Series 63 ALL notes
Study online at quizlet.com/_8ypos
1. 3 Categories of Federal Covered Securities: (1) stocks listed on
a national exchange
(2) investment company securities
(3) Certain exempt securities, including out-of-state munis and
Reg D private placements.
2. ABC test: - provide ADVICE about securities
- provide services as a BUSINESS
- receive COMPENSATION for services
3. Admin has jurisdiction over any offer to buy/sell and any
acceptance if:: - originated in state
- directed/sent to state
- accepted in state
4. Agency Cross Transaction: An adviser acts as agent for both
parties in a trade. (4-140)
5. Agent: any individual who represents a B/D or issuer in
securities transactions
6. Application Requirements for Agent: - method of business
- qualifications and business history
- financial conditon/history
- any injunction/misdemeanor/felony
7. Application Requirements for B/D: - place and form of
business
- method of business
- qualifications and history of any
partner/officer/director/controlling person
- financial conditon/history
- any injunction/misdemeanor/felony
8. Application Requirements for IA: - place and form of business
- method of business
- qualifications and history of any
partner/officer/director/controlling person
- financial conditon/history
- any injunction/misdemeanor/felony
- any info to be furnished to clients
9. Application Requirements for IAR: - method of business
- qualifications and business history
- financial conditon/history
- any injunction/misdemeanor/felony
10. Are annuities a security?: Fixed annuities are not, but variable
annuities are. (they are dependent on the investment
performance of securities within the annuity). (2-57)
11. Are gifted non-assessable securities considered a sale?: NO.
they do not involve a sale
12. Are individuals considered agents when transacting in
exempt securities, exempt transactions, or as a non-
commissioned employee of the issuer?: No. (they are not
agents and thus do not have to be registered.) (1-16)
13. Are solicitations of unregistered, exempt securities allowed?:
YES because they are exempt
14. Are solicitations of unregistered, nonexempt securities
allowed?: NO.
15. Are the following people Agents or not?
1. a person effecting transactions in municipal securities on
behalf of a broker dealer.
2. a salaried secretary taking buy and sell orders from
clients
3. bank employee selling bank-issued securities
4. an employee of a nonexempt issuer selling securities to
employees for a commission
5. a person representing an issuer in effecting transactions
with underwriters.: 1. agent
2. agent
3. not an agent
4. agent
5. not and agent
(1-20)
16. At what point is a document considered to be officially
"filed"?: When it is received by the Administrator. (3-102)
17. Breakpoint: minimum amount of $ clients needs to invest in
order to receive sales charge for mutual fund
18. Brochure rule: - requires written disclosure doc at a specific
time and contains:
-services/fees
-types of clients
- if acts as B/D; gets benefits for that
- exercises discretion, suggest brokers, receives addt'l
compensation
- des of securities
-disclosure of affiliates
19. Broker/Dealer: any person in business of effecting transactions
in securities for its own account or account of others
20. Can a client agree to waive his right to sue, or to waive any
other protections under the USA?: No, and an agreement with
such a sitpulation is null and void. (4-127)
21. Can Admin release nonpublic info?: NO. the admin nor any of
his officers/employees may disclose nonpublic info obtained
in the course of performing their duties
22. Can advisers use B/D to execute transactions in exchange for
certain services?: YES...called soft dollars
23. Cash Account: must pay for all securities by settlement date
24. Causes for admin to deny/suspend/revoke etc registration: -
incomplete apps
- false/misleading info
- convicted with past 10 years of misdemeanor
- convicted of felony
- if prohibited from engaging in business
- violated fed/state/commodities laws within past 10 years
- considered to be insolvent (liabilities > assets)
- failed to pay filing fee
25. Cease and Desist Order: Issued by administrator, with or
without a prior hearing, directing a person or persons to cease
and desist from illegal activity in which they are engaging. (1-4)
26. Churning: Unethical practice of inducing excessive trading in a 40. documents for Reg T of 1934 Act when opening MARGIN
customer's account, generally done for the sole purpose of account: - loan consent form
generating transaction fees. (4-119) - hypothecation agreement
27. Clients must receive disclosure____ hours before they sign - margin account form
contract or at the time the account was open: 48 hours.... if 41. Enjoined: A person who is the subject of an injunction. (3-92)
not, they have 5 days to cancel contract without penalty 42. Examples of non-assessable securities: - bonafide
28. Commingling: Unethical practice of holding customer pledge/loan of stock
securities in the same account as firm securities. (4-121) -exchange of securities due to merger/reorg/bankruptcy
