Snapshots Chapter 1: Definitions Flashcards
According to the Uniform Securities Act (USA), who is included in the definition of a person?
Individuals or corporations, and almost any entity other than a natural person who is a minor, deceased, or medically incapacitated.
Under the USA, what is the definition of an agent?
An agent is any individual who represents a broker/dealer or issuer in effecting or attempting to effect purchases or sales of securities.
Agents are prohibited from registering individually with the State Administrator. How are agent registrations performed?
Through the broker/dealer; agents cannot register directly with the State Administrator.
Under what conditions may an agent conduct securities business in a state prior to his registration becoming effective?
If an agent’s application is pending in that state, the agent may engage in transactions for up to 30 days for an existing client who has moved to that state. An agent may also conduct business with a current client who is in the state temporarily. Neither a broker/dealer nor an agent needs to register in a state when the client has temporary residency however any solicitation to state resident would require registration.
What is the definition of an investment adviser?
An investment adviser engages in the business of advising others for compensation, either directly or indirectly, as to the advisability and merit of purchasing or selling securities.
What persons are excluded from the definition of investment adviser?
Lawyers, accountants, teachers, engineers, publishers, employees of investment advisers, and banks are a few examples of persons excluded.
How may an investment adviser be exempt from registration in a state?
If the adviser’s only clients are other investment advisers or broker/dealers, an investment adviser may be exempt from registration in a state. If the adviser has no place of business in the state and communicates with no more than 5 public clients in that state within 12 months, the state and communicates with no more than 5 public clients in that state within 12 months, the De Minimis exemption applies.
What information must be disclosed in client contracts?
The services being rendered, the fees being charged and how the fees are computed.
What provisions must an investment advisory contract contain?
It must state that the adviser won’t be compensated based on capital gains or capital appreciation, can’t assign the contract without the customer’s consent, and will notify customers in a timely manner of changes in the members of the partnership.
What information does the State Administrator require on the registration application?
Location and type of business organization and proposed method of doing business.
What may states require of an investment adviser registered with the SEC?
File with the state copies of documents filed with the SEC, file a Consent of Service of Process, and pay a state filing fee.
Every state requires payment of a registration fee for what type of applications?
Initial and renewal.
What falls under the definition of a Sale or Offer to Sell a security?
Any security given as a bonus in conjunction with the purchase of a security; the sale or offer of a right, warrant, or convertible security; and a gift of an assessable stock involving an offer and sale fall under the definition of a Sale or Offer to Sell a security.
