1) govt

2) commercial paper w/ 9 mos or less

3) religious, educational charitable or not-for-profit

4) RR equip trust

5) securities issued by a federal or state bank, S&L, building and loan assoc, or similar

1) Reg A

2) Rule 147

exempted under SEC

offered to public w/ total amt of $5 mill or less during any 12 mo pd

simpler filing

exempt under SEC

offered and sold only to persons resident w/in a single state or territory, where the issuer is a resident and doing business w/in the territory; for 9 mos from date of last sale, resales made only to residents; 80% of issuers gross rec derived from w/in state; 80% of proceeds used w/in state 80% of issuers assets w/in state

1) foreign gov securities

2) federal covered securities listed on a national exchange or Nasdaq

3) insurance co securities

1) transactions by anyone other than issuer, underwriter, or dealer

2) transactions by issuer that dont invovle puclic offering

civil- 2 yrs after discovery or 3 yrs after act

for criminal offenses - 5 yrs from date of offense, $5k max fine and improsonment of no more than 3 yrs (5-5-3)

exemption for offers and sales to no more than 35 persons; doesnt count accredited investors; no general solicitation or general advertising; federal covered securities, no state can impose requirements; federal covered securities and no state may impose registration or qualification requirements, but can impose notice filing requirements

**for USA offered at no more than 10 persons other than institutional investors

1) institutional investors (banks, ins cos, investment cos, b/d purchasing for own acct, employee ben plans managed by banks, ins cos, or IAs, or employee ben plans w/ assets in excess of $5mill

2) directors, exec officers, and general partners of issuer

3) person whos net worth, or joint, exceeds $1 mill

4) person who has income inexcess of $200k in each of last 2 yrs and in current yr; w/ spousal income = 300k

5) entities made up of accredited investors

1) collect, process, prepare for distribution or publication info w/ respeact to transactions in, or quotations for, any nonexempt securit 2) distributing or publishing on a current and continuing basis, info w/ respect to such transactions or quotations

ex: ticker tape, bloomberg and reuters, nasdaq, pink sheets

doesnt include: publication w/ general circulation, SRO (except nasdaq) bank or B/D supplying quotation and transaction info as part of business, radio or tv

1) brokers/dealers (w/ form BD, SEC has 45 days to accep/reject)

2) securities exchanges

3) national securities associations (NASD, FINRA, and MSRB)

4) corps w/ listed securities, app for registration includes: org, finc structure and nature of business; terms, positions, rights and privileges of diff classes of outstanding sec; terms on which their sec are to be, and have been offered to public, insiders, BS for past 3 yrs; P&L for past 3 yrs

civil: $1 mill or treble damages

criminal: max 20 yrs

S of L: 5 yrs after the date of hte last transaction

main purpose to remove any barriers to competition in the sec industry

1) fixed-commission rates abolished in favor of negotiated commissions

2) developes national mkt system; led to increased efficiency bc of improvement in flow of info; goal was to lessen the reliance on dealers and have more trades take place in an agency capacity

3) SEC given power to approve rule changes by exchanges, FINRA, or MSRB

4) requried registration of municipal securities dealers w/ SEC and gave rise to MSRB; banks not regulated by SEC

5) regulate activities of clearing corp, securities depositories, and transfer agents

any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting, or trading in securities; primarily in the busienss of investing = more than 40% of value of issuer's total assets invested in investment securities; not permitted to make a public offering of securities unless it has a net worth of at least $100k

doesnt include: b/d and underwriters, banks and S&L, ins cos, hodling cos, issuers whos sec are beneficially owned by no more than 100 persons; issuers who trade in investments other than sec

acting w/o prior notice (administrator); upon entry of the order the admin must notify all interested parties that it has been entered, the reasons, and w/in 15 days after the receipt of a written request a hearing will be granted

used to: postpone or suspend registration of securities professional or a security pending a final determination of a proceeding relating to a problem and in denying or revoking a specific security or transaction exemption

employee of issuer not an agent when representing an issuer in these exempt securities:

1) US govt and muni sec

2) sec of other govts

3) sec of banks and savings institutions or trust cos

4) comm paper in top 3 categories by rating cos w/ denoms of $50k or more and maturity of 9 mos or less

5) investment contracts used in connection w/ employee's stock purchase, savings, pensions, or profit-sharing plans

1) isolated nonissuer transactions

2) transactions btwn issuer and underwriters

3) transactions btwn savings institutions or trust cos

4) private placements

agent- if agent terminates employment w/ b/d, both parties must notify admin promptly; if agent terminates employment to join another b/d, all 3 parties notify admin

IAR- if IAR termminates employment w/ IA, notification depends on how IA registered; if state-registered adviser, then firm notifies admin; if federal covered, then IAR notifies admin