29. consent to service of process: appoints the state administrator - stock dividend
as the applicant's attorney to receive and process noncriminal 43. Examples of Non B/D: - issuers
securities-related complaints against the applicant (1-37) - agents
30. Contumacy: when the recipient of a subpeona from an - banks/savings institutions/trust companies
Administrator disobeys the request. (3-91) - no place of business in state/only institutional customers
- no place of business in state/licensed in state of
31. Current initial requirement when purchasing common stock:
business/only existing clients in other state
50% of market value of security
44. Examples of soft dollars: - traditional/3rd part research
32. Customer tickets must include:: -account #
- discussions with research analysts
-time order received
- portfolio analysis software
-time entered
- attendance at a conference or seminar
-time trade executed
- mkt/economic data services
33. Cutoff for assets under management for state vs. federal - certain trading software
covered investment advisers.: - Federal: 30M or more (or
45. Examples of soft dollar violations: - compliance/admin
pension consultants w/ 50M assets under control)
assistance
- State: 25M or less (unless doing business in 30 or more
- adversiting/marketing
states), 25-30M - may choose
- adviser's travel expenses/meals/entertainment
34. Delivery delays: Unethical practice consisting of a pattern of - overhead/admin expenses
unreasonable and unjustifiable delays in the delivery of -employee salaries
securities purchased by clients. (4-118) - prof licensing fees
35. De Minimis Exemption: - no place of business in state - computer terminals
- no more than 5 noninstitutional clients -correction of trading errors
- 12 consecutive months 46. Exam required to be an investment adviser representative.:
Series 65 or 66, and FINRA 6 or 7. (1-34)
for IA, NOT B/D
47. Exempt Securities: - muni
36. De Minimis Exemption for Agents: - application is pending in - agencies
state (up to 60 days) (as long as B/D registered in that state, - guaranteed by US or any state
agent is registered with FINRA, registered in at least one other - Canadian or foreign anything
state) - bank/savings institution/trust company
- existing client who is visiting in another state - fed savings and loan assoc/fed credit union
37. An Detroit retail client of a national BD firm calls the - insurance company
Cleveland office to place an (unsolicited) order for an - railroad, common carrier, public utility
exempt security. The agent in Cleveland is not registered in - any exchange security
Michigan. Can he/she accept the order?: No, must transfer to - non profit orgs
an agent registered in Michigan. - promissionary note, draft, bill of exchange
38. Directed transactions: Transactions directed from an IA to a 48. Exempt Transactions: (1) Isolated nonissuer (secondary)
BD in a soft money arrangement in exchange for research or transactions,
other items that benefit the client. (4-148) (2) nonissuer transactions by pledgees,
39. Do admins have inspectorial power?: YES: (3) transactions with existing security holders
- may require written statemnts under oath detailing facts (4) unsolicited brokerage transactions,
- may take place in ANY state (5) underwriter transactions,
- can be public or private (6) bankruptcy/guardian/conservator
- may subpeona witnesses (inside and outside of state) (7) institutional investor,
(8) Limited offerings (private placements),
(9) preorganization certificates
49. Federal Covered Adviser: adviser exempt from state
registration
50. Federal Covered Securities: - listed on exchanges
- securities that are = or > in seniority than a listed security
- issued by investment company
- offered/sold to qualified purchasers (private placements)
51. Federal Covered Security: one that registers with the SEC and
is traded on a national exchange, and is exempt from state
registration.
52. Filing fee: paid with registration; based on % of total offering
price
53. Final Orders: (1) prior notice,
(2) opportunity for hearing,
(3) written findings of fact and conclusions of law. (1-4)
54. Form ADV: application in 2 parts for registration as an
investment adviser. (1-29)
55. For which exempted transactions may the administrator
revoke exemption?: Any other than federally covered
securities. (2-71)
56. Front Running: illegal practive of brokerage firm executing
orders on security for its own account while taking advantage
of advance knowledge of pending orders from its customers
57. Fulcrum fee: an advisory fee that increases and decreases
proportionately with the investment record of an appropriate
securities index; averaged over a specific period
- if account outperformed index, adviser would be entitled to
addt'l fee
-if client's account underperformed index, the fee would be
reduced
58. How are exempt securities and excluded securities different
under USA?: - EXCLUDED items (ie, real estate, metals, and
other non-security items) are not subject to anti-fraud
provisions under the USA.
