Series 63

if information with the administrator changes a BD must give notification how soon?

ASAP (Promptly)

• no exact time frame

when a agent leaves a firm and goes to a different BD who must notify the administrator

the old BD, new BD, and the agent must all notify the administrator

• Supervisor does not

what does easily accessible mean exactly

in the BDs principal office

when a BD passes the exam to register in the state when does it become effective

Noon on the 30th day

withdrawal of registration of a BD

Effective on the 30th day

Disclosure of bankruptcies within how many years when registering as an agent

10 years

when is a surety bond required when registering as an agent

when exercising discretion

• AAA

  • Asset

  • Amount

  • Action

4 people that are not IAs

Lawyer, Accountant, Teacher, Engineer

• As long as the advice given is incidental to doing their job

• If any of these recieve payment for the advice they lose the exemption

If an IAR worked for a federal covered IA when do they need to register

only where the IAR maintains a place of business

when an IAR leaves their job who notifies the administrator

the representative

For pension plan companies how much AUM is needed to be considered a federal covered adviser

$200 million

BD offers a wrap fee program is the person soliciting it exempt from being an IA?

when a wrap fee is being offered an IA exclusion is lost

When it comes to investment research when does it make a BD register as an IA?

whenever there is a fee for selling investment research no matter who its sold to

when an IA registers with the state which form and which form when they register federally

ADV part 1A for Federal (Federal is always first)

ADV part 1B for State

minimum net worth/ surety bond for an IAR for discretionary and custody

discretionary - 10k

Custody - 35k

• IARs have no financial requirement only the IA does (the firm)

Form ADV part 2B

Brochure supplement

If an insurance company is registered to do business in the state what securities are exempt? what isnt?

Stocks and Bonds are exempt

Variable annuities and variable life insurance are not exempt

Federal covered securities

listed on major exchange

investment companies (mutual fund, UIT)

Private placement reg D

Preorganization certificates are only limited to how many investors to be exempt?

10 subscribers individuals or institutions

All Exempt transactions

Institutional clients (mutual fund, insurance companies)

transactions by executors, sheriff, marshals, receivers, trustees, guardians, conservators

Primary offerings when no commission

Unsolicited transactions

Nonissuer

Bankruptcy trustee

Preorganization if less than 10 investors with no commission

All exempt securities

Gov securities

Can an agent reccomend a security that is unlisted to a resident of another state?

NO violates USA

When must a BD register in the state theyre doing business

whenever it involves individual investors

• does not matter if they are high net worth

registration under qualification

good for 1 year from effective date, unless issuer still has unsold shares if so can be extended

can be amended to increase # of shares as long as everything stays the same

If a client dies during a dispute what happens

the executor of state takes over unless there is a joint survivor account the spouse does

what is not a sale

dividend or split

stock from merger or consolidation

pledge/loan

gift of non assessable stock

bona fide gift of securities

Preliminary agreements between issuers and underwriters

for an administrator to have jurisdiction over a newspaper in their state how much has to remain in the state

at least 1/3rd

• No state has jurisdiction if more than 2/3rds are circulation outside the publishing state

who issues injunctions

Courts

• NOT administrators

Qualified client

Net worth of more than $2.2 million

or have at least 1.1$ AUM

Procedure for opening a margin account

firm must be given a properly executed margin account agreement promptly after the initial transaction in the account

when must a margin account agreement be recieved

promptly AFTER the first trade

Affinity fraud

pretending to be a member of a group to spread information

Targeting specific groups

3 fees that are not included in brokerage account fee disclosure templates

Commissions

markup markdowns

Advisory fees for firms also registered as IAs

Allowed third party Guarantees

Interest and principal repayment on debt

dividends on equity

Allowable IA compensation arrangements

Flat fees and fee based on total portfolio value

Disclosure of compensation in advertising include?

cash

directed brokerage

retainer fees

(NOT SALARY OR BONUSES)

Performance Guarantee

Urgency to act quickly on something happening to invest

Can IA shares in profits and losses with written consent?

No but BDs can with written consent from all parties

An agent cannot use the term “no load” for a mutual fund if?

12b-1 charge in excess of 0.25%

Service fee in excess of .25 %

Cannot have a front end OR back end load

Matched orders

BDs buy and sell between each other to drive up trading volume to make it look better

• (Market manipulation like wash sale)

Covered accounts

Individual deposit accounts ( one where the individual deposits funds)

if an IA maintains custody of securities how often must a statement be sent to the customer? And how often must the adviser be audited?

Quarterly (3 months)

Adviser must be audited annually

Who is exempt from delivery of the advisers brochure from an IA

Registered investment companies open or closed end

when must an adviser deliver the brochure and how long is the penalty free period if the brochure is not delivered in time?

must be delivered 48 hours prior to entering the contract

5 day penalty free period if the brochure is not delivered

For private placements how many noninstitutional investors can be solicited within how long?

10 in 12 months

(Unlimited institutional)

IAs with less than $100 register with who and IAs with $110 million register with who?

less than $100 million - State only

$110 milion - SEC

$100 - $110 - choice to pick

who never has to register as a BD

agents

issuers

banks

IA is exempt from registration making recommendations in a state it doesnt do business if its clients are?

