Series 63 Cheat Sheet

Regulation of Persons

35% of exam
Broker-Dealers Agents Investment Advisers IARs Registration Exclusions

Securities + Issuers

9% of exam
Security Definition Registration Methods Exempt Securities Exempt Transactions Antifraud

Remedies + Administration

11% of exam
Administrator Powers Orders Penalties Civil Liability Statute of Limits

Communication + Ethics

45% of exam
Disclosure Suitability Custody Discretion Prohibited Practices Compensation

Quick Facts

Exam Series 63
Body NASAA (FINRA-administered)
Questions 60 scored + 5
Pass 43 of 60 scored
Time 75 min
Fee $147
Basis Uniform Securities Act
Format Closed book MCQ

Registration Filing PE

Application, Consent, Bond, Fee, Effective
Consent: service of process Bond: if discretion/custody Effective: noon 30th day

Broker-Dealer vs Agent PE

Broker-Dealer

Firm/entity
Form BD
Net capital

Agent

Individual
Form U4
Represents BD
Firm vs person

Must Register? PE

Firm trades for others → Broker-dealer ( Form BD )
Individual solicits sales → Agent ( Form U4 )
Firm advises for fee → Investment adviser ( Form ADV )
Individual gives advice → IAR ( Form U4 )
Clerical, no solicitation → No registration ( Excluded )
Only existing out-of-state → No BD registration ( Snowbird )
Issuer sells own → Not a BD ( Excluded )
Reps exempt securities → Not an agent ( Excluded )

Defined Persons PE

Person Individual or entity
Broker-dealer Firm trading securities
Agent Individual representing BD/issuer
Investment adviser Firm advising for fees
IAR Individual giving advice
Issuer Entity selling securities
Administrator State securities regulator
Institutional client Bank, insurer, fund

State vs Federal Adviser PE

State (USA)

Under $100M
Administrator registers
Form ADV state

Federal Covered

$110M+ AUM
SEC registers
Notice filing only
Size sets regulator

Not a Broker-Dealer PE

Agent acting Person, not BD
Issuer Sells own securities
Bank/trust Excluded entity EXCL
No state office Only existing clients
No place here Institutional clients only
30-day rule Vacationing existing clients

Not an Agent PE

Clerical/admin No solicitation
Exempt issuer reps Govt securities EXEMPT
Bank/trust reps Excluded securities
No commission Exempt transactions
Underwriter only Issuer-to-BD
Employees only No public sale

Registration Filing PE

Form U4 Individual registration
Form BD Broker-dealer firm
Form ADV Investment adviser
Consent to service Appoint Administrator agent
Net capital/bond Financial requirement
Effective noon 30th day default
Renewal December 31 expiry
U5 termination Within 30 days

Agent Transfers PE

Change firms All three notify
Old BD Files U5
New BD Files U4
Agent Updates U4 amendment
Multiple states Register each one
License non-transfer Tied to firm

Exempt Transactions SE

Unsolicited, Institutional, Fiduciary, Underwriter, Private
Unsolicited: customer order Institutional: bank/fund Fiduciary: executor Private: <=10 offerees

Exclusion vs Exemption SE

Exclusion

Not the definition
Never that person
Persons concept

Exemption

Fits definition
Relieved of registration
Securities concept
Outside vs excused

Exempt From Registration? SE

US/muni/Canadian govt → Exempt security ( Type-based )
Bank or insurer → Exempt security ( Institution )
Exchange listed → Federal covered ( Blue-chip )
Customer-initiated order → Exempt transaction ( Unsolicited )
Sold to institution → Exempt transaction ( Institutional )
Executor or trustee → Exempt transaction ( Fiduciary )
<=10 offerees → Exempt transaction ( Private )
None apply → Must register ( Full filing )

Exempt Securities SE

US/municipal Government bonds
Canadian govt Foreign sovereign
Bank/savings Insured institution
Insurance Not variable products
Federal covered Listed/Investment Company
Nonprofit Religious/charitable
Commercial paper 270-day prime
Employee plan Benefit securities

Exempt Securities SE

Government, Bank, Insurance, Nonprofit, Covered
Government: US/muni Bank: insured Insurance: fixed only Covered: listed/fund

