NASAA Series 63 — All Questions

A registered investment adviser is reorganizing its advisory business into a new corporation that does not exist yet. How does the Act allow the successor to be registered?

• a.The predecessor's registration continues in the successor's name, with notice to the Administrator within 30 days of the closing
• b.The adviser may file an application for the successor before it exists, for the rest of the year and with no filing fee✓
• c.The successor files its own application once it is formed and pays a prorated fee for the months left in the calendar year
• d.The successor waits until the predecessor has withdrawn, then files a new application and pays the full annual registration fee

A registered adviser may file an application for a successor, whether or not the successor exists, for the unexpired part of the year, and no fee is charged. A prorated or full fee is not required, registration does not pass automatically to a new entity, and the predecessor need not withdraw first.Uniform Securities Act (1956, as amended by NASAA) §202(d)

Dana gives investment advice to clients from an office in State X. Her employer is headquartered in State Y and is registered with the SEC, not with any state. Must Dana register in State X?

• a.Yes, because a representative of a federal covered adviser with a place of business in the state must register unless exempt✓
• b.Yes, but only if she advised more than five clients in State X during the preceding twelve-month period
• c.No, as long as her employer has made its notice filing and paid the notice-filing fee to State X's Administrator
• d.No, because the employer's SEC registration extends to all of its employees in every state where the firm has advisory clients

The notice filing covers the firm, not its people: an investment adviser representative with a place of business in the state must register there even when the employer is a federal covered adviser. SEC registration of the firm does not pre-empt that, and the five-client de minimis test applies to out-of-state advisers with no place of business in the state.Uniform Securities Act (1956, as amended by NASAA) §201(d); §401(g)

A broker-dealer organized as a partnership has just become registered in the state. One of its partners also takes orders from the public. What must that partner do before taking orders?

• a.Nothing more, provided he owns at least 10% of the partnership capital and has passed the qualifying examination for agents
• b.File his own application, because every individual who effects transactions for the public needs a separate agent registration of his own
• c.Nothing more, because the firm's registration automatically covers any partner, officer or director who acts as an agent✓
• d.File his own application, which takes effect on filing and carries no fee because the partnership has already paid its own

A broker-dealer's registration automatically registers its partners, officers and directors who act as agents, so no separate filing is needed. The ownership threshold and exam condition are not part of the rule, and a same-day, no-fee application is not an alternative route.Uniform Securities Act (1956, as amended by NASAA) §202(a)

A registered investment adviser with discretionary authority over client accounts has financial resources well above the minimum the Administrator has set. The Administrator nevertheless asks it to post a bond. What is the Administrator's position under the Act?

• a.The Administrator may not require it, because no bond may be required of a registrant whose financial minimum is exceeded✓
• b.The Administrator may require it, in an amount capped at the total advisory fees the firm collected in the prior year
• c.The Administrator may require it, because discretionary authority over client accounts is by itself enough to justify a bond
• d.The Administrator may require it, but must accept a deposit of cash or securities in place of the bond if the adviser offers one

Bonds may be required of registrants with custody or discretion, but not of a registrant whose financial minimum exceeds the amount the Administrator requires. A cash deposit in lieu of a bond is the alternative only where a bond may be required at all, and the fee cap is not in the statute.Uniform Securities Act (1956, as amended by NASAA) §202(f)

Four months after an investment adviser's registration became effective, one of its officers is convicted of a misdemeanor involving securities. What must the adviser do about the application it has on file?

• a.Disclose it at the Administrator's next scheduled examination, which satisfies the duty to update
• b.Send notice to the SEC only, because the adviser's registration documents are a Form ADV filing
• c.File a correcting amendment promptly, since the information on file is now materially incomplete✓
• d.Wait for the December 31 renewal, when the next application will bring the record up to date

A registrant must promptly file a correcting amendment when a document on file becomes materially inaccurate or incomplete. Waiting for renewal or an exam leaves a misleading record on file in the meantime, and telling only the SEC does not satisfy the duty owed to the state Administrator.Uniform Securities Act (1956, as amended by NASAA) §203(d)

Examiners from the Administrator's office arrive unannounced at a registered broker-dealer and ask to inspect its required books and records. The manager refuses, saying that the Administrator must first serve a subpoena. Is the refusal correct?

• a.No, but only after the Administrator has given the firm 15 days' written notice of the planned examination
• b.No, required records are open to reasonable examination at any time; a subpoena is a separate investigative tool✓
• c.Yes, unless the Administrator's examiners are located in the same state in which the firm keeps its records
• d.Yes, an on-site inspection requires a subpoena once a firm has been registered in the state for more than one full year

Registrants' records are subject to reasonable periodic or special examination at any time, within or outside the state, without a subpoena; subpoenas under the investigation section serve a different purpose. The one-year rule, the in-state condition, and a 15-day notice requirement are not part of the examination power.Uniform Securities Act (1956, as amended by NASAA) §203(e); §407(b)

An outside director of a registered broker-dealer votes on firm policy at board meetings but has no contact with customers and never handles an order. Under the Act, is she an agent?

