NASAA Series 63 — All Questions

An individual is hired by a start-up corporation to sell the corporation's own common stock to retail investors in State A, and she is paid a commission on each sale. Under the Uniform Securities Act, this individual is:

• a.An agent who must register in State A✓
• b.An issuer, because she sells only the company's own shares
• c.A broker-dealer, because she effects securities transactions for compensation
• d.Excluded from the definition of agent because she represents an issuer rather than a broker-dealer

An agent is an individual who represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities, so representing an issuer does not by itself create an exclusion. The narrow exclusions for issuer representatives cover certain exempt securities, specified exempt transactions, and employee plans with no commission, none of which apply to commissioned retail sales of common stock. She is not the issuer; the corporation is. She is not a broker-dealer because a natural person representing an issuer is treated as an agent.Uniform Securities Act

Which of the following would NOT meet the Uniform Securities Act's definition of a 'person'?

• a.A city that issues revenue bonds
• b.A limited partnership formed to invest in real estate
• c.An unincorporated investment club
• d.An individual who died last month✓

'Person' is defined broadly to include individuals, corporations, partnerships, associations, joint-stock companies, trusts, unincorporated organizations, and governments or political subdivisions. The classic exclusions are a deceased individual, a minor, and an individual who has been judged mentally incompetent. Partnerships, municipalities, and unincorporated associations all fall squarely inside the definition.Uniform Securities Act

Which of the following is NOT a security under the Uniform Securities Act?

• a.A limited partnership interest in a real estate venture held for the account of passive outside investors, an instrument the Act lists outside its securities definition because real estate is tangible property
• b.A certificate of interest in an oil and gas drilling program marketed broadly to the public, which the statute classifies as a fractional mineral right rather than as an investment security
• c.A variable annuity contract
• d.A fixed annuity contract whose payout is guaranteed by the insurance company✓

A fixed annuity shifts the investment risk to the insurer and pays a guaranteed dollar amount, so it is treated as an insurance product rather than a security. A variable annuity passes investment risk to the contract holder and is a security. Fractional interests in oil and gas programs and limited partnership interests are both named in the statutory definition.Uniform Securities Act

A broker-dealer registered in State X has no office in State Y. Its only State Y business consists of trades executed for three banks, a registered investment company, and another broker-dealer. Must the firm register in State Y?

• a.No, because broker-dealers register only with the SEC and never with a state
• b.No, because a firm with no place of business in the state whose only clients there are institutions is excluded from the definition of broker-dealer in that state✓
• c.Yes, unless it has fewer than five total clients in State Y
• d.Yes, because any securities business conducted with State Y residents requires registration

The institutional exception removes a firm from the broker-dealer definition in a state where it has no place of business and deals only with other broker-dealers, banks, savings institutions, trust companies, insurance companies, investment companies, and large employee benefit plans. The exception depends on the character of the clients, not a headcount, so the five-client answer is wrong. Broker-dealers doing business in a state generally do register at the state level, so the third choice misstates the law.Uniform Securities Act

An agent registered only in State A telephones a long-standing client who is spending the winter in State B. The agent recommends a bond purchase and the client agrees. Which statement is correct?

• a.The agent must register in State B before the call because the offer was received there, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary
• b.The agent may complete the trade only if the client signs a waiver of State B law
• c.No registration in State B is required, because the client remains a resident of State A and is only temporarily present in State B✓
• d.The agent must wait until the client returns to State A before accepting the order

The so-called snowbird exception excludes from the broker-dealer and agent definitions a firm or individual with no place of business in the state whose only contacts there are existing customers who are not residents of that state. Residency, not physical location on the day of the call, drives the analysis. No client waiver can manufacture an exemption, and nothing in the act requires the agent to postpone the order.Uniform Securities Act

An investment adviser has its only office in State M. Over the past twelve months it has advised five individual clients who reside in State N, where it has no place of business. Regarding State N registration, the adviser:

• a.Must register because advisers never qualify for numerical exemptions
• b.Qualifies for the de minimis exemption because it has no place of business in the state and has had five or fewer non-institutional clients there in the preceding twelve months✓
• c.Must register because it has more than one client in the state
• d.Must register only if the five clients' combined assets exceed one million dollars

The de minimis exemption applies to an adviser with no place of business in the state that has had no more than five non-institutional clients in that state during the preceding twelve consecutive months. Client asset size is irrelevant to the count. Had the adviser maintained an office in State N, registration would be required no matter how few clients it had.Uniform Securities Act

Which statement about the consent to service of process is correct?

• a.It authorizes the Administrator to settle civil claims against the registrant
• b.It is required only of applicants whose principal office is outside the state
• c.It must be refiled with each annual renewal of the registration
• d.It is filed with the initial application and remains in effect permanently, appointing the Administrator to receive legal papers on the registrant's behalf✓

The consent to service of process is filed once with the original application and stays in force indefinitely; it names the Administrator as the registrant's attorney to receive service of process in actions arising under the act. It is required of all applicants, in-state and out-of-state alike, and of issuers registering securities. It is a procedural document and gives the Administrator no authority to settle claims.Uniform Securities Act

An agent resigns from Broker-Dealer One and joins Broker-Dealer Two the following week. Under the Uniform Securities Act, notice of the change must be given to the Administrator by:

• a.Broker-Dealer One only, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures
• b.The agent, Broker-Dealer One, and Broker-Dealer Two✓
• c.Broker-Dealer Two only, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category
• d.The agent only

When an agent begins or terminates a connection with a broker-dealer or issuer, the act places the notification duty on all three parties: the agent, the firm being left, and the firm being joined. An agent's registration is not effective during any period when the agent is not associated with a registered broker-dealer or issuer, which is why the transition must be documented on both ends.Uniform Securities Act

Which individual at a state-registered investment advisory firm would be considered an investment adviser representative?

• a.An accounts-payable clerk who processes vendor invoices, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules
• b.A building maintenance technician employed by the firm
• c.A portfolio manager who selects securities for client accounts and supervises two junior analysts✓
• d.A receptionist who schedules client meetings

An investment adviser representative is a supervised person who makes recommendations or renders advice, manages accounts, determines what advice to give, solicits advisory services, or supervises those who do. Individuals whose functions are purely clerical or ministerial are excluded, which covers the receptionist, the clerk, and the maintenance worker. The portfolio manager both advises and supervises, so registration is required.Uniform Securities Act

Absent a denial order or pending proceeding, an application for registration as a broker-dealer, agent, investment adviser, or investment adviser representative becomes effective:

• a.At the close of business on the tenth day after filing, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose
• b.Immediately upon filing with the Administrator, a conclusion the NASAA model rules are commonly understood to support for a person already registered and in good standing elsewhere
• c.When the applicant passes the required qualification examination, on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order
• d.At noon on the thirtieth day after a complete application is filed✓

The act provides that a registration application becomes effective at noon of the thirtieth day after filing if no stop order is in effect and no proceeding is pending. The Administrator may by rule or order specify an earlier effective date. Passing an examination is a qualification the Administrator may impose, but it does not by itself trigger effectiveness.Uniform Securities Act

A state-registered investment adviser maintains custody of client funds and securities. Regarding financial requirements, the Administrator may:

• a.Require a minimum net worth and a surety bond, though an adviser that meets the state's net worth standard may be excused from posting the bond✓
• b.Require a surety bond but never a minimum net worth
• c.Require the adviser to insure client accounts against market losses
• d.Require nothing, because financial requirements are set exclusively by federal law, provided the customer is furnished the required written confirmation and the details are recorded on the books the firm must maintain

The act authorizes the Administrator to establish minimum net capital or net worth standards for broker-dealers and advisers and to require surety bonds, particularly where the firm has custody or discretionary authority. States commonly allow an adviser that satisfies the net worth requirement to deposit cash or securities in lieu of the bond or to be excused from it. No state may require a firm to guarantee client accounts against market loss.Uniform Securities Act

A registered broker-dealer files an application to withdraw its registration in a state. Which statement is correct?

