Unit 1 Series 65 pages 155-180

Dealer

(1 ) An individual or a firm engaged in the business of buying and selling securities for its own account, either directly or through a broker. (2) The role of a firm when it acts as a principal and charges the customer a markup or markdown.

Who are exempt from registration under the Investment Advisers Act of 1940?

1. Intrastate Advisers (advisers who clients are all georgia residents, its only place of business was georgia, and it did not give advice on securities that are listed on national exchanges (nyse)) 2. Advisers to insurance companies 3. Private fund advisers (under dodd-frank, private funds with less than $150 mil in assets, venture funds, and advisers with no place of business in the us & minimal US adviser client assets)

Which of the three examples does not have to register under the Uniform Securities Act? 1. Publisher or a newspaper that renders general financial advice 2. Broker-dealer that charges a fee for providing investment advice over and above commissions from securities transactions 3. Investment advisor that manages $10 million in assets

1. Publisher or a newspaper that renders general financial advice

Who is allowed to register with the SEC as an exception to Dodd-Frank?

1. pension consultants with at least $200 million in AUM 2. mid-size advisers with at least $100 million in AUM 3. investment advisers affiliated with an already SEC registered investment adviser 4. investment advisers who expect to be eligible to register with the SEC within 120 days of ADV filing 5. investment advisers who are required to register in 15 or more states 6. internet advisers

What is a Foreign Investment Adviser?

A foreign investment adviser is any adviser that: - has no place of business in the US - has fewer than 15 clients and investors in the US in private funds advised by the advisers - has less than $25 million aggregate assets from US based clients - does not act as an adviser to any investment company under the 1940 act or advertises in the US as an adviser

Fiduciary

A legally appointed person authorized to hold assets for another person and manages them. (bienville is a fiduciary for its clients assets).

When is a person considered to have "control"?

A person has control when they directly or indirectly has 25% or more voting power (ownership) (UNLESS IT IS UNDER THE EXCHANGE ACT, THEN IT IS 10% OR MORE)

When is a person "in the business of giving investment advice"?

A person is in the business of giving investment advice if he receives separate compensation that represents a charge for giving the advice.

Who is considered a "Supervised Person"?

A supervised person is considered to be any employee of the investment advisor (including clerical workers!) *this definition is different from Associated Persons because it includes clerical workers.

How long does it take after filing the ADV with the state for your registration to take effect? A. 30 days at noon B. 25 days at noon C. 40 days at noon D. 45 days at noon

A. 30 days at noon

Which of the following investment advisers are exempt from registration under the investment advisers act of 1940? i. an adviser whose only clients are insurance companies ii. an adviser who maintains offices in only one state, advises only residents of that state (no private funds), and gives advice relating to only tax-exempt municipal bonds iii. an adviser whose only clients are banks A. i and ii B. i and iii C. ii and iii D. i, ii and iii

A. i and ii (Advisers who only service insurance companies are exempt, as are advisers performing intrastate who do not give advice on listed securities. Advising banks only does not qualify for the exemption(though banks are exempt)) (banks are exempt, but advisers who ADVISE banks are not exempt)

ABC Advisors is a federal covered IA. John Oldman has been responsible for keeping the firm's form ADV updated for the last 40 years. John has suddenly announced his immediate retirement. This would require: A. prompt filing of an amended ADV with the SEC indicating the change in contact person B. prompt filing of an ADV-W with the SEC indicating the change of contact person C. filing of amended ADV within 90 days of the end of the adviser's fiscal year giving notice of the change of contact person D. filing of the ADV-W within 90 days of the end of the adviser's fiscal year giving notice of the change of contact person

A. prompt filing of an amended ADV with the SEC indicating the change in contact person

Investment Advisor

Any person who gets paid to advise others on investing or the value of SECURITIES or, as part of regular business, issues analyses or reports concerning securities.

Who was added into the definition of an investment advisor with the SEC release IA-1092?

Anyone who: 1. provides investment advice, reports, or analyses on securities 2. is in the business of provided advice or analyses 3. receives compensation, directly or indirectly, for these services (financial planners, pension consultants, sport & entertainment reps (ballers), & others who offer investment advice as part of their financial practices) * THEY MUST REGISTER WITH THE SEC

Which of the following is required to register as an investment adviser with the state securities Administrator? A. The author of a book on money and banking that was sold to residents of the state in which it is published. B. An investment advisory firm with $85 million in AUM that opens an office in the state C. A person with no office in the state whose only advisory clients are investment companies and banks in the state. D. A newly formed investment advisory firm with $145 million in AUM that has two offices in the state and serves exclusively individual clients.

