Chapter 3 Part 2 Flashcards Preview

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Flashcards in Chapter 3 Part 2 Deck (20):
1

The following persons arc excluded from the definition of a broker-dealer

• Agents • Issuers • Banks, savings and loan companies, savings institutions, and trust companies (bank holding companies or bank subsidiaries are not excluded from the definition.)

2

another exclusion from BD

A person that has no place of business in the state AND only transacts business with issuers, other broker-dealers, financial institutions, or institutional buyers. Institutional investors are considered sophisticated and as having the expertise and ability to make independent investment decisions. Most often, institutions are able to assume greater risks and have a better understanding of those risks than individual, noninstitutional investors

3

another exclusion from BD 2

A person that has no place of business in the state AND is registered where the person maintains her place of business and only conducts business with existing clients who are not residents of the state (e.g., clients on vacation, or working there but not living there, or attending school)

4

In other words, if a broker-dealer has an office in the slate, it must register in the state. If the broker-dealer does not have an office in the state and its noninstitutional clients do not live in the state, then

it is not required to register. Registration is not required in states where clients are visiting temporarily

5

If asked to identify whether a firm is considered a broker-dealer in a state:

"(1) Identify the activity in which the firm is involved (2) Determine if the firm has an office in the state If YES, the firm must register If NO, note who its clients are + If the only clients are institutional clients, the firm is NOT required to register. + If one or more clients are retail clients, then the firm must register.
"

6

The Administrator may require broker-dealers to maintain

at least a specified minimum amount of net capital (essentially the broker-dealer's liquid net worth). However, the state Administrator may not set a level that exceeds the requirement established by federal (SEC) rules.

7

All advertising, sales literature, as well as other written materials (prospectuses, pamphlets, circulars, form letters, etc.) intended for distribution to current or potential clients must be

filed with the Administrator. however, filing is not required for materials relating to exempt securities, exempt transactions, or federal covered securities.

8

Broker-dealer records must be preserved for

Account records, correspondence, and books must be maintained as required by the Administrator. Broker-dealer records must be preserved for three years, with the first two years in an easily accessible location, unless otherwise directed by the Administrator

9

Financial reports must be filed with

the Administrator quarterly, annually, or as often as determined by rule or order.

10

All required records of a broker-dealer, whether located within or outside the state, are subject to periodic or special

examination as determined by the Administrator. The Administrator will cooperate with the Administrators of other states, the SEC, national securities exchanges, and national securities associations to avoid duplicate records inspections

11

the individual is required to register as an agent

If the individual (1) is specifically hired to effect securities transactions, (2) will be compensated based on these transactions, and (3) this activity is a regular part of the individual's business

12

Exclusion from the definition of an agent of an issuer exists when the individual effects securities transactions:

On behalf of an exempt issuer, When the security is exempt, When the sale is made through an exempt transaction

13

In order to avoid registration as an agent of an issuer, the individual may not

receive a commission, remuneration, or transactional compensation for the sale of the security

14

When an agent effects securities transactions for compensation, that person

"must be registered, even if the security is exempt from registration
"

15

agent of the bd

An individual who represents a broker-dealer in effecting transactions in securities

16

If an individual wishes to solicit business in a state as an agent, he must

be registered under the Uniform Securities Act, by filing Form U4 through the Central Registration Depository (CrD).

17

The registration of an agent is in effect only while

the agent is associated with a registered broker-dealer

18

When no longer affiliated with a broker-dealer

a Form U5 (Uniform Termination Notice) is filed with the broker-dealer's self· regulatory organization evidencing the termination of the relationship

19

Dual registration of an agent is allowed only if

the Administrator's direct authorization is received

20

Agents who would like to split or divide commissions with another person are allowed to do so only ifthe

other person is a registered agent. In addition, both agents must work for the same broker-dealer or broker-dealers under common control. Firms under common control include affiliates, subsidiaries, and parent companies

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