Question 1

Julia Hasty has recently applied with the Administrator to be a registered investment adviser in the state. Eager to open her new business, she has business cards printed that indicate that she is a "state-registered" investment adviser and visits some local businesses, asking them for permission to put some of her cards in their waiting rooms. Has Julia violated any of the provisions of the Uniform Securities Act by distributing her business cards?

Accepted Answer

Yes. Julia has violated a provision of the Uniform Securities Act by distributing business cards that indicate she is a "state-registered" investment adviser because she has not yet received notification of the acceptance of her application by the state Administrator. The filing of an application for registration is not the same as registration, and the placement of the cards is, at this early point, false advertising.

Question 2

Ari Gaunt is employed by a small state-registered broker-dealer and has recently received notification that his application to be a registered agent of the state has been accepted. Now that he is licensed to execute transactions for the firm's clients, Ari has a batch of business cards printed up, with a picture of himself on the right-hand side of the card. Underneath the picture is the caption, "State-Approved Agent." Will Ari be violating any securities laws if he distributes these business cards?

Accepted Answer

Yes, Ari will be violating a securities law if he distributes the business cards because the cards suggest he has been approved by the state Administrator. The Uniform Securities Act specifically states that the effective registration of a person does not mean that the Administrator has "given approval to" that person. Any statement to this effect is considered an unlawful representation.

Question 3

Which of the following is not in itself a reason for the Administrator to deny, suspend, or revoke the license of a person?

Accepted Answer

An Administrator may not deny, suspend, or revoke the license of a person simply because the applicant has never before worked in the securities industry if that person has received the training necessary. The Uniform Securities Act specifically states that the order cannot be entered ". . .solely on the basis of lack of experience if the applicant or registrant is qualified by training, knowledge, or both."

Question 4

Once a person has filed an application with the Administrator, and in doing so has truthfully disclosed every material fact, how long does the Administrator have after the effective date of the registration to commence a proceeding to deny, suspend, or revoke that person's license based on those facts?

Accepted Answer

If a person has appropriately and truthfully disclosed every material fact on its application for registration, the Administrator has 90 days after the registration becomes effective to commence a proceeding to deny, suspend, or revoke the license. If the Administrator has known about the fact for longer than this, he may not begin a proceeding against that person according to the Uniform Securities Act.

Question 5

A broker-dealer cannot legally be

Accepted Answer

A broker-dealer can be a partnership, an individual, or a sole-proprietorship under the guidelines of the Uniform Security Act.

Question 6

Harry Lange manages the investment portfolio for the Fidelity Magellan Mutual Fund. Mr. Lange is a(n)

Accepted Answer

If Harry Lange is managing the investment portfolio of Fidelity Magellan Mutual Fund, he is an investment adviser. He is making the investment decisions and receives a percentage of the assets under management as his compensation. He is not selling the mutual fund or the fund's investors anything, which is the job of a broker-dealer or an agent. Fidelity Magellan is the investment company.

Question 7

An investment adviser
I. provides investment advice to clients.
II. sells securities to clients.
III. buys and sells securities in their clients' accounts for the clients.

Accepted Answer

An investment adviser provides investment advice to clients and may also buy and sell securities in their clients' accounts for the clients. He does not, however, sell securities to his clients.

Question 8

After passing the necessary exams, you must submit which of the following to the state Administrator when applying for registration as an agent?

Accepted Answer

When applying for registration as an agent, you will need to submit a U-4. No photograph is necessary. Form ADV is used to register as an investment adviser, and only broker-dealers and investment advisers must meet the state's minimum net capital requirement.

Question 9

Bootstraps, Inc. is a family-owned business that has experienced enormous growth in the last couple of years. The business needs more cash to support this growth and has decided to issue some promissory notes, each with a face value of $5,000, for sale to the general public. The firm plans to hire three individuals to help them sell these notes. These individuals will earn a commission based on the notes they sell. Given these facts, which of the following is true?

Accepted Answer

If Bootstraps hires three individuals to sell promissory notes to the public, both the notes and the three individuals hired to sell the notes must be registered with the state. The promissory notes are securities and, therefore, are required to be registered with the state before they can be offered for sale. The three individuals are working for the issuer, Bootstraps, to sell its securities to the public. This makes them agents, according to the Uniform Securities Act, and they must be registered as agents with the state.

Question 10

Skip is a registered agent with state. He recently quit his job with Venus Broker-Dealers to become affiliated with Mars Broker-Dealers. Which of the three entities must report this change to the state Administrator?

Accepted Answer

When Skip leaves one broker-dealer and signs on with another, all three entities-Skip, Mars, and Venus-must report this to the state Administrator. Under the Uniform Securities Act, when an agent leaves a broker-dealer, both the agent and the broker-dealer are required to report this to the state Administrator, and when an agent begins employment with a new broker-dealer, both the agent and the new broker-dealer must report it.

