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Series 66 Exam Prep Episode 4 Laws and Regulations — Transcript

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0:02welcome back to the geek and the guru
0:05podcast for the series 66 uh my name is
0:08Brian Lee the Tes geek and alongside my
0:11wingman my ever trusted wingman the
0:15series 7 Guru Dean Tenny what's
0:17happening Dean how are you today nothing
0:19much excited uh for episode four of our
0:22collaboration on this H podcast series
0:25abies 66 uh you're hosting today what do
0:29you got in mind for us episode four well
0:31we've got the biggest and the baddest
0:34section of the series 66 laws and Rags
0:3845 of those bad mothers right 45% of the
0:42test on laws and rs uh and we'd like to
0:47take a look at the definitions and
0:50registration of persons Dean you and I
0:52have worked on these
0:54collaboratively several times uh I think
0:58we have a nice method of kind of
1:01consolidating that stuff uh again you
1:04know I ad knowled I've mentioned this
1:07you know this is kind of the origin of
1:08the test geek is trying to put this
1:10stuff turning mashed potatoes in the
1:12premium vodka right and we've come up
1:15with a little cheat sheet that helps cut
1:18through the 87 pages of textbook to help
1:22you with the registration definitions of
1:27persons one thing if if I could before I
1:30turn it over to you a little bit um I
1:33first try to tell people that you know
1:35knowing the basic definition of these
1:37persons to begin with for example just
1:40give you a quick example broker dealer
1:42right persons that affect Securities
1:45transactions for the benefits of others
1:46or themselves all right for me that
1:50gives me a a basic kind of picture in
1:53mind as to what a broker dealer actually
1:57does right and then of course we go into
1:59the registration requirements you know
2:01they have to have an office uh and or a
2:05client who is a resident of that state
2:08one thing I add to that if they mail
2:11something or if they just call somebody
2:14in a particular state that counts as a
2:17client who is a resident of that state
2:20Dean anything uh that you can come up
2:22with yeah I'm I'm with you ways for
2:24people to remember this stuff well first
2:26thing I like to start with is it's very
2:28similar is you know
2:30depending on your background persons
2:32don't necessarily mean living breathing
2:35human beings walking in planet Earth so
2:39that is important for us because we have
2:41definitions of what we call Natural
2:43persons those are going to be agents of
2:45the broker dealer and investment advisor
2:48reps those are living breathing human
2:50beings walking planet Earth right right
2:53and that means that they can be held
2:55accountable we also though have
2:56unnatural persons and those would be the
2:59broker deal ERS and the investment
3:01advisors not living breathing human
3:03beings walking planet Earth however can
3:05be held accountable and then that's what
3:07that really means is to say that if a
3:09person if you're a person you'll be held
3:11accountable which leaves those questions
3:12about who's not a person who can't be
3:14held accountable you know miners dead
3:16people you know whatever the case may be
3:18so I know Brian you probably get some uh
3:21attorney types taking this exam and they
3:23say mine if I don't pass it's going to
3:25be embarrassing I say
3:26absolutely because if anybody should
3:29understand these
3:30these definitions it certainly should be
3:32you and the other thing I love your
3:34definition about broker dealer just
3:36again today Brian people get so confused
3:39about whether the question is about a
3:40broker dealer or an investment
3:44advisor and I think you do a really
3:46great great great job on that cheat
3:47sheat but I the person was hung up on De
3:51Minimus in this broker dealer question I
3:54I said listen that that is not the right
3:56answer you you can wish it is but it's
3:58not please read the question again it's
4:00about a broker dealer so these
4:02definitions are important when uh test
4:04takers read the question to be very sure
4:06what they're being asked about broker
4:09dealer investment advisor on that
4:11investment advisor site can get Messier
4:12ferally not agent in you know you really
4:15gotta be uh on your toes I know in your
4:18your practice test I don't think it's a
4:20got you question briy you have but but
4:22you know test takers sometimes miss one
4:24of your questions and it's the same deal
4:26it's it's not a gotta question it's that
4:28they didn't read the question you got
4:31State X and state B and state D and it
4:34doesn't have any meaning not to
4:37specifically reveal answer choices to
4:39test questions because we all know
4:41that's prohibited but I wouldn't be
4:44surprised if some of the answer choices
4:48again let's take broker dealer as an
4:50example where one answer Choice might
4:52say a person affecting Securities
4:56transactions and another answer saying
4:58an individual idual affecting Securities
5:01transactions as you just mentioned
5:03broker dealers are unnatural persons
5:07they are not people living breathing
5:09walking in planet Earth so you can
5:11separate that person from an individual
5:15it's absolutely correct um and again you
5:18know we we we try to consolidate this
5:21stuff one time I boy I did this
5:24intentionally in class because I knew
5:26and in a class of 30 people there would
5:28be 16 would say no more than five right
5:33everybody remembers for some reason in
5:36those textbooks that di Minimus
5:38exemption but it does not apply to
5:41broker dealers as a matter of fact it
5:42doesn't apply in most cases most persons
5:46right we'll see a little bit later where
5:48it only applies but it doesn't apply to
5:50broker dealers it doesn't apply to
5:52agents it doesn't apply to the majority
5:55of IAS so we'll see that so do not apply
5:59that the minim is everywhere I I I joke
6:02that one of the things that make the 66
6:05difficult is first you got to stuff it
6:07all into your brain housing group and
6:09that's where I think some of that comes
6:11from because they haven't
6:11compartmentalized that information yet
