Unit 1 - Chapter 2 - State Regs Under the Uniform Securities Act

Question 1

What is the name of the office or agency that has complete responsibility for administering the securities laws of states.

Answer 1

Administrator

Question 2

What is a Cease and Desist Order?

Answer 2

Whenever it appears that any registered person has engaged in any act or practice constituting a violation of any provision of the USA or any rule. The Administrator may issue a cease and desist order with or without a prior hearing against the person or person engaged in the prohibitive activities.

Question 3

What is the stop order?

Answer 3

Denies effectiveness to, or suspend or revoke the effectiveness of any registration statement. This applies to securities.

Question 4

What is a summary order?

Answer 4

Acting without prior notice that allows the administrator to:

1. ) postpone or suspend the registration of any securities professional pending a final determination of a proceeding related to a problem
2. ) Postponing or suspending the registration of a security pending a final determination of a proceeding relating to a problem
3. ) denying or revoking a specific security or transaction exemption

Question 5

What is a final order?

Answer 5

What ends in litigation, the administrator has rendered a judgment in an action (guilty or innocent). No final order may be rendered without:

1. ) appropriate prior notice to the interested parties
2. ) opportunity for hearing
3. ) written findings of fact and conclusions of law

Question 6

What are Blue-Sky Laws?

Answer 6

Common term used to refer to state securities laws.

Question 7

Define a person?

Answer 7

Means any individual, corporation, partnership, association, joint stock company, or trust where the interests of the beneficiaries are evidenced by a security, unincorporated organization, a government, or a political subdivision of a government.

Question 8

Who are the three nonpersons?

Answer 8

1. ) minors
2. ) deceased individuals
3. ) individuals declared mentally incompetent

Question 9

Define a broker-dealer?

Answer 9

Any person engaged in the business of effecting transactions in securities for the account of others or for its own account. When acting on behalf of others, they are acting as brokers; when acting on behalf of themselves, they are acting dealers.
-Excludes: Agent, Issuer, Banks or Trust companies,

Question 10

Define Agent?

Answer 10

Any individual, other than B/D, who represents a B/D or issuer in effecting or attempting to effect purchases or sales of securities. Agents are always individuals (natural persons) and their function is to be involved in securities sales or supervising those who do. Aka as registered reps
Excluded: Clerical or administrative, board members, LPs
Agents can only register in state where their B/D is registered

Question 11

Define investment adviser?

Answer 11

Any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities.

Question 12

Define Investment adviser representative?

Answer 12

Any individual who represents a state-registered investment adviser or federal covered investment adviser performing duties related to giving of or soliciting for advisory services. These can only be individuals (natural persons).

Question 13

Define Issuer?

Answer 13

Any person who issues or proposes to issue any security. Issuers primarily include corporations and governments. Know that under the USA with respect to certificates of interest or participation in oil, gas or mining titles or leases, or in payment out of production under such titles of leases, there is not considered to be any “issuer.”

Question 14

Define Noninssuer.

Answer 14

Not directly or indirectly for the benefit of the issuer, it is a secondary transaction. I.e. a nonissuer transaction is one where the issuer does not receive money because the seller of the security is someone other than the issuer. Such as your basic trading on the stock markets.

Question 15

Define Security?

Answer 15

Includes items such as stocks bonds debentures, mutual funds, variable annuities, investment contracts, preorganization certificates
Howie Decision - Four Prongs:
1.) Investment of money is made
2.) common enterprise
3.) a profit is anticipated
4.) through efforts of third-party management

Question 16

What is an exempt security?

Answer 16

The security does not have to registered in order to be sold and there is no requirements to file advertising about the security with the Administrator.

Question 17

What is an exempt transaction?

Answer 17

The nature of the sale is such that registration with the Administrator and filing of advertising material is not required in order for that transaction to take place.

Question 18

What does it mean to be Guaranteed?

Answer 18

Guarantee payment of principal, interest or dividends, but not capital gains.

Question 19

Explain offer/offer to sell?

