Series 66 Chapter 3: Registration of Persons Flashcards
Three things needed to register in state?
Application, filing fees, consent to service of process
Agents and IAR’s form?
U-4
Broker-Dealer form?
From BD
Investment Advisers form?
Form ADV Part I and Part II
What must adviser do prior to holding custody of a clients assets?
Obtain written permission from client
Notify necessary administrators (does not need admin permission)
Must also provide quarterly statements
Who cannot take custody of customers assets?
Agents and IAR’s
What are net capital requirements?
If holding securities or cash - 35mm
If no assets, but discretionary accounts - 10mm
Where must a firm meet Net Capital Requirements?
In state of home office
If an IA holds customer assets, what needs filed?
How often?
An audited balance sheet with each state
Annually
Surety Bond
Covers any legal expenses for the administrator
Why are surety bonds used?
If an administrator believes that an applicant is a huge compliance risk
Other Surety Bond information?
- May be waived if person’s net capital is large amount above capital requirement
- Administrator determines amount
- initial registration of BD typically 10m
Expiration of registration of securities?
Expiration of registration of persons?
Exactly one year after effective date
December 31 st
Record Keeping requirement for Administrator?
indefinitely
Record keeping requirement for BD?
3 and 2
Record keeping for IA?
5 and 2
Where must a BD be registered?
- 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
How long can can BD conduct business in new state with client before registration is effective?
45 days
How long can an Agent do business in new state of client where BD is registered but agent is not?
60 days
3 requirements firm must comply with if entering financial institution for business?
- 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
If BD or Adviser is in an institution, is signature required before opening a new account?
If possible, but not. Must get signature within a reasonable amount of time.
Canadian Firms?
Firm must register with state administrator through same process as US firm. Must also be a member of a Canadian SRO.
What if a Canadian firm is not a member of FINRA and wants to solicit in US?
Can only solicit
- institutions
- vacationing customers
- established clients that were Canadian residents
Can a Mexican Firm solicit in US if not member of FINRA?
No
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?
Under $100mm in assets = State
$100-110 mm in assets = Either
Above $110 mm in assets = SEC
What is a Federally Covered Adviser?
Where do they have to register?
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
IAR’s of Federally covered Advisers must register?
- Register with states and pay filing fees
- Only need to be registered where they are located when giving advice
IAR’s of State Registered Advisers must register?
Where they are located and the states where clients reside. ASSUME THIS
When MUST and adviser register with SEC?
- When registered in at least 15 states
- If managing institutional clients (except insurance companies)
De-Minimus Exemption (SEC) for IA’s
Federal vs State?
Exception or Exemption?
What law?
- 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
What sentence must be in every advisory contract?
An advisory contract may not be assigned to another advisory firm without a customer’s signature.
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?
Advisory Partnership
In writing
If advisory firm changes by majority
Reasonable amount of time
If an IA acquires another IA, what signatures are needed?
Signatures of clients of IA being bought out (not clients of acquiring IA)
Agency Cross-Transaction
Connecting two clients of the same firm to execute a trade
Agency Cross-Transaction Adviser vs BD
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
If agent leaves one BD for another, who must be notified and by who?
When does transfer of employment become public?
Agent and BOTH BD’s must notify administrator promptly
30 days
Can an agent be affiliated with more than one firm at once?
Yes, if both firms give consent and are under COMMON CONTROL
If an IAR of state registered adviser transfers employment to another state registered adviser, who reports to whom?
Only advisers notify state administrator
If IAR of a federally covered adviser transfers employment to another federally covered adviser, who reports to whom?
Only the IAR notifies the administrator
If an IAR of a state registered adviser wishes to withdraw registration from the state, who notifies who?
The adviser notifies the state.
If an IAR of a federally covered adviser wishes to withdraw state registration, who notifies who?
IAR notifies the state.
