Series 63 Review

Contumacy

Involves failure or refusal to recognize the authority of the Administrator or cooperate with any administrative investigations or hearings

Adminsitrators CANNOT:

Issue Injunctions
Impose criminal penalities
impose fines
make arrests

Two orders that are non punative:

Cancellation
Withdrawal

Criminal Penalities for WILLFUL violations under the uniform securities act are:

3 years in prison
$5000 fine
or both PER VIOLATION

Criminal Prosectors at the district attorney or attorney general's office MUST come after the offender within?

5 years of the alleged misdeed

Under the Uniform Securities Act the plantiff can sue for:

-Price paid for the security and/or advice
-Plus Interest
-Plus court costs/Attoney Fees
-Minus any income recieved on teh security

The statue of limitations expires _____ years from discovery or _______ years from the event-- whichever comes first.

2 years from Discovery
3 Years from the event

NSMIA:

The National Securities Markets Improvement Act of 1996: Declared that certain advisers must only register with the SEC. E.G if the adviser has an office in Albany, NY, they would not register with the state of NY if they were a federal covered adviser.

The Howey Decision:

an Investement contract is:
-investment of money due to
-an expectation of profits arising from
-a common enterprise
-which depends solely on the efforts of a promotor or third party

What does the administrator require on the securities registration statement:

-Filing fee
-Total amount of the offering
-Amount of securities offered in THEIR*** state
-Names of other states where securities will be offered
-Any adverse order, judgement, or decree entered by a court, the securities agency, or adminstrator in any st

Also know that:

-Registration are effective for ONE year
-Securities offered by coordination or qualification may require an escrow account whose proceeds are impounded by the Administrator and not released to the issuer/UWs until they have raised the specified amount
-S

WHEN MUST BROCHURES BE DELIVERED OR AT LEAST OFFERED TO CLIENTS?

Within 48 Hours (before) of signing the contract, or at the time of signing the contract if the client has five days to cancel without financial penality

When are testimonials allowed in an Adviser's advertistment?

NEVER; they are inherently misleading

What is NOT important when using discretion over accounts?

TIME AND PRICE****** TP TP TP TP TP TP

What is a broker dealer?

Any person engaged in the business of effecting transcations in securities for the account of others or for its own account

What is an investment advisor?

any person who, for compensation, enagages in the business of of advising others, either directly or through publications or writings, as to the value of securities, or who, for compensation and as a part of a regular business, issues or promulgates analy

Investment Advisors file using form:

ADV

To withdraw, Investment Advisors use form:

ADV-W

How long after the ADV-W is filed is the Investment advisors registration good for?

60 Days in case the the SEC needs to take regulatory action against the adviser. (The ADV-W is considered effective as soon as filed though)

Minimum Net requirements for Advisers:

Adviser WITH custody= $35,000
Adviser with discretion but NOT custody = $10,000
Adviser accepting prepayment > $500 6 + months in advance: POSITIVE net worth

Consent of service to process:

Accompanied with intial application;
Authorizes the administrator to recieve legal papers known as 'service of process' on the applicants behalf in any non-criminal legal complaint.
ONLY filed intially; does not need to be filed with each renewal

IARD stands for:

Investment Adviser Registration Depository: it is the account that must be set up to process ADV's.

NSMIA (National Securities Markets Improvement Act)

Created the idea of federally covered advisers; But they made it clear that the state regulators retain the authority to require and collect a fee for notice filling and the authority to legally pursue even a federal covered adviser if they are defrauding

Federal Covered Advisers: IA's register with the SEC either because they are required to or because they are eligible to:

-Adviser with at least 100 million of assets under management
-Adviser to a registered investment company
-Mid-Sized adviser (25-100 million under assets) to a business development company
-Pension consultants providing advice to employee benefit plans wi

Dodd-Frank Act

a law enacted in the aftermath of the financial crisis of 2008-2009 that strengthened government oversight of financial markets and placed limitations on risky financial strategies such as heavy reliance on leverage (raised from 25 million to 100 million

@ 100 million they ______ register with the the SEC
@110 million they _____regisiter with the SEC

Can
MUST***

(25) Registration by coordination is made possible under which of the following federal securities acts?

Correct Answer: Securities Act of 1933

(28) If an investment adviser representative publishes a website that merely explains what he does for his employer--without mentioning the employer's name--what is true of this business practice?

Correct Answer: the IAR must disclose his affiliation with his employer, who is responsible for approving the content on the website

(32) Which of the following represents a true statement concerning withdrawals from registration under the Uniform Securities Act?

(32) Which of the following represents a true statement concerning withdrawals from registration under the Uniform Securities Act?

(34) Under the Uniform Securities Act, which of the following represents an offer, a sale, or both an offer and a sale of a security?

Correct Answer: a gift of assessable stock
Pledges and loans of securities are not offers or sales. Nor is a stock dividend. Assessable shares are considered to involve both an offer and a sale even when given as a gift.

(36) Which of the the following terms has to do with securities purchased on margin being pledged as collateral to secure the loan?

(hypothecation) involves pledging securities as a loan. The BD then "re-hypothecates" a % of the securities to the bank who provides the loan.

(54) After the state securities Administrator has accepted the registration for an offer of securities registered by qualification, which of the following may be altered?

Correct Answer: number of shares/units sold to investors

(9) A local company would like to raise capital by issuing additional shares of common stock without registration. They could achieve this by doing all of the following except:

Correct Answer: offering 100 shares to investors who purchase at least $15,000 par value of the company's preferred stock
Offerings to existing securities holders don't have to be registered, and neither do shares offered and sold to institutional investo

(34) Which of the following is an inaccurate statement concerning an investment adviser's receipt of "soft dollar compensation"?`

Correct Answer: only advisers also registered as broker-dealers may receive such compensation
soft dollar compensation must be disclosed, and it must benefit the clients of the adviser, not just the firm. So vacations and computer HARDWARE or officing exp