Fraudulent practices
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, when may an investment adviser borrow money from a client? When the client is a broker/dealer. When the client is a bank or financial institution in the business of loaning money. When the client is an affiliate of the investment adviser. A) I and II. B) II only. C) I, II and III. D) II and III. Your answer, II only., was incorrect. The correct answer was: I, II and III.
CAN BORROW MONEY 3 ways!! client is a broker/dealer bank or other institution in the biz of loaning $$ affiliated person It is unethical to borrow money or securities from a client, unless the client is a broker/dealer, a bank or other financial institution in the business of loaning money, or an affiliated person of the adviser. Owing money or securities to a client is not only unethical, it could also influence advice rendered to a client, creating a potential conflict of interest. Reference: 10.17 in the License Exam Manual.
An investment adviser representative who makes extensive use of third-party research to formulate portfolio recommendations to clients: A) must disclose that fact to the clients. B) must obtain consent of the clients to use third-party research. C) need not disclose that fact to the clients. D) is in violation of his fiduciary responsibility as IARs may only use research provided by the firm. Your answer, must disclose that fact to the clients., was incorrect. The correct answer was: need not disclose that fact to the clients. It is not necessary to disclose what sources an IAR uses as the basis for recommendations. If the third-party research is distributed to clients, proper attribution is required. Reference: 10.17 in the License Exam Manual.
It is not necessary to disclose what sources an IAR uses as the basis for recommendations. If the third-party research is distributed to clients, proper attribution is required. Reference: 10.17 in the License Exam Manual.
An investment adviser representative is required to make disclosure to the client when: the IAR, in preparing a recommendation, uses research provided by a third party with whom the IAR is not affiliated. the IAR recommends a specific insurance policy for the client's overall financial plan, where a commission will be received on that sale. transactions recommended to a specific client are inconsistent with those for other clients with objectives that are identical to that particular client. transactions recommended to the client are inconsistent with those for the IAR's own account. A) I and III. B) I, II and III. C) II and IV. D) II, III and IV. Your answer, I, II and III., was incorrect. The correct answer was: II and IV. An investment adviser must provide full disclosure to his client if there would be even a hint of conflict of interest. This will include the case where a recommended product will generate a commission or other source of income to the adviser, as well as full disclosure, if a recommendation is not consistent with the adviser's own activity in his own account. The adviser can use any source of information to create his own analysis, disclosure of source only being required if the adviser uses the product of a third party as the presentation to the client. It would be unusual that all clients with the same objectives would purchase or have recommended for purchase the same securities. Reference: 10.17 in the License Exam Manual.
Investment adviser representative must disclose if the recommendations are inconsistent with IARs own account An investment adviser must provide full disclosure to his client if there would be even a hint of conflict of interest. This will include the case where a recommended product will generate a commission or other source of income to the adviser, as well as full disclosure, if a recommendation is not consistent with the adviser's own activity in his own account. The adviser can use any source of information to create his own analysis, disclosure of source only being required if the adviser uses the product of a third party as the presentation to the client. It would be unusual that all clients with the same objectives would purchase or have recommended for purchase the same securities. Reference: 10.17 in the License Exam Manual.
There are a number of requirements placed upon investment advisers found in both the Uniform Securities Act and NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers. Which two of the following are included in those requirements? When the adviser acts as an agent or a principal for an advisory client, written consent from the client must be received no later than completion of the transaction. Advisory clients must receive the adviser's brochure within 48 hours after entering into a contractual agreement. Investment advisory contracts must be in writing. The adviser may not provide a report or recommendation to any advisory client prepared by someone other than the adviser without making a disclosure of that fact. A) III and IV B) I and IV C) II and III D) I and II Your answer, II and III, was incorrect. The correct answer was: III and IV The USA requires all initial and renewal investment advisory contracts to be in writing. If a specific securities report or recommendation has been prepared by someone other than the adviser, disclosure must be made to clients. When an adviser acts as an agent or principal in a trade involving an advisory client, it is only oral consent that must be obtained prior to the completion of the transaction. Brochures must be delivered no later than the time of entering into the contract. Reference: 10.17 in the License Exam Manual.
There is conflicting information here. Disclose or not disclose other reports The USA requires all initial and renewal investment advisory contracts to be in writing. If a specific securities report or recommendation has been prepared by someone other than the adviser, disclosure must be made to clients. When an adviser acts as an agent or principal in a trade involving an advisory client, it is only oral consent that must be obtained prior to the completion of the transaction. Brochures must be delivered no later than the time of entering into the contract. Reference: 10.17 in the License Exam Manual.
