In theory, are these Mnemonics accurate for the Series 63?
1. Exempt Securities
These are securities that do not require registration with the state, and they are exempt from the registration provisions under the Uniform Securities Act (USA).
Mnemonic: GUMS-IN-BENCH
- Government securities: Includes U.S. government, U.S. government agencies, and municipalities (both in-state and out-of-state).
- Utility securities: Public utilities and railroads are exempt.
- Municipal bonds: State and local government bonds, including out-of-state municipal bonds.
- Securities issued by Banks, Savings institutions, and Trust companies (including promissory notes with maturity of 9 months or less).
- Insurance company securities: This includes securities issued by insurance companies, but not variable products or mutual funds.
- Nonprofit organizations: Securities issued by charitable, religious, or educational organizations.
- Benefit plan securities: Securities issued by employee retirement plans (pension plans, profit-sharing plans).
- Employee stock and savings plans: Securities offered to employees as part of stock or savings programs.
- Nationally recognized foreign governments: Securities issued by foreign government entities recognized by national and international authorities.
- Commercial paper: Short-term debt instruments with maturities of 9 months or less and rated in the top two categories by a nationally recognized rating agency.
- Holding company securities: Registered under the Public Utility Holding Company Act of 1935.
2. Exempt Transactions
These are sales or offers to sell securities that do not require registration under the Uniform Securities Act (USA).
Mnemonic: I-PAPA-IU
- Isolated Non-Issuer Transactions: Transactions where the issuer is not involved in the sale, such as sales between private individuals.
- Private Placements: Regulation D offerings that are typically sold to limited numbers of investors, usually institutional investors or accredited investors.
- An Institutional Investor Transactions: Sales to institutional investors (e.g., large banks, insurance companies, pension funds).
- Placed Securities: Securities used as collateral in a loan or similar transaction.
- Associated with Issuers: Transactions involving the issuer or underwriters in the sale.
- Investment Adviser Transactions for Unsolicited Trades: An investment adviser may execute an unsolicited trade on behalf of a client (i.e., the client requests the transaction).
- Unsolicited Broker-Dealer Transactions: Broker-dealers may execute unsolicited trades made by the client.
3. Registration of Securities
This section covers the methods by which securities are registered under the state law.
Mnemonic: QC-FIN
- Qualification: Used for intrastate offerings, where the state regulates the offering and the issuer registers the securities with the state.
- Coordination: Used when a company files with the SEC, and the state coordinates that filing, allowing the same registration to be used at both the federal and state levels.
- Federal Covered Securities: These include securities traded on national exchanges or regulated by the SEC (e.g., mutual funds, stocks, corporate bonds).
- Issuer Transactions: Transactions in which the issuer of the security is involved. These often require notice filing but are exempt from full registration.
- Non-Issuer Transactions: Transactions between investors, not involving the issuer, and may qualify for exemptions such as isolated transactions.
4. Registration of Persons (Broker-Dealers, Agents, Investment Advisers)
This section covers who needs to register under state law, including broker-dealers, agents, and investment advisers.
Broker-Dealer and Agent Registration
Mnemonic: BASIC
- Broker-dealers: Must be registered to operate in a state.
- Agents: Representatives of broker-dealers who must also register with the state.
- State registration: Broker-dealers and agents must register in each state where they conduct business.
- Investment advisers: Must register with the state unless they meet the SEC registration threshold.
- Compliance: They must comply with both state and federal regulations to maintain registration.
Investment Adviser Registration
Mnemonic: IA MUST FILE
- Investment advisers with $100 million+ AUM must register with the SEC.
- Mid-sized advisers with $25 million to $100 million AUM must register with the state unless exempt.
- Under $25 million AUM, advisers must register with the state.
- State-specific filing requirements.
- Thresholds for SEC registration apply.
- FILE: Notice filings may still be required for federal-registered advisers in some states.
5. Prohibited Practices and Fraud
This section lists unethical practices and fraudulent behaviors prohibited under the USA.
Mnemonic: CHIMPS
- Churning: Excessive trading for commission.
- High-pressure sales tactics: Forcing clients into buying or selling quickly.
- Insider trading: Trading on non-public, material information.
- Misrepresentation: Providing false or misleading information to clients.
- Placing unauthorized trades: Executing trades without client consent.
- Splitting commissions: Without proper disclosure.
6. Administrator Powers
This section outlines the powers of the state securities administrator.
Mnemonic: IS-SCARS
- Issue subpoenas: To require testimony or documentation.
- Suspend or revoke registrations: Due to violations or misconduct.
- Seek court orders: Including cease-and-desist orders to stop violations.
- Civil penalties: Fines imposed for violations of securities laws.
- Administer oaths: To compel testimony in investigations.
- Require amendments: To registration filings if necessary.
- Sanction firms or agents: For violations of the rules.
7. Civil Liability and Remedies
This section discusses the remedies available to investors under the USA.
Mnemonic: PARIAH
- Purchase price (rescission): Investors can rescind the transaction and recover their original investment.
- Attorney fees: Can be recovered in certain cases.
- Reasonable interest: Paid from the date of the violation.
- Investment lost value: Due to misrepresentation or fraud.
- Accrued damages: From fraud or negligence.
- Holding period adjustment: If applicable.
8. Statute of Limitations
Time limits for filing claims under the USA.
Mnemonic: 3-2-1 CLAIM
- 3 years: From the date of the violation.
- 2 years: From the discovery of the violation.
- 1 claim: Per offense.
9. Key Definitions
Important definitions you need to know for the exam.
Mnemonic: BASIC-PIE
- Broker-dealer: A firm or individual involved in buying or selling securities.
- Agent: A person representing a broker-dealer or issuer in selling securities.
- Security: A financial instrument (stocks, bonds, options, etc.).
- Investment adviser: A person providing advice about securities for compensation.
- Client: A person or entity receiving financial advice or services.
- Private placements: Securities sold in a limited offering.
- Institutional investors: Large investors like banks, pension funds, and insurance companies.
- Exemptions: Categories of securities or transactions that are exempt from registration or other requirements.