• a.The Administrator loses all authority over the firm the moment the application is filed
• b.The withdrawal becomes effective thirty days after filing unless a proceeding is pending, and the Administrator retains jurisdiction for one year to institute a revocation or suspension proceeding✓
• c.The withdrawal never becomes effective if a customer complaint is on file
• d.The withdrawal is effective immediately upon filing

Withdrawal becomes effective thirty days after filing, or earlier if the Administrator so determines, provided no revocation or denial proceeding is pending. The Administrator keeps jurisdiction for one year after the withdrawal takes effect and may still enter a revocation or suspension order. A pending complaint alone does not permanently block a withdrawal.Uniform Securities Act

Unless renewed, the registration of a broker-dealer, agent, investment adviser, or investment adviser representative expires:

• a.Every two years on June 30
• b.On December 31 of each year✓
• c.Only when the registrant ceases doing business in the state
• d.On the anniversary of the original effective date

State registrations run on a calendar-year cycle and expire on December 31 unless renewed by filing the required renewal and paying the annual fee. There is no rolling anniversary date and no two-year cycle under the act. A registrant who stops doing business must affirmatively withdraw rather than simply let the file lapse.Uniform Securities Act

An individual represents a corporate issuer in selling only United States Treasury notes and general obligation bonds of the state to the public. Under the Uniform Securities Act, this individual:

• a.Is excluded from the definition of agent because he represents an issuer in transactions in specified exempt securities✓
• b.Must register as an agent only if he receives commissions, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary
• c.Must register as a broker-dealer instead of an agent
• d.Must register as an agent because he sells to the public, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures

The act excludes from the agent definition an individual who represents an issuer in effecting transactions in certain exempt securities such as federal and municipal government obligations and qualifying commercial paper. Because the exclusion applies, no agent registration is required whether or not commissions are paid. A natural person representing an issuer is never a broker-dealer under the act.Uniform Securities Act

A certified public accountant prepares tax returns for a client. During the engagement she explains that municipal bond interest would reduce the client's tax bill and suggests he discuss municipal bonds with a broker. She charges only her standard tax preparation fee. Under the Uniform Securities Act, the accountant is:

• a.An investment adviser representative of her accounting firm
• b.A broker-dealer because she referred the client to a securities firm
• c.An investment adviser who must register in the state
• d.Excluded from the definition of investment adviser because the advice was solely incidental to her accounting practice and she received no special compensation✓

The act excludes lawyers, accountants, teachers, and engineers whose investment advice is solely incidental to their profession and who receive no special compensation for it. Both prongs are met here: the comment arose out of tax work and no separate advisory fee was charged. Had she billed a distinct fee for securities advice, the exclusion would be lost.Uniform Securities Act

Which of the following is specifically excluded from the definition of broker-dealer under the Uniform Securities Act?

• a.A partnership organized to trade securities for the accounts of its many outside investors
• b.A bank, savings institution, or trust company✓
• c.A firm with no place of business in the state that solicits retail investors there by telephone
• d.A firm that maintains a branch office in the state and trades for retail customers

The broker-dealer definition expressly excludes agents, issuers, and banks, savings institutions, and trust companies. A firm with a place of business in the state must register regardless of client type, and a firm cold-calling retail residents from out of state is doing business in that state. The trading partnership effects transactions for the accounts of others and would need to register.Uniform Securities Act

An investment adviser with $400 million in assets under management is registered with the SEC and has offices in three states. With respect to those states, the adviser:

• a.Cannot be required to register with the states, but may be required to file a notice, pay fees, and file a consent to service of process✓
• b.Must register in the state of its principal office and notice file in the others
• c.Must also register in each state where it has an office
• d.Has no obligation of any kind to the state Administrators

An adviser required to register with the SEC is a federal covered adviser, and federal law preempts state registration requirements for such firms. States retain the right to require notice filings, collect fees, and demand a consent to service of process, and they keep full antifraud authority. State registration itself may not be imposed on a federal covered adviser, even in the state of its principal office.Uniform Securities Act

An individual who advises clients on behalf of a federal covered investment adviser works out of the firm's branch office in State P. This individual:

• a.Is exempt from state registration because the firm is federally covered, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category
• b.Must register with the SEC rather than with State P
• c.Need not register anywhere as long as he has fewer than six clients
• d.Must register as an investment adviser representative in State P because he has a place of business there✓

Although the firm itself is federally covered and cannot be required to register with a state, individual representatives are registered at the state level. The trigger is having a place of business in the state, so a representative working from an in-state office must register there. The SEC does not register individual representatives, and the de minimis client count applies to advisory firms without a place of business, not to representatives with one.Uniform Securities Act

A broker-dealer registered in State A opens a branch office in State B. Its only State B customers will be three large insurance companies. Regarding State B registration, the firm:

• a.Must register only after it accepts a retail account
• b.May rely on its State A registration under reciprocity, on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order
• c.Is excluded because its only clients there are institutions, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules
• d.Must register in State B because it maintains a place of business in the state✓

The institutional exception is available only to a firm with no place of business in the state. Once the firm opens an office in State B, registration is required regardless of how sophisticated its customers are. The Uniform Securities Act contains no general reciprocity provision that lets one state's registration substitute for another's.Uniform Securities Act

An agent working from an office in State A mails a prospectus and a solicitation letter to a prospect who reads it at her home in State B. Under the Uniform Securities Act, the offer is considered made:

• a.In neither state, because no sale occurred
• b.Only in State A, where the letter originated
• c.In both State A and State B, giving each Administrator jurisdiction✓
• d.Only in State B, where the letter was received, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose

An offer is made in a state if it originates from that state or is directed to and received in that state, so both Administrators have jurisdiction. The failure to complete a sale is irrelevant because the act reaches offers as well as sales. Sending offering material into a state is precisely the conduct that triggers the receiving state's authority.Uniform Securities Act

A securities offering is advertised in a television broadcast that originates outside State C but is viewed by residents of State C. Under the Uniform Securities Act, the offer is:

• a.Deemed made in State C because residents saw it
• b.Not deemed made in State C, because the broadcast originated outside the state✓
• c.Deemed made in State C only if a State C resident responds, a conclusion the NASAA model rules are commonly understood to support for a person already registered and in good standing elsewhere
• d.Deemed made in every state where the signal is received, provided the customer is furnished the required written confirmation and the details are recorded on the books the firm must maintain

The act contains a media exception: an offer is not deemed made in a state when it appears in a bona fide newspaper or periodical published outside the state, or in a radio or television broadcast originating outside the state. The point of origination controls, not where the signal lands. A resident's response would create an ordinary transaction subject to the usual rules, but it does not retroactively make the broadcast an in-state offer.Uniform Securities Act

