nonissuer transaction
a transaction in which the proceeds do not directly or indirectly go to the issuer (as secondary transaction)
Exempt transactions under USA
- Sales to institutions
- sales by fiduciaries
- unsolicited transactions
Exempt issuers under USA
- any state
- any Canadian province
- foreign national governments (but not their political subdivisions)
- SEC registered investment companies (but not unregistered hedge funds)
Agency Cross Transaction
- occurs when an investment adviser acts as a broker for one or both sides of a transaction involving an advisory client
- cannot recommend this to both buyer and seller even if consent is given
- can be executed if acting in best interest
- disclosure is
Exclusion to definition of Investment Advisor
- LATE (lawyers, accountants, teachers and engineers)
Broker-dealer surety bond limits
any amount that does not exceed that set by the SEC
Civil Suit terms under USA
- Must be filed within 3 years of alleged infraction or 2 years from discovering the violation
- death does not remove cause
- waivers are never valid
Administrator can designate what:
- an officer to serve subpoenas
Agent
any individual who represents a broker-dealer in effecting securities transactions
Private Placement Exemption Qualifications
- offer cannot be direct to more than 10 persons during a 12-month period
- seller must reasonably believe non institutional buyers are purchasing for investment purposes only
- those who sell cannot receive a commission on sales to non institutional clie
Broker-dealer
Any person in the business of making trades in its own account or for the accounts of others
Assessable Stock
Stock that is issued below par or stated value. All stock issued today is nonassessable.
Form ADV-E
-ONLY applies to IA's who have custody of client accounts
-requires an annual surprise examination by an independent public accountant
-the form contains info about the adviser and about the exam conducted
Securities exempt under the Securities Act of 1933
- government issues
- commercial paper
- securities issued or guaranteed by financial institution
- regulated common carrier issues
- nonprofit charitable or religious institution
Securities Exempt from USA and not SA of 1933
- stocks and bonds issued by insurance companies
- securities by foreign governments
- securities listed on certain exchanges are not exempt under SA of 1933
Nonissuer Transaction
when someone other than the issuer sells securities
Investment Counsel
Term that may be used by investment advisers providing continuous supervisory management services only (not impersonal advice). The two criteria are 1) an investment advisor rending investment advice and 2) the advice must be continuous
The consent to service process
appoints the state administrator as the applicant's attorney to receive and process noncriminal securities-related complaints against the applicant (1-37)
Consent to service
formal legal agreement whereby a registrant will be bound by a legal action or subpoena served on the Administrator as if it had been served on the registrant
Who administers the Investment Advisers Act of 1940?
The SEC
Structuring
Any attempt to circumvent the currency reporting rules
Form PF
Must be filed by private fund managers who AUM is $150 million or over
Investment Advisors EXEMPT from registration under Investment Advisers Act of 1940
Advisors who service:
- investment companies
- venture capitalist funds
- advisors who do not give advice on private funds or listed securities
State Registration Rules for an IAR
- only required to register in states they have an office in
- no amount of clients in other states would constitute registration in those states if the IAR works for a covered advisor
Exempt Securities under USA
- US and Canadian gov and municipal securities
- foreign government securities
- depository institutions
- insurance company securities (does not include variable life policies)
- public utility and common carrier securities
- federal covered securities
-
Exempt Transactions under USA
- isolated non-issuer transactions
- unsolicited brokerage transactions
- underwriter transactions
- bankruptcy, guardian or conservator transactions
- institutional investor transactions
- limited offering transactions *must not be offered to more than 1
SEC Rule 501: Accredited Investors
- bank, insurance or registered investment company
- employee benefit plan
- charitable org, corp or partnership
- directors, executive officers and general partners
- net worth exceeds $1 million excluding primary residence
- individual income in excess
SEC Rule 506(b) vs 506(c)
506b: can sell offering to unlimited number of accredited investors, up to 35 non-accredited investors and no advertising may be done
506c: permits offering to be advertised, all purchasers are accredited and issuer takes reasonable steps to verify all pu
Cooling-off period
period of 20 or more days after the issuer files a registration statement with the SEC
- underwriter cannot take orders or distribute sales materials during this time
Escrow Requirements
- administrator may require security to be placed in escrow if:
- issued within the past 3 years
- proporter at a price substantially different than offering price
- any person for a consideration other than cash
Notice Filing
(1) Method by which a registered investment company and certain other federal covered securities file records with state securities Administrators (mutual funds). (2) SEC-registered advisers (federal covered) may have to provide state securities authoriti
Registration by Coordination
A process that allows A security to be sold in a state. It is available to an issuer that files for the security's registration under the Securities Act of 1933 and files duplicates of the registration documents with the state administrator. The state reg
Registration by Qualification
A process that allows a security to be sold in a state, not federal. It is available to an issuer who files for the security's registration with the state Administrator, meets minimum net worth, disclosure, and other requirements, and files appropriate re
Consent to Service of Process
A legal document entered into by all registrants, whereby the Administrator is given the power to accept legal papers on behalf of the registrant. Every legal or natural person (investment advisors and broker dealers) seeking registration or making a noti
Fines under Investment Advisor Act of 1940 (violating SEC rule)
$10,000 fine or up to 5 years in prison
Fines under Uniform Securities Act
$5,000 fine or up to 3 years in prison
The Administrator has the power to:
-issue cease and desist orders
-apply to courts for temporary or permanent injunctions - apply to courts for restitution to investors
- have the court appoint receivers over a violator's assets
When can performance fees be charged?
Can be charged to anyone with a net worth in excess of $2.1 million or with at least $1 million under management with the firm.Only assets held jointly with a spouse will count.