Textbook
1. Introduction
2. Investment vehicle characteristics
3. Recommendations & strategies
4. Economic factors & business information
5. Laws & regulations
5.1 Securities laws
5.2 Definitions
5.2.1 Persons
5.2.2 Exempt & excluded
5.2.3 Issuers & securities
5.2.4 Broker-dealers
5.2.5 Agents
5.2.6 Investment advisers
5.2.7 Investment adviser representatives (IARs)
5.2.8 SEC & state administrator
5.2.9 Offers & sales
5.3 Registration
5.4 Enforcement
5.5 Communications
5.6 Ethics
6. Wrapping up
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5.2.1 Persons
Achievable Series 65
5. Laws & regulations
5.2. Definitions

Persons

Definitions are very important when taking an exam focusing 30% of its test questions on the legal aspects of finance. If a regulation or rule applies to a specific entity, item, or circumstance, one must know the exact definition of certain terms in order to determine if the law applies. For example, the speed limits on the highway apply to automobiles. That seems easy enough, but what exactly is an automobile? Does an ambulance, fire truck, or motorized skateboard meet the definition?

One of the first definitions we’ll start with is the term ‘person.’

Definitions
Person
An individual; corporation; business trust; estate; trust; partnership; limited liability company; association; joint venture; government; governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity

When we utilize the English language in normal circumstances, “persons” are our colleagues, friends, and family members. However, don’t assume a person refers to a natural person (a.k.a. human being) in a test question. While you are a person, so is the US Government, so is a large corporation, and so on. Any natural person or entity that can enter into legal contracts is considered a person.

Definitions
Legal contract
A mutual agreement between two or more parties that is enforceable by law.

Examples: employment contracts, insurance contracts, option contracts

There are some important examples of non-persons to be aware of. The following parties are never considered persons:

  • Minors
  • Incapacitated
  • Deceased

The most common reason for non-person status is the inability to enter into legally binding contracts. While minors can technically enter into contracts, they are considered generally unenforceable, plus the minor can void the contract at any time. Incapacitation, which occurs when someone is unable to manage their own affairs or well-being, also results in an inability to enter binding contracts. The most common reasons for incapacitation are dementia, mental illness, and a sustained lack of consciousness (e.g. in a coma). Last, dead people obviously cannot enter into contracts.

Key points

Person

  • Any natural person (human being), or;
  • Any legal entity

Non-persons

  • Minors
  • Incapacitated
  • Deceased

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