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Series 63 > Series 63 > Flashcards

Series 63 Flashcards

1
Q

NSMIA

A

National secuirities markets improvement act

-1966 eliminate duplicate regulation between states

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2
Q

State vs fed covered advisor registration amount

A

SEC:fed covered advisors with 100-110M fed reg. 90 buffer so doesn’t have to deregister

state below 100M

mid size: 25 mil or more that must register in 15 or more states can opt to be SEC

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3
Q

issuer/ non issuer

A

issuer- any person who issues or proposes to issue a secuirity

nonissuer- person who is not defined under act like purchaser. secondary transactions

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4
Q

institutional buyer

A

distinguished from gen public

-banks, savings and loans, trust companies, insurance companies, investment companies, pension and profit sharing plans

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5
Q

broker dealer

A

engages in business effecting secuirities transactions for the account of others, or his own account (proprietary trading)

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6
Q

agency vs principal

A

agency- firm effects trades for others

principal- firm trades out of its own accounts, dealer

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7
Q

NOT broker dealers

A

agents
depository institutions
issuers
firms that trad with professional investors with no place of business
firms that contact existing clients on vacation in another state
de minimis exemption

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8
Q

agents

A

individual who represents BD or issuer effecting secuirities transactions. sales rep.

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9
Q

exclusions from agent

A

(only apply to individuals representing issuers, not BD)

  • sales of specified exempt secuirities
  • exempt transactions
  • sales of specified covered secuirities
  • sales of secuirities to employees of issuer if no comission is paid
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10
Q

exempt transactions

A
  • non isssuer transaction in the secondary market
  • transactions between issuers and underwriters since public not involved
  • trsnaction with financial or instiutional investors. exempt because investors are sophisticated
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11
Q

covered securities

A
  1. cannot be required to register in state, only SEC
    - traded on national secuirities do not have this exclusion
  • treasury/agency and muni
  • bank issues
  • money market instruments
  • contracts issued in connection with pension plans
  • employees of issuer if no comp is paid
  • qualified wealth ypurchasers
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12
Q

covered trsnaction

A
  • federal private placement rule 506 reg D
  • qualified purchasers
  • natural persons who own at least 5 mil
  • pre existing trust for persons above
  • any other person acting for own account or qualified purchasers who own and invest discretionary baiss 25mil
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13
Q

investment advisor

A
  • give advice for fee and must register in state
  • engages in business of advising others directly or indirectly
  • issues or promulgate analysis or reports concerning secuirities as regular part of business
  • fed covered advisor
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14
Q

excluded from IA

A
  • IAR
  • depository institutions (banks, savings, loans, trusts
  • professionals- laywers, accountants, engineers, teachers
  • publishers that do not give specific advise
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15
Q

federal covered advisor

A

must register with SEC, state not required
100mil+ assets or
advise investment companies
-any person excluded from investment adviser under 1940 act

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16
Q

investment advisor rep

A

any partner officer, director or other individual employed by IA who

  • makes recomendations or gives secuirity advice
  • manages accounts or portfolios of clients
  • determines which recommendations or advice regarding secuiritiies
  • solicits, offers or negotiates for sale of investment advisory services
  • supervises employees who perform functions above
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17
Q

exluded from IAR

A

clerical or ministerial duties

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18
Q

NASAA

A

north american secuiriites admin association

-each state has jurisdiction to require reg of individuals assoicated with fed covered advisors

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19
Q

Form BD

A

used to register with state or with SEC

  • check of SROs register with SRO self regulatory org like FINRA if with SEC
  • check off states if state. pay reg fee

-unlike IAs, BD’s must register with BOTH SEC and in each state. balance and computed net capital (liquid net worth( filed with both). surety bond just with state

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20
Q

Agents dual reg

A

-cannot be affiliated with more than one BD at one time unless affiliated (some states allow dual reg)
-if admin allows dual reg, must be disclosed to BD
(separate aplication for each)

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21
Q

IARs of fed covered advisors

A
  • if IAR is phsyically present in state, they must register
  • if IAR is not present in state and fed covered adviser files notice in state, IAR must register in state
  • if IAR solicits business there but is not in state, IA must notice filing and IAR must register
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22
Q

reg applicaiton

A
  • reg application
  • form of business organization
  • place of business and proposed method for doing business
  • qualifications and business history
  • injunctions, admin orders or convictions
  • financial condition and history

