Knopman Exam

Knopman Exam Question and Answer 2023. Registration as an investment adviser representative is always Correct Answer: at the state level For an Administrator to deny or revoke a registration it must have 2 reasons to do so, with one of the reasons being that it is in the public's best interests. Reasons include insolvency (meaning the firm cannot meet its financial obligations), conviction of a securities or money related crime within the last 10 years, or if another state prohibits the firm from participating in the securities industry. There is no specific rule that authorizes the Administrator to deny or revoke a registration if it does not employ any agents Correct Answer: k Registration by coordination is available to any issuer that is also registering securities with the SEC under the Securities Act of 1933. Securities being issued by a company listed on the New York Stock Exchange or Nasdaq Market or authorized for listing on either of the markets are federal covered securities and are therefore exempt from registration. Securities being offered and sold only to the residents of one state will register by qualification Correct Answer: k According to the Uniform Securities Act, there are three entities that are not considered a person: a minor (defined as an individual under 18 years old), a deceased individual, or an individual declared legally incompetent. One application of this concept is that those three entities would require a fiduciary to open an account with a broker-dealer Correct Answer: k Investment advisers are required to disclose their capacity in executing transactions to a client before entering the order. This is different than the requirement for broker-dealers, who disclose their capacity on the confirmation upon trade execution Correct Answer: k Which of the following persons, natural or corporate, fall under the definition of a broker/dealer under the Uniform Securities Act? Correct Answer: A broker-dealer is a person that buys and sells securities for its own account and for the accounts of others. Agents, issuers, and commercial banks (which include credit unions, savings and loans, and thrifts), are specifically excluded from the definition of a broker-dealer Hypothecation is the process by which customers pledge their securities as collateral for a loan. Hypothecation can only be done with the customer's consent. Broker-dealers and agents are always required to have written authority to exercise discretion. IA and IARs have 10 business days upon account opening to exercise discretionary power obtained verbally from the customer. After 10 business days an IA or IAR must obtain written discretionary authority from the customer. Firms must always charge reasonable fees and expenses. Retaining an insufficient number of clerical personnel is not a violation according to NASAA policy Correct Answer: k An agent is prohibited from making a loan to a client unless the client is a financial institution in the business of lending money (e.g., a bank). If a customer instructs an agent to purchase a particular security, the agent must execute the transaction regardless of their opinion of the investment (with the only exception being if the transaction would be illegal). An agent can purchase IPO shares on behalf of a client and can register in any state he/she wants, even if no clients reside in the particular state. Correct Answer: k Registration of all personnel at the state level (including broker-dealers, agents, investment advisers, and investment adviser representatives) expires annually on December 31st, unless renewed. Note that registration of securities is current for 1 year following registration Correct Answer: expires on Dec 31st regardless Agents of a broker-dealer are always required to register. If an agent represents an issuer in selling its securities, it can avoid registration if it sells exempt securities, or securities in exempt transactions. Agents of issuers can also avoid registration by selling securities to employees Correct Answer: k Intrastate offerings are effective for 1 year from the effective date (note that registration of personnel expires annually on December 31st). Throughout the offering process, the issuer may update the number of securities being sold while maintaining the same fees and offering price Correct Answer: k While debt issued by a foreign government that maintains diplomatic relations with the United States is exempt from registration, securities issued by foreign corporations are not. If an issuer is exempt from registration, its securities are also exempt from registration. Any securities that are traded on the New York Stock Exchange or Nasdaq Market are federal covered securities and are therefore exempt from registration Correct Answer: k Broker-dealers are required to register in the state if they have an office in the state or if they have a single resident client in the state, without exception. Note that Investment Advisers can avoid registration in a state if they do not have an office in the state and have fewer than 6 retail clients in a given year Correct Answer: k Exempt securities include securities issued by a non-profit corporation, securities issued by a pension fund, and securities issued by a foreign government with whom the United States maintains diplomatic relations. Securities issued and sold only in a single state are non-exempt at the state level Correct Answer: k An agent's registration is only active while the individual is affiliated with a broker-dealer. If the broker-dealer's registration is revoked, the agent's registration is frozen until the agent becomes associated with another broker-dealer with an active registration. Correct Answer: k