A broker-dealer engages an individual as an independent contractor to contact prospective customers, describe the broker-dealer's services, and encourage the prospects to open accounts and purchase securities through the broker-dealer. The individual is compensated with a percentage of the commissions earned by the broker-dealer's registered agents who service the accounts the individual opens. The individual is not authorized to accept orders or negotiate terms, does not complete any transactions, and does not discuss specific securities with prospects.
Under the Uniform Securities Act, which of the following is correct regarding the individual? Answer: The individual is an agent because the individual represents the broker-dealer in attempting to effect purchases or sales.
Under Uniform Securities Act § 401, an agent is an individual who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales. Soliciting prospective customers for a broker-dealer is attempting to effect purchases or sales even when no transaction is completed and no specific security is discussed. The definition does not distinguish employees from independent contractors, and compensation based on commissions generated by the accounts the individual opens confirms the representative role. The independent-contractor option invents an employment requirement the statute does not contain; the no-completed-transactions option ignores the statutory phrase 'attempting to effect'; the registration option reverses the statutory relationship, because registration is required because the individual is an agent, not the other way around.
An individual registered as an agent of a broker-dealer terminates the association on October 1. The broker-dealer notifies the Administrator of the termination on October 2. The individual does not become associated with another broker-dealer until November 1. During October, the individual continues to effect transactions for former clients, believing the registration remains effective because it was renewed in January and does not expire until December 31.
Under the Uniform Securities Act, which of the following is correct regarding the individual's registration? Answer: The registration is not effective while the individual is not associated with a registered broker-dealer.
Under Uniform Securities Act § 201, an agent's registration is not effective while the agent is not associated with a registered broker-dealer or issuer. The annual renewal and the December 31 expiration do not preserve effectiveness during a gap in association. Because the individual's association ended on October 1 and no new association began until November 1, the registration was ineffective throughout October, so effecting transactions for former clients violated the Act. The December 31 option ignores the association requirement; the option saying the registration is ineffective because the individual failed to notify the Administrator misstates the cause, since the lack of association is what makes the registration ineffective and the notice failure is a separate violation; the option saying the registration remains effective because the individual continues to effect transactions reverses the rule, because an effective registration is a precondition to transacting business.
- Under the Uniform Securities Act, which statement is true regarding a partner, officer, or director of a registered broker-dealer?
Answer: A partner, officer, or director of a registered broker-dealer who solicits customer orders is an agent and must be registered even if the person receives only a fixed salary and no commissions.
Under Uniform Securities Act § 401(b) and § 201, a partner, officer, or director of a broker-dealer is an agent only if the person otherwise meets the definition by representing the broker-dealer in effecting or attempting to effect securities transactions. Soliciting customer orders is attempting to effect transactions, and no transaction-based compensation is required, so the fixed-salary officer who solicits must register. Automatic registration based solely on the firm's registration or the person's title is incorrect; the automatic-registration provision covers only those who act as agents. Supervision alone is not effecting transactions and does not by itself create an agent registration requirement under the Act. The statement that transaction-based compensation is required adds a condition the definition does not contain.
An individual files a complete application for initial registration as an agent with the Administrator on November 5. The Administrator takes no action on the application, and no denial order or proceeding is pending. The sponsoring broker-dealer is registered in the state.
Under the Uniform Securities Act, which of the following is correct regarding the application? Answer: The registration becomes effective at noon on December 5 and expires on December 31 unless renewed.
Under the Uniform Securities Act (USA §§ 201-204), a registration becomes effective at noon of the 30th day after filing if no denial order is in effect and no proceeding is pending, and every registration expires December 31 unless renewed. An application filed on November 5 becomes effective at noon on December 5 and expires at year-end, not one year from the effective date. The immediate-effectiveness option ignores the 30-day waiting period; the one-year-from-effective-date option applies a term the Act does not provide; the written-order option confuses the administrative process with effectiveness by operation of law.
An agent terminates her association with a registered broker-dealer and, two weeks later, begins associating with a different registered broker-dealer in the same state. The new firm files an agent registration application for her, and both broker-dealers promptly notify the Administrator of the termination and the new association. The agent files no notice herself, believing the firms' filings satisfy the statutory requirements.
Under the Uniform Securities Act, which of the following is correct? Answer: The agent must promptly notify the Administrator of both the termination and the new association.
