Chapter 4: Communication with Customers and Prospects - G. Summary Flashcards
Summary
In this chapter, you learned about the state administrators’ authority and jurisdiction.
An administrator has jurisdiction over a transaction if
- The customer or the agent resides in the state;
- The transaction was effected or accepted in the state; or
- The offer was directed from the state or into the state.
Remember that administrators have the right to investigate and subpoena and impose disciplinary actions, but they cannot order an injunction or imprison registrants.
Remember regulations concerning media offerings as well as unlawful representations. It is illegal to make false or misleading statements, including
- Stating that
- Registration of a security or of an agent means that either the state or the SEC has approved the security;
- Security is safe because it is regulated by securities industry authorities;
- Advising a client of an anticipated exchange listing for a security without knowing the information to be true;
- Promising to perform certain services for a client without the intention or ability to do so;
- Using inflated language or exaggerated statements;
- Misrepresenting status of a customer’s - account;
- Inaccurate market quotations;
- Inaccurately stating the commission or charged; and
- Spreading false statements or rumors.
There are rules associated with record-keeping, including what formats are acceptable and the required time frames (broker/dealers have a 3-year requirement and investment advisers have a 5-year requirement).
It is also important to know the applicant’s qualifications and the cancellation or termination of employment and who is responsible for informing the state administrator.
You also learned about the civil liabilities and criminal liabilities for violations. Make sure you carefully review what may constitute grounds for penalties.
