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Series 63 > State Regulations Governing Broker-Dealers and Agents > Flashcards

State Regulations Governing Broker-Dealers and Agents Flashcards

1
Q

May a wife enter trades in a husband’s account?

A

Yes, with written third-party authorization.

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2
Q

Does the payment date requirement of Regulation T apply to cash or margin accounts?

A

Payment is required within 5 business days for both (100% in a cash account, 50% in a margin account).

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3
Q

Is a bank whose trust department occasionally executes securities transactions considered a BD?

A

No. Banks are excluded from the BD definition.

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4
Q

Is an individual who represents a BD in the sale of Treasury bonds considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

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5
Q

Is a sales assistant for a BD who accepts unsolicited orders from clients considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

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6
Q

Is an individual who represents an issuer in the sale of municipal bonds considered an agent?

A

No, since the individual is involved in the sale of exempt securities.

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7
Q

Is an individual who represents the issuer of a private placement considered an agent?

A

No, since the individual is involved in an exempt transaction.

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8
Q

Is an individual who represents the issuer in the sale of Treasury bonds considered an agent?

A

No, since the individual is involved in the sale of exempt securities.

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9
Q

Is an individual who represents a BD in the sale of a private placement considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

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10
Q

Is an individual who represents a BD in the sale of a bank’s stock considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

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11
Q

Is an individual who represents a BD in the sale of stock to a bank considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

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12
Q

Is an individual who represents an issuer in the sale of stock to a bank considered an agent?

A

No, since the individual is involved in an exempt transaction.

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13
Q

Is an individual who represents an issuer in the sale of the issuer’s stock to its underwriter considered an agent?

A

No, since the individual is involved in an exempt transaction.

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14
Q

Is Jim an agent if he works in ABC’s retirement dept. and, once a year, places ABC stock in employees’ accounts?

A

No, Jim is representing the issuer in an exempt transaction.

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15
Q

True or False: A Consent to Service of Process is an example of an exculpatory clause.

A

False. Exculpatory clauses are waivers absolving agents from wrongdoing. The waivers are null and void under the USA.

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16
Q

A surety bond may be required if an investment adviser has _____________ or __________ of client assets.

A

A surety bond may be required if an investment adviser has discretion or custody of client assets.

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17
Q

In place of a surety bond, the Administrator will accept a deposit of _______ or _____________.

A

In place of a surety bond, the Administrator will accept a deposit of cash or securities.

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18
Q

True or False: A Consent to Service of Process must be filed by BDs, but not their agents.

A

False. A Consent to Service of Process is required of all registrants.

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19
Q

True or False: A successor advisory firm must pay a new filing fee, but need not file a new application.

A

False. The successor firm must update its application, but not pay a new filing fee.

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20
Q

The application for registration of an agent or IAR becomes effective in _____ days.

A

The application for registration of an agent or IAR becomes effective in 30 days.

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21
Q

The application for withdrawal of registration of an agent or IAR becomes effective in _____ days.

A

The application for withdrawal of registration of an agent or IAR becomes effective in 30 days.

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22
Q

True or False: An agent whose client moves to a new state may not contact the client until registered in the new state.

A

False. The agent may engage in transactions with the client for 60 days if registration is pending in the new state.

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23
Q

May an agent whose client is visiting another state sell securities to the client without being registered in the state?

A

Yes, provided the client is in the state temporarily.

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24
Q

May a cash account be opened without the customer’s signature?

A

Yes

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25
Q

May a margin account be opened without the customer’s signature?

A

No

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26
Q

True or False: The initial transaction in a margin account requires a written margin agreement promptly after the trade.

A

True

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27
Q

What information is included on an order ticket? 5

A
  1. Client’s name
  2. account number,
  3. execution price
  4. time of execution,
  5. time order is received, entered, and executed
  6. Whether order was solicited or unsolicited.
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28
Q

List some of the exclusions from the definition of a BD. 4

A
  1. Agent,
  2. issuer,
  3. bank, or
  4. a BD with no office in the state that only deals with institutions or its existing clients
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29
Q

How may the failure to pay the proper filing fee be corrected?

