Laws & Regulations

Question 1

Uniform Securities Act (USA)

Answer 1

Questions about the USA are state law

Question 2

National Securities Markets Improvement Act

Answer 2

Federal Act that addresses registration of investment advisers. State law cannot override federal laws

Question 3

Investment Adviser

Answer 3

A Firm or a person that is registered (usually used to describe a firm/business)
110M+, 110-100M, 90M. Different Registrations.
Is not: Bank, IAR (representatives), LATE (Lawyers, Accountants, Teachers, Engineers) (SEC registration aka Federal Registration)

Question 4

Broker/Dealer

Answer 4

Firm or individual. Broker: Facilitate trading for others. Dealer: Buying and selling investments for their own accounts.

Question 5

A person

Answer 5

Is not Deceased, Incapacitated, a Minor
Is: individual, corp, partnership, association, joint venture/stock company, estate, business trust, trust, unincorporated org, gov.

Question 6

LATE acronym for those not an Investment Advisor

Answer 6

Lawyers, Accountants, Teachers, Engineers. These might have investment advice that is incidental portion of their business.

Question 7

Notice Filing

Answer 7

Federal advisors don’t need to register at the state level. But sometimes need to file a Notice Filing and pay a fee in each state they do business in. (AKA Consent to Service of Process)

Question 8

Form ADV (ADViser) part 1

Answer 8

General info on the adviser. Name, address, type of business entity, any past sanctions. Asks questions to determine if granting registration is revoked or approved.

Question 9

Form ADV (ADViser) part 2A

Answer 9

A written brochure containing 2A info. Given to each client 2 days before signing OR given 5 days to nullify contract. And offered annually. Business practices, fees, conflicts of interest.

Question 10

Investment Advisors are Exempt from SEC registration if…

Answer 10

They have no place of business in the state.

And
Their only clients are other investment advisers.
OR
They solicit no more than 5 retail clients in that state in the preceding 12-month period.

Question 11

Investment Adviser Representative (IAR)

Answer 11

Manages accts for clients, makes recommendations/advice, solicits services, supervises employees who do the above tasks.

Question 12

Form U4

Answer 12

(Uniform Application for Securities Industry Registration or Transfer)
IA’s can file it for their IAR’s to be registered in the correct jurisdiction.

Question 13

Form U5

Answer 13

(Uniform Termination for Securities Industry Registration)
An IA used this to terminate an IAR’s association with the IA

Question 14

Continuing Education (CE) Requirements for every reporting period of 12 months

Answer 14

An IAR needs
IAR Ethics and Professional Responsibility Requirement- 6 credits with at least 3 hrs in ethics.
IAR Products and Practice Requirement- 6 credits

Question 15

Agent

Answer 15

Those who represent a broker/dealer or issuer. Who attempts to affect trades.
Must register with the (USA) Uniform Securities Act

Question 16

Form U-2

Answer 16

(Uniform Consent to Service of Process)
Registration for IA’s, IAR’s, Broker/Dealer, and agents. Submitted to the administrator in each state they will effect transactions.

Question 17

Investment Advisors must keep records for…

Answer 17

5 years. (Broker/dealers are 3 years)

Question 18

List of non-securities

Answer 18

Fixed insurance policies, fixed Annuities, commodities Futures (not including options), pensions, IRA’s, Keoghs, condominium for residence, currency, and Collectibles.

Question 19

When the sale of a security is for the benefit of the Issuer.

Answer 19

Issuer Transaction or Primary Transaction(Cuz it’s in the Primary market)

Question 20

When the sale of a security is not directly for the benefit of the Issuer

Answer 20

Non-Issuer Transaction or Secondary Transaction(Cuz it’s in the secondary market)

Question 21

Sale

Answer 21

Anything with a Contract (Contract for Sale)

Question 22

Blue-Skying

Answer 22

The process of registering a security before the state.

Question 23

-Registration by Filing
-Registration by Coordination
-Registration by Qualification

Answer 23

-Least costly and done by corps that are well- established and federally covered.
-If the same offering is to be done with the SEC. Common for IPO’s. Very stringent/difficult.
-Most difficult. For any security that’s not SEC filed IPO and doesn’t meet the usual requirements.

Question 24

Exempt Securities ( exempt from state registration and advertising filing requirements)

Answer 24

-Issued by U.S. Gov, state or Federal
-Canadian, Mexico (not Mexico City), other diplomatic relations.
-Banks, savings and Loans, trust company, federal credit unions
-Building and loan association issues.
-Public Utility issues
-Securities on the NYSE or Nasdaq that’s registered with SEC already. (Federal covered securities)
-Promissory Notes that mature within 9 months 270 days. Corporate Commercial paper
-Pensions, stock purchase plan securities
-Municipal notes and bonds sold outside the state.