Uniform Securities Act § 201(b). An agent's registration is effective only while the agent is associated with a particular registered broker-dealer, so a move to a new firm requires a new filing by that firm, which the new firm made here. Separately, when an agent's association begins or ends, the agent as well as the broker-dealer must promptly notify the Administrator. The firms' notices and the new firm's application satisfy the firms' obligations but do not discharge the agent's own duty, so she must notify the Administrator of both the termination and the new association. The statement that the broker-dealers' notifications are the required filings ignores the agent's independent duty. The statement that the new firm's application takes the place of notice confuses the registration filing with the separate notice requirement. The statement requiring notice only of the new association ignores that notice is due when the association ends as well as when it begins.
- Which one of the following individuals is required to register as an agent under the Uniform Securities Act?
Answer: An employee of an issuer who offers the issuer's common stock to 11 non-institutional offerees in the state during any 12 consecutive months, receives no commission, and reasonably believes each buyer is purchasing for investment.
Under Uniform Securities Act § 401(b), an issuer's representative is not an agent when selling in an exempt transaction or when selling exempt securities such as municipal bonds (§ 402(a)). The state private-placement exemption in § 402(b) is available when offers are directed to no more than 10 non-institutional offerees in the state in 12 consecutive months, the seller reasonably believes buyers take for investment, and no commission is paid for soliciting non-institutional buyers. The 9-offeree offering fits that exemption, so that employee is not an agent; the 11-offeree offering exceeds the limit, so that employee is required to register. A sale to an insurance company is a sale to an institutional buyer, an exempt transaction, so that employee is also not an agent.
An agent of a state-registered broker-dealer resigns from the firm on June 1 and does not file any paperwork with the Administrator. On July 15, while not associated with any broker-dealer, the agent executes a securities trade for a long-time customer.
Under the Uniform Securities Act, which statement is true? Answer: The agent's registration is not effective while the agent is not associated with a registered broker-dealer, so the July 15 trade violates the Act.
Uniform Securities Act § 201(b). An agent's registration is not effective while the agent is not associated with a registered broker-dealer or issuer. When the agent resigned on June 1, the registration ceased to be effective, regardless of whether a withdrawal application was filed. The trade on July 15 while unassociated therefore violates the Act. The statement that the registration remains effective until a withdrawal application is filed is wrong because effectiveness is tied to association, not to withdrawal paperwork. The statement that the registration remains effective until the Administrator revokes it is wrong because no revocation order is needed to render an unassociated agent's registration ineffective. The statement that the registration lapses automatically thirty days after resigning is wrong because the registration is ineffective immediately upon the loss of association, not after a waiting period.
An agent of a state-registered broker-dealer terminates her association with the firm and, 60 days later, becomes associated with a different state-registered broker-dealer. The agent and her former firm promptly notified the Administrator of the termination. The new firm and the agent have not yet notified the Administrator of the new association.
Under the Uniform Securities Act, which of the following statements is correct? Answer: The agent's registration ceased to be effective at termination, and she may not act for the new firm until a registration filed for that firm becomes effective.
Uniform Securities Act § 201(b), with § 202(a) for effectiveness. An agent's registration is effective only while the agent is associated with a particular registered broker-dealer or issuer. When the agent left her firm, her registration ceased to be effective, and it does not carry over to a different broker-dealer. Before she may transact business in the state for the new firm, that firm must file for her registration, which takes effect at noon of the 30th day after filing unless the Administrator sets an earlier date. The statement that the registration became effective again upon association with the new firm treats the registration as portable between firms, when it attaches to the particular firm. The statement that prompt notice of the termination preserved effectiveness ignores that effectiveness depends on association, not on notice. The statement that a 30-day grace period applied invents a period the statute does not contain.
- Under the Uniform Securities Act, which statement regarding the effectiveness and renewal of an agent's registration is true?
Answer: An agent's registration becomes effective at noon on the 30th day after the application is filed unless a denial order is in effect or a proceeding is pending, and it expires on December 31 unless renewed.
Under Uniform Securities Act § 202(a), a registration becomes effective at noon on the 30th day after filing if no denial order is in effect and no proceeding is pending; § 201(e) provides that every registration expires on December 31 unless renewed. Immediate effectiveness after passing the examination is wrong because the application must be filed and become effective. One-year-from-filing renewal is wrong because the expiration is calendar-year. A prior hearing and written order of approval are not prerequisites to effectiveness; the Administrator acts on registrations through the statutory denial and suspension procedures.
A privately held company is conducting a Rule 506(b) private placement of its common stock. The company's vice president of investor relations, who is not associated with any broker-dealer, solicits purchases from accredited investors in the state and receives a commission from the company equal to 2% of each investor's purchase.
