Series 66 Investment Adviser act of 1940

A hedge fund wishes to make a seed capital investment in a start-up company under Rule 504 of Regulation D. The maximum permitted investment by the hedge fund is:

$10M -Rule 504 is for small offerings $5M-$10M

Under the Investment Advisers Act of 1940, which of the following are included in the Form ADV Part 1 filed with the SEC?

1. A list of the officers of the advisory firm 2. a list of the shareholders of the advisory firm 3. the states in which the advisory firm is registered

Under so-called "soft dollar" arrangements, investment advisers are permitted to accept all of the following from broker-dealers in return for directing their portfolio trades (and thus paying commissions) to that broker-dealer:

1. A research reports provided by the broker-dealer 2. asset allocation software provided by the BD 3. recommendations of securities made by that BD - The soft dollar arrangements cannot solely benefit the advisor -For example computer equipment would only benefit the advisor therefore would not be allowed

Which statements are TRUE regarding advisory contracts under the Investment Company Act of 1940?

1. Advisory contracts must be in writing 2. advisory contracts must be approved by a majority vote of the outstanding shares 3. advisory contracts can be terminated by a majority vote of the board of directors 4. advisory contracts can be terminated by a majority vote of the outstanding shares

Which of the following are "federal covered" advisers?

1. An investment advisor with $400,000,000 of AUM 2. an investment advisor to an investment company with $400,000,000 of AUM 3. an investment adviser to an investment company with $40,000,000 of AUM -Advisors that manage $100M or more of assets or that render investment advice to investment companies must register

Under the Investment Advisers Act of 1940, the SEC policy regarding emails maintains that:

1. Both business related and personal emails are required to be recorded and maintained 2. records must be retained for 5 years

All of the following are forms of compensation to an investment adviser:

1. Commissions taken on securities transactions for customers 2. sales charges earned on investment company sales to customers 3. asset management fees taken on customer wrap accounts - Bid ask spread on securities transactions is not earned by IA, bid ask are earned by market makers

Under the Securities Exchange Act of 1934, all of the following are defined as "securities information processors" :

1. NYSE TRF 2. NASDAQ TRF 3. OTC markets -MSRB is not a processor, it regulates municipal market participants

Under the Investment Advisers Act of 1940, a person is "in the business" of giving investment advice if he or she is compensated for which of the following?

1. Recommendations of securities 2. analyses of securities 3. reports about specific securities -To be "in the business" of giving investment advice this must be a regular activity of the firm or person; and the advice must be rendered about securities; and that person must be compensated for giving such advice -recommendations -analyses -reports about a specific security or categories

A pension consultant has been hired by an employee benefit fund to render advice for compensation. The adviser is exempt from the registration requirements of the Investment Advisers Act of 1940 if it takes any of the following actions:

1. Retaining an outside counsel to advise the plan on labor law 2. hiring an accounting firm to provide employee benefit consulting services to the plan 3. allocating plan assets to investments in real estate -Under the Investment Advisor Act of 1940, "a person who receives compensation for advising others about securities or the advisability of investing in securities" is an IA -therefor someone who decides the proportion of plan assets to be invested in securities is not exempt from registration

Under the Investment Advisers Act of 1940, which of the following statements are TRUE about the acceptance of prepaid advisory fees by an investment adviser?

1. The fees must be detailed in writing in the advisory contract 2. Prepaid fees in excess of $1,200 require that the advisor's balance sheet be included in the Brochure -Fees can be prepaid over any time period -prepaid fee does not constitutes taking custody of customer funds

Under the requirements of the Investment Advisers Act of 1940, the separate disclosure document that the solicitor must provide to a potential investment advisory client must include all of the following :

1. The nature of the relationship between the solicitor and investment advisor 2. a statement that the solicitor will be compensated by the investment adviser for the referral 3. a copy of the written agreement between the investment adviser and the solicitor -a copy of the written agreement between the investment adviser and the solicitor does NOT need to be included

To determine if a person is "in the business" of giving investment advice under the Investment Advisers Act of 1940, which of the following are considered?

1. that the individual regularly gives advice on securities 3. that the individual receives compensation for giving advice on securities

A customer inherits 3,000,000 shares of ABC stock, a company listed on the NYSE which has 10,000,000 shares outstanding. The customer is not a director or officer of the company. Which of the following statement(s) is/are TRUE?

1. the customer is defined as an insider under the Securities exchange act of 1934 2. the customer is prohibited from selling ABC stock short except for tax deferral purposes (short against the box) 3. if the customer trades ABC stock at a profit after having held the stock for less than 6 months, the gain is forfeited 4. the customer must report trading activity to the SEC

An investment adviser is NOT required to keep a record of each person to whom a communication is sent if the communication is sent to more than how many persons?

