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Series 66 > State Regulation Governing Broker-Dealers and Agents > Flashcards

State Regulation Governing Broker-Dealers and Agents Flashcards

1
Q

Is a bank whose trust department occasionally executes securities transactions considered a BD?

A

No. Banks are excluded from the BD definition.

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2
Q

Is an individual who represents a BD in the sale of Treasury bonds considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

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3
Q

Is a sales assistant for a BD who accepts unsolicited orders from clients considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

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4
Q

Is an individual who represents an issuer in the sale of municipal bonds considered an agent?

A

No, since the individual is involved in the sale of exempt securities.

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5
Q

Is an individual who represents the issuer of a private placement considered an agent?

A

No, since the individual is involved in an exempt transaction.

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6
Q

Is an individual who represents the issuer in the sale of Treasury bonds considered an agent?

A

No, since the individual is involved in the sale of exempt securities.

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7
Q

Is an individual who represents a BD in the sale of a private placement considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

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8
Q

Is an individual who represents a BD in the sale of a bank’s stock considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

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9
Q

Is an individual who represents a BD in the sale of stock to a bank considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

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10
Q

Is an individual who represents an issuer in the sale of stock to a bank considered an agent?

A

No, since the individual is involved in an exempt transaction.

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11
Q

Is an individual who represents an issuer in the sale of the issuer’s stock to its underwriter considered an agent?

A

No, since the individual is involved in an exempt transaction.

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12
Q

Is Jim an agent if he works in ABC’s retirement dept. and, once a year, places ABC stock in employees’ accounts?

A

No, Jim is representing the issuer in an exempt transaction.

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13
Q

True or False: A Consent to Service of Process is an example of an exculpatory clause.

A

False. Exculpatory clauses are waivers absolving agents from wrongdoing. The waivers are null and void under the USA.

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14
Q

True or False: A Consent to Service of Process must be filed by BDs, but not their agents.

A

False. A Consent to Service of Process is required of all registrants.

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15
Q

True or False: An agent whose client moves to a new state may not contact the client until registered in the new state.

A

False. The agent may engage in transactions with the client for 60 days if registration is pending in the new state.

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16
Q

May an agent whose client is visiting another state sell securities to the client without being registered in the state?

A

Yes, provided the client is in the state temporarily.

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17
Q

True or False: In state law, individuals representing issuers in effecting securities trades are ALWAYS deemed agents.

A

False. Individuals are not deemed agents if representing issuers of exempt securities or effecting exempt transactions.

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18
Q

List some of the exclusions from the definition of a BD.

A

Agent, issuer, bank, or a BD with no office in the state that only deals with institutions or its existing clients

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19
Q

May the Administrator set minimum net capital requirements for BDs?

A

Yes, but the requirement on BDs may not exceed the federal (SEC) requirement.

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20
Q

Is there a limit to the amount of net capital the Administrator may require of a BD?

A

Yes. The Administrator may not set a requirement that exceeds the federal (SEC) requirement.

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21
Q

A _________ bond is posted to cover the potential costs of legal action taken against certain persons.

A

A surety bond is posted to cover the potential costs of legal action taken against certain persons.

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22
Q

An individual who represents an issuer in selling registered, non-exempt securities for compensation is an ________.

A

An individual who represents an issuer in selling registered, non-exempt securities for compensation is an agent.

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23
Q

May an agent continue to do business in a state if his BD has gone out of business?

A

No. An agent’s registration is only in effect while associated with a BD or issuer.

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24
Q

When an agent ends her association with a BD, who must notify the Administrator?

A

Both the agent and the BD

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25
Q

If a BD is not registered in a state, may an agent of the BD do business in the state without being registered there?

A

Yes, if the agent is dealing with an existing client that is temporarily in the state.

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26
Q

If a client moves to a new state, may the agent continue to do business while applying for registration in the state?

A

Yes, as long as the agent is registered in at least one other state and is not subject to disqualification.

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27
Q

A client of a Canadian BD is visiting the U.S. May the agent do business with her without registering in the state?

A

Yes. Since she is an existing client of the Canadian BD, business may continue in the state.

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28
Q

May an agent of a BD located in Mexico do business with a client in the U.S. without registering in the state?

A

No. BDs of Mexico are required to register in the U.S. to effect securities transactions in a state.

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29
Q

What is the purpose of a Consent to Service of Process?

A

To appoint the Administrator as the applicant’s attorney to receive and process any non-criminal legal complaints

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30
Q

Who must sign a Consent to Service of Process?

A

Any issuer, BD, IA, IAR, or agent initially registering to engage in business within a state

31
Q

Must the Consent to Service of Process be renewed each year?

A

No. It is only required at initial registration.

32
Q

State registration expires annually on ______________.

A

State registration expires annually on December 31.

33
Q

When does state registration become effective?

A

At noon on the 30th day after filing an application, provided there are no proceedings pending

34
Q

If a BD is registered with the SEC, is registration required in any state in which it intends to do business?

A

Yes. There are no exemptions from registration in the state as a BD.

35
Q

True or False: If a BD registers in a state on March 3, it must pay a registration fee for the full year.

A

True

36
Q

If a firm meets the BD definition in the state, are there any exemptions from registration under the USA?

A

No. Firms that meet the BD definition are required to register in the state.

37
Q

The USA refers to an individual who represents a BD in the sale of securities as an ________.

A

The USA refers to an individual that represents a BD in the sale of securities as an agent.

