Ch2. Uniform Securities Act Show
A model law (not the actual law of any state, but acts as a blueprint or template that each state may customize) Ch2. NCCUSL NASAA NSMIA National Conference of Commissioners on Uniform State Laws North American Securities Administrators Association National Securities Markets Improvement Act: to reduce duplication of state and federal securities regulation. Ch2. Notice Filing The process in which information that is filed with the SEC is also filed or shared with the Administrator. Investment advisors managing $110 million or more, generally, must register with the SEC. Ch2. What is not a security? 1. Fixed
annuity Ch2. When is an investment contract a security? The Howey case (test of whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of
others) Ch2. Person Defined Any legal person. Ch2. Agent Defined Any individual who represents a broker-dealer or an issuer in effecting transactions in securities. An individual is not considered an agent when she represents the issuer of exempt securities (U.S. govt securities, securities of foreign govts, municipal notes and bonds, securities of banks, trust companies, and savings institutions) An individual is not considered an agent when involved in exempt transactions: private placements, etc. Ch.1 Canadian Broker-Dealers Allows limited registration on the conditions that: Must file: NAFTA, however, did not extend limited registration status to Mexican broker-dealers Ch.1 Investment Adviser Defined Any person who, for compensation, engages in the business of advising others as to the value of securities or the advisability of purchasing or selling securities. 1. Provides advice Exclusions: Banks, publishers of newspapers, etc. The investment adviser is a business. Ch.1 Investment Adviser Representative Any partner, officer, director, or other individual associated with an investment advisor The IAR are the individual employees who work for the business Ch.2 Offer defined An offer is said to be made in a particular state, whether or not either party (agent or customer) is present in that state at the time: 1. When the offer originates from that state Exclusion: If more than two-thirds of a magazines/paper's circulation is outside North Dakota, the advertisement is not considered an offer in any state according to the USA The offer occurs on the day contact is first made; the sale occurs when the trade is executed. Ch.2 Gifts Nonassessable: Good, standard gift. Ch.2 Suspension/Postponing registration The applicant and the employing broker-dealer or investment adviser must be notified of the action and the reasons for the action, and that a hearing will be scheduled within 15 days of a request. Withdrawals from registration become effective 30 days after the filing of an application to withdraw. The Administrator has the ability to institute proceedings for one year following the effective date of withdrawal. Ch.3 Consent to Service of Process A document that irrevocably appoints the Administrator as the registered person's attorney for the service of legal papers. The filing of the consent is a convenience for customers with complaints that they wish to pursue in court. A client may file papers with the Administrator of State A or B. Ch.3 Surety bond Obligation posted by a registrant to cover the costs of possible legal action arising from violations of the Uniform Securities Act Needs to be maintained for as long as the registrant is in business and for three years after withdrawal. Ch.3 Advertisements If the transaction or security discussed in these materials is exempt, they do not need to be filed with the Administrator. Advertising and sales literature that refer to federal covered securities also do NOT need to be filed. Ch.3 Effective Date and Expiration Registration becomes effective at noon on the 30th day after filing the application Ch.3 Postregistration Requirements for Broker-Dealers The Administrator may require broker-dealers to maintain at least a specified minimum amount of net capital Registered broker-dealers must generate and retain records as required by the Administrator for three years Ch.3 Registration of Agents When an agent moves from one broker-dealer to another 1. The agent The registration of a broker-dealer constitutes the automatic registration of a partner officer or director as an agent if they were with the firm at the time of registration. Ch.3 De Minimis Exemption for Agents Two situations in which agents may conduct business with an existing client without being registered in the state 1. If an agent's application is pending in a state, the agent may engage in transactions for up to 60 days with an existing client 2. Allows an agent to accept orders from an existing client that are placed while the client is visiting another state Ch.3 Customer Accounts Joint Account: If the transaction requires a signature, then all joint owners must sign it. Any checks from the account must be made payable to all the joint owners. Only one account number and only one social security number will be used for tax reporting. TOD Account: Copy of the death certificate. Margin Account: A client with a cash account must pay for all the securities that she purchased by settlement date. In contrast, a client with a margin account only needs to pay a portion of the purchase price for the securities that she buys, borrowing the remainder from the brokerage firm. Ch.3 Customer Orders Every new account must be approved by a supervisor before the first order for that account may be entered. A supervisor must review all client orders after execution promptly. Ch.3 Exemptions from Registration Investment adviser is not required to register with the Administrator if: 1. The person has no place of business in the state AND the person's only clients are investment companies with at least $1,000,000 of assets 2. The person has no place of business in the state AND the person does not direct communications to more than five noninstitutional clients in the state within 12 consecutive months Both require NO place of business Federal registrations are
