📘 Series 63 Exam Vocabulary You Should Know

The Series 63 exam tests your understanding of state securities laws and regulations, many of which rely on precise legal and financial terminology. Mastering key vocabulary is essential to avoid confusion and score confidently on scenario-based questions.

Below is a curated list of must-know terms for Series 63 success.

🏛️ Regulatory Terms

• Uniform Securities Act (USA): Model legislation used by states to regulate securities at the state level.
• Administrator: The state-level official who enforces securities laws, can issue orders, deny/suspend/revoke registrations, and initiate investigations.
• Cease and Desist Order: Issued by an Administrator to stop suspected violations; may be issued with or without prior hearing.
• Consent to Service of Process: A legal document allowing the Administrator to receive legal documents on behalf of the registrant.

👥 Registration Terms

• Agent: A person who represents a broker-dealer or issuer in effecting or attempting to effect securities transactions.
• Broker-Dealer (BD): A person or firm engaged in the business of buying and selling securities for customers and their own accounts.
• Investment Adviser (IA): A firm or person who provides securities-related advice for compensation.
• Investment Adviser Representative (IAR): An individual employed by an IA who provides advice or manages accounts.
• Federal Covered Adviser: An IA registered with the SEC and exempt from state registration, though still subject to state notice filing.

📄 Securities & Transactions

• Security: Includes stocks, bonds, mutual funds, options, investment contracts, and more.
• Exempt Security: A security that is not required to be registered under the USA (e.g., U.S. government securities, municipal bonds).
• Exempt Transaction: A transaction not subject to registration requirements (e.g., private placements, isolated nonissuer transactions).
• Offer (Offer to Sell): Any attempt to solicit the sale or disposition of a security for value.
• Sale: Every contract to sell a security or interest in a security for value.

⚖️ Legal Concepts

• Fraud: Includes intentional or unintentional misrepresentations, omissions, or deceit in connection with the sale of securities.
• Material Fact: Any fact that would affect a reasonable investor’s decision-making. Must be disclosed to avoid fraud.
• Misrepresentation: Making a false or misleading statement, whether intentional or not.
• Churning: Excessive trading in a client’s account to generate commissions, violating fiduciary duty.
• Suitability: The obligation to ensure that a recommendation fits a client’s investment profile, including their financial goals, risk tolerance, and investment horizon.

🧾 Documentation & Filings

• Form U4: Used to register individuals with FINRA and state regulators.
• Form U5: Filed when an individual leaves a firm. Discloses reasons for termination.
• Form ADV (Parts 1 & 2): Registration document for investment advisers. Part 2 is the disclosure brochure given to clients.
• Prospectus: A legal disclosure document provided to investors before or at the time of sale of a new security.

🧠 Exam Tip: Learn to Differentiate

• Issuer vs. Nonissuer Transactions: Issuer transactions involve the issuer receiving the proceeds. Nonissuer transactions do not.
• Solicited vs. Unsolicited Orders: Solicited orders are recommended by the agent. Unsolicited orders originate from the client and may qualify for exemptions.
• Discretionary Authority: Requires written authorization for agents; IAs may have broader discretion under their fiduciary duty.

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