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Flashcards in 1 - USA, Broker-Dealers & Agents Deck (46)
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1

Who is a "person" under the Uniform Securities Act?

Under the Uniform Securities Act a "Person" means an individual, a corporation, a partnership, an association, a joint-stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government. A person is defined very broadly.

2

Who is a NOT a "person" under the Uniform Securities Act?

The only nonpersons are: (1) minors (those under 18), (2) deceased individuals, and (3) individuals declared legally incompetent.

3

What is the relationship between a broker dealer and an agent?

Broker dealers (any legal person) employ agents (individuals) to represent them in effecting securities transactions.

4

When does the registration of broker dealers, agents, investment advisers, and investment adviser representatives expire?

December 31st of each year. All registrations come up for renewal on December 31st. A registration is renewed by paying a fee.

5

Define broker dealer

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

6

What is an issuer?

An issuer is any person who issues or proposes to issue a security, such as companies or governments.

7

Define agent

Any individual other than a broker dealer who represents a broker dealer or issuer in effecting or attempting to effect purchases or sales of securities.

8

Define legal person

Legal person means an individual, a corporation, a partnership, an association, a joint-stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government.

9

Define natural person

Natural person means an individual. A living human being.

10

A broker dealer has an office in the state. Does it have to register in the state?

Yes. A broker dealer with a physical office in a state must register in that state. No further analysis is required.

11

A broker dealer has a single retail client in the state. Does it have to register in the state?

Yes. A broker dealer with a single retail client in a state must register in that state.

12

Who is an agent of an issuer?

An agent of an issuer is an employee of an issuer who sells the issuer's securities in the marketplace.

13

When is an issuer's agent exempt from registration?

An issuer's agent is exempt from registering if the agent: (1) sells exempt securities, (2) sells securities in an exempt transaction, or (3) sells the securities to existing directors, officers, or employees of the issuer and receives no additional compensation for such sales.

14

Are there financial requirements to register as an agent?

No.

15

What four characteristics define a security?

(1) An investment of money; (2) in a common enterprise; (3) with the expectation of profits; (4) to be derived primarily from the efforts of a person other than the investor.

16

Six categories of items that are not securities under the Uniform Securities Act.

(1) Insurance, endowments or annuities with fixed payouts; (2) Interests in a retirement plan; (3) Collectibles; (4) Commodities or futures contracts for commodities; (5) Condominiums used for personal residences; and (6) Currency

17

What is the difference between an exempt security and an exempt transaction?

An exempt security is exempt from registration based on the nature of the issuer or the type of security. An exempt transaction is exempt from registration based on the manner in which the sale is made or the nature of the purchaser.

18

What are the two methods for registration of securities in a state?

(1) Coordination (issuer supplies state securities administrators with the federal registration statement filed under the Securities Act of 1933. This is the most frequently used method of registration); and (2) Qualification (issuer supplies all information directly to the state securities administrator).

19

What is the effective date of state registration of a security by coordination?

Registration is effective at the same time the federal registration becomes effective, provided: (1) there are no issued stop orders or pending proceedings against the issuer; (2) the registration has been on file for the minimum number of days specified by the Administrator (10-20, depending on the state); and (3) a statement of the minimum and maximum proposed offering prices and maximum underwriting discounts and commissions have been on file for two business days.

20

What types of annuities are securities and what types are not?

Annuities with fixed payouts are not securities, but annuities with variable payouts are securities, because the amount of the payouts depends on the performance of securities within the annuity.

21

What is an issuer transaction?

An issuer transaction is one in which the proceeds of the sale go to the issuer. All newly issued securities transactions are issuer transactions.

22

What is the difference between a primary offering and an initial public offering (IPO)?

A primary offering is an issuer transaction involving new securities. An initial public offering is the first time an issuer distributes securities to the public.

23

What is a non-issuer transaction?

A non-issuer transaction (also called a secondary transaction, or a transaction between investors) is one in which the proceeds of the sale do not go to the issuer. Non-issuer transactions are exempt transactions.

24

What are the main categories of federal covered securities?

(1) Securities listed on the New York Stock Exchange, the American Stock Exchange, the Chicago Stock Exchange and the Nasdaq Stock Market, and any security equal in seniority or senior to these securities; (2) investment company securities registered under the Investment Company Act of 1940; and (3) offers and sale of certain exempt securities, such as those offered by a municipal/governmental issuer (except in the state the municipal securities are being offered) and private placements under Regulation D of the Securities Act of 1933.

25

What category of federal covered security is always required to engage in Notice Filing, and what does it entail?

Investment companies are required to file a notice with Administrators in states in which their securities will be sold, and to pay specified filing fees.

26

State Administrators may require that an issuer file certain documents under notice filing procedure. What are these documents?

(1) Documents filed with registration statements filed with the SEC, and documents filed as amendments thereto; (2) A report on the value of the securities being offered in the state; and (3) consent to service of process.

27

When may a security be registered by coordination?

A security may be registered by coordination if a registration statement has been filed with the SEC under the Securities Act of 1933 in connection with the same offering.

28

What documents must an issuer file with a state Administrator when registering in a state by coordination?

(1) Consent to service of process; (2) if the Administrator requires, copies of the latest prospectus filed with the SEC under the Securities Act of 1933; (3) copies of its articles of incorporation and by-laws, a copy of the underwriting agreement or a specimen copy of the security; (4) if the Administrator requires, copies of any other information filed under the Securities Act of 1933; and (5) each amendment to the federal prospectus promptly after it is filed with the SEC.

29

When may a security be registered by qualification?

Any security may be registered by qualification, and any security not eligible for registration by another method must be registered by qualification. Securities that will be sold only in one state must be registered by qualification. Generally, any security that will also be registered with the SEC will be registered by coordination.

30

What is a material fact?

Information used by a prospective purchaser to make an informed investment decision.