Regulation of Broker-Dealers and Agents
Each associate of a broker-dealer must participate in a compliance meeting once every:
Twelve months
If information required on a registered representative’s form U4 changes, who is/are responsible for notifying FINRA of the change?
Both the registered representative and the registered representative’s firm
In a non-issuer transaction, the proceeds from the sale always go to:
The investor who sold the shares
Under the provisions of the Investment Advisers Act of 1940, if an adviser takes custody of customer funds or securities, account statements must be sent to the customer:
quarterly
An agent sells unregistered nonexempt common stock to his client unintentionally. What may the agent’s broker-dealer do to remedy this action?
Make an offer of rescission to the client
Administrators can require minimum Net Capital and Net Worth for registration of?
Investment Advisers and Broker-dealers
Which of the following clients can an investment adviser representative take a loan from?
An IAR can take a loan from any of the other clients listed here
(Feedback: An investment adviser representative can take a loan from a bank or other savings institution, a broker-dealer, or an affiliate of their employing firm)
If a broker-dealer receives an unsolicited customer order to buy a security for a customer, this is a(n):
exempt transaction
Which suitability obligation requires a broker-dealer to understand the complexity and risks of a security or investment strategy and consciously determine whether it is suitable for at least some investors?
Reasonable-basis suitability obligation
Under NASAA’s Model Rule on Financial Exploitation of Vulnerable Adults, which would be considered a “vulnerable adult”?
Anyone aged 65 or over or adults of any age with certain disabilities
Upon filing a withdrawal of registration with the State, the Administrator can commence a revocation or suspension proceeding for up to:
1 year from the effective date of the withdrawal
(Feedback: The Administrator retains jurisdiction over anyone who withdraws from registration in the State for 1 year following the effective date of the withdrawal. Thus, if one withdraws from registration, and 6 months later, there is a complaint filed by a customer with the Administrator against that person; the Administrator can still investigate, and can issue a suspension, revocation, or a cease-and-desist order.)
Which of the following are excluded from the definition of an investment adviser under the USA?
1,2,3,4
Under the Uniform Securities Act, a private placement is an offer where no commissions are paid, made to no more than:
10 persons in a 12-month period
(Under the Uniform Securities Act, a private placement is an offer to no more than 10 investors in a 12-month period, where no commissions are paid.)
A margin agreement must be signed by a customer no later than:
Promptly after the first trade is made in the account
Lisan al Gaib is charged with committing three separate criminal securities violations. What is the maximum penalty that the state administrator can impose on him?
The State Administrator cannot impose criminal penalties
Which of the following individuals is excluded from the definition of an agent under the USA?
3 and 4
If an investment adviser finds that its Net Capital is below the minimum requirement, it must:
II and III
An agent of a broker-dealer is located in State A. The agent solicits a customer located in State B, but no sale of securities results from that contact. The agent re-contacts the customer in State C, where the customer spends winters and a sale of securities results. Which State Administrators have jurisdiction?
The Administrators of States A, B, and C
Which conditions must be true to avoid taking custody of client funds? (There’s 3)
A willful violation of the Uniform Securities Act is:
Punishable by prison time up to 3 years, and a fine up to $5,000
Bill Nye is an agent working with a client named Science. Today Science tells Bill they’ll need to withdraw $10,000 from their account at some point within the next month. Science leaves it up to Bill to decide how to liquidate $10,000 of assets and when to withdraw the money during that 30-day period. Without any further instructions from Science, what actions can Bill take?
(B)
(Feedback: An agent cannot decide which trades to make in a client’s account without discretionary authority. So, without further instruction from Science, Bill could not decide whether to sell the shares of stock A or the treasury bills. Bill could withdraw the cash balance resulting from the matured bonds principal payments without any further instructions)
Question: An investment adviser qualifying for and seeking SEC registration files form ____, which prompts you to join them by way of their completing a form ____ on your behalf. Three years later, however, the firm fails to qualify and files form ____ to convert to state registration, at which point you direct them to file form ____ on your behalf, since you are leaving to start your own firm
IV, I, III, II
Lugentz is an agent working for OKC Brokerage. He suggests that a client, Sue, invest in Company A, which had an IPO 60 days prior. Sue is interested, and since the shares are Nasdaq-listed, Lugentz has no problem purchasing them that same day. Five days later, an angry Sue contacts Lugentz. Her shares have decreased in value by 15%, and Sue is concerned about the investment. Sue mentions Lugentz that she never received a copy of the prospectus before making her purchase, and indicates that she is considering informing the state administrator of this omission. Will Lugentz be held liable for omission?
No!
Since the shares in Company A are listed on an exchange and more than 25 days had passed between the IPO and the date of purchase, Lugentz is not obligated to provide a prospectus.
A Registered Investment Adviser has discretionary control over 50 accounts that range in value from $200,000 to $1,500,000. She receives a free due diligence trip from a real estate limited partnership sponsor to inspect a property in Florida. She is enthusiastic about the investment potential and purchases a $50,000 real estate limited partnership unit in the property for each of her accounts. The RIA disclosed the fact that she received the free trip to each of her customers before making the purchases. Which statement is true?
D
Under the Uniform Securities Act, the Administrator has jurisdiction over offers of advisory services made to:
I, II, III