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Flashcards in Chapter 1 Deck (32):
0

NSMIA (national securities markets improvement act) of 1996 was created to simplify regulations. How does it achieve this?

By mandating that in certain cases if registration is required by federal law then state laws cannot require registration as well.
And if registration is not required at federal level, then the state can require it

1

When a firm acts as the middle party in a transaction effecting trades for others accounts it's acting in what capacity?

Agency or broker they are the same meaning

2

When a firm trades out of it's own account to others it is acting in what capacity?

Dealer or principal

3

Because they can act in either capacity broker or dealer, agency or principal this is why they are called broker dealers. True or false they need not be registered in that state?

False they must register

4

"Persons" as defined under the uniform securities act, include which of the following?
A. Joint ventures
B. Individuals
C. UnIncorporated businesses
D. Municipalities

The correct answer is all of the above
It is important to know who are defined as "persons" since these entities may be then further defined as either agents which can be individuals, broker-dealers which can be incorporated or unincorporated businesses, or issuers which can be incorporated or unincorporated businesses, joint ventures, or municipalities

5

The term "issuer" applies to whom?
A. A person who proposes to sell a security
B. A director of a company that is selling new shares to the public
C. A traitor executing trades off an exchange floor
D. In marketmaker in a security traded over-the-counter

The correct answer is a

6

The term broker dealer includes which of the following
A. A person in the business of trading securities for his account or for the account of other persons
B. Agents to execute trades for broker-dealers
C. Financial institutions regulated under federal banking laws
D. Issuers of securities

The correct answer is a

7

Which statement is false under the uniform securities act?
A. For corporate securities, the corporation itself is the issuer
B. For oil and gas program fractional interests, the owner of the minerals is the issuer
C. For collateral trust certificates, the person performing the functions of depositor under the trust agreement is that the issuer
D. For equipment trust certificates, the corporation is the issuer

The correct answer is B

8

which of the following individuals would be defined as an agent under the uniform securities act?
A. The manager of a broker-dealer who does not solicit or take orders
B. A silent partner in a broker-dealer
C. A trader who is authorized to accept customer orders
D. A clerk who solely performs back office functions

The correct answer is C

9

Which of the following are defined as investment advisors under the uniform securities act?
A. Lawyers who advise customers on investments for pension planning without taking a fee
B. Newspapers having an investments column with a general circulation
C. Persons who take a fee for advising clients about securities
D. Publisher of an investment newsletter that provides advice based upon each clients specific investment situation

The best possible answers are C and D
An investment advisor is defined as a person who for compensation, engages in the business of advising others directly or indirectly as to the value of securities or the advisability of investing in, buying, or selling securities.

10

The term investment advisor includes:
A. Lawyers
B. Depository institutions
C. Publishers of reports on securities
D. Broker dealers

The correct answer is C
Excluded from the definition of an advisor are professionals such as lawyers accountants who give incidental a device without taking a fee broker-dealers since they also give incidental advice without taking a fee for the advice instead they earn a commission on the trade and depository institution such as banks and savings and loans since they are already highly regulated under other laws

11

Which of the following is a non-issuer or transaction?
A. The sale of the new issue of bonds by a corporation
B. The trade of 100 shares of stock on an exchange floor
C. The sale of mutual fund shares to a customer
D. The sale of treasury bills by the US government

The best answer is B a quote non-issue or" transaction is a trade where the proceeds do not go to the issuer. The sale of bonds by a corporation benefit the issuer. The sale of mutual fund shares benefits the issuer. The sale of treasury bills by the US government benefits the issuer. A trade in the secondary market or trading market results in the proceeds going to the seller who is not the issuer

12

All of the following individuals are defined as "sales representatives" under the uniform securities act except an individual employed by a broker dealer who:
A. Effects securities transactions only in non-exempt securities
B. Effects securities transactions only in exempt securities
C performs the function of giving securities quotations over the phone
D. Performs the function of accepting orders from customers of the firm

The correct answer is C
The uniform securities act defines an agent as an individual who represents a broker-dealer or if you were in affecting securities transactions. These agents are also known as sales representatives and must register in each state in which they wish to perform traits it makes no difference if the security that person trades is exempt or nonexempt

13

Which of the following are defined as "persons"under the uniform securities act?
A. Joint stock company
B. Partnership
C. Estates
D. Unincorporated organization

