Series 65: Laws, Regulations, and Guidelines, Including Prohibition on Unethical Business Practices

A MFP has violated the political campaign contribution rule, which could result in the firm being prohibited from negotiated underwriting for what period of time?

2 years

When must an adviser become federally registered?

Advisers must be registered when assets exceed a certain amount

The notification or notice filing method is available for what type of securities and advisers?

Federally covered securities and advisers

What mandates the registration of corporate bonds at the state level?

The Uniform Securities Act

What are the conditions under which a soft dollar arrangement is permissible?

The arrangement must be reviewed regularly and soft dollars may only be spent on items of direct customer benefit

With regard to mutual funds, when does switching occur?

When an agent recommends moving assets from one fund to another to generate commissions

Under the Uniform Securities Act, what is the statute of limitations for civil suits?

Within 3 years from the alleged violation, or 2 years from the discovery of the violation, whichever comes first

Under the Money Laundering Act, what is the timeframe for filing relevant Suspicious Activity Reports?

Within 30 days of initial discovery

Private fund advisers and advisers to hedge funds must register with the SEC if they have assets under management (AUM) in what amount?

$150 million or more

What are the net worth requirements for investment advisers who maintain custody of clients' funds and securities under the USA?

$35,000

Under the Uniform Securities Act, what is the recordkeeping requirement for broker/dealer (BD) vs. investment adviser (IA)?

3 years for BD and 5 years for IA

A foreign company can facilitate the trade of its stock in the U.S. securities market by structuring what?

American Depositary Receipts (ADRs)

What is the maximum civil penalty a court may imposed for insider trading violations?

An amount up to 3 times the profit gained or loss avoided

What is the difference between an offer and a sale?

An offer is an attempt; a sale is a binding contract to transfer securities for value

What are internal procedures that limit and control the passing of sensitive, potentially non-public information between the departments of a corporation or firm to aid in protecting investors against violations of insider trading laws?

Chinese walls

When a broker/dealer is acting in a broker capacity, how is the broker/dealer compensated for transactions?

Commissions (remember ABC - Agent, Broker, Commissions)

What term describes an agreement that gives the Administrator the power to receive and process legal papers on behalf of a registration in noncriminal proceedings?

Consent to Service of Process

Who is not considered a person under the Uniform Securities Act (USA)?

Deceased individuals, individuals who have been declared mentally incompetent, and minors

If not renewed, all registrations expire on what date?

December 31 of the year for which the application for registration is filed and every year thereafter

When must ADV Part 2A brochure be sent to the client?

Either 48 hours prior to signing and advisory contract or concurrently, as long as the client has 5 business days to nullify the contract

What is a security in which the payment of principal, interest, and/or dividends is assured?

Guaranteed security

When does the Administrator have the right to subpoena the records of an agent or broker/dealer?

If there is suspicion that a violation has occurred

Administrators require that investment advisers provide full disclosure to clients at least 48 hours prior to entering into an advisory contract. What is this disclosure document usually called?

Investment Adviser Brochure

What term describes a CPA who also provides investment advice to clients for a fee?

Investment adviser

Which professionals are considered exempt from registration as an Investment Adviser if their investment advice is incidental to their profession?

Lawyers, Accountants, Teachers, and Engineers (LATE)

What is the name for a letter mailed to the State Administrator indicating an issuer's intent to sell federally covered securities in that state?

Notice Filing

When is an investment adviser representative's registration effective?

Only during employment with an adviser

What is the registration method that is usually used for intrastate offering?

Registration by qualification

What term describes a customer's right to be indemnified in a securities transaction?

Right of rescission

What is the name for profits that result from trades of securities held b the insider for less than 6 months?

Short-swing profits

According to the Uniform Securities Act, who is responsible for enforcement of the Act's provisions?

State Securities Administrator

An investment adviser who has at least $110 million of assets under management (AUM) must register with what entity?

The SEC

Under the USA, an Investment Adviser who has less than $100 million of assets under management (AUM) must register with what entity?

The State

An agent is recommending for a client to purchase a stock based on material inside information. This practice is known as what?

This is known as insider trading and it is considered fraudulent

The ideology that an investment adviser should exercise care, caution, and control while managing a client's funds is the basis of what?

Uniform Prudent Investor Act