Answer 19

Include attempt or offer to dispose of or solicitation of an offer to buy a security or interest in a security for value.

Question 20

Define Fraud?

Answer 20

An intentional effort to deceive someone for profit; not limited to common-law deceit.

Question 21

SRO

Answer 21

Self-Regulatory Organization such as FINRA, Municipal Securities Rulemaking Board (MSRB), Chicago Board Options Exchange (CBOE) and the Investment Industry Regulatory Organization (IIRO)

Question 22

Define Solicitor?

Answer 22

Any individual who, for compensation, acts as an agent of an investment adviser in referring potential clients.

Question 23

Define Accredited Investor

Answer 23

Found in Rule 501 of the federal Securities Act of 1933, refers to a person who is not counted when computer the number of investors purchasing a private placement under Reg D. This is a federal term and not one found in the USA on the exam. The term is meant to confuse when discussing the USA

Question 24

Define Registrant?

Answer 24

Refers to those securities professionals (BDs, IAs, agents, IARs) or securities issuers, who are in the process of, or who have registered with the Administrator.

Question 25

Define Institution?

Answer 25

Includes banks, trust companies, savings and loans associations, insurance companies, investment companies, employee benefit plans with assets or not less than $1MM and governmental agencies or instrumentalities. Institutions are included in the term persons

Question 26

Define Retail Client?

Answer 26

those that need more protection than institutional investor and those who meet the standard of accredited investors

Question 27

National Securities Markets Improvements Act of 1996 (NSMIA)

Answer 27

Enacted in ‘96 to promote efficiency in capital formation in the financial markets. In effect, the act generally preempts states’ blue-sky laws, eliminating the dual system of state and federal registration of certain securities and investment advisers.

Question 28

What are online red flags for investors from social media con artist?

Answer 28

1. ) Promises of high returns with no risk
2. ) offshore operations
3. ) e-currency sites
4. ) recruit friends
5. ) professional websites with little to no information
6. ) No written information
7. ) Testimonials from other group members

Question 29

What is the legal definition of a security?

Answer 29

A security must constitute the following:

1. ) an investment of money
2. ) in a common enterprise
3. ) with the expectation of profits
4. ) to be derived primarily from efforts of a person other than the investor
   * Note: The USA does not define the term security, but provides a list of securities

Question 30

What is a common enterprise?

Answer 30

An enterprise in which the fortune of the investor are interwoven with those of either the person offering the investment, third party, or other investors.

Question 31

Name 6 of the common investments that are NOT securities?

Answer 31

1. ) Annuity contract
2. ) IRAs or other retirement plans
3. ) collectibles
4. ) commodities such as precious metals or grains
5. ) Condominiums used as a personal resident
6. ) currency

Question 32

What is a nonexempt security?

Answer 32

A security subject to the registration provisions mandated by the USA. The sale of unregistered nonexempt securities is prohibited practice under the USA.

Question 33

What is an issuer?

Answer 33

Any person who issues (distributes) or proposes to issue a security. The most common issuers of securities are companies or governments. If an issuer is nonexempt, it must generally register its securities in the states where they will be sold.

Question 34

What is an issuer transaction?

Answer 34

One in which the proceeds of the sale go to the issuer. When a company raises money be selling securities to investors, the proceeds from the sale go to the company itself.

Question 35

What is a nonissuer transaction?

Answer 35

When the sale of the proceeds of the sales do not go, directly or indirectly, to the entity that originally offered the securities to the public. The most common instance is everyday trading on exchanges such as the NYSE. The proceeds of the sale go to the investor who sold the shares. These transactions are also known as secondary transactions.

Question 36

What is an initial public offering?

Answer 36

The first time an issuer distributes securities to the public.

Question 37

What is a subsequent public offering?

Answer 37

When any subsequent issuance of new share are distributed to the public after the IPO.

Question 38

What are the lawful requirements of a security?

Answer 38

1. ) It is registered under the USA
2. ) the security or transaction is exempted from registration under the USA
3. ) it is a federal covered security
4. ) If none of the first 3, must be registered in the state of cannot not be sold

Question 39

What does it mean to be federally covered?

