LOMA 357 MODULE 4 VERIFIED STUDY GUIDE
Functional regulatory systems - Answers - Fiduciary duty standards:
A fiduciary is an individual or entity that holds a special position of trust or confidence
when handling the affairs of another and that must put the other's interest above the
fiduciary's own interests. In many jurisdictions, investment professionals have a
fiduciary duty—the obligation to act in the best interest of a particular party—with regard
to certain types of clients and end users of investment services.
Suitability requirements:
A suitability requirement imposes a duty on financial professionals or financial services
companies to have reasonable grounds on which to believe that a specific product is
suitable for a customer's needs. Suitability requirements typically require a financial
professional to have a basic understanding of a customer's financial situation and
investment objectives and constraints before making product recommendations.
Disclosure requirements:
Regulatory entities typically require financial professionals and financial services
companies to make specific types of disclosures. An example of a required disclosure is
a mutual fund prospectus. The disclosure of relevant information to investors and
potential investors encourages transparency and trust.
Customer privacy protections:
Nonpublic personal information is information about a customer that a financial services
company collects in connection with providing a financial product or service
Functional regulation - Answers - is the principle that a single regulatory body should
oversee similar financial activities, regardless of which type of financial institution
engages in the activity. With a functional regulation framework, a company that
performs multiple functions is likely to be subject to regulations from multiple regulatory
entities."
financial services regulation concerns a company's.... - Answers - "Securities activities.
Securities laws address (1) the issuance, offering, and sale of financial securities, (2)
financial reporting and other conduct of securities issuers, (3) arrangements for the
establishment and administration of securities exchanges, (4) securities transactions,
and (5) penalties for regulatory violations. Securities laws generally apply to life insurers
that offer variable life insurance and variable annuities, as well as the separate accounts
supporting those products. In addition, securities laws apply to publicly traded
companies, which include many insurance companies.
Investment advisory activities.
,Securities laws pertaining to investment advisory services address individuals and
companies that offer recommendations about investing in securities. For regulatory
purposes, certain insurance products—such as variable life insurance and variable
annuities—are considered securities. Thus, an insurance company employee or
financial professional who sells variable insurance products to customers is subject to
securities laws regarding investment advice.
Insurance activities.
Insurance laws address the formation, licensing, operation, conduct, transfer of
ownership, and orderly termination of insurance companies. In addition, such laws
address the issuance, sale, and administration of insurance contracts by specifying the
rights and duties of insurance companies and insurance customers.
Banking activities.
Banking laws address the formation, licensing, operation, conduct, and orderly
termination of[...]"
Securities Act of 1933/ securities law - Answers - regulates publicly traded companies in
the United States.
The act has two primary objectives:
- To ensure that investors in public companies have access to financial and other
significant information about securities offered for sale to the public
- To prohibit misrepresentation, deceit, and fraud in the sale of securities///////////////////.
Securities laws address the issuance, offering, and sale of financial securities; financial
reporting and other conduct of securities issue or's; arrangements for the establishment
and administration of securities exchanges; securities transaction; penalties for
regulatory violations.//////Insurance laws address the formation, licensing, conduct,
operation, transfer of ownership, orderly termination of insurance companies, and the
issuance, sale and administration of insurance contracts,///////banking laws typically
require banks to hold enough capital to meet their obligations and set limits on interest
charges
The Securities Exchange Act of 1934 - Answers - established the Securities and
Exchange Commission (SEC) and specified rules for the orderly conduct of public
transactions in securities and through securities exchanges. The act sets additional
requirements for participants in the U.S. securities industry, including requirements
governing
-The registration of securities and market participants
-Corporate reporting and controls
-Transactions by individuals possessing material nonpublic information—also called
inside (or insider) information—which is company information that has not been
communicated to the general public and that a reasonable investor would consider
important in making an investment decision about the company
-Tender offer disclosures; a tender offer is an offer made by a prospective buyer to all
current shareholders of a particular publicly traded security to purchase their shares at a
specified price during a specified time
, -The filing of proxy statements, which we discuss below
Proxy - Answers - "a written authorization given by one person, such as a shareholder,
to another person, who is thereby enabled to act on behalf of the first person"
Proxy statement - Answers - "describes the matters submitted for a vote in corporate
meetings held for the election of directors and the approval of other corporate actions.