• a.Yes, unless the firm is a partnership rather than a corporation, in which case partners and directors are excluded
• b.No, but only while she owns less than 10% of the firm's voting stock, since a larger holder is treated as an agent
• c.Yes, because a director shares in the control of the firm's registered business and so stands in an agency relationship
• d.No, a director is an agent only if she otherwise represents the firm in effecting or attempting to effect transactions✓

The definition says that a partner, officer or director is an agent only if he or she otherwise comes within the definition by representing the firm in securities transactions. Title alone does not make someone an agent, the form of organization does not change the analysis, and ownership percentage is not part of the test.Uniform Securities Act (1956, as amended by NASAA) §401(b)

On Monday a registered broker-dealer hires a salesperson and files her state application the same morning. On Tuesday she takes a customer's order while her application is still within its 30-day period. Which statement is accurate?

• a.Only the salesperson has violated the Act, because the firm's own registration covers the orders its employees take
• b.Neither has violated the Act, because her application was already on file with the Administrator before she took the order
• c.Neither has violated the Act, because a new hire may take orders under a principal's supervision for up to 30 days
• d.Both the firm and the salesperson have violated the Act, because she was not yet registered when she took the order✓

It is unlawful to act as an agent unless registered, and it is unlawful for a broker-dealer to employ an agent who is not registered. Filing alone does not make the registration effective, and the Act contains no supervised trial period for new hires.Uniform Securities Act (1956, as amended by NASAA) §201(a) and (b)

Under the Act's limited registration for Canadian broker-dealers with no U.S. office, which client may such a firm serve in the state?

• a.A Canadian-born resident of the state who buys Canadian stocks in an ordinary taxable margin account at the firm
• b.A U.S. citizen who opened a taxable account with the firm online after relocating to the state from another state
• c.A person from Canada who is temporarily resident in the state and had a relationship with the firm before arriving✓
• d.A Canadian visitor staying in the state for under 183 days who had no prior account at the Canadian firm

The limited registration covers temporary residents with a pre-existing relationship with the firm, and residents whose trades are in a Canadian self-directed tax-advantaged retirement plan. A new U.S. customer, an ordinary taxable account, or a first-time account opened by a visitor falls outside it.Uniform Securities Act (1956, as amended by NASAA) §201-A(a)

Mark sells a monthly newsletter by subscription with general market commentary. He never tailors any of it to a subscriber's finances. For purposes of the Act, Mark is:

• a.Excluded only if he has fewer than six subscribers in the state during any period of twelve consecutive months
• b.An investment adviser, unless he is also a licensed accountant or attorney whose advice is incidental to that practice
• c.An investment adviser, because he receives compensation for giving opinions about the value of securities
• d.Excluded from the definition, because the newsletter does not advise on each subscriber's own situation✓

A publisher of a bona fide newsletter that does not render advice on the specific investment situation of each client is excluded. Compensation alone does not make someone an adviser. The accountant and lawyer exclusion is a separate one, and the five-client test belongs to out-of-state advisers.Uniform Securities Act (1956, as amended by NASAA) §401(f)

At a state-registered investment adviser, a senior principal makes no recommendations and manages no accounts herself, but she supervises the employees who do. Is she an investment adviser representative?

• a.No, because she personally neither advises clients nor manages any client's account or portfolio
• b.No, because supervisory principals are covered by the investment adviser firm's own state registration
• c.Yes, but only if she supervises more than five advisory employees at the firm at any one time
• d.Yes, because supervising employees who advise clients, manage accounts or solicit clients is within the definition✓

The definition of investment adviser representative includes a person who supervises employees performing advisory, account-management or solicitation functions. Not giving advice herself is therefore irrelevant, firm registration does not substitute for hers, and there is no five-employee threshold.Uniform Securities Act (1956, as amended by NASAA) §401(g)

An Administrator requires a written examination for investment adviser representative applicants but wants to excuse holders of a recognized financial-planning designation. May the Administrator do so?

• a.Yes, but only through a court order that the Administrator obtains on a petition to the court
• b.Yes, but only for designation holders who also have at least five years of advisory experience
• c.Yes, by rule or order, if the exam is found unnecessary to protect advisory clients✓
• d.No, the written examination is a statutory requirement imposed on every applicant for registration

The Administrator may require an exam by rule and may waive it for a person or class of persons when it is not needed for the protection of advisory clients. The Act does not itself mandate the exam, requires no court order for a waiver, and sets no five-year experience condition.Uniform Securities Act (1956, as amended by NASAA) §204(b)(6)

An agent whose registration takes effect on October 20 never files a renewal. On what date does the registration lapse?

• a.On December 31 of the following year, after one full calendar year as a registrant
• b.On December 31 of the same year in which the registration became effective✓
• c.On October 19 two years later, the term of an agent's first registration
• d.On October 19 of the following year, one year after the effective date

Every registration expires on December 31 unless renewed, regardless of the date it became effective. It does not run for a year from the effective date, it does not extend through the next calendar year, and there is no longer first-term period.Uniform Securities Act (1956, as amended by NASAA) §201(e)

From her office in State A, an agent mails a sales letter describing a private placement to residents of State B. She is not registered in State B. Where is the offer made, for purposes of the Act?