Answer 39

A security that is exempt from registration on the state level.

Question 40

Name the categories of federally covered securities?

Answer 40

1. ) securities issued by open-end or closed-end investment companies, unite investment trusts, or face amount certificate company covered by the Investment company Act of 1940
2. ) securities listed on most US stock exchanges
3. ) securities offered pursuant to the provisions of Reg D under the Securities Act of 1933
4. ) most securities exempt from registration under the Securities Act of 1933. If the federal gov says the security does not have to register, no state can overstep that

Question 41

What are the methods for registering a security in a state?

Answer 41

1.) notice filing
2.) coordination
3.) qualification
Note: this can also be a special method for certain federal covered securities

Question 42

Under NSMIA, what happens to a security when a municipal issuer is located in the state in which the security is being offered?

Answer 42

The security is not considered a federal covered security

Question 43

What are the two items that a person do who sells federal covered securities?

Answer 43

1. ) be licensed as b/d

2. ) comply with anti-fraud provisions of state laws

Question 44

What are notice filings?

Answer 44

The opportunity for states to collect revenue in the form of filing fees

Question 45

What may a state administrator require for federal covered securities sold in their state?

Answer 45

1. ) documents filed along with their registration statements filed with the SEC
2. ) documents filed as amendments to the initial registration
3. ) report of value of such securities
4. ) consent to service of process

Question 46

What is the difference between federally covered securities and SEC covered securities?

Answer 46

federal covered securities are a narrowly defined group of securities that either trade on certain exchanges or are exempt from SEC registration. There are thousands of SEC-registered securities that do not meet the required standard including OTC Bulletin Board aka Pink Sheets

Question 47

Explain registered by coordination?

Answer 47

a registration statement that has been filed under the Securities Act of 1933 in connection with the same filing

Question 48

What must an issuer supply when coordinating federal registration with state registration?

Answer 48

1. ) latest form of prospectus
2. ) Articles of Incorp and bylaws, copy of the underwriting agreement
3. ) copies of any other information filed by the issuer under the Securities Act of 1933, if requested by the state
4. ) amendments to the federal prospectus

Question 49

What is registration by the effective date?

Answer 49

When state registration become effective at the same time as federal registration becomes effective assuming:

1. ) no stop orders have been issued
2. ) registration has been on file for at least a minimum number of days specified by the state (around 10-20, could be more based on the state)
3. ) statement of max and min offering prices and underwriting discounts have been on file for two business days

Question 50

What is registration by qualification?

Answer 50

requires a registrant to supply any information required by the state securities Admin. This where instrastate securities are registered

Question 51

If registering by qualification, what must the issuer supply?

Answer 51

1. ) name, address, form of organization, description of property, and nature of business
2. ) info on directors and officers and every owner of 10% or more of the issuers securities, and the remuneration paid to owners in the last 12 months
3. ) description of issuer’s capitalization and LT debt
4. ) estimated proceeds and the use to which the proceeds will be put
5. ) type and amount of securities offered
6. ) stock options to be created in connection with this offering
7. ) copy of any prospectus, phamplet, circular, or sales literature to be used in the offering
8. ) specimen copy of the security along with the opinion of counsel as to the legality of the security being offered
9. ) audited balance sheet current within 4 months of the offering with an income statement for three year before the balance sheet date

Question 52

What are two conditions to amend the increase in securities being sold in an issue?

Answer 52

1. ) public price offering is not changed from the amount stated in the original registration statement
2. ) underwriters’ discounts and commissions are not changed from the respective amounts state in the original registration statement

Question 53

When is the effective date triggered?

Answer 53

Whenever the state administrator orders

Question 54

How long is each registration effective?

Answer 54

One year

Question 55

What securities are exempt under the USA, but not the Securities Act of 1933?

Answer 55

1. ) Foreign Government Securities
2. ) Insurance Company securities
3. ) Federal covered securities (those listed on exchanges and registered investment companies)

Question 56

Explain why banks are exempt from registration under both state and federal law?