-consent to service process (only required for initial applications)

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23
Q

fed covered advisers reg req

A
  • same documents as with SEC for fed reg
  • form ADV under investment advisers act of a1940
  • consent to service of process
  • initial notice fee
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24
Q

reg effective date and expiration

A

Reg effective in 30 days (admin may specify earlier or later)

reg expires each dec 31st

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25
Q

CRD vs IARD

A

CRD- BD and agents at fed level.
IARD- reg for state or fed advisers
-notice requirements for fed covered adviseres
-fee, check off states
IA also expires dec 31st and renewed with fee

Annual A

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26
Q

IARD form

A

–form adv
-notice requirements for fed covered adviseres
-fee, check off states
IA also expires dec 31st and renewed with fee

ADV amendment filed within 90 days of fiscal year end under SEC and NASAA
-material changes amendment update filed within 30 days (NASAA) SEC is promtply

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27
Q

U4

A

app creates CRD as agent or IARD as investment advisor rep

annual u4 update within 30 days of year end renwal date

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28
Q

u5

A

termination. former employing firm must filwithin 30 days

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29
Q

u6

A

report of disicplinary action taken by regulator
u6 files can be viewed by public
-reports of felony complaint. if respolved its cleared

-brokercheck makes public

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30
Q

Reg standards for BD or IA

A
  • min dolar amounts of net capital
  • surety bond coverage (usually 10k)
  • pass qual exam
  • filing of advertising (unless exempt)
  • publication of opening announcment in paper
  • business history
  • financial condition
  • conviction record
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31
Q

surety bond coverage

A
  • usually 10k, can be raised to 35k
  • can be required for agents, BD, or IA (but not IAR)
  • only required for advisers that take custody
  • required to accept deposit of cash or secuiriites in lieu
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32
Q

net worth requirement

A
  • applies in state where adviser has prinicpal business
  • kept in accordance with 1934 act

liquid assets minus all liabilities. intangibles excluded

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33
Q

filing of financial reports

A

every BD and IA file financiap reports required by admin
-statement of financial condition (Balance sheet)
oat or affirmation it is true

  • if BD or IA fails to meet financial statnadrsds, notify admin promptly next business day.
  • net worth deficiency notice given day after discovery, report filed day after
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34
Q

agent and IARs reg standards

A
  • surety bond coverage (if custody or discretionary power)
  • passing of qual exam (or cert)
  • filing of fingerprints required by some states (filed with CRD run by FINRA)
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35
Q

financial condition

A
  • trial alance of ledger accounts
  • statement of all client funds not segregated
  • compilation of aggregate amount of lcient ledger debit balances
  • statement as to number of customer accounts
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36
Q

u10

A

apply to take exams not subject to finra rules

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37
Q

waived from 65/66

A 
CFP- planner
CIC- chartered investment counselor
chFC- chartered financial consultant
PFS- personal financial specialist
-CFA chartered financial analyst
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38
Q

IA reg

A

automatically registeres partners, officers and directors (do not have to file separately in state)
reps must file separately (same for BD and agents)

  • if no denial order or proceedint pending, reg is effective noon on 13th day after app is filed
  • admin may rule or order earleier or later effedctive date
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39
Q

private secuirities trasnactioin

A

prohibited. all secuirities effected by agents must be known to BD, must be recordd on books, and be supervised.

if does not, agent must then register as BD

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40
Q

dealer vs agent

A

dealer/principal

agent/middleman/broker/salesman

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41
Q

Broker dealers records 1934 rules

A

customer correspondence- 3 years
trade confirmations- 3 years
account statements- 6 years

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42
Q

covered advisors 1940 rules

A

all records kept 5 years

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43
Q

customer accounts

A

secuirities transactions posted by 10 business days after end of calendar quarter in which trade occurs

BD must post customer accoutn transactions on settlement under SEC rules

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44
Q

custody of client funds records

A

must retain records in principal office. 5 year retention with first two in principal office
NASAA- all records ketp for 5 years

NASAA- customer purchases and sales, customer sec positions (account statements)
permenant records kept for life of firm. 3 years after firm is closed

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45
Q

permenant records

A

kept for life of firm +3 years

  • articles of incorporation
  • minutes to board of directors meetings
  • stock certificate books
  • partnership articles and any amendments
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46
Q

advertising and sales lit

A

may be required to be filled with state unless exempt
-prospectus, pamphlet, circulars, form letters

advertising- communication seen by gen public
sales lit- specific audience: research, form letters, password protected web

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47
Q

if registration is withdrawn

A

withdrawl is effective in 30 days unless admin allows earlier date

when reg filled, is effective within 30 days

both agent and BD must notify admin promptly of withdrawl

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48
Q

if agent is terminated

A

agent- both agent and BD must notify state admin promptly.

