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series 63 > Securities Registration > Flashcards

Securities Registration Flashcards

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Series 63 flashcards
1
Q

What is the definition of a Security?

A

No precise definition. If there was, people could find loopholes and create a security that is just outside the definition.

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2
Q

What is a Viatical Settlement?

A

Also known as life settlements, pose the potential for abuse. This occurs when a life insurance holder sells the death benefit of their policy

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3
Q

Howey Test

A

1) Must be an investment company (2) In a common enterprise with (3) the expectation of profits from efforts of 3rd party

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4
Q

What is another name for Security?

A

Investment contract

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5
Q

List of EXCLUDED Securites

A

Currency, precious metals, non-variable annuities, real estate for personal residence, CDs, Retirement plans.

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6
Q

Are options considered Securities?

A

Yes. Options on currency and futures contracts are securities. Futures itself is not

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7
Q

It is unlawful for any person to offer or sell any security in a state unless:

A

1) The security is registered in the state under USA
2) The security or transaction is exempt from registration under USA
3) The security is a federal covered security

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8
Q

Where is a registration filed and what must it specify?

A

Must be filed with the State Admin. Must specify the amount of securities to be issued, any other states in which the securities have or will be offered, any adverse ruling by a state regulatory authority, a court or SEC in conjunction with
the offering

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9
Q

What may the Admin require when filing?

A

A prospectus, advertising, sales literature, circular, pamphlets or form letter that are intended for distribution to prospective investors

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10
Q

What are those darn Filing Fees for?

A

For registering securities, which is a percentage of the offering price of the securities sold in the state

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11
Q

Is the Filing Fee reimbursed if the registration statement is withdrawn?

A

Only part of it. The Admin keeps some

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12
Q

Effective Date

A

State Admin declares the issue effective for sale within the state and registration is effective for 1 year from effective date. May require QUARTERLY reports after registration is effective

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13
Q

Methods of Registration (3)

A

1) Filing (notification)
2) Coordination
3) Qualifications

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14
Q

What is the easiest and least costly form of registering?

A

Registration by Filing (notification)

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15
Q

What are the qualifications for registration by filing?

A

Only permitted by certain issuers. The issuer must have net worth of at least 4 million, 400,000 shares held by the public, 4 market makers for at least 30 days during the preceding 3 months, and the offering price must be at least $5/share

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16
Q

Is notice filing considered a registration method?

A

No

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17
Q

Which registration method is not used very often? Why?

A

Registration by Filing. Mainly because most securities that meet these requirements are federally covered

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18
Q

What is Notice Filing?

A

Issuer is required to pay a filing fee with each state involved and may be required to submit SEC registration documents to each Admin

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19
Q

What must be included in the Registration Statement for a Registration by Filing?

A
  • Statement demonstrating the issuer’s eligibility
  • Name, address, and form of business
  • Description of security being offered
  • Copy of the offering circular and prospectus filed with the SEC
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20
Q

What type of Registration method is used for Non-Issuer Distribution?

A

Registration by Filing

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21
Q

Who receives the benefits from a Non-Issuer Distribution when Registering by Filing?

A

Does not benefit the Issuer. Distribution is for the benefit of someone else such as an officer or insider. If officer wants to sell large block of shares to the public, securities may have to be registered

22
Q

How may a Mutual Fund or UIT qualify for registration by Filing?

A

1) The applicant previously qualified the sales of its own securities within the last 24 months
2) The applicant is in compliance with the material terms of prior registrations
3) Since prior registration, there has been no material change in the terms, method of distributing, investment practices or objectives, or sales terms of its own securities

23
Q

When is the Effective Date for Registration by Filing?

A

If the filing fee is paid, the state registration statement has been on file with the Admin for 5 days, and no stop order is in effect, the registration becomes effective at the same time as federal registration

24
Q

What if the federal registration is already active?

A

The notice filing becomes effective under USA once all conditions are satisfied

25
Q

When is Registration by Coordination used?

A

In conjunction with the SEC registration. If there is a pending application to register a security with the SEC under the securities Act of 1933, the security may also be registered by coordination concurrently with Admins in multiple states

26
Q

What 4 must a Registration by Coordination contain?