An employee of a manufacturing corporation is asked to distribute and explain the company's new stock purchase plan to fellow employees. She receives no commission or other remuneration for these sales. Under the Uniform Securities Act, she is:

• a.A broker-dealer with respect to the plan
• b.An agent who must register before speaking with any employee, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary
• c.Not an agent, because she represents the issuer in transactions with the issuer's employees and receives no commission✓
• d.An investment adviser representative

The act excludes from the agent definition an individual who represents an issuer in effecting transactions with the issuer's employees, partners, or directors when no commission or other remuneration is paid for soliciting those persons. The absence of transaction-based compensation is essential; paying her a commission would destroy the exclusion. She gives no investment advice for compensation and does not effect trades for the accounts of others as a firm.Uniform Securities Act

A broker-dealer's state registration is suspended for sixty days. During the suspension, the registrations of the agents employed by that firm:

• a.Are also not in effect, because an agent's registration is effective only while the agent is associated with a registered broker-dealer or issuer✓
• b.Transfer automatically to any affiliated firm
• c.Remain fully effective because they were registered individually
• d.Are automatically revoked and must be reapplied for

An agent's registration is derivative: it is effective only while the agent is associated with a registered broker-dealer or issuer, so suspending the firm suspends the agents' ability to act. The registrations are not revoked outright, so a brand-new application is not automatically required. Registrations do not migrate to affiliates by operation of law.Uniform Securities Act

A registered broker-dealer reorganizes and a successor firm takes over the business in the middle of the registration year. Under the Uniform Securities Act, the successor firm:

• a.May simply continue to operate under the predecessor's registration indefinitely
• b.May file an application that becomes effective on the date the predecessor's registration terminates and is effective for the unexpired portion of the year without an additional filing fee✓
• c.Must file a completely new application and wait thirty days before doing business
• d.Must cease all business until the next annual renewal cycle

The act permits a successor to file an application that takes effect when the predecessor's registration terminates and runs for the unexpired portion of the year, with no filing fee charged for that partial period. The successor cannot simply operate on the predecessor's registration, but neither must it endure a full waiting period or suspend operations.Uniform Securities Act

A Canadian broker-dealer with no U.S. office wants to continue servicing the self-directed retirement accounts of Canadian clients who are temporarily living in a U.S. state. Under the NASAA model rule for Canadian firms, the broker-dealer:

• a.Is completely exempt from all state requirements
• b.Must obtain full broker-dealer registration in the state
• c.May not deal with those clients at all while they are in the United States
• d.May obtain a limited registration by filing an application, evidence of home-jurisdiction registration and good standing, and a consent to service of process✓

The NASAA model rule creates a limited registration path for Canadian broker-dealers and their agents servicing Canadian clients temporarily present in the United States, primarily for self-directed tax-advantaged retirement accounts. The firm files an application, proof that it is registered and in good standing in its home jurisdiction, and a consent to service of process. It is neither barred from the business nor forced into full domestic registration, and it is not free of all state obligations.NASAA Model Rule

Which of the following would be considered a 'sale' under the Uniform Securities Act?

• a.A pledge of securities as loan collateral that is never foreclosed
• b.A gift of assessable stock✓
• c.A stock dividend for which shareholders give up nothing of value
• d.A bona fide gift of fully paid, nonassessable stock to a family member

The act treats a gift of assessable stock as a sale because the recipient takes on a potential future obligation, which functions as consideration. A bona fide gift of nonassessable stock involves no value given and is not a sale, and a stock dividend for which nothing is surrendered is likewise excluded. A pledge creates a security interest rather than a transfer of ownership for value.Uniform Securities Act

An individual employed by a registered broker-dealer answers the main telephone line, routes calls to registered personnel, and files paperwork. He never discusses securities or accepts orders. This individual:

• a.Must register as an agent because he is employed by a broker-dealer, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures
• b.Must register as an agent because he speaks with customers, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category
• c.Must register as an investment adviser representative
• d.Need not register, because his functions are clerical and he does not effect or attempt to effect securities transactions✓

Registration as an agent turns on whether the individual effects or attempts to effect purchases or sales of securities, not on mere employment at a firm. Purely clerical and ministerial staff fall outside the definition. If he began taking orders or making recommendations, registration would immediately be required.Uniform Securities Act

An investment adviser opens a small office in State Q and, during its first year, takes on only two clients who reside in State Q. Regarding State Q registration, the adviser:

• a.Must register, because the de minimis exemption is unavailable to an adviser that has a place of business in the state✓
• b.Need not register until it has at least fifteen clients
• c.Must register only if the clients are institutional
• d.Need not register, because it has fewer than six clients in the state, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules

The de minimis exemption requires that the adviser have no place of business in the state; the client count is a second condition, not a substitute for the first. Once an office exists in the state, registration is required even with a single client. Institutional clients would, if anything, make an exemption easier to reach rather than harder.Uniform Securities Act

For purposes of the institutional exception from the broker-dealer definition, which of the following clients would NOT preserve the exception?

• a.An insurance company, which the institutional list in the broker-dealer exclusion expressly enumerates alongside trust companies and savings institutions
• b.An individual investor with a $4 million portfolio✓
• c.A commercial bank
• d.A registered investment company, one of the enumerated institutional buyers whose presence keeps the no-place-of-business exclusion fully intact under the Act

The institutional exception lists other broker-dealers, banks, savings institutions, trust companies, insurance companies, investment companies, and large employee benefit plans. A wealthy individual is still a retail customer and does not appear on that list, no matter how large the account. Doing business with even one such person in a state where the firm has no place of business defeats the exception.Uniform Securities Act

An agent is registered only in State A. Her broker-dealer is registered in both State A and State B. She begins cold-calling residents of State B from her desk in State A. Which statement is correct?

• a.No registration in State B is needed because she never physically enters the state, on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order
• b.She may solicit up to five State B residents before registering
• c.No registration in State B is needed because her firm is registered there, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose
• d.She must register as an agent in State B, because her offers are directed into and received in that state✓

Agent registration is individual and state-specific; the firm's registration does not cover its agents. An offer directed into and received in a state is made in that state, so physical presence is irrelevant. The de minimis client counts belong to the investment adviser provisions and create no free-solicitation allowance for agents.Uniform Securities Act

Which statement about issuers under the Uniform Securities Act is correct?

