authorized to do business in state
What are the depository institution security categories?
Federal chartered
* Bank
* Savings and loan association
* Building and loan association
* Credit union
State authorized
* Bank
* Savings institution
* Trust company
* Savings and loan association
* Building and loan association
* State credit union
* Industrial loan association
What are exempt public utility securities?
- Securities issued or guaranteed by a public utility
- Securities issued or guaranteed by a public utility holding company
- Equipment trust certificates
- issued by a railroad or other common carrier
and
(
* Rates regulated by federal or state authority
or
* Issued or guaranteed by US, state, Canada, or Canadian province
)
What are exempt employee benefit plan securities?
Any investment contract issued by one of the following plans:
* Employee stock purchase
* Saving
* Pension
* Profit-sharing
For cooperative securities to be exempt, who may purchase them?
Only members of that cooperative
What law created Federal Covered Securities?
National Securities Markets Improvement Act (NSMIA) of 1996
Does NSMIA remove all regulating powers from states relating to federal covered securities?
Almost but not quite
States may still enforce antifraud provisions.
Must covered securities still register with states?
No
Though covered securities are exempt from US state registration and qualification requirements, states may require notice filings and filing fees with respect to offerings of covered securities, subject to certain exceptions for national securities exchange-listed covered securities.
What are the major categories of federal covered securities?
Major exchanges, such as
* NYSE
* NYSE American, LLC
* Nasdaq Stock Market
Investment company securities registered under the Investment Company Act of 1940, such as
* Open-end management investment companies (mutual funds)
* Closed-end management investment companies
* Unit investments trusts,
* Face-amount certificates
Offers and sales of certain exempt securities, such as
* Issued/guaranteed by the U.S
* Banks regulate by Federal Reserve Bard (FRB)
* Munis except is issuer is located in the state where muni is being offered
* Offers and sales sold through certain exempt transactions, such as private placements (Reg D) to qualified purchasers
What is a federal covered security?
A security that cannot be regulated by state securities Administrators.
What is the Howey Test?
An Investment Contract
An investment in an organization (common enterprise) managed by a third party (people besides the investors) with an expectation for profit
