According to the uniform securities act, which of the following is true regarding the administrator

One of the keys to passing the Series 63 exam is to make sure that you have a complete understanding of how The Uniform Securities Act will be tested on the Series 63 Exam. This article which was produced from material contained in our Series 63 textbook and will help you master the material so that you pass the Series 63 exam.

Introduction

The state securities administrator has the authority to enforce all of the provisions of the Uniform Securities Act (USA) within their state. The state securities administrator may deny, revoke, or suspend the registration of a security, an agent, or a firm. The administrator may also revoke an exemption from registration, subpoena and investigate any registrant, and amend rules as required. The North American Securities Administrators Association or NASAA is the oldest investor protection organization in the country and represents the interest of all of the state securities administrators. NASAA also writes policies and administers the Series 63, 65, and 66 exams.

Actions by the State Securities Administrator

A state securities administrator may take action to bar, suspend, censure, or restrict the activities of a registrant if the administrator finds it in the public interest, and the applicant or registrant does one or more of the following:

  • Fails to pay filing fees
  • Is insolvent
  • Fails to supervise employees
  • Willfully violates the securities or banking laws of another country or has had a foreign regulator deny, revoke, or suspend its registration within the last five years
  • Violates federal securities or commodities laws
  • Has been convicted of any felon within the last 10 years
  • Has been convicted of a securities-related misdemeanor
  • Willfully violates any provision of the USA
  • Files an incomplete, false, or misleading application for registration
  • Has been temporarily or permanently enjoined from the securities business by a court of law
  • Has been subject to an order by a state securities administrator denying, revoking, or suspending its registration
  • Is deemed unqualified due to a lack of experience, training, or knowledge
  • Engages in unethical or dishonest business practices

The administrator deeming it is in the public interest is not enough to take action. The applicant must have been involved in one or more of the activities listed above. If the administrator is going to take action against the applicant, it must notify them promptly in writing of their intention and must provide a hearing for the applicant within 15 days of receiving the request for a hearing. An administrator may deny an applicant’s registration based on lack of knowledge, training, or experience but a lack of experience, may not be the sole basis for the denial of a registration.

Cancellation of a Registration

The administrator may cancel the registration of a broker dealer, investment adviser, or an agent if the registrant or applicant no longer exists, has ceased doing business, or cannot be located. An individual’s registration may be cancelled if they have been deemed incompetent.

Withdrawal of a Registration

A broker dealer, investment adviser, or an agent may request that their registration with the state be withdrawn. The withdrawal will become effective 30 days after the administrator receives the request if no revocation or suspension proceedings are in process. The administrator has up to one year after the withdrawal of an applicant’s registration to take action against the applicant to suspend or revoke their registration.

Actions Against an Issuer of Securities

The administrator may deny, revoke, or suspend the registration of a security if it deems it is in the public interest and:

  • Any officer or director has been convicted of a securities crime
  • The registration statement is false, misleading, or incomplete
  • The security is subject to a court injunction
  • Promoter’s fees or offering expenses are excessive or unreasonable
  • The offering is fraudulent

The administrator may also revoke a security’s exemption from registration if it is in the public interest and the exemption was based on a false, misleading, fraudulent, or unethical practice or statement. An administrator may, without prior notice, revoke the exempt status of a securities transaction.

Rule Changes

An administrator may change or amend rules as he or she deems necessary. All rules enacted by the administrator will have the same force and effect as rules enacted under the USA. An administrator’s order may be appealed to the court system within 60 days.

Investigations

A state securities administrator may investigate a broker dealer, an investment adviser, or an agent in any state if they feel that a violation has taken or may take place. The administrator may also subpoena people, books, and records in any state and may administer oaths to compel people to testify. Anyone who displays contempt for the administrator’s order is guilty of contumacy and may be found in contempt of court if the administrator asks the court to enforce its orders.

