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Quick fact 66

Terms in this set (93)

An agents of an issuer who is compensated for sales to the public:
must register
How long is a registration statement effective?
1 year after effective date
USA considers what exempt?
any offer to an investment company or other institutional investor, a transaction by an executor of an estate, or a trustee involved in a bankruptcy
form 10-k, 10-q
Publicly traded companies disclose their annual financial reports on 10-k and quarterly on form 10-q; filed with SEC
Form 8-k
Publicly traded companies must report certain material events shareholder should know about on a current basis they use form 8-k, 4 days
Sec release 1092
was published by SEC to provide guidance to investment advisors
what is exempt from being considered a investment advisor according to the USA?
1)Banks, trusts, savings institutions 2) LATE 3)broker dealers and their agents 4)federal covered advisors 5) any person who is designated by the administrator 6) publishers of newspaper or periodicals 7) IA representatives
form 13d
if a person squires more than 5% of common voting shares this form must be filed with SEC
Form 13F
filed by institutional investment managers that exercise investment discretion over 100 million or more in securities, required to file within 35 days of the end of the quarter
form 144
if filled when an investor intends to sell restricted (private placement) stock or when an insider intends to sell control stock
what is exempt from being considered an investment advisor according to act of 1940:
Bank or Bank holding comp that is not an investment company, lawyer engineer accountant or teacher who's advise is incidental to profession, broker-dealer who's advise is incidental, a bona fide publisher, any person whose advice is limited to securities that are direct obligations of the US gov or guaranteed by the US gov.
expected rate of return is:
used to estimate or anticipate the performance of a portfolio by averaging all of the possible returns and the probability that they will occur
form 1041
trustee is responsible for reporting income, gains and loses to the IRS
form 1040
personal tax returns
form 1065
used by partnerships
form k-1
information statement distributed by a partnership to its partners, which they use to prepare their 1040
form bd
required when registering as a broker dealer
what is a security:
anything with a variable return, retirement plans are not!
Exempt security based on issuer on state level:
Government, Canada securities, (Cuba and north Korea don't get exemption), bank savings and loan, trust company, credit union, isn company, non-profit, common carrie, company regulated by the pacific utility holding company act of 1935
why are short term debt exempt?
9 month max maturity, one of the highest 3 ratings by NRSO, denominations of 50k or more
Federal Covered securities:
any security listed on NYSE or regional exchange, securities issued by an ins company (mutual fund), Rule 506 private placement, qualified purchasers (any person that owns at least 5 million of securities)
can state cancel the registration on fed covered security?
no
can state prohibit sale of fed covered security?
no
what may mutual funds need to file at state level even though fed severed security?
notice filing, consent to service of process and payment of fee (any issue listed company on exchange does not need to fill anything)
what is a person:
broker dealers, investment advisors, broker dealer representatives, agents
what is a broker dealer:
someone effecting transactions in an account for themselves and account others, must always register with state administrator
What is not a broker dealer:
agents, issuers, banks savings institutions and trust co, a broker dealer w/ no place of business in the state who transacts business with intuitions of existing clients who are not residents of that state
issuer:
any person that issues or propose to issue any security for purpose of raising capital (issuer transaction)
Agent:
an individual who represents an issuer in the sale of securities is Only considered an agent and subject to registration if the security is being registered and the individual receives specific compensation for the sale
when must an IAR of federal covered advisor register with a state:
only if it has an office in the state
when must a IAR of state register advisor register with a state:
if it has an office in the state or if it has 6 or more non institutional clients
What must a broker dealer, agent IA and IAR file?
Application (crd or IARD), Consent to service process, Filing fee
file Application:
effective 30 days after filing, expired annually dec. 31st, updated annually at renewal, amendments for material changes are filed promptly (usually within 30 days)
Consent to service of process:
filed once not renewed, grants the administrator power of attorney to receive and process non-criminal legal complaints
filing fee
paid annually
Filling fee for successor firms (firm changes ownership):
new application must be filed, no additional filing fee for remainder of year
CRD:
Broker dealers and agents file application through CRD, electronic filing
IARD
IA and IARs file application through IARD, electronic filing
surety bond:
to cover cost of possible legal action, required if B/D agent and I/A have custody of or discretionary authority of clients funds, not required if B/D net capital or IA's net worth exceeds the min set by administrator, must maintain for as long as in business plus 3 years thereafter, in lien of bond, cash or securities may be deposited (amount and type determined by admin.)