Answer 56

Securities issued by bank holding companies are not exempt under federal law. Most major banks are listed on exchanges or the Nasdaq and as federal covered securities are exempt from registration with the states.

Question 57

What security issues can the Administrator revoke or deny registration exemption from?

Answer 57

1. ) securities issued by any person organized and operated not for private profit by exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes or as a chamber of commerce or trade or professional association
2. ) any investment contract issued in connection with an employees’ stock purchase, savings, pension, profit sharing or similar benefit plan

Question 58

Who does the burden of providing an exemption or an exception from a definition fall upon?

Answer 58

The person claiming it

Question 59

What is a registrant?

Answer 59

The person registering the securities with the state Administrator.

Question 60

What does the state Administrator require every issuer to supply in their applications?

Answer 60

1. ) amount of securities to be issued in the state
2. ) states in which the security is to be offered
3. ) any adverse order to judgment concerning the offering by regulatory authorities, court, or SEC
4. ) anticipated effective date
5. ) anticipated use of the proceeds (why are they raising the money)

Question 61

How many years back can an applicant reach to file documents in the state registration application?

Answer 61

5 years

Question 62

Who can file registrations applications with the state?

Answer 62

1. ) issuer
2. ) selling stockholders
3. ) b/ds

Question 63

How frequent can reports be required by the Administrator?

Answer 63

Quarterly

Question 64

Why would a security be placed in escrow?

Answer 64

1. ) If the security has been issued within the past three years
2. ) If the security is issued to a promoter at a price substantially different than the offering price
3. ) If the security is issued to any person for a consideration other than cash

Question 65

When can a registration statement be withdrawn?

Answer 65

Not until one year after its effective date, if any securities of the same class are outstanding, and may be withdrawn only with the approval of the Administrator

Question 66

What are the unlawful actions of fraud under the USA?

Answer 66

1. ) employ any device, scheme, or artifice to defraud.
2. ) make any untrue statement of a material fact or omit to state a material fact necessary to make a statement that is not misleading
3. ) engage in any act, practice, or course of business that operates as a fraud or deceit on a person

Question 67

Explain a material fact in the context of fraud?

Answer 67

Information used by prospective purchaser to make an informed investment decision. i.e. Agents must not conceal a material fact to encourage a client to buy or sell a security, which would constitute deceit for personal gain. It is the on the agent to determine what is a material fact or not.

Question 68

Explain full disclosure in the context of fraud?

Answer 68

When filling out an order to purchase or sell securities, an order ticket, each ticket must disclose the account ID, description of the security - including the number of shares if a stock and total par value if a bond, the terms and conditions of the order, the time of the order entry and execution, the execution price, and the identify of the agent who accepted the order

Question 69

What are delivery delays?

Answer 69

unreasonable and unjustifiable delays in the delivery of securities purchase by any of a b/d’s customers and/or in the payment upon request of freed credit balances reflecting completed transactions

Question 70

Explain churning?

Answer 70

inducing trading in a customer’s account which is excessive in size or frequency in view of the financial resources, objectives, and character of the account.

Question 71

What are unsuitable recommendations?

Answer 71

recommending to a customer the purchase, sale or exchange of any security without reasonable grounds to believe that such transaction or recommendation is suitable for the customer based upon reasonable inquiry concerning the customer’s investment objectives, financial situation and needs, and any other relevant info known by the b/d

Question 72

What practices are considered in violation of the suitability requirements under the USA?

