Series 66 Chapter 1

Which of the following persons is NOT excluded from the definition of investment adviser if their advice given is incidental to the individual's profession? A) Economist B) Engineer C) Lawyer D) Teacher

A

Who of the following is not exempt from registration as an investment adviser under the Investment Advisers Act of 1940? A) An adviser, with total AUM of $125 million, specializing in stocks listed on the New York Stock Exchange, whose only place of business is in State F and whose only clients are 110 State F resident individuals B) An adviser whose only office is in State G who deals only with State G residents, none of whom is a private fund, and does not deal in securities listed on any national securities exchange C) An adviser to seven private funds with total assets under management in the U.S. of $125 million D) An adviser whose clientele consists solely of insurance companies

A

Under SEC Release 1A-1092, which 3 standards are used to define an investment adviser? Provides advice, reports, or analyses concerning securities Is in the business of providing securities-related advice or analysis Receives compensation Is the principal business activity

1, 2, 3

Under the Investment Advisers Act of 1940, the records that must be maintained by an investment adviser may be kept in which of the following forms? Hard copy Microfilm Computer disk

1, 2, 3

Which of the following factors determine(s) whether a person is considered an investment adviser under the Investment Advisers Act of 1940? The specificity of the advice The business engaged in Whether compensation is received

1, 2, 3

Which of the following would meet the USA's definition of "person"? An individual An unincorporated association A political subdivision

1, 2, 3

Based on the Investment Advisers Act of 1940, which of the following would be excluded from the definition of investment adviser? A lawyer who advertises financial planning services Persons whose advice relates solely to government securities An accountant who receives separate fees for providing investment advice

2 only

According to the Investment Advisers Act of 1940, how can records of the investment adviser's business be stored during the first 2 years? In written form on site On microfilm on site On magnetic tape or computer on site On computer disks at an offsite storage facility that requires 30 days' notice to retrieve

1, 2, 3

An investment adviser must meet the net worth requirements of the Administrator. When doing the computation, which of the following assets would be included? A sofa in the reception area The value of the copyright on an investment manual authored by the investment adviser The reputation of the investment adviser Patents held by the investment adviser on a stock tracking software program

1 For purposes of this Rule, the term "net worth" means an excess of assets over liabilities. But net worth does not include the following as assets: goodwill, franchise rights, patents, copyrights, marketing rights, and all other assets of intangible nature; home, home furnishings, automobile(s), and any other personal items not readily marketable in the case of an individual; advances or loans to stockholders and officers in the case of a corporation; and advances or loans to partners in the case of a partnership. So, what's the deal with the sofa? Because the choice specifically says that it is in the reception area, we must assume that it is not a "home" furnishing, rather one in the office and those are not excluded assets.

A federal covered investment adviser has which of the following obligations regarding the state in which it maintains its principal place of business? It must notify the Administrator of its SEC registration. It must pay state-required filing fees. Its adviser representatives are exempt from state-required exams. It must maintain net worth equal to the higher of federal requirements or those of the state.

1 + 2

An investment adviser registered with the SEC could use the term investment counsel if its principal business consists of rendering investment advice a substantial portion of its business involves investment supervisory services it maintains full investment discretion

1 + 2

To be defined as an investment adviser under the Uniform Securities Act, which of the following must apply? Compensation must be received. Advice is provided regarding securities. Advice must be provided through direct written communication.

1 + 2

Under the Investment Advisers Act of 1940, which of the following is (are) excluded from the definition of investment adviser? The publisher of a financial newsletter on a paid subscription basis, which contains only general securities recommendations Persons whose investment advice relates solely to issues distributed or guaranteed by the U.S. government A lawyer who charges a separate fee for investment advice that is provided as a separate part of the business

1 + 2

Which of the following statements regarding registration of investment advisers is (are) TRUE under the Investment Advisers Act of 1940? If any material information filed in the registration becomes inaccurate, an amendment must be filed promptly. If any nonmaterial information filed on Form ADV changes, an amendment must be filed within 90 days of the end of the fiscal year. Material information requires a prompt amendment, but nonmaterial changes do not require amendment.

1 + 2

A federal covered investment adviser is one who has $110 million or more in assets under management manages an investment company registered under the Investment Company Act of 1940 limits his advice to securities listed on the NYSE is affiliated with a federally chartered bank

1 + 2 Federal registration is generally required of any investment adviser managing at least $110 million in assets. The NSMIA provides that any investment adviser under contract to a registered investment company under the Investment Company Act of 1940 is required to register with the SEC as a federal covered adviser. Providing advice on federal covered securities listed on the NYSE does not make the adviser a federal covered adviser. Determining if one is a federal covered investment adviser is not based on affiliations; it is generally a function of AUM or managing an investment company.

Under both state and federal law, the definition of investment adviser excludes certain publishers. To qualify for that exclusion, the publication must meet which of the following criteria? It must be bona fide, containing disinterested commentary without promotional material. It must be published on a schedule to coincide with market events. It must be of a general and impersonal nature. It must contain enough specific advice to enable the targeted recipient to construct an appropriate portfolio.

1 + 3

Under the Investment Advisers Act of 1940, which of the following criteria are considered in determining whether a person is in the business of rendering investment advice? The person regularly gives advice on securities. The person derives his earnings from executing transactions on recommended securities. The person receives compensation from rendering advice on securities.

1 + 3

Under the NSMIA, the term "federal covered adviser" includes a person registered with the SEC under the Investment Advisers Act of 1940 registered as an investment adviser in two or more states excluded from the definition of investment adviser under the Investment Advisers Act of 1940 required to register with the state Administrator

1 + 3

Under the Uniform Securities Act, requirements for registration as an investment adviser in a state include which of the following? The Administrator may require an announcement of the application for registration in one or more newspapers in the state. Minimum financial requirements for federal covered advisers with a place of business in the state who have custody of customer funds and/or securities, or have discretionary authority over customer accounts. For those needing a surety bond, it must provide that any customer who can prove a violation is entitled to collect against the bond.

1 + 3 A published announcement may be required by the Administrator. The Administrator may not impose any financial requirements upon federal covered advisers (other than to pay a fee when notice filing). The USA has specific wording requiring that customers who can prove they were the subject of a violation by the IA are entitled to collect against the bond.

An investment adviser who has custody of customer funds and securities discovers that her net worth has dropped below the required minimum under the rules of the state Administrator. Under NASAA rules, the adviser must notify the Administrator by close of business after the day of discovery file a report of its financial condition no later than close of business the day after notification include in the report of financial condition a statement as to the number of client accounts cease doing business

1, 2, 3

In defining an investment adviser under SEC Release 1A-1092, which of the following would meet the business standard? A person who advertises himself as an investment adviser A person who provides securities-related advice on a frequent or regular basis A person who receives separate or additional compensation for securities-related advice

1, 2, 3

Kapco Investment Advisers currently has $18 million in assets under management and has offices in Colorado and Utah. Kapco's only clients in Utah are two insurance companies domiciled in that state. Kapco has no office in Washington but does service the accounts of three middle-class individuals. Kapco has recently opened an advisory account for a pension plan for a corporation located in Montana. Under the Uniform Securities Act, Kapco would have to register with the Administrator in the state of Colorado Montana Utah Washington

1 + 3 With less than $100 million in assets under management and no investment company clients, Kapco cannot qualify as a federal covered adviser. Therefore, the firm must register in each state in which it maintains an office, regardless of the nature of its clientele in that state. Registration would not be required in Washington because there is no office and Kapco qualifies for the de minimis exemption. Kapco would not be required to register in Montana because there is no office and its only client is an institution.

Which of the following situations would require registration as an investment adviser? A broker-dealer provided investment research services to a customer and charged a fee for the service. An agent of a broker-dealer recommends the purchase of ABC securities to a customer, who then purchases 100 shares, and the agent earns a commission. A broker-dealer has its agents prepare complete financial plans for customers for a nominal fee. The plans recommend specific securities transactions, and when the customers place orders, the agents earn commissions on those securities transactions. A broker-dealer charges its customers for collecting dividends and maintaining their accounts in addition to commission charges for transactions executed.

1 + 3 Under the Uniform Securities Act, broker-dealers and their agents are not defined as investment advisers if their performance is solely incidental to the conduct of a brokerage business, and no special compensation is received for the advisory services. A broker-dealer charging for research advice is charging for advisory services, which would require registration as an investment adviser. Preparing a complete financial plan for a customer goes beyond being solely incidental to conducting a brokerage business and would require registration as an investment adviser because a fee was charged, even if only a nominal one. Although not asked in this question, those agents would also have to register as IARs. Recommendations of securities purchases are incidental to conducting a brokerage business and would not require registration as an investment adviser if no fees are charged for the advice. Broker-dealers may charge for clerical services provided to customers, but clerical services are not considered investment advisory services.

The Administrator may require which of the following from a federal covered adviser? copy of the IA's Form ADV filing of the IA's advertising in the state a listing of the IA's fee schedule a filing fee

1 + 4 Even though Administrators have limited jurisdiction over federal covered advisers, they can require filing of a copy of the information filed by that IA with the SEC (the Form ADV), as well as a filing fee.

Credible Investment Specialists (CIS) is a state-registered investment adviser with its only offices in State A. In which state(s) would registration be required? State A where the only clients are large pension plans State B where the only clients are banks State C where the only clients are insurance companies State D where there are 6 or fewer retail clients over any 12 month period

1 + 4 For those investment advisers who are not federal covered, registration is always required in any state in which the firm maintains a place of business, regardless of the nature of its clientele. If there is not a place of business in the state, registration is not required when the clientele is limited to institutions, such as banks, insurance companies, and large employee benefit plans (at least $1 million in assets). Once the adviser has more than 5 retail clients in a state over a 12-month period, the de minimis exemption is lost and registration is required.

Under the Investment Advisers Act of 1940, which of the following are exempt from the requirements for registration? Foreign investment advisers with fewer than 15 clients per year who do not hold themselves out as investment advisers to the public and have less than $25 million in AUM in the United States Investment advisers who conduct all of their business in 1 state and who do not provide advice on securities listed on an exchange and have no private funds as clients Investment advisers whose only clients are banks

1, 2 Usually, anyone who meets the federal definition of investment adviser must be registered with the SEC. Some investment advisers are not excluded from the definition but are exempt from the registration requirements of the SEC. One example is an adviser whose clients are all residents of the state in which the adviser maintains its principal office who renders no advice on any exchange-listed security and does not give advice to any private funds. Advisers whose clients are limited to insurance companies are exempt from registration, as are foreign advisers who limit themselves to fewer than 15 clients a year (none of whom can be investment companies), do not advertise or hold themselves out to be investment advisers and have less than $25 million in AUM in the United States. There is no exclusion for advisers whose only clients are banks.

