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Registration of Persons Under State Law
The Series 63 exam is built on the Uniform Securities Act, the model blue-sky law that nearly every state has adapted. More than a third of the exam turns on a single chain of reasoning: read the definitions, decide whether the individual or firm falls inside one of them, check whether an exclusion or exemption removes them, and only then ask whether registration is required in that particular state. This chapter walks through the four registration categories, the exclusions that quietly resolve most exam questions, and the mechanics of applying for, renewing, and withdrawing a registration.
The Definitions That Drive Everything
Every Series 63 question begins with a definition. A person is any individual or legal entity, including corporations, partnerships, trusts, associations, and governments; the only people who are not persons are the deceased, minors, and individuals judged mentally incompetent. A security is defined by a long inclusive list plus the investment contract concept, which catches any arrangement where money is invested in a common enterprise with profits expected from the efforts of others. Learn the items that are deliberately outside the definition, because they generate reliable exam points: fixed annuities, whole life insurance, commodity futures contracts, collectibles, and real estate held for its own sake are not securities, while variable annuities, limited partnership interests, and fractional interests in oil and gas programs are.
Person
Any individual or entity, including governments and political subdivisions. Not a person: a deceased individual, a minor, or an individual adjudicated mentally incompetent.
Uniform Securities ActSecurity
Includes stock, bonds, notes, debentures, investment contracts, certificates of interest in oil, gas or mining titles, variable annuities, and interests in limited partnerships.
Uniform Securities ActNot a security
Fixed annuities, traditional life insurance, commodity futures, currency, collectibles, and direct ownership of real estate are outside the definition.
Uniform Securities ActIssuer
Any person who issues or proposes to issue a security. An entity selling only its own securities is not a broker-dealer, because it is not effecting transactions for the accounts of others.
Uniform Securities ActOffer and sale
An offer includes any attempt to dispose of a security for value; a sale requires a contract of sale. A gift of assessable stock is a sale, while a bona fide gift of nonassessable stock is not.
Uniform Securities ActBroker-Dealers: Who Must Register and Who Is Excluded
A broker-dealer is any person engaged in the business of effecting securities transactions for the account of others or for its own account. Three exclusions are built into the definition itself: agents, issuers, and banks, savings institutions, and trust companies are not broker-dealers. Beyond those, the act creates two situational exceptions that appear constantly on the exam, and both share a threshold condition: the firm must have no place of business in the state. If the firm opens an office in the state, registration is required no matter how few or how sophisticated its clients are.
Broker-dealer
A person in the business of effecting transactions in securities for the account of others or for its own account.
Uniform Securities ActBuilt-in exclusions
Agents, issuers, and banks, savings institutions, and trust companies are excluded from the broker-dealer definition.
Uniform Securities ActInstitutional exception
A firm with no place of business in the state whose only clients there are other broker-dealers, banks, savings institutions, trust companies, insurance companies, investment companies, or large employee benefit plans is not a broker-dealer in that state.
Uniform Securities ActSnowbird exception
A firm with no place of business in the state whose only contacts are existing customers temporarily present but not resident there is not a broker-dealer in that state.
Uniform Securities ActPlace of business defeats both
Once a firm maintains an office in the state, neither situational exception is available and registration is mandatory.
Uniform Securities ActCanadian firms
A NASAA model rule allows a limited registration for Canadian broker-dealers servicing Canadian clients temporarily in the United States, mainly self-directed retirement accounts.
NASAA Model RuleAgents and the Issuer Exclusions
An agent is always a natural person, never an entity, and is defined as an individual who represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. Anyone representing a broker-dealer in a sales capacity is an agent and must register. Individuals representing issuers are treated more generously, but only in three narrow situations, and each of them is a favorite exam trap because a single fact, usually the payment of a commission, destroys the exclusion. Remember also that an agent's registration is derivative: it is effective only while the individual is associated with a registered broker-dealer or issuer, which means suspending or withdrawing the firm parks every agent under it.
