Unit 11: Regulation of Broker-Dealers and Their Agents

Question 1

Broker/Dealer

Answer 1

-Any person who effects securities transactions in others or their own accounts
-Represented by Agents or Dealers
-Also involved in underwriting securities

Question 2

Excluded from definition of Broker/Dealer

Answer 2

Agents
Issuers
Banking, Savings, and Trust companies

Question 3

B/D doesn’t need state registration if:

Answer 3

-no place of business and deals with qualifying institutions
-dealing with existing customers and no place of business
-snowbird exemption
-NO de minimis exemption

Question 4

B/D website does not constitute advertising if:

Answer 4

-states whether registered or not
-doesn’t follow up to solicit business
-has general information

Question 5

Agent/IAR website is not advertising if:

Answer 5

-Affiliation is disclosed
-B/D IA is responsible for reviewing and approving

Question 6

B/D conducting business in only one state is

Answer 6

exemption from SEC registration, but cannot participate in a national exchange.

Question 7

Agent

Answer 7

Any natural person representing a broker dealer or issuer in effecting or attempting to effect securities transactions

Question 8

Associated persons

Answer 8

Anyone connected to B/D whose functions are more than clerical/administrative.
-includes those whose only contribution is capital

Question 9

Clerical/Administrative

Answer 9

can speak to clients on the phone and provide a quote, but cannot take any orders.

Question 10

Exclusions for registering as an agent

Answer 10

-the security or transaction is exempt
-they are an existing employee of the issuer and not receiving extra remuneration for soliciting

Question 11

Exempt transaction when issue is exempt

Answer 11

-Security guaranteed by US/Canadian govt, or any political subdivision
-Security of national govt that US has diplomatic relations with
-Security from BST company
-IG Commercial paper, less than 9 months, and $50K denom
-Any investment issued in connection with employee stock plan, savings, pension or profit sharing.

Question 12

Exempt transactions

Answer 12

-unsolicited brokerage transactions
-transaction between issuer and underwriter
-transaction between financial institutions
-private placements

Question 13

B/D & agent de minimis

Answer 13

does not exist, only:
-snowbird exemption
-institutional with no place of business

Question 14

B/D typically registers with

Answer 14

SEC and at least one state
-agents must be registered in state B/D is registered
-officers are automatically registered

Question 15

Form BD

Answer 15

for registering with state. fees for initial and renewing

Question 16

Agent/IAR registration is effective when

Answer 16

Administrator says so

Question 17

Statutory Disqualification

Answer 17

-expelled or suspended from SRO
-subject to barring/suspension
-found to be the cause of any suspension or expulsion
-any felony or securities misdemeanor in the past 10 years
-subject to any security injunction
-willful violation of securities law
-false, misleading, or omitted information filed with SRO

Question 18

If Agent terminates, then

Answer 18

both Agent and B/D must notify administrator

Question 19

Financial requirements for Agent

Answer 19

none; but could have bonding requirements

Question 20

Canadian B/D

Answer 20

Can work with existing Canadian client temporarily in US, or, Canadian client who is now US Resident, but has a RRSP account

Question 21

B/D capital requirements

Answer 21

must follow SEC guidelines, unless B/D is intrastate

Question 22

State capital and record-keeping requirements

Answer 22

CANNOT be more strict than federal level

Question 23

Record-keeping

Answer 23

2 years in office
3 years easily accessible (USA)
5 years easily accessible (IA)

Question 24

IAR begin/terminate with state IA,

Answer 24

the IA must notify the Administrator

Question 25

IAR begin/terminate with federally covered advisor,

Answer 25

the IAR must notify the Administrator