State Registration of Securities Flashcards
1
Q
What instruments are used to facilitate trading of foreign securities in the U.S.?
A
American Depositary Receipts (ADRs)
2
Q
List the securities that are exempt from registration. 7
A
- Government bonds
- municipal bonds,
- commercial paper,
- bankers’ acceptances,
- bank issues,
- non-profit issues and
- small business issues
3
Q
Though some securities are exempt from registration, nothing is exempt from the ____________ provisions of the Act.
A
Though some securities are exempt from registration, nothing is exempt from the anti-fraud provisions of the Act.
4
Q
True or False: An American Depositary Receipt (ADR) is a security.
A
True
5
Q
True or False: Precious metals are not considered securities.
A
True
6
Q
Is a voting trust certificate a security?
A
Yes
7
Q
Is a Keogh plan considered a security?
A
No, but Keogh plan participation is considered a security.
8
Q
Is an investment interest in livestock considered a security?
A
Yes
9
Q
Is a certificate of interest in a mining lease a security?
A
Yes
10
Q
Is a fixed annuity a security?
A
No, but variable contracts (e.g., variable annuities or variable life insurance) are considered securities.
11
Q
Is an endowment life insurance policy a security?
A
No
12
Q
Is a variable life insurance policy a security?
A
Yes, but a term or universal life insurance policy is not considered a security.
13
Q
Is a universal life insurance policy considered a security?
A
No
14
Q
Is Keogh plan participation considered a security?
A
Yes, but the Keogh plan itself is not a security.
15
Q
Is a 401(k) plan considered a security?
A
No
16
Q
Is treasury stock considered a security?
A
Yes. Treasury stock is stock that was issued and subsequently repurchased by the company.
17
Q
Is a debenture considered a security?
A
Yes. A debenture is an unsecured corporate bond.
18
Q
Is a preemptive right considered a security?
A
Yes
19
Q
Is a warrant a security?
A
Yes. Warrants are financial instruments that allow investors to acquire stock at a preset price.
20
Q
Is a preorganization certificate considered a security?
A
Yes
21
Q
Is an IRA account considered a security?
A
No
22
Q
Is a futures contract considered a security?
A
No, but an option on a futures contract is a security.
23
Q
Is a multi-level distributorship considered a security?
A
Yes
24
Q
Is a limited partnership a security?
A
Yes
25
Is an interest in oil and gas drilling program considered a security?
Yes
26
Is a whiskey warehouse receipt considered a security?
Yes
27
True or False: Securities issued by provinces and municipalities of Canada are subject to state registration.
False. Securities issued by Canadian provinces or municipalities are exempt from registration.
28
Are bonds issued by the City of New York exempt from state registration?
Yes
29
True or False: Securities issued by the states and municipalities of Mexico are exempt from registration under the USA.
True. An exemption is provided to securities issued by foreign governments with whom the U.S. has diplomatic relations.
30
Securities issued by any government with whom the U.S. has _____________ relations are exempt from state registration.
Securities issued by any government with whom the U.S. has diplomatic relations are exempt from state registration.
31
True or False: Securities issued by the U.S. Treasury and U.S. agencies are deemed exempt securities under the USA.
True
32
________ issued by insurance companies are exempt from state registration.
Bonds issued by insurance companies are exempt from state registration.
33
True or False: Securities of a Canadian company, but listed on the NYSE, are exempt from state registration.
True
34
Are bonds issued by a charitable organization subject to state registration?
No. Securities issued by non-profit organizations are exempt from registration.
35
What criteria must be met for commercial paper to be exempt from registration? 3
1. A 270-day maximum life,
2. minimum denomination of $50,000,
3. rated in one of the top-three categories according to an NRSRO
36
An executor of an estate sells a block of securities that are not registered. Is this a violation?
No. This is an example of an exempt transaction.
37
True or False: Bankers' Acceptances rated AAA, maturing in 6-months, and issued in $25,000 denominations are exempt.