A foreign private adviser is defined in the Dodd-Frank Act as any investment adviser that has no place of business in the United States. has, in total, fewer than 15 clients and investors in the United States in private funds advised by the adviser. has aggregate AUM attributable to clients in the United States and investors in the United States in private funds advised by the adviser of less than $25 million. holds itself out to the public in the United States as an investment adviser or acts as an investment adviser to an investment company registered under the Investment Company Act of 1940.

1, 2, 3

Under SEC Release 1A-1092, which of the following has (have) met the test of providing advice or analysis concerning securities? A stockbroker calls a client and recommends the purchase of a certain stock. A lawyer recommends against purchasing shares of a mutual fund in favor of another investment. A publisher of an investment newsletter provides general information and recommendations concerning specific securities.

1, 2, 3 Any person who gives advice (positive or negative, specific or general) or issues reports or analyses concerning specific securities meets the criterion of providing advice. This does not mean that these examples qualify for the definition of investment adviser. They only qualify for the first criterion. For example, a lawyer may be exempt from the definition if she provides advice incidental to the profession and does not receive compensation, but may still meet the first criterion. Likewise, if the stockbroker's only compensation is commissions from securities transactions, the exclusion is in effect.

Under the Investment Advisers Act of 1940, persons who provide a variety of services, including investment advisory services, are considered to have received compensation for their advice when they receive: any economic benefit a fee paid directly for the investment advice portion of their services a commission on the sale of real estate when the agent advertises that she will give free advice regarding investing the proceeds from the sale of any home she lists

1, 2, 3 The question is not asking "who is an investment adviser?" It is focusing on the compensation prong. Compensation may take the form of, but is not limited to, fees, payments for subscriptions, salaries, or commissions. Compensation does not have to be direct. An example of that holds for the real estate agent—she doesn't give advice unless you list your home with her.

As defined in the Uniform Securities Act, the term person would include a limited partnership a political subdivision an unincorporated association the executor of an estate for a deceased individual

1, 2, 3, 4

The Uniform Securities Act provides an exemption from registration as an investment adviser for which of the following persons who have no place of business in the state? Advisers who deal exclusively with broker-dealers Advisers who deal exclusively with insurance companies Advisers who deal exclusively with registered investment companies Advisers who have no more than 5 clients in that state in a 12-month period

1, 2, 3, 4

Under the Uniform Securities Act, if sent to 2 or more persons, a file must be maintained containing a copy of which of the following? Bulletins Newspaper articles Notices Websites

1, 2, 3, 4

Under the Uniform Securities Act, which of the following is (are) excluded from the definition of an investment adviser when providing investment advice solely incidental to the business? Lawyer Accountant Engineer Teacher

1, 2, 3, 4

Which of the following are required for an initial application for registration as an investment adviser? A consent to service of process A fee Disclosure as to whether the applicant will have discretionary powers over client funds and/or securities Disclosure as to whether the applicant will have custody of client funds or securities

1, 2, 3, 4

Which of the following statements concerning the books and records of a state-registered investment adviser under the Uniform Securities Act is (are) true? Books and records must be maintained in the principal office of the adviser for the first two years. Books and records must be maintained in an easily accessible place for no less than five years from the end of the last fiscal year in which an entry was made. Copies of all investment letters, advertisements, or communications to two or more persons must be preserved for five years from the end of the fiscal year of the publication date. An adviser who ceases business continues to be responsible for the maintenance and preservation of certain records, such as corporate charters and minute books, for three years after termination of the enterprise.

1, 2, 3, 4

Under the USA, the definition of person includes which of the following? An unincorporated investment club An individual who buys and sells securities only for his own account Associations and partnerships whether or not they issue certificates The U.S. government

1, 2, 3, 4 An unincorporated investment club, an individual who buys and sells securities for his own account, associations, and partnerships (whether or not they issue certificates), and the U.S. government are specifically listed as persons in the act. On the exam, minor children, deceased individuals, and mentally incompetent individuals are the only choices that are not persons under the act.

Which of the following are not investment advisers under the Uniform Securities Act? Joe advises customers regarding the value of gold and silver coins. The trust department of ABC Bank provides investment advice to its clients. Tammy writes a newspaper column in which she analyzes and recommends securities. Jack is an investment adviser representative.

1, 2, 3, 4 Joe's advice does not concern securities. Banks are excluded from the definition of investment adviser. Tammy's advice is neither specific nor based on the situation of each client (impersonal advice). An investment adviser representative (IAR) is specifically excluded from the definition of an investment adviser.

Sam wants to start his own registered investment adviser firm, independent of the brokerage firm where he is registered as an agent. He plans to provide financial planning services, which will include investment advice as an integral part of his business. Sam must file with either the state securities Administrator or with the Securities Exchange Commission as a registered investment adviser by filing the appropriate Form ADV file Form ADV with his current brokerage firm notify his current brokerage firm and receive permission to operate independently from the firm as a registered investment adviser do nothing and begin performing investment advisory services without regard to his current brokerage firm

1, 3

Which of the following statements are TRUE? The Uniform Securities Act is not the actual law of any state or territory of the United States. The National Securities Markets Improvement Act of 1996 requires states and the federal government to have identical registration requirements. The state securities Administrator has responsibility for the enforcement and administration of a state's securities law.

1, 3

A federal covered investment adviser registered with the SEC that has offices in 5 states must do which of the following? Pay state filing fees if required by the Administrator Notify the Administrator within 1 business day if net worth falls below the required minimum Notice file in any of those states where required by the Administrator Become licensed as a broker-dealer

1, 3 Although exempt from state registration, federal registered investment advisers must notice file and pay state filing fees (if required by the Administrator) to practice within a given state. Federal covered advisers do not come under the financial or recordkeeping requirements of the state, only the SEC.

Under the Uniform Securities Act, an investment adviser is exempt from registration if the person has no place of business in a state and does not direct communication to more than 5 noninstitutional clients to more than 15 noninstitutional clients within 9 consecutive months within 12 consecutive months

1, 4

Under the Uniform Securities Act, which of the following are elements in the definition of an investment adviser? Advice as to investments must be in writing, not given orally. Advice must relate to the value of securities or recommendations to purchase or sell securities. There must be compensation for services rendered.

2 + 3

Which of the following statements is (are) TRUE regarding the registration of investment advisers? If they are required to be registered with the state, they must also be registered with the SEC. If they are registered with the SEC, state registration is not required. Whether a person is registered with the state or with the SEC depends on the type and scope of the person's advisory business.

2 + 3

Which of the following statements is (are) true? A person with a place of business in the state who transacts business exclusively with banks and savings institutions is not an investment adviser under the Uniform Securities Act. A person excluded from the definition of investment adviser under the Investment Advisers Act of 1940 who offers investment advice to individual investors residing in this state, and has less than $25 million in assets under management, is subject to the jurisdiction of the state Administrator. A person included in the definition of an investment adviser under the Investment Advisers Act of 1940, who manages funds on a regular basis as a business headquartered in a state, is subject to payment of filing fees required by the state Administrator. Broker-dealers who supply incidental investment advice and make securities recommendations to customers who pay commissions for the execution of their trades are not investment advisers subject to state or federal registration.

2 + 3 A person who conducts business exclusively with banks and savings institutions is an investment adviser under the USA if he has a place of business in the state. Had the person no place of business in the state and conducted business exclusively with banks and savings institutions, he would not be considered a broker-dealer subject to the regulatory control of the state Administrator. Under the NSMIA, any person excluded from the definition of investment adviser under the Investment Advisers Act of 1940 is considered a federal covered adviser. Therefore, regardless of the amount of money under management, the state has no jurisdiction. A federal covered adviser may be subject to payment of state filing fees. Broker-dealers who supply investment advice incidental to their business and receive no special compensation for it are not investment advisers.

The Investment Advisers Act of 1940 excludes from the definition of "investment adviser" persons whose advice relates solely to municipal issues relates solely to issues issued by or guaranteed by the U.S. Treasury is solely incidental to their professional practice as an aeronautical engineer is limited to fewer than 15 clients in any 12-month period, none of whom is a registered investment company

2 + 3 Among the exclusions from the definition of "investment adviser" under both state and federal regulations is the case where certain professionals, including engineers, render the advice in a manner solely incidental to the practice of their professions. Unique to the federal law is the exclusion granted to those persons whose advice deals exclusively with federal government-issued or guaranteed issues. Advice to fewer than 15 clients qualifies one for an exemption (not an exclusion from the definition) from registration, but only in the case of a foreign adviser with less than $25 million in AUM in the United States.

As defined in the Uniform Securities Act, an investment adviser is all of the following EXCEPT a broker-dealer who charges for investment advice a publisher of a financial newspaper a person who sells security analysis a CPA who, as an incidental part of his practice, suggests certain tax-sheltered investments to his affluent clients

2 + 4

Fast Execution Services (FES), a registered broker-dealer, provides investment advice as an incidental part of its commission business. Madeleine, an agent registered with FES, charges for investment advice as a freelance investment adviser outside the scope of her employment at the firm. Which of the following statements are true? FES must register as an investment adviser. Madeleine must register as an investment adviser. Madeleine need not register as an investment adviser. FES need not register as an investment adviser.

2 + 4

Under the Uniform Securities Act, which of the following are NOT considered investment advisers or investment adviser representatives in this state? An individual who sells advisory services in several states, including this one, for AAA Advisers, Inc. United Trust Company of America An agent for a broker-dealer advising customers for a fixed separate fee stated as a percentage of the customer's assets under management An investment adviser with no office in the state that does business exclusively with other investment advisers located in the state

2 + 4 An agent for a broker-dealer advising customers for a fixed fee, stated as a percentage of the customer's assets under management, is acting as an investment adviser representative. An individual who sells advisory services for AAA Advisers, Inc., is an investment adviser representative. A trust company is not an investment adviser under the USA. An investment adviser with no office in the state and does business exclusively with other investment advisers located in that state is also excluded as an investment adviser under the USA.

