Unit 1 Registration of Persons Flashcards
(65 cards)
Uniform Securities Act (USA) of 1956
*Model legislation that arose in an attempt to
unify all state securities laws (Blue-Sky Laws).
Each state must adopt the principles of the act to
create the state’s laws for how securities are
issued and sold within each state.
*The USA provides for both criminal and civil
penalties for violations.
The template for all the states to use.
The Securities Act of 1933
Primary Markets
Also known as the 1933 Act, the Securities Act, the Truth in Securities Act, the Federal Securities Act, and the ‘33 Act, was enacted by the United States Congress on May 27, 1933, during the Great Depression and after the stock market crash of 1929.
The Securities Exchange Act of 1934
Secondary Markets
Is a law governing the secondary trading of securities in the United States of America.
A landmark piece of wide-ranging legislation, the Act of ‘34 and related statutes form the basis of regulation of the financial markets and their participants in the United States.
Fraud, SEC
The Trust Indenture Act (TIA) of 1939
For corporate non-exempt bonds
Requires that non-exempt corporate bond issuers create a trust indenture when issuing bonds worth $50 million or more. The TIA is a law that protects bondholders by requiring the issuer to appoint a trustee and create a written agreement that details the bond issue. The Securities and Exchange Commission (SEC) enforces the TIA.
Investment Advisers Act of 1940
A federally covered advisor is an investment advisor that is registered with the (SEC) under the IAA of 1940.
This act regulates investment advisers who provide professional advice about securities investments.
Who is a federally covered advisor? Advisers with at least $100 million in assets under management, Advisers who advise a registered investment company, Certain pension consultants, Internet-based advisors, and Multi-state advisors.
The Investment Company Act of 1940 (ICA)
Is a law that regulates investment companies, including mutual funds. The ICA’s purpose is to protect investors by requiring companies to disclose information about their investments and operations. The ICA is also known as the 40 Act.
Face Amount Certificates
Unit Investment Trust
Management Companies (open end, closed end mutual funds, etc.)
Year Triggers: Whenever you see a year
Whenever you see a year, think federal
State Administrator
The Administrator is the regulator for the state
Each state has their own regulator
They have jurisdiction in their state
They enforce rules their state congress has set up
State Administrator Cont’d
- The securities industry is primarily regulated at the federal level. However, each state has its own securities department known as the Administrator. The Administrator is responsible for administrating the securities laws of the state.
The North American Securities Administrators Association (NASAA)
Agency, and it has no state or federal powers, but it has influence with legislators and regulatory authorities.
NASAA writes the test.
National Securities Markets Improvement Act of 1996 (NSMIA)
Modified and limited the powers of the states with regard to the registration and regulation of some B/D, IA, and securities issuers.
Fed covered Securities
- Exchange Listed Securities
- Reg D (Rule 506)
- Investment company securities
- municipal securities
What is a State?
- A state, commonwealth, any property/territory of the US
Definition of a Person
- Person could be individual human (natural person), or a corporate person.
Anyone with the ability to enter into a contract.
Who is not a person
Dead, Dumb, Don’t Touch
Minors are excluded as they cannot legally enter into a contract. Those deemed mentally incompetent are also excluded.
Examples of Persons
- An individual
- A corporation
- An estate
- A business trust
- A government body
- A political sub-division
Registration Procedures
*The state administrator requires the following
information on the registration application: * Location and type of business
* Proposed method of doing business
* Applicant’s financial history and condition
* Qualifications and business history
Consent to Service of Process
*A form that gives the state administrator
jurisdiction over the registrant to receive and
process any non-criminal legal proceedings
*This appointment is irrevocable and remains in
force as long as a registration is effective
*The consent is not required with renewal
applications
Effective date and expiration
*Registration is effective noon on the 30thcalendar day after the filing date
*If not renewed, all registrations expire on
December 31st
Minimum Net Capital Requirements of
BDs
*BDs who can receive and promptly forward
deposits from customers is $50,000
*BDs who can’t receive any money from
customers is $5,000
Investment Advisor Financial
Requirements
- For Investment Advisers with discretionary and
custody of client funds/securities is $35,000
*Investment Adviser with discretionary, but
without custody is $10,000
Surety Bonds
*B/Ds and IAs who have discretionary authority
over client accounts may be further required (by
the state administrator) to post a surety bondin
the amount of $35,000
When Does the Surety Bond Requirement Not Apply?
The surety bond requirement does not apply if: * The B/D’s net worth exceeds the minimum standards
* The IA meets the minimum financial requirements
Fidelity Bonds
*Not likely to be seen
*Insurance to protect against fraud, theft,
and other unethical or illegal acts by
employees.
Investment Advisor
*A person (firm) who advises for a Fee