FCA under Dodd-Frank states covered:
advisors providing advice in 15 or more states
FCA under Dodd-Frank Employee Benefit Size:
Pension consultants to plans w/ at least 200 million in assets
when is an advisor a FCA:
advisor to register investment companies regardless of the amount of assets under management, advisors not regulated as IAs in the state in which they have their principal office
newly formed advisors who believe they will be eligible for federal registration:
within 120 days
IAs registration requirement:
filing fee and 2 part registration doc form ADV
ADV:
used to register with SEC or State,
ADV part 1:
IA name, # of employees, nature of business, for each partner office or director- name address education and 10 yr business history, How firm maintains custody of client assets, if principal business consists of investment supervisory service, and number and size of discretionary and non discretionary accounts
ADV part 2:
(main be used in pace of brochure) Potential conflicts of interest, services provided and related fees, soft-dollar arrangements, types of securities on which advice is given and types of analyses used, education and business background of those rendering investment advice, Education and business background of those rendering investment advice ( no standards), balance sheet ( if IA has custody of clients funds/securities or collects prepaid fees of more that 500, six months or more in advance)
ADV material changes:
Changes in status of general partner, manner of custody, structure of fees (promptly within 30 days)
ADV routine changes:
(amendment within 90 days of fiscal year-end) Changes in number of employees, number of discretionary accounts
ADV annual renewal:
(90 days after fiscal year) file an annual updating amendment, determines eligibility for continued SEC registration
ADV-W
withdrawal of registration
ADV-E
files by independent public accountant to report the results of an audit of adviser who has custody of clients funds or securities (must be filed with 30 days of audit)
ADV-NR
filed by w/ general partners or managing agents who are non-US residents. appoints the security of the SEC as the adviser's agent for receipt of legal papers
SEC release IA 1092:
determines if others may be subject to IA registration requirements) sports/entertainment reps, financial planners, pension consultant, NRSRO- moody's, S&P's
Professionals giving incidental advice:
LATE, lawyers, accountants, teachers and engineers
what is exempt from being considered a investment advisor according to the IA act of 40:
1) banks or hank holding companies (not S&L or IA subsidiaries of banks) 2) LATE 3) B/Ds and their representatives 4) Publishers of regular and general circulation publications 5) US gov securities 6) Any other person designated by SEC
State Exemptions from IA registration:
no place of business in the state and institutional exemption, de minims exemption (5 clients)
Federal Exemptions from IA Registration:
Local exemption (all clients are residents of state where office is located and gives no advice on exchange listed securities) Insurance exemption ( all clients are ins companies), De Minims Exemption (15 clients)
Brochure rule exclusions:
contracts with registers investment companies, contracts for impersonal advisor service costing less than $500 per year
If a wrap account is sponsored by a B/D:
the firm would be required to register as an investment adviser
When are performance baed fees allowed for clients:
registered investment companies, Qualified clients (1 mill under mgmt or 2 mill net worth), Non-US residents, knowledgeable individuals associated with the IA such as officer director trustee general partner or nonclarical employee who has participated in the investment activities of the adviser for at least 12 months, 3c7 hedge funds
Fulcrum fee:
a fee w/ 2 parts, a base fee plus a performance-based fee that increases or decreases based on the performance of a portfolio as compared to specified benchmark
Agency cross transaction:
Advisor acts as a broker for its client and another person on the other side of the trade, prohibited if the advisor recommends the transaction to both sides of the trade- one must be unsolicited
What qualifies as both offer and sale:
any security given w/ or as a bonus for the purchase of a security (warrant), a gift of assessable stock, a gift of stock is neither offer or sale
Jurisdiction U.S. mail or telephone:
2 states, state where offer originated and the state to which it is directed (mail is not the state where mail is forwarded)
Jurisdiction TV or Radio:
1 state, the state in which camera or microphone is located
Jurisdiction Newspaper or Magazine:
one state or no state, the state in which the newspaper or magazine is published, unless more than 2/3 of the circulation is outside the state
right of action:
client may sue in civil court, may sue for original cost or any loss due to advice, plus interest, court costs reasonable to attorneys fees, minus any income received from the security/advice
any person who willfully violates any provision of the USA may be subject to criminal penalties:
state: 3 yrs in prison or 5k or both, fed: 5 yrs in prison or 10k or both (5 year statute of limitations)
Futures and forwards:
a contract between a buyer and seller who agree to trade a specific commodity at a specific time
Futures:
standardized quantity, non-personal, may be offset, exchange traded
Forwards:
Variable, OTC-traded with negotiable terms, Personal, may not be offset
Value stock:
undervalued, low P/E, low price-to-book value, pays dividends, yes "out of favor"
Groth stock:
Rapid growth, high P/E, high price to book, doesn't pay dividends, not "out of favor"
Contrarian:
betting against market trends or prevailing consensus, may focus on companies out of the mainstream or those with low P/Es
Complexity risk:
highly sophisticated strategies may delay reaction to market changes,
the maximum that may be charged for organizational and offering expenses:
15%
The max that can be charged for offering compensation and expenses:
10.5%
Howey Test:
1) investment of money 2) expectation of profit 3) common enterprise 4) efforts made by a third party
omnibus account:
uses one account to invest all clients funds
What securities may have there registration denied or revoked by the administrator:
non-profit securities, exchange-listed securities and investment contracts for employee benefit plans
blind pools, blank check, mergers and acquisitions:
not exempt USA
section 15 of the securities exchange act of 1934 regulates:
broker-dealer registration
who may accept verbal authority from a client to make transactions?
investment advisors not B/D
An investment adviser representative is any person who is associated with an investment adviser
and makes recommendations, manages accounts, provides advice, solicits advisory services, negotiates the sale of advisory services, or supervises persons engaged in these activities
What must be maintained by IA for five years:
a copy of audited financial statements, written complaints and a copy of a solicitors written disclose documents
What must be maintained by IA for life of the firm:
Partnership agreements, articles of incorporation, minute books from board meetings, and stock certificate books are preserved for the life of the firm and for at least three years after termination of the firm.
when does SEC allow continence fees?
clients have 1 million under management or 2 million in net worth
internal rate of return:
IAR measures the cash inflows, outflows, and time over which the client's money compounds in the portfolio.
Monte Carlo
is a technique which uses randomly generated scenarios, called simulations, to attempt to determine the probability of possible returns
404(c) of ERISA
fiduciaries are not held responsible for investment losses if certain conditions are met
after someone turns 70 1/2 when must they take required minimum distribution?
december 1st each year
capital need analysis
used to determine how much insurance would be need in the event of an untimely death
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