The best answer is all of the above
A person as defined under the uniform securities act includes joint stock companies partnerships Estates in unincorporated businesses

14

Which of the following individuals is defined as an agent under the uniform securities act
A. An individual who represents an issuer in isolated non-issue or transactions
B. An individual who represents an issuer in transactions with underwriters
C. An individual who represents an issuer in transactions with financial institutions
D. In individual who represents an issuer in transactions with investors

The correct answer is D
The act defines individuals who represent issuers affecting securities transactions with the public as agents who must be registered so choice D meets this definition. the act exempt from licensing as an agent those individuals who represent issuers in:

Sales of specified exempt securities, exempt transactions not involved in the public, and sales of securities to employees of the issuer if no commissions are paid

15

Which of the following individuals are excluded from the definition of an agent under the uniform securities act? An individual who represents a:
A. Issuer in the sale of one year commercial paper
B. Issuer in the sale of Canadian government debt
C. issuer in a transaction with an underwriter
D. Secondary government broker-dealer in the sale of US government bonds

The correct answers are B and D
An individual who represents the issuer in the sale of specified exempt securities is exquisite it from the definition of an agent under the act. Any government security weather US or foreign is exempt. If an individual represents a broker-dealer in selling exempt securities to the public that individual is not exempt from registration

Commercial paper is an exam to security only if the maturity does not exceed 270 days therefore commercial paper with a one-year maturity is a non-exempt and the agent must be registered

16

Which of the following persons would be defined as sales representatives?
A. A clerical employee of a broker-dealer who does not affect securities trades and does not receive commissions
B. A clerical employee of a broker-dealer who affects securities trades and receive commissions
C. A partner of a broker-dealer who does not affect securities trades and who receives connections
D. A partner of a broker-dealer who affects securities trades and who does not receive commissions

The correct answer is B and D
To be defined as an agent under the uniform securities act and individual must take or solicit orders from the public. Individuals who do not solicit to the public and who solely perform clerical or managerial duties, do not fall under the definition. It makes no difference how that person is compensated when determining if they fall under the definition of an agent

17

Which of the following are excluded from the definition of an investment advisor under the uniform securities act?
A. In employee of an investment advisor
B. A federal covered advisor
C. A savings and loan institution
D. A broker-dealer

The correct answer is all of the above
If a person is excluded from the definition of an investment advisor, then they will not have to register in that state as such. Excluded from the definition of an investment advisor are employees of investment advisors, they must register separately as agents of the advisor in the state. Depository institutions and broker-dealers who are regulated add both the state and federal level under other laws.

Federal covered advisors, who are regulated by the S EC or who are excluded from the federal definition of an investment advisor, so that state cannot require their registration as well, professionals who give incidental advice, and publishers of general content investment advice not based upon the specific situation of each client

18

All of the following are excluded from the definition of an agent except an individual who represents the issuer in the:
A. Sale of municipal securities to the public
B. Private placement of common stock
C. Sale of common stock to the issuers employees
D. Sale of common stock to the public

The correct answer is D
Excluded from the definition of an agent are individuals who represent issuers not broker-dealers in the sale of specified exempt securities, but not all exempt securities, exempt transactions or the sale of securities basically private placement issues and sales two persons with investment assets of at least $5 million in investment managers handling assets of at least $25 million also excluded from the definition are issuers who represent sales of securities to employees of that issue or if no remuneration is paid

19

Which of the following is defined as a federal covered advisor?
A. An investment advisor to banks
B. An investment advisor to registered investment companies
C. And investment advisor to accountants
D. An investment advisor to attorneys

The correct answer is B
Federal covered advisers are not required to register in that state, rather they are required to register with the SEC. Federal covered advisers include advisers managing assets of $100 million or more

20

Which of the following is not defined as a federal covered advisor
A. An adviser to insurance companies registered in the state
B. And adviser to investment companies registered with the securities and exchange commission
C. An advisor that manages at least $100 million of assets
D. And advisor that gives advice solely about US government securities

The correct answer is a
Federal covered advisers are not required to register in the state rather they're required to register with the Securities and Exchange Commission. Federal covered advisers include advisers managing assets of $100 million or more, advisers to investment companies, and anyone excluded from the federal definition of an investment advisor banks broker-dealers professionals who give incidental investment advice such as lawyers accountants engineers and teachers, publishers of general circulation financial publications, and person who give advice solely on us government obligations