• a.An issuer is automatically an agent of the individuals who sell its shares
• b.Only corporations can be issuers
• c.An issuer must always register as a broker-dealer before selling its own securities, a conclusion the NASAA model rules are commonly understood to support for a person already registered and in good standing elsewhere
• d.An issuer is any person who issues or proposes to issue a security, and an issuer selling only its own securities is not a broker-dealer✓

The definition covers any person who issues or proposes to issue a security, which includes governments, partnerships, and trusts as well as corporations. Because a broker-dealer effects transactions for the accounts of others, an entity selling only its own securities falls outside that definition. The relationship in the last choice is backwards: individuals who sell for the issuer may be its agents.Uniform Securities Act

An agent's employing broker-dealer voluntarily withdraws its state registration. Absent any other affiliation, the agent's registration in that state:

• a.Continues until the next December 31 renewal date
• b.Is not in effect, because an agent may not act while unassociated with a registered broker-dealer or issuer✓
• c.Automatically converts to an investment adviser representative registration, provided the customer is furnished the required written confirmation and the details are recorded on the books the firm must maintain
• d.Is unaffected because agents register independently of their firms, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary

The act states that an agent's registration is not effective during any period when the agent is not associated with a registered broker-dealer or issuer. Withdrawal by the firm therefore parks the agent's registration until a new affiliation is filed. Agent and investment adviser representative registrations are separate categories and never convert automatically.Uniform Securities Act

A registered broker-dealer discovers that information in its original state application has become materially inaccurate. The firm should:

• a.Correct the information only if a customer or the Administrator asks about it
• b.Promptly file an amendment with the Administrator correcting the information✓
• c.Withdraw its registration and file a new application
• d.Wait and correct the information at the next annual renewal

Registrants must keep their filings current and promptly amend any information that becomes inaccurate or incomplete in a material respect. Waiting for renewal or for someone to ask leaves a false filing on record, which is itself a ground for discipline. Withdrawing and refiling is a drastic step the act does not require for a simple amendment.Uniform Securities Act

An investment advisory firm has its only office in State D, where it is registered. It also serves three individual clients in State E and four individual clients in State F, with no office in either. Which statement is correct?

• a.It need not register anywhere because no state has more than five of its clients, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures
• b.It must register in all three states because it has clients in each
• c.It must register in State E and State F but may withdraw from State D
• d.It must remain registered in State D and may rely on the de minimis exemption in States E and F✓

Registration is required in the state where the adviser maintains a place of business, so State D registration is mandatory. In States E and F the firm has no place of business and has had five or fewer non-institutional clients in the preceding twelve months, satisfying the de minimis exemption. The counts are measured state by state and never excuse registration where an office exists.Uniform Securities Act

An unregistered individual introduces investors to a small private company and receives a percentage of every dollar the investors put in. The most likely conclusion under the Uniform Securities Act is that she:

• a.Is acting as an unregistered agent, because transaction-based compensation for effecting securities sales points squarely to agent status✓
• b.Is a broker-dealer because she was paid a percentage
• c.Is an investment adviser rather than an agent
• d.Is exempt because she never handled customer funds

Receiving compensation tied to the size or completion of securities transactions is the strongest indicator that a person is effecting or attempting to effect sales and is therefore acting as an agent. Never touching customer money creates no exemption. She is not an adviser because she is paid for sales rather than for advice, and a natural person representing an issuer is treated as an agent rather than a broker-dealer.Uniform Securities Act

Under the Uniform Securities Act, a person is an investment adviser only if all three parts of a defining test are met. Those three elements are:

• a.Advice, custody, and discretion
• b.Registration, examination, and bonding, the three procedural prerequisites the definition treats as the substantive elements of being an investment adviser
• c.Giving advice about securities, doing so as a business, and receiving compensation for it✓
• d.Advising institutions, using leverage, and charging performance fees, the combination the Uniform Act codifies as the exclusive three-part test for adviser status in every state that adopted it

The definition turns on the three-part test: a person who provides advice about securities, does so as a regular part of a business, and receives compensation for it. All three must be present. Custody, discretion, examinations, bonding, client type, and fee structure are not the definitional elements.Uniform Securities Act

A broker-dealer that gives investment advice will generally avoid the definition of investment adviser only if the advice is:

• a.Solely incidental to its brokerage business and the firm receives no special compensation for the advice✓
• b.Given only to institutional clients, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules
• c.Approved in advance by the Administrator, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category
• d.Limited to exempt securities

The broker-dealer exclusion from the investment adviser definition requires both that the advice be solely incidental to the conduct of brokerage and that the firm receive no special compensation for that advice. Charging a separate advisory fee is special compensation and destroys the exclusion. Client type, security type, and Administrator approval are not the test.Uniform Securities Act

A broker-dealer begins charging some customers a separate, stand-alone fee specifically for financial-planning advice. With respect to those services, the firm:

• a.Remains excluded from the definition of investment adviser
• b.Is exempt because it is already a registered broker-dealer
• c.Loses the broker-dealer exclusion and must consider investment adviser registration, because it now receives special compensation for advice✓
• d.Need only notify its customers of the new fee

Receiving special compensation, a separate fee, for advice removes the broker-dealer exclusion, so the firm must analyze investment adviser registration for that activity. Being a registered broker-dealer does not exempt a firm from the advisory framework once it charges specifically for advice, and mere customer notice does not resolve the registration question.Uniform Securities Act

The publisher of a general-circulation financial newspaper that offers regular market commentary and non-personalized stock suggestions is:

• a.An investment adviser that must register, on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order
• b.Excluded from the definition of investment adviser, because bona fide publications of general and regular circulation are excepted✓
• c.An investment adviser representative
• d.A broker-dealer

A bona fide newspaper, news magazine, or business publication of general and regular circulation is excluded from the investment adviser definition so long as its content is not personalized to a particular client's situation. The exclusion can be lost if the publication begins giving individualized, tailored advice.Uniform Securities Act

An investment adviser managing $60 million in client assets, and not otherwise required to register with the SEC, is generally:

• a.A federal covered adviser barred from state registration, because the Act channels every adviser that manages more than fifty million dollars into exclusive federal oversight under NSMIA
• b.Exempt from all registration
• c.A state-registered adviser, because advisers below the $100 million threshold generally register with the states✓
• d.Required to register with both the SEC and every state in which it operates, a dual-filing obligation the statute imposes on mid-sized advisers until their assets fall back below the reporting threshold

Advisers below the $100 million assets-under-management threshold, in the mid-sized band above $25 million, generally register at the state level rather than with the SEC; federal (covered) registration is generally required at $100 million and above, with a buffer for crossing the line. Such an adviser is neither exempt nor routinely dual-registered.Investment Advisers Act / NSMIA

An individual's only function for a state-registered adviser is to solicit prospective clients to sign advisory agreements, for which he is paid. He is:

• a.An investment adviser representative who must register, because soliciting advisory clients is a covered function✓
• b.Exempt, because he gives no actual investment advice, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose
• c.A broker-dealer agent
• d.Exempt, because solicitation is a clerical activity, a conclusion the NASAA model rules are commonly understood to support for a person already registered and in good standing elsewhere

The investment adviser representative definition includes supervised persons who solicit, offer, or negotiate for the sale of advisory services, not only those who give advice. Solicitation is not clerical, so it triggers IAR registration even though the individual renders no securities advice himself.Uniform Securities Act

An individual wishes to act as an agent for two unaffiliated broker-dealers at the same time. Under the Uniform Securities Act, this is:

• a.Automatically prohibited in every state
• b.Permitted without anyone else's knowledge
• c.Generally allowed only if the individual is registered as an agent of each firm and both firms consent, subject to state variation✓
• d.Permitted only for agents serving institutional clients, provided the customer is furnished the required written confirmation and the details are recorded on the books the firm must maintain

An agent must be separately registered for each employing broker-dealer, so acting for two firms requires a registration with each and generally each firm's consent; several states restrict or discourage dual registration with unaffiliated firms, so the answer carries a state-by-state caveat. It is neither automatically barred nor something done secretly, and it is not limited to institutional agents.Uniform Securities Act

With respect to examinations, the Uniform Securities Act provides that the Administrator:

• a.May never require an examination as a condition of registration, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures
• b.May require an examination only of investment advisers
• c.Must require every applicant to pass the same national examination, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary
• d.May by rule or order require applicants to pass a written or oral examination as a condition of registration✓

The Administrator may, by rule or order, require applicants for registration as broker-dealers, agents, investment advisers, or investment adviser representatives to pass a written or oral examination as a condition of qualification. The authority is discretionary, is not limited to advisers, and does not mandate a single uniform national test.Uniform Securities Act

The Administrator may require a state-registered broker-dealer or investment adviser that has custody of, or discretion over, client assets to:

• a.Guarantee client accounts against investment loss, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category
• b.Do nothing beyond filing the initial application
• c.Maintain a minimum net capital or net worth and post a surety bond, within limits tied to federal standards✓
• d.Insure client accounts through a private carrier

The Administrator may set minimum net capital or net worth requirements and require surety bonds, particularly where a firm has custody or discretionary authority, though for firms also subject to federal net-capital rules the state may not exceed those federal ceilings. No firm may be required to guarantee accounts against market loss or to privately insure them.Uniform Securities Act

Regarding the books and records of registered broker-dealers, the Administrator may:

• a.Prohibit any recordkeeping at all
• b.Require records but never set a retention period
• c.Impose requirements that exceed the federal standards for firms also registered with the SEC
• d.Require registrants to make and preserve specified records for prescribed periods, not exceeding the federal requirements for firms also registered with the SEC✓

The Administrator prescribes recordkeeping and retention requirements, but for firms also registered with the SEC, state requirements may not exceed the corresponding federal ones, a coordination Congress imposed through NSMIA. Records are mandatory and time-limited, so prohibiting records or refusing to set a retention period misstates the law.Uniform Securities Act

A broker-dealer organized as a partnership has one of its several partners withdraw from the firm. Under the Uniform Securities Act, the firm's registration:

• a.Remains effective, but the firm must promptly notify the Administrator of the change in membership✓
• b.Automatically terminates and must be refiled from scratch, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules
• c.Is unaffected and requires no notice of any kind, on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order
• d.Converts to the departing partner individually, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose

A change in the partners of a partnership registrant does not automatically void the firm's registration, but the firm must promptly file an amendment reporting the material change in its membership. It neither terminates automatically nor requires no notice, and the registration does not follow the departing partner.Uniform Securities Act

A state-registered investment adviser must keep its Form ADV current by:

• a.Refiling a brand-new Form ADV every year
• b.Amending it only when the Administrator specifically asks
• c.Filing an annual updating amendment within 90 days of its fiscal year end and promptly amending any materially inaccurate information✓
• d.Never amending it once the registration is granted

Advisers must file an annual updating amendment to Form ADV within 90 days of the end of their fiscal year and must promptly amend the form whenever information becomes materially inaccurate. They do not refile a new form from scratch, wait to be asked, or leave the form frozen after registration.NASAA Model Rule

A retired engineer gives securities advice to friends a few times a year and never charges for it. Under the Uniform Securities Act, he is:

• a.An investment adviser who must register
• b.Not an investment adviser, because he is neither in the business of advising nor compensated for it✓
• c.An investment adviser representative
• d.A broker-dealer

He fails two prongs of the three-part test: occasional advice to friends is not being in the business of advising, and he receives no compensation. Either failure alone keeps him outside the investment adviser definition, so registration is not required.Uniform Securities Act

An individual will both sell securities for a broker-dealer and provide advisory services for the firm's affiliated state-registered investment adviser. This individual must:

• a.Register only once, in whichever capacity occupies more of his time
• b.Register only as an agent, because that is the higher standard
• c.Register separately as an agent of the broker-dealer and as an investment adviser representative of the adviser✓
• d.Not register at all, because the two firms are affiliated

Agent and investment adviser representative are distinct registration categories tied to distinct functions and distinct firms; performing both roles requires registration in each capacity. Affiliation between the broker-dealer and the adviser does not merge the two registrations, and neither one is a mere subset of the other.Uniform Securities Act

Which of the following is most likely a 'security' under the Uniform Securities Act?

• a.A commodity futures contract on wheat
• b.A rare-coin collection sold outright to a collector
• c.A fixed, guaranteed annuity issued by a licensed insurer, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category
• d.An investment contract in a whiskey-warehouse-receipt program marketed to passive outside investors✓

An investment contract—an investment of money in a common enterprise with profits expected from others' efforts—is a security, and warehouse-receipt programs sold to passive investors have been treated as such. Fixed annuities, commodity futures, and collectibles sold outright are outside the definition (USA §401 'security'; Howey investment-contract test).

Under the Uniform Securities Act, which of the following is NOT a 'person'?

• a.A minor child who has not reached the age of majority✓
• b.A professional corporation
• c.A trust created to hold family assets, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary
• d.A government or political subdivision

'Person' is defined broadly but expressly excludes a deceased individual, a minor, and one adjudged mentally incompetent. Trusts, governments, and corporations are all persons (USA §401 'person').

Under the Uniform Securities Act, the term 'agent' may include:

• a.A corporation that acts as a broker-dealer
• b.The issuer itself when it sells its own shares, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures
• c.A bank acting as trustee
• d.Only a natural person (individual) who represents a broker-dealer or issuer in effecting securities transactions✓

'Agent' is defined as an individual (natural person); entities are never agents. A corporation effecting trades for others is a broker-dealer, and an issuer is not its own agent (USA §401 'agent').

An individual represents an issuer solely in effecting transactions with underwriters. Under the Uniform Securities Act, this individual:

• a.Must register as a broker-dealer
• b.Is an investment adviser representative
• c.Must register as an agent because compensation is received, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules
• d.Is excluded from the definition of 'agent,' because representing an issuer in certain specified exempt transactions is excluded✓

The Act excludes from 'agent' an individual representing an issuer in effecting transactions in certain exempt securities or specified exempt transactions, including transactions between the issuer and an underwriter. No agent registration is required (USA §401 'agent' exclusions).

Under the Uniform Securities Act, which of the following is included in the term 'offer' or 'offer to sell'?

• a.A judicially approved transfer of securities in a reorganization
• b.A solicitation of an offer to buy a security for value✓
• c.A bona fide pledge of securities as loan collateral
• d.A stock dividend for which the shareholder gives up nothing of value

'Offer' includes every attempt to dispose of, or solicitation of an offer to buy, a security for value. Pledges, no-consideration stock dividends, and court-approved exchanges are not offers or sales (USA §401 'offer'/'sale').

When the Uniform Securities Act refers to a security as 'guaranteed,' it means guaranteed as to:

• a.Freedom from all market risk
• b.A minimum resale price set by the broker-dealer, on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order
• c.Payment of principal, interest, or dividends by a person other than the issuer✓
• d.Approval of the merits by the Administrator

'Guaranteed' means guaranteed as to payment of principal, interest, or dividends by someone other than the issuer. It never means a guarantee against market loss or a resale price (USA §401 'guaranteed').

A 'non-issuer' transaction under the Uniform Securities Act is one in which:

• a.The security is sold exclusively to an institution, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose
• b.Only exempt securities are sold
• c.The proceeds do not benefit, directly or indirectly, the issuer✓
• d.The issuer receives all of the proceeds

A non-issuer transaction is one in which the issuer does not directly or indirectly benefit from the proceeds—typically ordinary secondary-market trading between investors (USA §401 'non-issuer').