Which of the following is (are) required to register with a state Administrator? An adviser who only provides impersonal investment advice through newspaper columns, magazine articles, or financial publication of general and regular circulation Investment adviser representatives of federal registered advisers who have natural person clients and have a place of business in the state An investment adviser who has no place of business in the state and has 5 advisory clients in the state A person who is an officer of a federal registered investment adviser who has no natural person clients

2 only Under federal law, publishers of bona fide newspapers, magazines, and financial publications of general and regular circulation are excluded from the definition of an investment adviser. Under state law, the publication of investment advice that is not based on the specific investment situation of each client excludes the publisher from the definition of an investment adviser. Based on these definitions, the publisher of an investment advisory newsletter providing only impersonal investment advice available only on a subscription basis is not required to register under federal or state law. The investment adviser representatives of a federal registered adviser are required to register in each state in which they have a place of business. The Uniform Securities Act provides a de minimis standard exemption from state registration for advisers who have no place of business in a state and have fewer than six clients resident in the state. A person employed by and supervised by a federal registered investment adviser who is not an investment adviser representative with natural person clients (as defined by federal law) is not required to register with state Administrators.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which of the following is (are) required to register as investment adviser in a particular state? An adviser who manages client accounts in excess of $100 million in value An adviser who manages client accounts with less than $100 million in value An adviser to investment companies registered under the Investment Company Act of 1940 An adviser who acts as pension consultant to employee benefit plans with assets of $200 million or more

2 only Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, only advisers who manage client assets that total less than $100 million are required to register with the state Administrators. Those who manage client assets of at least $110 million or advise registered investment companies are required to register with the SEC and are exempted from state registration. The pension consultant in this question would not be required to register with the state because those who act as pension consultants and have at least $200 million in assets under management have the option to register with the SEC. There is a corridor between $100 and $110 million in which the adviser also has a choice of state or federal registration.

Under the National Securities Markets Improvement Act of 1996 (NSMIA), states are prevented from registering securities establishing capital and custody requirements that exceed those provided for in the Securities Exchange Act of 1934 establishing recordkeeping requirements for broker-dealers or investment advisers that exceed those required under federal securities law registering investment advisers

2, 3

In October 1987, the SEC promulgated Release IA-1092, which had the effect of broadening the definition of investment adviser. As a result of the Release, which of the following would be included in the definition? Commercial banks offering comprehensive financial planning for their high-net-worth clients Entertainment agents earning a fee for negotiating contracts for their clients and then placing a portion of the client's royalties into investment-grade bonds or large-cap stocks as market conditions dictate Persons who receive a nominal fee for assisting employee benefit plan administrators select investment managers for the plan's assets Lawyers who prepare trust agreements for clients with large securities holding with a goal of minimizing estate taxes A)

2, 3 Once the entertainment agent makes investment decisions for a client who is paying fees for overall services rendered, that agent now comes under the IA-1092 definition of investment adviser. Similarly, any person who is compensated for giving investment-related advice to employee benefit plans is considered a pension consultant and is required to register under IA-1092. Banks are never IAs, and the lawyer is merely doing legal and tax work.

Under the Uniform Securities Act, persons providing investment advice do not have to register as investment advisers if they have no place of business in the state and they limit their clientele to individuals who meet the accredited investor standards deal only with institutional investors have 5 or fewer noninstitutional clients in the state during any 12-month period deal only with other registered investment advisers

2, 3, 4

Under the Uniform Securities Act, the term person would include a minor who has a valid U.S. passport a political subdivision an unincorporated association an inter vivos trust

2, 3, 4

According to the Investment Advisers Act of 1940, which of the following statements regarding Part 2 of Form ADV are TRUE? It must be filed with the state Administrator. A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, 6 or more months in advance. Certain minimum business and education qualifications must be met before an investment adviser can file. It may be used to satisfy the brochure requirements of the act.

2, 4

Under IA-1092, an investment adviser makes advice his principal activity makes advice his regular activity is compensated directly for advice is compensated directly or indirectly for advice

2, 4

Which of the following statements are TRUE? A federal covered adviser sells federal covered securities only. Federal covered advisers are advisers with federally imposed exemptions from state registration as investment advisers. A federal covered security is exempt from registration with the SEC. Federal covered securities include those issued by investment companies registered under the Investment Company Act of 1940.

2, 4

A broker-dealer with an office in this state would be defined as an investment adviser if it charges: commissions for selling securities commissions for selling securities while offering investment advice incidental to the sale of the securities a fee for selling investment research and additional fees in the form of commissions for the sale of securities fees for investment research sold exclusively to institutions located in this state

3 + 4

The Investment Advisers Act of 1940 contains the basic definition of persons who are investment advisers. Which of the following persons would be included in the listing of those who must register? A person who gives advice to investors on collectibles that are most likely to appreciate in value in the next 10 years A chemical engineer who gave advice on new product ideas that was solely incidental to the practice of the profession and for which no compensation was received A person, while receiving compensation, described the advantages of certain types of managed investments, such as mutual funds and REITs, but did not recommend a specific investment A fee-based financial planner who, on the basis of current economic forecasts, had many of his clients liquidate their investment-grade bonds and purchase gold coins with the proceeds

3 + 4

An investment adviser with $20 million under management exercises investment discretion over client portfolios. If the firm's accounting manager were to discover that the firm's net worth was only $8,500, the USA would require the firm to cancel all discretionary powers immediately raise an additional $1,500 send notice to the Administrator before the close of business on the day following discovery send a financial report to the Administrator before the close of business on the day following the sending of notice

3 + 4 State-registered investment advisers maintaining discretion over client accounts must maintain a minimum net worth of $10,000. Any advisory firm whose net worth falls below required minimums is required to send notice to the Administrator no later than the close of business on the day following discovery. This notice must be followed up no later than the next business day with a complete financial report to the Administrator.

Both the Investment Advisers Act of 1940 and SEC Release IA-1092 specifically exclude from the definition of "investment adviser" certain persons who provide investment advice solely incidental to the practice of their profession. Which of the following would NOT by definition qualify for this exclusion? An accountant who provides high-tax-bracket clients with a useful chart showing them how to compute the tax-equivalent yield for municipal bonds A divorce attorney who, after obtaining settlements for clients, provides them with a list of suggested investment alternatives encouraging them to be prudent with their newfound wealth A university professor who provides investment advice for a substantial fee to fewer than 15 clients during any consecutive 12-month period, none of whom is an investment company An economist who consults with very large corporate employee benefit plans on how to best invest their funds

3, 4

According to the Investment Advisers Act of 1940, for how many years must books and records be maintained for an account after the end of the year in which the last transaction occurred? A) 1 year B) 2 years C) 10 years D) 5 years

5

A broker-dealer is NOT considered an investment adviser if A) the investment advisory services are incidental to the broker-dealer's business and no special compensation is received B) the firm's investment advice is limited to 10 or fewer people C) the firm is registered under the Investment Advisers Act of 1940 D) the firm has less than 15 advisory accounts totaling less than $1 million

A

A federal covered investment adviser is a person A) registered, or excluded from the definition, under the Investment Advisers Act of 1940 B) registered under the Uniform Securities Act C) exempt from regulation under the Securities Exchange Act of 1934 D) registered with North American Securities Administrators Association (NASAA)

A

Alpha-Beta Advisers (ABA) has its principal office in State X. ABA limits its clientele to insurance companies that are authorized to do business in State X. Which of the following best describes the registration requirements for ABA? A) State X only B) Neither the SEC nor State X C) Both the SEC and State X D) SEC only

A

An investment adviser is eligible to register with the SEC if it A) anticipates acquiring at least $100 million in assets under management within the next 120 days B) would be required to register in at least 10 different states C) has more than 100 investment adviser representatives D) has rendered advice to more than 15 clients during the most recent 12-month period

A

Out-of-state investment advisers with no office in this state are not required to be registered if only advising A) insurance companies B) on stocks listed on the NYSE C) on growth issues D) on preferred stock

A

The SEC requires investment advisers registered under the Investment Advisers Act of 1940 to maintain certain books and records for a minimum of A) 5 years B) 1 year C) 6 years D) 3 years

A

The final responsibility for ensuring that investment adviser representatives are adequately supervised is that of A) the chief compliance officer. B) each investment adviser representative's immediate supervisor. C) the Administrator. D) the managing principal.

A

The primary responsibility for supervising the activities of an investment adviser representative who is affiliated with a federal covered investment adviser lies with A) the investment adviser the IAR represents B) the Administrator C) the investment adviser representative D) the SEC

A

Under certain conditions, the Uniform Securities Act provides that an Administrator may require a minimum net worth standard be met by an investment adviser. Which of the following would be an allowable asset in the computation of an investment adviser's net worth? A) Accounts receivable B) Copyrights C) Accounts payable D) Advances or loans to partners in the case of an IA organized as a partnership

A

Under the SEC Release IA-1092, who of the following would be considered to be in the business of rendering investment advice? A) A financial planner who charges no fee for developing a financial plan, but takes commissions on recommended trades B) An individual who provides investment advice to family members, but receives no compensation C) An accountant who provides investment advice to clients as an incidental part of the business D) An agent who receives no separate compensation for investment advice but who takes commissions on recommended trades

A

Under the Uniform Securities Act, a state-registered investment adviser whose only office was in State N would NOT have to register in State O if its only clients were A) trust companies B) individual accredited investors C) 6 or fewer retail clients D) complex trusts

A

Under the Uniform Securities Act, investment advisers are exempt from registration in a state where they have no office if they direct business communications with no more than 5 retail clients within A) 12 months B) 6 months C) 2 years D) 30 days

A

Under the Uniform Securities Act, which of the following must register with the state securities Administrator? A) Investment advisers with a place of business in the state and less than $100 million in assets under management B) Investment advisers who have $100 million or more under management C) Investment advisers to an investment company registered under the Investment Company Act of 1940 D) Investment advisers without an office in the state whose clients are exclusively insurance companies

A

Under the Uniform Securities Act, which of the following statements is TRUE about an investment adviser who does not have an office in a state and solicits no more than 5 clients in that state? A) He is not required to register as an investment adviser in that state. B) He must file a consent to service of process. C) He is exempt from the advertising requirements in the state. D) He is not liable for violations of the antifraud provisions.

A

What is the official designation of the person or agency that enforces the USA in each state? A) Administrator B) Transfer agent C) Registrar D) Issuer

A

Which of the following firms would be a federal covered adviser? A) ABC Money Managers, a partnership with $112 million under management B) DEF Fund Managers, a corporation managing an unregistered hedge fund with $20 million in assets C) GHI Consultants, a sole proprietorship managing $15 million belonging to high-net-worth individuals D) XYZ Broker-Dealer with custody over $50 million of clients' invested assets

A

Which of the following is NOT a person as defined by the Uniform Securities Act? A) A child prodigy for whom his mother, as custodian, opened an account at a major securities firm. B) Guelph, a small city outside of Toronto, Ontario, that maintains an investment account at a brokerage house to invest surplus funds. C) XYZ Dry Cleaners, Inc., whose shareholders all work on the premises and also offer financial advice to customers who request it. D) A small unincorporated investment club.