38
Q

May the Administrator set net capital requirements for BDs?

A

Yes

39
Q

If the Administrator requires an IA, BD, or agent to post a bond, is a deposit of cash or securities acceptable?

A

Yes. However, the Administrator determines the amount and types of securities that are appropriate.

40
Q

A BD must maintain its books and records for a minimum of ____ years.

A

A BD must maintain its books and records for a minimum of 3 years.

41
Q

Identify the acronym: CRD

A

Central Registration Depository

42
Q

True or False: The USA requires all employees of a BD to register.

A

False. Only those representing a BD in effecting transactions (as an agent) must register.

43
Q

An _______of an ________ is an individual who represents an issuer in effecting transactions with the general public.

A

An agent of an issuer is an individual who represents an issuer in effecting transactions with the general public.

44
Q

A BD in New York gets an order from a client who is on vacation in Florida. Does the firm need to register in Florida?

A

No. Registration is not required since the client is an existing client who is temporarily in Florida.

45
Q

True or False: An agent may sell limited partnerships if he is not yet registered with the Administrator.

A

False. Limited partnerships are securities and an individual must be properly registered to sell them.

46
Q

True or False: An employee who is hired to assist in selling IPO shares is required to be registered.

A

True

47
Q

True or False: It is always prohibited for agents to split commissions.

A

False. Splitting commissions is allowed if both agents are licensed with the same firm and in the same state.

48
Q

Is an individual who represents an issuer in the sale of registered stock considered an agent?

A

Yes. An individual who represents an issuer of securities being offered publicly must register as an agent.

49
Q

If a person works for a federally chartered bank, is he required to register with the SEC or a state Administrator?

A

No. Only non-clerical employees of broker-dealers and investment advisers are required to register.

50
Q

True or False: On Form U4, a person must disclose any aliases or previously used names.

A

True. An alias or previously used name could simply include a person’s maiden name.

51
Q

To apply for a securities license, a person must file Form ___ with FINRA.

A

To apply for a securities license, a person must file Form U4 with FINRA.

52
Q

True or False: BDs must file retail communication with the Administrator.

A

True

53
Q

True or False: A partner, officer, or director of a BD is always considered an agent of the BD.

A

False. A partner, officer, or director is deemed an agent of a BD if she is involved in the purchase/sale of securities.

54
Q

Is an individual who represents a bank in the sale of its bond offering considered an agent?

A

No, since the individual is representing the issuer in the sale of exempt securities.

55
Q

Is a firm considered a BD if it has an office in a state, but only deals with institutional clients in the state?

A

Yes, because the firm established an office in the state.

56
Q

Is a corporation considered a BD if it raises capital by selling new shares of its stock to the public?

A

No. The corporation is an issuer and issuers are excluded from the BD definition.

57
Q

Is a firm considered a BD if it has no office in a state and only deals with institutional clients in the state?

A

No. The firm is excluded from the BD definition.

58
Q

Is an individual who represents a BD in the sale of municipal bonds considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

59
Q

BD records must be kept for at least _____ years.

A

BD records must be kept for at least three years.

60
Q

True or False: Canadian agents cannot effect trades with existing Canadian clients who are temporarily in the U.S.

A

False. Provided the relationship with the client existed prior to entering the U.S., trades may be effected.

61
Q

A BD that is located and licensed in Canada may contact what types of individuals in the U.S.?

A

Existing clients who are temporarily in the U.S.

62
Q

In state law, individuals who represent BDs in effecting securities transactions are referred to as ______.

A

In state law, individuals who represent BDs or issuers in effecting securities transactions are referred to as agents.

63
Q

Is there a registration exemption for agents who conduct business in a state? If so, what are the guidelines?

A

Yes, no place of business in state and a client visits the state or existing client moves to the state (regist. pending)

64
Q

If a registrant wishes to withdraw her registration, when does the withdrawal become effective?

A

If no action is pending, it is effective 30 days after filing the withdrawal request with the Administrator.

65
Q

What is a consent to service of process?

A

A document that appoints the Administrator as attorney for any non-criminal legal complaints issued against a registrant

66
Q

If an agent has applied for registration, but has not yet heard back from the Administrator, what may she sell?

A

The agent is not permitted to sell securities. If she is properly licensed, she may sell life insurance or fixed annuities.

67
Q

True or False: An agent may sell fixed annuities if she is not yet registered with the Administrator.

A

True. Since fixed annuities are not securities, registration with the Administrator is not required.

68
Q

If a firm wants to register as both a BD and an IA, with whom must it register?

A

With the Administrator in the state in which its office is located and with the SEC

69
Q

True or False: Under the USA, a Canadian BD may solicit a Canadian client to open up an account while he is in the U.S.

A

False. Canadian BDs may service existing accounts of Canadians who are in the U.S., but cannot open new accounts.

70
Q

Under the USA, is a bank holding company that occasionally executes securities trades excluded from the BD definition?

A

No. Under the USA, bank holding companies are not excluded from the BD definition.

71
Q

Who must file Form U4 in order for an agent to register in a state?

A

Both the agent and the employing broker-dealer

72
Q

Retail communication generally requires __________ ____________.

A

Retail communication requires principal preapproval.

73
Q

With whom may an agent split commissions?

A

Another agent who is registered with the same BD, or another BD that is under common control

74
Q

If a BD or an IA ceases operations, how long must it maintain a surety bond?

A

Surety bonds must be maintained for three years after the firm ceases operations.

Series 66 (12 decks)

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