what is a security
paper traded for value or profit/ interest through a third party
what aren't securities
fixed insurances
futures (commodities) contracts
prospectus
retirement plan
Securites Act of 1933
seeks to provide full and fair disclosure of new issues through the use of a prospectus.
Regulates the primary market
Securities Exchange Act of 1934
for the secondary market
prevents lying, cheating, fraud, stealing
Remember SCAM
S ec (created by the 34 act )
C redit
A nti fraud provision
M anipulation (fictitious trading, fictitious account)
Insider trading enforcement act of 1986
part of the 34 act includes the tippers and tepees
Civil Penalties. if caught you get 1 mill or 3x profits mad or avoided
there's a Chinese wall between all the departments in the office so that insider trade can't happen
Investment advisor act of 1940
the regulations of persons both natural and legal
in the business of giving investment advice and establishment of standards of ethical business conduct for the industry.
Investment company act of 1940
Provides for securities and exchange commission(sec) regulations of investment companies and their activities.
Breakpoint
scale of declining sales charges based on the amount invested.
both
state and federal law
prohibit registered personnel from making higher commissions by selling investments company shares in a dollar amount just below the point at which the sales charge
Right of accumulations
permits an investor of aggregate shares owned in related accounts or all funds in the fund family to reach a breakpoint discount
letter of intent
an investor informs the company that he intends to invest the additional funds necessary to reach the breakpoint within 13 months.
can be backdated as far as 90 days
Broker dealers
primary business is executing transactions in securities
compensation is either commission or markup mark down
Abc= agency transaction broker commission
PDM= principal(transaction) dealer mark up
people or aren't considered broker dealer
agents
issuers
banks
savings institutions
trust companies
Broker dearler registrations
broker dealer must register in states where they have an office or have a client
broker dealers don't have to register if they
don't have an office.,
don't have a client (snowbirds dont count)
if clients are institutional or issuers
Agents must register
if they accept or place orders for a security for B/D
or
if they accept or place order for non-exempt issuers
agents exempt from registration if they
act as clerical workers( interns, sales assistant)
work for exempt issuers (government)
act as silent partners
Investment advisor
receives economic benefit from financial advice , he earnes money thruoghs fees or other charges
examples are
financial planners
pensions consultants
sports and entertainment reps
what is not considered an advisor
bank
a B/D who does accidental advice
publisher
Federal covered advisor (AUM>110Mill)
IAR (Investment advisor representative)
as well as LATE
lawyer
accountant
teacher
engineer
Investment Advisor reprasentatives
what i am, and FFA is the IA,
Federally covered investment advisors
must register with the sec because they AUM>110 mill
federally covered investment advisors representatives
in state of home office only
they don't have to register if they don't have a home office in the state
IA's must register to the state if
AUM<100mill and
if they have an office in the state or they have clients in the state
IA's don't have to register if
they have no office in the state and have no more than 5 clients in a state
or
they have institutional clients
registration requirments for Agents/AIR's
application
felony conviction/misdemeanor - 10 years
consent to service of process
filing fees
pass test
finger prints
registration requirements for AI/BD
same as Agents/AIR plus
net capital standards
IA-10k,35K
BD- no more than what SEC requires
surety bond
or could be posted cash/securities
successor firm
must refile registration, no added fees until dec31st
registration is effective noon, 30th day of app
Bookeeping under U.S.A
B/D keep records for 3 years- 2 years easily accesible
IA keep record for 5 years-2 years easily accesible
withdrawal of registration with the agents and IAR's
Agent Withdrawal: (A stands for all - all tell admin)
B/D, agent, and if applicable, hiring B/D notify an administrator
IAR:
Federal covered advisor - IAR notifies Administrator
State Registered Advisor: IA notifies Administrator
AUM for IA's
110 mill+ = sec registration only
100 mill - 110 mill = sec or state registration (they choose)
25 mill but not 100 mill = mid size state registration
#<25 mill = small state registration
if you state registered and reach 110 mill then you have 90 days to