Ch 3: State Regulations Governing Broker-Dealers and Agents

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dundane
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Ch 3: State Regulations Governing Broker-Dealers and Agents
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2014-08-16 10:36:37
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Ch 3
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  1. Is a firm that has an office in a state, but only deals with institutional clients in the state, considered a BD?
    Yes, because the firm established an office in the state.
  2. Is a bank whose trust department occasionally executes securities transactions considered a BD?
    No. Banks are excluded from the BD definition.
  3. If a corporation raises capital by selling new shares of its stock to the public, is it considered a BD?
    No. The corporation is an issuer and issuers are excluded from the BD definition.
  4. Is a firm with no office in a state that only deals with institutional clients in the state considered a BD?
    No. The firm is excluded from the BD definition.
  5. Is an individual who represents a BD in the sale of Treasury bonds considered an agent?
    Yes, since anyone representing a BD in the sale of securities is an agent.
  6. Is a sales assistant for a BD who accepts unsolicited orders from clients considered an agent?
    Yes, since anyone representing a BD in the sale of securities is an agent.
  7. Is an individual who represents a BD in the sale of municipal bond considered an agent?
    Yes, since anyone representing a BD in the sale of securities is an agent.
  8. Is an individual who represents a BD in the sale of a private placement considered an agent?
    Yes, since anyone representing a BD in the sale of securities is an agent.
  9. Is an individual who represents a BD in the sale of a bank's stock considered an agent?
    Yes, since anyone representing a BD in the sale of securities is an agent.
  10. Is an individual who represents a BD in the sale of stock to a bank considered an agent?
    Yes, since anyone representing a BD in the sale of securities is an agent.
  11. True or False: A Consent to Service of Process is an example of an exculpatory clause.
    False. Exculpatory clauses are waivers absolving agents from wrongdoing. The waivers are null and void under the USA.
  12. True or False: A Consent to Service of Process must be filed by BDs, but not their agents.
    False. A Consent to Service of Process is required of all registrants.
  13. BD records must be kept for at least ____ years.
    3
  14. True or False: An agent whose client moves to a new state may not contact the client until registered in the new state.
    False. The agent may engage in transactions with the client for 60 days if registration is pending in the new state.
  15. May an agent whose client is visiting another state sell securities to the client without being registered in the state?
    Yes, provided the client is in the state temporarily.
  16. True or False: Canadian agents are not permitted to effect trades with existing Canadian clients temporarily in the U.S.
    False. Provided the relationship with the client existed prior to entering the U.S., trades may be effected.
  17. A BD located and licensed in Canada may contact what types of individuals in the U.S.?
    Existing clients who are temporarily in the U.S.
  18. In state law, individuals representing BDs in effecting securities transactions are referred to as ________.
    agents
  19. True or False: In state law, individuals representing issuers in effecting securities trades are ALWAYS deemed agents.
    False. Individuals are not deemed agents if representing issuers of exempt securities or effecting exempt transactions.
  20. List some of the exclusions from the definition of a BD.
    Agent, issuer, bank, or a BD with no office in the state that only deals with institutions or its existing clients
  21. A _________ bond is posted to cover the potential costs of legal action taken against certain persons.
    surety
  22. May an agent continue to do business in a state if his BD has gone out of business?
    No. An agent's registration is only in effect while associated with a BD or issuer.
  23. When an agent ends her association with a BD, who must notify the Administrator?
    Both the agent and the BD
  24. If a BD is not registered in a state, may an agent of the BD do business in the state without being registered there?
    Yes, if the agent is dealing with an existing client that is temporarily in the state.
  25. If a client moves to a new state, may the agent continue to do business while applying for registration in the state?
    Yes, as long as the agent is registered in at least one other state and is not subject to disqualification.
  26. A client of a Canadian BD is visiting the U.S. May the agent do business with her without registering in the state?
    Yes. Since she is an existing client of the Canadian BD, business may continue in the state.
  27. May an agent of a BD located in Mexico do business with a client in the U.S. without registering in the state?
    No. BDs of Mexico are required to register in the U.S. to effect securities transactions in a state.
  28. Does the de minimis exemption apply to BDs that have no place of business in a state?
    No. The de minimis exemption only applies to IAs and IARs.