A

Which of the following persons does NOT meet the definition of providing investment advice as a business outlined in SEC Release IA-1092? A) A management consultant whose only investment advice is suggesting to a couple of small business clients who had invested their surpluses in speculative securities that they should find something less risky B) Accountant who charges clients an additional fee for providing investment advice C) Attorney who advertises the availability of investment advice D) A financial planner who provides specific investment advice as part of his fee- based services and also makes specific securities recommendations to his clients in his capacity as an agent for a broker-dealer

A

Under the terms of the Uniform Securities Act, which of the following is an investment adviser for purposes of state regulatory jurisdiction? A) An investment advisory subsidiary of a bank holding company located in the state that manages $20 million in assets B) An accountant located in the state who offers general securities advice as an incidental part of his business C) A commercial bank with a place of business in the state that advises clients on banking matters D) A federal covered adviser with clients in the state

A A bank holding company's investment advisory subsidiary that manages $20 million in assets is an investment adviser subject to the Uniform Securities Act (USA). Under the language of the USA, a commercial bank is excluded from the definition of investment adviser whereas a bank holding company subsidiary is not. While a federal covered adviser is an investment adviser in practice (that is, it performs the functions of an adviser), it is excluded from the definition of an investment adviser under the USA to avoid duplicate regulation. An accountant located in the state that offers general securities advice as an incidental part of his business is not an investment adviser.

A state-registered investment adviser maintains custody of client funds and securities. On Thursday, the chief financial officer of the firm informs the chief compliance officer that their net worth is $31,578. Under the provisions of the Uniform Securities Act, the firm would A) send a detailed financial report to the Administrator by the close of business Monday B) do nothing, as their net worth is far in excess of the minimum requirement of $10,000 C) send a detailed financial report to the Administrator by the close of business Friday D) need to increase the amount of their surety bond

A A state-registered investment adviser who maintains custody of client assets must maintain net worth of at least $35,000 or a bond of the same amount (not both). If the net worth should fall below the minimum, by the close of the next business day after discovery (Friday in our example), notice of the deficiency must be sent to the Administrator of the state in which the principal office of the adviser is located. Then, by the close of business the day after that (Monday in our example), a detailed financial report, including the number of clients served by the adviser, must be sent to the Administrator. The firm would need to increase their net worth, not the bond.

Under all of the following circumstances, the USA requires investment advisers with no place of business in the state to register EXCEPT A) when an adviser only provides advice to registered investment companies B) when an adviser with numerous clients in the state has not been subject to disciplinary action within any state within the last 10 years C) when an adviser has maintained assets of $100 million or more for 7 out of the last 10 years D) when an adviser only provides investment advice to 401(k) plans with assets of $250,000 or more

A An adviser that only provides investment advice to investment companies registered under the Investment Company Act of 1940 is federal covered and does not have to register in a state, regardless of whether or not it has a place of business there. An adviser that provides advice only to 401(k) plans or other tax qualified employee benefit plans with $1 million in assets (not $250,000) is not required to register in a state in which it does not have a place of business. The assets of the adviser is not what determines becoming a federal covered adviser; it is assets under management and the determining factor is the AUM now, not the range over the previous 10 years.

Which of the following is required to register as an investment adviser with the state securities Administrator? A) An investment advisory firm that opens an office in the state with less than $100 million in assets under management B) The author of a book on money and banking that was sold to residents of the state in which it is published C) A newly formed investment advisory firm with $145 million in assets under management D) A person with no office in the state whose only advisory clients are investment companies and banks in the state

A An investment adviser must register in a state if it manages less than $100 million in assets. Publishers of general circulation books are exempt from state registration, as are advisers with no offices in the state whose only customers are institutions, such as banks and investment companies, in the state. Investment advisers with $110 million or more in assets under management must register with the SEC, not the state Administrator.

To register a sole proprietorship as an investment adviser in a state, the application for initial registration (Form ADV) must be filed with the appropriate party. This application must include all of the following except A) a copy of the articles of incorporation for the business. B) the appropriate fees. C) a consent to service of process. D) any information to be furnished or disseminated to any client or prospective client.

A Articles of incorporation only apply to corporations. Sole proprietorships are not incorporated. To register as an investment adviser in a state, Form ADV is filed with the Administrator or with a central registration depository designated by the Administrator. The application must include, among other things, a consent to service of process, appropriate fees, and the brochure or any other information that will be used to solicit clients.

Which of the following does NOT meet the compensation test for defining investment advisers under SEC Release 1A-1092? A) Your next-door neighbor recommends the purchase of a certain security from his broker, which you eventually do B) A real estate agent advertises that she will give free advice regarding investing the proceeds from the sale of any home she lists C) Subscription payments received by a publisher of a newsletter providing impersonal securities-related advice D) An insurance agent sells a life insurance policy and receives a commission on that policy. During the sale of the insurance policy, the agent provides some securities investment advice

A Compensation may take the form of, but is not limited to, fees, payments for subscriptions, salaries, or commissions. Compensation does not have to be direct. The commission on the insurance policy is considered indirect compensation covering the investment advice given by the insurance agent. The same logic holds for the real estate agent—she doesn't give advice unless you list your home with her. Nothing in the neighbor's advice involves compensation.

Under current regulations, registration with the SEC is optional for all of the following investment advisers EXCEPT A) CEF Investment Managers, LTD., a partnership managing a small registered closed-end investment company traded on the OTC Bulletin Board B) Employee Benefit Specialists, Inc., a pension consultant with $225 million in AUM C) Grand Visions Advisers, a sole proprietorship with $104 million in AUM D) Midwestern Asset Managers, LLC, with $53 million in AUM, required to register in 17 states

A Currently, registration with the SEC is mandatory (not optional) for any investment adviser managing a registered investment company (open or closed-end). It is optional for: pension consultants once their AUM reach $200 million; small and mid-size advisers who would be required to register in 15 or more states; and those advisers with at least $100 million in AUM, but not $110 million in AUM. Any of these choosing to register with the SEC are federal covered advisers and do not register with any state, although a notice filing may be required.

An investment adviser sends a notice offering a research report she has recently prepared to a group of 25 new members of the local Lions Club. Under the NASAA Model Rule on recordkeeping for investment advisers, the firm must keep a copy of the notice along with A) a memorandum describing the list and its source B) a copy of the full roster of the local chapter C) the names of those members to whom the report was sent D) the date the Administrator approved the research report

A If an investment adviser sends any notice, circular, or other advertisement offering any report, analysis, publication, or other investment advisory service to more than 10 persons, the investment adviser shall not be required to keep a record of the names and addresses of the persons to whom it was sent, except if the notice, circular, or advertisement is distributed to persons named on any list, then the investment adviser shall retain with the copy of the notice, circular, or advertisement a memorandum describing the list and its source.

In which of the following cases is the exemption from registration with the SEC not based on the value of assets under management? A) An investment adviser that acts as an adviser solely to one or more venture capital funds B) An investment adviser that acts as an adviser solely to one or more national banks C) An investment adviser with assets under management of less than $25 million D) An investment adviser that acts as an adviser solely to private funds and has assets under management in the United States of less than $150 million

A It is only in the case of the adviser to venture capital funds where there is no dollar limitation on AUM. Private fund advisers with AUM of $150 million or more must register, and "small" investment advisers, those with less than $25 million in AUM, are generally prohibited from SEC registration. If the investment adviser's only clients are insurance companies, the adviser is exempt from SEC registration even if the firm has billions in AUM, but that exemption does not apply when the only clients are banks.

Under the Uniform Securities Act, all of the following persons with no place of business in the state are exempt from registration as an investment advisers EXCEPT A) advisers who have conducted business with no more than 6 individual clients in the state within the last 12 months B) advisers who deal exclusively with federal covered investment advisers located in the state C) advisers who deal exclusively with savings banks located in the state D) advisers who deal exclusively with investment companies registered under the Investment Company Act of 1940

A The de minimis rule for a registered investment adviser who has no place of business in the state is fewer than 6 clients. Doing business with 6 clients within the last 12 months exceeds this de minimis amount, and therefore, the exemption from registration does not exist. All others listed as possible answers are institutional or professional types of investment client. If a registered investment adviser works only with this type of client, an exemption from registration in that state exists as long as the registered investment adviser has no place of business in that state.

Which of the following parties is most likely to be considered an investment adviser under the Investment Advisers Act of 1940? A) A CPA who manages investment accounts for 50 clients and charges hourly fees for the service B) The trust department of Citibank, which handles billions of dollars in trust assets C) Dow Jones, Inc., publisher of The Wall Street Journal D) An expert in fixed-income securities whose only clients are individuals and whose only recommendations deal with securities issued or guaranteed by the U.S. Treasury

A The Investment Advisers Act of 1940 excludes accountants providing investment advice from the definition of investment adviser only when the advice is given on an incidental basis and with no specific compensation. A publisher of periodicals of general circulation, whether or not the publication covers financial matters, is excluded from the definition, as is an adviser whose advice is exclusively limited to U.S. government securities. Banks are also excluded from the definition of investment adviser under the act.

Under the Investment Advisers Act of 1940, which of the following are excluded from the definition of an investment adviser? A) Banks and trust companies B) Insurance companies C) Accountants who advise on securities (only) for a fee D) Attorneys who advise on securities (only) for a fee

A The act excludes the following from the definition: banks or trust companies; publishers of bona fide publications of general circulation (newspapers and magazines); persons advising about certain securities (U.S. government or agency issues); broker-dealers not receiving special compensation for giving advice; and persons whose advice is incidental to their profession, such as lawyers, accountants, engineers, and teachers

If a federal covered adviser's fiscal year ends on November 30, 2017, it must file its annual updating amendment to its Form ADV no later than A) February 28, 2018 B) December 31, 2017 C) January 18, 2018 D) March 30, 2018

A The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal-year end.

If a federal covered adviser's fiscal year ends on October 31, 2017, it must file its annual updating amendment to its Form ADV no later than A) January 29, 2018 B) February 28, 2018 C) December 31, 2017 D) March 30, 2018

A The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal-year end.

The sole proprietor of an insurance business that exclusively provides advice on fixed-income annuity contracts A) need not register under any securities laws B) must register as an investment adviser representative under the USA C) must register as a broker-dealer with the SEC D) must register as an investment adviser under the Investment Advisers Act of 1940

A The sole proprietor of an insurance business need not register under the Uniform Securities Act or Investment Advisers Act. He provides advice on fixed-income annuities only, which are insurance products, not securities. Regulations under the USA, as well as federal securities laws, only apply to securities.