• a.In neither state until an offeree signs and returns a subscription agreement accepting the offer
• b.Only in State A, where the letter originated, because she was never physically present in State B
• c.In State B as well as State A, because an offer directed into a state and received there is made in that state✓
• d.Only in State B, where the offerees live, because the recipient decides in which state an offer is made

An offer is made in a state when it originates there or is directed there and received, whether or not either party is present. The letter therefore reaches both states. Acceptance matters only to when an offer to buy is accepted, not to whether an offer to sell has been made.Uniform Securities Act (1956, as amended by NASAA) §414(a), (c)

A regular, paid-circulation magazine is printed in State D. Over the past twelve months, 70% of its copies were distributed outside State D. A securities advertisement in it is read by State D residents. Has an offer been made in State D?

• a.Yes, because the exclusion applies only when at least 90% of the circulation is outside the publisher's state
• b.No, because more than two-thirds of its circulation was outside the state during the past twelve months✓
• c.No, but only if the advertisement itself states that the securities are not registered in State D
• d.Yes, because the magazine is published in State D, where the advertisement was printed and first circulated

A publication of general, regular and paid circulation does not make an offer in the state if it is published elsewhere, or if it is published in the state but more than two-thirds of its circulation was outside the state during the past twelve months. There is no 90% test and no disclaimer requirement.Uniform Securities Act (1956, as amended by NASAA) §414(e)

A dentist made about forty purchases and sales in her own brokerage account over the past twelve months. She used only her own money, has no customers and holds herself out as nothing. Must she register as a broker-dealer in this state?

• a.No, an ordinary investor who trades often with her own money is not in the business of effecting securities transactions.✓
• b.Yes, because the definition expressly covers a person who effects transactions for her own account, whatever the trading volume.
• c.Yes, because more than fifteen transactions for her own account in twelve months makes a person a broker-dealer.
• d.No, but only if every one of her orders passes through a registered broker-dealer that takes on her registration duty.

Section 401(c) covers a person engaged in the business of effecting transactions for others or for her own account, and the Official Comment separates that person from an ordinary investor who buys and sells with some frequency. The same comment says that more than fifteen own-account transactions in twelve months, made in the course of ordinary investment, do not alone make someone a broker-dealer. The dentist serves no one else, so she is an investor. Her routing orders through a firm is not what keeps her out of the definition.Uniform Securities Act §401(c) and Official Comment

Harbor Securities Inc. regularly buys municipal bonds for its own inventory and resells them to retail buyers at a markup. It never executes an order as agent for a customer. Is Harbor a broker-dealer under the Act?

• a.Yes, regularly trading for its own account makes it a broker-dealer even if it never acts for a client as agent.✓
• b.No, because the definition reaches only a firm that effects transactions for the account of others as their agent.
• c.No, because municipal bonds are exempt securities and a firm dealing only in exempt securities need not register.
• d.Yes, but only if it also holds itself out to the public as a market maker in the bonds it sells from inventory.

Section 401(c) covers a person in the business of effecting transactions in securities for the account of others or for his own account, so a regular dealer qualifies without ever acting as agent. The municipal bond exemption in Section 402(a) removes the securities from the registration and filing requirements for securities. It does not relieve the dealer of the duty in Section 201(a) to be registered. Market-maker status is not a condition of the definition.Uniform Securities Act §401(c); §201(a)

Priya runs a securities brokerage as a sole proprietorship under her own name, takes customer orders herself and answers to no other firm. How does the Act classify Priya?

• a.As neither until she hires employees, because the broker-dealer definition applies only to firms with more than one person.
• b.As an agent, because every individual who takes customer orders in the state is an agent regardless of whom she works for.
• c.As a broker-dealer, because an agent is an individual other than a broker-dealer who represents a firm, and she represents none.✓
• d.As an agent of her own business, because a sole proprietor is treated as represented by the proprietorship she owns.

Section 401(b) defines an agent as an individual other than a broker-dealer who represents a broker-dealer or issuer, and the Official Comment ties agency to acting subject to the control of the firm represented. Priya acts for no one, so she is herself a broker-dealer in the business of effecting transactions for others. Section 401(c) applies to any person, which includes an individual, and it contains no minimum size.Uniform Securities Act §401(b), §401(c)

A national bank forms a separately incorporated subsidiary that sells securities to the public for commissions. The bank itself sells none. Is the subsidiary excluded from the broker-dealer definition because of its parent?

• a.No, because the exclusion covers only state-chartered banks, so a national bank's securities business must register.
• b.No, the exclusion names the bank, and a separately incorporated subsidiary is another person outside it.✓
• c.Yes, because a wholly owned subsidiary of an excluded bank takes on the exclusion whenever the parent holds all its stock.
• d.Yes, but only if the subsidiary sells solely to customers who already hold deposit accounts at the parent bank.

Section 401(c)(3) excludes a bank, savings institution or trust company, and the exclusion attaches to that institution. A separately incorporated company is a different person, so a subsidiary that sells securities for commissions is a broker-dealer unless it has an exclusion of its own. The parent's charter type plays no part, and a test based on the customer base does not appear in the definition.Uniform Securities Act §401(c)(3)

A retired lawyer is trustee of one family trust. A few times a year, without pay, he buys and sells stocks for it. Is he a dealer or a broker under the Securities Exchange Act definitions?

• a.No, an individual who trades in a fiduciary capacity but not as part of a regular business falls outside both definitions.✓
• b.No, but only because he is unpaid, and a trustee who took a fee for the same trades would become a dealer or broker.
• c.Yes, because dealer status turns on holding securities in any capacity, and the exclusion covers only trades with personal funds.
• d.Yes, because the trades are for the account of the trust, a person other than himself, so he is a broker who must register.