Exempt Security vs Transaction SE

Exempt Security

Type of issue
Govt/bank paper
Always exempt

Exempt Transaction

How it sold
Unsolicited/institutional
Per trade
What vs how

Exempt Transactions SE

Isolated nonissuer Occasional secondary sale
Unsolicited Customer-initiated order COMMON
Institutional Bank, insurer, fund
Underwriter Issuer to BD
Fiduciary Executor, trustee, sheriff
Private placement <=10 offerees
Preorganization <=10 subscribers
Existing holders Rights/dividends

Registration Methods SE

Notification Filing for seasoned
Coordination With SEC filing IPO
Qualification State-only offering
Effective coordination When SEC clears
Effective qualification Administrator order
Registration period One year typically

Administrator Toolkit RE

Rules, Orders, Investigate, Subpoena, Enjoin
Orders: deny/suspend/revoke Subpoena: records No criminal sentencing

Civil vs Criminal RE

Civil

Rescission/damages
No willful needed
3yr / 2yr

Criminal

$5,000 / 3 years
Willful required
5-year statute
Money vs prison

Which Remedy? RE

Stop ongoing violation → Cease and desist ( Administrator )
Bar a registrant → Revoke order ( After hearing )
Urgent registrant risk → Summary suspension ( Pending hearing )
Investor wants money → Civil rescission ( Price + interest )
Willful fraud → Criminal referral ( Court only )
Challenge an order → Appeal court ( 60 days )

Administrator Powers RE

Make rules Not laws
Issue orders Deny, suspend, revoke
Investigate In or out state
Subpoena Witnesses, records
Cease and desist Stop violation
Summary suspension Pending hearing
No criminal sentence Courts only LIMIT
Public interest Plus protection

Penalties + Liability RE

Criminal $5,000 / 3 years
Statute criminal 5 years prosecute
Civil rescission Price plus interest
Civil suit limit 3yr / 2yr
Recovery Cost, interest, attorney
Right of rescission Buyer accepts/sues
No willful needed Civil liability
Appeal order 60 days court

Discretion vs Time/Price ET

Discretion

What/how much/action
Needs writing
Before trading

Time/Price

When to execute
No written needed
Same trade day
Choice vs timing

Communication Rules ET

No guarantees Performance promises prohibited
No misleading registration License not approval
Disclose conflicts Material facts
Advertising filing Administrator may require
Social media Firm supervision
Email/digital Retained correspondence
New account info Suitability basis
Margin agreement Signed promptly after

Prohibited Practices ET

Churning Excessive trading commissions
Unauthorized trade No discretion granted
Commingling Firm/customer funds mixed
Selling away Off-firm transactions
Front running Trade ahead orders
Market manipulation Painting the tape
Borrowing client funds Generally prohibited
Sharing in account Proportional, written consent

Custody + Discretion ET

Custody Holds cash/securities
Discretion What, how much, action
Time/price only Not discretion
Written authorization Before discretionary trade
Oral discretion Time/price 1 day
Suitability Match client objectives
Best interest Reg BI standard

Common Traps

Exclusion vs exemption

Exclusion = persons ≠ Exemption = securities

Security vs transaction

Security = type ≠ Transaction = how sold

BD vs agent

BD is firm ≠ Agent is individual

Rules vs orders

Rules apply broadly ≠ Orders apply specifically

Administrator vs court

Administrator bars registrant ≠ Court imposes prison

Discretion vs time/price

Discretion needs writing ≠ Time/price does not

Last Minute

1. Pass: 43 of 60 scored questions
2. Exclusion = person; exemption = security
3. Agent = individual; BD = firm
4. Unsolicited orders are exempt transactions
5. Govt, bank, insurer = exempt securities
6. Consent to service appoints Administrator
7. Registration effective noon 30th day
8. Administrator cannot impose prison
9. Criminal: $5,000 fine, 3 years prison
10. Civil limit: 3yr or 2yr
11. Discretion needs prior written authorization
12. No performance guarantees ever allowed

Series 63

Practice Questions 207 questions Study Guide 29 topics Cheat Sheet 95 facts Flashcards 49 cards Shorts 2 short s Videos 22 videos Blogs 8 blogs Free CE Podcast