- if moving from one to the other, all 3 must notify

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49
Q

how long jurisdiction after widrawl of agent

A

agent from 1 year from withdrawl date

both agent and BD must notify admin promptly of withdrawl

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50
Q

reasons to revoke reg of adviser or BD

A
  • ceased operating
  • mentally incompetent
  • relocated, not notified admin
  • fails to pay fee
  • does not maintain required records
  • does not file financial reports
  • does not file advertising
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51
Q

BD vs IA reg rules

A

Firm with No Office in State and Only Deals with Institutional Clients:

  • BD excluded
  • IA- exempt

Firm with No Office in State Contacting Existing Customer Vacationing in That State

  • BD excluded
  • IA exempt

Firm with No Office in State That Has 5 or Fewer Clients in That State

  • BD exempt in many states
  • IA exempt in all states

record retention

  • BD 3 years except customer accounts 6 years
  • IA 5 years if firm closes, keep all for 3

compensation

  • BD comissions
  • IA fixed fees
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52
Q

BD vs IA fees vs comissions

A

BD comissions, IA fixed fees

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53
Q

advisory contract rule 502 c

A
  • NASAA state advisors
  • applies to fed covered advisers if there is fraud.
  • advisory contracts with customers must be in writing and have fixed life eg 12 years etc
  • can accept prepaid advisory fees
  • early termination, detail the refund to be made
  • cannot assing contract unless lcient approves

*customer must be notified of changes in partnership comp.

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54
Q

what customers can be charged a performance fee?

A

wealthy clients 1.1 mil or 2.2mil net worth

  • investment advisers act of 1940 allows this
  • requires disclosure of incentive to make riskier investments
  • compensation for unrealized and capital gains
  • basis for valuing iliquid investments used in compputing unrealized appreciation
  • periods that will be used to measure performance and significance to fee
  • nature of an index used as comparison of investment performance
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55
Q

wrap fees

A

wrap all services including costs of trades into single annual fee/flat dollar or percentage of assets under management

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56
Q

12b-1 fees

A

sec rule. investment companies can charge shareholders annual fee .75 cap

-no load must be under .25

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57
Q

brochure supplement

A

free look must be delivered 2 days before signing
-if no free look, 5 days to rescind without penalty

  • broachure update. material changes must be provided within 120 days of years end
  • can be sent electronically, firms create own brochures
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58
Q

Form ADV brochure delivery rule

A

copy of 2a gives info about advisers business

part 2b supplement. gives info about adviers key personnel

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59
Q

IA custody

A
  • needs notice to admin in form aDV
  • secuirities held by qualified custodian
  • prompt notice to customer of custodian identity, address and manner they are maintained
  • quarterly statements
  • no requirement for customer statements to be sent if no custody
  • annual suprise audit filed within 120 days with state admin
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60
Q

qualified custodian registration

A
  • FDIC insured deposit-taking institutions
  • registered broker-dealers holding customer assets
  • registered futures commission merchants holding assets
  • foreign financial institutions holding financial assets for customers
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61
Q

taking custody of funds

A

-$500 or prepaid advisory fee more 6 months more in advance for state reg advisors

1940 fed law states $1200 for fed covered advisors,

-account with full power of attorney

  • Annual ADV update 90 days of fiscal year end
  • material changes adv update 30 days from NASAA, SEC says promptly
62
Q

fee only advisers

A

hourly fees, fees based on percentage of assets, charge performnace fees for wealthy investors

  • cannot charge commissions on transactions or recieve 12b-1 fees (commissions paid by mutual fund to BD or advisory firm
  • because adviser has incentive to actively trade the account. supposed to be unbiased in selection of secuirities
63
Q

customer must receive what by 120 days year end?