B. An investment advisory firm with $85 million in AUM that opens an office in the state

Seven Seas Strategic Advisers maintains a place of business in 11 states and is registered with the SEC. As defined in the Investment Advisers Act of 1940, the office from which control of the activities of SSSA takes place is known as the: A. Office of Supervisory Jurisdiction B. Principal Office and Place of Business C. Home Office D. Executive Office

B. Principal Office and Place of Business!

Registration as an investment adviser is required for any firm in the business of giving advice on the purchase of: A. apartments undergoing a conversion to condos B. convertible bonds C. gold coins D. rare convertible automobiles

B. convertible bonds

Which of the following would be excluded from the definition of an investment advisor under the investment advisers act of 1940? i. a bank offering advice through its trust department ii. a geologist giving advice on the potential prospects of an oil and gas limited partnership program iii. a person whose only clients are individuals and whose only advice deals with securities which are direct obligations of the us government A. i and ii B. i and iii C. ii and iii D. i, ii and iii

B. i and iii There is a clear exclusion in the law for banks (regardless of what they do) and persons whose advice relates only to securities that are direct obligations or guaranteed by the US gov. BUT geologists are not excluded. Only accountants, attorneys, engineers and teachers.

Under which of the following circumstances would the SEC be permitted to cancel or revoke an investment adviser's registration? i. a registered investment adviser with no place of business in the state has fewer than 6 clients ii. the annual updating amendment has not been filed for the current fiscal year, and mail addressed to the investment adviser is returned with a notation "no forwarding address available". iii. an investment adviser doing business in 10 states has been enjoyed by a competent court of jurisdiction in one of those states from engaging in the securities business. iv. a registered investment adviser is insolvent. A. i and ii B. ii and iii C. ii, iii and iv D. i, ii, iii, and iv

B. ii and iii (reasons for cancellation does not include dropping below a minimum number of clients. Insolvency is ONLY cause for cancellation under the USA.

How long does a federally covered investment adviser have to register with the states after is AUM falls below $90 million? A. 120 days B. 25 days C. 180 days D. 90 days

C. 180 days

Which of the following investment advisors would be permitted to use the term "investment counsel"? A. a financial planner offering a wide range of services to his clients, including tax planning, estate planning, and insurance planning, as well as investment advice. B. a professional providing a market timing service with an annual subscription fee of $495 (this service attempts to maximize profits by suggesting entry and exit points for over 100 listed stocks) C. a firm whose exclusive business is placing their client's assets into model portfolios D. all of the above

C. a firm whose exclusive business is placing their client's assets into model portfolios (investment counsel must have the PRINCIPAL BUSINESS giving investment advice and they must provide investment supervisory. financial planners are not principally in the business of giving investment advice)

Which of the following would meet the definition of investment advisers under the uniform securities act? i. a broker-dealer making a separate charge for investment advice ii. the publisher or a weekly magazine, sold on newsstands, that contains at least 5 stock recommendations per issue iii. A civil damages attorney who advertises that she is available to assist clients in suggesting appropriate investments for their successful claims iv. a finance teacher at a local community college who offers weekend seminars on comprehensive financial planning at a very reasonable price A. i only B. i, ii and iii C. i, iii and iv D. i, ii, iii and iv

C. i, iii and iv (comprehensive financial planning always includes securities advice)

How long does it take after filing the ADV with the SEC for your registration to take effect? A. 30 days B. 25 days C. 40 days D. 45 days

D. 45 days

How long does an investment adviser have to register with the SEC once their AUM reaches $110 million? A. 120 days B. 25 days C. 180 days D. 90 days

D. 90 days

The Investment Advisers Act of 1940 excludes certain persons from the definition of an investment adviser if their performance of advisory services is solely incidental to their professions. This exclusion would apply to all of the following EXCEPT: A. an accountant B. an economist C. an electrical engineer D. a college professor teaching a course on economics

D. a college professor teaching a course on economics

The Investment Advisers Act of 1940 would permit an ADV to be filed by a(n) i. corporation ii. partnership iii. sole proprietorship iv. unincorporated association A. i and ii B. i, ii and iii C. ii and iii D. i, ii, iii, and iv

D. i, ii, iii, and iv (everyone one who is an investment adviser has to file a form ADV)

What are Exempt Reporting Advisers (ERA's)?

Exempt Reporting Advisers, ERA's, are exempt from registration from the investment advisers act but still required to complete & e-file reports on certain amended ADV items

True or False: A small investment adviser under Dodd-Frank, with $25 mil or less in AUM, is permitted to register with the SEC if it has to register with 14 or more states.

FALSE. Registration with the SEC for small investment advisers under Dodd-Frank are only permitted for advisers who have to register in 15 or more states.

True or False: Investment Advisers with $100 million AUM are REQUIRED to register with the SEC

FALSE. Although they likely would, they are not required to register until they meet the $110 AUM mark. These IA are known under Dodd-Frank as "large investment advisers"

True or False: Notice Filing is required to all federally covered advisers when doing business in other states

False. Notice filing is not required for federally covered advisers doing deals only with institutions, other IAs, other BDs, etc (no public involved).