False. Because the BAs were not issued in at least $50,000 denominations, registration is required.
38
Under the USA, private placements are exempt if securities are offered to ____ or fewer retail clients over ____ months.
Under the USA, private placements are exempt if securities are offered to 10 or fewer retail clients over 12 months.
39
What does the USA consider a security issued by an investment company that is registered under the Inv. Co. Act of 1940?
The securities are considered federal covered.
40
True or False: Agents selling unregistered, non-exempt securities to banks and trust companies are violating the USA.
False. Transactions with banks and trust companies are considered exempt transactions.
41
If a Nasdaq stock trades in the secondary market, does the USA consider it an exempt security or exempt transaction?
Exempt security
42
True or False: Bonds issued by a railroad are exempt from state registration.
True. Securities issued by a railroad, common carrier, or public utility are exempt at the state level.
43
Are securities issued by a software company exempt from state registration?
No
44
True or False: According to the USA, debt issued by a fraternal organization would NOT be considered exempt.
False. Securities issued by non-profit organizations are exempt from state registration.
45
Non-issuer trading of securities subject to reporting requirements of the Act of 1934 are _________ transactions.
Non-issuer trading of securities subject to reporting requirements of the Act of 1934 are exempt transactions.
46
True or False: Occasional, secondary market transactions in an OTCBB stock are considered exempt transactions.
False. Only non-recurring secondary market transactions are considered exempt transactions.
47
Is an unsolicited, non-issuer transaction in an OTC stock exempt from state registration?
Yes, because it is unsolicited.
48
True or False: The sale of securities to a pension plan is considered an exempt transaction under the USA.
True
49
Registration by Filing (Notification) requires issuers to be in business at least _____ months preceding registration.
Registration by Filing (Notification) requires issuers to be in business at least 36 months preceding registration.
50
What method of state securities registration requires issuers to wait to hear from the Administrator before selling?
Qualification
51
To use Filing (Notification) to register stock, the offering price must be at least $______ per share.
To use Filing (Notification) to register stock, the offering price must be at least $5.00 per share.
52
Registration by Filing (Notification) requires that the underwriting commission be no more than _____%.
Registration by Filing (Notification) requires that the underwriting commission be no more than 10%.
53
Registration by Coordination has a minimum cooling-off period of _____ days.
Registration by Coordination has a minimum cooling-off period of 10 days.
54
Which method of state securities registration would likely be used for an IPO being offered in several states?
Coordination
55
Registration by Coordination requires issuers to meet requirements of the USA as well as what other Act?
The Securities Act of 1933
56
True or False: A state may require a registration fee from the issuer of a Nasdaq security.
False. Nasdaq securities are federal covered securities.
57
True or False: An Administrator may not require a sales report from the issuer of an OTC security.
False
58
True or False: Soliciting orders for unregistered, non-exempt securities is prohibited.
True or False: Soliciting orders for unregistered, non-exempt securities is prohibited.
59
Accepting orders for unregistered, non-exempt securities is allowed if clients attest that the trade was _____________.
Accepting orders for unregistered, non-exempt securities is allowed if clients attest that the trade was unsolicited.
60
Define an investment contract (according to the Howey Test).
An investment of money, in a common enterprise, with expectation of a profit due to efforts of third-party management.
61
Regarding federal covered securities, may an Administrator cancel a registration?
No
62
Regarding federal covered securities, may an Administrator prohibit the sale of the security in his state?
No
63
As it applies to persons and securities, what does the term "exemption" mean in the USA?
Exemption signifies that a person or security is not subject to registration under the USA.
64
True or False: Variable annuities are not securities and are, therefore, not subject to registration.
False. Any variable products are considered securities. However, fixed insurance products are not securities.
65
True or False: IRAs and Keogh plans are considered securities.
False. The participation in these plans (what goes in the plan) is considered a security, but the plan itself is NOT.
66
True or False: Options on commodities are securities.
True. Options are always considered securities (e.g., options on futures, a currency, an index, or equities).
67
List some of the different types of institutional clients.