A

By paying the appropriate amount

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30
Q

May the Administrator set minimum net capital requirements for BDs?

A

Yes, but the requirement on BDs may not exceed the federal (SEC) requirement.

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31
Q

Is there a limit to the amount of net capital the Administrator may require of a BD?

A

Yes. The Administrator may not set a requirement that exceeds the federal (SEC) requirement.

32
Q

A _________ bond is posted to cover the potential costs of legal action taken against certain persons.

A

A surety bond is posted to cover the potential costs of legal action taken against certain persons.

33
Q

May an agent continue to do business in a state if his BD has gone out of business?

A

No. An agent’s registration is only in effect while associated with a BD or issuer.

34
Q

When an agent ends her association with a BD, who must notify the Administrator?

A

Both the agent and the BD

35
Q

If a BD is not registered in a state, may an agent of the BD do business in the state without being registered there?

A

Yes, if the agent is dealing with an existing client that is temporarily in the state.

36
Q

If a client moves to a new state, may the agent continue to do business while applying for registration in the state?

A

Yes, as long as the agent is registered in at least one other state and is not subject to disqualification.

37
Q

A client of a Canadian BD is visiting the U.S. May the agent do business with her without registering in the state?

A

Yes. Since she is an existing client of the Canadian BD, business may continue in the state.

38
Q

May an agent of a BD located in Mexico do business with a client in the U.S. without registering in the state?

A

No. BDs of Mexico are required to register in the U.S. to effect securities transactions in a state.

39
Q

What is the purpose of a Consent to Service of Process?

A

To appoint the Administrator as the applicant’s attorney to receive and process any non-criminal legal complaints

40
Q

Who must sign a Consent to Service of Process?

A

Any issuer, BD, IA, IAR, or agent initially registering to engage in business within a state

41
Q

Must the Consent to Service of Process be renewed each year?

A

No. It is only required at initial registration.

42
Q

State registration expires annually on ______________.

A

State registration expires annually on December 31.

43
Q

When does state registration become effective?

A

At noon on the 30th day after filing an application, provided there are no proceedings pending

44
Q

If a BD is registered with the SEC, is registration required in any state in which it intends to do business?

A

Yes. There are no exemptions from registration in the state as a BD.

45
Q

True or False: If a BD registers in a state on March 3, it must pay a registration fee for the full year.

A

True

46
Q

If a firm meets the BD definition in the state, are there any exemptions from registration under the USA?

A

No. Firms that meet the BD definition are required to register in the state.

47
Q

A BD must maintain its books and records for a minimum of ____ years.

A

A BD must maintain its books and records for a minimum of 3 years.

48
Q

Identify the acronym: IARD

A

Investment Adviser Registration Depository

49
Q

True or False: The USA requires all employees of a BD to register.

A

False. Only those representing a BD in effecting transactions (as an agent) must register.

50
Q

A BD in New York gets an order from a client who is on vacation in Florida. Does the firm need to register in Florida?

A

No. Registration is not required since the client is an existing client who is temporarily in Florida.

51
Q

True or False: BDs must file retail communication with the Administrator.

A

True

52
Q

True or False: A partner, officer, or director of a BD is always considered an agent of the BD.

A

False. A partner, officer, or director is deemed an agent of a BD if she is involved in the purchase/sale of securities.

53
Q

Is an individual who represents a bank in the sale of its bond offering considered an agent?

A

No, since the individual is representing the issuer in the sale of exempt securities.

54
Q

Is a firm considered a BD if it has an office in a state, but only deals with institutional clients in the state?

A

Yes, because the firm established an office in the state.

55
Q

Is a corporation considered a BD if it raises capital by selling new shares of its stock to the public?

A

No. The corporation is an issuer and issuers are excluded from the BD definition.

56
Q

Is a firm considered a BD if it has no office in a state and only deals with institutional clients in the state?

A

No. The firm is excluded from the BD definition.

57
Q

Is an individual who represents a BD in the sale of municipal bonds considered an agent?

A

Yes, since anyone representing a BD in the sale of securities is an agent.

58
Q

BD records must be kept for at least _____ years.