1) insurance or endowment policy or annuity contract that ins co promises to pay a fixed sum of money

2) interest in a retirement plan

3) collectibles

4) commodities (precious metals and grains, including futures contracts)

5) condominiums used as personal residence

6) currency

cannot be regulated by state securities administrators

1) securities issued by investment cos (mutual funds, UITs, etc)

2) securities offered under rule 506 of Reg D (private placements)

3) sec from govts and munis, unless the muni issuer is located in the state in which the securities are being offered

4) securities listed on an exchange

1) nonprofits

2) investment contract in connection w/ employees' stock purchase, savings, pension, profit sharing, or benefit plan

may deny any exempt transaction

1) amt to be issued in state

2) states in which sec is to be offered, but not amts offered in those states

3) any adverse order or judgment w/ offering

1) a tv or radio broadcast not originated in the state

2) bona fide newspaper or periodical published outside the state

3) newspaper or periodical published inside the state but w/  more than 2/3 of its circulation outside that state in the last yr

1) make, amend, or rescind rules and orders

2) conduct investigations adn issue subpoenas

3) issue cease and desist orders and seek injunctions (cant compel compliance w/ orders, so injunction by court requires compliance and impose penalties)

4) deny, suspend, cancel, or revoke registration and licenses

1) gives advice on a regular basis such that it constitutes a business activity conducted w/ some regularity

2) advertises investment advisory services and presents himself to the public as an investment advisor or as oen who provides investment advice

3) receives separate compensatioin that represents a charge for giving the advice

1) bank or bank holding co

2) lawyer, accountant, teacher, or engineer

3) b/d whose performance of such services is solely incidental to the conduct of his business as a b/d and who receives no special compensation (such as a wrap fee); also applies to reps of b/d

4)publisher of bona fide publication of general and regular circulation as long as the publication is not primarily a vehicle for distributing finc advice

5) any person whose advice relates solely to securities issued or guaranteed by the federal govt

1) banks, savings inst, and trust cos

2) lawyer, accountant, teacher, engineer

3) b/d or agents whos advice is incidental to regular conduct of business and receives no special compensation

4) publication that does not consist of rendering advice on the basis of the specific investment situation of each client

5) IAR

6) any person who is a federal covered advisor

7) any person excluded by IA act of 1940

8) anyone else administrator specifies

1) advisers whose clients are residents of the state in which the adviser has principal office and place of business and who dont give advice dealing w/ securities listed on any national exchange

2) only clients are insurance cos

3) during the course of the preceding 12 mos had fewer than 15 clients, none of which is an investment co registered w/ the SEC, adn dont hold themselves out to the public as investment advisors; de minimis exemption

1) $30 mill or more of assets under mgmt & must register w/ SEC

2) excluded from definition of investment adviser by the IA act of 1940, or

3) under contract to manage an investment co registered under the investment co act of 1940, regardless of the amt of assets under mgmt

4) pensions consultants w/ assets of $50 mill or more under control

1) transactions effected pursuant to an automatic reinvestment plan; purchases or w/drawals made automatically w/ predetermined schedule and allocation

2) w/ respect to securities held in accts over which the access person had no direct or indirect influence or control

3) in the case of advisory firm that has only 1 access person, so long as firm maintains records of holdings and transactions the rule would otherwise require to be reported

1) govt sec

2) money mkt instruments

3) shares of money mkt funds

4) transactions and holdings in shares of mutual funds, unless IA acts as IA or underwriter for the fund

5) transactions in units of a UIT if the UIT is invested exclusively in unaffiliated MFs

1) natural person or co that after entering contract has at least $750k under mgmt of hte investment adviser

2) natural person or co that the IA has reason to believe that immediately prior to entering into the contract has a net worth in excess of $1.5mill

3) natural person who is an officer or director of the IA or one of their IARs who has been employed in the industry at least 12 mos

1) written authorization

2) notice of fee deduction; sent qualified custodian notice of amt of fee to be deducted and sent client an invoice itemizing the fee which includes a formula, amt of assets under mgmt, and time pd covered by fee

3) notice of safeguards; notifies admin in form ADV taht adviser intends to use the safeguards provided previously

4) waiver of net worth or bonding requirements

1) federal covered advisers using a qualified custodian dont have to include the BS in their brochure; NASAA rule requires BS

2) if fed covered advisor uses a qualified custodian, doesnt require adviser to send invoices or fee calculation statments when deducting fees from client's accts; NASAA believes qualified custodian merely performs a safekeeping function, which isnt to be confused w/ advisers fiduciary duty and books and records requirements that all IAs sent billing statements to clients