6:15and that is why that cheat sheet of
6:16yours is helpful uh because it helps
6:18them compartmentalize that information
6:21fact you literally have it in boxes and
6:22sometimes what I'll do is all assuming
6:25they've uh you know got your cheat sheet
6:27I'll say listen let's just put you in
6:28these boxes where what which box are you
6:30in which box is your firm in try and put
6:33yourself in the context of the question
6:35oh agent that's me that's my my 663 or
6:39763 whatever the case me oh investment
6:41visor up oh that's me right 66 means
6:45that's who you are assuming you pass
6:47right so that be a little helpful yeah
6:50and and I of course you know how I am I
6:52love drawing on my whiteboard I can't I
6:55can't talk unless I have a dry
6:58erase uh and I draw a box for a broker
7:01dealer and I draw a box for an IIA with
7:04a roof right subconsciously that
7:07actually differentiates the two right
7:09because it's drawn slightly differently
7:11and I go AFF Securities transactions
7:13here IAS are different this is what they
7:16do right they're fiduciaries they're
7:17more holistic they do this that and the
7:19other thing just to separate them in the
7:21mind and then I go now let's take a look
7:23at the real world and I glue those two
7:27together right because most of the big
7:28firms are dual registered as both right
7:32you walk into that office and it's like
7:35where's the broker dealer and I you
7:36can't tell you can't see it right
7:39there's no wall that separates one from
7:41the other there is no physical
7:42separation business and the type of
7:45compensation they receive yes which
7:47really differentiates those two right
7:50yeah I think the key words there are on
7:52the broker dealer side right Mark up
7:54markdowns and commissions that means
7:55broker dealer yeah you know and for the
7:58most part there can be fees for
8:00brokerage services but you know they
8:02have fee for investment
8:03advice right so I joke you know uh the
8:07broker dealer side the transactions are
8:09what pay for the relationship that's
8:11right the investment advisory side it's
8:12the fee that pays for the relationship
8:14right so that's exactly right no free
8:16lunch you're paying one way or another
8:17somebody that's right yeah and the
8:20commissions are paid only for
8:23transactions that's right it's solely
8:27transaction based where IA is don't have
8:29to be there are transactional based fees
8:32right but you know it's assets under
8:35management most times that you know that
8:37quarterly or annually fee based on the
8:40percentage of assets under management
8:41that kind of thing right and you know I
8:44try to also explain the the Myriad of
8:46differences of IAS out there right where
8:48you have the independent IAS out there
8:50all by themselves and then they hire out
8:54the broker dealers and the custodians
8:56and put them on a little platform right
8:59and that's where they put all the
9:00security so I try to visualize all of
9:03that stuff for them and and you're
9:05absolutely right you got to categorize I
9:08sometimes joke about the little guy in
9:10my head yeah who's in a pink cashmere
9:12sweater right he's running up the stairs
9:15trying to find goes nope NOP that's the
9:16broker dealer file I need the IIA file
9:19right because it's categorized it helps
9:21you to or it just again today I was
9:24tutoring somebody Brian again know what
9:25we talk about right she missed it
9:27because she said five years and that
9:30would have been correct if it was an
9:31investment
9:33advisor it was a broker
9:35dealer so it was three and you know it
9:38gets aggravating but you know that's the
9:40nature of the dragon that needs to be
9:42slayed right that's exactly right you
9:45know and and included in some of these
9:47not just the
9:49definitions but also the registration
9:52requirements now I find it interesting
9:55that there is a net capital requirement
9:57for the IIA
9:59who's registered with State
10:02administrators but no net capital
10:04requirement for federal it's not in
10:06federal law it's only that's right you
10:08know and some of those subtleties that
10:11may or may not be asked I know they can
10:13show up from time to time well also
10:16those registration requirements the
10:17record keeping see that's another that's
10:19an ongoing registration procedure right
10:23are those things uh also what speaking
10:26of registration procedures for uh
10:30uh investment advisor reps right we all
10:32know we have to have this criminal
10:34background check right and what would
10:37prohibit you from registration as an
10:41agent or any of these other you right
10:44and it's and everybody remembers felony
10:46past 10 years right but then I go now
10:49would that be a felony
10:51arrest or a felony
10:54arraignment a
10:55felony conviction because they play
10:59those subtle things on the test and you
11:01got to know specifically it's got to be
11:03for a felony conviction right because
11:05someone's arrested for a felony doesn't
11:07mean they are a felon right that's right
11:09everybody's innocent until proven guilty
11:11I guess that's right but uh but that's
11:14one of the subtleties for some of those
11:15registration procedures uh again I I
11:19tell people that the first thing you got
11:21to get through for the
11:23ser66 is differentiating between the
11:26federal IIA and the state IIA the
11:29federal I and the state I that's number
11:32one that's where you got to begin right
11:35and I don't think that overly difficult
11:40if you keep it
11:41simple right and of course it starts
11:43with AUM right greater than 110 now that
11:47number I'll bet you dollars to a bag of
11:49donuts you'll never see the number 110
11:52million on the test never yeah it's just
11:55a threshold you might see well you know
11:58XYZ advisor firm who has 180 million in
12:02assets well there you go it's above the
12:04threshold that tells you it's a federal
12:07advisor I always home office in in state
12:10a they have clients in state B seminar
12:13you know these questions right semar and
12:15state C which of these states do they
12:17have to register
12:18in none that's right it's never both uh