The proxy statement materials must:
-Be filed with the SEC prior to the solicitation of shareholder votes
-Disclose all important facts concerning the issues on which shareholders are asked to
vote
Trust Indenture Act of 1939 - Answers - applies to bonds and other debt securities and
imposes certain requirements on the issuer before the securities can be sold publicly.
The issuer must establish a trust for the benefit of the owner
Trust - Answers - "a legal arrangement that is
(1) created at the direction of an individual or entity and (2) designed to allow one party,
the trustee, to hold specified property belonging to the trust's creator for the benefit of
trust beneficiaries."
Trust indenture - Answers - also known as a trust deed, is a formal agreement that
establishes a trust and forms the relationship between a trustee and a trust beneficiary.
The indenture states the
(1) limits of the trustee's authority
(2) conditions governing the trustee's actions in handling the trust's assets. The Trust
Indenture Act of 1939 requires a trust indenture to contain certain provisions
—Certain debt securities, such as municipal bonds and private placement bonds, are
exempt from the requirements of the act. Despite being exempt, however, such
securities are often issued by means of trust indentures.
Investment Company Act of 1940 - Answers - regulates the organization of investment
companies. In the context of this act, an investment company is an entity that issues
securities and engages primarily in investing, reinvesting, and trading in securities.
Examples of investment companies include mutual funds, unit investment trusts (UITs),
exchange-traded funds (ETFs), and insurance company separate accounts
The Investment Company Act of 1940 requires investment companies to:
-Register with the SEC before conducting business
-Disclose their financial condition and investment policies to investors (1) when their
shares are initially sold and (2) on a regular basis thereafter
-Disclose certain information about a fund and its investment objectives, as well as
about the investment company's structure and operations
-Follow rules that address the safekeeping and proper valuation of a fund's assets
Functional regulatory systems - Answers - Fiduciary duty standards:
A fiduciary is an individual or entity that holds a special position of trust or confidence
when handling the affairs of another and that must put the other's interest above the
fiduciary's own interests. In many jurisdictions, investment professionals have a
fiduciary duty—the obligation to act in the best interest of a particular party—with regard
to certain types of clients and end users of investment services.
Suitability requirements:
A suitability requirement imposes a duty on financial professionals or financial services
companies to have reasonable grounds on which to believe that a specific product is
suitable for a customer's needs. Suitability requirements typically require a financial
professional to have a basic understanding of a customer's financial situation and
investment objectives and constraints before making product recommendations.
Disclosure requirements:
Regulatory entities typically require financial professionals and financial services
companies to make specific types of disclosures. An example of a required disclosure is
a mutual fund prospectus. The disclosure of relevant information to investors and
potential investors encourages transparency and trust.
Customer privacy protections:
Nonpublic personal information is information about a customer that a financial services
company collects in connection with providing a financial product or service
Functional regulation - Answers - is the principle that a single regulatory body should
oversee similar financial activities, regardless of which type of financial institution
engages in the activity. With a functional regulation framework, a company that
performs multiple functions is likely to be subject to regulations from multiple regulatory
entities."
financial services regulation concerns a company's.... - Answers - "Securities activities.
Securities laws address (1) the issuance, offering, and sale of financial securities, (2)
financial reporting and other conduct of securities issuers, (3) arrangements for the
establishment and administration of securities exchanges, (4) securities transactions,
and (5) penalties for regulatory violations. Securities laws generally apply to life insurers
that offer variable life insurance and variable annuities, as well as the separate accounts
supporting those products. In addition, securities laws apply to publicly traded
companies, which include many insurance companies.
Investment advisory activities.
,Securities laws pertaining to investment advisory services address individuals and
companies that offer recommendations about investing in securities. For regulatory
purposes, certain insurance products—such as variable life insurance and variable
annuities—are considered securities. Thus, an insurance company employee or
financial professional who sells variable insurance products to customers is subject to
securities laws regarding investment advice.