Judy is in the business of giving general investment advice, suggesting appropriate asset allocation percentages, but not recommending specific securities. George's business model is giving investment advice and recommending specific securities. Assuming that both receive compensation, who must register as an investment adviser under the Uniform Securities Act? A) Both B) Only George C) Neither D) Only Judy

A Two of the 3 critical elements in the definition of investment adviser are whether the person provides advice regarding securities and receives compensation for doing so. (The third element is "being in the business" and the question states that both are). Even without recommending specific securities, the fact that Judy suggests asset allocation percentages constitutes investment advice. Both Judy and George provide advice regarding securities for compensation and must register, unless specific exemptions apply.

Under both state and federal law, the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser is properly referred to as A) the home office B) the principal office and place of business C) the office of supervisory jurisdiction (OSJ) D) the registered office

B

A federal covered registered investment adviser who receives compensation for advice and whose business is primarily as an investment adviser may describe its business as investment counsel if A) it maintains custody of customer funds and/or securities B) a substantial part of his business is providing investment supervisory services C) it maintains its registration by filing an updating amendment to its Form ADV annually D) it receives SEC approval to use the definition

B

A state-registered investment adviser suddenly incurs a liability that materially affects its net worth, causing it to drop below the required minimum. Which of the following statements is TRUE? A) The investment adviser must notify the Administrator promptly. B) The​ ​investment adviser must notify the Administrator​ by the close of business on the following business day​. C) The ​investment adviser ​must increase its surety bond to make up the deficiency. D) The ​investment adviser is not required to file​ ​an amendment to its registration with the Administrator.

B

A state-registered investment adviser with discretionary authority over client accounts discovered on Monday, that the firm's net worth is below the required amount. He must notify the administrator and then file a report no later than the A) close of business Monday, close of business Friday B) close of business Tuesday, close of business Wednesday C) close of business Tuesday, close of business Friday D) close of business Monday, close of business Wednesday

B

ABC Advisers changes its name to XYZ Advisers and also changes its location. Under the Investment Advisers Act of 1940, it must A) notify FINRA within seven days B) amend Form ADV promptly C) notify the Administrator D) amend Form ADV in advance

B

An investment adviser has its home office in Wisconsin. Its only business is with trust companies, large employee benefit plans, and insurance companies. It has no place of business in Colorado but provides investment advice to two Denver banks, both chartered under Colorado banking laws. There is a new Administrator in Colorado, and it is his opinion that this IA should be required to register in his state. A careful reading of Section 201 of the Uniform Securities Act would indicate that A) the Administrator is correct and the firm must register B) the firm does not have to register because it has no place of business in the state and its only clients are registered financial institutions C) as long as the IA does not have an office in Colorado, there are no conditions that would mandate registration there D) this firm would be exempt from registration with the Colorado Administrator because it is doing business in more than one state

B

An investment adviser registered in State A who has no office in State B is exempt from registration in that state if, during any 12-month period, the adviser limits its retail clients in State B to no more than A) 35 B) 5 C) 10 D) 20

B

An investment adviser sends a notice offering a research report she has recently prepared to a group of 25 new members of the local Lions Club. Under the NASAA Model Rule on recordkeeping for investment advisers, the firm must keep a copy of the notice along with A) the date the Administrator approved the research report B) a memorandum describing the list and its source C) a copy of the full roster of the local chapter D) the names of those members to whom the report was sent

B

Under both state and federal law, there are a number of exclusions from the definition of investment adviser. Which of the following would not qualify for an exclusion? A) A CPA who gives high tax bracket clients a chart showing the tax-equivalent yield of municipal bonds B) A publisher of a newsletter that is paid to make reports to be used in the sale of specific securities C) A personal injury attorney who recommends that clients consult with a CFP® for advice on how to deal with the large settlements they receive D) An economist who teaches a course in fundamental analysis at a local community college

B

Certain documents belonging to a federal covered investment adviser must be kept for a period of time after the enterprise closes. Those documents are A) sent to the Administrator for safekeeping B) the responsibility of the investment adviser C) required to be shredded D) sent to the SEC for safekeeping

B

Long-Term Financial Solutions, Inc. (LTFSI), an investment adviser registered in five states, files a Form ADV-W indicating the business is closing. It is being acquired by another federal covered adviser, Gold and Sylver Advisers, LLC. Which of the following statements is correct? A) Gold and Sylver will not have to amend their Form ADV Part 1 until the filing of their annual updating amendment. B) LTFSI is responsible for ensuring that a copy of the LTFSI corporate charter is preserved for at least three years after the acquisition. C) Gold and Sylver must notify all clients of LTFSI that their advisory contracts have been assigned. D) As the successor firm, Gold and Sylver Advisers must keep copies of the LTFSI corporate charter for at least three years after LTFSI's acquisition.

B

MidWest Advisory Services has $175 million in assets under management and has offices in 10 Midwest states. Regarding recordkeeping requirements, MidWest must meet those of A) the state in which its principal office is located B) the SEC C) the state with the most stringent financial requirements D) each state in which it has a place of business

B

On April 15, ABC Advisers, Inc., made application for registration as an investment adviser with State X. Absent a denial or stop order, registration will become effective A) April 30 B) April 15 C) May 15 D) May 1

B

On last year's annual updating amendment filed with the SEC, Alpha Investment Advisers indicated that it had more than $140 million in assets under management. Due to a reduction in the size of the firm, this year's annual updating amendment shows that assets under management have fallen to the $75 million level and are expected to remain there. Which of the following actions are required for Alpha? A) Withdraw from SEC registration within 90 days of the adviser's fiscal year-end B) Withdraw from SEC registration within 180 days of the adviser's fiscal year-end C) Do nothing and continue as a federal covered adviser D) Withdraw from SEC registration immediately

B

Peterson Financial Planning is a small personal financial planning partnership in Missouri that has $10 million in assets under management. As a result of the Dodd-Frank Act, which of the following statements best describes the registration requirement for Peterson Financial Planning? A) Peterson Financial Planning is required to register as an investment adviser with the SEC but has no requirement to register with the Administrator of the Missouri Department of Securities. B) Peterson Financial Planning is required to register as an adviser with the Administrator of the Missouri Department of Securities. C) Peterson is required to register as an adviser with both the SEC and the Administrator of the Missouri Department of Securities. D) Peterson Financial Planning is required to register as an investment adviser with the SEC and to notify the Administrator of the Missouri Department of Securities of its operation.

B

The Investment Advisers Act of 1940 requires every registered investment adviser to have a chief compliance officer (CCO). This individual would be responsible for ensuring compliance with the firm's Code of Ethics by all of these EXCEPT A) investment adviser representatives employed by the firm B) a nonaffiliated broker-dealer through whom the majority of the firms trades are executed C) clerical and ministerial employees of the firm D) investment adviser representatives who are independent contractors

B

The agreement that the Administrator can receive subpoenas on behalf of a registered agent, broker-dealer, or investment adviser involved in any securities sale that violates the Uniform Securities Act is A) the right of rescission B) the consent to service of process C) the right of retribution D) the agreement to actionable offenses

B

The document that gives the Administrator the right to process complaints against a registrant is known as A) an injunction B) a consent to service of process C) a writ of habeas corpus D) a durable power of attorney

B

Under the Investment Advisers Act of 1940, which of the following is TRUE about the use of the term "investment counsel" by investment advisers? A) The use of the term is prohibited under any circumstances. B) Advisers may use the term only if their principal business is acting as an investment adviser and a substantial part of their business consists of providing continuous advice based on a client's individual needs. C) Advisers may use the term without restriction as long as they are registered. D) Advisers may use the term only if they are attorneys.

B

Under the NASAA Model Rule on financial requirements for investment advisers, unless an exception exists, investment advisers who have discretionary powers but NOT custody of customer funds are usually required to have a net worth in the amount of A) $50,000.00 B) $10,000.00 C) $5,000.00 D) $35,000.00

B

Under the Securities Act of 1933, the term "person" would NOT refer to which of the following? A) A nonprofit, charitable corporation B) A deceased individual C) An unincorporated amateur athletic club D) A subdivision of a government

B

Under the Uniform Securities Act, a person who exclusively provides advice on commodities is A) an options representative B) not a registered investment adviser C) a registered insurance agent D) a registered investment adviser representative

B

Under the Uniform Securities Act, a person whose business model is selling reports on a subscription basis concerning specific securities to investors based on their individual objectives will be defined as A) a broker-dealer B) an investment adviser C) a journalist D) an agent

B

Under the Uniform Securities Act, if no denial or proceedings are pending, when does an investment adviser registration become effective? A) When the Administrator so orders, but not to exceed 90 days B) When the Administrator so orders, but not to exceed 30 days C) 60 days after application or an amendment is filed D) No sooner than 15 days

B

Under the Uniform Securities Act, if not denied, an application for registration as investment adviser will generally become effective how soon after filing? A) Immediately B) 30 days C) 15 days D) 10 days

B

Under the Uniform Securities Act, when must a consent to service of process be filed with the Administrator? A) With the original application and renewal B) With the original application only C) When a case is pending D) It need not be filed, unless requested by the Administrator

B

Under the Uniform Securities Act, which of the following is an investment adviser? A) An individual who provides financial advice over the Internet with no recommendations based on specific investment situations of individual clients B) A firm with no office in the state that has provided specific investment advice to 10 noninstitutional clients within the state during the past 12 months C) A broker-dealer who receives no compensation for investment recommendations D) An investment adviser representative

B

Under the Uniform Securities Act, who must register as an investment adviser? A) A bank that provides investment advice B) A registered broker-dealer who receives compensation for providing investment advice C) An accountant who provides advice solely incidental to the business D) A financial planner with no place of business in a state and who advises only trust companies

B

Under which of the following circumstances may attorneys and accountants claim an exclusion from the definition of investment adviser under the Investment Advisers Act of 1940? A) The investment advisory activities have grown to represent 30% of their business. B) The advice is incidental to the practice of their profession. C) They charge a separate fee for the provision of investment advice from that received for their professional services. D) They advertise that they are available to provide investment advice.