12:22Brian even just today I continue to
12:24receive debrief that it's just what you
12:26said the question is not a recognition
12:29of the 100 or the 990 or the 110 but
12:33rather where they give you firms and
12:35then you have to pull out of the mix The
12:38Firm that's federally covered and I did
12:41kapl had a practice question I just was
12:43doing today and I shared screen a final
12:45with somebody and it was a 138 million
12:48it was up to her to recognize right that
12:51138 is over the threshold therefore
12:55ferally covered and the thing we always
12:57want you to know it's never never ever
12:59both I don't know how we can make stress
13:01that to folks they keep trying to you
13:04know once you say federally covered your
13:06point about it doesn't matter about
13:07State A or B or C or D and that's to
13:11your point about you know categorizing
13:13and organizing that information uh in in
13:16the cheat sheet I try to do the same
13:18thing under federally covered advisers
13:21right threshold greater than 110 million
13:24register with the SEC now I tell
13:26everybody I I I I I stop and say okay
13:29now we need to add one more
13:33word
13:34only
13:36SEC only there is registration for
13:39federal covered advisor you know it's so
13:42you try to and as we say what follows
13:45from that is really important because
13:47now the second com part of the the
13:50flowchart if you will and answering the
13:52question is now is this an investment
13:54advisor rep of a federally government
13:57advisor or a federally investment
14:00advisor rep of State because then again
14:02you can get in the weeds if it's the
14:03state if it's Federal Life is easy so
14:06now watch this right so you know we
14:09drill into the fact that the federally
14:11covered IIA The Firm right register is
14:15only with the SEC right but the
14:18federally covered
14:19I uhuh it's with the state
14:22administrator that's
14:25right the rep the I is with the
14:28administr now what state he's got 15
14:30clients in this state 32 clients in that
14:32state but his office from where he works
14:38is the only thing that matters it
14:40doesn't matter where the clients are so
14:42you know it's hard to keep all of that
14:44straight that's why you gotta flowchart
14:46it categorize it yeah you absolutely got
14:50to do that I got one of those oh yeah I
14:53got of those man I tell you what when I
14:56first did that 20 11 is the first I can
15:00still remember it 2011 I first did that
15:03and I
15:04thought wow now I even remember it
15:08better which makes it better to teach
15:09and easier to teach in that two and a
15:12half hour afternoon class
15:15remember Gotta Move pretty quick and
15:18back in the day on the uniform
15:19Securities act so uh right on so uh
15:23broker dealers uh you just got to
15:25remember one retail client office and in
15:29the res yeah that's it right I I pretty
15:31I think the broker dealers are is pretty
15:33straightforward and I think
15:36uh I say the same the vendors whether
15:39it's the test taker I think they make
15:41that unnecessarily complicated right so
15:45your point office in state Register
15:47retail client state Register Dean don't
15:51get me
15:52started vendors yeah anyways broker
15:55dealer side pretty pretty
15:56straightforward and then I think what
15:58people need to know is usually it flows
15:59from there the agent of the broker deal
16:01right you have a retail client you know
16:03gotta get registered that's right yeah
16:06uh again uh I I always ask people before
16:10I get into agents what their definition
16:13is and they always include the def in
16:15the definition someone who works for a
16:18broker dealer and I
16:20go 99% but be careful there is another
16:25you know and I go okay I'm founder
16:26President Chief bottle washer of geek
16:28exam prep and I'm issuing Securities and
16:31I'm accepting and placing orders for
16:34interested investors well guess what I'm
16:36gonna have to register under a
16:39U10 as opposed to
16:42ukor um as an agent in that case uh
16:46anytime someone accepts or places orders
16:48nine times out of 10 you're gonna have
16:50to register as an agent Only Exception
16:53is if I work for an exempt issuer mun
16:56BBY bank that kind of thing that's see
16:59to me I think agent is even easier than
17:01broker dealer too you accept to place
17:04orders you got to register and I would
17:05tell you the thing I you know we're
17:07talking about 45 potential test
17:09questions well would say potential there
17:11is 45 exactly but the registrations of
17:15the broker dealer and agent of the
17:16broker dealer are not as testable As
17:21registration of investment advisory
17:23firms and investment advisor
17:25Representatives so in terms of the test
17:28taker is making decisions I say would I
17:30like you to know everything the answer
17:32is yes now given that you have limited
17:33brain space uh NASA is the one making
17:37you take the test and it's primarily
17:39going to be focused in this area of the
17:42exam on the idea of registering the
17:44investment advisory firm and the
17:46investment advisor rep and then the
17:48state versus Federal so and the state is
17:51more important than federal anyways but
17:53yeah know you should you know both the
17:55answer is yes so let's see if we can
17:58nail one another down okay for folks who
18:02are listening to this the definition
18:06registration procedures of persons
18:08broker dealers agents IAS I ARS in total
18:12what would you
18:14say oh let's see putting your to the
18:18here I'm gonna go with nine
18:22nine is that what you would have said I
18:24well I I was going to be a little
18:25broader I like to be a little bit more
18:27concern I say s to 10 that's right okay
18:30okay I'm right with you there I like it
18:33yeah so uh the I again is a little bit
18:36more problematic I just want to repeat
18:38this they federally covered I right and
18:42they got clients all over the place
18:43remember it's only about their office
18:47where the physical state the pH physical
18:50office in which they're working I go the
18:52two steps right first is to say okay the
18:55question is about an investment advisor
