Section 6

A firm will be responsible for the content of a linked third-party site if the firm

"adopts" its content on any of the firm's sites

when selling out of inventory there a requirement to obtain client consent if

The agent is acting in an advisory capacity

In order to act as an agent (or principal) in a trade with an advisory client, there are 2 requirements:

The client receives full written disclosure as to the capacity in which the adviser proposes to act and needs Consent of the client. Both of these are required before the completion of the transaction.

disciplinary actions that resulted in a fine in excess of

$2,500 must be disclosed to customers

Legal or disciplinary action taken against an adviser by a court or a regulatory authority within the past

10 years must be disclosed to clients in any case

Regulation Best interest

2018-2019

Firms need to provide customers with at least

30 calendar day notice if they are increasing the fees

Not included on the fee disclosure are

Commissions, mark ups or downs and advisory fees

An investment adviser plans to sell securities out of its own investment account to an advisory client. In order to do so, which of the following is required?

Consent of the client before completion of the trade and Written disclosure of the adviser's capacity before completion of the trade

Among the most common ways for making fee disclosure is to

Create a chart, list or tabular form of the fees

Under the USA, the term "guaranteed" refers to

a guarantee of interest, principal, or dividends by a party other than the issuer.

A type of fraud using social media where the fraudsters pretend to be member of a group, sometimes using respected leaders of the group to spread the word about the scheme is known as

affinity fraud

If an investment adviser representative assist a client with a trade from the broker dealers inventory it is okay and there is no consent needed if the IAR is acting as

agent

the two primary services that are always present in wrap fee accounts are

Investment advice and execution of brokerage transactions

Investment advisers structured as partnership must notify clients when there is

a change involving minority of the partners

by requiring prepayment of over $1,200 in fees, 6 or more months in advance, an adviser is required to include

an audited balance sheet with Part 2 of Form ADV, which must be filed with the SEC and made part of the adviser's disclosure brochure

Pledging majority stock interest in an adviser structured as a corporation is considered

assignment therefore requires client consent

Under the Uniform Securities Act, an investment adviser may legally have custody of money or securities belonging to a client

if the Administrator has not prohibited this practice and if the investment adviser has notified the Administrator that it has custody

The SEC prohibits client testimonials in

investment adviser advertising.

part 2a appendix is the

wrap fee program brochure

Any mention of investment recommendations in any adviser advertisement must always include

all recommendations, not just good ones, made over the course of the last 12 months.

part 2b of form ADV is the

brochure supplement

A thinly traded security is cause to

charge more

the administrator has

cleared this issue for the sale to the public, would be a correct statement

When it comes to investment adviser structured as a partnership, if there is no majority change in ownership you do not need consent but you do need to provide

clients with notice within a reasonable time

There are 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are:

commissions; markups and markdowns; and advisory fees for those firms that are also registered as investment advisers.

Entanglement is adoption taken one step further. This is when the firm or one of its reps

contributes to the third-party information and then posts it.

To state that the SEC or state administrator approved anything is subject to a

criminal offense

Adoption is defined as a firm's

endorsement of the content of a third-party site.

the NASAA made a template for fees and disclosing the

fees as a way to initiate standardized fees

part 2a of form ADV is the

firm brocheure

Firms can charge a fee

for late settlement received, for example after t plus 2

Safekeeping of funds or securities

is cause for a charge or fee

NASAA stands for

national american securities administrators association

outside endorsements are

never allowable on the exam

there is no legal requirement for a client to sign acknowledging receipt of the brochure, if it is the adviser's practice, the account may proceed, but only with

notice to the appropriate supervisory person.

Part 2 of Form ADV consist of 3 parts.

part 2a, part 2a appendix, and part 2b

a guarantee security is where a

party other than the issuer guarantees the payment of principal and interest on a debt security or dividend on an equity security

Investment advisers may only assign client contracts with the client

permission

It is very common for a broker-dealer to charge a fee for

processing the closing of an account

Waiving fees and such should always be

prohibited

a industry professional making a performance guarantees are

prohibited actions

In order to be in compliance with the rules, an investment adviser would have to disclose that the firm was acting in a principal capacity when

purchasing shares directly from advisory clients

SEC Release IA-688 contains the specifications for

required inclusions in a third-party solicitor's disclosure document slash brochures.

If an investment adviser representative is acting as principal in a trade that will be out of the firms inventory then he or she would need

the clients consent

Under the Investment Advisers Act of 1940, if an investment adviser's sales literature describes an investment system, the description must include

the difficulties and limitations of using the system

Under NASAA's Model Rule an investment advisory contract must contain

the formula used to compute an advisory fee, provisions on discretionary power, and a clause stating that the client's consent is needed to assign the contract

In the case of a firm registered in both capacities, those disclosures would not be required when

there was a transaction with a client of both entities, but the trade was not based upon advisory services rendered

A state-registered investment adviser would be permitted to

use Part 2 of the Form ADV to satisfy the brochure requirement