Series 63 cheat sheet

A broker-dealer is a person engaged in effecting securities transactions for its own account or for the accounts of others; banks, issuers, and certain no-place-of-business persons are excluded.

An agent is an individual who represents a broker-dealer in effecting securities transactions and must register in each state where it transacts business unless exempt.

An investment adviser is a person compensated for advising others about securities or issuing securities reports; banks and lawyers or accountants whose advice is incidental are excluded.

An investment adviser representative is an individual who makes recommendations, manages accounts, or solicits clients for an adviser and must register unless an exemption applies.

State broker-dealer registration uses Form BD through CRD; agent and investment adviser representative registration uses Form U4 with employment and disciplinary disclosures.

Federal covered advisers file notice, fee, and consent to service in states but do not obtain state registration.

An investment adviser with no place of business in a state and fewer than six clients there in the prior 12 months is commonly exempt from state registration.

A broker-dealer with no place of business may be exempt if it serves only institutional clients or a de minimis number of retail clients under state rule.

Registration is not approval of the firm or a recommendation of any security.

State securities registration methods are notice filing, coordination, and qualification.

Coordination applies to offerings registered with the SEC; state registration becomes effective with the federal registration.

Qualification requires administrator review on the merits, and registration becomes effective by order.

Notice filing applies to federal covered securities and requires notice, fee, and consent but no state approval.

Exempt securities include U.S. government, state and municipal, bank, nonprofit, insurance, and certain common carrier securities.

Exempt transactions include isolated nonissuer trades, unsolicited brokerage orders, and limited private offerings.

The limited offering exemption permits offers to no more than ten noninstitutional persons in twelve months without general advertising.

State securities registration remains effective one year after the effective date unless renewed or terminated earlier.

Federal covered securities are exempt from state registration but remain subject to state antifraud enforcement.

The administrator may investigate, subpoena records, issue cease and desist orders, suspend or revoke registrations, censure, fine, and order restitution.

A summary suspension may be ordered when public interest and investor protection require immediate action; a hearing follows.

A stop order denies or suspends the effectiveness of a securities registration.

Civil liability for a securities law violation generally allows rescission plus interest or damages.

A defrauded purchaser must typically tender the security to recover the consideration paid.

Civil actions must be brought within three years after sale or two years after discovery, whichever occurs first.

Criminal penalties apply to willful violations and may include imprisonment and fines.

The administrator may require bonds for firms with custody and may appoint receivers.

Communications must be fair and balanced, cannot be misleading, and must disclose material risks.

Retail communications need principal approval and supervision; correspondence is subject to review.

Testimonials must disclose whether the speaker is compensated and cannot imply typical results.

Performance advertising must be net of fees and cannot project or guarantee future returns.

Agents may not use the name of a regulator to imply approval or endorsement.

Cold callers must identify themselves, the firm, and the purpose and honor do-not-call requests.

Electronic and social media communications are governed by the same advertising and recordkeeping rules.

Agents must not sign blank forms or falsify customer information.

Agents may not trade a customer account without authorization or a written discretionary power.

Churning is excessive trading to generate commissions and violates the duty to act in the customer's interest.

Selling away is a private securities transaction outside the firm without disclosure and approval.

Commingling customer funds with firm assets is prohibited; customer assets must be segregated.

Front running is trading ahead of a customer order to profit from its price impact.

Insider trading involves material nonpublic information obtained in breach of a duty.

Borrowing from or lending to customers is generally prohibited absent a permitted exception and written approval.

Agents must disclose outside business activities and may not share commissions with unregistered persons.

Senior investor exploitation should be escalated and reported under firm and state procedures.