Offer

to

Sale

-Includes every attempt/offer to dispose of/solicitation of an offer to buy a security/interest in security for value. Offer can't be made until registered in state. Offer also includes...

• Security given as bonus in conjuction w/purchase of security
• Sale/offer of a right, warrent,/ convertible security
• Gift of an assessable stock involving an offer & sale

Prospectus

• legal document businesses use to describe securities they offer
• must cover in detail all material info. required for investor to make informed decision
• definition excludes communications sent after effective date of registration statement/advertisment w/respect to security must indicate where full prospectus can be obtained.

Statement of Additional Information

Contents of

Prospectus

• Investment objectives, Polices, & Restrictions
• Sales Load and Fees Include : Front end, Contingent Deffered, 12B-1 Fee, Redemption Fee, Management Fee, Other Expenses
• Expense Table
• Breakpt., Rights of Accumulation, Combination of Accounts & Letter of Intent (LOI)
• Exchange Privileges w/ Family Funds
• Per-Share Income & Capital Changes
• Methods of Sale
• Methods of Redemption
• Investment & Withdrawal of Plans
• Financial Statements

Sale/delivery after sale

of

unregistered securities

Requirement

to

Deliver Prospectus

Prospectus must be delivered to customer prior to/in conjuction with security transaction. Civil Liberties can be opposed upon issuers for following reasons

• inclusion of false/misleading statment of mat. facts
• Exclusion of material facts required to be stated
• unlawful representation of SEC No Approval Clause

Securities Investor Protection Coverage

(SIPC)

• Provided for each separate customer up to $500,000, w/ $100,000 max. in cash
• Individual owning cash & margin account 1 customer, if individual has joint account w/ spouse/ IRA rollover treated as separate customers. Each account eligble for $500k
• Applies only to customers

Insider

• Director, officer, or owner of 10% or more of stock corp.
• person becoming insiders must notify SEC w/in 10 days of becoming insider and also required to report position change on 10th day of month following change in position
• prohibited from making short swing profits/ acting on non public material info. for own profit

Short Swing Profits

Rule 2210

Communications with Public

• Advertisments - materials used in media (newspapers, magazines,radio,tv,telephone recordings, other public media)
• Sales Literature - written/electronic comm. distributed/made generally available to customers/public (circulars,research reports, market letters, performance reports, form letters, telemarketing scripts, seminar texts, reprints/exerpt of advirtisment, sales lit., published article)
• Public Appearence - participation in seminars, radio/tv interviews, others public speaking activites

-Testimonial/endorsment of security made by 3rd party which is misleading is unlawful. Any presentation must state following:

• if fee/compensation was paid for testimonial
• if statment implies person is qualified by special experience/knowledge, qualifications must be listed
• In statement "past performance doesn't indicate future results"

Approval

&

Recordkeeping

-Advertisments & sales lit. must be approved by principal of firm prior to use & kept on file for 3 yrs.

-Any previously mentioned materials must be filed w/FINRA w/in 10 days after initial use

-Member firms that have not previously filed advertisments must file initial advertisments w/FINRA 10days prior to use & must continue to do so for 1yr.

IM2210-2

Communications

w/Public

About Variable Life Insurance & Annuities

-Specifies guidelines for advertising & sales lit. for variable life & Annuities

• Product Identification - communications must clearly describe product as variable
• Liquidity - variable products as short term liquid investments should not be presented as liquid since it involves substantial charges & tax penalties for early w/drawal
• Claims Regarding Guarantees - communications shouldn't exaggerate related safety of variable products based on specific guarantees

Correspondence

• Gov entity/subdivision
• Employee benefit plan w/@ least 100 participants
• Qualified plan w/@ least 100 participants
• FINRA member, registered associated persons, / person action on behalf of institutional investor

Recordkeeping

• Institutional sales materials and name of preparor must be kept on file for 3 yrs from last date issued
• Info. about sources of charts, table,  graphs, /illustrations used in communication w/ public
• Correspondence & institutional sale lit. must be available for spot check procedures from Advertising Regulation Dept.

Telemarketing

• person made financial transaction &/ account activity w/in 18 months immediately proceeding date of telemartketing call
• telemarketer is broker/dealer of record of person's account w/in 18 months
• person contact telemarketer regarding product/service 3 months preceding call

-names issuer, underwriter, and other basic info., no other form of advertising allowed

-Sec. Act 1933 rule 134 allowed simple advertisment describing basic features surrounded by simple black border

• Name issuer
• title security
• #shares offered
• brief description of issuer's bus.
• price of offering
• Date of sale

To determine if statement

containing material fact may be

misleading weight should be given to

• Context in which statments are made
• Absence of explainations, qualifications,/limitations on statments made
• General economic/financial conditions
• Representation about past/future performance
• Portrayals of past income, gain,/ growth of assets
• Statement about possible benefits
• Exaggerated / unsubstantiated claims about management skill/technique
• Unwarrented comparisons to other investments
• Statement involving characteristics/attributes of an investment co.

-may only contain info. the substance of which is included in prospectus, a legend, the source of where prospectus can be obtained. Can't included an application to invest in company

-if includes yields of money market fund must be calculated on 7day period, if not a money market fund than 30 day period

-calculations for total returns 1,5,10 yr. periods

 Section 15 Securities act 1934

Registration of

Broker/Dealer

-Registered by filing w/ commission an application for registration. W/in 45 days of filing Commission

• Grant registration
• Institute proceedings to determine whether registration should be denied

Investment Company Act 1940

Sect 30b

Periodic & Other Reports

Investment Co. required to file following reports and documents

• Annual Report by Co.- annually filed info., report & documents w/Commission
• Semiannual/Quarterly filing of info. - copies of periodic/interim reports sent to security holders and info. deemed necessary in public interest
• Semiannual Reports to stockholders - financial statements/equivalents
• Certificant of indepedent public accountants
• Duties & liabilities of affiliated persons
• Diclosure to church plan participants -
• Copies of periodic reports/extracts -file w/ National Securities Exchange

Investment Company Name

Hot Issue

A public offering of securities which immediately sale @ premium to POP when 2ndary market begins.

Violation to sale hot issue to the following:

• underwriters of issue
• FINRA member firm/persons associated w/ member firm
• Supported family members of persons associated w/member firms
• person financially dependant on persons associated with member firms

Freeriding

&

Withholding

-member's failure to make bona fide offering @ POP of a hot issue.

-Member firms can't hold back any part of issue for their own trading accounts

-failure to make bona fide public distribution can artifically raise price (Not  good)

Office

of

Supervisory

Juridiction

(OSJ)

-Any office of a member @ which any 1/more of following functions take place:

• Order execution &/ market making
• Structuring of public offerings / private placements
• Maintaining custody of customers' funds &/ securities
• Final acceptance (approval) of new accounts
• Review/endorsments of customer orders, pursuant to paragraph above
• Final approval of advertising sales lit.
• Responsibility for supervising activities of persons associated with member

Written

Notice

Associated persons of member firms prohibited from entering in private transactions w/out prior written notice to member firm

• Proposal transaction
• Person's proposed role
• Compensation conditions

Selling

Compensation

any compensation paid directly/indirectly as a result of the purchase / sale of security including commissions, finder's fees, rights of participation in profit, tax benefits, expense reimbursement, etc

Transaction

for

Compensation