Chapter 1 Flashcards
(41 cards)
Uniform Securities Act (USA)
Not the law of any particular state. Just covers the blueprint or the model
State administrator / Commissioner
The regulator for the Uniform Securities Act
North American Securities Administrators Association (NASAA)
-Responsible for updating the Uniform Securities Act through various NASAA Model Rules and Statements of Policy.
-Write our exam
National Securities Markets Improvement Act (NSMIA)
-A federal law; defines where federal regulations stop and state regulations begin.
-Reduced duplication of federal and state regulations
-Defined federal covered securities and federal covered advisers that are now exempt from state regulations
Person
-An individual, corporation, partnership, unincorporated organization, government or political subdivision of a government and certain trusts (any legal entity)
-The term does not include minors, anyone declared mentally incompetent or a deceased person
State
-Any state, territory or possession of the U.S., including the District of Columbia and Puerto Rico
Broker-Dealer
Sell securities for a fee (commissions)
-Must register with the state, FINRA and the SEC
-Agent/Registered Representatives
Investment Adviser (IA)
Advises people for a fee
-Must register with the state (Administrator) OR SEC
-Investment Adviser Representatives (IARs)
Agents/ Registered Representatives
Must register with the state Administrator and FINRA
Investment Adviser Representatives (IARs)
Must register with state Administrator
Security Definition (4)
-Under Howey Test, a security involves:
A) Investment of money
B) In a common enterprise
C) With the expectation of profits
D) Derived from the efforts of others
Securities include (12):
- Stocks (including treasury stock)
- Notes, bonds and debentures (debt)
- Rights and warrants
- Investment contracts
- Preorganization certificates
- Certificate of participation in any profit sharing agreement
- Certificate of participation in an oil, gas, or mining lease
- Investment company shares (Mutual funds)
- Limited partnerships
- Variable contracts
- Options
- Viatical investments
-All regulated under FINRA under the USA.
Not a security (4):
- Life insurance
- Endowment policies
- Fixed annuities
- The Four Cs:
a) Commodities
b) Collectibles
c) Currencies
d) Condominiums as a place of business or residence
Viatical Investment
-Refers to the purchase of an interest in an insurance policy covering an individual’s life.
-Since it’s unknown when the insured will die, the investment is considered illiquid.
-NASAA has established rules for the buying of this security including;
a) Accredited investors according to Reg D or:
i) Minimum net worth of at least $150K (not including their residence and an annual income of $100K
ii) Minimum net worth of at least $250K (not including their residence)
-Viaticals are considered speculative and highly risky
Issues are generally required to (3):
1) Pay a filing fee
2) Disclose the amount of securities being offered in a state
3) Disclose the other states in which a registration statement has been filed
*A state administrator may require a prospectus to be sent to any person to who an offer is made
Effective date
-Granted by the administrator and represents the date on which the securities can be sold publicly
When does a securities registration expire?
One year after its effective date
What are the 3 methods of securities registration?
- Filing(Notification)
- Coordination
- Qualification
Filing (Notification)
For larger issuers conducting follow-on interstate (selling in multiple states) offerings-
1. Issuers must meet stringent financial requirements and conditions (e.g. registration statement previously filed under Act of 1933, minimum of 36 months of continuous business, minimum of four market makers)
2. Becomes effective at the same time as the federal registration
**Rarely used
Coordination
For smaller issuers conducting interstate offerings (likely IPOs):
1) State registration is coordinated with the federal registration under the 1933 Act (although it doesn’t need to be filed at the same time)
2) Becomes effective at the same as the federal registration
Federally Covered Securities
Exempt under the USA
Qualification
For issuers conducting intrastate (inside 1 state only) offerings:
1) Requirements are determined by the individual state; no federal registration is required
2) Becomes effective when determined by the Administrator (NOT THE SEC/State)
The administrator can deny, suspend or revoke any registration statement if it’s in the public interest and (6):
1) The registration is incomplete or contains false or misleading information
2) The issuer’s enterprise is illegal
3) The offering is or may be fraudulent
4) The issuer, a partner, officer or director of the issuer, or an underwriter has willfully violated any provision of the USA
5) The underwriter’s compensation is unreasonable (10% is probably the cap/maximum)
6) The proper fee hasn’t been paid
* A stop order cannot be issued against an effective registration based on facts the administrator knew when the registration became effect unless proceedings are instituted within 30 days.
Exempt Securities
-Typically based on the safety of the investment. For example;
1. Treasury bonds
2. Municipal bonds
3. Foreign government bonds
4. Commercial paper
5. Stocks/Bonds of banks
6. Federal Covered Securities (eg. listed securities)
