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Series 66 > Unit 4 - Regulation Of Securities And Issuers > Flashcards

Unit 4 - Regulation Of Securities And Issuers Flashcards

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Series 66 flashcards
1
Q

***What is NOT a security?

A
  • An insurance or endowment policy or annuity contract under which an insurance company promises to pay a FIXED sum
  • Interest in a retirement plan, such as an IRA or 401(k)
  • collectibles
  • Commodities such as precious metals and grains, including futures and forward contracts
  • condominiums used as a personal residence
  • currency
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2
Q

Issuers and registering securities

A

If an issuer is non-exempt (not exempt from registering its securities), it must generally register its securities in the state where they will be sold.

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3
Q

Issuer transaction

A

Proceeds of sale go to issuer

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4
Q

Non-issuer transaction

A

Proceeds do not go, directly or indirectly, to the entity that originally offered the securities to the public.

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5
Q

Primary Offerring

IPO

A

IPO is 1st time ever

Primary is any tome the issuer is issuing new securities.

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6
Q

It is unlawful for any person to offer or sell an unregistered security in a state unless: (3)

A
  • it is registered under the Act
  • the security OR transaction is exempt from registration under the Act
  • it is a federal covered security
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7
Q

Federally Covered Securities Examples

A

Securities exempt from registration at the state level.

Securities issued by an open end or close end investment company, UIT, trust or face amount certificate company that is registered under investment company act.

  • securities on any major exchange, including rights, warrants, bonds, stock.
  • securities offered through 506b, 506c Regulation D, private placement
  • most securities exempt from registration.
  • a municipal bond is not federally covered in the state it is issued in. It is federally covered in all other states.
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8
Q

Federally Covered Securities vs. A security that is registered with the SEC.

A

Registering a security does not automatically make it federally covered. If fed says it doesn’t have to register, states have to abide. It is federally covered but not registered.

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9
Q

Exempt Transactions

A

A transaction is exempt because of the manner in which a sale is made or because of the person to whom the sale is made.

An agent can sell an unregistered security that is not exempt from registration in the state if the purchaser of the security is a bank or other institutional buyer because the sale is an exempt transaction and can be made without registration.

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10
Q

Types of Exempt Securities (securities exempt from state registration)

A
  • US And Canadian government and municipal securities
  • foreign government securities maintains diplomatic relations)
  • Depository institutions
  • Insurance company securities
  • Public utility in common carrier securities
  • Federal covered Securities
  • Securities issued by nonprofit organizations
  • Securities of employee benefit plans
  • certain money market instruments,commercial paper
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11
Q

Exempt transactions examples**

A
  • Isolated non-issuer transactions
  • Unsolicited brokerage transactions
  • Underwriter transactions
  • Bankruptcy, guardian, or conservator transactions
  • Institutional investor transactions
  • Limited offering transactions - private placement
    (Directed at not more than 10*** persons (CALLED OFFEREES, NOT PURCHASERS)other than institutional investors during the previous 12 consecutive months
  • Pre-organization certificates
  • transactions with existing security holders (rights, warrants)
  • Nonissuer transactions by pledgees (you default on a loan with which you had stock as collateral. The holder of the stock will sell the stock to recoup the money…this is exempt)
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12
Q

Administrator may revoke the registration exemption of what types of securities? (2)

A
  • Any security issues by any person organizing operated not for private profit but exclusively for religious educational benevolent charitable
  • And investment contract issued in connection with an employee stock purchase savings pension profit-sharing or similar benefit plan
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13
Q

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

A

The person claiming it

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14
Q

Rule 147 Exemption

A

Exempt from federal registration but not the USA. Has to be sold to residents of the state also. Everything in the state to be federally exempt.

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15
Q

Federal Exempt Transactions (Securities act of 1933)

A
  • transactions by any person other than an issuer underwriter or dealer.(individual to individual)
  • transactions by an issuer where they do not involve a public offering ( private placement)
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16
Q

SEC Rule 506, 506(b), 506(c)

Private placement

A

SEC Rule 506 - private placement where no dollar limit on amount sold.

506(b) - can sell the offering to an unlimited number of accredited investors and up to 35 non-accredited investors (cannot be advertised)

506(c) - permits the offering to be advertised if
- All purchasers are accredited investors or the issuer reasonably believes they are.

-the issuer take reasonable steps to verify that all purchasers are accredited investors which could include reviewing documentation.

17
Q

Accredited investor (Rule 501) (different from qualified investor)

A

Realize the difference

Accredited only applies to private placements. Eligibility does not mean suitability.

Accredited include officers of issuing stock, charitable organizations , employee benefit plans with AUM $5m+, etc. oh 76. $200k income for one or $300k for joint income or $1m + assets

18
Q

Prospectus

A

Any notice circular letter or communication written or broadcast by radio or television that offers any security for sale or confirms the sale of a security

19
Q

Underwriter

A

A person usually a broker dealer who has purchases securities from an issuer with the view to distribution of the security or participates or has a direct or indirect participation in that distribution

20
Q

SEC does not approve securities

A

-

21
Q

Registrant

A

Person registering the securities

22
Q

***State Securities Registration Procedures

Filing the registration statement

A

Filing the registration statement, it must have the following information:

  • amount of securities to be issued in the state
  • States in which the security is to be offered but not the amounts offered in those other states
  • any adverse order or judgment concerning the offering By regulatory authorities court or the SEC
  • Anticipated effective date
  • Anticipated use of the proceeds
23
Q

***State Securities Registration Procedures

Filing fee

A

Issuer or rep registering must pay. Percentage of offerring price.

If the registration is withdrawn or if the administrator issued a stop order before the registration is effective the administrator may retain a portion of the fee and refund the remainder to the applicant

24
Q

***State Securities Registration Procedures

Stop Order

A

Used to deny effectiveness to or suspend or revoke effectiveness of any registration statement. Applies only to securities, not professionals.

25
Q

***State Securities Registration Procedures

Ongoing Reports

A

Administrator may require keep information contained in the registration statement current not more often than quarterly ***

26
Q

***State Securities Registration Procedures

Escrow

Administrator may require a security be placed in escrow if:

A

The security is issued:

  • within the last 3 years
  • To a promoter at a price substantially different than the offering price
  • To any person for a consideration other than cash

Admin may require that the proceeds from the sale of the registry at security in the state be impounded until the issue receives a specified amount.

27
Q

***State Securities Registration Procedures

Special Subscription Form

A

Administrative me requires a condition of registration that the issue be sold only on a form specified by the administrator and that a copy of the form or subscription contract be filed with the administrator or preserved for up to 3 years.

28
Q

Methods of state registration of securities

A

Notice Filing
Coordination
Qualification

29
Q

**Registration statement may be amended after it’s effective date to change the number of shares to be offered and sold of the public offering price and underwriters discounting commissions are unchanged. **

A
30
Q

Regulation D form?

A

Form D - filed no later than 15 days after the first sale

Series 66 (19 decks)

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