Series 66 take 2 Flashcards
Person
anyone not
Dead
Minor
mentally incompetent
3 prong test to determine if someone is investment advisor
Give advice on securities
as part of regular business
for which compensation is received.
investment counsel
principal business is the giving of investment advice
A substantial part of the business consists of rendering investment advisory services
This means giving continuous advice on the basis of individual client needs
sec release IA-1092 who is an investment advisor
Financial planners
Pension Consultants
Sports agents and entertainer agents.
when is a financial planner an investment advisor
person who advice’s clients to select among a variety of financial products.
person who recommends mixture of securities, insurance products, and real estate( this would be comprehensive plan)
compensated for investment advice
when a financial planner is compensated and it does not come directly from investment advice… is it still considered compensation
yes
what do pension consultants do
advice employee benefit plans on funding, alternative investments, performance evaluation, and advisor selection
when is sports agent IA
provide entertainers with contract negotiations, tax planning, budget, and money management(including investment recommendations
exclusion from investment advisor under the investment advisor act of 1940
These people are just not investment advisors
- bank, trust company, bank holding company
- Professionals providing incidental advice(Lawyers, accountants, teachers, engineers. and not charging fee
3.Broker Dealer, if no special compensation- must be solely incidental to their business
:Wrap fee program loses exception
- Person solely advising solely on government securities
- Publishers(General and regular circulation)(loses exclusion when advise is specific to market events
According to USA
Investment advisor Representatives
Federal Covered investment advisors
exemptions from investment advisor act 1940
As in exempt from sec registration
1.intrastate advisors(clients and offices only in one state
no advice on listed exchanges, no clients are private funds
- Only clients are insurance companies
Uniform Securities act exemptions
1.no place of business in state and
fewer than 6 individual retail(non institutional) clients in 12 months
- no place of business in the state and only deals with institutions(bank, trust company, savings and loan, insurance,investment companies, mutual funds, employee benefit plans with assets least than 1,000,000, and governmental agencies
- no place of business and only deals with investment advisors and broker dealers.
- Snowbird exception
title IV of the dodd Frank act of 2010
or also known as Private fund investment advisors registration act of 2010
- Private fund advisors with less than 150 million in assets
- Non us advisors with no place of business in the us and less than 25 million with us clients and investors
Venture Capital funds
These exemptions apply under federal and state law
private fund advisor under state law
in qualifying for the exemption, all investors must be qualified clients(2.1 million net worth or 1 million assets under management.)
Neither the private fund advisor nor any of its advisory affiliated are subject to bad actor provisions( felonies, suspension, expulsion etc).
this was skipped in video course
exclusion vs exemption
exclusion means excluded from definition, exemption is not subject to registration
Skipped in video course
Investment Advisor Registration SEC
110 or more
100-110 sec or state
if it is less than 100 but the following apply
- required to register in more than 15 states
- manage a registered investment company
- expect to meet 110 million within 120 days
investment advisor registration State
<100
unless
- required to register in more than 15 states
- manage a registered investment company
- expect to meet 110 million within 120 days
Buffer exception
An SEC registered IA can allow its assets under management to drop as low as 90 million before needing withdraw from sec and registering with state within 180
When state registered IA reports assets under management at 110 they must withdraw from state and register with sec within 90 days
pension consultants and registration
once they reach 200 million, they have the choice to continue to be registered with state or the sec.
Federal covered advisors and notice filing
may be required to pay a filing fee known as a notice filing.
must make notice filing with the state if they have a place of business in the state or have 6 or more clients in that state in a 12 month period, regardless of place of business.
Registration procedures
File form ADV 1A which includes
1a business name and form of organization
1b past 5 year affiliations of control person 25% or greater voting power
1c educational background
1d nature of business
1e balance sheet certified by independent public accountant(substantial prepayment would require this for both)
1f. scope of authority over client funds
1g compensation arrangement
i. portion of business devoted to providing investment advice
j. consent to service of process(permanent)
k. ADV part 1b(state registered only)
l. pay filing fee
State and fed do pt 1a
State also does 1b which asks additional questions required by state authorities(sec does not have to do)
both have to do 2a which is the brochure containing info about advisory firm.
both have to do 2b which is brochure supplements containing info about certain supervised persons
m.Registration effective noon 30th day(USA)
Registration effective 45 days(sec)
State registration expires every 31st unless you renew(USA only)
Updating the form ADV
State
1.Adv updated each year by filing an annual updating amendment within 90 days of fiscal year end
- Show assets under management to verify with SEC(must have at least 90 mill)
- Both pay renewal fees
- Report of any changes promptly if any changes to business like name location etc
Exempt reporting advisors
advisors exempt from registration but need to report certain info to regulators but don’t answer questions and don’t need adv part 2.
They file adv pt 1 without answering all questions
how to withdraw from registration
ADVW
Effective on 30th day USA
Effective on 60th day SEC
successor firm
new firm because of merger or acquisition or sale
New application filed, effective for remainder of year. no additional filing fees
Agent
any individual who represents a broker dealer or issuer in effecting transactions in securities for their clients
substantial prepayment
federal covered advisor- more than 1200 six months or more in advance
state more than 500 6 months or more in advance.
State registered investment advisors net worth requirements
and SEC
10000(discretion) 35000(cust)
cust applies unless direct fee reduction
or advising pooled investment vehicles subject to an annual annual audit
surety bond of 35000 is acceptable in leu of networth
in leu of surety bond you can put up marketable marketable securities
If you go below- administrator must be notified in 1 day and need to file financial report a day after that.
Only need to meet net worth and record keeping requirements are only those of the state principal office located.
SEC only meet sec requirements
Disclosure of financial impairment required
required if
a. has discretion
b. has custody
c. State prepayment (m 500 6)
d. Fed prepayment( m 1200 6)
Record keeping requirement under
Same for state and federal law
Maintain books and records easily accessible 5 years
kept at principal office first 2 years
Certain docs like partnership agreements, articles of incorp, minute books must be preserved for 3 years after termination of enterprise.
For federal covered investment advisers, a prepayment in excess of $1,200 and for periods of 6 months or more in advance (substantial prepayment) requires
requires the adviser to submit an annual audited balance sheet as part of its ADV Part 2 (and brochure).
Under the NSMIA, the term “federal covered adviser” includes a person
registered with the SEC under the Investment Advisers Act of 1940
excluded from the definition of investment adviser under the Investment Advisers Act of 1940
A federal covered investment adviser refers to
a natural person or firm registered under the Investment Advisers Act of 1940 or excluded from the definition of investment adviser under that act.