A

1) 3 copies of the latest prospectus from the SEC
2) If required by Admin, copies of any other docs filed with SEC under Securitas Act of 1933
3) Statement that issuer agrees to provide the Admin with any amendments to the Prospectus within one business day
4) If required, a copy of articles of incorporation and bylaws, copy of underwriting agreement, copy of the security being offered and copy of any trust indenture

27
Q

What is the most rigorous registration method?

A

Registration by Coordination because of all the extra documents

28
Q

When is Registration by Coordination effective?

A

Its effective at the same time federal registration is effective as long as:

1) State registration statement has been on file with the Admin for 10 days
2) Statement of the maximum and minimum proposed offering prices, and the maximum underwriting discounts and commissions has been on file with the Admin for 2 full business days
3) No stop order is in effect

29
Q

What happens if an Admin issues a stop order when registration by coordination is pending?

A

The Admin bears the burden of proof that the registration violates State law

30
Q

Does the Issuer need to notify the Admin of the date and time when the federal registration statement becomes effective?

A

Yes

31
Q

Registration by Qualification

A

Complex procedure. Can be used to register any security in any state and is used for only State registration

32
Q

When is Registration by Qualification used?

A

When the issue is not eligible for notice or coordination filing. Must be used for securities that will not register with the SEC, but are required to register with the state, or for a security that is only registered in one state

33
Q

Is filing a complete registration statement guarantee a security will become registered?

A

No. The Admin may issue a stop order, deny, suspend, or revoke registration if its is in the best interest of the public

34
Q

When may an Admin NOT issue a stop order?

A

May not if the registration statement is based on a known fact when the statement became effective, unless action is taken within 30 days of the effective date

35
Q

Due Process

A

Admin may (without advance notice) postpone or suspend the effectiveness of the registration statement, but must allow opportunity for hearing

36
Q

When must the Admin notify the applicant or issuer of a postponement or suspension?

A

Immediately. and upon written request of one of the parties notified, the Admin must schedule the hearing within 15 days

37
Q

What happens if the Admin makes order permanent?

A

The interested parties must be given the reasons in writing

38
Q

What if the hearing isn’t requested or ordered by the Admin?

A

The order remains in effect until changed by Admin

39
Q

Why is Escrow used during registration?

A

When using registration through coordination or qualification, they may be required to hold the proceeds of the offering in escrow until minimums are obtained

40
Q

Why is Escrow used?

A

Prevents issuer from taking money from investors if requirements aren’t met

41
Q

Can Exempt securities be offered at a State level?

A

Yes, without USA registration. Treasury bills are exempt

42
Q

What does it mean when a security is exempt?

A

Mainly because of the nature of the investor.

Ex: If an issuer is going to sell only to Institutional investors, the securities do not need to be registered because of the nature of the investor

43
Q

Exempt Securities Examples

A

Government Securities, Financial Institution securities, commercial paper, Exchange Listed Securites

44
Q

Exempt Transactions Examples

A

Isolated Non-Issuer Transactions, Unsolicited BD Transactions, Fiduciary Transactions and Institutional Investor Transactions

45
Q

Are there EXCLUSIONS with transactions?

A

NO, NO, NO. God no

46
Q

Federal Covered Securities

A

Required to register with SEC and covered under the Securities Act of 1933

47
Q

What eliminates duplicate regulations?

A

NSMIA

48
Q

Federal Covered Securities Examples

A

NYSE Securities and NASDAQ, Municipal securities of out of state issuers, Private Placements (Reg D), securities offered or sold to qualified purchasers.

Fun fact: Exempt securities from federal law cannot be required under state

49
Q

Accredited Investor

A

Natural person with individual or joint net worth of $1million, holds series 7, 65 or 82, investment advisors, any bank, investment company, and insurance company, officer or director of issue and assets in excess of $5 million (corporations)

50
Q

Notice filing

A

Any federal security is subject to this. State may charge a notice filing fee based on value of securities sold in the state

51
Q

What may be required to file as an Issuer to the state?

A

State may require issuer to file with the Admin any documents filed with the SEC, along with statement of value of the securities

52
Q

What is not subject to advertising filing requirements under USA?

A

Exempt securities, transactions and federal covered securities

series 63 (4 decks)

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