- EXEMPT securities (munis, federally covered) are exempt
from registration but still subject to anti-fraud provisions. (2-
67)
59. How can a BD ensure that their website content does not
require registration in all states where the site can be
viewed?: (1) clear communication that they can only do
business if registered in state (or exempt),
(2) follow-up individualized responses must comply with USA,
(3) site may only supply general info and no specific advice.
(4-151)
60. How can a BD set up an office/space for transactions within a
retail bank?: The space must be separate from the main bank
space. If this is not possible due to space constraints, effort
must be made to distinguish as separate services. (4-152)
61. How can an investment adviser ethically advertise a
proprietary charting system that is used in providing
advice?: Must indicate that there are limitations and difficulties
inherent in using such programs. (4-137)
62. How can an out-of-state broker dealer be exempted from
registration requirements?: (1) Must have no place of business
in the state, AND either
(2a) must deal exclusively with other BDs or instituational
clients, or
(2b) may only do business with existing retail customers who
do not live in the state (snowbird exemption). (1-11)
63. How does a firm treat a written complaint if a customer
wishes to withdraw it?: Make a copy for file and return
original. (4-126)
64. How does an Administrator enforce a cease and desist
order?: must seek an injunction from a court of competent
juristiction. (3-92)
65. Howey Case Test (4 part test to see if security): -
INVESTMENT of $
- common ENTERPRISE
- expectation of PROFITS
- results on EFFORTS OF OTHERS
66. How long after filing is a registration application deemed
effective?: At noon 30 days after the application is filed and
complete. (1-40)
67. How long after the withdrawl of professional registration
does the Administrator have jurisdiction over the person?: 1
year
68. How long does an adviser have to register with the SEC if
asset level changes enough to require it? How long to
register with the state?: - SEC: w/in 90 days of assets
exceeding $30M;
- State: w/in 180 days of assets dropping below $25M (1-26)
69. How long does the withdrawal of a registration application
take to be effective?: At noon 30 days after filing, unless there
are legal proceedings in progress. (1-41)
70. how often does a consent to service of process have to be
renewed?: never. only completed ONCE
71. How should a broker ethically conduct a trade when they are
affilliated with or have a control relationship with an issuer?:
Disclosure must be made in writing at or before completion of
the transaction. (4-125)
72. Hypothecation agreement: gives B/D authority to hold title to
the client's securities in street name and use them as collateral
for bank loans
73. IAR: partner, officer, director, associate with an IA who
recommends/gives advice/manages/supervises
74. If a BD is set up on the premises of a retail bank, what
disclosures must be made to the client, in writing?: (1) not
FDIC insured,
(2) investments are are not guaranteed
(3) investments are subject to risk, including possible loss of
principal.
75. If a broker/dealer's existing (retail) client moves to a new
state, how long do they have to register in the new state to
continue doing business with the client?: 30 days. (1-11)
76. If a federally-covered adviser is operating within an
administrator's jurisdiction what may he require of the
adviser?: May require notice filing, or submission of
documents filed with the SEC (ADV Part I). (1-29)
77. If an IA is registered in 3 states with different record keeping
requirements, how does he know which to follow?: The one
where the home office is located. (1-40)
78. If a person does not comply with a subpoena (contumacy),
what recourse does an Administrator have?: The
Administrator can apply to the courts for a court order,
punishable by contempt of court. (3-91)
79. If client funds are inadvertently transferred to an adviser,
how long does he have to return the funds?: 3 days. (4-145)
80. If security is said to be "guaranteed" under the USA, it is
guaranteed as to: - interest
- dividends
- principal
81. If the issue causing a stop order is corrected, what happens
to the order?: It is vacated. (3-94)
82. Impersonal advisory services: - activities of an investment
adviser that do not meet the specific needs or objectives of a
client, or which do not render an opinion of the investment
merits of a particular security
83. Individual account: single acocunt opened by 1 person for his
exclusive benefit
84. in order for Canadian securities to be exempt, the securities
must be:: - issued by an entity that files reports with canadian
regulators
- AND
- listed on the Toronto Stock Exchange
85. inspectorial power: power to initiate investigations
86. Institution: Banks, trust companies, S&Ls, insurance companies,
employee benefit plans with $1M in assets, and governmental
agencies. (1-8)
87. institutional investor: manages large amounts of money, such
as a mutual fund, insurance company, bank, or pension fund.