18:57second is the investment advisor
18:59federally covered or state then we move
19:02on to the investment advisor rep yeah
19:04and that is where the focus now becomes
19:06in terms of answer the question so in
19:08this exam NASA exams you've got to
19:10really uh own that question
19:12intellectually before you jump in we say
19:16rtfq read the full question RTF read the
19:19full answer that I had a guy yesterday
19:21Brian tough love and I said listen my
19:23friend you're not in the spot yet to be
19:25doing practice questions because to be
19:27honest with you you you don't even know
19:28what you're being asked yeah and if you
19:31don't know what you're being asked you
19:32don't even know the answers that are
19:33being offered to you you need to lay
19:35some base and I thought he took in
19:36strike his next time saw him he said no
19:38I'm halfway there I go what do you mean
19:39he goes I now know what I'm being asked
19:41I still don't know what the answers are
19:43what I'm being asked and on this test
19:45that can be a challenge once you get
19:48past that I I'll Brian stipulate that
19:51could be dish you but if you can get
19:53past that whether it's a cheat sheet or
19:55that then you can really rock and roll
19:57and roll up some points points here once
20:00once that's there because then boom then
20:02it becomes more aim and shoot point and
20:03click rather than judgment questions
20:05that's exactly right that and that's why
20:07I usually tell people this is the first
20:09place when you start the series 66 it's
20:11the first place is getting those persons
20:13straight Federal versus State IIA
20:15Federal I versus State I right by the
20:18way right I mentioned I would mention uh
20:20I would bring this up that the Minimus
20:24only applies to the state registered IIA
20:27and or I no one
20:31else right so essentially I have Broker
20:35dealer agent federally covered IIA along
20:39with the federally covered
20:41I State IIA State I right right two four
20:48six
20:50persons uh laid out fairly simply and if
20:54you can start to connect do more than
20:58try to analyze the 47 words in each
21:01question and answer choice right it
21:04should become a little easier and to
21:05your pointing once you get past that a
21:09lot of the other laws and R questions
21:11start to become Point shoot questions
21:14right it's a lot easier um as a matter
21:17of fact and I think we've mentioned this
21:19in the beginning of the series
21:2066 uh that I oftentimes see folks
21:24actually score the highest in laws and
21:27rs some of the other stuff that we've
21:29already covered in uh previous episodes
21:32is the sticking points you know the
21:34quantitative analysis right right right
21:36right but you get those definitions of
21:38persons down right and the registration
21:41procedures the seven to 10 nine
21:44questions you man you're rocking and
21:46rolling that's the first start first
21:48place you want to start right on right
21:50on right yeah di Minimus only state IAS
21:56and
21:57State
21:58[Laughter]
22:00I like that you know that's
22:02that's probably the first mistake
22:05everybody starts making when they start
22:07studying the 66 is they apply that no
22:09more than five like I say we're I'm with
22:12them they gotta first stuff it all up
22:13here once you get it up there then you
22:15got to work Del on delineating which
22:18thing goes with which and uh you know
22:21that know that part of the process is
22:23frustration with uh you know applying
22:25the D Minimus when it doesn't app is is
22:28n part of the question or vice versa and
22:31uh if there's any exams and I know
22:33sometimes Brian and I disagree about you
22:35know performance uh practice uh
22:37performance opportunities you you got to
22:39make sure you do enough practice
22:41questions to get to where you know
22:43you're you're getting the flow of how
22:46these things break down in terms of
22:47questions I just finished tutoring
22:49somebody for 66 today and I said hey
22:52last thing I want you to do Testing
22:54Saturday is tomorrow I want you to do
22:56that t geek practice test
22:58yeah because that'll going to be our
22:59final Mark and I said you know I'm
23:02transactions relationship let's check in
23:04let's talk tomorrow but that's not the
23:07learning process that's to get the mark
23:10and hopefully she's done up practice
23:12questions that you know she's not
23:14fumbling around with what what that
23:16practice test is asking her and what
23:19answers are being offered to her
23:21speaking to that poting too you know
23:23because I've I've done three tutoring
23:24sessions today myself um and uh I I I
23:28laid out this clear plan I said okay
23:30this is you know you and I both
23:33absolutely agree evaluation and
23:35Remediation for those last you know week
23:38week and a half two weeks right and so
23:40we laid out this plan I said you know we
23:42want to see that simulated exam score
23:44see how close you are and the
23:46performance tracker find out where those
23:48weak spots is it you know these
23:52persons and uh that way we can then fill
23:55in those holes he goes great next time
23:57I'll see I'll have four practice finals
23:59done I go whoa where did I say do four
24:03the goal is not to do multiple practice
24:06fun oh my godate remediate evaluate
24:08remediate rinse and I told somebody that
24:11all time yeah yeah and and I had to tell
24:12somebody you need to take a break you
24:14can't be doing it two three finals a day
24:16or one every day you you know you can't
24:19be remediate remediating if all you're
24:21doing is slamming practice files so the
24:23idea is to get the mark and have it
24:25point to you to the direction you need
24:27to kind remediate on particularly on on
24:30on these issues so I think Brian we've
24:32talked about registration of the broker
24:34dealer we said they have a office or
24:37they have a retail customer broker de's
24:39register agent follows the same I I
24:43would add to that just to remind people
24:45you can't be an agent that's registered
24:46in state your broker dealer is not right
24:49so if you have a client that you know as
24:52a resident State you're going to have to
