Laws, Regulations, and Guidelines

Last updated Dec 10, 2022 Edit Source

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Only a conceptual summary is available
Because this topic is subject to change, we try only to summarize the most important concepts. We are carefully avoiding facts or figures that can change from year to year as the exam is updated. For the latest, we recommend you purchase the latest edition of a good textbook. See Buying Guide for more.

Editor’s note
The full title of this topic, as you might see mentioned in textbooks and other resources, is Laws, Regulations, and Guidelines, Including Prohibition on Unethical Business Practices. The page title here is shortened for usability reasons.

# Key Concepts

# Securities

A security is any investment product that can be 🔁 exchanged for value and ⚠️ involves risk, such as stocks, bonds, options, warrants, and more.

You will be expected to know which securities need to be registered with the Securities Exchange Commission (SEC) or State Securities Administrators, and in which cases issuers or securities become exempt or excluded from registration.

This topic heavily focuses on concepts related to firms and individuals who are securities professionals, who are individuals and firms whose job it is to provide financial services related to securities, for the benefit of their customers or owners based in the United States.

There are four main persons in the United States securities industry that the exam focuses on:

The meaning of “persons” in a legal context
In a legal context, a “person” may refer to a company or an individual. An individual is known as a “natural person”.

# Regulatory Bodies

This topic also focuses on how these firms and individuals are regulated by regulatory bodies based in the United States. These regulatory bodies may be a federal government authority (national level) or a state authority.

The State Securities Administrator
Because the exam is designed to license Investment Adviser Representatives (IARs), which are regulated by State Securities Administrators, the exam places a heavy focus on the role and jurisdiction of the State Securities Administrator

Which regulatory bodies regulate each of the four securities professionals?

Investment Advisers (IAs) and Investment Adviser Representatives (IARs) are regulated by:
- Securities Exchange Commission (SEC) on the federal level
- State Securities Administrator on the state level
Broker-Dealers (BDs) and Agents are regulated by:
- FINRA on the federal level
- State Securities Administrator on the state level

# Registering with regulatory bodies

All securities professionals are expected to be registered with a regulatory body, although some are either exempt or excluded from registration under specific conditions. You must know what these conditions are, as you will be tested.

You must also know which of the four securities professionals registers with which regulatory bodies.

# As a rule of thumb:

Investment Advisers (IAs) register either on the federal or state level, never both
Investment Adviser Representatives (IARs) only register on the state level
Broker-Dealers (BDs) register on the federal and state level
Agents register on the federal and state level

# Regulations

These regulatory bodies are responsible for administering certain regulations, to which securities professionals are subjected at either the federal or state level. We will refer to these as securities regulations.

You are expected to know how these laws apply to each of the four securities professionals.

# For this topic, the most important regulations to become familiar with are:

List of regulations covered in the Series 65
See a list of all the regulations that will be tested in some form.

😇💰 Series 65 for Angels