Section 3(a)(5)(B) excludes from dealer a person who buys or sells for his own account, either individually or in a fiduciary capacity, but not as part of a regular business. Section 3(a)(4) makes a broker a person in the business of effecting transactions for the account of others. A trustee making occasional trades for a single trust is in neither business. The test is the regular business, not whether he is paid.Securities Exchange Act §3(a)(5)(B); §3(a)(4)

Marcus sells securities to the customers of Delta Securities, a registered broker-dealer. He is paid only commissions, and Delta tells him whom to call, what to offer and how to handle accounts. Is Marcus an agent or a broker-dealer?

• a.An agent only after Delta files notice that it supervises him, because supervision alone does not create agency.
• b.A broker-dealer, because an individual becomes an agent only when the firm pays him a salary rather than commissions.
• c.An agent, because he works subject to Delta's control, and the form of his pay does not change that.✓
• d.A broker-dealer, because anyone paid only commissions for effecting securities transactions is in the business himself.

The Official Comment to Section 401(b) says that whether an individual is an agent or himself a broker-dealer turns on the factors that create agency at common law, mainly whether he has consented to act subject to the firm's control. Marcus follows Delta's direction, so he is its agent. Commission pay is common for agents and neither a salary nor a notice filing is required for the status.Uniform Securities Act §401(b) and Official Comment

A corporation applies for broker-dealer registration. One investor holds all of its stock but is neither an officer nor a director, and in practice controls the company. May the Administrator require the application to show this investor's qualifications and business history?

• a.Yes, the application may call for the history of any person who controls the applicant, not only its officers.✓
• b.No, only partners, officers and directors are covered, so a shareholder outside those roles is not reached.
• c.Yes, but only if the shareholder also intends to register as an agent or to sell its securities in the state.
• d.No, ownership of the stock is disclosed on the federal form alone, and the Administrator may not ask for it again.

Section 202(a)(3) lets the Administrator require, for a broker-dealer or adviser applicant, the qualifications and business history of any partner, officer or director, any person in a similar status, and any person directly or indirectly controlling the applicant. The sole shareholder fits the last group. Agent status plays no part, and the Act does not defer to the federal form.Uniform Securities Act §202(a)(3)

A broker-dealer renewing its registration in a state is told the Administrator has issued a rule requiring a newspaper announcement of each application. Can the Administrator require this firm to publish an announcement of its renewal?

• a.No, because the Act allows publication to be required only of investment advisers and never of broker-dealers.
• b.Yes, the Administrator may require publication for any application, since the rule covers initial and renewal filings.
• c.No, the authority to require publication of an announcement applies to applicants for initial registration only.✓
• d.Yes, but only if the firm's renewal reports a change of officers or owners during the preceding year.

Section 202(a) permits the Administrator, by rule or order, to require an applicant for initial registration to publish an announcement of the application in specified newspapers in the state. It does not extend that power to renewals. The power is not limited by the type of registrant, and a change of officers does not enlarge it.Uniform Securities Act §202(a)

A broker-dealer files its application on March 1. The Administrator has not set an earlier date and no proceeding is pending. On March 20 the firm files an amendment, and the Administrator by order defers the effective date. Counting from the amendment filing, when does registration become effective?

• a.At noon on March 31, the thirtieth day after the original application was filed.
• b.At noon on April 18, the day before the thirtieth day after the amendment was filed.
• c.At noon on April 30, the thirtieth day after the month in which the amendment was filed.
• d.At noon on April 19, which is the thirtieth day after the amendment was filed.✓

Under Section 202(a) registration becomes effective at noon of the thirtieth day after an application is filed, absent a denial order or pending proceeding. The Administrator may by order defer the effective date until noon of the thirtieth day after the filing of any amendment. Thirty days after March 20 is April 19, since March has 31 days. The original filing date no longer controls once the deferral is ordered.Uniform Securities Act §202(a)

Lee applies for registration as an agent in a state where Lee's earlier registration lapsed two years ago. A consent to service of process was filed with the Administrator then. Must Lee file another consent now?

• a.Yes, because a consent stays valid for only one year after the registration it accompanied expires.
• b.No, but Lee must first file a notice that the earlier consent remains valid before the application takes effect.
• c.No, a person who filed a consent in connection with a previous registration or notice filing need not refile.✓
• d.Yes, because the earlier consent ended when the registration lapsed, a new one accompanies every initial application.

Section 202(a) requires an application to be accompanied by a consent to service of process under Section 414(g). That subsection says a person who has filed such a consent in connection with a previous registration or notice filing need not file another. The consent is irrevocable and appoints the Administrator to receive service, so it does not lapse with the registration. No separate notice is required.Uniform Securities Act §414(g); §202(a)

A registered broker-dealer moves its main office telephone line to a new number, so the number on its Form BD is no longer accurate. Under the SEC's rules, what must the firm do?