USA- must be in writing; fees must be competitive

federal- can be written or oral; fees be reasonable in view of services rendered

under both, must disclose: services to be provided, term of contract, amt of fee or formula, amt or manner of calculation of any prepaid fee to be returned w/ termination, if there is discretionary power, that no assignment of contract may be made w/o consent of client; if adviser organized as partnership, any change to a minority interest in firm will be communicated to advisory clients w/in a reasonable pd of time, change to majority interest considered assignment

act prohibits certain performance fee arrangements contingent on cap gains or appreciation or waiving fees in event of losses

fed: $10,000 and 5 yrs

state: $5,000 and 3 yrs

enforcement and administration of IA act responsibility of SEC bc IAs have no SRO; SEC and admin have power to censure, place limitations on the activities, functions or operatios of, suspend for a pd not exceeding 12 mos (no max for NASAA), or revoke the registration of any IA if it finds, after a hearing held in fed court system, the penalty is appropriate; appeals w/ federal made to US ct of appeals, w/ state made to state ct of appeals; appeal must be filed w/in 60 days

collectibles, muni bonds, muni bond funds, and UITs

no short sales, speculative option strategies, or margin acct trading

investment selection- participant is able to materially affect port return potential and risk level, choose btwn at least 3 investement alternatives, and diversify his investmetn to minimize the risk of large losses

investment control- allow employees to exercise independent control over the assets in their acct by letting them make their own choices among investment options cos have selected (at least 3); informing employees they can change their investment allocations at least quarterly; fiduciary isnt relieved from monitoring the performance of the investment alternatives being offered adn replace them when necessary

communicating required info- make info available upon request; statement that plan is to be a 404(c) plan and fiduciaries are relieved of liability; describe risk and return characteristics of each investment alternative available; explain how to give investment instructions; allow real-time access to employee accts either by telephone or internet

exempt from penalty by qualified and 401k: death, disability, separation from service after 55, certain medical, QDROs, to reduce excess cont or deferrals, and as substantially equal pmts over life

exempt from IRAs and SEPs: death, disability, medical, to reduce excess cont or deferrals, as substantially equal pmts over life, first-time home purchase, higher ed expense, health ins premiums while unemployed

agreement usualy includes: conditions and circumstances under which some or all of the benefits may be forfeited, such as if employee moves to a competing firm; statement that employee not entitled to any claim against employer's assets until retirement, death, or disability; disclaimer that the agreement may be void if firm suffers a business failure or bankruptcy

co directors not considered employees for eligibility for def comp plan and cant participate; plans may be unfunded, in which case comp paid from firm's operating assets; if funded, advantages of tax deferral are lost; many plans are informally funded through life ins or trust agreements

1) recommend securities w/o regard to customer financial situation, needs, or investment objectives

2) induce transactions to get commission

3) recommend a security w/o reasonable grounds

4) fail to sufficiently describe the important facts and risks concerning a transaction or security

safety of principal; steady stream of income; fixed maturity date; possibility of high income w/ speculative bonds

taxable as ordinary income; w/ municipal bonds, no federal or state tax

flexible premiums and death benefit; premiums invested only in separate acct, and only a variable death benefit; insured can increase or reduce premiums, but must maintain a minimum cash value, and death ben adjusted appropriately; charges deducted from gross premiums: admin fees (one time), sales load (9%/yr over 20 yrs), state premium taxes

charges deducted from separate acct: mortality risk fee (cost of ins), expense risk fee (covers the risk that the cost of administering and issuing the policy may be greater than assumed) and investment mgmt fee (cost of mgmt of separate sub-accts)

quote = market maker's current bid and offer on a security

bid = highest price dealer will buy

offer = lowest price dealer will sell

1) grantor retains life interest, or life income

2) grantor retains a reversionary interest in the trust that is considered more than incidental; grantor may receive property back from the trust; treated as owner when have reversionary interest if value exceeds 5% of value of that portion

3) grantor retains general power to direct to whom trust property will pass

4) grantor transfers one or more life ins policies into an irrevocable life ins trust while retaining certain incidents of ownership, including ability to amke loans from policy cask values and/or change beneficiaries

alimony- pmt to an ex-spouse; deductible to spouse making the pmts and includable in income tax for purposes by spouse receiving them

child support- not deductible by parent who pays it and not includable as income by recipient 

common stock- expresses annual div payout as a percentage of stock price; div/value

debt security- expresses annual interest payout as a percentage of the current mkt price of the security; interest/value

liquidation value of the enterprise; what is left to common SH

(net tangible assets - liabilities - par value of preferred stock)/# share of common

large cap- S&P 500

mid cap- S&P 400

small cap- Russell 2000

International stocks- EAFE

capitalization = # outstanding shares; large cos stock price changes have greater effect on index; beta measured against S&P500 composite index