(2-70)
88. Investment Adviser: A person who: (1)advises others in
securities for compensation, or
(2) issues analyses or reports for compensation and as part of
regular business. (1-6)
89. An investment adviser that wishes to act as a principal for its
own account must:: - disclose the capacity in which it is acting
prior to the completion of transaction
- obtain the client's written consent
90. Investment Advisory Contract must include what 3
statements?: 1- IA will not be compensated on basis of sharing
in CAPITAL GAINS or CAPITAL APPRECIATION of client's
funds
2- may not assign contract without consent of client
3- IA will notify client of any change in membership within
reasonable time (60 days)
91. Investment Company: Mutual Funds (open-end or closed-end
funds), Unit Investment Trusts, and face-amount certificates. (2-
60)
92. In what case can an Administrator cancel a registration?: If
the holder no longer exists or ceases to transact business. (3-
96)
93. In what cases can an Administrator require by rule or order
for an Investment Adviser to file advertising materials,
prospectuses, or other sales literature?: In all cases except
exempt securities, exempt transactions, or federal covered
securities. (3-102)
94. In what cases can the purchaser of a security sue for
recovery of losses?: (1) securities were sold in violation of
registration requirements,
(2) securities professionals lied or ommitted information,
(3) the agent was unregistered,
(4) the securities were sold in violation of a rule or order of the
administrator. (3-97)
95. Is a broker allowed to hypothecate a customer's securities?:
Yes, with a lien or properly executed written consent. (4-122)
96. Is an administrator of one state allow to review an office's
records if they are maintained in the company's home office
in another state?: Yes. (1-40)
97. Is a representative of a broker/dealer considered an agent
when transacting in exempt securities or exempt
transactions?: Yes (a sales rep of a broker dealer pretty much
ALWAYS must be registered.) (1-16)
98. Joint Account: - more than 1 owner
- 1 account #
- 1 SSN
- signature of both owners
- checks payable to both
- any owner places orders
- account info = all owners
99. Joint Tenants with Rights of Survivorship: - undivided interest
- if 1 dies, other gets all assets
100. Letter of Intent: allows clients who are planning to advest
additional money in mutual fund over the next 13 months to
qualify for breakpoint
101. Limited Offering Transaction: Exempt transaction directed at
no more than 10 non-institutional offerees (and unlimited
institutional offerees) in a given 12 months. (2-69)
102. List 3 situations in which securities "given" constitute an offer
to sell.: (1) security given with (or as a bonus for) any purchase
of securities or other items,
(2) gift of assessable stock,
(3) warrant or right to purchase another security. (3-86)
103. Margin Account: must pay portion of purchase price,
borrowing remainder from B/D firm
104. Mutual Fund classes of shares are distinguished by:: sales
charge (front load, 12-b1 charges)