Under the Uniform Securities Act, which of the following is a 'broker-dealer' that must register in the state?

• a.A firm with an office in the state that effects securities trades for the accounts of retail customers✓
• b.A bank effecting trades through its trust department, provided the customer is furnished the required written confirmation and the details are recorded on the books the firm must maintain
• c.An issuer selling only its own securities
• d.An agent of a registered firm

A broker-dealer is a person engaged in effecting securities transactions for the accounts of others; the definition excludes agents, issuers, and banks, savings institutions, and trust companies. A firm with an in-state office serving retail customers must register (USA §401 'broker-dealer').

An investment adviser has no place of business in State K and advises only insurance companies and registered investment companies located there. Regarding State K registration, the adviser:

• a.Must register only if it takes custody of client assets
• b.Must register because it advises clients located in the state
• c.Need not register, because with no place of business there and only institutional clients it is excluded regardless of the number of such clients✓
• d.Must register once it has more than five institutional clients, a conclusion the NASAA model rules are commonly understood to support for a person already registered and in good standing elsewhere

Like the broker-dealer institutional exception, the adviser exclusion removes a firm with no place of business in the state whose only clients there are institutions such as insurers and investment companies; the five-client de minimis limit counts only non-institutional clients (USA §401; NASAA de minimis rule).

An investment adviser's only advisory client is a registered open-end investment company, and it manages $30 million. This adviser is:

• a.Exempt from registration entirely
• b.A state-registered adviser because it is below $100 million
• c.A federal covered adviser that registers with the SEC regardless of its assets under management✓
• d.Required to register in every state where the fund has shareholders, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category

An adviser to a registered investment company must register with the SEC and is a federal covered adviser regardless of assets under management; states may require only a notice filing (Investment Advisers Act §203A; NSMIA).

An investment adviser managing $130 million of client assets is required to:

• a.Register with each state in which it has a client
• b.Register with the SEC as a federal covered adviser, subject only to state notice filing where required✓
• c.Register with both the SEC and the states of its offices, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary
• d.Do nothing until it reaches $150 million

An adviser with $100 million or more in AUM may register with the SEC, and at $110 million or more generally must; either way it is federal covered and states may require only notice filings and fees (Advisers Act §203A; NSMIA).

An investment adviser representative of a federal covered adviser works from the firm's office in State A. He has several advisory clients who reside in State B, where he has no office. Regarding State B, he:

• a.Must register with the SEC for his State B activity
• b.Is not required to register, because he has no place of business in State B✓
• c.Must register because he has clients there
• d.Must register once he has more than five clients there, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures

An IAR of a federal covered adviser must register only in states where he has a place of business; clients alone in a no-office state do not trigger registration, and the SEC does not register IARs (NSMIA; USA §401 'investment adviser representative').

An Administrator determines that a registered agent has died. The Administrator will most likely:

• a.Refer the matter for criminal prosecution
• b.Cancel the registration, a non-punitive action used when a registrant no longer exists, cannot be located, or is mentally incompetent✓
• c.Suspend the registration pending a hearing, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules
• d.Revoke the registration for cause

Cancellation is a non-disciplinary action used when a registrant has died, ceased to exist, cannot be located, or is declared mentally incompetent; it implies no wrongdoing, unlike revocation (USA §204; NASAA).

A registered agent files a request to withdraw her registration. Absent a pending proceeding, the withdrawal generally becomes effective:

• a.On the next December 31
• b.30 days after filing, or within any shorter period the Administrator determines✓
• c.Immediately upon filing
• d.Only after the Administrator issues an approval order, on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order

A withdrawal of registration becomes effective 30 days after filing (or sooner if the Administrator allows) if no proceeding is pending; the Administrator retains jurisdiction for one year afterward (USA §204).

Under NASAA model rules, a state-registered investment adviser that has discretionary authority over accounts but does NOT have custody generally must maintain:

• a.A $1 million surety bond in every case
• b.A minimum net worth (commonly $10,000) or, if it cannot, post a surety bond✓
• c.No financial requirement of any kind
• d.Insurance protecting clients against market losses, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose

NASAA's model rule sets a minimum net worth for advisers with discretion (commonly $10,000; custody triggers a higher figure, commonly $35,000). An adviser failing the net-worth test may post a surety bond instead; no firm may insure clients against market loss (NASAA Model Rule on minimum financial requirements).

A consent to service of process must be filed by all of the following EXCEPT:

• a.An issuer registering securities in the state
• b.An investment adviser applying for registration
• c.A customer opening a brokerage account✓
• d.A broker-dealer applying for registration

Applicants for registration (broker-dealers, agents, investment advisers, IARs) and issuers registering securities must file an irrevocable consent to service of process; customers do not (USA §414).

An attorney sets up a separate advisory service and charges clients a distinct fee specifically for securities recommendations, apart from his legal work. Under the Uniform Securities Act, the attorney:

• a.Is automatically a broker-dealer
• b.Is not excluded; charging special compensation for advice defeats the professional exclusion, so he must consider investment adviser registration✓
• c.Remains excluded because he is a lawyer
• d.Is excluded if he advises fewer than six clients, provided the customer is furnished the required written confirmation and the details are recorded on the books the firm must maintain

The exclusion for lawyers, accountants, teachers, and engineers applies only when the advice is solely incidental to the profession and no special compensation is received; a separate advisory fee destroys it (USA §401 'investment adviser' LATE exclusion).

A firm, for a fee, regularly issues written analyses and reports advising pension plans on the selection of securities and money managers. This firm is most likely:

• a.A broker-dealer
• b.Excluded as a bona fide publisher
• c.An investment adviser, because it is in the business of issuing securities analyses for compensation✓
• d.Excluded because it advises only institutions, a conclusion the NASAA model rules are commonly understood to support for a person already registered and in good standing elsewhere

A person who, for compensation and as part of a business, issues analyses or reports concerning securities meets the investment adviser definition; advising institutions does not exclude it (USA §401 'investment adviser'; three-part test).

Which location is a 'place of business' of an investment adviser representative under NASAA rules?

• a.The client's home in every case
• b.Any office where the IAR regularly provides advisory services or meets clients, or any location held out to the public as such✓
• c.Any state the IAR has ever visited, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category
• d.Only the firm's principal office

A place of business is any office at which the IAR regularly conducts advisory business or meets clients, and any location held out to the public as a place where he does so (NASAA Model Rule; Advisers Act Rule 203A-3).

Which officer of a registered broker-dealer must also register as an agent?

• a.A silent investor in the firm
• b.An officer listed on the letterhead who never solicits business
• c.An officer who performs only administrative duties with no customer contact
• d.An officer who solicits securities orders from public customers✓

An agent is any individual (including an officer) who effects or attempts to effect securities transactions for the firm; purely administrative officers are not agents, but soliciting orders triggers agent registration (USA §401 'agent').

An offer is NOT considered made in a state under the Uniform Securities Act when it appears in a newspaper published in the state that has:

• a.Any circulation at all within the state, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary
• b.Only an online edition
• c.More than two-thirds of its circulation outside the state during the past twelve months✓
• d.Fewer than 1,000 subscribers

The publishing exception treats an offer as not made in a state if it appears in a newspaper published out of state, or one published in-state but with two-thirds or more of its circulation outside the state during the past year (USA §401 'offer'/'sale' publishing exception).