IAs, BDs, investment, insurance, or trust companies, banks, savings and loan associations, and pension plans
68
True or False: Two friends, anticipating a rise in value, purchase property. The property is considered a security.
False
69
Identify the three forms of state securities registration.
1. Notification (filing),
2. coordination,
3. qualification
70
How would a well-established corporation register a subsequent offering to be sold in multiple states?
Notification (filing)
71
True or False: Paperwork related to coordination is filed with the Administrator at the same time as the SEC filing.
False. Registration will become effective simultaneously with SEC registration, but need not be filed at the same time.
72
Do the anti-fraud provisions of the USA apply to exempt securities?
Yes. Nothing is exempt from fraud.
73
What form of state registration is not available in all states?
Notification (filing)
74
The only form of state registration that has its effective date set by the Administrator is _______________.
The only form of state registration that has its effective date set by the Administrator is qualification.
75
The solicitation of buyers for unregistered, non-exempt securities is _____________.
The solicitation of buyers for unregistered, non-exempt securities is prohibited.
76
True or False: Securities issued by municipalities of Mexico are exempt under the USA.
True. An exemption applies to securities issued by foreign governments with whom the U.S. has diplomatic relations.
77
True or False: Securities issued by municipalities of Canada are exempt under the USA.
True
78
Transactions between the issuer and its underwriter are considered ________ transactions.
Transactions between the issuer and its underwriter are considered exempt transactions.
79
May a state prevent the sale of a federal covered security in its state?
No. Federal covered securities are not regulated by the state.
80
What's an issuer transaction?
A transaction in which the issuer receives the proceeds.
81
True or False: A transaction by an executor is exempt.
True. Any transaction by an executor, administrator, trustee in bankruptcy, or conservator is considered exempt.
82
Who must prove that an exemption exists?
The party claiming the exemption
83
True or False: Under the Uniform Securities Act, municipal bonds are federal covered securities.
False. Municipal bonds are exempt securities. Federal covered securities include listed stocks and mutual funds shares.
84
The USA considers preorganization certificates, prime bank notes, and voting trust certificates to be __________.
The USA considers preorganization certificates, prime bank notes, and voting trust certificates to be securities.
85
In order to qualify for an exemption, who bears the burden of proof?
The person claiming the exemption
86
What four elements are required for an investment contract to be considered a security?
1) An investment of money,
2) A common enterprise,
3) Efforts made by a third party,
4) An expectation of profits
87
Describe what it means for a security to be registered.
The security may be legally offered or sold in the state.
88
True or False: A certificate of interest in a mining title is a security under the USA.
True. Certificates of interest in mining or drilling titles are securities under the Uniform Securities Act.
89
True or False: Exchange-listed futures contracts are securities.
False. Futures and forward contracts are not securities.
90
What type(s) of transaction(s) are exempt from the antifraud provisions of the USA?
No transaction is exempt from the antifraud provisions of the USA.
91
Under the USA, is a federal covered security trading in the secondary market an exempt security or an exempt transaction?
Exempt security
92
Under the USA, is stock issued by an electric company an exempt security or an exempt transaction?
Securities issued by public utilities are considered exempt securities.
93
An __________ policy is a type of life insurance that pays face value at the end of a period.
An endowment policy is a type of life insurance that pays face value at the end of a period.
94
List some securities that are considered federal covered and exempt from registration. 3
1. Those listed on national exchanges (e.g. NYSE, NASDAQ) and
2. investment company securities (e.g., mutual fund shares)
95
True or False: Federal covered securities issuers may be required to pay a filing fee to an Administrator.
True. Certain types of federal covered securities issuers may be required to pay a filing fee.
96
Name some of the federal covered securities.
Securities listed on an exchange, issued by an investment company, and sold as a private placement (Reg. D Rule 506)
97
True or False: A state Administrator may require notice filing by an issuer of an NYSE security.
False. Notice filing is required for mutual funds and Reg D (Rule 506) offerings, but not exchange listed securities.