24:53do that and we said investment advisor
24:55federal state we talked about investment
24:57advisor reps uh we have not talked about
25:00registration of Securities and issuers
25:03do we want to do that or do we have some
25:05more we do there's just one more point
25:07I'd like to make on this and and I want
25:10to get your advice on this yeah we know
25:14um let
25:15me we believe yes uh that you may see a
25:20question asking you about the state
25:24administrator's authority over a
25:26federally covered
25:28advisor right and I I think most people
25:31understand that that there is none
25:34except for anti fraud that's the only
25:38thing a state administrator will have
25:40okay yeah we we first teach or at least
25:42I teach that that federally covered
25:44advisors registered with the SEC only
25:46but as a compromise to that law in 1996
25:50they said well you still have to pay
25:52your state filing
25:54fees so I then tell people there's a
25:58name for that
26:00process it's not a registration it's
26:03essentially just paying their state
26:05filing fees telling the administrator
26:08leave me alone I'm a federal advisor do
26:11we know the name of that process
26:14notification notice filing that's right
26:17yeah notice filing so remember that's
26:18not a you know people get hung up on it
26:19I don't think it's a huge test
26:21distinction but it's not a form of
26:23registration is the point right that's
26:26my point it's exactly
26:28now see Dean this is a perfect segue
26:31into registration Securities right right
26:33I just want to point out you're abely
26:35right about no one and nothing is exempt
26:36from anti fraud right so no yeah so you
26:39know that's a trick question right uh
26:41sometimes they ref that jurisdiction I I
26:44think of jurisdiction as you know like
26:46when I cross a state line they always
26:47tell me what state I'm in because you
26:50know if I'm on my way to my cabin
26:51Arizona I across the Nevada line and you
26:53know the Nevada guy doesn't have any uh
26:56uh jurisdiction all right so you said
26:58this is
26:59segue to Securities and issuers that's
27:02right uh now I again we know H how the
27:07the the Publishers work they often cut
27:09and Pace from all their other textbooks
27:11so they don't have to rewrite this stuff
27:13right I call that the chunk Theory right
27:15we take it chunk that's right that's
27:17exactly what it is and so I
27:21believe um there's a lot more of this
27:23stuff in the textbook and the practice
27:25questions and ultimately will show up
27:28I do too I think this is no doubt I I'm
27:31totally with you Brian in fact uh I want
27:33to give us kudos to our viewers you know
27:37Brian and I could try and make a
27:406566 podcast and do I could do the chunk
27:44thing okay well it's a little over here
27:46and this is a little over there we're
27:47we're trying to stay uh dedicated to in
27:50the lane of each particular series even
27:53though I get white vendors do it because
27:55they're trying to save a buck here or
27:57whe they're trying to repurpose their
27:59their content I I understand it Brian
28:01but I'm totally with you I think they go
28:03completely overboard on this I would
28:06think we talked about nine questions in
28:08this category and I think security is an
28:11issuer I'd be interested in what you
28:12thought you said seven to 10 I think in
28:14this section the two shallowest or I
28:17should say lower probability in terms of
28:20numbers of questions are broker dealers
28:22and this yes maybe two three questions
28:25here that's right again in this area
28:27most mostly about investment advisors
28:29and investment advisor rep so don't go
28:31down any rapit all on broker dealers and
28:33securities and issuers so I I don't even
28:35include Securities and issuers in that
28:37seven to nine that's just def there you
28:39go there you go but I agree 110% with
28:42you Securities and issuers two or three
28:46that's it uh and and the one place and
28:48we'll get to that is is the exempt
28:50transactions with which everybody just
28:53you know just struggles with so first of
28:56all I believe
28:58that you might get a basic question on
29:00the types of registration for
29:03Securities right should we even go into
29:05the definition all the following are
29:06securities except you know there's often
29:08that question well I would know yeah I
29:11think I a little bit right uh it's not a
29:14security I think I would focus on what's
29:16not a security like I would focus on
29:17what's not a person that's I do that's
29:19how I do it I just had the young lady
29:20today we were tutoring and she got the
29:22question right I said okay so why is
29:24that not an investment
29:26advisor and and I said there it seems
29:28like they meet the ABC test they give
29:31investment advice they're in the
29:32business giving investment advice they
29:34want compensation and she nailed it and
29:37she said because it's investment advice
29:39about Antiques and coins right and those
29:42are not Securities right so you know I I
29:45would expect you should have a general
29:46understanding of what what is not a
29:48security insurance is not a security fix
29:52insurance right yeah yeah so uh I don't
29:55think I'd worry what what is I would
29:56probably worry about what is not that's
29:58right Howe decision and a piece of paper
30:01that can be traded to their party I
30:02don't I just it's it's in the textbooks
30:04and practice questions I don't believe
30:06it's on the test much anymore it might
30:08be on the 63 the the little cousin uh
30:11the the I would I would point out in our
30:14whiskey Warehouse receipts right
30:16everybody always ask me what is it I say
30:18who cares it's not a right answer well
30:20you know I can't resist answering the
30:22question because in San Francisco during
30:24the fire in earthquake the fire came all
30:26the way up to the whiskey Warehouse
30:28district and uh then the fire stopped
30:31and they said well if God was really
30:33punishing San Francisco why would he
30:35have not burned down the red light
30:36district in San Francisco the old days
30:38uh you would trade that to a third party
30:40this was how you settle your bills with
