USA - Registration / Licensing Flashcards
the Act requires that any ____, ____, _____, and ______ be registered in the state unless there is an exemption
BDs, agents, IAs, or IARs`
NSMIA was enacted to eliminate _______
duplicate fed and state registrations
“Persons” are ______
legal entities
Persons can issue and trade securities, and can be ____ or ____
human or non-human
Persons can be:
- individuals
- corporations
- partnerships
- business trusts
- estates
- trusts
- associations
- joint stock companies or joint ventures
- governments and political subdivisions of governments
- unincorporated organizations and any other legal or commercial entity
The “issuer” for a trust is the person _______
performing the functions of manager of depositor under the trust agreement
The “issuer” for equipment trusts is _______
is the person to whom the equipment is to be leased or conditionally sold (which is the corporation)
For fractional interests in O&G programs, or mining titles or leases, there is no _____
issuer (this makes them have to register through qualification - more stringent to detect fraud)
When an issuer sells or redeems securities, it is termed a _______
issuer transaction
A “non-issuer” is someone who is ______ as an issuer under the act
not defined
In a “non-issuer” transaction, the proceeds from the sale of the securities goes to _____
someone other than the issuer (a secondary transaction)
Firms with no ______ in the state that only deal with ______ are not required to register
with no office in the state than only deal with institutional clients are not required to register
Institutional buyers are:
- banks
- S&Ls
- trust companies
- insurance companies
- investment companies
- pension and profit sharing plans
- anyone else so designated by the state administrator
A broker-dealer is a person who:
- engages in the business of effecting securities transactions for the accounts of others
- engages in the business of trading for his own account
M&A advisors and finders are also considered _____
broker-dealers
Persons that are NOT considered BDs are:
- agents
- depository institutions
- issuers
Firms that trade ______ with ________ with no place of business in the state are exempt
exclusively with professional investors (issuers, other BDs, institutional buyers)
BDs are not required to register in the state where their existing customers are _____
vacationing (30 days or less)
For Canadian BDs with clients visiting the US, they can stay in the US no longer than _____ and must intend to go back to Canada in order for them to not have to register in the US
6 months
An agent is a person who represents a ______ or _____
an issuer or a BD
Is there a requirement saying that you must earn a commission to be considered an agent?
NO
The names of the officers of the company that will act as agents are included on the ______ (Form ____)
included on the BD registration (Form BD)
The only exclusions from the definition of an agent are those representing _____
issuers
The four exclusions for individuals who represent issuers are:
- sales of specified exempt securities (but not all exempt securities)
- exempt transactions
- sales of specified covered securities (but not all covered securities)
- sales of securities to employees of that issuer if no remuneration is paid
The “exempt” securities in regards to an agent of an issuer not having to register in the state are:
- US gov’t
- Foreign gov’t
- Muni gov’t
- Canadian gov’t
- Bank and Savings institutions
- Trust companies
- Promissory notes that will mature in 9 months or less that are rated in top 3 categories in amounts at least of $50,000 (ie commercial paper)
- securities issued in connection with savings, pension, profit sharing plans, and ESOP plans
The “exempt” transactions in regards to an agent of an issuer not having to register in the state are:
- isolated transactions with someone other than the issuer – NOT repeated or successive trades by the same person
- transactions between issuers and underwriters
- transactions with financial or institutional investors
“Covered” securities that exempt an agent of an issuer from registering are:
- federal private placements (Reg D)
- Sales to qualified purchasers (natural persons or family owned companies with at least $5m in investments; pre-existing trusts for the persons listed above as qualified purchasers (but cannot be formed to buy securities); any other person with at least $25m of discretionary investments)
Employees of an _____ who effect trades only for the _____ employees are excluded from registration requirements, as long as no comp is involved
employees of an issuer who effect trades only for the issuer’s employees are excluded
An investment adviser is someone who:
- engages in the business of advising others, directly or indirectly, as to the value of securities, investing, buying/selling securities