98
For certain federal covered securities, may an Administrator require the issuer to complete the notice filing?
Yes. Notice filing is the process by which information filed with the SEC is also filed/shared with the Administrator.
99
According to NSMIA, when is an investment pool considered a federal covered security?
When it registers as an investment company under the Investment Company Act of 1940
100
True or False: Under the Uniform Securities Act, debentures issued by a Canadian bank are exempt from registration.
False
101
Which Act regulates Unit Investment Trusts?
The Investment company Act of 1940
102
Is an option on a commodity futures contract a security?
Yes. Options are securities, but futures contracts alone are not. Options may be tied to an equity, index, or currency.
103
Is an interest in a real estate condominium development considered a security?
Yes
104
Are securities that are traded on the Toronto Stock Exchange subject to state registration requirements?
No. These secondary market transactions are considered exempt from registration according to the USA.
105
Is a private placement considered an exempt transaction or an exempt security under the USA?
Exempt transaction
106
Are securities that are traded on the OTCBB or the OTC Pink Market exempt?
No
107
Is an isolated, non-recurring, non-issuer transaction in OTCBB or OTC Pink Market stock subject to registration?
No. It is considered an exempt transaction.
108
An intrastate offering may use which method of state securities registration?
Qualification
109
True or False: Securities that are issued by registered investment companies are considered federal covered securities.
True
110
True or False: An issuer whose securities trade on the NYSE must pay a registration fee to a state Administrator.
False
111
What is the minimum cooling-off period for registration by notification?
Five days
112
True or False: A trade of unregistered, non-exempt securities between two BDs is a violation of the USA.
False. This is an exempt transaction.
113
If an IPO is being registered, an issuer is most likely using what form of state registration?
Coordination
114
A car dealer gives 100 shares of stock to all new car buyers. Is this considered a sale of securities?
Yes. Since the gift is contingent on a purchase being made, it is considered a sale of the security.
115
True or False: Securities that are listed on the NYSE are exempt from state registration.
True
116
NSMIA indicates that securities listed on the NYSE, NASDAQ and Toronto Exchange are _______ _______ securities.
NSMIA indicates that securities listed on the NYSE, NASDAQ and Toronto Exchange are federal covered securities.
117
True or False: Charitable organizations may issue securities.
True. The securities issued by charitable organizations are exempt from registration.
118
State registration remains in effect for ___ year(s).
State registration remains in effect for one year.
119
Give some examples of insurance company offerings that are exempt from the antifraud provisions of the USA.
Life insurance policies and fixed annuities are exempt from the provisions since they are not securities.
120
If an Administrator was aware of facts before a registration became effective, a stop order may be issued if done within __ days.
If an Administrator was aware of facts before a registration became effective, a stop order may be issued if done within 30 days.
121
What investment instruments are NOT defined as securities? 6
1. Insurance, endowment policies, or annuity contracts under which an insurance company promises to pay a fixed some of money either as a lump sum or periodically for life or other specified period (i.e., term, universal, whole life insurance policies, and fixed annuities)
2. Individual retirement accounts (IRAs) or Keogh plans
3. Commodity futures contracts
4. Currencies
5. Collectibles
6. Condominiums (as primary residences)
122
Viatical settlements should only be sold to suitable investors, such as persons who have what? 2
1. Minimum net worth of at least $150,000 (not including their residence) and an annual income of $100,000, or
2. Minimum liquid net worth of at least $250,000 (not including their residence)
123
State Administrators require registrants to provide general information about the securities being offered, such as what? 3
1. The amount of securities being offered in the state
2. Any adverse ruling entered in connection with the offering by a state regulatory authority, a court, or the SEC
3. Other states in which a registration statement has been or will be filled.
124
When are issuers who are subject to state registration required to pay filing fees?
At both
- The time of registration and
- annual renewal
125
What is the effective date of registration?
The date on which the appropriate regulator releases the security for public distribution.
126
A security's registration expires when?
One year after its effective date.