A newly hired individual may begin transacting securities business as an agent:

• a.As soon as he is hired, regardless of registration
• b.After he passes the exam, even if registration is not yet effective, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures
• c.Only after his registration in the state is effective and he is associated with a registered broker-dealer✓
• d.As soon as the firm files his application, before it is effective

An agent may act only when his registration is effective and he is associated with a registered broker-dealer or issuer; hiring or exam-passing alone does not authorize transacting business (USA §201).

With respect to a federal covered investment adviser, a state Administrator MAY require:

• a.A notice filing consisting of documents filed with the SEC, payment of fees, and a consent to service of process✓
• b.That the adviser pass a state examination
• c.Full registration in the state of the adviser's principal office, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules
• d.That the adviser meet state minimum net-worth rules

For federal covered advisers, states may require notice filings (copies of SEC documents), fees, and a consent to service of process, but not registration, exams, or state financial standards; antifraud authority remains (NSMIA; Advisers Act §203A).

A financial planner prepares comprehensive financial plans that include specific securities recommendations and charges a fee for the plans. The planner is:

• a.Exempt because a written plan is not 'advice', on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order
• b.An investment adviser, because he provides securities advice as a business for compensation✓
• c.A broker-dealer
• d.Excluded as an incidental professional

A financial planner who gives securities advice as part of a business and is compensated meets the three-part investment adviser definition; a fee-based plan with securities recommendations is advisory activity (USA §401; NASAA financial-planner interpretation).

At a state-registered adviser, which supervised person is an investment adviser representative?

• a.An outside contractor who maintains the firm's servers, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose
• b.The office manager who handles payroll
• c.The receptionist who schedules meetings
• d.A research analyst whose written recommendations the firm uses to advise clients✓

An IAR includes supervised persons who make or determine recommendations, manage accounts, solicit advisory services, or supervise those who do; a research analyst whose recommendations drive client advice qualifies, while purely clerical staff are excluded (USA §401 'IAR').

If the Administrator requires a broker-dealer to post a surety bond, the bond requirement:

• a.Must be renewed monthly
• b.Guarantees customers against investment losses, provided the customer is furnished the required written confirmation and the details are recorded on the books the firm must maintain
• c.Applies only to out-of-state firms
• d.May be satisfied by a deposit of cash or securities in lieu of the bond✓

The Administrator may require bonds, and an applicant may deposit cash or qualifying securities in lieu of a surety bond; a bond covers wrongful conduct, not market losses (USA §202).

Which individual must register as an agent under the Uniform Securities Act?

• a.An individual representing an issuer in a transaction with an underwriter
• b.An individual representing an issuer selling stock only to the issuer's employees with no commission, a conclusion the NASAA model rules are commonly understood to support for a person already registered and in good standing elsewhere
• c.An individual representing a broker-dealer in selling registered common stock to retail investors for commissions✓
• d.An individual representing an issuer selling U.S. government bonds

Representing a broker-dealer in effecting retail securities sales for compensation is the core of the agent definition; the other three are excluded issuer-representative situations (exempt securities, transactions with underwriters, no-commission employee sales) (USA §401 'agent').

Which of the following is EXCLUDED from the definition of 'investment adviser' under the Uniform Securities Act?

• a.A financial planner charging fees for securities advice
• b.A pension consultant paid to recommend securities
• c.A bank or bank holding company that is not itself an investment company✓
• d.A person who manages client portfolios for a percentage fee, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category

The investment adviser definition excludes banks and bank holding companies (not themselves investment companies), broker-dealers giving incidental advice without special compensation, LATE professionals, and bona fide publishers. Fee-based managers, planners, and pension consultants are advisers (USA §401 'investment adviser').

For the investment adviser de minimis exemption, the five-client limit is measured:

• a.Over the preceding 12 consecutive months, counting only non-institutional (retail) clients✓
• b.Per calendar year, resetting each January 1
• c.By counting every client, including institutions, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary
• d.Over the entire life of the firm

The de minimis exemption looks back 12 consecutive months and counts non-institutional clients only; an adviser with no place of business in the state and five or fewer such clients need not register there (NASAA de minimis rule).

A broker-dealer registered in a state hires a new agent. Before the agent may solicit customers, the firm generally must:

• a.Obtain SEC approval of the individual, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures
• b.Simply add the agent to its payroll
• c.Wait until the annual renewal date
• d.File the agent's application and have the agent's registration become effective in that state✓

Agents register at the state level; the firm files the application (Form U4 via CRD) and the agent may act only once the registration is effective. Payroll status and SEC approval are not the triggers (USA §201).

Under the Uniform Securities Act, a security given as a bonus with the purchase of another security is considered to have been:

• a.An exempt transaction automatically, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules
• b.Sold, because it was part of a package given as consideration for value✓
• c.A non-security gift
• d.A tax-free stock dividend

A purported gift of a security accompanying the sale of another security (a bonus) is considered part of the subject of the purchase and to have been offered and sold for value (USA §401 'offer'/'sale').

A state-registered adviser's assets grow to $120 million. It generally must:

• a.Remain state-registered indefinitely
• b.Do nothing, because AUM is irrelevant
• c.Register with both the state and the SEC permanently, on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order
• d.Register with the SEC and withdraw its state registrations (states may then require only a notice filing)✓

At $110 million or more, an adviser generally must register with the SEC as a federal covered adviser and withdraw state registrations; states may require notice filings thereafter (Advisers Act §203A; NSMIA).

An adviser with $40 million in AUM would ordinarily register with the states, but its home state does not subject advisers to examination. In that circumstance the adviser:

• a.Must register in all 50 states
• b.Registers only with its home state regardless, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose
• c.Is exempt from all registration
• d.Must instead register with the SEC, because a mid-sized adviser not subject to examination in its home state registers federally✓

A mid-sized adviser ($25M–$100M) generally registers with the states, but if it would not be subject to examination by its home-state Administrator, it must instead register with the SEC (Advisers Act §203A(a)(2)).

For purposes of the broker-dealer institutional exception, an employee benefit plan qualifies as an institutional client only if it:

• a.Has fewer than 100 participants
• b.Is invested entirely in securities, provided the customer is furnished the required written confirmation and the details are recorded on the books the firm must maintain
• c.Is a governmental plan
• d.Has assets of not less than $1 million✓

The institutional exception includes employee benefit plans with assets of at least $1,000,000; smaller plans are treated as non-institutional (USA §401 'broker-dealer'; NASAA).

Which of the following is NOT a 'sale' or 'offer' under the Uniform Securities Act?

• a.A solicitation of an offer to buy stock for value
• b.The offer of a security as a bonus with a purchase, a conclusion the NASAA model rules are commonly understood to support for a person already registered and in good standing elsewhere
• c.A sale of a warrant attached to a bond
• d.A stock dividend in which the shareholder gives up nothing of value✓

A stock dividend where nothing of value is surrendered is expressly excluded from 'sale/offer.' Solicitations for value, warrants, and bonus securities are all offers or sales (USA §401 'offer'/'sale').

