Very Brief Summary of the Uniform Securities Act

Introduction

• Lecture from Las Vegas studio.
• Aimed at Series 63, 65, and 66 classes.
• Condensed to 32 slides, designed to be target-rich with testable content.

Key Agencies and Acts

• NASAA (North American Securities Administrators Association): Agreed on a common test template for the Uniform Securities Act.
• SEC (Securities and Exchange Commission): Oversee retail investors along with state administrators.
• State Administrators: 50 in the U.S., each overseeing state-specific securities regulations.

Structure of Financial Entities

• Holding Companies: Own various businesses, e.g., Robinhood Markets.
• Broker-Dealers: Must register with the state where they transact business.
• Associated Persons: Representatives with licenses such as Series 6 or Series 7.
• Examples: Robinhood, Gamma Global Investments, Schwab Holdings.

Registration and Regulation

• Broker-Dealers' Registration: Required in the states where they have offices or transact with the general public.
  • Must file Form BD and pay fees.
  • Consent to Service is mandatory.
  • Net capital standards cannot exceed FINRA/SEC requirements.
  • Registration lasts until December 31 each year.
  • Automatic registration of officers and directors as agents.

State and Federal Coverage

• Investment Advisory Firms: Must register federally (if managing >$150 million) or with the state.
  • Federally Covered Advisors can't fall below $90 million in assets without re-registering with the state.

Legal Definitions

• Natural Persons: Living individuals who can be held accountable by law.
• Unnatural Persons: Entities like corporations, which can't be jailed.
• Non-Persons: Minors, deceased individuals, and legally incompetent individuals.
• Accredited and Non-Accredited Investors: Definitions for legal and registration purposes.

Exemptions and Non-Registrations

• Exempt Entities: U.S. government, municipalities, Canadian federal and provincial governments, banks, and common carriers.
• Federally Covered Securities: NYSE, NASDAQ, mutual funds, and Reg D private placements do not require state registration.
• Unsolicited Transactions: Do not need registration.
• Private Placements & Pre-Organization Certificates: Limited to 10 offers under the Uniform Securities Act.
• Investment Advisor Representatives: May need to take Series 65 or 66.

Misconduct and Prohibited Practices

• Selling Away: Unauthorized sales outside the employing broker-dealer
• Selling Dividends: Creating artificial urgency for stock purchases based on dividends.
• Breakpoint Sales & Churning: Avoiding discount tiers and excessive trading for commissions.
• Unethical Business Practices: Prohibited but not covered extensively in this lecture.

Penalties and Right of Rescission

• Penalties: up to $5,000 fine and/or 3 years in prison.
• Right of Rescission: Offered for violations, allowing investors to reclaim their initial investment plus interest.

Record-Keeping and Operational Practices

• Broker-Dealer Records: Must be kept for three years (state) and five years (federal).
• State Administrators: May examine records anytime, require pre-use sales literature/advertising review.
• Canadian Broker-Dealers: Exempt if dealing only with Canadian clients.

Miscellaneous

• Investment Advisory Fees and Losses: Clients may retrieve these if misadvised.
• Soft Dollars: Broker-dealers can use these to benefit investment advisory firms but cannot cover travel or rent.
• Charitable/Religious Organizations: Exempt but must adhere to anti-fraud regulations.
• Exam Preparation: Stress on testable issues and legal terminology understanding.

Goal and Additional Lectures

• Ensure understanding of key points for Series 63, 65, and 66 exams.
• Upcoming lectures on additional topics like quantitative analysis for 66 and economics for 65.