B

When, if ever, would a broker-dealer be required to register as an investment adviser? A) Always B) If it charges distinct fees for investment advice or management C) If it is not registered with the SEC D) Never

B

Which of the following investment advisers would be permitted to use the term "investment counsel"? A) A professional providing a market timing service with an annual subscription fee of $995, with this service attempting to maximize profits by suggesting entry and exit points for over 100 listed stocks B) A firm whose exclusive business is placing clients' assets into model portfolios C) A financial planner offering a wide range of services to his clients, including tax planning, estate planning, insurance planning, and investment advice D) An investment adviser who has been admitted to the bar in the state in which the firm's principal office is located

B

Which of the following investment advisers, with no place of business in the state, does not qualify for the de minimis exemption? A) An investment adviser who, during the preceding twelve-month period, has had no more than 5 retail clients. B) An investment adviser who, during the preceding twelve-month period, has had no more than 6 retail clients. C) An investment adviser who, during the preceding twelve-month period, has had fewer than 6 retail clients. D) An investment adviser who, during the preceding twelve-month period, has had 5 or fewer retail clients.

B

Which of the following is specifically excluded from the definition of an investment adviser providing the investment advice is solely incidental to the business in which the person is engaged? A) Pension manager B) Industrial engineer C) Sports representative who advises on securities for a fee D) Movie star's business manager who handles the star's investment portfolio

B

Which of the following statements is CORRECT? A) Both state-registered and federal covered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. B) State-registered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. C) A state-registered investment adviser collecting fees of $500 for 6 months or more in advance, is considered to be receiving a substantial prepayment. D) Federal covered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients.

B

Each of the following statements about postregistration provisions is true EXCEPT A) a registered investment adviser may be required to file advertisements B) the securities Administrator does not have the authority to conduct an onsite examination of an investment adviser registered in his state if the adviser does not have an office in that state C) a correcting amendment to the Form ADV must be filed with the Administrator if any information filed becomes inaccurate or incomplete D) investment advisers must comply with recordkeeping rules

B Administrators have the authority to conduct an onsite examination of a registered investment adviser, even if there is no place of business maintained in the Administrator's state. Under the Act, Administrators may require the filing of advertising used by broker-dealers and investment advisers, who must also comply with certain recordkeeping requirements and file correcting amendments.

Under the Investment Advisers Act of 1940, an adviser is required to be registered with the SEC if A) the adviser's advice relates solely to securities issued or guaranteed by the U.S. government. B) the adviser's clients are investment companies registered under the Investment Company Act of 1940 C) the adviser's clientele is exclusively federal credit unions and the adviser has less than $100 million in assets under management D) the adviser is the publisher of a news magazine of general and regular circulation

B Advisers to registered investment companies are required to be SEC-registered. Under the Advisers Act, as modified by the Dodd-Frank Act, advisers are exempt from SEC registration if they manage less than $100 million in assets and have no investment company clients. Persons are excluded from the Advisers Act definition of investment adviser if they are publishers of news or business/financial publications of general and regular circulation or if their advice relates solely to U.S. government securities.

The Investment Advisers Act of 1940 would consider each of the following investment advisers to be exempt from registration EXCEPT A) an adviser who maintains an office in only one state, advises only residents of that state (none of whom is a private fund), and gives advice relating solely to securities not traded on any national exchange B) an adviser whose only clients are banks C) an adviser whose only clients are venture capital funds D) an adviser whose only clients are insurance companies

B Advising banks only does not qualify one for the exemption. Advisers who only service insurance companies or venture capital funds are exempt, as are advisers performing intrastate who do not give advice to private funds or on listed securities.

Which of the following would meet the USA's definition of federal covered adviser? An investment adviser who A) serves as a consultant to pension funds with assets of $500 million B) is registered under section 203 of the Investment Advisers Act of 1940 C) does business on an interstate basis D) gives advice on federal covered securities

B All investment advisers registered under the Investment Advisers Act of 1940 are federal covered advisers. Doing business in more than one state (interstate) does not necessarily mean that the investment adviser is required to register with the SEC. As long as the AUM is under $100 million, the adviser registers with the appropriate states. Pension consultants are eligible to register with the SEC once their AUM reached $200 million, but it is not mandatory.

Searching Out New Growth (SONG) is a venture capital fund. As such, all of the following statements are true EXCEPT A) SONG only issues securities which are, except in extraordinary circumstances, non-redeemable B) SONG must have less than $150 million in assets in the fund C) SONG is not registered under the Investment Company Act of 1940 D) SONG's investment adviser is exempt from registration

B Although venture capital funds are included in the general definition of private funds, unlike the private equity fund, there is no ceiling on the size of the fund before the adviser loses the exemption. Advisers to VC funds are exempt from registration. The funds themselves do not register with the SEC under the Investment Company Act of 1940 (and don't register with the states as well). These investments do not offer ready liquidity.

Under the Uniform Securities Act, which of the following investment advisers with no place of business in the state must register with the state as an investment adviser? A) An adviser rendering advice solely to broker-dealers B) An adviser rendering advice to no more than 10 individual clients within a 12-month period C) An adviser rendering advice to employee benefit plans with at least $1 million in assets D) An adviser managing more than $110 million in assets

B An investment adviser with no office in the state would be exempt from registration in the state if the adviser renders advice to no more than 5 noninstitutional clients (not 10) in a 12-month period. If an investment adviser has no office in the state, and renders advice solely to broker-dealers, insurance companies, banks, investment companies, governmental agencies, or employee benefit plans with assets of $1 million or more, the adviser is exempt from registration with the state. If the adviser manages assets of $110 million or more, the adviser would be required to register with the SEC, not the state.

Platinum Investment in Growth Group, Inc. (PIGGI) is registered in and has its principal office in State W. PIGGI has near-term plans to open offices in State A and B. In an effort to test the waters, PIGGI mails several hundred flyers to prospects in those 2 states. Under the Uniform Securities Act, A) as a federal covered investment adviser, the flyers would need filing with the SEC B) these flyers could not be mailed until PIGGI was registered in States A and B C) as long as PIGGI did not maintain an office in either of these states, the flyers could be mailed D) these flyers could be mailed, but no accounts can be opened until PIGGI is registered in States A and B

B Any attempt to hold oneself out as offering investment advice as part of a business would require the person to be registered in the state, unless that person qualifies for an exclusion or exemption. Nothing in this question implies that an exclusion or an exemption applies. We know that PIGGI is not a federal covered investment adviser (and therefore does not need to file its flyers with the SEC) because we are told it is registered in State W—federal covered advisers don't register in any state.

A federal covered IA files a petition for bankruptcy. The firm must A) do nothing until the court decides the disposition of the firm's assets B) notify the SEC immediately C) notify the Administrator immediately D) notify all of its clients immediately

B As a federal covered investment adviser, the responsible regulatory body is the SEC.

Which of the following would have to register as an investment adviser under the Uniform Securities Act? A) An economics professor who occasionally gives a lecture to business groups about the stock market B) A retired aeronautical engineer who charges a nominal fee for holding seminars on opportunities in aerospace stocks C) A trust company D) An accountant who advises clients about investments as an incidental part of services

B Excluded from the definition are banks, publishers of general paid circulation publications (newspapers or magazines), investment adviser representatives, and certain professionals (lawyers, accountants, engineers, teachers) if the advice is incidental to their profession and no additional compensation is charged. In the case of the engineer, the advice is not incidental and is being given for compensation.

Which of the following statements regarding the SEC's power to revoke the registration of an investment adviser is TRUE? A) An investment adviser receiving substantial prepayment of fees from 50% of its clients that fails to include a copy of its balance sheet in its brochure delivered to all clients would give the SEC cause for beginning revocation proceedings. B) Failure to adequately supervise a person associated with the adviser could be cause for the SEC to revoke the firm's registration. C) If it is determined that an investment adviser is insolvent, the SEC may revoke the registration. D) Revocation would occur, with appropriate notice, when a firm's annual updating amendment was received by the SEC 120 days after the end of the registrant's fiscal year.

B Failure to supervise, if proven, is one of the most common causes for disciplinary action against a broker-dealer or investment adviser. Insolvency is not a cause for revocation under the Investment Advisers Act of 1940, but it is for a state-registered investment adviser (it's tough to keep these straight; please see Appendix A). A late ADV annual updating amendment might be cause for some action but almost certainly not a revocation; it is not that serious an offense. The balance sheet would only have to be part of the disclosure statement (brochure) given to those from whom substantial prepayment of fees is received.

A firm is registered as an investment adviser under the Investment Advisers Act of 1940. It has decided to raise its annual management fee from $1,500 to $1,800 and require that it be paid 1 year in advance instead of quarterly. The firm would A) continue doing business as before because the firm was already charging more than $1,200 per year B) now come under the requirement to include a balance sheet as part of its brochure C) be in violation of the law that prohibits pre-payments more than 6 months in advance D) need SEC permission to make this change

B For federal covered investment advisers, a prepayment in excess of $1,200 and for periods of 6 months or more in advance (substantial prepayment) requires the adviser to submit an annual audited balance sheet as part of its ADV Part 2 (and brochure). Previously, even though the firm's fee was in excess of $1,200, because it was collected on a quarterly basis, the firm did not fall under the balance sheet rule. Had this been a state-registered IA, the answer would have been the same, even though the dollar limit is $500 rather than $1,200. That is for the reason given above—the former fee was charged quarterly and the substantial prepayment definition requires both exceeding a stated dollar amount ($500 or $1,200) and it being for 6 months or more in advance.

Registration as an investment adviser or investment adviser representative under the Uniform Securities Act is required of A) a tax attorney who, as an incidental part of his tax practice, recommends that his high-tax-bracket clients investigate the use of municipal bonds in their portfolios B) an economics professor at a local community college who gives lectures in the evenings to public groups about portfolio analysis for which he charges a nominal fee C) an agent of a broker-dealer who recommends model portfolios to clients in exchange for them executing their trades through him D) an officer of a trust company handling investments for trust accounts

B If you are putting yourself out to the public as providing investment advice and charging a fee for doing so, you must register. The exceptions to this are if your giving of investment advice is incidental to your primary reason of doing business and if you are not charging specifically for the giving of that advice. Trust companies and their employees are specifically excluded from the definition of "investment adviser." A tax attorney making recommendations incidental to his legal practice and not charging specifically for the making of those recommendations is also not an investment adviser. The professor would have also been exempt from registration except for the fact that compensation was received for securities-related advice. Agents who are compensated only on the basis of recommended trades are not receiving special compensation and are, therefore, not considered to be in the business of giving advice.