105. NASAA: North American Securities Administrators Association.
(1-3)
106. National Conference of Commissioners on Uniform State 120. Registration by Filing Application must contain:: - statement
Laws (NCCUSL): org that allows states to work cooperatively of eligibility
to reduce differences among state laws - name/address/form of org of issuer
107. Non issuer transactions: not directly/indirectly for the benefit - statement describing offering
of the issuer...issuer does not receive proceeds of the -copy of prospectus
transaction (ie trading listed on exchange) -non issuer's info (if applies)
108. Non-Persons: (1)minors, 121. Registration by filing (notification): - well established
(2) deceased individuals, companies
(3) the mentally incompetent (1-5) - financial requirements
- fed filed under act 1933 (will be listed on exchange)
109. Not an Agent: - represent issuer of exempt securities
- reg issuer under sec act of 1934 (with 500+ shareholders)
- does not effect on transactions and does not receive direct
- total net worth = 4 million+ or income of 2mill for at least 2 of
compensation
last 3 years
110. NOT IA: - banks/savings/trust companies
- 36 calendar months in business
- prof whose advice is incidental to doing their jobs (teacher,
- 4 mkt makers for issuer's sec
lawyer, accountant)
- underwriters commissions cannot > 10% of aggregate
- b/d that gives advice as part of normal business (no extra
offering price
commission)
-cannot failed to pay dividend on PREFERRED stock or default
- fed covered advisers
on any bond/LT lease
-IARs
- offering price of $5+
111. Notice Filing: Administrators can require documentation for the - usually not used anymore
record and a filing fee for federally covered securities. This *becomes effective same time as fed
includes all Investment Companies. (2-62)
122. Registration by Qualification: - any state, all types of
112. NOT securities: - "fixed" anything securities
- futures - fed already effective
- commodities - intrastate
- retirement plans (401k or keogh) * becomes effective only when determined by admin*
113. NSMIA: National Securities Markets Improvement Act of 1996. 123. Registration by Qualification's disclosure requirements are:: -
Eliminated redundancy in state and federal laws. (1-6) general data about issuer
114. An offer is made before a security's effective date (a - info on directors/officers
violation that subjects an agent to civil liability), but the sale - info on all holders of 10%+
is made in full accordance with the USA. Is the agent civilly - nonissuer info
liable for losses incurred by the investor?: Yes. (Although the - des of capitalization and long term debt
sale must occur in order for the agent to be liable, the - type/amount of securities, price, selling fees, underwriting
violation on the offer will expose the agent to liability.) (3-100) agreements
115. offer is not made in state when:: - bonafide newspaper is - cash proceeds to be received, purpose of them
circulated and NOT published in state - copy of every prospectus, letter, ad, legal opinion
-radio/tv program broadcasts in state but communication - balance sheet, profit/loss statement for each of last 3 yrs
originates in other state 124. Registration of Professionals become effective when?: at
116. Ponzi scheme: any returns received by investors comes from NOON on the 30th day after filing
the capital contributed by subsequent investors 125. Registration of Securities is effective for:: 1 year from its
117. recission: buying back from a customer a security that was effective day
sold unlawfully. The customer has 30 days to accept or reject 126. Requirements for IA and B/D: B/D: min net capital, bond, 3
a recission offer. (3-99) years of records
118. Registration by Coordination: - same offering is being
registered under Sec Act of 1933 IA: min financial requirements, bond, 5 years of records
- need $$ 127. Restrictions for a promissory note (commercial paper), draft,
- coordination with fed bill of exchange, or banker's acceptance to be exempted
*becomes effective same time as fed under the USA.: - must mature within 9 months
119. Registration by Coordination must be filed with:: - 3 copies of - be issued in denominations of at least $50,000
the latest prospectus filed with SEC - receive one of the highest 3 ratings available from a national
- copies of articles of incorporation ratings agency.
- underwriting agreements 128. Sale: any contract of sale, contract to sell, or disposition of a
- indenture relating to security security/interest in a security of value
- amendments of prospectus
129. Section 28(e) of Securities Act Exchange of 1934: recognizes
soft dollar arrangements as safe harbor; as long as: exercise
discretion, services assist the adviser, and value of services are
reasonable in relation to commission
130. Selling away: Unethical practice of conducting securities
transactions not recorded on the regular books or records of
the BD that an agent represents without notice. This would be
allowed if the transactions are suthorized in writing by the BD
prior to execution. (4-129)
131. Shadowing: B/D executes trade for own account after
executing a (substantial size) trade for a client, but before
client's trade is reported
132. soft dollar arrangements: An investment manager directs the
commission generated by a transaction towards a third party
or in-house party in exchange for services that are for the
benefit of the client but are not client directed. (4-147)
133. Soft Dollars: a means of paying brokerage firms for their
services through trade commissions
*must benefit its clients*
134. Solicitor: Any individual who refers potential clients to an
investment adviser for compensation. (1-8)
135. stock offering (offer/offer to sell): every attempt to dispose
of and every solicitation to buy a securtiy/interests in a
security of value
136. Stop Order: Used by administrator to deny effectiveness to, or
suspend/revoke the effectiveness of, a security's registration
statement. (1-4)
137. Submission requirements for a professional to register with
Administrator:: - application,
- consent to service of process,
- pay filing fees,
- post bond (if required),
- pass exam
138. Surety bond: covers costs of possible legal actions (B/D, IA,
Agent...NOT IAR)
bonds listed for as long as in business + 3 years after
withdrawal
139. Tenants in Common: - interest in account varies
- if 1 dies, share becomes part of estate
140. T/F: All ads must be filed except for fed covered securities:
TRUE
141. T/F: An agent has the flexibility to adjust the amount of a
client's order by a de minimis amount of less than 10% of
total shares purchased, if it is done in the best interest of the
client.: FALSE. (Unless the agent has discretionary authority, he
may not execute an order other than as specified as the client.)
