Term
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Definition
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Term
| Federal Acts/ What should you first think about regarding the 1933 Act? |
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Definition
| New Issues - Think about Full and Fair Disclosure. Regulates PRIMARY market. |
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Term
| Federal Acts/ What else is the 33 act called? |
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Definition
| The "paper act" because it involves Reg statement, paperwork with NASD, paperwork where securities are sold. |
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Term
| Federal Acts/ What else is the 34 act called? |
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Definition
| The "people act" because is regulates all the people in the SECONDARY MARKET. |
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Term
| Federal Acts/ What does the investment company act of 1940 focus on? |
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Definition
| Mutual funds mostly -- investment companies. |
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Term
| Act of '40/ For definition of IA under the 40 Act, what does "primarily engaged in the business" mean exactly? |
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Definition
| Advisory services represent more than 50% of the total sales and revenue before tax for most recent three fiscal years not including investment company clients. |
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Term
| Act of '40/ A person who receives compensation for advising others about securities is what? |
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Definition
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Term
| Act of '40/ If you only get commissions you are not an IA - True or False? |
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Definition
| False- compensation is compensation. |
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Term
| Act of '40/ What are the two categories of private funds under Dodd Frank that are exempt from registration? |
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Definition
| 1. Accredited investors; or, more than 100, limited to 499 which are not making a public offering; must be "qualified purchasers" |
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Term
| Act of '40/ What is an accredited investor? |
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Definition
| Over $1m in assets, excluding residence; or, earned income of $200k past two years with expectation to continue or make more. |
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Term
| Act of '40/ What is a qualified purchaser? |
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Definition
| Includes married couple or individual with over $5m investments; owned by two or more related persons like a family business; could be institutional investor who owns at least $25M in investments, or a trust not formed just to invest. |
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Term
| Dodd Frank/ What fund issuers are excluded from the definition of an investment company under Dodd Frank and don't have to register with the SEC and are exempt from reporting under SEC act of 34? |
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Definition
HPV!!!
1. Hedge funds
2. Private equity funds
3. Venture Capital funds |
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Term
| Dodd Frank/ Can private funds advertise? |
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Definition
| No, but they can direct market to potential investors. |
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Term
| Dodd Frank/ What is the threshold for a private fund no longer being private and being subject to the SEC Act of 1934 reporting requirements? |
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Definition
| 500 or more investors and more than $10m in assets. |
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Term
| Act of '40/ Of this list, who is NOT considered an associated person of an IA (can be more than one): Officers; directors; partners; shareholders; clerical employees |
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Definition
| Clerical and shareholders are not. |
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Term
| Act of '40/ When does an IA have to file amendments to the ADV? |
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Definition
| No later than 90 days after the end of the fiscal year of the firm. |
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Term
| Act of '40/ What will qualify you to say you are "Investment Counsel?" |
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Definition
| You are an IA; and, a substantial amount of your business is providing investment supervisory services. |
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Term
| Act of '40/ What are penalties for violating the act? |
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Definition
| $10,000 and/or five years in prison. |
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Term
| Act of '40/ What can I give advice on without having to register under the act? |
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Definition
| 1.ONLY fixed annuities or insurance products; any other non-securities products ONLY. The key is only |
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Term
| Act of '40/ What are election contribution limits? |
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Definition
| $350 per election if you can vote; $150 per election |
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Term
| SEC IA-1092/ Exception to definition of an advisor |
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Definition
| A person would not be considered to be in the business if advice is "only given in rare and isolated instances." |
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Term
| SEC IA-1092/ An Access person includes who and when must these access persons report their own transactions? |
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Definition
| Most advisers and all officers, directors and partners of the IA; must report quarterly to CCO. |
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Term
| Act of '40/ What are differences between NASAA, USA, and 1940 Act regarding written and oral contracts? |
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Definition
| Contracts must be in writing under NASAA and USA; in 1940, oral contracts are acceptable. |
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Term
| Act of '40/ What are differences between ADV delivery requirements regarding SEC v. NASAA? |
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Definition
| SEC: Before or at time of contract; NASAA: 48 hours prior to contract or at time if client can terminate in 5 days. |
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Term
| Act of '40/ How many days does an IA have to update ADV with clients per both SEC and NASAA? |
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Definition
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Term
| Act of '40/ How many days must IA update SEC with ADV3 changes if becomes inaccurate and how many days to notify clients? |
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Definition
| SEC notified in 30 days; clients within 90. |
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Term
| Act of '40/ IAs requiring prepayment of more than 1,200 in fees per client 6 months or more in advance must provide in the ADV form… |
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Definition
| Audited financial statement in ADV brochure. State threshold is $500. Federal is $1,200. If question mentions "federal" or "SEC" use federal. |
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Term
| Act of '40/ Who must file CRS? |
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Definition
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Term
| Act of '40/ What is form ADV part 3 and who files it? |
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Definition
| IAs file ADV-3 - it is the CRS version for IAs;. |
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Term
| Act of '40/ A retail customer under Reg BI is defined as: |
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Definition
| One (a person or legal rep of person) who receives advice, then also acts on that advice for a personal or family account (NOT a commercial account). |
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Term
| Investment Act of 1940 Antifraud/ (Disclosure/Consent Requirement) How does the Act differ in requirements when an IA is also acting as a broker-dealer compared to USA? |
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Definition
| Under USA, disclosure has to be in writing but we don't need "written consent; however, under the Act, we need have both written disclosure and consent in writing. |
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Term
| Investment Act of 1940 Antifraud/ Describe some exceptions to the Disclosure/Consent requirements relating to when an IA is acting also as a BD. |
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Definition
| Public distribution to more than 35 people who pay for materials; written or oral statements that don't purport to meet investment objectives for individual accounts; or issuance of statistical info that does not contain options regarding investment into a particular security. |
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Term
| Investment Act of 1940 Antifraud/ What is an Agency Cross Transaction? |
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Definition
| IA acts as broker for both client and person on other side. |
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Term
Investment Act of 1940 Antifraud/ When is Agency Cross OK?