Answer 72

1. ) recommend securities transactions w/o regard to the customer’s financial situation, needs, or investment objectives
2. ) induce transactions solely to generate commissions (churning)
3. ) recommend a security w/o reasonable ground
4. ) make blanket recommendations
5. ) fail to sufficiently describe the important facts and risks concerning a transaction or security

Question 73

Unauthorized transactions

Answer 73

executing a transaction on behalf of a customer without authorization to do so, unless discretionary authorization has been received

Question 74

Trading Authorization

Answer 74

Discretion given to an agent by the client when the client authorizes (in writing) the agent to act on his own and use his discretion in deciding any or all the following for the client

1. ) asset (security)
2. ) action (buy or sell)
3. ) amount (how many shares)

Question 75

Commingling

Answer 75

must segregate customers’ free securities or securities held in safekeeping that are free of liens from those securities that are pledged as collateral in a margin account. Mixing shares would give undue borrowing power and could jeopardize the security of the client securities in the even of default

Question 76

Hypothecation

Answer 76

the pledging of margin securities when a b/d extends credit for the purchase of eligible securities

Question 77

Timely Prospectus delivery

Answer 77

must provide a prospectus or preliminary prospectus to the client purchasing securities no later than the due date of confirmation of the transaction

Question 78

What are examples of typical b/d fees?

Answer 78

1. ) Issuance of a stock certificate
2. ) transferring an account from one b/d to another
3. ) wiring funds
4. ) margin account interest
5. ) account maintenance fees
6. ) safekeeping of funds/securities - charge made for maintaining custody of client assets
7. ) late settlement fee
8. ) postage and handling

Question 79

Market manipulation

Answer 79

effecting any transaction in, or inducing the purchase or sale of, any security by means of any manipulative, deceptive, or fraudulent device, practice, plan, program design or contrivance

Question 80

matched orders

Answer 80

occur when an order to buy or sell securities is entered with knowledge that a matching order on the opposite side of the transaction has been or will be entered for the purpose of 1.) creating false or misleading appearance of active trading in any publicly traded security 2.) creating a false or misleading appearance with respect to the market for any such security.
This requires two parties pre-arranging entries of equal but opposite buy and sell order in the same security

Question 81

wash trade

Answer 81

an order to buy or sell securities resulting in no change of beneficial ownership for the purpose of 1.) creating a false or misleading appearance of active trading in any publicly traded security 2.) creating a false or misleading appearance with respect to the market for any such security. In this case, the beneficial owner of the traded securities does not change

Question 82

arbitrage

Answer 82

is the simultaneous buying and selling of the same security in different markets to take advantage of different prices; it is not a form of market manipulation.

Question 83

Describe the relevance of highlighting of a prospectus/

Answer 83

It is a prohibited action along with any other marks to draw attention to key points on a prospectus.

Question 84

What are examples of conflicts of interest?

Answer 84

Conflicts of interest must be disclosed at or before the completion of a transaction. Some include:

1. ) An agent offering a proprietary products such as a house fund or a limited partnership offering where the sponsor is an affiliate of the b/d
2. ) program sponsors, such as investment companies or insurance companies, providing incentives or rewards to agents for selling the sponsors’ products
3. ) securities professionals having a financial interest in any security being recommended
4. ) a b/d going public and placing shares of it own stock into discretionary accounts
5. ) b/d publishing a favorable research report after underwriting the issuer’s stock offering

Question 85

What is front running?

Answer 85

The unethical business practice of a b/d or one of its representatives placing a personal order ahead of a previously received customer order. By running in front of the order, the firm or rep can profit on that movement.

Question 86

How must complaints be received?

Answer 86

They must be received in writing (email constitutes in writing). Oral complaints do not require any action.

Question 87

Explain the role of client waivers?

Answer 87

Any security purchase or investment advice received by a client to waive compliance with any provision of the USA or any rule under it is considered null and void.

Question 88

Explain the NASAA policy of Unethical Business Practices by B/Ds and Agents in Connection with Investment Company Shares.

Answer 88

Any b/d or agent who engages in one of the following practices shall be deemed to have engaged in dishonest or unethical practices in such securities business in the USA which can be grounds for denial, suspension, or revocation of registration.

1. ) Sales Loan Commissions
2. ) Breakpoints
3. ) Selling Dividends
4. ) Share Classes
5. ) Switching Funds
6. ) Proper Yield Disclosures:

Question 89

Explain the unethical behavior of Sales Loan Commissions.