30:41whiskey Warehouse that being said where
30:43I think this is Tes being a great
30:45Storyteller my I learn every time I talk
30:47to you man the update though I would uh
30:50do is where this is relevant I think
30:52today in terms of updates to the exams
30:54right is is a cryptocurrency
30:58a
30:59security and you know that state
31:01administrators in the SEC say that
31:04certain cryptocurrencies are being
31:07offered as an investment and our
31:10Securities and therefore need to be
31:13registered something that's continuing
31:14being litigated but as far as 66's exam
31:18it's the state administrator that
31:19decides whether it's a security or not
31:23right but they have updated the exams as
31:25you know not the exams themselves but
31:27the specifications about digital assets
31:31and I think that's what that that has to
31:32is about is this digital asset being
31:35sold as a security I don't even know if
31:36I've heard of one not yet not yet I'm
31:39just pointing out that it's in I think
31:41eventually it it it'll probably work its
31:43way into the test somewhere but and
31:45there are people have gone to jail for
31:46making unregistered offerings of crypto
31:48investment opportunities right so you
31:50know I being the old war horses that we
31:52are I remember when the internet first
31:55came in in the mid to late 90s 90 and
31:58people were offering these penny stocks
32:01over the internet and saying hey we're
32:03doing it over the Internet internet's
32:05exempt from everything right and ASC
32:08said no it's security it's got to be
32:11registered and they were selling you
32:13know swamp land in Arizona over the
32:16internet right like SEC said that put a
32:20big stop on that I always joke we should
32:23probably an evolving regulation for
32:24crypto who who is the SEC they I always
32:27joke Brian the phone rings it's the SEC
32:30and they say do you know who we are I
32:32say yes you have primary jurisdiction
32:35interpretation and enforcement of the
32:37domestic Securities laws of the United
32:39States of America keyword
32:42interpretation right they get to decide
32:44what is a security now I joke the SEC is
32:48God State administrators think they are
32:51so there's you know 50 Demi Gods running
32:53around that within their state have that
32:55same type of power right that's right
32:58that's right I would even think the
32:59state administrator in terms of
33:00jurisdiction has more power in their
33:02state than the SEC yeah that's right uh
33:06when it comes to registration of
33:08Securities right I have to tell people
33:11there's only two there's only two
33:14methods and again the way in which
33:16they're always organized in textbooks it
33:18always appears there's
33:20three so if you get a registration of
33:24question and I believe there is one it's
33:25a relatively simple question
33:27right if it's an IPO right a new
33:31issue um it's qualification and it has
33:35an SEC registration right then it has to
33:39be done
33:40through coordination they're
33:43coordinating the State registration with
33:46the federal I mean there's that word
33:47right if there's a federal registration
33:49then you have to coordinate the state
33:51regation for all IPOs that's right right
33:55if it's not registered with with the SEC
33:58and an example would that be uh if the
34:00security is only sold in one state
34:03that's an exemption to SEC registration
34:05then it's qualification and that's it
34:08those are the only two now what's this
34:11third one everybody talks about we
34:14already mentioned it there are advisors
34:18we know right only have to register with
34:20the feds don't have to register with
34:22State there's certain Securities that
34:23are same way that's right on an exchange
34:27if it's included in the NASDAQ system or
34:29if it's a mutual fund I.E Investment
34:32Company I think I think the vendors
34:34again no surprise go get the weeds on
34:36this but basically you know the national
34:39Securities Market Improvement act I
34:40wouldn't worry about that knows me as a
34:42except to know that that's where that
34:44came from they created two buckets two
34:47buckets that were created were federally
34:48CED investment advisors and the other
34:51bucket is federally covered Securities
34:53and you know it took power away from the
34:55state administrators they didn't like it
34:56because you know it's we're ferally
34:58covered advisor we go nener ner nener I
35:00don't suggest you say that but you know
35:03I'm federally covered that's right and
35:05then the the other thing I would mention
35:06is backtrack a little bit if I'm a
35:08broker dealer and I'm answering to the
35:10SEC I have to register the state but the
35:12state can't impose on a broker dealer
35:14any higher standard than I already have
35:16in terms of record retention or net
35:18capital or but that being said uh yeah
35:21you know uh you brought it up New York
35:23NASDAQ mutual funds right regy a private
35:26placement under reg D those big four I
35:29think that's right and and you mentioned
35:32nisia and we had already talked about
35:35how Federal advisors they don't have to
35:37register with state but they still have
35:38to pay filing fees it was a compromise
35:40in that law right they took all that
35:42power away from the state give you some
35:44money instead but they took away their
35:47revenue as well the registration fee so
35:50they compromised and say we're taking
35:51the power away but you can still have
35:53the money that's right right so they
35:54still have to pay filing fees and we
35:56already know what that process is called
35:59it's called notice filing so it's not a
36:02method of
36:03registration Rec covered advisors and
36:06federally covered Securities mutual
36:08funds uh exchange listed and uh NASDAQ
36:11included y those are the covered
36:13Securities that you may see so I don't
36:16think these it's one question on the
36:18test which of the following methods of
36:20registration is required for the
36:21following you know it's an IPO it has an
36:24SEC registration boom coordination right
36:27uh it's only sold in a state there's no
36:30SEC qualification right do mutual fund