(4-120)
142. T/F: an agent must always disclose the commission or
markup on a trade before the transaction is executed.:
FALSE. (If the markup is higher than normal due to special
circumstances, it must be disclosed before transaction.
Otherwise, it needn't be disclosed, but must appear on the
trade confirmation) (4-115)
143. T/F: an individual is not considered an agent if the individual
represents the issuer of effecting exempt transactions: TRUE
144. T/F: Anyone can change beneficiary of an account: FALSE:
only account owner can change beneficiary...NO exceptions
145. T/F: day of execution signals the existance of a contract
which by definition is a sale: TRUE
146. T/F: Giving third party authoriy to trade in an individual
account is valid if it is in writing: TRUE
147. T/F: If an agent is found culpable for an investor's loss, the
agent can be held responsible for treble (3x) damages.:
FALSE (this is a federal not state law, and only pertains to
insider trading anyway) (3-97)
148. T/F: If a person commits a non-securities related felony and
is thus suspended from registration in State A, he can move
to State B (where his crime is only a misdemeanor) and
achieve registration there.: FALSE (The Administrator must
consider the crime under the statutes of the state where it
occured, not his own). (3-93)
149. T/F: If a registrant does not know that a violation is
fraudulent, he cannot be criminally conviceted of fraud.:
TRUE (The fraud must be willful and the registrant must know
the activity is fraudulent). (3-100)
150. T/F: oral discretion is sufficient for 10 days: TRUE
151. T/F: The most balanced way for an agent to provide
information on a security to a client is to provide the full
prospectus (which will include risks as well as investment
potential), and highlight the most relevant points.: FALSE (It is
unethical for an agent to highlight or otherwise mark up a
prospectus.) (4-125)
152. Time period to appeal an Administrator order.: 60 days.
153. To whom does a de minimis provision (allowing an out-of-
state professional to engage with up to 5 local retail clients)
apply?: Investment Advisers and Investment Adviser
Representatives (1-27)
154. Transfer on Death (TOD)/Pay on Death (POD): - both
individual/joint accounts
- acct may be passed directly to named beneficiary with
showing death certificate
- may have more than 1 beneficiary with specified %
155. Under the USA, who automatically becomes registered when
a BD registration becomes effective?: any partner, officer, or
person of similar status or similar function. (1-41)
156. Under USA, an admin may:: - conduct investigations involving
B/D domiciled in other states
- conduct an investigation without proof of wrongdoing
- issue supeonas to individuals outside the state
157. Under what circumstances can an Administrator enforce a
subpeona that has been issued in another state?: Only if the
activities being investigated are illegal in the Administrator's
state. (3-91)
158. Under what conditions can an investment professional share
in client accounts (share in profits and losses)?: An agent may
do so with written approval from the BD and client. BDs, IAs,
and IARs are never permitted to share in the profits and losses
of client accounts. (4-130)
159. USA: Uniform Securities Act, model legislation for state
securities laws. (1-3)
160. What are 3 ways that one may legally sell a security?: (1)
registered issue
(2) exempt security and/or exempt transaction
(3) federally covered security
161. What are 3 ways to register a security?: filing, coordination,
qualification
162. What are the 4 broad powers that the Administrator has to
enforce and adminster the USA?: (1) make/amend/rescind
rules and orders,
(2) conduct investigations and issue subpoenas,
(3) issue cease and desist orders and seek injunctions,
(4) deny/suspend/cancel/revoke registrations and licenses.
