Friday, March 6, 2009

Unregistered, Non-Exempt Securities

The titles to these blog posts are "click-able" links. Usually, I take you to one of our websites, but today the title takes you to FINRA's February roundup of disciplinary actions. This is the sort of thing I read Friday mornings in order to stay on top of what is important to regulators and, therefore, what types of questions the exams might begin to ask.

This morning I'm on the third disciplinary action and I see more proof that the seemingly useless information you learn concerning the Uniform Securities Act is actually as real-world as a heart attack. Even a crazy-sounding phrase such as "unregistered non-exempt securities" has a place in the day-to-day workings of the securities business. Check out this snippet from the action against Cambria Capital, LLC:

Cambria Capital, LLC (CRD #133760, Salt Lake City, Utah) submitted a Letter of Acceptance,Waiver and Consent in which the firm was censured and fined $40,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it conducted sales of unregistered securities that were not exempt from registration. The findings stated that the firm failed to establish a supervisory system or establish, maintain and enforce written supervisory procedures reasonably designed to achieve compliance with Section 5 of the Securities Act of 1933 to detect or prevent the sale of securities that were neither registered, exempt from registration by the firm or its representatives or to determine that securities received into customer accounts could be sold without restriction.

The Friday Free Broadcast on March 20th covers "Industry Rules & Regulations," and we'll look at several real-world disciplinary actions that illustrate testable points. I encourage you to take a look at the February summary of FINRA disciplinary actions for several reasons. One, you will see all kinds of test topics in action. Two, it will stretch your mind and give you an edge over the other test-takers who are just memorizing bullet points and hoping to wing it at the testing center. Third, this is the industry you are entering. Even if you're only on the advisory side, outside of FINRA's reach, please know that the SEC, FINRA, and the state regulators are all pretty much on the same page. An adviser would get in just as much trouble with the SEC or state regulators if they put clients into unregistered non-exempt securities or sold securities that were restricted. If it violates securities law, it's a problem.

Enough for now. Gotta get to the office and finish up Pass the 6 3rd Edition . . . or perhaps you're all waiting for the movie.

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