Which of the following would not fall under the classification of “institutional investor”?
C
Explanation:
Nuering Investment Advisers would not fall under the classification of “institutional investor.”
Institutional investors are defined as banks, insurance companies, mutual funds, some pension plans,
and broker-dealers registered under the Securities Exchange Act of 1934. Investment advisers are not
part of this group.
Which of the following is an example of a non-issuer transaction?
B
Explanation:
When Jose buys a 10-year bond that has 6 years remaining to maturity, it is a non-issuer transaction
since he is buying it in the secondary market from another investor, and Progress Energy does not
benefit from the transaction. If a firm receives money when its securities are sold, it is considered an
issuer transaction; otherwise it is a non-issuer transaction. When Progress Energy originally issued
the bond, it had ten years to maturity, and Progress Energy received the proceeds from the bond
issue; that was an issuer transaction. When Jose buys the bond, another investor is receiving the
proceeds. When IBM sells new bonds, regardless of whether it is to the general public or to an
institutional investor, IBM receives the proceeds from the transaction, so it is an issuer transaction.
Similarly, when a firm that is already publicly held, like Google, sells more shares, the firm receives
money from the sale, just as when a firm that is going public for the first time, like NewCorp, receives
the proceeds generated through the IPO. Those are examples of issuer transactions.
Which of the following is not considered to be a security, as defined by the Uniform Securities Act
(USA)?
D
Explanation:
The Uniform Securities Act excludes annuity contracts wherein an insurance company promises
either to pay a fixed sum, either in a lump amount or through periodic payments, from its definition
of a security. Debentures, CDs, and option contracts are all classified as securities under the USA.
Which of the following scenarios would not be considered a “sale,” as defined by the Uniform
Securities Act (USA)?
I . Yoshito owned shares of Minnow Corporation and received shares of Whale Corporation from
Whale when it merged with Minnow.
II . Olivia’s uncle, an agent with SecureMoney Brokers, sold Olivia ten call options on the stock of
Microsoft.
III . Hans purchased a bond of Indebted Corporation that had detachable warrants and subsequently
sold the warrants.
IV . Tom pledged some shares of stock he owned personally to secure a business loan for his
company.
C
Explanation:
Neither Scenario I nor Scenario IV describes sales as defined by the USA. When an investor receives
securities from Company X when Company X merges with a company in which the investor owns
stock, Company X is not considered to have sold those securities to the investor. Likewise, when a
person uses securities he owns as collateral for a loan, the USA does not consider this to be a sale of
the securities.
Jeremy Sly considered himself somewhat of an inventor. The only problem was that his day job
interfered with his opportunity to exercise his creativity. He came up with a plan to get outside
investors to support his inventive activities. To this end, he produced and distributed a brochure
advertising partnership interests with a guaranteed return on investment of at least 15% after the
first 12 months, based on what he had allegedly generated from his other (non-existent) inventions.
Given these facts, is Jeremy guilty of any security violations under the Uniform Securities Act (USA)?
D
Explanation:
Yes. Jeremy is guilty of security violations under the Uniform Securities Act when he provides
misleading information when offering securities for sale, even if no securities are actually sold.
Partnership interests fall under the definition of securities, and Jeremy’s claim to have generated a
return of at least 15% on other inventions that he never created is an absolute falsehood.
Although an Administrator has broad powers, he or she cannot:
C
Explanation:
An Administrator has broad powers, but he or she cannot deliver a judicial injunction because an
Administrator does not have the authority bestowed on a court of law. The Administrator can issue
subpoenas to require attendance, participate in evidence gathering, and formulate rules and orders.
“Federal covered securities” were defined and exempted from state registration requirements by
the:
A
Explanation:
The National Securities Markets Improvement Act of 1996 defined “federal covered securities” and
exempted them from state registration requirements. The Gramm-Leach-Bliley Act focused on
financial institutions and provided for their registration as broker-dealers under certain conditions.
The National Conference of Commissioners on Uniform State Laws (NCCUSL) is the organization that
drafted the Uniform Securities Act, which is not comprised of actual laws itself, but is, instead, just a
guideline for each state to use when formulating its own securities laws.
Rich Quick is a broker-dealer licensed in the state of Massachusetts and has offices only within the
state. Two of Rich Quick’s clients regularly vacation in Florida during the winter months, and Rich
Quick executes trades for them when they call him from out-of-state.
Based on these facts,
I . Rich Quick needs to register as a broker-dealer in the state of Florida as well.
II . Rich Quick needs to register only as an agent in the state of Florida.
III . Rich Quick needs to establish an office in the state of Florida in order to transact business.
IV . Rich Quick need not register in Florida.
D
Explanation:
Based on the facts provided, Rich Quick need not register in Florida since he has no offices in the
state of Florida, and he is conducting business for existing clients who are merely vacationing in
Florida and are not residents of the state.
Most individual state securities laws today are based on:
A
Explanation:
Most individual state securities laws continue to be based on the 1956 Uniform Securities Act.
Although the Uniform Securities Act was revised in 1985, 1988, and 2002, none of these revisions
have been widely incorporated by the individual states. The National Securities Markets
Improvement Act of 1996 dealt mainly with the definition of federal covered securities and more
efficient management of mutual funds. The focus of the Gramm-Leach-Bliley Act of 1999 was on
financial institutions.
BigCash Broker-Dealers is registered in the state and is in the process of purchasing a smaller broker-
dealer, Target Investments, as a subsidiary. Target Investments is also registered in the state.
After completing the purchase, what actions must BigCash take regarding registration of its new
subsidiary?
B
Explanation:
After completing the purchase, BigCash will have to file a new registration application for its new
subsidiary, but BigCash can utilize the remainder of any annual filing fees that Target Investments
had paid for the year. Although registration applications are never transferable, annual filing fees are.