• a.Mail the correction to the SEC regional office within thirty days, because CRD handles only new applications.
• b.Report it at the next FINRA examination, because the rule requires no separate filing for minor contact details.
• c.Wait until it becomes materially inaccurate, because the rule requires an amendment only for material changes.
• d.File an amendment on Form BD promptly through the Central Registration Depository, because the rule covers any inaccuracy.✓

Rule 15b3-1(a) requires a broker or dealer to promptly file an amendment on Form BD with the Central Registration Depository, operated by FINRA, whenever information in its application is or becomes inaccurate for any reason, and paragraph (b) treats the filing as a report to the Commission. The federal rule has no materiality threshold, no thirty-day period, and no waiting for an examination, and the CRD is the channel for amendments as well as new applications.SEC Rule 15b3-1(a) (17 CFR 240.15b3-1(a))

A corporate broker-dealer is registered in a state. Its vice president, who is also a director, sells securities to customers every day. The firm's registration was effective on January 10. What must the vice president do before selling in the state?

• a.Nothing, because the firm's registration automatically registers an officer or director who is an agent.✓
• b.File a separate agent application, because every individual who sells securities must file one regardless of rank.
• c.File a separate application only if the vice president receives commissions in addition to a salary at the firm.
• d.File a separate application, because a director may be registered as an agent only after the firm's first renewal.

The last sentence of Section 202(a) provides that registration of a broker-dealer automatically constitutes registration of any agent who is a partner, officer or director, or who has a similar status. The information about such people is already in the firm's application, so the Act does not require it twice. Pay structure and renewal timing are not conditions.Uniform Securities Act §202(a)

A state-registered investment adviser already delivers a Form ADV Part 2A brochure that complies with federal law. The Administrator requires advisers to furnish certain information to clients. May the brochure satisfy the state requirement?

• a.Yes, a brochure that complies with federal law automatically satisfies every state client-disclosure requirement.
• b.No, a brochure may be used only by advisers that are also federal covered advisers notified in this state.
• c.No, the Act requires client information in a form specific to the state and forbids substituting the federal brochure.
• d.Yes, to the extent the Administrator so determines, federally compliant information may satisfy it in whole or in part.✓

Section 203(b) lets the Administrator require advisers to furnish information to clients as necessary or appropriate in the public interest, and says that, to the extent he determines in his discretion, information that would comply with the Investment Advisers Act and its rules may be used in whole or part satisfaction. The use is therefore neither automatic nor forbidden. Federal covered adviser status is not required.Uniform Securities Act §203(b); §202(a)(6)

A broker-dealer's application stated that no officer had ever been enjoined. Three weeks after the application became effective, the Administrator learns that its president was enjoined from securities conduct a year earlier. The statement was false when made. What basis does the Act give for action against the registration?

• a.A ground exists in the public interest, because the application was materially false or misleading when made.✓
• b.None, because the false statement concerned an officer rather than the firm, and the firm is judged on its own conduct.
• c.A ground exists only if the firm fails to file a correcting amendment within ninety days of the effective date.
• d.None, because the Administrator may act on an injunction only if it is issued after the registration takes effect.

Section 204(a)(2)(A) makes an application that was incomplete in any material respect, or contained a false or misleading statement of material fact as of its effective date, a ground for an order, if the order is in the public interest. The Official Comment adds that a partner's, officer's or director's disqualification can support action against the firm. The false statement existed from the start, and the ninety-day figure in Section 204 concerns something else.Uniform Securities Act §204(a)(2)(A)

Dalton & Co. is a broker-dealer whose business is exclusively intrastate, and it uses no facility of a national securities exchange. Which statement about its registration is correct?

• a.It must register with the SEC, but it needs state registration only once it opens an office across a state line.
• b.It is exempt from SEC registration and from state registration, since purely local business falls outside both statutes.
• c.It must register with the SEC, and that registration takes the place of any state registration it would otherwise need.
• d.It need not register with the SEC under Section 15(a)(1), but it must still register as a broker-dealer in its home state.✓

Section 15(a)(1) of the Securities Exchange Act excepts a broker-dealer whose business is exclusively intrastate and who uses no exchange facility from SEC registration. That exception does not touch state law, and Section 201(a) of the Uniform Securities Act still makes it unlawful to transact business in the state as a broker-dealer unless registered. Federal registration never replaces the state's, and the state's reach does not depend on an interstate office.Securities Exchange Act §15(a)(1); Uniform Securities Act §201(a)

The SEC has issued an order granting a new firm's registration as a broker-dealer. The firm has not joined a registered securities association and does not trade solely on an exchange of which it is a member. What is the status of the order?

• a.It is not effective until the firm joins a registered securities association, unless exempted from membership.✓
• b.It takes effect when issued but restricts the firm to trades through other registered broker-dealers until it joins one.
• c.It takes effect when issued, and the firm then has ninety days after that to join a registered securities association.
• d.It is not effective until the state also registers the firm, which can happen only after the firm has joined.

Section 15(b)(1) provides that the order granting registration is not effective until the broker-dealer has become a member of a registered securities association, or of a national securities exchange if it effects transactions solely there, unless the SEC has exempted the firm from membership. The statute sets no grace period and no routing restriction. State registration is a separate requirement and is not a condition for the SEC order to take effect.Securities Exchange Act §15(b)(1)

A state administrator proposes that every broker-dealer registered in the state hold net capital 25% above the SEC's minimum and file a monthly financial report the SEC does not require. May the state apply the rule to a firm registered with the SEC?

