Securities

Question 1

Are commodity futures contracts a security?

Answer 1

NO

BUT options on them ARE a security

Question 2

What determines if an annuity or insurance policy is a security?

Answer 2

Fixed: is not a security

Variable: is a security

Question 3

Common items which are NOT a security?

List 4

Answer 3

• IRAs or Keith plans
• currencies
• collectibles
• condos as private residences

Question 4

What are Federal Covered Securities?

List 4

Answer 4

Securities exempt from state registration including:

• National Exchange listed
• sold to qualified purchasers
• investment company securities (mutual funds)
• Reg D 506

Question 5

In context of Federal Covered Securities, what’s a Qualified Purchaser?

Answer 5

As defined under Investment Company Act of 1940 - assets of $5m or more.
(Securities sold to Qualified Purchasers are Federally Covered)

Question 6

Aside from Federal Covered Securities, what are Exempt Securities?
List 5

Answer 6

1. Government (all levels, Canada levels, foreign govt)
2. Securities issued by banks, federal credit unions, insurance companies, trust companies
3. Common carriers and utilities
4. Nonprofits
5. Commercial paper

Question 7

What’s Covered by Reg D 506 (and thereby Federally Covered)?

Answer 7

Private placement sold to no more than 35 non-accredited investors who have net worth of $1m or income of $200k for each of last two years

Question 8

Which Federally Covered Securities must Notice File?

Answer 8

Investment Company securities and Reg D 506 securities

Consent to Service of Process, fee, filing copies of SEC filed materials

Question 9

What’s the registration status of most secondary market trades?

Answer 9

If in an exchange, generally registered at federal level and so are an exempt transaction for state level

Question 10

Principal types of Exempt Transactions:

List 6

Answer 10

• most non-issuer transactions esp if isolated or of listed stock
• Unsolicited non-issuer transactions
• issuer to underwriter transactions
• sale or offer to institutional investor
• transactions by a fiduciary
• private placement to <10 retail investors

Question 11

If no registration exemption available, what are types of registration?

Answer 11

1. Registration by Notification (Filing) - hardly used as available to well established corporations and most Federally Covered
2. Registration by Coordination - doesn’t require response as effective when federal registration is
3. Registration by QUALIFICATION - requires extensive info and response

Question 12

What’s not an offer or sale of a security?

List 3

Answer 12

1. Bona fide pledge or loan of stock
2. Exchange of securities due to merger, reorganisation or bankruptcy
3. Stock dividend provided nothing of value is given in return

Question 13

What does filing of a new issue with Administrator require?

Answer 13

Number of shares
Articles
Financials

NB - Not tax ID number

Question 14

Under USA what does guaranteed mean in relation to a security?

Answer 14

Payment of dividends, interest and principal are guaranteed (e.g. a Treasury)

Question 15

Must stock listed on a foreign exchange file a registration statement with state Administrator?

Answer 15

Generally yes, but an exemption exists for stock listed on TSX and TSX Venture Exchange

Question 16

What do subaccounts in an insurance policy indicate?

Answer 16

Choosing investment options to vary rate of return – therefore a SECURITY

Question 17

Is a REIT a security?

Answer 17

Always

Question 18

Who has burden of proof for establishing that a security is exempt?

Answer 18

The person claiming the exemption