exempt from registering with the states: Ch.3 Form ADV Both federally registered advisers and state registered advisers must file Form ADV which asks detailed questions about the adviser's business and provide prospective clients with information about the adviser Ch.3 Custody Investment adviser that has custody of client funds or securities must: Funds should return them to the client within three business days; receiving a check must be forwarded within one day to avoid having custody. Ch.3 Custody, Minimum Financial Requirements Must maintain a minimum net worth of $35,000 at all times. Discretionary authority must maintain $10,000. Adviser requiring client to pay fees of $500 or more at least six months in advance must maintain positive net worth at all times. Adviser is required only to satisfy the minimum net worth requirements of the state in which its principal office is located. Records must be preserved for a period of three years by broker dealers and five years by investment advisers. Ch.3 Brochure Rule Requires the adviser give each client a written disclosure document at a specific time. Clients must receive the adviser's brochure or Form ADV Part II at least 48 hours before they sign a contract with the adviser or at the time the account is opened. Clients who do not receive this disclosure document in advance must be given five business days to cancel the contract without penalty. Ch.4 General Registration Provisions The first step in registering a security at the state level is the filing of a registration statement with the Administrator. Every registration statement must specify: Any document filed in the last 5 years may be incorporated into the registration statement by reference. Prospectuses must be furnished no later than the due date of confirmation of the transaction. Ch.4 Effective Date of Registration The registration statement remains in force for one year from its effective date. A state registration statement expires one year after it becomes effective and the securities covered by it are no longer registered. The issuer may amend its registration statement after the effective date to increase the number of shares being sold. Ch.4 Registration by Filing Also called registration by notification, is used by well-established corporations meeting stringent financial requirements. Ch.4 Registration by Coordination Must be filed along with three copies of the latest prospectus filed with the SEC. The difference between registration by filing and registration by coordination are that under coordination, the issuer might be required to provide extensive additional documentation if the Administrator so requests. Registration by coordination becomes effective when the federal registration statement becomes effective, provided that: The minimum cooling off period for federal registration is 20 days, while state registrations require a 10-ay cooling-off period. Ch.4 Registration by Qualification May be used in any state for all types of securities Used when the federal registration has already gone into effect or when there is no federal registration The unique feature of registration by qualification is that it becomes effective only when determined by the Administrator SEC Rule 147 covers securities sold within the borders of a single state, these securities are exempt from registering with the SEC. Used if company has 80% of its assets are located within one state from which it also derives 80% of its gross revenues. 80% of its proceeds from the offering to expand its facilities within that state. 100% of the purchasers of the Rule 147 offering must have their principal residence within the state. Ch.4 Denial, Suspension, and Revocation of Registration Administrator may not institute a stop order proceeding against an effective registration statement on the basis of facts that were known to the Administrator when the registration statement became effective unless the proceedings are instituted within 30 days. The registrant must be notified and may submit a written request for a hearing, which must be held within 15 days of the request. Ch.4 Exempt Securities Solicitations of unregistered, exempt securities are allowed, but solicitations of unregistered, nonexempt securities are prohibited Which records must be retained in a state registered investment adviser's principal office quizlet?Which records MUST be retained in a state-registered investment adviser's principal office? customer securities positions (account statements). Under NASAA recordkeeping rules for investment advisers, any advertisement, circular or other communication must be retained: 2 or more persons must be retained for 5 years.
Which of the following orders must be retained as a record by brokerWhich of the following orders must be retained as a record by broker-dealers? All orders placed by customers with a broker dealer, whether executed, on executed or canceled, must be retained as a record by the broker-dealer. The retention. For these is set at three (3) years.
Which of the following may be required to be filed with the Administrator quizlet?To maintain registration as a broker-dealer or investment adviser, which of the following may be required to be filed with the Administrator? The best answer is D. The Administrator can require the filing of advertising, sales literature, pamphlets, prospectuses, form letters, etc. used by any registrant.
Which of the following are included in the Form ADV filed to register as an investment adviser with the SEC?The Form ADV Part 1 filed with the SEC includes the officers of the firm, the States in which the firm is registered, and if the firm is a partnership, a schedule of the partners' names is included; while if the firm is a stock company (privately held) a schedule of the shareholders in included.
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Which records must be retained in a state registered investment advisers principal office quizlet?
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