• a.No, except that the state may impose the higher capital standard on any firm that holds customer funds or securities.
• b.Yes, the power to register broker-dealers lets an administrator set higher capital standards to protect local investors.
• c.No, a state may not add capital or financial reporting requirements to those under the Securities Exchange Act.✓
• d.Yes, if the state applies the same higher capital standard to resident firms and to firms based in other states.

Section 15(i)(1) bars a state from establishing capital, custody, margin, financial responsibility, recordkeeping, bonding, or financial or operational reporting requirements for broker-dealers that differ from or add to the federal ones. Section 202(e) of the Uniform Securities Act is expressly subject to the limits of Section 15. Equal treatment of local and out-of-state firms does not cure the conflict, and holding customer property does not create an exception.Securities Exchange Act §15(i)(1); Uniform Securities Act §202(e)

Rafael is registered with FINRA and in Washington. His firm is registered in Oregon, but Rafael is not. An Oregon customer who has been his client since opening an account on June 1 places an order through him on June 20. All other conditions for the federal limit on state law are met. May Oregon prohibit Rafael from effecting the order?

• a.Yes, because the account had been open only 19 days, short of the 30 days the exception requires before the transaction.✓
• b.No, because Rafael had been assigned to the customer for more than 14 days and holds both FINRA and Washington registrations.
• c.Yes, because Rafael would have had to be registered in Oregon for 30 days before the order for the exception to apply.
• d.No, because the firm is registered in Oregon, which is all the federal limit requires to protect a transaction.

The exception in Section 15(i)(4)(A)(i) requires that the customer maintained an account with the firm for 30 days before the day of the transaction. June 1 to June 20 is 19 days, so the order is not a described transaction and Oregon may require Rafael to be registered. The 14-day assignment and the firm's Oregon registration are separate conditions that do not make up for the short account history. Nothing requires 30 days of prior registration in the second state.Securities Exchange Act §15(i)(3)-(4)

A customer has held an account at Meridian Securities for 90 days. On April 1 her representative, who is registered with FINRA and in her home state, files an application to register in the state where she now lives. That state takes no action. Through what date may the representative effect her transactions under the federal limit on state law?

• a.The protection continues until the state acts, because the filing starts a period with no fixed end.
• b.May 1, which is thirty days after the filing date, the same period that applies to the account history.
• c.May 31, which is 60 days after the application was filed, unless the state denies it or stays it for cause sooner.✓
• d.May 16, which is forty-five days after filing, the period the SEC has to act on a firm's application.

Section 15(i)(4)(A)(ii) protects transactions for a customer whose account has been open 30 days, from the date the representative files an application with the state until the earlier of 60 days after filing or the date the state denies the application or stays it for cause. April 1 plus 60 days is May 31. The 30-day and 45-day periods belong to other provisions, and the statute does set a fixed end.Securities Exchange Act §15(i)(4)(A)(ii)

On March 5, 2026, a representative effects a trade for a customer. On Thursday, March 12, the representative learns that the customer has lived in another state for more than 30 consecutive days. By what date must the representative file an application there so that later trades stay protected under the federal limit on state law?

• a.March 22, 2026, which is ten calendar days after the date of discovery.
• b.March 19, 2026, which is ten business days after the date of the trade.
• c.April 11, 2026, which is thirty calendar days after the date of discovery.
• d.March 26, 2026, which is ten business days after the date of discovery.✓

Section 15(i)(4)(B)(ii) requires the application not later than 10 business days after the later of the transaction date or the date of discovery of the customer's presence or move. The later date is March 12, and ten business days from it end on March 26. The earlier trade date, calendar days and a 30-day period each produce a different, wrong deadline.Securities Exchange Act §15(i)(4)(B)(ii)

A firm files its application for broker-dealer registration with the SEC on January 20, 2026, and has not consented to a longer period. By what date must the SEC either grant registration or institute proceedings to determine whether to deny it?

• a.February 19, 2026, which is 30 days after filing.
• b.March 6, 2026, which is 45 days after filing.✓
• c.March 21, 2026, which is 60 days after filing.
• d.May 20, 2026, which is 120 days after the filing.

Section 15(b)(1) requires the SEC, within 45 days of the filing date or a longer period to which the applicant consents, to grant registration or institute proceedings. January 20 plus 45 days is March 6. The 120-day figure is the time allowed for concluding proceedings once they have begun, so it is not the deadline to act on the application.Securities Exchange Act §15(b)(1)

Whitfield Securities is registered with the SEC and is a FINRA member. It staffs a new office in Idaho with FINRA-registered representatives who will sell to Idaho residents. Which registrations does Idaho require?

• a.Whitfield and each representative must register in Idaho, since SEC registration and FINRA membership are no substitute.✓
• b.Only Whitfield must register in Idaho, and the firm's registration then covers each representative who works in the office.
• c.Neither must register in Idaho, because FINRA registration is accepted as the equivalent of state registration.
• d.Only the representatives must register in Idaho, since the firm's SEC registration already covers it in every state.

Section 201(a) makes it unlawful to transact business in the state as a broker-dealer or agent unless registered under the Act, and Section 201(b) bars a broker-dealer from employing an unregistered agent. SEC registration and FINRA membership are federal and self-regulatory requirements, and the federal limits on state law do not displace state registration of the firm or its agents. A firm's registration covers only agents who are partners, officers or directors.Uniform Securities Act §201(a)-(b)

A registered investment adviser with custody of client funds posts the bond its Administrator requires. A staff member steals a client's deposit, an act unrelated to any sale of securities or investment advice. May the client sue on the bond?