36:34right yeah how much depth do you think
36:37they need to know on exempt issuers and
36:40exempt transactions and the differences
36:42I I think it's a overkill on the vendor
36:45part but I mean do you think they need
36:47to know that the government is an exempt
36:49issuer municipals are exempt from
36:51registration well I'll tell you
36:53nonprofits you know here's Here's my
36:56thought by
36:57feries you just passed the bleepity
37:00bleep Series 7 yeah so you should know
37:03that USG mun's Banks insurance companies
37:06nonprofits are exempt anyway right
37:07that's exempt under the 33 act well boom
37:10put that under the USA they're the same
37:13right there's a couple others right
37:14Canadian Security SEC so I I I list that
37:18again I put it in my little chart that
37:20guy in the pink cashmere sweater going
37:22up the stairs finally you
37:25know
37:27I hope he doesn't get any wine spilled
37:29on that beautiful
37:31pink or have someone spill it on you yes
37:35that's a whole different story what
37:37story for later day story later if you
37:41ever come to Vegas we'll tell you that
37:42story we'll take we'll take you out and
37:44we'll we'll show you the scene of the
37:46crime that's right absolutely oh my
37:49goodness you trouble me for you um I
37:51think there might be one question so I I
37:54try to separate the fact uh there's a
37:57term that everybody struggles with
37:59non-exempt security non-exempt issuer
38:03right what does
38:04that instead of reading the word
38:07non-exempt cross it off in your brain
38:09the guy in the pink cashmere sweater is
38:11crossing that off and putting corporate
38:14yeah I like corporate Securities stops
38:16and bonds I I usually do and bonds have
38:18to be registered of course they do I do
38:21I do it a little backwards I say
38:22non-exempt means it ain't a government
38:24it ain't a mun right it's not one of
38:26those so either way but yeah I like it I
38:28like it corporate is way to do it
38:29non-exempt means corporate so non-exempt
38:32issuer test geek exam prep it's
38:35nonexempt issuer it's a corporate issuer
38:37that's right stocks and bonds they have
38:39to be registered yeah
38:43except if it's unsolicited if it's done
38:46between those are transaction how it's
38:48sold so I don't know Brian I I don't
38:51know how much time testat want to spend
38:53on it but I don't know if this makes
38:55some sense when I do it I say an exempt
38:58security is a list it's you know it's a
39:01noun and an exempt transaction is a verb
39:05you know it's how we're selling it that
39:06makes it exempt it's not the security
39:09that's exempt it's how we're selling it
39:11exempt security is just simply a as you
39:15mentioned a laundry list of things I'll
39:17do it your way that are not corporate
39:20Securities work it does work it does
39:22work exactly right and one last thing
39:25we'll talk about this because again
39:26aren't that many of them right the the
39:30exempt transactions refer to the
39:33registration of the security not the
39:37agent oh yeah agents placing Securities
39:41they still have to be registered that do
39:44you have that one question and oh my God
39:47yeah you know as I told you now I just
39:48tell them to call you it's your content
39:51you know have you defended but uh you
39:53have a question that everybody well not
39:55shouldn't everybody lots of people this
39:57is not right this is I said please read
40:00it again the question isn't about the
40:03security or the transaction it's about
40:05the person who's selling it and uh you
40:09know it just drives me n Somebody went
40:11so far I may have mentioned this to you
40:13this was a while back was so far to tell
40:15me he checked with his STC instructor
40:17and his you know past perfect instructor
40:19and his C instructor and and Dean and
40:21Brian are wrong and I said listen you
40:23know uh hate to break the news to you
40:25we've been doing this quite a few more
40:27years than perhaps I there yeah I you
40:31know I I I don't want to get into you
40:33know turf wars with anybody I I I really
40:36don't it's just it's not worth it to me
40:38I passing the test that's right that's
40:41exactly right um so you know you gota
40:44you're right it's read the full question
40:47yeah it doesn't exempt the agent it
40:48doesn't yeah all right uh let's talk one
40:51last uh one last item uh and that's
40:54administrative provisions
40:56uh what the administrator can do to you
40:59basically their power the what they can
41:02do to you we already joke Brian they
41:05don't they don't make as much they're
41:06typically attorneys and uh they would
41:08make more in private practice than they
41:10would make being a state
41:12administrator what they don't get in
41:15money they get in power point they get
41:18power yeah uh we mentioned uh one point
41:20to this um about the felony convection
41:24that I to say it but you know that
41:27question's been around for a long time
41:29right right be careful of that uh it's
41:31not the right answer because you know
41:32say which of the following would uh be
41:34reason for denial revocation whatever of
41:37registration and one says a felony
41:39arrest seven years ago uh which doesn't
41:42work I believe all the test uh prep
41:45vendors have that a similar question
41:47that's why I'm revealing that because
41:49they all to um so it's not even the
41:52right question a right answer because a
41:54felony arrest is not reasonable for
41:56denial right it's got to be a felony
41:58conviction so that's one thing and and
42:00to your point too you brought this up
42:02earlier too jurisdiction there's always
42:04a jurisdiction question uh people often
42:07get my question wrong on that one too
42:11right where the solicitation
42:14originates where it was directed to end
42:18or accepted in right and they start
42:21thinking about the agent registration
42:23it's not about the agent registration
42:25it's about the administrator that's
42:27where did the solicitation originate
42:30that's jurisdiction where was it
42:33directed to in other words did they call
42:35somebody in California did they call
42:37somebody in Florida that's what we mean
