Series 66 Overview Flashcards
Investment Advisor Firms
(not Subject to FINRA only to State and SEC)
Less than
Broker/Dealer
Subject to FINRA and the State if applicable
(registration effective 30 days from filing date.)
Employ Registered Representatives/agents
Securities Exempt under the USA
//Generally if they enact their own law, such as government & Municipalities i.e. US gov. Canadian Municipal (except within the State of issue) //Under the control of other Agencies. i.e. Trust Companies, Savings institutions commercial banks credit unions insurance companies financial institutions that only trade with other Financial institutions //Exempted by law i.e. securities issued for employee savings plans, pension plans, profit sharing and stock purchase plans, Commercial paper with less than 270 days to maturity //Church Bonds (because too expensive to register and only purchased by their own members)
Securities Exempt under the USA
Nationally traded and covered under federal rules, preempting state regulations.
//Securities listed on any national exchange meeting SEC standards (NYSE) //Securities offered to qualified purchasers / Sophisticated investors/institutional //Issued by investment companies under ICA //Security issued by federal gov. or its agencies //Issued by a financial institution regulated by the federal reserve board //Reg D Certain private placements such as (federal rule) //Municipal Bonds offered outside the state of issue otherwise nonexempt (Must register within their state of issue)
Non Exempt
All Corporate issues Multi Level Distributorship Programs Network marketing Arrangements Whiskey Warehouse Receipts Commodity options contracts Interest in Farm land or animals COMO? REIT's Limited Partnerships
Exempt - Registration not required
Government Issues, Federal, State, Municipals, Foreign with which US has diplomatic relations
Church Bond, Non Profit Organizations, Trade associations co-op’s
Banks, Savings and Loans, Trust Companies, Federal Credit Unions, S&L Associations
Insurance Company issues, Except for variable annuity / Variable life contracts
Public Utility issues reg by Public Utility Act of 1935
Federally covered: SEC Traded on NYSE MF etc
Promissory Notes : 270 day max maturity
Securities through Federal Private Placements
Securities though State Private Placements
Consent to Service of Process
State can Always require
no matter of Exempt they can serve you with notice also charge a filing fee.
Legislation with a year is associated with Federal. therefore federally covered and thus exempt from registration
Security Registration Process
Primary Registration Methods
//Registration by Notification or Filing: Primarily for established corporations, has previously issued stock, Not IPO Notifying the administrator they are intending to issue additional shares (Mutual Funds) //Registration by Coordination - Applied with IPOs. Have not previously issued stock. Coordinating the registration at the same time as they are registering with the SEC. //Registration by Qualification - For Corporations previously registered federal level possibly other states, intrastate for one state only, More complex asserting previously Qualified
Security Registration Process
Registration Statement
//Articles of Incorporation, Nature of the business, //Management participants //Certified Financial Statements, Description of security to be offered //Prospectus, Fees, Underwriter agreements, sample of security to be issued //indenture related to offering if a debt issue. //Amounts paid to promoters, past 3 years and anticipated future paymentsIf payments to promoters in stock, must be held in escrow up to 3 years to avoid immediate cash out at a profit //all contracts over the previous 2 years, copies of any litigation, legal opinion if a debt offering, and fees paid.
Security Registration Process
Activities associated with registering and issuing securities
//Creates Tombstone Ads to announce upcoming issue and taking indications of interest (IOIs) //Provide Red Herrings to IOIs //20 day cooling off period followed by effective date then another 10 days if no problems (30 days total) //Filing in effect for a minimum of 1 year, Administrator //Approval required to withdrawal registration within the first year //May be required to provide quarterly filings during the registration process until completed //Proposed offer pricing and commissions
Boker Daler and Agent Registration
for BD / Agent that are not exempt
(Generally non exempt when selling to the public)
Generally non exempt when selling to the public //partners and officers automatically registered when the firm registers //if Broker Dealer loses registration, agents also get registration cancelled //if Agent looses registration B/D doesn’t get affected //if client moves to a new state and conducts a trade with BD/Agent must file registration within 30 days following the first transaction.
B/D Exempt from registration (if not selling to the public generally)
//Must be located outside the state in question and have no place of business within the state. //if located and no place of business then other exemptions may be considered //Transacting only with other broker dealers or financial institutions //they make offers or service clients temporarily in the state but resident of their home state and a client already (Snowbird exemption) //If client moves to a new state without conducting any trades (if conducting trade must register with 30 days) //No more than a limited number usually (1 of public customers) within a 12 month period, where transactions isolated & unsolicited.
Non Exempt Agent (registered rep rep)
//natural person who represents a B/D or issuer attempting to effect sales or pruchases o securities in a state //can be known as an authorized agent acting on behalf of another such as a principal or broker dealer executing securities transactions //must register in the purchasers resident state and be registers in the agents resident state //Tries to or effects to effect trades with the public, not a clerical or ministerial employee //After 2 years of not being associated with a B/D must reestablish registration including the retaking of examinations //Dual Registration with 2 Broker dealers only allowed if B/D are under common control (owned by the same company)
Agents Exempt from Registration
//Agent acts for an exempt B/D transacting with other B/Ds only //if they are excluded from the definition of an agent: Clerical staff, issuer //Represents an Issuer to sell only the issuers own securities and is not compensated for doing just that //Represents only an issuer selling federally covered securities therefore exempt securities under the USA //Exemption does not apply if agent is compensated in connection with the offer or sale of securities.
Who is an Investment Advisors
//Firm paid a fee not a commission for advice and making recommendations, analysis issuing managing assets and managing client //Also Registered Investment Advisor (RIA) //Solicits offers negotiates sale of advisory services //supervises employees who do any of the above employees incude partners, officers, directors, individuals who are the investment advisor representatives (IARs) //Must Register with the SEC if they give advice interstate to 15 or more investors regardless off AUM
Who is not an Investment Advisor
//Banks Savings banks institutions //B/D or the agents who’s advice is incidental and receive no compensation only commission //LATE Lawyers Accountants Teachers Lawyers who don’t get paid for the advice its incidental to their profession.
Investment Advisors Registration
Physical offices are located within the state
customers actively solicited by the IA residing with the state
partners are automatically registered as IARs
IA Exempt from registration
Dealing with other advisors or B/D trust insurance companies employee benefit plans of 1 million or more and gov agency
Even if exempt may be required to notify state and pay a fee
No more than 5 public customers in 12 months (De Minims Exemption for IAs applies to both solicited and unsolicited transactions)
Investment advisory Brochure
//Usually provided within 48 hours PRIOR to contracting //Fees practices and any conflicts of interest //if not paid in advance or brochure not provided until the contract signing then must give a 5 day free look to the client //Wrap account: one fee structure for all the products in an account Wrap fee brochure required in INSTEAD of the standard brochure not in addition to a standard brochure. not in addition to the standard brochure.
No Brochure required if
Contracts with an investment co
offers impersonal advice
charges less than 500/yr
Advisory Contracts
//No Compensation based upon capital gains or capital appreciation //May be compensated upon total value of Assets under Management. (Exception hen customer meets Performance fee Criteria) //Cannot Assign the account to another party without the clients verified written consent //Must Notify the client of any partner or member changes by the advisory firm (does not void the clients contract) //Annual surprise audit by an independent accountant //Notice of securities held provided to the state administrator
