Which of the following does NOT meet the test in proving who is an investment advisor?
Answer(s): D
Under the Uniform Securities Act, an investment advisor may be defined by meeting the "ABC" test: Provides Advice about securities Provides advisory service as a Business Receives Compensation for these services
Investors International Securities is in possession of 10,000 shares of NoSoy Corporation that belong to Shirley McIntosh. Investors International is currently working to secure a $10 million loan from Capital Management Trust and will offer Shirley''s NoSoy shares as collateral. Is this considered an ethical practice?
Answer(s): A
When Shirley established her margin account, she signed a margin agreement that allows her to purchase securities from Investors International on credit. A part of her margin agreement is the hypothecation agreement, which allows the broker-dealer to hold title to her securities in street name and to use those securities as collateral for loans when needed. Investors International would be rehypothecating the securities to Capital Management Trust
A broker-dealer must collect customer payment for securities purchased in a margin account:
Answer(s): B
Customer payment for transactions executed in a margin account is due two business days from regular-way settlement. Regular-way settlement is the day on which the broker-dealers pay each other and take proceeds for securities purchased and delivered. It is considered ethical to ask investment customers to pay for their securities by settlement date instead of payment date
Milky Way Satellite Radio is listed on the New York Stock Exchange. Which of the following is true if Milky Way wants to sell part of its new offering in Connecticut?
The state of Connecticut may not require Milky Way to file a notice of its offering, nor may the state require registration or charge a registration fee to a NYSE securitity. The state could levy a fee if the security were not included on NYSE, Nasdaq, or AMEX. The last two choices are not even relevant options
Art Smithers is a CPA who often refers business to his friend Jake DeLeon, an investment advisor in New Jersey. Jake has been picking up so much business from Art''s referrals that he offers him a fee for each one and puts it into a letter of agreement to Art. Art agrees that he will give one of Jake''s brochures to each client he refers. Under the Investment Advisor''s Act, is this a legal practice?
This arrangement is completely acceptable under law provided that Art provides the client with Jake's brochure AND a separate disclosure document that identifies him as a solicitor. Art must give these two to the client prospect at the time of solicitation. Jake is then responsible for obtaining a client signature that acknowledges receipt of both documents
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