Answer 89

Saying their is no commission on the purchase of securities when in reality there is either a.) front-end load; b.) contingent deferred sales load (CDSC); c.) Ruyle 12b-1 fee or a service fees in total exceed .25% of average net fund assets per year

Question 90

Explain the unethical behavior of Breakpoints.

Answer 90

failing to disclose to any customer any relevant sales charge discount on the purchase of shares in dollar amount at or above a breakpoint or letter of intent feature, which will reduce the sales charge

Question 91

Explain the unethical behavior of Selling Dividends

Answer 91

the purchase of such shares shortly before an ex-dividend date is advantageous to such customer unless there are specific describe tax advantages to the customer or a distribution of LT capital gains by an investment company is part of the income yield from an investment in such shares

Question 92

Explain the unethical behavior of Share Classes

Answer 92

recommending to a customer the purchase of a specific class of investment company shares in connection with a multi-class sale charge or fee arrangement w/o reasonable grounds to believe that sales charge or fee arrangement associated with such class of share is suitable and appropriate based on the customer’s investment objectives

Question 93

Explain the unethical behavior of Selling Dividends

Answer 93

Recommending to a customer the liquidation of redemption of investment company shares for the purpose of purchasing share in a different investment company portfolio having similar investment objectives and policies w/o reasonable grounds to believe that such rec is suitable and appropriate based on the customer’s investment objectives

Question 94

Explain the unethical behavior of Proper Yield Disclosures

Answer 94

Stating or implying to a customer the fund’s current yield or income w/o disclosing the fund’s most recent average annual return, calculated in a manner prescribed in SEC Form N-1A for 1,5,and 10 yr periods and fully explaining the difference between current yield and total return, unless the fund does not have that long of a duration

Question 95

Explain the lending and borrowing restrictions

Answer 95

Securities professionals may not borrow money or securities from a client unless the client is a b/d, an affiliate of the professional or a fin institution engaged in the business of loaning money.
Securities professionals may not loan money to clients unless the firm is a b/d or financial institution engaged in the business of loaning funds or the client is an affiliate

Question 96

Selling Away

Answer 96

An agent may not conduct transactions with customers of his employing b/d that are not recorded on the books w/o prior written consent. aka as trade made off books of the b/d

Question 97

Sharing in Accounts

Answer 97

Agents cannot share in the profits or losses of client accounts unless the client and the b/d supply written approval. Unlike agents, b/ds, IAs, and IAR are never permitted to share in the profits and losses in their client’s accounts

Question 98

Splitting Commissions

Answer 98

splitting the agent’s commissions, profits, or other compensation from the purchase or sale of securities with any persons not also registered as an agent for the same b/d, or for a b/d under the direct or indirect common control is permissible, so long as it does not increase transaction cost to the client

Question 99

What are examples of registration terminations that do not violate the USA?

Answer 99

1. ) Request for Withdrawal - effective 30 days after received, however, the Administrator holds jurisdiction over you for 1 yr
2. ) lack of qualifications
3. ) cancellation - this does not result from failure to follow the provision in the act, it occurs as the result of death, dissolution, or mental incompetency

Question 100

What happens to an agent or IAR’s license when a BD or IA ‘s employer’s registration is suspended or revoked?

Answer 100

The license is placed into suspense and essentially has the same effect of the employer.

Question 101

When can a purchaser of securities sue for when recovery the investment advice or securities violates the USA?

Answer 101

1. ) a sale was made of an unregistered nonexempt security in violation of the registration provisions of the USA
2. ) securities professional omits or makes an untrue statement of material fact
3. ) the agent was named along with the b/d for a civil infraction
4. ) securities were sold by an agent who should have but was not registered under the act
5. ) securities were sold in violation of a rule or order of the securities Administrator

Question 102

What is the statute of limitations for a violation of civil provisions of the USA?

Answer 102

3 years from the date or two years after discovering the violation, whichever comes first

Question 103

What can a client recover if the claim of civil liability is found true from the improper sale of a security?

