Snapshots Chapter 4: Federal and State Laws Flashcards
When does the Uniform Securities Act (USA) give the Administrator jurisdiction over any offer to buy or sell, or any acceptance of the offer?
When the customer or agent resides in the state, the transaction was effected or accepted in the state, or the offer was directed from the state or into the state.
List some functions that are performed by the Administrator to monitor and direct the state’s securities laws.
Performing examinations, reviewing applications, subpoenaing documents.
What are some examples of misleading statements that are prohibited by the Uniform Securities Act?
Stating that the registration of a security means that either the state or the SEC has approved the security, or stating that an agent’s registration means that either the state or the SEC has approved of the agent.
Explain the prohibited practice of front-running.
This is when a securities professional makes his or her own trades before making a client’s trades, thereby getting a more profitable trade for himself or herself.
What information may the State Administrator require registered broker/dealers and investment advisers to maintain on file?
The Administrator may require them to keep on file accounts, correspondence, memoranda, papers, books and other records.
Under what circumstances may an administrator cancel a registered person’s registration?
If the person is no longer in existence, is found to be mentally incompetent or cannot be located after a reasonable search the Administrator may cancel a registered person’s registration.
When an agent moves from one broker/dealer to another, what action must be taken?
The application for registration must be filed by or on behalf of the registrant within 30 days after the termination.
On what grounds may the Administrator deny, suspend, o revoke the registration of an agent, broker/dealer, or investment adviser?
Willfully violating the provisions of the Act and being convicted of a felony are two circumstances in which the Administrator may revoke, deny or suspend a license.
What are the Administrator’s obligations to a registrant and employing broker/dealer if the Administrator has summarily denied, suspended, or postponed a registration?
The Administrator must give the registrant and employing broker/dealer a written notice of the order, the reason for the action and notice that within 15 days after the receipt of the request the matter will be scheduled for a hearing.
Under what transactions would civil liabilities apply?
Failing to be properly registered as an agent or broker/dealer; and soliciting of unregistered, nonexempt securities.
Under a letter of rescission, a person may offer to buy back the security provided that what information is delivered to the purchaser in the written rescission offer?
An explanation of the liability and advice to purchasers about their rights of rescission.
What is the primary difference between a person found to have willfully violated any order of the Uniform Securities Act, and a person found in violation of the Act without willful intent?
Whether or not fraud exists. Fraud is always intentional.
In a civil liability issue, what is the customer entitled to recover?
Their purchase price plus interest and court costs, less any income from the security.
If a person who dispenses investment advice for a fee is found in violation of the Act, what is the customer entitled to recover?
The cost or fee for the advice, costs and reasonable attorney fees, and any loss due to the advice (minus income received from the advice).
What is the prose of “Chinese walls” and who must establish them?
Chinese walls are internal procedures that limit and control the flow of information between departments of a firm. These are established by broker/dealers.
