Note Cards 5.txt

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  1. If representatives of a federally covered adviser terminate their employment, who is required to inform the state administrator?
    Because the adviser is federally covered, the adviser has no obligation to inform the state administrator. The representatives, however, are required to inform the administrator.
  2. An agent tells a customer that since dividends are reinvested in the fund, the investment can always be sold at a profit. The statement is
    This is a misleading, unethical and fraudulent statement and a felony violation under the Act.
  3. Stout Securities is making efforts to transition the entire brokerage office from a paper-based recordkeeping system to a paperless system. Copies of all of the following must be maintained in an accessible format acceptable to the state administrator
    account correspondence, memoranda, papers, books, and other records required by the Act
  4. Under the USA, when do registrations of persons become effective?
    Registrations under the Uniform Securities Act become effective 45 days from the filing date. If an amendment to the application is filed, the effective date is 45 days from the filing date of the amendment.
  5. Which of the following intentional acts by an agent are deemed fraudulent? I. Sharing in the profits with a customer to assure him against loss; II. Representing a bond yield as 7% when the actual yield is .7%; III. Paying an investment adviser a percentage of the commission on a client's account.
    These are all fraudulent, intentional acts. The sharing of commissions with an investment adviser would be allowable if disclosed to the customer, but the issue of disclosure was not presented in the question.
  6. Community Investors is a subsidiary of Community National Bank. Community Investors operates in many of CNB’s branch facilities. Which of the following is true regarding Community Investors?  I. The broker/dealer must have a separate entrance and distinct signage. II. The broker/dealer must operate in its own separate space. III. A Chinese wall prevents bank personnel from communicating sensitive information to broker/dealer personnel. IV. Community Investors’ space must be clearly identified as an area where securities business takes place.
    The broker/dealer must operate in its own separate space, which must be identified as a place where securities activity takes place. There is no requirement for the broker/dealer to have its own entrance. The Chinese wall rule applies to the investment banking department of a broker/dealer, not to commercial banking affiliates.
  7. True or False: A Keogh Plan is a security
    A Keogh plan is not a security, although the investments held under the plan are almost always securities. Multilevel marketing schemes have been recently defined as securities for investor protection under the Act due to past abuses in the selling of the interests.
  8. A federally covered investment company would like to sell their mutual fund share in a state. They would most likely register the offering by what method?
    Registration by filing is appropriate in this situation, along with any required fee
  9. An investment adviser sells a security from inventory to a customer. What must be done prior?
    An investment adviser may not execute trades from inventory (principal trades) with a customer unless it has prior written consent from that customer
  10. When an agent terminates an association with a broker/dealer
    both the agent and the firm must promptly notify the Administrator.
  11. Advisers with assets in excess of what sum must register with the SEC as federally registered advisers?
    Advisers with assets between $100 million and $110 million may register with the SEC; however, advisers with assets of more than $110 million are required to register with the SEC and are known as federally registered advisers.
  12. In order for an Administrator to impose a penalty on an agent, the Administrator must
    The Administrator must give the agent the opportunity for a hearing within 15 days of the request.
  13. An adviser is registered with the SEC. Which of the following is true? I. The adviser may need to pay a state filing fee. II. The adviser may need to submit to the state all documents given to the SEC. III. If the adviser is registered with the SEC, then filing fees or forms with the state is not required. IV. The adviser is immune to sanctioning authority of the administrator.
    I and II: Although federally covered advisers are not required to register with the state, the state may require advisers registered with the SEC to file with the state a copy of any documents filed with the SEC, file consent to service of process, and pay a state filing fee. Federally covered advisers are subject to the sanctioning authority of the state administrator.
  14. Any adviser that wants to exercise discretionary authority over a client’s account must do which of the following? I. Have written authorization from the client; II. Have approval to exercise such control by the administrator; III. File a Form ADV with the Securities Administrator; IV. Post a bond in the amount of the client’s account value.
    I and III: Any investment adviser that wishes to exercise discretionary authority over a client’s account must have authorization from the owner of that account, approval for such authority from the broker/dealer (not the administrator), and file a Form ADV for the account with the Securities Administrator.
  15. An appeal of a State Administrator's decision must be filed
    An appeal of an Administrator's decision needs to be filed in the appropriate court within 60 days of the order.
  16. The maximum fine under the Uniform Securities Act (USA) for criminal violations is
  17. Which of the following is NOT considered a security?

    Merchandising Marketing Scheme
    Keogh participation
    An endowment policy
    Commodity Options Contract
    Fixed life insurance contracts, including endowment policies, are not considered securities. Although a Keogh plan is not security, Keogh participation is considered a security.
  18. When an investment adviser representative begins or terminates an association with a state registered investment adviser, what action (if any) is required?
    The investment adviser must notify the administrator.

    The representative’s registration is effective only while he or she is employed by an investment adviser. When an investment adviser representative begins or terminates an association with a state registered investment adviser, the investment adviser must promptly notify the administrator. This differs from the requirements for a broker/dealer and agent whereby both are required to notify the administrator.
  19. Any person in violation of the anti-fraud provisions under the Act may be subject to
    Persons in violation of anti-fraud provisions are liable for civil and criminal penalties, as well as injunctions by the courts and administrative sanctions.
  20. ABC broker/dealer holds custody of several of their customers’ securities. If the state has no rule prohibiting such custody what is ABC’s obligation under the USA?
    If the state does not have rules against broker/dealer holding custody of customers securities all the broker/dealer has to do is inform the administrator that it has custody of customer assets.
  21. Alvetech Inc. has an initial public offering they wish to offer for sale in several states. They can register the security by I. Filing; II. Coordination; III. Qualification.
    They can only register by coordination. Registration by filing is reserved for seasoned companies only. An initial public offering cannot be defined as a seasoned company issue. Registration by qualification does not apply to IPOs that must be registered with the SEC.
  22. Where must an agent be registered?
    In each state in which he effects securities transactions
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Note Cards 5.txt
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