Question 11

The net worth of a broker-dealer has fallen below the minimum net capital requirement specified by the state in which the broker-dealer is registered. This broker-dealer must notify the Administrator of this fact

Accepted Answer

When the net worth of a broker-dealer falls below the minimum net capital requirement specified by the state, the broker-dealer must notify the Administrator of this fact by the close of business on the next business day according to the Uniform Securities Act.

Question 12

Barring no irregularities (such as a license revocation by another state last year), after you have filed for registration as an agent, your license will be granted within

Accepted Answer

Barring no irregularities, after you have filed for registration as an agent, you should receive your license within 30 days. More specifically, your license will be approved "no later than noon of the 30th day after filing."

Question 13

White and Associates is an investment adviser registered in the state of Kentucky and, as such, is meeting Kentucky's minimum net capital requirement for investment advisers. The firm recently registered with the state of Virginia and has opened an office there. Virginia has a significantly higher net capital requirement for its investment advisers. Which of the following statements is true?

Accepted Answer

Since S. White is already registered in the state of Kentucky and meeting the net capital requirement of that state, the Investment Advisers Act of 1940 stipulates that Virginia cannot require a higher minimum net capital. The Act states that if an investment adviser is registered in one state and is meeting its net capital requirement, a second state cannot impose a higher net capital requirement on the investment adviser.

Question 14

Which of the following statements is false?

Accepted Answer

"A state cannot require a higher minimum net capital for investment advisers than the amount specified by the Investment Advisers Act of 1940" is a false statement. The Investment Advisers Act of 1940 does not specify a minimum net capital requirement. The Act simply indicates that if an investment adviser is already registered in one state and meeting that state's minimum net capital requirement, a second state can't impose a higher net capital requirement on it.

Question 15

Which of the following entities are subject to post-registration provisions?
I. broker-dealers
II. agents
III. investment advisers
IV. investment adviser representatives

Accepted Answer

Only selections I and III are subject to post-registration provisions. Broker-dealers and investment advisers can be required to file advertising materials and financial reports with the Administrator, as specified by the Administrator. They are also required to keep records to the specifications of the Administrator. These records will include items such as client e-mails, client letters of complaint, and advertising brochures and must be kept for three years.

Question 16

Fly-By-Night Investment Advisers has closed its doors. Which of the following statements is true?

Accepted Answer

Even after Fly-By-Night has closed its doors, it is required to preserve and maintain all records, including client transactions and communications, advertising materials, and the financial statements of the business for five years, under the guidelines of the Uniform Securities Act.

Question 17

You have passed the necessary exams (congratulations!) and are applying for registration as a securities agent. It is already the end of September. Therefore, you must pay

Accepted Answer

Once you have passed the necessary exams and are applying for registration as an agent, you must pay the full annual fee and your license will expire on December 31st of the current year, no matter how late in the year it is.

Question 18

To continue operating as an agent, broker-dealer, investment adviser, or investment adviser representative next year, you must pay the filing fee to renew your license with the state Administrator by

Accepted Answer

To continue operating as an agent, broker-dealer, investment adviser, or investment adviser representative next year, you must pay your filing fee to renew your license by December 31st of this year. Otherwise, your license will expire. There is no grace period.

Question 19

Bigwig, CEO of HiGrowth Corporation, meets with the president of BigFee Investment Bankers and arranges for BigFee to underwrite an Initial Public Offering (IPO) for the firm. When the IPO comes to market, GetErDone Broker-Dealers is part of the selling group, which handles the sale of the stock to the public. In this scenario, which party is acting as a dealer?

Accepted Answer

BigFee Investment Bankers is acting as a dealer. In underwriting the securities, the firm is purchasing them from HiGrowth and selling the securities to the public. If the securities don't sell for the amount that BigFee thinks they can, BigFee takes the loss as owner of the securities.

Question 20

Bigwig, CEO of HiGrowth Corporation, meets with the president of BigFee Investment Bankers and arranges for BigFee to underwrite an Initial Public Offering (IPO) for the firm. When the IPO comes to market, GetErDone Broker-Dealers is part of the selling group, which handles the sale of the stock to the public. In this scenario, which party is the broker?

Accepted Answer

GetErDone Broker-Dealers is the broker in this scenario. GetErDone is simply finding buyers for the securities and receives a commission for doing so. GetErDone is not itself purchasing the securities in the scenario described. It would be considered unethical for the broker-dealer to do so since they are required to make a bona fide public offering of all of the securities allotted to them for distribution under NASAA Model Rules.

Quiz 4: Uniform Securities Act USA and State Registration Requirements