42:39about directed to that's right and then
42:42they say okay I'll buy a thousand sharff
42:45that's accepted now were they still in
42:47Florida when they accepted it right or
42:49did they go back to their home state you
42:51know the textbooks like to use all three
42:55I tell people that's a little too easy
42:58to figure out you know it's all three
42:59states and and probably not going to be
43:03that way it's simply what itates and
43:05where it's directed to is usually the
43:07answer to those questions right yeah I
43:09agree with you uh the jurisdiction
43:11people get hung up a lot on it and uh
43:14you know uh it it's mainly you know your
43:16point it's a a legal term for an offer
43:20an offer accepted becomes a sale and so
43:23your point where it originate you know I
43:26usually to just make it clear Brian I
43:27usually put myself in Nevada your point
43:30I call California I do the same thing
43:33the guy picks up the phone I call him
43:34you know next time he's up in uh Oregon
43:37drinking Pino Noir and he says you know
43:40Dean I want 24 hours to think about it I
43:42call him and now he's in Oregon and he
43:44accepts and he says let's do it right
43:47exactly uh that's it's a pretty common
43:50question that that shows around again
43:51there's one um what about penalties and
43:54liabilities right
43:56three year up to three years in the hcal
43:59up to a 5,000 $5,000 fine really do you
44:03do pay the fine do the
44:06crime wow yeah uh which I think it is so
44:10and and then they might also get into
44:11the statue of Li limitations too that's
44:14right and the other thing I would add
44:15wrer recision would you you be familiar
44:17with wrer cision or not you know you and
44:19I know these are absolute Classics on
44:22the 63 they do bleed over to the 66 how
44:26many of them I don't know I don't think
44:29they're overly challenging right two
44:31years from occurrence three years from
44:33acceptance or backwards whichever comes
44:36first right yeah that's right uh that's
44:38that's the statute of limitation again I
44:41think these tend to be a little bit more
44:43point and shoot questions I don't think
44:44they're that difficult but again I you
44:47know let's not diminish it there's there
44:49can be four questions on this right and
44:52when you need 73 out of a 100 I'll take
44:55these four
44:56absolutely yeah
44:58absolutely so without having to
45:01overwhelm you with all 45 questions
45:04today uh we're going to have uh episode
45:074 a and episode we'll call it episode
45:11five yeah and we'll call it disclosures
45:14and ethical practices or something along
45:16those lines Brian I think one of the
45:18challenges on the test is the narrative
45:20thread that is lacking in 66 as compared
45:24to the seven and what I mean by that is
45:26there's not much narrative threat and
45:28there's there's not a lot of Target Rich
45:30environments but this episode five is
45:32very Target Rich uh on disclosures
45:35communication and une ethical business
45:37practices about 25 questions is what I
45:40would uh probably a good good estimate
45:43that's right so so that'll be important
45:45so uh we will revisit that in episode
45:49five anything else here uh uh thanks
45:52Brian for uh we always appreciate you on
45:54the channel uh collaborating with us on
45:57the YouTube channel and uh serving as
45:59host today so I just want to give you my
46:01thanks I know the test takers love uh
46:04seeing you and getting your help in
46:06terms of uh things we've roped you into
46:08uh helping out on and so uh I just want
46:11to give you my thanks on behalf of the
46:13other test takers and we'll finish up
46:14this uh podcast with episode five and
46:17then we'll decide what to do next uh
46:19together right thanks remember Brian
46:21also I just want to do a little
46:22commercial for uh Brian and his paid
46:24supplements but remember he does have
46:27free stuff on YouTube as well Brian has
46:30uh some stuff where you can go che check
46:32out some of the great free stuff that's
46:35available on YouTube uh his paid
46:37supplements nobody does NASA better than
46:40Brian I think in terms of his paid
46:41supplements for
46:4366 uh 65 and you know this was 66 what
46:48is it for the whole shoot match on 66
46:52about 100 bucks with a 20% discount9 129
46:56with a guru discount it's like 103 okay
46:59so there you go so Brian not only has
47:01been kind enough to collaborate with us
47:03he's also gives our viewers a 20%
47:05discount Guru 20 on his content so I
47:08can't recommend highly enough getting a
47:11supplement whether it's a free
47:13supplement like the YouTube channel or
47:15paid supplement like Brian's this is not
47:17a time on this last leg of your testing
47:19journey to be uh pound wise and uh Penny
47:23pound wise or Pennywise and pound f I
47:26think is the cliche if you have the
47:28resources uh make sure you you use them
47:32to get yourself whatever it is you need
47:35in your quiver any arrows in your quiver
47:37to make your mark and and I'm finding a
47:39lot more people are actually using my
47:41supplements as as well as the guru's
47:44play
47:45playlist uh I think those are a perfect
47:47combination and the 65 n66 these NASA
47:51exams just scream for supplements they
47:54really do yeah yeah well your point
47:56Brian about the
47:57distillation if if there ever was
48:00distillation necessary yes it's on the
48:02NASA exams uh I've probably shared my
48:05frustration with you but a uh you know
48:07uh Kaplan that book no matter what
48:10happens to test always gets bigger and
48:12bigger and bigger and bigger even though
48:15the test hasn't changed no it really
48:19hasn't it's amazing it's amazing all
48:22right then de great man this is a lot of
48:24fun doing this
48:26out there look for episode five com up
48:30very shortly very shortly remember as I
48:32always say inch by inch your exam is a
48:35inch yard by yard your exam is hard and
48:37Brian keep it simple stay with what you
48:40know you take the test don't let the
48:42test take you all right everybody we'll
48:44see you for episode five byebye take
48:46care now bye bye

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