- issues or circulates analyses or reports concerning securities on a regular basis
- provides investment advisory services to others in a financial planning context
Persons that are excluded from the definition of investment advisers are:
- IARs
- depository institutions
- professionals
- BDs
- publishers of newsletters that do NOT give advice based on specific investment situations
- federal covered advisers
A federal covered adviser must register with the _____ but not with the state
SEC
If NOT a federal covered adviser, must register with the ____ and not with the SEC
state
Federal investment advisers are those who ________, or adviser to _____
have more than $100m in AUM or are advisers to registered investment companies
A federal covered adviser can choose state or SEC registration if they have between ___ and ___ in AUM
$100 and $110m in AUM
A federal covered adviser does not need to de-register unless its AUM falls beneath _____
$90m
Mid-size advisers that are not required to register in the state must register with the ____
SEC ($25m or more in AUM)
Mid-size advisers with registration in 15 or more states can opt to be ____
SEC-registered
A federal covered adviser is also anyone who is NOT an ______ under the investment adviser act of 1940
NOT defined as an investment adviser
Excluded from the definition of an investment adviser are:
- banks or bank holding companies
- professionals
- BDs and their RRs
- publishers of bona fide newspapers, magazines, or financial publications of a general and regular circulation
- any person who advises solely about US gov’t guaranteed obligations
An IAR is anyone employed by an IA that:
- makes recommendations or renders advice
- managers accounts or portfolios of clients
- determines which recommendations or advice regarding securities should be given
- solicits, offers, or negotiates for the sale of investment advisory services
- supervises employees performing any of these tasks
States still have jurisdiction over IARs who are employed by a _____
federally covered adviser
Agents cannot be affiliated with more than ______ at one time in most states
cannot be affiliated with more than one BD at one time in most states
When an agent begins or terminates employment with a BD or issuer, the agent, as well as the employer, must _____
promptly notify the State administrator
Canadian BDs are _____ from registration (not _______)
EXEMPT (not EXCLUDED)
Agents associated with excluded or exempt BDs are considered _______
exempt
Federal covered advisers have to file ______ in each state they conduct business in
file notice
IAs who have no office in the state who only deal with the following clients are EXEMPT from registration:
- other IAs or fed covered advisers
- BDs
- banks, trust companies, and S&Ls
- insurance companies
- investment companies
- Employee benefit plans with over $1m in assets
- gov’t agencies
- anyone designated by the administrator
Advisers with no place of business in the state, and with no more than ____ within a ____ period are EXEMPT
5 clients over a 12 month period
If the IAR of a federal covered IA is physically present in the state, then they must ______
register in the state
If the IAR of a fed covered IA is not physically present in the state but the IA files notice in the state, the IAR ____
must register (if they solicit business there)
Solicitors (referral generators) for IAs must be _____
registered in the state, even if they are not employees of the IA
If an IAR begins or terminates employment with an IA, the ____ must promptly notify the state
the IA
If an agent of a BD begins or terminates employment, _______ must notify the state
BOTH the agent and BD
When an IAR of a fed covered IA begins or terminates employment, the _______ gives prompt notice to the state
IAR
The Consent to Service of Process is only filed with ______
initial applications - no need for renewal
Fed covered advisers file form _____ in the state to give notice
file form ADV
There is an initial ________ for registration of each BD, Agent, IA, and IAR
initial registration fee
Each licensed person must pay an annual _______ (there are no _____ fees)
pay an annual fee, there are no pro-rated fees
Registration becomes effective in ______
30 days from filing
There is no additional filing fee for ______
successor firms
Registration expires _____ unless renewed
Dec 31st
_______ registration satisfies the state requirements (have to inform the state admin)
CRD registration
The IARD system handles registration of both _____ and _____ IAs, as well as notice requirements for _____, and registration from IARs
state and federal covered IAs, as well as notice filings for fed covered advisers and registration of IARs
For fed covered IAs, registration with the SEC and with each state expires ______