Under the Uniform Securities Act, an exchange of securities under a reorganization approved by a court or governmental authority is:

• a.A prohibited transaction
• b.Not a 'sale,' so no registration of the exchange is required✓
• c.Always a taxable sale requiring registration
• d.An offer made in every state where holders reside, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category

The definition of 'sale' excludes an exchange incident to a judicially or administratively approved reorganization; such exchanges are not sales requiring registration (USA §401 'sale' exclusions).

An investment adviser representative leaves one state-registered adviser to join another. To act at the new firm, he must:

• a.Do nothing, because IAR registration follows the individual, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary
• b.Wait until the next December 31
• c.Be registered as an IAR of the new adviser, because his registration does not automatically transfer✓
• d.Register with the SEC

IAR registration is tied to a specific adviser; moving firms requires a new IAR registration with the new adviser and notice to the Administrator of the change (USA §201; NASAA).

May a state require an investment adviser representative to pass a qualification examination?

• a.Only for IARs of federal covered advisers
• b.Yes, the Administrator may require IARs to pass a written or oral examination as a condition of registration✓
• c.No, examinations are prohibited for IARs
• d.Only if the IAR has custody of client funds, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures

The Administrator may by rule or order require applicants—including IARs—to pass a written or oral examination (e.g., Series 65/66) as a qualification condition (USA §202; NASAA).

Under the Uniform Securities Act, an issuer selling only its own securities to the public:

• a.Is an agent of its purchasers
• b.Is a broker-dealer that must register, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules
• c.Is an investment adviser
• d.Is not a broker-dealer, because it does not effect transactions for the accounts of others✓

A broker-dealer effects transactions for the accounts of others; an issuer selling only its own securities is expressly excluded from the broker-dealer definition, though its individual sellers may be agents (USA §401 'broker-dealer').

A person gives securities advice regularly as a business but never receives any compensation, direct or indirect. Under the Uniform Securities Act, this person is:

• a.Not an investment adviser, because compensation is a required element of the definition✓
• b.A broker-dealer
• c.An investment adviser who must register, on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order
• d.An investment adviser representative

The three-part test requires advice about securities, as a business, for compensation. With no compensation of any kind, the person fails the test and is not an investment adviser (USA §401; three-part test).

An 'investment adviser' may exist even where the client pays no separate advisory fee, if the person receives:

• a.Only a thank-you note
• b.Reimbursement of postage only, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose
• c.No compensation of any kind
• d.Indirect or economic compensation, such as commissions or other benefits tied to the advice✓

Compensation for the three-part test includes indirect economic benefit—commissions, markups, or other value received because of the advice—not just a direct fee (USA §401; NASAA 'compensation' broadly construed).

Under the Uniform Securities Act, the Administrator may, by rule or order:

• a.Exempt only issuers
• b.Never create additional exemptions
• c.Only expand, never narrow, registration requirements, provided the customer is furnished the required written confirmation and the details are recorded on the books the firm must maintain
• d.Exempt additional persons or securities from registration when consistent with the public interest and the protection of investors✓

The Act authorizes the Administrator to grant exemptions and exceptions by rule or order when consistent with the public interest and investor protection (USA §203/§402(b) exemptive authority).

In an application for broker-dealer registration, the Administrator may require information about the applicant's:

• a.Business history, disciplinary record, financial condition, and qualifications✓
• b.Customers' Social Security numbers, a conclusion the NASAA model rules are commonly understood to support for a person already registered and in good standing elsewhere
• c.Personal religious beliefs
• d.Political affiliations

The Administrator may require applicants to disclose business form and history, injunctions and administrative orders, criminal and securities convictions, financial condition, and qualifications (USA §202 application requirements).

If an application for registration is incomplete or a stop order is pending on the thirtieth day after filing, the registration:

• a.Becomes effective anyway at noon on the thirtieth day, so long as written notice describing the arrangement is delivered to the Administrator within the time fixed by rule for that category
• b.Does not become effective until the application is complete and no proceeding is pending✓
• c.Becomes effective when the applicant pays a penalty
• d.Is automatically denied

Effectiveness at noon on the 30th day presupposes a complete application and no pending proceeding; a deficient application or a pending order postpones effectiveness (USA §201).

A registered agent is charged with a felony. With respect to his registration record, he generally must:

• a.Report it only at annual renewal
• b.Promptly amend his registration to disclose the reportable event✓
• c.Do nothing unless he is convicted
• d.Report it only if the felony is securities-related, provided the firm files the required consent to service of process and the Administrator does not enter an order to the contrary

Registrants must keep filings current and promptly amend to disclose reportable events, including criminal charges, not merely convictions (USA §203; CRD amendment requirements).

A registered broker-dealer opens an additional branch office within the same state. The firm generally must:

• a.File a brand-new registration for the branch as a separate broker-dealer, since the Administrator generally treats this as a routine matter resolved through the state's ordinary coordination procedures
• b.Register the branch with the SEC only
• c.Do nothing at all
• d.File with or notify the Administrator as required (amend its registration) but need not register as a new firm✓

An added in-state branch is reported through amendment or branch filing; the firm does not become a new broker-dealer (USA §203; NASAA branch/recordkeeping rules).

A federal covered adviser's assets decline to $85 million as reported on its annual updating amendment. It generally must:

• a.Do nothing, because AUM changes are irrelevant
• b.Register with every state simultaneously and permanently
• c.Withdraw from SEC registration and register with the states, because it has fallen below the $90 million buffer for remaining SEC-registered✓
• d.Immediately deregister from the SEC the same day it dips, an interpretation that several states incorporated when they enacted the later revisions to the uniform act and its accompanying rules

A federal covered adviser that drops below $90 million (the buffer under the $100M threshold) generally must transition to state registration; the buffer prevents constant switching near the line (Advisers Act §203A; Form ADV instructions).

A broker-dealer with no place of business in State Z deals only with its existing customers who are temporarily present in State Z but are residents of other states. In State Z, the firm is:

• a.Prohibited from doing any business at all
• b.Excluded from the broker-dealer definition under the 'snowbird' exclusion, because it has no office there and its only customers are non-resident existing clients✓
• c.Required to obtain full broker-dealer registration, on the view that the relevant exemption stays available to the party unless and until the Administrator revokes it by a formal order
• d.Required to register only its agents

The snowbird exclusion removes a broker-dealer (and its agents) with no place of business in a state whose only customers there are existing clients who are not residents of that state (USA §401 'broker-dealer' exclusions).

State registration fees paid by a broker-dealer or agent are generally:

• a.Fully refundable if the registration is withdrawn, assuming the applicant has satisfied the net worth, surety bonding, and qualification-examination conditions the Administrator may impose
• b.Set by the SEC rather than the state
• c.Non-refundable, and not returned merely because an application is later withdrawn or denied✓
• d.Waived for out-of-state firms

Filing and registration fees are generally non-refundable; withdrawal or denial does not entitle the applicant to a refund, and states, not the SEC, set them (USA §202 fee provisions).

Which statement about a federal covered adviser is TRUE under state law?

• a.Its IARs never register with any state
• b.It is subject to state notice filing, fees, a consent to service of process, and state antifraud jurisdiction, but not state registration✓
• c.It must register in each state where it has a client
• d.It is completely beyond state authority for all purposes, provided the customer is furnished the required written confirmation and the details are recorded on the books the firm must maintain

States cannot require federal covered advisers to register but may require notice filings, fees, and a consent to service of process, and they retain full antifraud authority; the firm's IARs still register where they have a place of business (NSMIA; USA).