A
  • revised brochure Form ADV Part 2A
  • brochure supplement form ADV part 2b

if material changes, adviser can send summary of material changes

64
Q

USA: invetment advisory contracts must be how

A

in writing and have method of compensation

65
Q

new account signature

A
  • margin client signs promptly after first trade under NASAA
  • by signing, customer pledges secuirities as collateral

-agent and manager must sign new account cash or margin

66
Q

discretionary accounts

A

-must have written authorization
-NASAA written must be obtained no later than 10 days after verbal discretion (not for BD)
-
-BD written authority required for discretionary

67
Q

suitability failures

A
  • churning performing excessive frequency trades
  • performing excessively large trades
  • blanket recommendations
  • failure to state important facts and risks
  • recommending without reasonable basis
68
Q

fiduciary standard

A

IA fiduciary, not BD

69
Q

margin account payment

A

prompt payment for purchases. no later than 2 business days past settlement
-cash/secuirities msut be delivered on settlement

70
Q

commingling rules

A

BD can commingle street name margin secuirities with other customers and can pledge them to a bank to get a loan

  • IA and IAR
  • BD cannot commingle proprietary positions (owned by firm) with customer positions
  • agent of BD cannot commingle proprietary positions with customer secuirities
  • agent of BD cannot take customer funds and keep them
71
Q

order ticket BD

A

BD- SEC

-Customer name or account number;
-Agent (registered representative) name or number;
-Buy or Sell;
-If sale - Long or Short;
-Whether order was “Solicited” or “Unsolicited”;
• Number of shares or bonds to be traded;
• Description of security to be traded; and
• Execution price (if the order is a market order, there is no price - only the designation “MKT”).

72
Q

order ticket time stamp

A
  • Time of order receipt;
  • Time of order execution;
  • Time of order cancellation, if canceled.
73
Q

IA order ticket

A

NASAA
• Name of the person at the IA who recommended the transaction;
• Name of the person who placed the order;
• Date of order entry;
• Name of account for which order was entered;
• Name of broker-dealer or bank to which the order was sent for execution;
• Whether the order was discretionar

74
Q

confirmation information

A

□ Broker-dealer name, address and telephone number;
□ Customer name and address;
□ Number of shares bought or sold;
□ Security description;
□ Execution price;
□ Commission charge for an agency trade;
□ Whether a payment for order flow was received.

75
Q

what orders must be kept

A
  • executed orders, unexecuted, canceled

- retain for 3 years from Securities exchange act of 1934 for 3 years

76
Q

BD charges

A
  • comissions must be fair, higher must be justified by added value
  • comission charge not required to be disclosed at time of trade
  • must be disclosued in writing on trade confirmation
  • disclose unusual costs and fees
  • cannot charge for recommendations, can charge for clerical services
77
Q

IA charges

A

fees, must be comperable to other advisers

-must disclose availiability of discounts to all customers on borchure form ADV part 2A

78
Q

death of customer

A
  • cancel all open orders
  • note date of death
  • freeze account from removal of assets
  • wait for proper paperwork needed to trasnfer account
79
Q

customer complaints

A

sec rule 17a-3 NASAA follows

  • written record of each complaint
  • accoutn number, date of recipt, name of associated person identified, disposition of complaint
  • or may maintain a copy of each original complaint in a separate file of associated person with record of disposition
80
Q

information barriers

A

Research/

  • investment
  • retail sales
  • trading

investment banking/

  • research
  • retail sales
  • trading
81
Q

free riding

A

witholding IPO from public sale by a BD and keeping it personally
-BD and employeee IPO distribution not allowed

82
Q

churning

A

excessive trading of customer’s account with intention of generating commissions for agent

  • whether active trading is in line with customer objectives
  • character of customer accounts (types of investments made previously and frequency)
  • financial condition of agent
83
Q

painting the tape

A

wash trading. buying a secuirtyand selling it to create appearance of trading activity

84
Q

research report time period

A

10 days following effective date for IPO

3 days following effective date for secondary

85
Q

prospectus

A
  • required for IPO at or prior to time of entering into contract. confirmation of sale
  • not required for secondary
  • not required for muni
86
Q

testimonials in advertisements

A

NASAA IA cannot contain

FINRA for BD and SEC for fed covered IA permits testionial - must give disclosure if paid