  29. What is the purpose of a Consent to Service of Process?
    To appoint the Administrator as the applicant's attorney to receive and process any non-criminal legal complaints
  30. Who must sign a Consent to Service of Process?
    Any issuer, BD, IA, IAR, or agent initially registering to engage in business within a state
  31. Must the Consent to Service of Process be renewed each year?
    No. It is only required at initial registration.
  32. State registration remains in effect for ___ year(s).
    1 year
  33. State registration expires annually on ______________.
    December 31
  34. When does state registration become effective?
    At noon on the 30th day after filing an application, provided there are no proceedings pending
  35. If a BD is registered with the SEC, is registration required in any state in which it intends to do business?
    Yes. There are no exemptions from registration in the state as a BD.
  36. True or False: If a BD registers in a state on March 3, it must pay a registration fee for the full year.
    True
  37. If a firm meets the BD definition in the state, are there any exemptions from registration under the USA?
    No. Firms that meet the BD definition are required to register in the state.
  38. Is there an exemption for agents conducting business in a state? If so, what are the guidelines?
    Yes, no place of business in state and a client visits the state or existing client moves to the state (regist. pending)
  39. The USA refers to an individual who represents a BD in the sale of securities as an ________.
    agent
  40. If the Administrator requires an IA, BD, or agent to post a bond, is a deposit of cash or securities acceptable?
    Yes. However, the Administrator determines the amount and types of securities that are appropriate.
  41. A BD must maintain its books and records for a minimum of ____ years.
    3 years
  42. If a registrant wishes to withdraw her registration, when does the withdrawal become effective?
    30 days after filing the withdrawal request with the Administrator, provided there is no action pending
  43. What is a consent to service of process?
    A document appointing the Administrator as attorney for any non-criminal legal complaints issued against a registrant
  44. Identify the acronym: NAFTA
    North American Free Trade Agreement
  45. True or False: The USA requires all employees of a BD to register.
    False. Only those representing a BD in effecting transactions (as an agent) must register.
  46. Can a BD punish one of its agents for responding to a subpoena?
    No. This is a prohibited action.
  47. A registration withdrawal is effective ____ days after filing.
    30 days
  48. 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?
    No. Registration is not required since the client is an existing client who is temporarily in Florida.
  49. If an agent has applied for registration, but has not yet heard back from the Administrator, what may she sell?
    The agent is not permitted to sell securities. If she were properly licensed, she could sell life insurance or fixed annuities.
  50. True or False: An agent may sell limited partnerships if he is not yet registered with the Administrator.
    False. Limited partnerships are securities and an individual must be properly registered to sell them.
  51. True or False: An agent may sell fixed annuities if she is not yet registered with the Administrator.
    True. Since fixed annuities are not securities, registration with the Administrator would not be required.
  52. An underwriter would most likely be registered as a _____________.
    broker-dealer
  53. True or False: A person being compensated for providing clients with advice about securities is a broker-dealer.
    False. This person is considered an investment adviser.
  54. If a firm wants to register as both a BD and an IA, with whom would it register?
    With the Administrator in the state in which its office is located and with the SEC
  55. True or False: An employee who is hired to assist in selling IPO shares is required to be registered.
    True
  56. If a person works for a federally chartered bank, is he required to register with the SEC or a state Administrator?
    No. Only non-clerical employees of broker-dealers and investment advisers are required to register.
  57. True or False: On Form U4, a person must disclose any aliases or previously used names.
    True. An alias or previously used name could simply include a person's maiden name.
  58. True or False: A BD's Firm Element Continuing Education program offers employees both job and product-related training.
    True
  59. To apply for a securities license, a person must file Form ___ with FINRA.
    U4
  60. True or False: Under the USA, a Canadian BD may solicit Canadian clients to open up an account while they're in the U.S.
    False. Canadian BDs may service existing accounts of Canadians who are in the U.S., but cannot open new accounts.
  61. Is a broker-dealer required to publicize its recommendations before disclosing them to clients?
    No. Recommendations are not required to be made public.
  62. Is a bank holding company that occasionally executes securities transactions considered a BD?
    Yes. Under the USA, bank holding companies are not excluded from the BD definition.
  63. True or False: BDs must file retail communication with the Administrator.
    True
  64. True or False: A partner, officer, or director of a BD is always considered an agent of the BD.
    False. A partner, officer, or director is deemed an agent of a BD if she is involved in the purchase/sale of securities.

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