Banks

Insurance companies

Registered investment companies

other IAs

when you pass the 63 when can you begin soliciting brokerage clients?

when informed by your BD

a BD’s net capital requirement always follows who’s requirement the state or the SEC?

If the BD is SEC registered then it follows that requirement the states cannot require more stringent requirements

• (Assuming the firm is SEC registered)

Injunctions are issued by who?

courts

• NOT THE ADMINISTRATOR

what disclosure materials of an IA does the administrator check?

the brochure and communications with the public

• seminars and advertising

Rescission agreement

the byer recovers the purchase price and interest minus income received on the security

• used when a unregistered nonexempt security sold by mistake

Someone representing an issuer in effecting exempt transactions. Agent or not?

Not an agent

who can have custody?

BDs or IAs (never the individual)

Can the administrator require sworn oaths?

NO

which part of the margin agreement includes the interest rate and how its computed?

The credit agreement

what transactions are exempt from state registration

Isolated nonissuer transaction

administrator of an estate

who is the only person that can share in profits and losses with a client and how can it be done?

only Agents (Not BDs, IAs, IARs)

• Agents has customers AND employers written authorization

it is unethical to compare a money market mutual fund to what?

A savings account

when is a disclosure brochure of an IA not required to be delivered

if the client is a registered investment company

if the advisory service is impersonal and costs less than $500

what must a BD obtain to shares in profits and losses with a client?

joint account

Written approval from client and supervisor

How can two agents share/split commissions

registered in the same state

work for same BD/ affiliated BD

If a BD loses their license what happens to the agents licenses?

they also lose theirs and cannot continue business

For a federal IA who do they register with

No one since they are federally covered

For a IAR of a federally covered IA where do you have to register

only in the home state of the IA or in the state in which you have a place of business

Are securities bonuses counted as sales?

Securities given as a bonus ARE considered sales

if an agent takes an order must they have a place of business in that state?

must always have a place of business in the state they are taking the order from

BDs have net worth or net capital requirements from the SEC or the State?

Net capital from the SEC

State registered IAs have net worth or net capital requirements set by the SEC or state?

net worth requirements of the principal office state

the De minis rule is how many non institutional investors and who does it apply to?

5 non institutional investors and ONLY applies to state IAs

if you work for an issuer and receive compensation for the sale who do you register with?

register with the issuer and lose the exempt transaction status

if a firm is taken over and becomes a succesor are the accounts automatically transfered to the mother company?

no written consent must be given by the clients

2 cases for the brochure exemption rule

Impersonal advisory services less than $500 annually

Registered investment companies

• (NOT BANKS OR INSURANCE COMPANIES)

Who can file a civil suit against a BD who has committed a violation?

The aggravated purchaser

• NOT THE ADMIN

If using disk memory what must be required?

the information cannot be altered and it is WORM

• Write Once, Read Many

what does it mean when an agent has his license enjoined

agent is pending results of a hearing and is prohibited from acting as an agent

who corrects errors made by agents

The firm

• Never the agent

preorganization subscription requirements to be an exempt transaction

no more than 10 subscribers

no payment may be made by any subscriber

no commission may be paid to anyone for soliciting potential subscribers

• (It CAN be advertised)

Advisory contract components

Method of fee computation

be in writing

describe any provisions for a refund in the event of early contract termination

when is a new issue allowed to be valid for more than one year from its effective date?

if there is unsold securities from the issue

Safe harbor services permitted under section 28e 1934

clearance and settlement provided by the BD

Software

Research

counseling from BDs for execution strategies

seminar fees

Safe harbors not permitted

office equipment

hardware

travel expenses

if asked which transactions are exempt from sales literature and advtertising filing requirements. What are you looking for?

Exempt transactions

are warrant or rights when exercised considered sales?

Only when exercises they are considered sales

In order for an agent to share in profits and losses with a client who do they need authorization from

Written authorization from the client and the BD (Not the supervisor)

• IAs may never share in profits and losses

an IA has the option of registering with the SEC regardless of the amount under AUM if?

it is required to register in 15 or more states

if a partner, officer, or director of a BD who is not directly involved in securities or supervising agents are they agents?

they are not agents. The automatic registration of these people only apply to those that are involved

may fingerprints be required by a person registering as an agent

NO fingerprints are not required

private placements exempt or not exempt security

exempt transaction not exempt security

• exempt transaction if made to no more than 10 retail in 12 month period

An insurance company issuing stock is exempt if what?

the insurance company is authorized to do business in the state

Covered account means?

the ability of the customer to move funds out of the account on multiple occasions

what are the 3 things a BD needs to provide to the admin for a new issue

amount of shares

Articles of incorporation

Financials

when it comes to commingling securities when is it a violation?

When securities are comingled with the firm securities

• Comingling customers securities are allowed

registration is used in conjunction with which act?

Securities act of 1933

if an agent executing trades off the books of the BD what must happen?

The agent must register as a BD

what must a successor firm must do when registering

the successor firms registration will be effective for the unexpired portion of the year

• does not need to be in existence prior to filing

• does not need to submit a filing fee with registration

What does Inspectorial powers of the admin mean?

the power to subpoena records within and outside the state

a company conducting an IPO how long to make prospectus available for OTC, adittional, and stock exchange

OTC - 90 days

Adittional - 40 days

Stock exchange - 25 days