Which of the following would NOT be considered to be in the business of an investment adviser? A) A person compensated for investment advice, although this service is not a primary part of the business B) An accountant who provides occasional investment advice but receives no separate fee for the service C) A person compensated for investment advice, but who provides the advice only to institutions D) A person who provides investment advice but is compensated only through commissions on the sale of stock

B In applying the business standard, the following criteria are used: (1) Does the person hold himself out as an investment adviser, or does he provide investment advice on a frequent or regular basis? (2) Does the person receive any compensation, regardless of whether it is paid separately or included in any other compensation? (3) If the person engages in other financial service activities in connection with the advice, it cannot be used to avoid the business standard. In looking at these criteria, it would appear that all choices listed are considered investment advisers. However, under exclusions from the definition, accountants who give advice solely incidental to the conduct of their profession and who receive no special compensation for this advice are excluded from the definition along with lawyers, engineers, teachers, and broker-dealers.

Under the Investment Advisers Act of 1940, the exclusion for providing investment advice that is solely incidental to the practice of a profession is NOT available to A) teachers B) real estate agents C) engineers D) attorneys

B In the Investment Advisers Act of 1940 and the subsequent releases explaining the act, there is no specific exemption for real estate agents who give investment advice that is incidental to their practice. Engineers, teachers, accountants, and lawyers are specifically excluded if their advice is incidental to their practice.

Kapco Advisers, a federal covered investment adviser operating on a calendar-year basis, published a list of recommended securities in January 2015. A copy of this must be maintained until at least A) January 31, 2017 B) December 31, 2020 C) December 31, 2017 D) January 31, 2020

B Investment adviser records, including copies of advertisements, must be kept for at least 5 years from the end of the fiscal year in which the record originated—in this case, 5 years from the end of 2015.

An agent and a broker-dealer maintain wrap fee accounts for several of their customers. Which of the following registrations is required? A) Neither the broker-dealer nor the agent is required to have any license other than their regular securities license. B) The firm must register as an investment adviser. C) Only the registered principal would need to be registered in the state(s) in which they do business. D) The agent must be registered as an investment adviser.

B Once a broker-dealer handles wrap fee accounts, it loses the exclusion from the definition of investment adviser. Therefore, the firm must be registered with either the state or the SEC. Any agents handling these accounts would be registered as investment adviser representatives.

The powers of the Administrator include the ability to determine A) minimum net worth requirements for agents who exercise discretion B) minimum net worth requirements for investment advisers C) maximum net capital requirements for broker-dealers D) surety bond requirements for investment advisers who do not exercise discretion or maintain custody

B The Administrator can determine minimum, not maximum, net capital for broker-dealers (but not in excess of SEC requirements) and, for investment advisers, net worth. If the investment adviser does not exercise discretion (or maintain custody), no surety bond is required. Agents who exercise discretion may need a surety bond, but not a minimum net worth.

All of the following information is required on the SEC registration Form ADV EXCEPT A) the name of the adviser's business B) the personal securities holdings of the principalsof the firm C) the form of business organization D) the basis on which the adviser will be compensated

B The registration Form ADV does not require the disclosure of the personal securities holdings of the firm's principals. Form ADV requires the name of the adviser's business and form of business organization. In addition, Form ADV specifically requires information on how the adviser will be compensated. The Form ADV does include information about certain control persons (officers, directors, partners), but does not ask for a listing of their personal investment holdings.

Registration with the state as an investment adviser would be required for a person with an office in this state who A) serves as a pension consultant to the XYZ Employees Retirement Plan, covering 1,200 employees with total assets of $278 million B) manages $13 million in assets for 4 clients C) manages the portfolio of the KPF Balanced Fund, a registered open-end investment company with $22 million in net assets D) only gives advice on securities issued by or guaranteed by the government of the United States

B Under the Dodd-Frank Bill, investment advisers with less than $100 million in assets under management must register with the states. If the adviser manages a registered investment company, the adviser must be federal covered. If the person serves as a pension consultant with $200 million or more in AUM, the person has the option of registering with the SEC. A person whose sole advice deals with U.S. government securities is excluded from the federal definition of investment adviser and, therefore, under the NSMIA, is considered a federal covered adviser.

Jefferson, Adams, and Washington (JAW) is a pension consulting firm whose only office is on Constitution Avenue in Washington, D.C. JAW has only one advisory client—a U.S. government employees pension fund with assets of $4 billion. What are this firm's registration requirements? A) It must register with the SEC because the AUM is so high. B) It may choose to register with either the D.C. Administrator or the SEC. C) It can only register with the SEC because the District of Columbia is not a state. D) It does not have to register because its only client is the U.S. government.

B Under the provisions of the Dodd-Frank Act of 2010, pension consultants providing advisory services to employee benefit plans having at least $200 million of assets may register with the SEC (even though the consultant does not itself have those assets under management). JAW's only client has $4 billion in assets, well in excess of the minimum of $200 million required to allow the firm to choose between state or SEC registration. Under the USA, the District of Columbia (along with Puerto Rico and any U.S. territory or possession) is included in the definition of state. If an investment adviser only gives advice on securities issued or guaranteed by the U.S. government, it is excluded from the definition of investment adviser and doesn't register anywhere, but that is not the same as having the government as your only client.

Martin holds both the CPA and the CFP designations. Within the previous year, if he has provided portfolio advice to approximately 40 clients, is Martin required to register as an investment adviser? A) Yes, because he could receive commission income from investment clients. B) No, because he is a CPA. C) Yes, because he provides investment advice on a more than incidental basis. D) No, because he falls under the de minimis exemption having relatively few clients.

C

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 condominiums B) gold coins C) convertible bonds D) rare convertible automobiles

C

A consent to service of process required by an Administrator is A) a legal procedure that authorizes the Administrator to issue injunctions B) a formal statement declaring that an investment adviser will comply with all advertising requirements of the USA C) an agreement whereby a registrant will be bound by any legal action or subpoena served on the Administrator as if it had been served on the registrant D) an agreement to perform all services and duties that the Uniform Securities Act (USA) requires of those individuals covered by the USA

C

A discussion referring to blue-sky laws would include all of the following EXCEPT A) forms requiring issuers selling securities in the state to comply with state securities laws B) a state securities law that grants state securities Administrators the power to deny or revoke a broker-dealer's or an agent's registration within its state C) the Securities Act of 1933 and Securities Exchange Act of 1934 D) state laws that are designed to protect the public against fraud in securities sales within a state

C

A person may NOT engage in business as an investment adviser in a state unless A) the person is registered as a broker-dealer B) the person's only accounts are investment companies C) the person is registered as an investment adviser or is otherwise exempt from registration D) organized as a corporation or partnership

C

In which of the following cases could revocation of the registration of an IAR lead to disciplinary action against the investment adviser employing that individual? A) The firm supplied the IAR with a copy of its Code of Ethics and administered regular training on its contents. B) The IAR failed to make full disclosure of a previous felony conviction on the Form U4. C) The firm was found guilty of failure to supervise. D) The IAR was found guilty of first degree murder.

C

John Law is the owner of Mississippi Advisory Services (MAS), an independent financial planning organization. Law is registered as an investment adviser representative of SSC Securities and Investments, registered as a broker-dealer, and an investment adviser with the SEC. Supervision over Law's advisory activities is the responsibility of A) the SEC. B) MAS's CCO. C) SSC's CCO. D) John Law.

C

The Uniform Securities Act's definition of investment adviser would include A) Any person who is a federal covered investment adviser B) An investment adviser representative of an advisory firm who makes securities recommendations on a regular basis for compensation C) A person who, on a regular basis for compensation, offers specific investment advice to clients as to the value of securities D) A temporary employee hired to assist in administrative responsibilities of an advisory firm

C

The responsibility for administering the Investment Advisers Act of 1940 lies with A) FINRA B) the Administrator C) the Investment Advisers Association (IAA) D) the SEC

C

The term "federal covered investment adviser" would apply to a person who A) limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) B) is registered as such under the Investment Company Act of 1940 C) is registered as such under the Investment Advisers Act of 1940 D) limits the advice offered strictly to securities issued or guaranteed by the U.S. government or 1 of its political subdivisions

C

Under the Investment Advisers Act of 1940, for how many years must an investment adviser maintain the records required by regulation? A) No requirement B) 1 year C) 5 years D) 3 years

C

Under the Investment Advisers Act of 1940, which of the following is included in the definition of an investment adviser? A) A bank that advertises to the public that it offers a complete line of trust services B) A professional research analyst who holds himself out to the public as an expert in trading the Euro and other foreign currencies C) A lawyer who advertises to the public that he offers comprehensive legal and investment advice to high-net-worth individuals D) A research service that offers advice on the value of gold Explanation

C

Under the Investment Advisers Act of 1940, who is not excluded from the definition of investment adviser when their investment advice is solely incidental to the individual's profession? A) Engineers B) Teachers C) Insurance agents D) Attorneys

C

Under the NASAA Model Rule on financial requirements for investment advisers, investment advisers who have custody of customer funds are usually required to have a net worth in the amount of A) $10,000 B) $50,000 C) $35,000 D) $5,000

C

Under the Uniform Securities Act, all of the following are excluded from the definition of an investment adviser EXCEPT A) banks B) broker-dealers and their agents C) an individual providing advice on municipal bonds D) a federal covered adviser

C

Under the Uniform Securities Act, all of the following are exempt from state registration as investment advisers EXCEPT A) publishers of financial publications that are not addressed to clients' specific individual investment situations B) investment advisers with no office in the state who only advise employee benefit plans with assets of more than $1 million C) financial planners who provide fee-based investment advisory services to clients D) investment adviser representatives

C

Which of the following investment advisers would be required to register with the state? A) An IA who expects to have $132 million in AUM within 120 days B) An IA whose annual updating amendment showed a drop in AUM from $141 million to $99 million C) An IA whose annual updating amendment showed a drop in AUM from $109 million to $87 million D) An IA who is under contract to manage a registered investment company

C

Which of the following must register as an investment adviser under the Investment Advisers Act of 1940? A) A person who provides advice to people who are investing in coin collections B) A person who provides advice to people who are investing in antique furniture C) A person who provides advice to people who are investing in mutual funds registered under the Investment Company Act of 1940 D) A person who provides advice to insurance companies on their portfolios

C

Which of the following statements describes a person who provides investment advice on a regular basis but does not charge fees, yet would be considered an adviser under Release IA-1092? A) A wealthy college professor gives free lectures on sound investment practices and makes specific securities recommendations based on a quantitative model he has developed. B) A retired chief investment officer of a well-known investment management company, without compensation, writes a column in a general circulation newspaper commenting on the value of investing in equity securities; many readers find his advice useful and become clients of his former investment management company. C) A financial planner sold his business and spends his time consulting with pension plans on whether to retain or hire new investment managers based on their performance. He does not charge fees; however, those managers retained as a result of his recommendations routinely provide him with noncash benefits such as vacations, computers, and office space. D) The secretary of the U.S. Treasury, as part of his official duties, comments on conditions in the financial markets and their future investment implications.