Hint (AWWS) |
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Definition
Adviser-Written-Written-Statement
1. adviser acting best interest of client; 2. written consent that you receive commissions from both parties and potential for conflict exists; 3. client receives written confirmation post transaction; 4. adviser must send both clients annual statement identifying total transactions and commission received. |
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Term
| Investment Act of 1940 Antifraud/ When is Agency Cross NOT ok? |
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Definition
| If the adviser recommended the transaction to both parties. You can only recommend to one. |
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Term
| Investment Act of 1940 Antifraud/ True of Falls: An agent must disclose if their personal transactions are inconsistent with advice given? |
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Definition
| False- IAs must disclose their personal transactions, never agents. |
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Term
| Investment Act of 1940 Antifraud/ What annual fee would be considered excessive and require a disclosure? |
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Definition
| Annual fees of 3% or higher. |
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Term
| Investment Act of 1940 Antifraud/ What is an acceptable performance-based fee when allowed? |
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Definition
| 20% of annual profits when dealing with allowable performance-based fees. |
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Term
| Investment Act of 1940 Antifraud/ Why should you be aware of fees charged monthly? |
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Definition
| Fees charged on a monthly basis are usually excessive |
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Term
| Investment Act of 1940 Antifraud/ What is a wrap fee? |
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Definition
| Client pays a set percentage of the value of assets under management for all agreed-upon services. Can include a flat fee for all transactions and/or include advice or no advice. |
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Term
| Investment Act of 1940 Antifraud/ If you charge a wrap fee, what must you file on your ADV? |
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Definition
| Schedule H which includes IA fees, interest in client transactions, and IA's balance sheet. |
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Term
| Investment Act of 1940 Antifraud/ If you vote on behalf of a client, what must you do?? |
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Definition
| Have written procedures, disclose how you voted, and furnish copy of procedures if client asks. |
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Term
| Investment Act of 1940 CUSTODY/ If a client mistakenly sends check to you instead of custodian, how many days do you have to send it back? |
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Definition
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Term
| Investment Act of 1940 CUSTODY/ What does an independent CPA file after an unannounced visit when when does he file it? |
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Definition
| ADV-E within one day for material discrepancies; 120 days if no big issues. |
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Term
| Investment Act of 1940 SOLICITORS/ IAs may pay cash fees only if: |
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Definition
| IA is registered with SEC; there is written agreement between solicitor; solicitor not subject to suspensions. |
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Term
| Investment Act of 1940 SOLICITORS/ Affiliated v. unaffiliated solicitors |
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Definition
| Unaffiliated solicitors have to disclose their own ADV, compensation arrangement, and if it will cost client. |
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Term
| Investment Act of 1940 SOLICITORS/ Unaffiliated solicitors do not have to disclose what? |
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Definition
| BD name; business background of solicitor; |
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Term
| Investment Act of 1940 SOLICITORS/ True of false: Solicitors are going to have to register as IAR. |
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Definition
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Term
| Investment Act of 1940 Record keeping/ What are two primary sets of documents that an IA must keep for record-keeping - the two main ones. |
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Definition
| Journals of cash receipts and disbursements and other records of original enter. ; ledgers showing assets, liabilities, reserves, capital, income and expenses. |
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Term
| Investment Act of 1940 Record keeping/ Memorandum of each order including: |
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Definition
| 1. Terms; 2. Name of person recommending; Account number (but not name); 3. date; 4. name of bank or BD executing. |
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Term
| Investment Act of 1940 Record keeping/ T/F - Administrator must administer written exams. |
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Definition
| Does not have to keep a log of phone calls received. |
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Term
| Investment Act of 1940 Record keeping/ T/F Must keep a copy any notice, circular advertisement or other communication sent to one person (including seminar materials). |
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Definition
| False - If sent to two or more people yes. |
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Term
| Investment Act of 1940 Record keeping/ How long keep records and where, and explain how differs from USA. |
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Definition
| Accessible location for 5 years under Act. Under USA, it is determined by the administrator or federal law. DO NOT PICK 5 YEARS IF ASKED UNDER USA. |
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Term
| Investment Act of 1940 Record keeping/ How long do you keep records after terminating your business. |
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Definition
| Three years after termination. |
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Term
| Investment Act of 1940 Record keeping/ What are conditions for keeping records electronically and how do they differ from USA? |
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Definition
| As long as they can be read, copied, and a duplicate copy stored in separate location; under USA, the additional requirement of "they cannot be altered" is added. |
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Term
| The 33 ACT/ How long is the cooling off period? |
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Definition
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Term
| The 33 ACT/ What happens after cooling off period? |
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Definition