87
Q

internet commmunication

A

must disclose affiliation of BD for agent or IAR with BD or IA.
cannot exceed scope of authority

88
Q

IA advertising

A
  • cannot contain false or misleading statements
  • cannot contain a testinmonial
  • canont state any rreport or research will be provided for free unless offered without condition
  • can include a list of recommendations with performance as logn as reocmmendations over that period are included with current price of secuirty (cannot be selective

-no restriction of free services, but cannot be conditioned

89
Q

referral fees

A

IA can pay referral fees to solicotor. solicitor must be license as rep

agents or BD prohibited from sharing comissions

90
Q

modern portfolio theory considerations

A

§ Gen economic conditions
§ Inflation/deflation
§ Tax consequences
§ The role that each investment plays as part of overall portfolio
§ Expected total return
§ Other resources of beneficiaries
§ Need for liquidity, income and preservation or appreciation of capital
-An asset’s special value to one or more of the beneficiaries

91
Q

SAR

A

filed with FinCEN financial crimes enforcement network- department of treasyry
5k or more filed in 30 days

92
Q

CTR

A

currency transaction report, structurings

FINCEN for over 10k. filed in 15 days

93
Q

branch in bank

A
  • NOT NOT MAY
  • at or prior to opening an account for customer
  • accoutn not fdic insured
  • secuiritiies products are not deposits and not guaranteed by institution
  • secuirities products subject to investment risk and may lose value
94
Q

BD vs IA

  • fiduciary standard
  • conflict of interest disclosure
  • borrowing from client
  • sharing in gain/loss of customer accounts
  • able to take custody
  • discretionary POA
  • paying referral fees
  • roder tickets
  • testimonials
A

-fiduciary standard
BD-no IA yes

  • conflict of interest disclosure
  • BD- only when making recommendations
  • IAevery conflict of interest disclosed in brochure given to client at account opening
  • borrowing from client
  • BD no unless from lending insitution (NASAA does not permit family)
  • IA no unless borrowing from lending instituion
  • sharing in gain/loss of customer accounts
  • BD no unless joint account share proportional
  • IA no
  • able to take custody
  • BDyes always
  • IA no unless firm notifies admin
  • discretionary POA
  • BD at or pior to entering first trade
  • IA acn take verbal for 10 business days before written POA
  • paying referral fees
  • BD no because comissions can only be shared in same firm
  • IA yes as long as individual is registered IAR

-roder tickets
BD- time stamped with time of entry, execution, cancellation
IA no time stamp since order sent to BD

  • testimonials
  • BDyes must disclose if paid
  • IA no
95
Q

net capital

A

can be set by admin for BD and IA, but not for agents and IAR

96
Q

sharing in gain or loss by agent

A
  • customer and BD must agree in writing

- only direct proporition to contribution allowed

97
Q

secuirty

A

any investment in a common enterprise for profit with management performed by a third party

98
Q

corporate issues

A
  • transferable shares- common + preferred stock, notes, bonds, debentures
  • treasury stock
  • collateral trust certs
  • real estate investment trust certs
  • COD like ADR
  • CMOs
  • structured secuiriites like notes issued by investment banks and financial institutions
  • rights and warrants
  • voting trust certificates: special corp secuirities used in proxy fights
99
Q

voting trust certificates

A

special corporate secuirities used in proxy fights
-shareholders who wish to remove existing management deposit shares into voting trust, if enough shares deposited, mangement replaced

100
Q

investment company issues

A

open fund shares- mutual fund redeemable

  • closed fund shares- publicy trade. negotiable secuirities
  • investment contracts- front end load and spread load contractual plans
  • unit investment trusts. variable annuity contracts
101
Q

options clearing corp issues

A

options contracts on stocks

debt instruments- indexes and forieng curriences. put and call

102
Q

tax sheltered investments

A

pre organization certificates like subscription agreement for limited partnership