Who are federal covered investment advisers?

Federal covered investment advisers include: 1. those required to be registered or registered with the SEC because they meet the minimum threshold AUM. Investment advisers with $110 million AUM or more. 2. Investment advisers advising investment companies registered under the investment company act of 1940, regardless of AUM 3. Those excluded from the definition of an investment adviser by the investment advisers act of 1940 (banks, lawyer accountant teacher engineer, or broker-dealer)

If you want to withdraw registration (if the adviser no longer wishes to engage in the business), what form is required to be filed?

If you would like to withdraw your investment advisor registration, you must file a form ADV-W.(Form ADV Withdraw) Your withdraw becomes effective 60 days after filing with the SEC and 30 days after filing with the state.

What does the NISMIA do?

It eliminates the requirements under state law to register as an investment adviser

Investment Advisers Act of 1940

Legislation saying who must register as an investment advisor (with the SEC or states in which they do business).

A california registered investment adviser with no offices located in any other state has directed investment advice on 5 separate occasions over the past year to individual residents of the state of Nevada. Is this investment advisor required to register in Nevada?

No. They are not required to register in Nevada because they do not have an office in Nevada and has directed business to fewer than 5 individual residents in the time span of 1 year. (in this case just 1 resident received advice). (*if the IA conducted business with 6 or more individuals during a 12 month period, the IA would be required to register in the state of Nevada)

Do successor firms pay ADV filing fees under both the USA and federal law?

No. Successor firms only have to pay ADV filing fees to the SEC (under federal law).

Who are Persons "Associated" with an Investment Advisor?

Persons "Associated" with an Investment Advisor are any: 1. Partner of the investment advisor 2. Officer of the investment advisor 3. Director of the investment advisor (any person performing similar functions) 4. Employees of the investment advisor (excluding clerical workers)

True or False: If you are a federally covered investment adviser, you do not need to register with the state, under the NISMIA, or the SEC, under the Investment Advisers Act of 1940.

TRUE, also - any persons excluded from registration from the 1940 act is also excluded from registration in the state (Under the NISMIA)

True or False: An adviser with discretion over more than 100 accounts using pooled client funds might be considered an investment company, which would require registration under the investment company act of 1940 & the advisers act.

TRUE, based on 3(c)(1)

True or False: An investment adviser with $25 million in AUM, also known as a small investment adviser under Dodd-Frank, who advises solely to Investment Companies, has to register with the SEC

TRUE. Regardless of AUM, investment advisers to investment companies MUST register with the SEC. (if clients are public individuals, registration is prohibited)

What are the 4 parts to the form ADV?

The 4 parts to form ADV are: 1. Part 1A, asking details about the investment advisor (who controls it, who gives advice, its business practices) This includes: - Schedule A - Schedule B - Disclosure Reporting Pages 2. Part 1B, asks state-specific questions (not required for federally registered advisers) 3. Part 2A (requires advisers to create brochures with info about the firm) 4. Part 2B (requires advisers to create brochure supplements with info on certain supervised persons)

SEC Release IA-1092

The SEC Release IA-1092 maintains that any person who is in the business of giving investment advice (written or oral) and issues reports, analyses, and recommendations about specific securities is an investment advisor if they receive compensation for doing so.

Principal office and place of business

The firm's executive office from which the associated persons control and coordinate the activities of the firm.

Who is excluded from the investment advisor act of 1940?

The following are excluded in the definition of an investment advisor: 1. Banks & Bank holding companies 2. Lawyers 3. Accountants 4. Teachers 5. Engineers (as long as they do not have a SEPARATE advisory business) 6. Any broker-dealer who is solely a broker-dealer (cannot offer wrap-fee programs) 7. Publishers & Authors of bona fide publication (general paper like the ny times)

What form is used to register, or amend registration, with the state or SEC?

The form ADV is used. (there is a part 1 & part 2, part 2 is "essay formatted")

What are the 2 primary focuses of the Investment Advisers Act of 1940?

The two primary purposes of this act are to: 1. Regulate persons in the business of giving investment advice. 2. Establish standards of ethical business conduct for the industry.

True or False: If investment advisers of Private Funds manage over a certain amount of money, they have to register with the SEC.

True, once they exceed the $150 million threshold, they have one calendar quarter to register with the SEC.

Can the state administrator exclude other persons from the definition of an investment advisor?

Yes

How/where do you file the ADV?

You file your form ADV through the Investment Adviser Registration Depository, also known as the IARD. This is done all electronically.

Broker

any person engaged in the business of effecting transactions in securities FOR THE ACCOUNTS OF OTHERS

Proliferation

rapid increase in numbers