Series 63

By Investopedia AAA

The Foundation - The Uniform Securities Act (USA) - Definitions Part 4

GUARANTEED - "Guaranteed" means guaranteed as to payment of all principal and all interest."

This is much like a person co-signing for another person as security for a loan, except that in the USA, it most frequently refers to a parent corporation "guaranteeing" a subsidiary company's securities.
There are only three entities that may legitimately make guarantees:

  • The U.S. government
  • An insurance company
  • A parent company, as indicated above
Exam Tips and Tricks
Agents may not make guarantees. This point is likely to be emphasized on the exam.
  • INSTITUTIONAL INVESTOR - "Institutional investor" means any of the following, whether acting for itself or for others in a fiduciary capacity:
    1. A depository institution or international banking institution;
    2. An insurance company;
    3. A separate account of an insurance company;
    4. An investment company as defined in the Investment Company Act of 1940;
    5. A broker-dealer registered under the Securities Exchange Act of 1934;
    6. An employee pension, profit-sharing or benefit plan if the plan has total assets in excess of $10,000,000 ..."

In preparing for the Series 63 exam, you will note that "institutions" and "institutional investors" are quite frequently associated with exemptions, just like banks. Again, the USAdoes not place as much emphasis on protecting institutions as it does on protecting individual investors.

  • INVESTMENT ADVISER REPRESENTATIVE - "Investment adviser representative" means an individual employed by or associated with an investment adviser or federal covered investment adviser and who makes any recommendations or otherwise gives investment advice regarding securities, manages accounts or portfolios of clients, determines which recommendation or advice regarding securities should be given, provides investment advice or holds herself or himself out as providing investment advice, receives compensation to solicit, offer, or negotiate for the sale of or for selling investment advice, or supervises employees who perform any of the foregoing. The term does not include an individual who:
    1. Performs only clerical or ministerial acts;
    2. Is an agent whose performance of investment advice is solely incidental to the individual acting as an agent and who does not receive special compensation for investment advisery services;
    3. Is employed by or associated with a federal covered investment adviser, unless the individual has a "place of business" in this state ..."

Notice that the law stipulates both what is and what is not an investment adviser representative. The IAR works for an investment adviser, just as an agent works for a B/D. The IAR was not defined in the 1956 USA. This definition comes from the 2002 version of the law.

A NASAA Memorandum of Understanding (MoU) from 1997 on this subject deals with both Federal Covered Investment Adviser and Investment Adviser Representative:

"If an investment adviser is registered with the SEC, the states may not require registration, licensing, or qualification of the investment adviser or its supervised persons, except that states may license, register, or otherwise qualify investment adviser representatives who have a place of business located within that state."

This MoU refers to NSMIA and lays out the requirements for testing persons who are to be IARs.

IARs are always registered with the state. The IA firms that they work for may or may not be registered, depending on their status as defined by NSMIA.

The Uniform Securities Act (USA) - Definitions Part 5
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