Answer 103

1. ) original purchase price of the securities “made whole”
2. ) interest at a rate determined by the Administrator (generally referred to as the state’s legal rate)
3. ) all reasonable attorney’s fees and court costs
4. ) minus and income received while the securities were held

Question 104

What can a client recover if the claim of civil liability is found true from improper investment advice?

Answer 104

1. ) cost of the advice
2. ) loss as a result of the advice
3. ) interest at a rate determined by the Administrator
4. ) any reasonable attorney fees
5. ) minus amount of any income received from the advice

Question 105

Right of Rescission

Answer 105

Occurs when the seller of securities discovers that a sale has been made in violation of the USA, the seller may offer to repurchase the securities from the buyer. To satisfy the buyer’s right of rescission, the amount paid back to the buyer must include the original purchase price and interest, as determined by the Administrator. This also applies to investment advice

Question 106

Letter of Rescission

Answer 106

When a seller offers to buy back the securities that were sold in violation of the act to help in avoiding a law suit. The buyer has 30 days to respond to the letter. If they do not respond, the buyer gives up any right to pursue a lawsuit at a later date. This also applies to investment advice

Question 107

Are treble damages available under the USA for securities violations?

Answer 107

No

Question 108

What must a surety bond include to meet the requirements of the USA?

Answer 108

Provide that any customer who can prove a violation (and does so within the statute of limitations) is entitled to collect against the bond.

Question 109

What is the maximum criminal penalty under the USA?

Answer 109

Fine of $5,000 and jail sentence of 3 yrs. This can only occur if the person willingly made a violation of the USA. The Administrator does not have the power to arrest anyone they must apply to the appropriate authorities in the state

Question 110

What is the statute of limitations for criminal offenses under the USA?

Answer 110

5 yrs from the date of the offense

Question 111

What is 5-5-3?

Answer 111

When applying to criminal penalties there is a 5 year statute of limitations, $5,000 max fine, and 3 yrs of max imprisonment

Question 112

When can a b/d conduct b/d services on the premises of a financial institution where retail deposits are take?

Answer 112

1. ) Setting: When the b/d services are conducted in a distinct area from the area of where institution’s retail deposits are take?
2. ) Customer Disclosure and Written Acknowledgment: At or prior to the customer’s account being opened the b/d must: disclose orally and in writing that securities products purchased or sold in a transaction are not insured by the FDIC, are not deposits or other obligations of the fin institution, are not guaranteed by the fin institution, are subject to investment risk including loss, make reasonable efforts to obtain from each customer a written acknowledgment of this disclosures
3. ) communications with the public: format disclosure may be used in communications such as: Not FDIC Insured, No Bank Guarantee, May Lose Value. As long as these omissions of disclosure would not cause the advertisement or sales literature to be misleading.

Question 113

When are disclosures not required in communications to the public?

Answer 113

1. ) If the radio broadcast of 30 seconds or less
2. ) electronic signs, including billboard-type signs that are electronic, time, and temperature signs, ticker take signs, but excluding messages contained in such media as TV, online computer services or ATMs
3. ) signs such as banners and posters, when use only as location indicators

Question 114

Importance of Claim

Answer 114

Make sure to understand who has a claim and when they do!

Question 115

What are examples of non security?

Answer 115

1. ) Insurance
2. ) Retirement Plans (example of items that can’t be sold)
3. ) Collectibles
4. ) Commodity futures and actual commodities
5. ) Condominiums as personal residence
6. ) Currency

Question 116

Assessable Stock

Answer 116

Issued below par value and the creditors could assess the owner or issuer of stock can be assessed the difference in par value. Last assessable stock was sold in 1955. Can potentially be a future obligation where the owner of the stock may have to make of the difference in par value, owed to the creditor of the failed businesses. A gift is considered a “sale”

Question 117

What is the significance of 12/31 for Agents and IARs in the context of registration?

Answer 117

The license expires ALWAYS on 12/31. If you registrar in Oct, Nov, or Dec, it still expires 12/31/

Question 118

In M&A, does the successor firm have to pay two filing fees?

Answer 118

No