Series 66 Chapter 1 Flashcards
Who enforces federal securities laws?
SEC, FINRA, Exchanges
Securities Investor Protection Act of 1970
Established SIPC (provides protection for customers of bankrupt securities firms)
Nation Securities Markets Improvement Act of 1996 (NSMIA)
When federal and state law are the same, Federal Law has primary jurisdiction.
Any rule that includes a calendar year
Federal law
Person
individual, joint account, partnership, corporation, gov, association, NOT minor
NASAA
North American Securities Administrator Association
Exempt Security
Does not need to be registered on the state level to be issued publicly
Issuer transaction (Primary Market Transaction)
trade where issuer receives money from sale of securitites
Non-Issuer Transaction (Secondary Market Transaction)
a trade where proceeds of sale are received by an investor instead of an issuer
In-the-State
a person will be considered in the state if any offer or sale occurs in the state
Issuer transaction - exempt or not?
non-exempt
Non-Issuer Transaction - exempt or not?
exempt
Deny- Suspend- Revoke- Cancel-
Deny- person or security wishing to register did no satisfy state law req. Suspend - reg. person violates state law and is suspended for lim. period of time Revoke- reg. person violates state law and is indefinitely banned from registration in that state Cancel - reg. person has died, deemed mentally incompetant, missing, or allowed reg. to expire. No violation has been committed.
Broker-Dealer Exemption
must register in states where its locations are, but not other states (if a BD does not have a place of business in that state)
Broker-Dealer Exception
does not have to register in any states as a BD. An issuer, an agent (if a BD still records trades) Banks, savings institutions, credit unions, insurance companies, and trusts
Clients who may be charged performance based fees
Registered Investment Companies (mutual funds, etc), Qualified Clients -individual with 2 mm net worth -Individual with 1 mm under management -Qualifed purchaser of 3(c)(7) funds -employee of investment adviser for at least 12 months and has participated in investment activities Non US Residents 3(c)(7) funds
3(c)(7) funds
typically hedge funds made up of qualified investors only -individuals must have 5mm in investments
Non IA Exceptions (do not register in any state)
Broker-Dealer Financial Institutions Professionals giving advice that is part of job description Newspapers and magazines
Non IA Exemptions (must register in own state)
Persons having no place of business in the state
What is a recommendation to trade a security?
Offer
What is a trade of a security?
Sale
What is a gift with financial risk?
Offer and a Sale
If there is no money to be risked now or later?
Neither offer nor sale
Regulates trading of outstanding securities - rules to prevent manipulation
Securities Exchange Act of 1934
Securities Act of 1933
Regulates the registration of new issues - includes the rule of “full and fair disclosure”
Provides for regulation and registration of investment advisors with SEC
Investment Advisers Act of 1940
Provides for the regulation and registration of investment companies with SEC
Investment Company Act of 1940
Established SIPC (provides protection for customers of bankrupt securities firms)
Securities Investor Protection Act of 1970
When federal and state law are the same, Federal Law has primary jurisdiction.
Nation Securities Markets Improvement Act of 1996 (NSMIA)
a salesperson representing a broker-dealer or issuer in selling securities
Agent
a person or firm trading for themselves and for the accounts of others
Broker-Dealer
A person who charges fees for offering investment advice about securities.
Investment Adviser (IA)
any employee of an investment adviser except for clerical employees
Investment Adviser Representative (IAR)
a corp. or gov. who issues or plans to issue securities. According to state law, partnership may not be an issuer
Issuer
trade where issuer receives money from sale of securitites
Issuer transaction (Primary Market Transaction)
a trade where proceeds of sale are received by an investor instead of an issuer
Non-Issuer Transaction (Secondary Market Transaction)
dividends, interest and/or principal are guaranteed by institution not issuer (insurance company, gov, etc) Capital gains may not be guaranteed
Guaranteed Security
a person will be considered in the state if any offer or sale occurs in the state
In-the-State
violation has been committed or is about to be committed. If so, administrator has right to investigate possible violation and force people to submit records or testimonies.
Proper Cause
based on the performance of the account in relation to an index of similar types securities. If account outperforms, adviser receives more compensation, vis versa.
Fulcrum Fees
A person with no place of business in the state may offer advice to an unlimited number of insitutional clients, but no more than 5 non-institutional clients within 12 months.
De minimis exemption
Broker-Dealers, credit unions, savings and loan companies, insurance companies, investment advisers and pension funds with at least 1mm under management.
Institutional Clients
individual, joint account, partnership, corporation, gov, association, NOT minor
Person
an enforcer of rules and regulations of the securities industry within the state. Nominated by governor and approved by state legislature
State administrator (Commissioner)
typically hedge funds made up of qualified investors only -individuals must have 5mm in investments
3(c)(7) funds
