Ch 1 Laws & Regs Overview

Question 1

Exempt security

Answer 1

Does not have to be registered to be sold

Question 2

Who governs federal registration? What about state?

Answer 2

SEC for federal
USA for state

Question 3

Who is a person?

Answer 3

Can be an organization too
Cannot be a minor, deceased, or mentally incompetent

Question 4

Agent acting as broker vs dealer

Answer 4

Broker: securities transactions on behalf of clients; agent excludes principals

Dealer: securities transactions on own account

Question 5

Market maker

Answer 5

Dealer providing liquidity by publishing quotes in the Nasdaq marketplace

Question 6

Investment advisor can investment advisor representative

Answer 6

IA: usually a firm; ABC (advice, business, compensation)

IAR: partner, officer, etc individual associated with IA who gives advice, determines advice, manages client portfolios, solicits services, supervises employees who for his

Question 7

USA

Answer 7

Uniform Securities Act aka “Blue sky laws”
Model law for states to use, not a law itself

Question 8

Role of administrator

Answer 8

State securities regulator who administers and enforced securities laws and educates investors

Question 9

NASAA

Answer 9

North American securities administrators association

Updates USA and maintains 65 exam

Comprised of state administrators (+ Canada, Mexico and US territories)

Question 10

Securities acts of 1933

Answer 10

Regulation of new issues
Requires certain securities be registered with SEC to be sold

Question 11

Securities exchange act of 1934

Answer 11

Established the SEC
Regulation of secondary market

Question 12

Investment advisors act of 1940

Answer 12

Regulation of investment advisors

Question 13

Investment company act of 1940

Answer 13

Regulation of mutual funds and other investment companies

Question 14

National securities markets improvement act of 1996

Answer 14

Purpose was to eliminate duplication of state and federal regulation for securities and advisors

Created category of securities that are exempt from state registration called Federal Covered Securities

Includes securities listed on US exchanges, certain Regulation D offerings (private placements), municipal securities issued outside the state, securities issued by registered investment companies (e.g. mutual funds)

Created category of investment advisors called Federal Covered Advisors based on AUM or services

Question 15

Notice filing

Answer 15

For federal covered securities

Even though exempt from state registration, states may require issuer to file copies of SEC documentation with the state or pay a fee

Will be required for issuers of investment company shares and private placements under Regulation D

Question 16

Dodd frank act

Answer 16

Passed as a response to 2008 recession

Made most significant changes to financial regulation since the regulation that followed the Great Depression