A

BD records must be kept for at least three years.

59
Q

True or False: Canadian agents cannot effect trades with existing Canadian clients who are temporarily in the U.S.

A

False. Provided the relationship with the client existed prior to entering the U.S., trades may be effected.

60
Q

A BD that is located and licensed in Canada may contact what types of individuals in the U.S.?

A

Existing clients who are temporarily in the U.S.

61
Q

Is there a registration exemption for agents who conduct business in a state? If so, what are the guidelines?

A

Yes, no place of business in state and a client visits the state or existing client moves to the state (regist. pending)

62
Q

What is a consent to service of process?

A

A document that appoints the Administrator as attorney for any non-criminal legal complaints issued against a registrant

63
Q

Under the USA, is a bank holding company that occasionally executes securities trades excluded from the BD definition?

A

No. Under the USA, bank holding companies are not excluded from the BD definition.

64
Q

The electronic system used to register investment advisers is the __________ _______ ____________ ________________.

A

The electronic system used to register investment advisers is the Investment Adviser Registration Depository (IARD).

65
Q

If a BD’s net capital falls below the required minimum, it must notify the Administrator within ___ business day(s).

A

If a BD’s net capital falls below the required minimum, it must notify the Administrator within one business day.

66
Q

With whom may an agent split commissions?

A

Another agent who is registered with the same BD, or another BD that is under common control

67
Q

What is true regarding licensing and registration standards for broker-dealers? 3

A
  1. The Administrator may require that a broker-dealer have a minimum net capital as a condition of registration
  2. The Administrator may require registered broker-dealers to post bonds and may determine their conditions
  3. The Administrator may provide for a qualification examination, which may be written, oral, or both.
68
Q

What information does an employee applying for registration as an agent need to disclose on their application for registration (U4)? 4

A
  1. Any alias the agent has used
  2. Any personal bankrupctcies or bankruptcies of entities that they controlled during the last 10 years
  3. Unsatisfied judgments against him
  4. Tax liens
69
Q

What records must a broker-dealer keep? 3

A
  1. Original copies of all incoming client correspondence
  2. Signed copies of all discretionary account agreements executed by clients
  3. Copies of all order tickets
70
Q

If an agent wants to solicit retail clients in a state where neither themselves or their broker-dealer has registered in, what is required for them to begin soliciting retail clients in that state?

A

Get the broker-dealer and themselves registered in that new state.

71
Q

What type of material may a broker-dealer need to file with the Administrator?

A

Generally, the Administrator may require the filing of “any prospectus, pamphlet, circular, form letter, advertisement or other sales literature or advertising communication” intended for distribution to investors or prospective investors.

72
Q

What type of sales material may an Administrator not require a broker-dealer to file with them?

A

Sales materials related to exempt securities, exempt transactions, or federal covered securities be filed.

73
Q

What can a broker-dealer charge clients fees for?

A

It is permissible to charge clients reasonable and equitable fees for miscellaneous services performed by a broker-dealer. Some of these services include

  1. appraisals,
  2. safekeeping,
  3. transferring, and
  4. custody of a client’s securities. They also include
  5. collection of dividends,
  6. interest, and
  7. principal payments.
74
Q

An agent is employed broker-dealer and that broker-dealer is owned by a bank. If the agent sells securities issued by the bank to clients,

  1. what must the agent disclose?
  2. By when?
  3. How must it be made?
A
  1. That the broker-dealer is affiliated with or controlled by an issuer of securities.
  2. They would need to disclose the affiliation before entering into any contract with a customer to buy or sell securities.
  3. May be made verbally prior to trade if written disclosure is made at or before the completion of the transaction.
75
Q

When would the revocation of an agent’s registration (for doing wrong by a client), result in the revocation of their broker-dealer’s license?

A

When the Administrator determines the broker-dealer failed to properly supervise the agent.

76
Q

Generally, an employee of an issuer soliciting employees of that issuer for the purpose of selling securities would be considered an agent of the issuer if what?

A

The employee received commissions or other remuneration (such as a bonus based on securities sales).

Series 63 (7 decks)

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