21

To register an agent in a state, the administrator can require which of the following?
A. Minimum net capital
B. Surety bond
C. Qualifying written or oral exams

The correct answer is all of the above
To register as an agent in a state the administrator can require the passing of an examination and can require the posting of a Surty bond if the agent will be handling discretionary accounts or will be taking custody of customer funds. To register as an investment advisor or broker-dealer, the administrator can require a minimum amount of net worth or net capital in addition to an exam requirement and posting of a Surty bond

22

A "consent to service of process" must accompany which of the following?
A. Agents initial registration application
B. Agents renewal registration application
C. Investment advisors initial registration application
D. Civil complaint filed against a broker-dealer

The correct answers are a and C
Consent to service of process which appoints the administrator as attorney for that person to receive legal documents, is required on each initial registration application. This is true for registration of agents, broker-dealers, investment advisors and investment advisor representatives.

23

An agents license remains in effect:
A. For 30 days
B. For two years unless terminated earlier
C. Until canceled by the agent or revoked by the administrator
D. For a period of time that may very from state to state

The correct answer is D

24

If it is in the public interest, the state administrator may deny the registration of a person for all of the following reasons except the applicant:
A. Has willfully violated the act
B. Has insufficient experience
C. Is financially insolvent
D. Has failed to pay required fees

Correct answer is B

25

If an agent changes his place of employment from one broker-dealer to another broker dealer, the state administrator must be notified by the
A. Former employer
B. New employer
C. Agent

The correct answer is all of the above
If an agent to changes his place of employment the old broker dealer must inform the administrator that the agent is no longer registered with that dealer, the new broker dealer must inform the administrator that the agent is registering with the new firm, and the agent must inform the administrator of the change

26

If an agent changes his place of employment, the registration must be transferred:
A. Immediately
B. Within 10 days
C. Within 30 days
D. Within 90 days

The correct answer is a
if an agent changes his place of employment the registration must be transferred promptly under the act

27

Which statements are true about registration as an agent? Registration is:
A. Invalid if the agent terminates employment with the broker dealer
B. Valid immediately after passing the uniform securities exam
C. Valid for a predetermined length of time that varies in each state

The correct answer is a and C
If an agent leaves a firm his registration becomes invalid. Agents must be employed by a firm to be registered. Registration is not effective until 30 days have elapsed after the filing date, assuming the series 63 exam is passed registrations are valid for time periods that very from state to state the most states have a one-year renewal.

28

Which statements are true about registration of investment advisors?
A. An advisor with no place of business in the state that limits its clientele to insurance companies is exempt from registration
B. Broker-dealers can act as investment advisors without registering as such if any advice given is solely incidental to the business of the broker-dealer
C. Investment advisors must register with the state

The correct answer is all of the above
Investment advisors with no place of business in a state that limit their clientele to insurance companies or broker-dealers, banks, investment companies, are exempt from registration because they are dealing with professionals not the general public. Note that if the advisor had a physical office in the state then it still must register regardless of who its clients may be.

If a broker dealer is registered as such with the state, then a second registration is not required for that for him to act in the capacity of an investment advisor. As long as such investment advice is solely incidental to the broker-dealers business. This avoids the dual registration of these firms. Please note that if this firm were to actually sell investment advice, it would be registered in the state as an investment advisor.

29

The state administrator can require all of the following of broker-dealers to maintain registration except which?
A. Filing of advertisements and circulars
B. Periodic financial reports
C. Record retention for three years
D. Semi annual registration renewal

The best answer is D
The act provides that registrations are good for one year time period, though each administrator may very this from state to state.

30

Permanent records must be kept for how many years and for how long after the firm closes?
A. For 5 years initially plus 3 years after firm closes
B. As long as the firm is open plus 3 years after firm closes
C. As long as the firm is open plus 5 years after firm closes
D. For 5 years however if the firm closes within those 5 years they must be retained for 3 more years after the firm closes

The correct answer is b.
Permanent records are the exception to the 5 year rule. They must be kept for the life of the firm plus 3 years after the firm dissolves or closes

31

If a customer moves from the state the broker dealer is registered in how long does that broker dealer have to register in that new state if not already done?

60 days