163. What are the exceptions to the prohibition of performance
fees for investment advisory work?: Performance fees are
allowed BASED ON NET PERFORMANCE for contracts with:
(1) a registered investment company, or (2) any person with
$750K under the adviser's management or a net worth of at
least $1.5M. (4-141)
164. What are the limitations for advertising for an investment
adviser?: (1)May not include falsehoods,
(2) may not include testimonials,
(3) may not refer to past specific recommenations (unless
certain conditions are met),
(4) may not represent that a chart or formula alone can
determine what securities to trade. (4-137)
165. What are the requirements for an adviser to maintain client
funds?: (1) Administrator must not prohibit it, (2) Administrator
must be informed that adviser is holding funds in custody, (3)
the adviser must supply an account statement at least
quarterly. (4-145)
166. What are the requirements for a securities professional to
lend money to a client? To borrow from a client?: May
borrow from a BD or financial institution who loans funds in
the course of normal business. May lend only if a BD or
financial institution or to an affiliated party. (4-128)
167. What are the requirements for disclosing breakpoints to
clients?: An agent must notify the client if there is a sales
charge discount above a certain breakpoint, or if there is a
letter of intent feature that will reduce sales charges. (4-128)
168. What are the requirements to revoke a security's
registration?: (1) false application,
(2) fraudulent or inequitable offering,
(3) unreasonable fees,
(4) control person convicted of securities crime,
(5) subject to injunction,
(6) engaged in illegal business,
(7) subject to stop order of another state. (3-94)
169. What are the two primary types of conflict of interest that
must be disclosed to clients under the USA?: (1) if the adviser
expects to receive compensation for advice in addition to that
from the client, or (2) charging a client an advisory fee for
advice when the adviser expects to receive compensation for
executing the transaction. (4-136)
170. What can states require from Fed covered Securities?:
Notice filing
- to file notice, sales reports, consent to service of process**
- pay registration fee**
- investigate fraud
(**not for exchange securities)
171. What compensation may insurance agent receive from B/D in
exchange for referrals?: -Insurance referrals
only registered agents may receive $ compensation
172. What disclosures are required for an agency cross
transaction?: (1) that adviser will be receiving commissions
from both sides, (2) potential conflict of interest, (3) adviser
must furnish a statement of all total agency transaction and
compensation from them at least annually, (4) allows for
termination, (5) the adviser could not have recommended the
transaction to both parties. (4-140)
173. What does an investor have the right to recover from an
agent who engaged in an improper transaction? An IAR
providing improper advice?: Agent = ORIGINAL PURCHASE
PRICE + interest + legal costs - income
IAR = COST OF ADVICE + LOSSES INCURRED + interest + legal
costs - income . (3-99)
174. What happens if a buyer does not respond to a letter of
recision within the 30 day time period?: They forfeit the right
to a lawsuit. (3-98)
175. What happens if an investment advisor schedules to meet
with an existing client at a hotel out-of-state and invites them
to bring friends?: The out-of-state registration exemption is
lost. (1-27)
176. What happens to an agent if her employing broker dealer
has registration terminated?: the employeed agent's
registration is terminated as well. (1-18)
177. What info may issuer change by amending its registration
statement after it receives an effective date?: - number of
shares only
178. What information must be included in a written investment
advisory contract?: (1) services provided, (2) term of contract,
(3) fee and formula for computing it, (4) amount of prepaid
fees that are refunable on contract termination or non-
performance, (5) whether the contract grants discretionary
power, (6) no assignment without client consent. (4-138)
179. What is required for annual renewal of registrations for
professionals?: updated application and fee
180. What is the deadline for prospectus delivery under the
federal '33 Act? How soon may an Administrator require it?:
no later than the mailing of trade confirmation or actual
delivery of the security. Administrator can require delivery
prior to or concurrent with sale. (2-75)
181. What is the deadline to secure a properly executed margin
agreement when executing client transactions in a margin
account?: Must be received promptly after the initial
transaction in the account. (4-121)
182. what is the difference between a cease and desist order and
a stop order?: Cease and Desists: directed at persons,
Stop Orders: directed at applications for registration of
security
183. What is the difference between a registration cancellation
vs. a denial, suspension, or revocation?: A cancellation is
non-punitive. It results from death, dissolution, or mental
incompetency. (3-96)
184. What is the due date for an agent or adviser rep to deliver a
prospectus to a client?: No later than the due date of
confirmation of the transaction. (4-122)
185. What is the maximum fine for criminal offenses?: $5,000
186. What is the maximum frequence with which the
Administrator may require an issuer to file financial
statements?: quarterly
187. What is the maximum term of imprisonment to which an
offender can be sentenced under the USA?: 3 years.
