- exempt transaction (action) is a verb
- security is a noun
- net worth of > $1 million on date of purchase to meet definition
- individual with income of >$200,000/year or $300,000/year with spouse
institutional investor
- manages large amounts of money
- ex. mutual fund, insurance company, bank, pension fund
net worth
- only joint assets with spouse are counted
Administrator's Powers Over Exemptions
- Administrator can revoke exemption for:
- 1. any security for religious, educational, benevolent, charitable, fraternal, social, athletic, reformatory purposes
- 2. any investment contract issued in connection with an employee's stock purchase, savings, pension, profit sharing, or similar benefit plan
Administrator may deny any exempt transaction
- can consider a not federal covered transaction with an insurance company as non-exempt
Burden of proof for exemption
- person claiming exemption must provide proof
- Administrator will provide a hearing within 15 days of the receipt of a written request
Revoke categories
- ONLY two securities Administrator can revoke
- all EXEMPT transactions MAY be revoked NOT federal securities
Summary
- government security can be sold without registration
- person who sells it must be registered
- B/D with no office who sell to institutional investors-not considered a B/D
- Ex. B/D with no place of business, transact with banks, can sell government securities without registering, not considered a B/D
- if sell government bonds to individuals in another state, agents must register
- client purchases non-exempt security unsolicited-exempt
- an agent can only do business with a state if the agent is properly licensed in that state
Quiz 2H (first try 3/5)
*1. Mr. Thompson an agent with First Securities Inc (A B/D) receives an unsolicited request to purchase a security for a high net worth individual. Y
2. The sale of an unregistered security in a private, nonpublicly advertised transaction, offered to 10 or fewer retail investors over the last 12 months. Y
3. The sale of unclaimed securities by sheriff of Santa Fe, New Mexico. Y
4. Sale of stock of a privately held company to the public in an initial public offering N
Which are exempt transaction?
- a non issuer transaction with a bank in a NASDAQ Capital Market Security(I)
- an unsolicited request from an existing client to purchase a nonexempt security
- the sale of an unregistered security in a privsate, nonpublicly advertised transaction to 10 noninstitutional purchasers (suspicious) over a period not exceeding 12 months NO because 10 offerees not 10 purchasers.
- the sale of unlisted securities by a trustee in a bankruptcy (IV)
State Securities Registration Procedures
- securities registrant, person who registers the securities
Filing the registration statement
- amount of securities to be issued in the state
- states in which the security is to be offered but not the amounts offered in those other states
- any adverse order or judgment concerning the offering by regulatory authorities, court, or the SEC
- when filing the registration statement w/ the Administrator an applicant may provide documents that have been filed with the Administrator within the last five years if information is accurate
Filing fee
- the issuer must pay a filing fee as determined by the Administrator
- based on a percentage of the total offering price
- if registration is withdrawn OR Administrator issues a stop order before the registration is effective the Administrator may retain a portion of the fee and refund the remainder to the applicant
Ongoing Reports
- the Administrator may require the person who filed the registration statement to file reports so information stays current
Escrow
- any security issued within the past three years or to be issued to a promoter for a consideration very different from the public offering price or to any person for a consideration other than cash be deposited in escrow
- that the proceeds from the sale of the registered security in this state be impounded until issuer gets right amount from the sale for the security in this state or elsewhere
Special subscription form
- Administrator may require the issue be sold only on a form Administrator wants and a copy of form/subscription be filed with Administrator and kept for up to 3 years
Withdrawal of registration statement
- a registration statement may not be withdrawn until 1 year after its effective date
Quiz 2I
- With regard to the registration requirements of the Uniform Securities Act, which of the following are TRUE? 2. application for registration must indicate the amount of securities to be issued in the state 3. The Administrator may require registrants to file quarterly reports
Antifraud Provisions of the USA
- fraud, the deliberate or willful attempt to deceive someone for profit or gain
Fraudulent and prohibited practices
- using devices, schemes, artifices to defraud
- make untrue statements of material fact or omit material facts to make a statement not mislead
- engage in any act, practice or course of business that operates as a fraud or deceit
material, used to make an informed investment decision
- inaccurate market quotations-telling a client a stock is up when it is down. Not fraud if clerical error. Fraud is intentional.
- misstatements of an issuer's earnings or projected earnings or dividends-telling a client that earnings are up or that the dividend will be increased when it won't
- can't state agent has inside information when he doesn't
- tell a customer that a security will be listed on an exchange without concrete information about its status
- informing a client that the registration of a security with the SEC or with the state securities administrator means security has been approved by these regulators-registration is NOT approval
- misrepresenting the status of customer accounts
- promising a customer services without any intent to perform them or without qualifications to perform them
- saying the Administrator approves of B/D's or agent's abilities. Registered NOT approved
