Chapter 3 - State Regulations Governing Broker-Dealers and Agents

Question 1

B/D exclusions

Answer 1

• agents
• issuers
• banks, savings institutions, and trust companies
• person w/ no place of business in a state and only transacts business with issuers, other B/Ds, financial institutions, or existing clients who are not residents of the state

Question 2

B/D agent

Answer 2

• individual who represents a B/D in effecting securities tx
• NO EXCEPTIONS for exempt securities or exempt tx
• clerical employees are not agents

Question 3

B/D agents do not have to register if:

Answer 3

1. Existing customer is temporarily visiting another state
2. Existing customer moves to a new state AND
   - agent’s registration is pending in new state
   - agent is registered in at least one other state
   - agent is registered w/ a national securities association such as FINRA
   - agent’s B/D is registered in the new state

Question 4

Issuer

Answer 4

Any person that issues or proposes to issue any security for the purpose of raising capital

Question 5

Issuer agent

Answer 5

Employee of the issuer who is not required to register if the sale involves

• an exempt security or exempt tx
• a federal covered security
• tx w/ existing employees, partners, or directors of the issuer and no commission or remuneration is paid for soliciting a person in the state

Question 6

B/D registration expires:

Answer 6

December 31

Question 7

BD registration renewal must be filed by:

Answer 7

December 1

Question 8

B/D registration is effective ___ days after filing.

Answer 8

30

Question 9

B/Ds must file form ___ via ___.

Answer 9

B/D; CRD

Question 10

B/D agents must file form ___ via ___.

Answer 10

U4; CRD

Question 11

B/D bonding requirements (for B/Ds, agents, and IAs with custody or discretionary control over client assets)

Answer 11

• not required if B/D’s net capital or IAs net worth exceeds administrator min
• must be maintained for as long as B/D or IA is in business PLUS 3 years
• cash or securities may be deposited in lieu of bond

Question 12

B/D minimum financial requirements

Answer 12

• determined by SEC
• dependent on activity
• deficiencies must be reported w/in 1 business day
• deficient B/Ds must submit balance sheet and obtain surety bond

Question 13

B/D books, records, and correspondence must be kept for ___ years, and must be stored in an easily accessible location for the first ___ years.

Answer 13

3; 2

Question 14

B/Ds must file with administrator any advertising, sales literature, or other communication disseminated to existing or prospective clients - unless securities are ___.

Answer 14

exempt

Question 15

Canadian B/Ds and agents are allowed limited registration in US provided they have no place of business in a state, and:

Answer 15

• only transact business w/ a person who is in a state temporarily
• they don’t solicit new business in a state
• B/D is a member of an SRO or Canadian exchange
• must file application w/ administrator along w/ consent to service or process