10 Questions
- In which of the following circumstances has John, employed at AAA Securities Corporation, made an offer as defined in the USA?
I. John calls a long-standing client, Brenda, to indicate that a security on his firm's restricted list is suitable for her portfolio. John indicates that he cannot sell the securities unless Brenda requests them on an unsolicited basis. Brenda considers making the purchase but ultimately declines.
II. John discovers that Brenda has inherited shares in a manufacturing firm trading en the New York Stock Exchange, and suggests that she sell them to him in a private transaction in which no commission would be charged.
III. John owned XYZ securities for several years and decided to transfer them to his college's endowment fund in lieu of giving a cash gift. He then took a tax deduction for the value of the securities transferred.
IV. Mr. Baxter, as a reward for the years of John's service as his agent, transferred $5,000 worth of XYZ Corporation securities to John, claiming the transfer as a business expense on his tax form.
I and Il
- An agent with a broker-dealer is suddenly called out of town on a personal family matter. While away, the agent's
untegistered sales assistant receives a phone call from an existing client wishing to purchase 200 shares of a listed
stock. What would be the most appropriate action for the sales assistant to take?
Route the call to a licensed agent in the office
- Under the Uniform Securities Act, Which of the following agents are in violation of the act?
I. An agent persuades a client to cosign for a loan and does not disclose that he is facing financial difficulties
II. An agent's customer instructs her to buy shares in ABC Pharmaceuticals. ABC is experiencing financial troubles, so the agent buys shares in XYZ Health Care instead
III. An agent purchases shares of a new issue and hopes to cause the price of the shares to rise by recommending that all her clients purchase the stock. She does not tell clients that she owns the stock
1, Il and Ill
- The Uniform Securities Act provides an exemption from registration for certain securities and for certain transactions.
However, the Administrator is not empowered to deny an exemption from state registration to
I. U.S. government securities
II. private placement transactions
III. a transaction with an insurance company
IV. municipal bonds issued by another state
I and IV
- An individual living in this state would like to become registered as an agent for a broker-dealer. Which of the following conditions must be met?
I. The applicant must be eligible to register in this state.
II. The broker-dealer selected must be registered in this state.
III. The applicant must meet minimum net worth requirements.
IV. The individual must be registered as an agent in at least one other siate.
I and Il
- Under the Uniform Securities Act, all of the following are exempt from registration EXCEPT
common stock only sold intrastate
- According to the Uniform Securities Act an investment adviser may have custody of a customers funds and SECURITIES IF
the Administrator has been informed of the custody
- Under the USA, which of the following is considered a broker dealer in a state?
XYZ broker-dealer with an office in the state whose only clients are insurance companies
- Under the Uniform Securities Act, the term "nonissuer" refers to
a person other than the issuer
- Which of the following regarding the registration of investment advisers and their representatives is TRUE?
ABC Advisers, Inc., registered with the Administrator, employs an investment adviser representative who left the employment of another investment advisory firm six months ago. ABC must notify the Administrator of this association promptly.
Study Notes
Circumstances of Making an Offer
- John, employed at AAA Securities Corporation, makes an offer when he discovers a long-standing client, Brenda, has inherited shares in a manufacturing firm trading on the New York Stock Exchange, and suggests selling them to him in a private transaction with no commission.
- However, John does not make an offer when he informs Brenda that a security on his firm's restricted list is suitable for her portfolio, but only if she requests it on an unsolicited basis.
- John also does not make an offer when he transfers XYZ securities to his college's endowment fund in lieu of a cash gift and claims a tax deduction for the securities' value.
Actions of a Sales Assistant
- If an agent is called out of town, their unregistered sales assistant should take a message and not accept an order from an existing client wishing to purchase shares of a listed stock.
Violation of the Uniform Securities Act
- An agent violates the act if they persuade a client to cosign a loan without disclosing their financial difficulties.
- An agent also violates the act if they purchase shares of a new issue, recommend the stock to clients, and fail to disclose their ownership.
Exemptions from Registration
- The Uniform Securities Act provides exemptions from registration for certain securities and transactions, but the Administrator cannot deny an exemption for U.S. government securities, private placement transactions, transactions with an insurance company, or municipal bonds issued by another state.
Registering as an Agent
- To become registered as an agent, an individual must be eligible to register in the state, their broker-dealer must be registered in the state, and they must meet minimum net worth requirements.
- Registration in at least one other state is not required.
Exemptions from Registration
- Under the Uniform Securities Act, all of the following are exempt from registration, except for investment advisers who have custody of customers' funds and securities.
Definition of a Broker-Dealer
- A person is considered a broker-dealer in a state if they are engaged in the securities business and are not exempt from registration.
Definition of a Nonissuer
- Under the Uniform Securities Act, a "nonissuer" refers to a person who is not an issuer of securities.
Registration of Investment Advisers
- The registration of investment advisers and their representatives requires that the adviser must be registered with the state, and their representatives must also be registered with the state.
Test your understanding of offer definitions in the context of USA securities regulations. Determine in which scenarios John, employed at AAA Securities Corporation, has made an offer as defined by the law.
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