  • certificates of interest in a profit sharing arrangement like limited partnership subscription
  • fractional interests in oil,gas or minin ventures. real estate condominiums
  • farming, planting, breeding programs
103
Q

other issues that are secuirities

A
  • whiskey warehouse receipts
  • merchandising marketing schemes
  • commodity options ocntracts
104
Q

excluded from def of secuirity

A
  • insurance or endowment policies or contracts
  • fixed annuity contracts
  • ownership in credit unions or non profit org
  • commodities futures contracts
  • interest in retirement plans, pension, IRA, hr10
105
Q

fed covered secuirity

A

18b secuirities act 1933

NYSE, AMEX, NASDAQ or preferred stock/ bonds of that issuer

  • investment company issues
  • sold to qualified wealthy purchasers. 5mil or with 25mil under managment

sold in transactions exempt under 33 act

106
Q

sale

A

contract to sell or dispose of secuirity or an interest in secuirity for value

-gifr of assemble stock considered to be sale

107
Q

offer to sell

A

any attempt or offer to dispose of a secuirity or a solicitation of an offer to buy a secuirity or an interest in secuirity for value

-warrants, rights, convertible secuirities an offer or sale of underyling stock

108
Q

offer to purchase

A

an attempt to obtain a secuirity or a solicitation of an offer to sell a secuirity or an interest in a secuirity for value

109
Q

excluded from def of sale

A

dividends paid to shareholders in cash, stock, or property

secuirity interest- created as result of a loan

corporate reorganization caused by a vote of shareholders resulting in a maerger, reclassification of shares

110
Q

administrator

A

can be state secuirities comissioner, or secretary

part of secretary of states deparment, some report to department of commerce

111
Q

gurantee

A

as to payment of dividends, interest or principal made by someone other than the issuer

112
Q

registration effective length

A

1 year with quarterly updates.

if longer than a year, still remains effective

113
Q

post efective ammendment

A

increase offering size
pay late fee and addtional filing fee

  • offering price and underwriters comp cannot be change
  • must be within 6 mo of original sale date (effective date)
114
Q

reg statement for secuirities includes

A
  • business description
  • use of proceeds of offering
  • offering terms
  • legal opinion
  • accountants opinion
115
Q

secuirities registrations

A
  • filing. seasoned companies. used by officers in non issuer transactions. has outstanding and is current in SEC filings. 5 days after filing with state is complete
  • consent to service
  • registration by coordination. coordinated with fed. filing of SEC info with state will satisfy. Any company with SEC filing. app must have been on file for 10 days. burden of proof on admin
  • qualification. most difficult. most detailed disclosure. reg set by admin normally 30 days after filing. burden of proof on applicant
116
Q

filing qualification

A
  • business for 3 years, profits for 2
  • previously reg with SEC, held by at least 500 shareholders
  • timely filing
  • net worth of 4mil or 2mil and profit for 2 of 3 years
  • not defaulted
117
Q

consent to service for filing

A
  • statemnt demonstrating elibiility. name, address, form of organization
  • description of secuirity
  • copy of latest prospectus under 1933
118
Q

coordination requirements

A
  • 3 copies of prospectus filed with SEC
  • issuers article of incorporation and by laws
  • cop yof agreement among underwriters
  • copy of indenture governing the issuance of the secuirity
  • speciment of secuirity to be issued
119
Q

qualification requirements

A
  • issuers name, address, form of org, location,
  • earnings
  • balance sheet, income statement
  • terms
  • how proceeds will be used
  • descriptoin of stock options outstanding
  • copy of prospectus and advertising
  • legal opinion, accountants opinion
120
Q

admin req for fed covered secuirities

A
  • notice filing in state
  • filing with statate of SEC documents or consent to service
  • filing fee in state
121
Q

exempt secuirities from reg in state and advvertising filing

A

-gov and muni issues (safe)

  • issuers already regulated under other laws *banks *Savings and loans
  • insurance companies
  • industrial loan association issues
  • insurance company issues (except variable annuity) *railroad and common carrier
  • public utilities
  • large established companies (Fed laws already)
  • blue chip exemption
  • promissory notes, commercial paper (mature in 9 mo or less), rate 3 on moodys, and min denom of 50k

-non profit

122
Q

stop issue order

A
  • cannot do based on fact known to admin when reg became effective unless action taken within 30 days
  • opportunity for hearing given
  • admin must promptly notify all parties and reasons
  • withn 15 days of written request, hearing offered
123
Q

admin deny secuiriites reg by

A

order

124
Q

exempt from filing of advertising

A
  • exempt secuirities
  • fed covered secuirities
  • secuirities in exempt traansactions
125
Q

exempt transactions

A
  • secondary market
  • secondary market trading of companies reg with SEC for 180 days
  • traded on designated stock exchanges like toronto stock exchange
  • fiduciary trasnactions made by executor, admin, sherrif, marshall, reciever, trustee in bankruptcy, guardian or conservator
  • real estate trasnactions secred by mortgage
  • transactiosn between issuers and under writers