annually on Dec 31st
The annual form ADV updating amendment is filed within ______ of fiscal year end
90 days
Form ADV updating amendment is required for _____
both state and fed IAs
An amendment for any material change is required to be filed within ______ of the occurrence
30 days
For individual agents/IARs, renewal is done by updating the _____ within _____ of year end
U4 within 30 days
If terminated, a form ____ must be filed within ______ of termination
form U5 within 30 days of termination
For disciplinary action, a form ____ must be filed ______ (no later than ____ after action has been taken)
U6, promptly but no later than 30 days after action is taken
Any allegations of felony by a customer are filed using _____
form U6
Registration standards for BDs include:
- min dollar amounts of net capital
- surety bond coverage
- passing qualification exams
Registration standards for IAs include:
- min net worth amount
- surety bond coverage
- passing exams
Surety bonds are only required for IAs that ______
take custody of customer assets
There are higher net worth and bonding requirements for IAs that _____ or _____
take custody of assets or exercise discretion
The net worth requirement for IAs only applies to ______
the state of principal business
Net worth for an IA =
= all assets - all liabilities - intangibles (also deduct personal property if IA is an individual)
All IAs and BDs must also submit a ______ to prove net worth/net capital requirements
balance sheet
If an IA or BD fails to meet financial standards, must notify the state ______
next business day
Registration for an agent includes:
- surety bond coverage (if has custody or discretion)
- passing exams
Registration for an IAR includes
- passing exams
Record keeping requirements for BDs are ____ for correspondence, _____ for trade confirmations, _____ for customer account statements
3 years, 3 years, 6 years
For fed covered advisers, all records kept for _____
5 years
State registered IAs must keep records of:
- journal entries
- general ledger and trial balances
- order ticket copies
- copies of canceled checks, bank statements, and bank recons
- originals of all written communications
- list of discretionary accounts
- copy of each POA
- copy of each advisory agreement
- copy of each notice, circular, ad, etc. sent to 2 or more customers
- record of each securities transactions except for transactions in US gov’t securities
Advertising is considered a communication sent to _____
more than one person
If recommendation does not include a reason, a separate _____ must be retained documenting reasons for recommendation
a separate memo
Customer accounts must be posted no later than _____ after the end of the _____ in which the trade occurs
10 business days after end of the quarter
A _____ of electronic storage must be kept ______; cannot be _____
a copy must be kept at a separate location; cannot be erasable or rewritable
Record keeping rules of the ______ must be kept by IAs with multiple locations (does NOT apply to _____)
record keeping requirements of the principal state of business - does NOT apply to BDs
IAs that take custody of customer assets must keep records for _____ in the principal office of _____ and ____
5 years in the principal office of client purchase and sale history, current client securities positions
Permanent records must be kept for _____ after firm is closed
3 years
For revoking/suspending license, a hearing will be set down within ____ of written request
15 days
Registration is not fully effective until _____ with no legal action
1 year
Do unincorporated businesses and joint ventures count as “persons”?
YES
Does a minor count as a “person”?
NO
Is there a defined “issuer” for O&G programs?
NO
The USA does or does not set min capital standards to be considered an institutional buyer?
DOES NOT - basically whoever the state admin decides is one
If a BD meets the de minimus rules for a state, does that make them EXEMPT or EXCLUDED?
EXEMPT
Can a BD also register as an IA?
YES, if they offer advisory products
Are trusts EXCLUDED from the definition of an IA?
YES
Are commodity futures considered to be securities?
NO
If a BD buys out another BD, is there an additional filing fee?
NO (same goes for IAs)
For material changes to a BDs registration forms, when must they notify the state?
PROMPTLY
Is there a minimum experience standard for registration?
NO - you satisfy this by passing the exams
Net capital requirements for BDs are set under the ______ act
1934 securities exchange act
A group email or a research report are considered ______
sales literature
Records that must be maintained in the principal office of a state-registered IA are _____ and _____
customer purchases and sales and customer securities positions
If an agent withdraws their registration, it does not become effective until ____
30 days