• a.Only if the Administrator, by rule or order, required the bond to cover claims not arising under the Act.✓
• b.Yes, because every bond must cover any person who loses money through the dishonesty of a registrant or its staff.
• c.No, because a bond covers only Section 410 claims, and the Act forbids extending it to other claims.
• d.No, because a bond protects the Administrator's enforcement fund rather than private claimants of a registrant.

Section 202(f) requires every bond to permit suit by any person with a cause of action under Section 410 and, if the Administrator so requires by rule or order, by any person with a cause of action not arising under the Act. Embezzlement is not a Section 410 claim, so the client's access turns on whether the Administrator extended the bond. The Act does not forbid that extension, and a bond exists for private claimants.Uniform Securities Act §202(f) and Official Comment

A customer buys securities on January 10, 2023, and discovers the facts that make the sale a Section 410 violation on June 15, 2023. The seller's required bond bars suit beyond the Section 410(f) limits. What is the latest date the customer may sue on the bond?

• a.January 10, 2025, which is two years after the sale, because the shorter period always runs from the sale.
• b.June 15, 2025, which is the second anniversary of the discovery and comes before the third anniversary of the sale.✓
• c.January 10, 2026, which is three years after the sale, because only the date of the sale starts the period.
• d.June 15, 2026, which is three years after the discovery, because the period runs from the day the customer learned the facts.

Section 202(f) requires every bond to bar suit outside the limits of Section 410(f), and those limits are three years after the contract of sale or two years after discovery of the facts, whichever first occurs. Two years after June 15, 2023 is June 15, 2025, which falls before January 10, 2026. The other dates apply the wrong period or start it from the wrong event.Uniform Securities Act §202(f) and §410(f)

Crestline Advisors is a state-registered adviser whose principal office is in Ohio, and it complies with Ohio's recordkeeping rules. It is also registered in Utah, where it has eight clients. Utah requires a client-complaint log that Ohio does not. May Utah enforce the requirement against Crestline?

• a.No, but only if Ohio's recordkeeping rules are at least as strict as Utah's in every category of required record.
• b.Yes, because each state where an adviser is registered may set its own recordkeeping rules for clients it serves there.
• c.Yes, but only if the added records concern clients who reside in Utah rather than the adviser's other offices.
• d.No, a state may not require additional books and records of an adviser registered at its principal office and complying there.✓

Section 222(b) of the Advisers Act bars a state from enforcing a law that would require additional books or records of an adviser registered in the state of its principal office and place of business and in compliance with that state's requirements. The limit does not depend on where the clients live or on a comparison of the two states' rules.Investment Advisers Act §222(b)

An adviser is registered in Ohio, its principal-office state, and meets Ohio's minimum net capital rule of $10,000 with $12,000. It is also registered in Utah, whose minimum is $20,000. May Utah require the adviser to raise its net capital to that level?

• a.Yes, because the adviser's capital is below Utah's minimum, and the home state's rule yields to the stricter one.
• b.No, but only if the adviser posts a bond with Utah in an amount equal to the shortfall in its required capital.
• c.Yes, because the adviser is registered in Utah and a registrant must meet that state's own financial standard.
• d.No, a state may not require higher net capital than the principal-office state does of a compliant adviser.✓

Section 222(c) prohibits a state from requiring an adviser to maintain higher minimum net capital, or to post any bond in addition to what the principal-office state requires, when the adviser is registered there and in compliance with its capital and bonding requirements. Utah's own minimum yields, and no substitute bond restores the authority.Investment Advisers Act §222(c)

Eastgate Advisors is an SEC-registered federal covered adviser with a notice filing in this state made up of copies of its SEC filings. It finds a correction that the SEC requires only in the annual updating amendment. When must it correct the filing in this state?

• a.At the next December 31 renewal of the notice filing, when the state reviews the adviser's file.
• b.Promptly, because a state requires prompt correction of any material inaccuracy in a document it holds.
• c.When the SEC requires the amendment to be filed, which here is the annual updating amendment.✓
• d.Within thirty days, the time a state allows any filer to correct an inaccurate document on file.

Section 203(d) requires a registrant to file a correcting amendment promptly, but for a federal covered adviser the amendment is due when it is required to be filed with the SEC. The adviser therefore follows the federal schedule. The Act sets no thirty-day period and does not tie the correction to the annual renewal.Uniform Securities Act §203(d)

Dana is an investment adviser representative of a federal covered adviser. She works from the firm's branch office in this state and is registered here. She leaves the firm. Who must promptly notify the Administrator that her employment has ended?

• a.The federal covered adviser, because an employer must report every representative who ends employment with it.
• b.Dana and the firm together, each filing a separate notice so that the termination is reported twice.
• c.No one, because a federal covered adviser's representatives are handled entirely through the SEC and not the state.
• d.Dana herself, because the Act places the duty on the representative when the employer is a federal covered adviser.✓

Section 201(d) requires the investment adviser to give prompt notice when a representative begins or ends employment, but when the employer is a federal covered adviser the representative must give the notice. The representative is registered with the state, so the SEC route does not cover it, and the Act does not call for a second notice from the firm.Uniform Securities Act §201(d)

Harlan Advisors, a federal covered adviser, makes its first notice filing in this state on September 12, 2025, and pays the fee. If it does not renew, when does the notice filing expire?