-trasnactions with financial or institituional investors like banks, insurance, trusts, investment companies, pension or profit shsaring trusts, BD other insitutional buyers

  • isolated nonissuer transactions
  • private placements no more than 10 persons during 12 month period, no comissions

-offer of sales preorginzation subscriptions (limited to 10 subscribers)

sales where no comission is received

126
Q

private placements

A

different then fed law
no more than 10 persons in 12 mo period

no comissions may be paid for soliciting prospective buyers other than institutional investors

127
Q

pre-organization certificates exemption

A

suscribers limited to 10 persons, no payment can be made by subscriber

128
Q

registration of secuirity not required if

A
  • issue is exempt
  • issue is offered in exempt transaction
  • issue is not secuirity
  • issue is fed covered secuirity
129
Q

admin can deny based on

A
  • filed misleading app
  • wilfully violated provisions in act
  • convicted of a misdemeanor for secuiriites in past 10 years
  • been enjoined from engaging in secuirities business
  • been suspended or had reg revoked by SEC or state in past 10 years
  • been found to be insolvent
  • found to be unqualified
  • failed to supervise
130
Q

criminal penalties

A
  • restitituion
  • 5k fine
  • 3 years prison
  • 5 year statue of limitations
131
Q

civil liability

A
  • when person still owns secuirity
  • buy back secuirity, refund investment losses and advisory fees
  • buy back at original price or pay back any money lost plus fees
  • pay legal 6% rate of interest, net any income received
  • pay legal fees
  • no longer owns
  • difference bewteen original price and price that secuirity was disposed
  • plus 6% interest, attorney fees, minus income recieved
132
Q

civil suit limitations

A

brought within 3 years, but no later than 2 years after discovery

133
Q

offer of recision

A

offer must be made prior to buyers insituting
offer includes

  • a satement of how liability may have arisen, fairly advises purchaser of rights
  • if offer made because of misstatement, correct error
  • an offer to repurchase, payable upon delivery
  • offer must be accepted within 30 days
134
Q

consent to service

A

required by admin for any secuiriites registration

filing, qualifification, etc

135
Q

discretionary power BD vs IA

A

BD- written needed

IA verbal ok up to 10 business days before written

136
Q

prudent investor rule

A

all fiduciary accounts

-trustee, executor, custodian, agent with discretionary authroity

137
Q

covered account

A

designed to permit multiple payments or transactions

138
Q

can an IA act as agent or principal?

A

yes rarely, must have consnet of client before completing transaction.

with BD- disclosure of capacity is all thats necessary broker (agent) or dealer (principal)

139
Q

excluded from def of agent

A
  • sales of exempt secuirities like treasury, agency and muni
  • exempt transactions like to insitutions underwriters or private placements
  • sales of covered secuirities like private placement and sales to persons with investment assets of 5mil
  • sales of secuirities to employees of that issuer if no remuneration is paid
140
Q

broker dealer records

A

account ledgers, correspondence, papers and memoranda, blotters and books

141
Q

account document that is evidence of debot creditor relationship

A

credit agreemtn

142
Q

optional portion of account documentation which allows BD to lend out clients margin secuirities

A

loan consent agreement

143
Q

registration statement of secuiritiy

A

other states where secuirity is being registered
total amount of secuirity offered in this state
if theres a stop order

144
Q

de minimis

A

not for broker dealers, only IA

145
Q

NASAA sharing profits rule for agents

A

no requirement for proportional sharing

146
Q

agency cross transaction

A

where person is IA and BD in same trasnaction

147
Q

agent requirements from admin

A

surety bond (if has discretion), filing fees, pass exam, no min net capital

148
Q

revocation

A

permenant. person prohibited from ever doing business inthes tate. suspension has fixed life

149
Q

automatically registered

A

BD firms officers partners, directors and agents

150
Q

exclusion

A

anything identified as not being included in the definition

151
Q

exemption

A

anything that would normally meet the defnition, but is now an excemption

Series 63 (1 decks)

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