IA's & IAR's
The amount of AUM in which an investment advisor must register with the SEC.
$110 Million
Is state registration required for a broker dealer that does not sell securities?
NO
When a professional neglects to mention something that a reasonable person would want to know this is called
OMISSION of material facts.
Sale of mutual funds, variable annuities, and variable life insurance are always considered what kind of transactions
Issuer transactions - sale proceeds go to the issuer
What is the immediate effect if State X's administrator issues a cease and desist order for a firm under investigation by the SEC?
Firm's ability to participate in securities activity in State X is temporarily halted
True or False?
IARs employed by Federal Covered Advisors MUST register with the State Administrator in states where they have an office.
TRUE
"Zach Attack" is a dually registered firm. The employees of this firm will often give investment advice as well as effect securities transactions for clients charging both a fee and commissions. Both are disclosed to clients. This activity is considered...
Permitted
How long must Advisors keep most client records and marketing literature for? How long in an easily accessible place?
5 Years, 2 years in an easily accessible place.
Offers or sales made to only qualified purchasers are an example of this type of transaction.
Exempt transaction
"Robasaurus Rex", a registered investment advisor that has been advising Enrique Loaning LLC for many years. Enrique wishes to borrow money for the investment of a lifetime from Robasaurus Rex. Robasaurus Rex is not a lending institution and does not usually loan out money but Enrique Loaning LLC is. Is this permitted?
NO
Federal Covered Advisors must submit these in each state where they have a place of business or more than 5 non-institutional investors.
Notice Filing and filing fees
Canadian BDs without a state office only require limited registration to:
l. Sell to a new client temporarily in a state (6 months or less).
ll. Sell only to institutional investors
lll. Have a client in the state engaged in a Canadian self-directed tax-advantaged retirement plan
ll. and lll.
J. Son Investment Advisors is planning on registering with the state in August of this year and he wants to stay registered for the next 3 years. They really like to plan ahead with their expenses so which months should you tell him he should plan to be paying fees?
August and December of this year, and each December in the years following.
This requires an issuer to submit three copies of the latest prospectus, articles of incorporation and by-laws, agreement between issuer and its underwriter, any instrument governing the issuance of the security, and anything else the state administrator requests.
Registration by Coordination
When an offer is solicited, which state administrators will have jurisdiction?
State in which offer originated
State to which offer is directed AND received
Lebron's LeAdvice is an Investment Advisor with $80 million in AUM. They are an affiliate of and share the same home office with Doncic Investments, an SEC-registered advisor. Who is Lebron's LeAdvice required to be registered with?
The SEC
Each firm must maintain a(n) ___________ responsible for reviewing and endorsement of customer orders.
Office of Supervisory Jurisdiction
This is an incentive offered to investment advisors by broker dealers to direct client transactions to those broker dealers.
Soft Dollar Compensation
The Uniform Securities Act lists 9 categories of exempt securities. Name at least 4 of these TYPES of securitIes.
BONUS: EXTRA 100 POINTS FOR EACH EXTRA EXEMPT SECURITY LISTED
1. U.S. Government Securities
2. Foreign Government Securities
3. Bank-Issued Securities
4. Savings and Loan Securities
5. Insurance Company Securities
6. Credit Union Securities
7. Utility and Transportation Securities
8. Exchange-Listed Securities
9. Nonprofit Organization Securities
When a client is offered a rescission letter, how long do they have to accept or decline it? What is forfeited and what is received if the letter is accepted?
30 days to accept or decline
If accepted - receive reimbursement for the cost of investment and forfeit right to take legal action
If declined - Keep right to take legal action, forfeit the the reimbursement
Match the following parts of form ADV with their descriptions:
Part 1, Part 2A, Part 2B, Part 3
Brochure, Form CRS, Brochure Supplement, General information about the advisor
Part 1: General information about the advisor
Part 2A: Brochure - info relevant to firm's clients
Part 2B: Brochure Supplement - specific info about education background, employment, disciplinary history, etc.
Part 3: Form CRS - summarizes relationship between client and the firm
There are 12 categories for which a securities professional or firm might have its registration denied, suspended, or revoked by a state administrator if the order is in the public interest. Name at least 6.
1. Filing incomplete, false, or misleading application
2. Willfully violating the USA or rules
3. Felony or securities-related misdemeanor conviction
4. Court injunction related to securities or financial business
5. Subject to another state’s denial/suspension
6. Engaging in dishonest or unethical practices
7. Financial insolvency
8. Failure to supervise
9. Violation of federal securities laws
10. Unqualified due to lack of training, experience, or knowledge
11. Failure to pay filing fees
12. Being the subject of a cease and desist order
BDs operating within a bank setting must follow specific rules and disclosures that must be made to clients and prospective clients. What 3 things must the BD disclose orally and in writing about the securities purchased/sold by the BD?
1. Not insured by the FDIC
2. Not guaranteed by the bank
3. Subject to Investment risks
The SEC requires that a prospectus be delivered to each investor who purchased a newly issued security:
for ___ days after its IPO or at the time of its follow on offering if it is listed on a national exchange.
for ___ days after its IPO or 40 days after its follow on offer if it is traded only OTC.
25, 90
When must a firm disclose in writing agency cross transactions and commissions
Annually