Tuesday, May 26, 2009

IAR's working for federal covered IAs

Here is a good practice question that is very similar to something I saw last time I took the Series 65:

Jessica Stevens works for a federal covered adviser with an office in State A. Only once per month Jessica meets with a few clients at a diner in State B. Therefore:
A. Jessica is exempt from registration requirements in State B because she works for a federal covered adviser
B. Jessica must register in State B because she has a place of business there
C. Jessica must register in State B because she has clients in that state
D. Because the diner is not an actual office, Jessica need not register in State B

EXPLANATION: there is no such thing as "an actual office," so eliminate Choice D. An IAR has to register in any state where she has a place of business, so Choice A is eliminated. Choice C is tempting, but we don't know if the clients are residents of State B or if they just find it easier to meet Jessica there. Yes, anyplace where you conduct business is a "place of business." In fact, if you just let it be known that you can meet clients at a diner in State B, you have a place of business there.


  1. Hello, again.
    I'm a stock trader and have been trading at my firm for two and a half weeks now. I'm still learning a lot about stocks in general and reading and understand charts. I really underestimated technical analysis.
    I hoping you can recommend a book about stock trading and technical analysis. I already have a books called "Understanding Technical Analysis" or something by John J. Walker.
    I also appreciate any other advice you might have.
    Thank you, again!

  2. Great question, Daniel. Technical analysis is presented as a form of "science," and generally appeals to engineers and other math-loving professonials. Unfortunately, there is really nothing to support the effectiveness of charting and trying to determine that GE has to go up next week based on some recent or historical trading range. I would read books by William O'Neill, the force behind Investors Business Daily. At least he combines technical analysis with some fundamentals in his CANSLIM method. Otherwise, you're going to be kidding yourself that, for example, because GE traded between $10 and $20 the past 52 weeks, it, therefore, has to go to this or that price next week. Stocks are not chemicals that must behave in certain ways under certain conditions. Their prices are based entirely on speculation, greed, and fear. That's my two cents. Hope I don't tick off your fellow traders too much, but, if so, ask them why they have to work for a living if they can predict the short-term movements of the stock market? Why aren't they sitting at home in bermuda shorts and a nice latte right now buying the stocks that go up and shorting the ones that go down?

  3. ps O'Neill is actually spelled "O'Neil," as in "William J. O'Neil."

  4. "Their prices are based entirely on speculation, greed, and fear."
    I totally agree with you. I'm still new to trading, but I've realized that it is so easy to lose money. It's extremely risky! I'm learning to keep my losses tight. I think that's one of the most important things to keep in mind.
    I'll check out some books by William J. O'Neil.
    Thank you, again.

  5. You can keep the losses tight a few different ways, Daniel. One, place sell-stops below your purchase price, maybe 5-15% below. Two, buy puts on particular stocks for protection. Three, sell covered calls to offset some losses and generate income. Four, avoid buying the stocks that might go down. And, five, buy only the stocks that will go up. Good luck out there. From what I've read, the secret seems to be in trimming the losses and letting the winners run. Most folks want to sell for tiny profits and hang on forever to huge losses, especially the menfolk. I'm convinced that if you trim your losses at 50%, the occasional 300-1,000% winners will allow you to profit. That's long-term, though. If you're trading at a firm, I guess you have to get in there and mix it up every day . . . ? That really doesn't work long-term.