10 people

Under the Investment Advisers Act of 1940, after receiving an investment adviser application, the SEC must grant a registration to an investment adviser; or start a proceeding denying registration, within how many days?

45 days

Which of the following individuals will be denied federal registration as an investment adviser?

A person who, 11 years ago, was imprisoned for 18 months for counterfeiting -any person who has a criminal record and who has been imprisoned for 1 year or more will be denied

An investment adviser that is registered with the SEC under the Investment Advisers Act of 1940 moves to a new location. Which statement is TRUE?

An amendment to Form ADV must be filed promptly with the SEC

Which statement is TRUE about the education of investment adviser key employees who establish investment strategy or manage client accounts?

Education and work background are disclosed on form ADV part 2b

ADAP Advisors is a State-registered adviser with 7 IARs. One of the IARs, Mark, leaves the employ of ADAP to join another advisory firm. His accounts are assigned by ADAP to the remaining 6 IARs at ADAP. By taking this action, ADAP:

Is not required to take any further action -The customer's contract is with the advisory firm; not the IAR. The firm can reassign customer accounts to any IAR at the same firm without notifying the customer.

A private fund adviser:

Must file both form PF and form ADV with the SEC -a private fund advisor with at least $150M of AUM is required to register with the SEC

Private Fund Advisers:

Must register with the SEC once assets under management reach $150 million -Regular Investment advisers must register with the SEC as federal covered advisors once assets under management reach $100 million

The President of an investment club makes recommendations of securities to the club's members. The securities to be purchased are chosen by a majority vote of the club's members. The President is not paid for this; but does get to eat free snacks that are bought by the other members at the monthly meetings The President is:

Not defined as investment adviser under IA 1092 -getting a free snack does not meet the meet the compensation test

An investment adviser can hold all of its customer securities in a single brokerage account without identifying the individual customers to the brokerage dealer:

Omnibus account -Investment advisors that take custody will typically open a brokerage account to hold all customer securities positions

Which of the following can accompany the delivery of a prospectus for a new issue offering to a customer?

Only a tombstone for that issue is allowed

Form PF is required to be filed with the SEC by:

Private Fund Advisors -think PF

Under the provisions of the Investment Advisers Act of 1940, if an adviser takes custody of customer funds or securities, account statements MUST be sent to the customer:

Quarterly - when an advisor is in control statements are sent 4x per year

Which of the following is NOT an accredited investor under Regulation D of the Securities Act of 1933?

Registered Investment Advisor

Under the Securities Exchange Act of 1934, the SEC can suspend trading in the securities markets if it gives prior notice to the:

The President -the president appoints the 5 SEC commissioners and the senate approves them

An investment adviser is considered to be "in the business" of rendering investment advice under SEC Release IA-1092 if:

The firm advertises its services - or if giving advice about securities for compensation is a regular business of the firm

Under the Investment Advisers Act of 1940, if an investment adviser wishes to renew an advisory contract which will allow it to start taking prepaid advisory fees of $1,200 or more, 6 months in advance of rendering services, which of the following statements is TRUE?

The investment advisor must file a form adv and balance sheet with the SEC promptly, and must make the revised Brochure available to its customers - the advisor is required to do both file adv 2A which is the brochure to the SEC but also send it to their customers

A company is formed with 120 shareholders and $20,000,000 of capital with the purpose of investing in securities. Which statement is TRUE?

This company must be registered as an investment company -the investment company act of 1940 requires the registration of investment companies that have 100 or more shareholders and that have over $100,000 in initial capital

A registered publicly traded issuer has 10,000,000 shares outstanding. If a wealthy investor buys 6,000,000 shares and intends to exercise control:

a 13d report must be filed with the SEC within 10 days -anyone who accumulates a 5% or greater holding in a publicly traded company must file a form 13d within 10 business days

Which of the following persons is EXCLUDED from registration as an investment adviser under the Investment Advisers Act of 1940?

a person who renders advice on US gov securities -no exclusion is given to advisors who only give advice on muni and foreign securities

An investment adviser makes an offer to send, by mail, a "free" analysis covering his top 50 stock picks in an advertisement. In order for an individual to get the report, the adviser could require that individual to:

telephone the adviser and listen to a brief sales pitch before taking the mailing information -as long as it is actually free and the free offer isn't conditional

Under the Investment Advisers Act of 1940, all of the following are exempt or excluded from registration as investment advisers EXCEPT persons who give advice:

to other investment advisors -to customers within one state, where the investment advisor is a resident of that state is exempt because this is an intrastate advisor and the state would have jurisdiction over this advisor not the SEC

Under SEC rules, an "access person" must report personal securities:

transactions quarterly within 30 days of quarter end and all positions within 45 calendar days of the date of the statement used to prepare the report