• a.December 31, 2025, because every registration or notice filing expires then unless renewed.✓
• b.December 31, 2026, the end of the first full calendar year after the filing was made.
• c.September 12, 2026, one year after the date of the filing, the anniversary used for the adviser's fee.
• d.September 30, 2026, the end of the month in which the first filing was made and the fee was paid.

Section 201(e) states that every registration or notice filing expires on December 31 unless renewed, so the date does not depend on when the filing was made. A September filing therefore lapses at the end of the same year. The anniversary of the filing date and the end of the following year are not the expiration dates in the Act.Uniform Securities Act §201(e)

Which of the following offices of a member firm must be designated as an office of supervisory jurisdiction (OSJ)?

• a.A three-person office at which the firm gives final approval to new customer accounts, though it supervises no other office.✓
• b.A processing center that reconciles clearing statements and has no sales activity or public identification as an office.
• c.An office of convenience where a representative meets customers by appointment and forwards all paperwork to the branch.
• d.A branch where forty representatives solicit retail customers but every new account is sent elsewhere for approval.

Rule 3110(f)(1) defines an OSJ by function, and final approval of new accounts on behalf of the member is one of the listed functions, so the office qualifies whatever its size or whether it supervises others. Heavy retail activity, back-office processing and an occasional meeting place are not on the list.FINRA Rule 3110(f)(1)

A member firm's branch office supervises two non-branch locations. How often must the firm inspect that branch office?

• a.At least annually, but only when the branch also performs a function that makes it an OSJ.
• b.On a regular periodic schedule the firm sets, as for non-branch locations, with no fixed minimum.
• c.At least every three years, the cycle for any branch office that is not designated an OSJ.
• d.At least annually, on a calendar-year basis, because the branch supervises non-branch locations.✓

Rule 3110(c)(1)(A) requires an inspection at least annually, on a calendar-year basis, of every OSJ and of any branch office that supervises one or more non-branch locations. The three-year cycle is for branches that supervise no non-branch location, and the periodic schedule is for non-branch locations themselves. OSJ status is not required for the annual cycle.FINRA Rule 3110(c)(1)(A)

A firm decides to inspect a high-volume, non-supervisory branch office every year instead of every three years. What must the firm's written supervisory and inspection procedures set forth?

• a.The names of the principals who will conduct the inspections, rotated so that none repeats a location.
• b.An application to FINRA approving the shortened cycle, filed before the first inspection takes place.
• c.The shorter cycle, the factors behind it, and how it will still meet the three-year requirements.✓
• d.Only the date of each inspection, since a cycle shorter than the minimum needs no explanation.

Rule 3110(c)(1)(B) says the procedures must set forth the non-supervisory branch examination cycle, an explanation of the factors used to set its frequency, and how the member will comply with the paragraph (c)(2) requirements if it inspects more often than every three years. FINRA approval and inspector rotation are not part of the rule.FINRA Rule 3110(c)(1)(B)

A member firm's written report of a branch inspection must include testing and verification of the firm's procedures in which of these areas, where applicable to the location?

• a.The performance of each representative at the location measured against the sales targets the firm had set.
• b.The suitability of each recommendation the location's representatives made to retail customers during the period reviewed.
• c.The accuracy of the firm's quarterly net capital computation as it was prepared by the location's own staff.
• d.Transmittals of funds from customer accounts to third-party accounts or to outside entities such as banks.✓

Rule 3110(c)(2)(A) lists the areas an inspection report must cover: safeguarding of customer funds and securities, books and records, supervision of supervisory personnel, transmittals of funds or securities, and changes of customer account information. Suitability, net capital and sales results are supervised elsewhere and are not on that list.FINRA Rule 3110(c)(2)(A)

Hale Securities, a four-person firm, has the manager of its only branch inspect that branch because no one else is available. What must the firm do?

• a.Nothing further, because small firms may let the location's own supervisor conduct that location's inspection.
• b.Document in the inspection report the factors showing independence is not possible and how it otherwise complies.✓
• c.Place the explanation in the written supervisory procedures only, since an inspection report records findings.
• d.Hire an outside inspector for the next inspection and obtain FINRA's approval of the arrangement before then.

Rule 3110(c)(3)(B) requires that the person inspecting a location not be assigned to it or supervised by anyone assigned to it. Under (c)(3)(C), if that is not possible because of the firm's size or business model, the firm must document in the inspection report the factors behind its determination and how the inspection otherwise complies. There is no small-firm waiver and no approval step.FINRA Rule 3110(c)(3)

A firm files an application for registration for a new representative on September 3. The representative was previously registered with another firm. By what date must the firm review the representative's most recent Form U5, or show FINRA it made reasonable efforts to do so?

• a.December 2, which is 90 days after filing.
• b.October 18, which is 45 days after filing.
• c.October 3, which is 30 days after the filing date.
• d.November 2, which is 60 days after the filing.✓

Rule 3110(e) requires the member to review the applicant's most recent Form U5 within 60 days of the filing date of the application, or demonstrate reasonable efforts to do so. September 3 plus 60 days is November 2. The 30-day figure applies to verifying the Form U4, and the other periods are not part of the rule.FINRA Rule 3110(e)