USA- Definitions

Question 1

Definition of an “Administrator”

under the Uniform Securities Act

Answer 1

The designated State official who

administers and

enforces

the provisions of the Uniform Securities Act (USA).

Question 2

Definition of “Institutional Investors”?

Answer 2

Typically firms that participate in a large volume of trading on a day-to-day basis.

(State Administrators have the authority, by rule or order, to expand the definition of Institutional Investor).

Examples include:

1. Mutual Funds
2. Insurance companies
3. and Retirement funds.

Question 3

Exclusions for the Definition of an “Agent of a Broker-Dealer” under the USA?

Answer 3

Agent of a Broker-Dealer (BD) excludes someone who:

1. Represents a B/D in one state and is servicing an existing client who is temporarily in another state (30 days) or has just moved into another state.
2. Partners, Officers, or Directors on the B/D who do not serve in the capacity or supervise agents. Do not personally perform transactions.

EXCLUSION for a B/D (pg 6)

Question 4

Definition of a person under the USA?

Answer 4

1. An individual (excluding minors)
2. A legal entity such as a corporation, partnership, association, etc.

Question 5

USA Exclusions from the List of Federal Covered Securities?

Answer 5

1. Securities issued by non-profit organizations.
2. Municipal bonds issued intra-state only.
3. Other *intra-state offerings.
4. Securities issued with a guarantee (from another entity for principle, interest OR dividends. Ex: parent company).

*Intrastate refers to anything that pertains to a single state and does not require crossing over the boundaries of a single state. Within a state.

Inter-state connecting or involving different states

Question 6

Definition of an “Issuer” under the USA?

Answer 6

Any person who issues or porposes to issue any security for sale and receive the proceeds of the sale.

For example: a corporation issuing common stock to the public in an IPO (Initial Public Offering).

Question 7

Federal Covered Securities that are exempt from registration under the USA and the Securities Act of 1933?

Page 10

Answer 7

The 1933 Act specifically exempts certain securities from registration under both State and Federal law. These exemptions include:

1. U.S. Government Securities,
2. Interstate Municipal Bond offerings,
3. Securities that are unregistered and issued as Private Placement.

These securities would be considered “Federal Covered” since exempted by Federal Law, and would also be considered “Exempt”.

Question 8

Definition of “Guaranteed” under the USA?

Answer 8

“Guaranteed” means a guarantee by a separate entity of the payment of the principal or interest on a bond or dividends on stock.

Question 9

Exclusions to the definition of IAR under the USA?

Answer 9

Excluded from the definition of IAR:

Those who only:

1. Perform clerical or ministerial services, or
2. Sell fixed annuities, not securities.

Question 10

Exemptions from registration of Federal Covered Investment Advisors under the USA?

Answer 10

Certain advisory firms that would otherwise be considered “Federal Covered Advisors” are exempt from registration due to exemptions. These exemptions include advisers who:

1. Gives advise ONLY on U.S. Gov’t securities,
2. are banks,
3. publishers of general advice,
4. are providing advice incidental to the LATE professions (Lawyers, Accountants, Teachers, Engineers).

Question 11

Definition of an “Assistant to an Agent” under the USA?

Answer 11

Someone who performs clerical or ministerial functions only under the supervision and control of an agent.

Question 12

Definition of “Federal Covered Investment Advisor” or “Federal Covered Adviser” under the USA?

Answer 12

An IA who comes within the definition of an IA in the federal Investment Advisors Act of 1940.

This includes

1. An advisor to a registered investment company,
2. An Advisor with Assets Under Management (AUM) of $100 million or more (formally $25 million or more).

Question 13

According to the USA, what are its’ two main purposes?

Answer 13

1. Minimize duplication of federal and state registration of securities and market participants,
2. Prevent securities fraud.

Question 14

What is the definition of “Offer” and “Offer to Sell” under the USA?

Answer 14

Any attempt to solicit a purchase or sale of a security for value. A state can assert jurisdiction over a securities transaction if the offer:

1. Originated in the state.
2. Was directed to the state.
3. Was accepted in the state.

Question 15

Definition of “Agent” under the USA?

Answer 15

Any individual who

• represents a broker-dealer
  
  • or an issuer
• in effecting or attempting to effect
  
  • ​purchases or sales of securities.

Question 16

Definition of “Investment Advisor” under the USA?

Answer 16

(IA) is any person who:

• for compensation
• engages in the business of advising others
• about securities
• directly or indirectly.

Remember: ABC = Advising, Business & Compensation

Question 17

Exclusions from the definition of “Agent of an Issuer” under the USA?

Answer 17

Agents representing issuers in effecting:

1. Exempt transactions,
2. SOME exempt securities (U.S. Giv’t, Muni, Canadian Gov’t banks, Promissory notes)
3. Transaction I certain covered securities,
4. Transactions with investing employees, if no commission is paid.

Question 18

Definition of “Federal Covered Securities” under the USA?

Answer 18

Securities covered by Federal law (Section 18 of the 1933 Act) and do not need to register at the State level, but may need to file. The list includes:

1. Securities listed on a national stock exchange (now including NASDAQ), 2. investment company shares (e.g., mutual fund shares), 3. securities sold to “qualified purchasers”.

Question 19

Definition of a “Sale” or “Sell” under the USA?

Answer 19

To include any disposition of a security or interest in a security for value.

Question 20

Exclusions from the definition of “security” under the USA?

Answer 20

The USA specifically excludes fixed annuity contracts and fixed insurance policies from the definition of a security. Other asset classes which do not fall under the definition of security include:

1. endowment policies,
2. commodity futures contracts,
3. collectibles,
4. precious metals ,
5. real estate.

Question 21

Definition of “Fraud”, “Deceit”, and “Defraud” under the USA?

Answer 21

The USA defines fraud, deceit, and defraud to include:

1. Common Law action for “deceit”,
2. The Federal and State statutory definitions of fraud.The definition is not limited to common law definitions of deceit, as it includes Federal and State statutory definitions of fraud.

Question 22

Definition of “Investment Advisor Representative” under the USA?

Answer 22

An IAR is anyone who:

1. Makes recommendations or gives advice about any securities including exempt securities, 2. Manages client accounts or portfolios, 3. Determines recommendations given to clients, 4. Solicits, offers or negotiates for the sale of or sells investment advisory services, 5. Supervises employees performing IAR functions.

Question 23

Definition of “Broker-Dealer” under the USA?

Answer 23

Any person engaged in the business of effecting securities transactions in securities for the accounts of others or for its own account.

Question 24

Exclusions for the definition of “Broker-Dealer” under the USA?

Answer 24

1. Agents
2. Issuers
3. Banks, savings institutions, and Trust companies.
4. No place of business, and only clients are institutions,
5. No place of business, and whose existing customer is living in another state, but deals with the B/D in its state.

Question 25

USA exclusions from the definition of Investment Adviser (IA)?

Answer 25

1. IARs - Representatives of IA firms, 2. Banks, savings institutions, trust companies, and investment companies, 3. LATE professionals if the advice is incidental to their practice, 4. Broker-dealers and their Agents, if advice is incidental to their practice, 5. Publishers of any news or business publication who give general advice, 6. Federal Covered Advisors, 7. Employee Benefit Plans.