188. What is the statute of limitations for civil provisions of the
USA?: 3 years from incident or 2 years from discovery (3-98)
189. What is the statute of limitations for criminal offenses under
the USA?: 5 yrs
190. What is the timeframe for a person to challenge the order of
an Administrator?: 60 days from order issuance. (3-90)
191. What is the time requirement to provide a hearing for a
suspension or revocation of registration?: 15 days
192. What is the typical net worth (or, alternatively, bond)
required of an Investment Advisor with discretionary
authority? Custody of funds?: $10,000 and $35,000 (1-30)
193. What limitations does the Administrator face in making and
amending rules?: - must make all rules publicly available
- cannot change the securities laws themselves. (3-90)
194. What materials do B/D's may need to file with Admin?: - any
prospectus
- pamphlet
- circular
- form letter
- ad
- sales literature
**may NOT require sales materials related to exempt
securities, exempt transactions, or fed securities
195. What parties may likely file a registration statement?: issuer
196. What requirements must be met for an Administrator for a
formal order to suspend registration?: (1) appropriate prior
notice,
(2) opportunity for hearing,
(3) providing findings of fact and conclusions of law. (3-92)
197. what test is used to determine if IA?: ABC Test
198. When can an adviser reveal the identity, affairs, or
investments of a client?: Only with consent from the client. (4-
137)
199. When can an agent claim that shares are no commission,
"no-load", or have "no sales charge"?: If the shares do not
have: (1) a front-end load, (2) a contingent deferred sales load
(CDSC), or (3) a Rule 12b-1 fee or service fee in excess of
0.25% NAV. (4-127)
200. When does registration by coordination become effective at
the state level?: At the same time the federal registration
becomes effective
201. When does the registration of professionals EXPIRE?:
annually on December 31st
202. When is a registration withdrawl effective?: 30 days after
received by administrator. (3-95)
203. When is there no bond requirement for a B/D?: there is no
bond requirement if b/d does not have custody or
discretionary authority
204. When may an Administrator stipulate a surety bond for a
BD? For an IA?: If either has custody of, or discretionary
authority over, the clients' funds or securities and does not
meet state net capital/net worth requirements. (1-14)
205. When may an agent split commissions, and when must it be
disclosed to a client?: Split commissions are only allowed
between 2 agents at the same BD (or BDs under common
control). Disclosure is only necessary if it will increase the
charge to the client. (4-130)
206. When may a registration statement be withdrawn?: Not until
1 year after effective date IF any securities of the same class
are outstanding, and then only with the approval of the
Administrator. (2-74)
207. When might an Administrator require that a security be
placed in escrow?: (1) issued within past 3 years,
(2) at a price substantially different from offering price,
OR
(3) to any person for a consideration other than cash.
208. which persons becomes automatically registered as an IAR when an IA 's registration becomes effective?: - only those officers,
directors, and partners with MANAGEMENT responsibilities
209. Who is exempt from B/D definition?: agents, issuers, and persons conducting business exclusively with institutional buyers are all
exempt from definition
210. Who is qualified as a "person" under the USA?: - legal entities
- corporations
- partnerships
- assoc. trusts
- unincorporated orgs
- gov't bodies and their political subdivisions
211. Who is required to give bond?: B/D, IA, Agent...

NOT IAR***
212. Who must notify the Administrator if an agent is fired from a broker dealer? If he leaves to join another broker dealer?: - agent
and B/D
- agent, B/D, new B/D
213. withdrawal from registration (for B/D)becomes effective when:: Admin determines which there is an action for revocation of the firm's
license pending at the time the app is filed
214. Within what time period will a request for a hearing be granted if a professional disputes a stop order?: 15 days. (1-4)
215. Would speculative investing in an account with an objective of income only be acceptable?: NO. regardless of account size,
speculative investing would never be appropriate for an account with an objective of income only
216. Wrap Fee required disclosures: (1) amount charged,
(2) negotiability of fees,
(3) services provided,
(4) nature of additional fees,
(5) *statement that the program may cost more that purchasing services separately.* (1-31)