Civil and Criminal Penalties

A state securities administrator may issue a cease and desist order without a prior hearing or notice. The administrator may appoint a receiver to oversee the assets of violators and may require them to make restitution. Anyone who is found to have criminally violated the laws of the USA is subject to a $5,000 fine and/or three years in prison. People who criminally violate the Investment Advisers Act of 1940 are subject to a $10,000 fine and/or five years in prison. The statute of limitations for an administrator taking action is five years.

An investor who sues for a violation of the Uniform Securities Act is entitled to receive:

  • The value that they paid for the securities minus any income received during the holding period (for example, dividends)
  • Interest on their money for the holding period
  • Court costs

Civil actions may be taken against:

  • An agent
  • A firm
  • The agent’s supervisor

If an investment adviser violates the provisions of the USA, clients may sue to recover:

  • Advisory fees
  • Losses
  • Interest on the money
  • Attorney fees and court costs, minus any income received as a result of the advice

The correct answer was: II only.

Any security may be registered by qualification, but that would only be required if another method of registration were unavailable. ABC, Inc., must be SEC-registered because its previous offering was in several states. Generally, the nonissuer sale of an SEC-registered security that has been outstanding at least 180 days is an exempt transaction and, therefore, does not require registration. Since XYZ, Inc., will not have a federal registration statement, registration by coordination will not be available. AAA, Inc., will require federal registration in connection with the same offering, registration by coordination will be available.

Agents' and investment adviser representatives' registrations expire:

Annually on December 31st

How long is the consent to service of process in effect for?

As long as the person is registered

An individual has passed their Series 63 exam and has filed a registration statement to register as an agent in State A. When can this individual begin acting as an agent in State A?

An investment planning firm would not be required to register as an investment adviser in State A under any of the following circumstances, except:

The firm has an office in State A but advises only institutional investors

not an issuer under the Uniform Securities Act?

The Administrator may set all of the following requirements for a registered broker-dealer, EXCEPT:

Qualifying examinations of the firm

A broker-dealer who has no office in a state, would not need to register in the state, when:

Serving existing retail customers who are temporarily in the state

An agent does NOT include a person who:

Only advises others on their investment portfolio for compensation

Which of the following communications may be required to be filed with the Administrator in a given state?

general prospecting form letter and Ads for CMOs

According to the NASAA Recordkeeping Requirements for Investment Advisers, which of the following is TRUE regarding the preservation of an investment adviser’s records other than those required to be maintained for at least three years after termination of the firm?

Such records must be maintained in an easily accessible place for at least five years, the first two in the firm’s principal office

An agent with a place of business in the state who sells only municipal securities is not considered a what?

not considered a broker-dealer?

Federal covered securities that are required to be registered with the SEC are covered under the rules and regulations of the:

A broker-dealer has just changed its branch office location in State A. When does the firm need to file an amendment with the Administrator in State B?

A broker-dealer buying and selling securities for the benefit of their own account as a market maker is said to be operating in what capacity?

At the time of formation, any silent partner or affiliated person who will not be performing the duties of an agent or investment adviser representative, is:

Not registered automatically

When transactions or securities involved are exempt from state registration requirements, the agent representing a broker-dealer in such transactions:

An investment adviser requires payment of advisory fees six months or more in advance and in excess of $500 per client. What makes this situation is correct?

This practice is in compliance with the Uniform Securities Act, but the investment adviser must file an audited balance sheet with the Administrator

What is the minimum assets under management a firm providing investment advice for compensation needs in order to become a federal covered investment adviser?

What is the minimum assets under management a firm providing investment advice for compensation needs in order to become required to register with the SEC?

What is the first step in the registration process with the State Administrator?

Filing of a registration statement

Which of the following is the correct definition of a non-exempt security?

A security that must be registered under the Uniform Securities Act with the State Administrator

The preorganization certificate limit on subscribers is how many for a exempt transaction.

According to the Uniform Securities Act, which is true following are true regarding an investment adviser's responsibility related to delivery of its brochure?

An investment adviser must furnish each advisory client with a written disclosure statement not less than 48 hours prior to entering into any investment advisory contract with such client, or at the time of entering into any such contract if the advisory client has a right to terminate the contract without penalty within five business days after entering into the contract.