Agent
An individual who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities. Partners, officers, and directors are agents if they perform such functions.
Uniform Securities ActClerical staff
Individuals whose duties are purely clerical or ministerial and who do not solicit or take orders are not agents.
Uniform Securities ActIssuer exclusion: exempt securities
An individual representing an issuer in transactions in certain exempt securities, such as government obligations and qualifying commercial paper, is not an agent.
Uniform Securities ActIssuer exclusion: employee plans
An individual representing an issuer in transactions with the issuer's employees, partners, or directors is not an agent if no commission or other remuneration is paid for soliciting them.
Uniform Securities ActRegistration follows the firm
An agent's registration is not effective during any period when the agent is not associated with a registered broker-dealer or issuer.
Uniform Securities ActNotice of change
When an agent changes firms, the agent, the former firm, and the new firm must all notify the Administrator.
Uniform Securities ActInvestment Advisers, Representatives, and Federal Covered Advisers
An investment adviser is a person who, for compensation, is in the business of advising others about securities. The three-pronged compensation, business, and advice test is met by financial planners who charge for asset allocation advice as readily as by traditional money managers. The classic exclusions cover professionals whose advice is incidental to their main occupation and who receive no special compensation, publishers of general-circulation publications, and banks. Since federal reform, larger advisers register with the SEC and are federal covered, which means a state cannot require them to register but can require notice filings, fees, and a consent to service of process. Their individual representatives, however, do register with the state whenever they have a place of business there.
Investment adviser
A person who, for compensation, engages in the business of advising others as to the value of securities or the advisability of investing in them, including anyone who issues securities analyses or reports for compensation.
Uniform Securities ActProfessional exclusion
Lawyers, accountants, teachers, and engineers are excluded when the advice is solely incidental to their profession and no special compensation is received. Losing either prong destroys the exclusion.
Uniform Securities ActInvestment adviser representative
A supervised person who makes recommendations, manages accounts, determines what advice to give, solicits advisory services, or supervises those who do. Clerical staff are excluded.
Uniform Securities ActDe minimis exemption
An adviser with no place of business in the state and no more than five non-institutional clients there during the preceding twelve months need not register in that state.
Uniform Securities ActFederal covered adviser
An SEC-registered adviser may not be required to register with a state, but a state may require a notice filing, fees, and a consent to service of process, and it keeps antifraud authority.
Uniform Securities ActRepresentatives of covered advisers
Individual representatives of a federal covered adviser register in each state where they maintain a place of business.
Uniform Securities ActRegistration Procedures, Renewal, and Withdrawal
The mechanics are uniform across all four registration categories. The applicant files the prescribed application, a consent to service of process, and the filing fee, and the Administrator may impose qualification examinations, minimum net capital or net worth standards, and surety bonds. Absent a pending proceeding, the registration becomes effective at noon on the thirtieth day after filing. All registrations expire on December 31 and must be renewed annually. Withdrawal is not instantaneous: it takes effect thirty days after filing, and the Administrator keeps jurisdiction for one year afterward so that a registrant cannot escape discipline by resigning.
Application contents
Form, consent to service of process, and filing fee. The Administrator may also require examinations, financial statements, and information about the applicant's history and business.
Uniform Securities ActEffectiveness
Registration becomes effective at noon on the thirtieth day after a complete application is filed if no denial order or proceeding is pending.
Uniform Securities ActFinancial requirements
The Administrator may set minimum net capital or net worth standards and require surety bonds, particularly where the firm has custody or discretionary authority.
Uniform Securities ActRenewal
Registrations expire December 31 each year and must be renewed by filing and paying the annual fee.
Uniform Securities ActWithdrawal
Effective thirty days after filing absent a pending proceeding; the Administrator retains jurisdiction for one year to bring a revocation or suspension action.
Uniform Securities ActSuccessor firms
A successor may file an application effective when the predecessor's registration terminates, covering the unexpired portion of the year without an additional filing fee.
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