| Registration becomes effective and SEC allows sale of security. |
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Term
| The 33 ACT/ When must prospectus be delivered? |
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Definition
| No later than purchase confirmation. |
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Term
| The 33 ACT/ What are securities under 33 ACT? |
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Definition
| Stocks, bonds, rights, warrants; fractional interest in oil and gas rights NOT future, real estate, precious metals, collectables. |
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Term
| The 33 ACT/ What are exempt securities under 33 ACT. |
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Definition
| Gov Sec; Reg D; intrastate offerings; Munis; commercial paper; securities issued by banks, motor carriers; NOTE: Insurance companies and investment company shares are NOT NOT NOT excluded. |
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Term
| The 33 ACT/ What is Reg A+ offering? |
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Definition
| $50M or less in any 12 month period. Circular instead of prospectus. |
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Term
| The 33 ACT/ T/F an investment company is an accredited investor. |
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Definition
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Term
| The 33 ACT/ T/F an investment advisor is automatically considered an accredited investment advisor under the 33 ACT. |
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Definition
| False. Investment company yes, but not adviser. |
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Term
| The 33 ACT/ How is a BD that is a member of a syndicate compensated? |
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Definition
| Through the underwriting spread, not commissions. |
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Term
| The 33 ACT/ Members of underwriting syndicate must be paid in how many days? |
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Definition
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Term
| The Securities Exchange Act of 34/ What do transfer agents do v. what clearing agencies? |
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Definition
| Transfer agents cancel all certificates and issue new ones. Transfer agents do not include clearing agencies. Clearing agencies handle the processing of settlements of securities trades. A registrar maintains the stock record book and must account for all shares. |
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Term
| The Securities Exchange Act of 34/ Does SEC have jurisdiction over national Banks? |
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Definition
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Term
| The Securities Exchange Act of 34/ What are terms of commissioners? |
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Definition
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Term
| The Securities Exchange Act of 34/ If you become the owner of more than X% outstanding stock listed on a national exchange when must you report to SEC? |
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Definition
| More than 5%, report in 10 days. |
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Term
| The Securities Exchange Act of 34/ What percent is considered an "insider" or principal stock holder? |
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Definition
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Term
| The Securities Exchange Act of 34/ Who sets the rules for extension of credit? |
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Definition
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Term
| The Securities Exchange Act of 34/ T/F: Market makers MUST be willing to buy and sell from their own accounts every day. |
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Definition
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Term
| The Securities Exchange Act of 34/ If you want to participate in a private securities transaction, you must: |
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Definition
1. Give written notice
2. Obtain written approval
3. BD supervises and records |
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Term
| Investment Company Act of 1940/ What are the types of investment companies? There are three. |
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Definition
1. Face Amounts
2. UITs
3. Management companies
a. Open-end investment company
b. when investment company shares are selling at a discount to the NAV, the fund is automatically closed-end. |
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Term
| Investment Company Act of 1940/ What must investment companies obtain majority shareholder approval for? |
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Definition
1. Any deviation of investment objective;
2. Using fund assets to pay for the cost of distributing fund shares e.g. 12b-1 fees)
3. Compensation agreements between fund and IA |
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Term
| Investment Company Act of 1940/ If there is a compensation agreement between an investment company and an IA, what does it create? |
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Definition
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Term
| Investment Company Act of 1940/ A compensation agreement between an IA and an investment company must be in writing and needs shareholder approval when? |
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Definition
| It can't continue more than 2 years without shareholder approval. It also needs approval of board of directors. |
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Term
| Investment Company Act of 1940/ If an investment company wants to own more than XX% of the shares of another fund, it needs SEC approval. |
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Definition
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Term
| Investment Company Act of 1940/ Investment companies must send reports to shareholders: a. monthly; b. semi-annually; c. annually; d. quarterly. |
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Definition
| b. semi-annually. Must include balance sheet, income statement, and list of securities owned by company. |
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Term
| Investment Company Act of 1940/ Not more than XXX% of a mutual fund's board of directors may be considered "interested persons." |
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Definition
| 60%. That means 40% must be uninterested. |
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Term
| Investment Company Act of 1940/ What does a global fund include? This is a trick questions. |
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Definition
| Both foreign and domestic issues. |
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Term
| Investment Company Act of 1940/ Offering price is = to what??? |
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Definition
| Net Asset Value + Sales Charge = Offering Price |
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