In the absence of an order from the Administrator prohibiting an IA from assuming custody over customer funds, the IA may take custody:

As long as prompt notification is provided to the Administrator

If an agent identifies several investments, with essentially the same risks as a particular investment for his client, he/she has:

An order from the Administrator commanding the recipient to refrain from a fraudulent or prohibited practice, is an example of:

These securities may be sold to institutions and retail investors, provided the trade is done on an unsolicited basis?

unregistered, non-exempt securities

In order to qualify under the world-class foreign issuer exemption, a security must meet which of the following criteria?

The issuer is not organized under U.S. or any state law. *The issuer has been in business for the past 5 years,. *The issuer has at least $1 billion or more of market value of equity shares (not including preferred stock) owned by nonaffiliates, with overall value of equity shares of at least $3 billion. *The issuer's equity securities are listed for trading on a foreign securities exchange. Equity shares (not including preferred stock) and non-convertible debt securities (rated in the top four credit ratings) issued by world class foreign issuers are exempt from state securities registration and advertising/sales literature filing requirements.

Exempt securities are not subject to either the

registration or advertising filing requirements contained within the USA.

provinces and common stock issued by a savings and loan are exempt from USA registration.

A contract that specifies that the investment adviser's compensation will be based on the total assets under management is

Sharing in a customer's account is

RRs may not engage in "off the books" securities transactions about which their broker-dealers are unaware. This practice is known as

A person who is the subject of an order from the Administrator may appeal the order to a court within

Civil suits must be filed within

3 years of the contract of sale, or 2 years of discovery, whichever comes first. In the case of fraud, the administrator has 5 years to initiate a criminal action.

define an investment adviser as any person who provides advice about securities, as a business, for compensation.

Investment Advisers Act of 1940

clarifies the 'ABC Test' definition of an investment adviser and specifies criteria to identify when each of the 'three prongs' of the definition is met. Any person who holds themselves out to the public as being an investment adviser, provides advice on a regular basis, and receives identifiable compensation for their advice is in the business of being an investment adviser.

Depending upon the circumstances, any person engaged in the business of effecting transactions in securities for the account of others or for its own account may potentially be considered a broker-dealer under the USA, what is excluded from the definition (4)

Banks, Trust Companies, Issuers, and Agents

The Administrator may deny a registration if the registrant failed to pay the proper application filing fee within

30 days of notification, but the order will be vacated once the fee is paid.

A buyer in a private placement transaction receives unregistered securities. These nonexempt securities avoid registration because they were sold through a private placement, which is an exempt transaction. The maximum number of offers to non-institutional investors is limited to how many?

Records that must be retained for the life of the firm include:

stock certificate books, partnership papers, articles of incorporation, and minutes of Board of Directors (BOD) meetings.

Individuals representing broker-dealers and issuers in securities transactions are defined

An investment adviser must send a statement of account status to a client at least

Investment advisers are prohibited from being compensated based directly on

A transaction where an investment adviser acts as an agent for both the buyer and the seller of the securities is known as an

IA must send a summary at least annually showing of what?

showing the total number of agency cross transactions executed in the customer's account, and the total commissions or other remuneration received

protects firms from cyber-attacks originating as a result of access to firms' systems through third-party vendors.

"publicly distributed written materials" means

s materials that are paid for by the recipients and sent to at least 35 persons.

When two or more parties are involved in a pattern of buying and selling a security merely to give the appearance of active trading, this is known as engaging in

Insufficiently describing risks and other material facts regarding an investment is considered:

According to the USA, if a broker-dealer would like to withdraw its registration, how long does the State Administrator have to make the withdrawal effective?

not securities as they are an agreement to deliver a commodity (such as wheat, corn, crude oil, lumber, gold, sugar, or natural gas) at a specified future date and at an agreed-upon price.

Commodities Future Option

The bank is not a federal covered adviser because banks (as well as trust companies and insurance companies) are excluded from the definition of an

A Canadian broker-dealer is exempt from