Series 66 Chapter 3: Registration of Persons

Question 1

Three things needed to register in state?

Answer 1

Application, filing fees, consent to service of process

Question 2

Agents and IAR’s form?

Answer 2

U-4

Question 3

Broker-Dealer form?

Answer 3

From BD

Question 4

Investment Advisers form?

Answer 4

Form ADV Part I and Part II

Question 5

What must adviser do prior to holding custody of a clients assets?

Answer 5

Obtain written permission from client
Notify necessary administrators (does not need admin permission)
Must also provide quarterly statements

Question 6

Who cannot take custody of customers assets?

Answer 6

Agents and IAR’s

Question 7

What are net capital requirements?

Answer 7

If holding securities or cash - 35mm

If no assets, but discretionary accounts - 10mm

Question 8

Where must a firm meet Net Capital Requirements?

Answer 8

In state of home office

Question 9

If an IA holds customer assets, what needs filed?

How often?

Answer 9

An audited balance sheet with each state

Annually

Question 10

Surety Bond

Answer 10

Covers any legal expenses for the administrator

Question 11

Why are surety bonds used?

Answer 11

If an administrator believes that an applicant is a huge compliance risk

Question 12

Other Surety Bond information?

Answer 12

• May be waived if person’s net capital is large amount above capital requirement
• Administrator determines amount
• initial registration of BD typically 10m

Question 13

Expiration of registration of securities?

Expiration of registration of persons?

Answer 13

Exactly one year after effective date

December 31 st

Question 14

Record Keeping requirement for Administrator?

Answer 14

indefinitely

Question 15

Record keeping requirement for BD?

Answer 15

3 and 2

Question 16

Record keeping for IA?

Answer 16

5 and 2

Question 17

Where must a BD be registered?

Answer 17

• any state where firm has an office
• any state where firm has public customers who are residents of that state
• all states where firm’s agents are registered

Question 18

How long can can BD conduct business in new state with client before registration is effective?

Answer 18

45 days

Question 19

How long can an Agent do business in new state of client where BD is registered but agent is not?

Answer 19

60 days

Question 20

3 requirements firm must comply with if entering financial institution for business?

Answer 20

• area must be separate and conspicuous
• agreement between BD or Adviser and FI must be in writing
• BD or adviser must tell each client orally and in writing that securities are not insured by FDIC or guaranteed by institution

Question 21

If BD or Adviser is in an institution, is signature required before opening a new account?

Answer 21

If possible, but not. Must get signature within a reasonable amount of time.

Question 22

Canadian Firms?

Answer 22

Firm must register with state administrator through same process as US firm. Must also be a member of a Canadian SRO.

Question 23

What if a Canadian firm is not a member of FINRA and wants to solicit in US?

Answer 23

Can only solicit

• institutions
• vacationing customers
• established clients that were Canadian residents

Question 24

Can a Mexican Firm solicit in US if not member of FINRA?

Answer 24

No

Question 25

IA must register with SEC or State Administrator, not both. Amount of assets involved below?

Must register with state?
May register with either?
Must register with SEC?

Answer 25

Under $100mm in assets = State
$100-110 mm in assets = Either
Above $110 mm in assets = SEC

Question 26

What is a Federally Covered Adviser?

Where do they have to register?

Answer 26

an adviser that is already registered with the SEC and an exception (not exemption) to the adviser definition of the USA.

• DOES NOT NEED TO REGISTER IN ANY STATE
• do have to pay filing fees

Question 27

IAR’s of Federally covered Advisers must register?

Answer 27

• Register with states and pay filing fees

- Only need to be registered where they are located when giving advice

Question 28

IAR’s of State Registered Advisers must register?

Answer 28

Where they are located and the states where clients reside. ASSUME THIS

Question 29

When MUST and adviser register with SEC?

Answer 29

• When registered in at least 15 states

- If managing institutional clients (except insurance companies)

Question 30

De-Minimus Exemption (SEC) for IA’s
Federal vs State?
Exception or Exemption?
What law?

Answer 30

• IA’s who advise less than 15 clients per year and do not advertise themselves as IA’s
• 5 or less at state level
• EXEMPTION
• Investment Advisers Act of 1940

Question 31

What sentence must be in every advisory contract?

Answer 31

An advisory contract may not be assigned to another advisory firm without a customer’s signature.

Question 32

In what type of business structure must a client be notified if minority or majority changes?
How?
When are signatures needed?
In what amount of time?

Answer 32

Advisory Partnership
In writing
If advisory firm changes by majority
Reasonable amount of time

Question 33

If an IA acquires another IA, what signatures are needed?

Answer 33

Signatures of clients of IA being bought out (not clients of acquiring IA)

Question 34

Agency Cross-Transaction

Answer 34

Connecting two clients of the same firm to execute a trade

Question 35

Agency Cross-Transaction Adviser vs BD

Answer 35

Adviser May only solicit one customer
Adviser needs written permission from both clients

BD’s may execute w/o prior notification or permission
BD’s must execute trades for both customers at best possible prices

Question 36

If agent leaves one BD for another, who must be notified and by who?
When does transfer of employment become public?

Answer 36

Agent and BOTH BD’s must notify administrator promptly

30 days

Question 37

Can an agent be affiliated with more than one firm at once?

Answer 37

Yes, if both firms give consent and are under COMMON CONTROL

Question 38

If an IAR of state registered adviser transfers employment to another state registered adviser, who reports to whom?

Answer 38

Only advisers notify state administrator

Question 39

If IAR of a federally covered adviser transfers employment to another federally covered adviser, who reports to whom?

Answer 39

Only the IAR notifies the administrator

Question 40

If an IAR of a state registered adviser wishes to withdraw registration from the state, who notifies who?

Answer 40

The adviser notifies the state.

Question 41

If an IAR of a federally covered adviser wishes to withdraw state registration, who notifies who?

Answer 41

IAR notifies the state.