Insurance activities.
Insurance laws address the formation, licensing, operation, conduct, transfer of
ownership, and orderly termination of insurance companies. In addition, such laws
address the issuance, sale, and administration of insurance contracts by specifying the
rights and duties of insurance companies and insurance customers.
Banking activities.
Banking laws address the formation, licensing, operation, conduct, and orderly
termination of[...]"
Securities Act of 1933/ securities law - Answers - regulates publicly traded companies in
the United States.
The act has two primary objectives:
- To ensure that investors in public companies have access to financial and other
significant information about securities offered for sale to the public
- To prohibit misrepresentation, deceit, and fraud in the sale of securities///////////////////.
Securities laws address the issuance, offering, and sale of financial securities; financial
reporting and other conduct of securities issue or's; arrangements for the establishment
and administration of securities exchanges; securities transaction; penalties for
regulatory violations.//////Insurance laws address the formation, licensing, conduct,
operation, transfer of ownership, orderly termination of insurance companies, and the
issuance, sale and administration of insurance contracts,///////banking laws typically
require banks to hold enough capital to meet their obligations and set limits on interest
charges
The Securities Exchange Act of 1934 - Answers - established the Securities and
Exchange Commission (SEC) and specified rules for the orderly conduct of public
transactions in securities and through securities exchanges. The act sets additional
requirements for participants in the U.S. securities industry, including requirements
governing
-The registration of securities and market participants
-Corporate reporting and controls
-Transactions by individuals possessing material nonpublic information—also called
inside (or insider) information—which is company information that has not been
communicated to the general public and that a reasonable investor would consider
important in making an investment decision about the company
-Tender offer disclosures; a tender offer is an offer made by a prospective buyer to all
current shareholders of a particular publicly traded security to purchase their shares at a
specified price during a specified time
, -The filing of proxy statements, which we discuss below
Proxy - Answers - "a written authorization given by one person, such as a shareholder,
to another person, who is thereby enabled to act on behalf of the first person"
Proxy statement - Answers - "describes the matters submitted for a vote in corporate
meetings held for the election of directors and the approval of other corporate actions.
The proxy statement materials must:
-Be filed with the SEC prior to the solicitation of shareholder votes
-Disclose all important facts concerning the issues on which shareholders are asked to
vote
Trust Indenture Act of 1939 - Answers - applies to bonds and other debt securities and
imposes certain requirements on the issuer before the securities can be sold publicly.
The issuer must establish a trust for the benefit of the owner
Trust - Answers - "a legal arrangement that is
(1) created at the direction of an individual or entity and (2) designed to allow one party,
the trustee, to hold specified property belonging to the trust's creator for the benefit of
trust beneficiaries."
Trust indenture - Answers - also known as a trust deed, is a formal agreement that
establishes a trust and forms the relationship between a trustee and a trust beneficiary.
The indenture states the
(1) limits of the trustee's authority
(2) conditions governing the trustee's actions in handling the trust's assets. The Trust
Indenture Act of 1939 requires a trust indenture to contain certain provisions
—Certain debt securities, such as municipal bonds and private placement bonds, are
exempt from the requirements of the act. Despite being exempt, however, such
securities are often issued by means of trust indentures.
Investment Company Act of 1940 - Answers - regulates the organization of investment
companies. In the context of this act, an investment company is an entity that issues
securities and engages primarily in investing, reinvesting, and trading in securities.
Examples of investment companies include mutual funds, unit investment trusts (UITs),
exchange-traded funds (ETFs), and insurance company separate accounts
The Investment Company Act of 1940 requires investment companies to:
-Register with the SEC before conducting business
-Disclose their financial condition and investment policies to investors (1) when their
shares are initially sold and (2) on a regular basis thereafter
-Disclose certain information about a fund and its investment objectives, as well as
about the investment company's structure and operations
-Follow rules that address the safekeeping and proper valuation of a fund's assets