Under the Uniform Securities Act, which of the following statements is correct regarding the vice president? Answer: She is not an agent because the offering is a Rule 506 offering, and the commission does not change that result.
Governing authority: Uniform Securities Act § 401. An agent is an individual, other than a broker-dealer, who represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. Issuer representatives are excluded from the definition when selling in Rule 506 offerings, and unlike the exclusion for sales to existing employees, that exclusion does not require the absence of commissions. The vice president therefore is not an agent under state law despite the 2% commission. Saying she is an agent because she receives a commission imports the no-commission condition from the existing-employee exclusion into the Rule 506 exclusion, where it does not appear. Saying issuer representatives are categorically excluded ignores that the exclusion depends on the type of offering or transaction. Saying she is an agent but exempt from registration misstates the statutory structure: a person selling in a Rule 506 offering is outside the definition of agent entirely, so no registration is required.
- Under the Uniform Securities Act, which individual is required to register as an agent?
Answer: An employee of an issuer who sells the issuer's common stock to existing employees in a state-qualified public offering and receives a bonus for those sales.
Under Uniform Securities Act § 401(b), an issuer's employee who effects securities transactions is an agent unless an exclusion applies. The exclusion for sales to existing employees, partners, or directors applies only when no commission or other remuneration is paid for soliciting anyone in the state; a bonus paid for those sales is remuneration, so the employee in a state-qualified public offering must register. The employee who receives no compensation for sales to existing employees is excluded. A Rule 506(c) offering is a federal covered security, and an issuer's representative selling such securities is not an agent under the Act. The commercial paper described is an exempt security (270-day maturity, $100,000 denomination, top-tier rating), so that employee is also not an agent.
A broker-dealer's registration becomes effective in the state. The broker-dealer's president regularly solicits customers and executes trades for customers. The broker-dealer's treasurer handles only internal accounting and regulatory filings and never communicates with customers about securities.
Under the Uniform Securities Act, which of the following is correct regarding the president and the treasurer? Answer: The president is automatically registered as an agent; the treasurer is not an agent because the treasurer does not effect or attempt to effect sales.
Under Uniform Securities Act § 202(a), registering a broker-dealer automatically registers its partners, officers, and directors who act as agents. Under § 401, however, a partner, officer, or director of a broker-dealer is an agent only if the person otherwise fits the agent definition — that is, the person effects or attempts to effect purchases or sales. The president solicits customers and executes trades, so the president is an agent covered by the broker-dealer's registration. The treasurer's internal duties do not involve effecting or attempting to effect transactions, so the treasurer is not an agent and is not registered. The option registering both officers ignores the definitional requirement; the option requiring individual applications ignores the automatic-registration rule; the option requiring the treasurer to register treats officer status alone as sufficient.
- Which statement is true regarding an agent's registration under the Uniform Securities Act?
Answer: An agent's registration is not effective while the agent is not associated with a registered broker-dealer or issuer, and both parties must promptly notify the Administrator when the association begins or ends.
Under Uniform Securities Act § 201(b), an agent's registration is not effective while the agent is not associated with a registered broker-dealer or issuer, and both the agent and the associated broker-dealer or issuer must promptly notify the Administrator when the association begins or ends. Immediate effectiveness on filing is wrong because registrations become effective at noon on the 30th day after filing unless a denial order is in effect or a proceeding is pending. There is no 30-day grace period after termination of an association. An agent's registration does not run for one year from its effective date; it expires on December 31 unless renewed.
An employee of a state-chartered bank sells shares of the bank's own common stock to customers in the state. The employee is paid a salary plus a commission based on the dollar amount of bank stock sold. The bank is not registered as a broker-dealer in the state.
Under the Uniform Securities Act, which of the following is correct regarding the employee? Answer: The employee is not an agent because bank securities are exempt and an issuer's representative selling exempt securities is not an agent.
Under Uniform Securities Act § 401, an individual who represents an issuer in effecting or attempting to effect purchases or sales is an agent, but an issuer's representative is not an agent when selling exempt securities of the bank type. Securities issued by banks are exempt securities under § 402, so the employee's sales of the bank's own stock do not make the employee an agent, and the commission does not defeat this exclusion because it contains no compensation condition. The option saying the employee is an agent because commissions are received applies the general definition without the issuer-representative exclusion; the option saying the employee is an agent because bank stock is a security ignores the same exclusion; the option saying bank common stock is not a security confuses exempt status with the statutory definition of a security.