C

Which of the following statements is not true of investment advisers under the Uniform Securities Act? A) Investment advice includes advice regarding the value of securities, as well as recommendations to buy or sell. B) A natural person may register as an investment adviser. C) Only written advice concerning investments is covered by the act. D) Compensation is a key factor in determining whether a person is required to register as investment adviser.

C

​​​As defined in the Investment Advisers Act of 1940, all of the following would be considered investment advisers EXCEPT A) a civil engineer making investment decisions for $5 million held in escrow while a bridge for which she is the project manager is being constructed B) a tax attorney who manages investment portfolios for 50 clients C) a professional plumber with excellent stock market skills who as a hobby and without pay, manages portfolios for 8 of his neighbors D) a portfolio manager who limits advice to municipal securities exclusively

C

Under the Uniform Securities Act, which of the following is included in the definition of an investment adviser? A) Publisher that receives a yearly subscription fee for a newsletter that provides nonspecific investment advice B) Bank that offers investment counseling to its high-net-worth customers C) A broker-dealer who receives a flat fee for analyzing a customer's investment objectives and recommending a portfolio of securities D) Antiques dealer who receives a fee for advising customers as to the value of antiques and rare coins

C A broker-dealer who receives fees for investment recommendations is an investment adviser because that fee is considered special compensation relating to securities advice. The antiques dealer provides non-securities-related advice. Publishers may provide generic investment advice without registering as investment advisers. Commercial bankers are excluded from the definition of an investment adviser.

ABC Advisers, a federal covered investment adviser, is moving the firm's headquarters to a new office park in the suburbs. ABC is required to file this change with the SEC A) within 90 days B) within 30 days C) promptly D) within 60 days

C Any material change that affects an investment adviser's ADV must be filed promptly with the SEC (or Administrator if state-registered) and a change of address would certainly be material.

Under the Uniform Securities Act, Paul must register as a state-registered investment adviser if he A) becomes a full-time employee of AAA Investment Advisers, Inc., where he will advise clients whose assets under his discretion will exceed $200 million B) opens an investment advisory business as a sole proprietor in New Jersey with the intention of advising individual clients on the advisability of investing in securities. Paul will have $100 million in AUM within 120 days of opening. C) opens an investment advisory business as a sole proprietor in New Jersey with the intention of advising individual clients on the advisability of investing in securities. Paul will have $90 million in AUM within 120 days of opening. D) sells registered securities on a commission basis for a registered broker-dealer

C Being in the business of advising individual clients on the advisability of investing in securities requires one to register as an investment adviser, either with the state or the SEC. The key is the assets under management. If a new IA reasonably believes that he will have AUM of at least $100 million within the first 120 days of registering, he is permitted to register with the SEC. Of course, if it reaches $110 million, then SEC registration is required. Reaching $90 million is not enough and, therefore, registration with the state would be the only option here. As a full-time employee of AAA Investment Advisers, Inc., he would have to register as a registered investment adviser representative and will not be a registered investment adviser (the firm). Selling registered securities under the supervision of a broker-dealer would require an agent registration with the state and the SEC.

Under the Uniform Securities Act, which of the following persons has to register as an investment adviser? A) An attorney who writes a legal opinion for a municipal bond indenture B) An agent of a broker-dealer who gives investment advice within the course of his duties with the firm for which a fee is charged C) A broker-dealer who gives advice for which he charges a specific fee D) A broker-dealer who gives investment advice that is incidental to the course of its business and for which no special compensation is received

C Broker-dealers need not register as investment advisers unless they charge a separate fee for providing investment advice. If the advice is strictly incidental and without a separate charge, the BD is not an investment advisor. Attorneys are not investment advisers provided their investment advice is incidental to their practice. Giving a legal opinion on a municipal security indenture is not investment advice. Agents giving advice for which a fee is charged must register as investment adviser representatives and their BDs as investment advisers.

Both state and federal law contain a number of exclusions from the definition of investment adviser. Which of the following choices is unlikely to qualify for an exclusion? A) A lawyer with sophisticated investment experience who gratuitously offers his clients advice on the value of securities B) A bank that purchases securities on behalf of its custodial accounts C) A retired mechanical engineer who charges a reasonable fee for offering investment advice in his areas of expertise to less than 25 clients D) A columnist for a major news magazine who writes on the business and economic functions of banking institutions

C Even though an engineer is part of the acronym LATE, a retired or active engineer of any specialty, who offers investment advice to clients for a fee falls within the definition of investment adviser under the Uniform Securities Act. The LATE exclusion only applies to incidental advice given in the practice of a profession. Although the lawyer is giving investment advice, as long as no compensation is received, that missing prong eliminates being included in the definition of investment adviser. Banks are always excluded as would be this columnist.

All of the following are exempt from registration requirements with the SEC under the Investment Advisers Act of 1940 as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 EXCEPT A) investment advisers whose only clients are insurance companies B) someone who gave investment advice to 11 private funds throughout the Midwest last year and has total assets under management of $120 million C) investment advisers with $110 million or more in assets under management D) an adviser with 50 clients, none of whom is a private fund, all within one state, that furnishes no advice on exchange-listed securities

C Investment advisers with $110 million or more of assets under management are subject to registration with the SEC under the Investment Advisers Act of 1940 and the Dodd-Frank Act. Federal exemptions apply to advisers whose clients are all in one state, whose principal office is in that state, and whose clients (none of whom are private funds) are not furnished advice on exchange-traded securities. Private fund managers are exempt from SEC registration until their AUM in the U.S. reaches $150 million.

There are a number of exclusions from the definition of investment adviser. Which of the following would NOT qualify for an exclusion under the Uniform Securities Act? A) A financial planner who conducts seminars for the local PTA, where he presents the benefits of term life insurance B) A lawyer who charges an hourly fee for preparing trust documents for individuals referred to her by an investment adviser C) A teacher at the local high school who receives nominal compensation for giving investment advice to engineers D) An accountant who conducts seminars on the tax benefits of contributing to IRAs, both traditional and Roth

C The LATE exclusion applies when advice is given by one of the listed professionals on an incidental basis. When a teacher (or any of the others) is compensated specifically for giving advice, regardless of the amount, the exclusion is lost. To be defined as an investment adviser, one must give advice on securities; term life insurance is not a security. Similarly, preparing trust documents is not securities advice, even if the clients are referred by an investment adviser. Finally, one of the roles of an accountant is giving tax advice, and IRAs are not securities.-

Leslie is an IAR with Financial Visions (FV), a federal covered investment adviser. Leslie operates Innovative Financial Solutions (IFS), a separate financial planning company with its own office in State W. Should Leslie be found guilty of fraudulent business activities, FV would A) be immune from State W's Administrator's jurisdiction because it is a federal covered adviser. B) possibly have its State W registration suspended. C) be subject to possible disciplinary action brought by the State W Administrator if it could be shown that FV failed to supervise Leslie's activities. D) claim that IFS is a separate entity over which FV has no responsibility.

C Under the doctrine of respondeat superior, an investment adviser is responsible for the actions of any of its registered IARs, even those who operate an independent financial planning firm (independent contractors). Although, as a federal covered adviser, FV doesn't have a registration that can be suspended, state administrators do have jurisdiction over covered advisers when fraud is involved.

Under SEC Release IA-1092, a financial planner would not be considered an investment adviser when A) he is a licensed insurance agent and credits the commission earned on the sale of insurance policies included in a comprehensive financial plan against the fee charged for the plan B) he does financial planning as part of offering a wrap fee program as a licensed agent of a broker-dealer C) the extent of his planning is limited to wills, estates and trust creation D) there is an up-front fee charged for creating a comprehensive financial plan, even when the plan is not put into place

C Wills, estates, and trusts are not securities, so any advice given on them does not make one an investment adviser. Look for the term "comprehensive financial plan" because that always includes securities advice and, as long as a fee is charged, even when the advice is not followed, registration as an IA (or perhaps IAR) is required. Wrap fee programs may only be offered by IAs or IARs.

Under the Uniform Securities Act, the recordkeeping requirements established by the Administrator for out-of-state investment advisers wishing to register in his state are subject to the limitations of A) the Investment Advisers Act of 1940 B) the requirements set by each individual state C) the requirements set by the Administrator of the adviser's home state D) the Securities and Exchange Act of 1934

C For state-registered investment advisers, requirements set by the Administrator are subject to the limitations of the requirements set by the Administrator of the adviser's home state. Covered advisers don't register in any state, only with the SEC (and come under the SEC's requirements set forth in the Investment Advisers Act of 1940).

Serenity Strategic Investments (SSI) is an investment adviser registered in four states. SSI's most previous annual updating amendment showed AUM of $108 million. Six months later, a favorable market resulted in SSI's AUM growing to $120 million. Unfortunately, several large clients left, so at the end of SSI's year, its AUM was down to $94 million. Which of the following statements is CORRECT? A) SSI may remain SEC registered as long as AUM is at $90 million or more. B) SSI has the choice of remaining state-registered or registering with the SEC. C) SSI remains state-registered because its AUM is less than $100 million. D) SSI must become registered with SEC within 90 days of exceeding $110 million.

C The key to answering this question is remembering that, for purposes of SEC registration, it is the AUM (technically known as the RAUM - Regulatory AUM) shown on the annual updating amendment to the Form ADV that is the determining factor. We are told that SSI is state registered, something permitted when reported AUM is $108 million, although it was eligible to register with the SEC. The mid-year increase has no effect on registration, only that at the end of the year. Because SSI will report $94 million on the next annual update, it will remain state registered and does not have the option to register with the SEC because its AUM is below $100 million. The only time the $20 million buffer down to $90 million enables an investment adviser to remain registered with the SEC is just that—the IA is already registered with the SEC and can stay there.

USAAdvisers is registered in 10 Midwest states. Regarding financial requirements, USAAdvisers must meet those of A) the SEC B) the state with the most stringent financial requirements C) each state in which it has a place of business D) the state in which its principal office is located

D

A person is excluded from the definition of investment adviser under the Investment Advisers Act of 1940 if the investment advice and reports are restricted to A) bank and insurance company securities B) securities listed on a national stock exchange C) foreign securities D) U.S. government securities

D

According to the Investment Advisers Act of 1940, the SEC must either grant investment adviser registration or begin proceedings to determine whether registration should be denied within how many days of filing? A) 60 B) 30 C) 90 D) 45

D

An investment adviser (IA) has its primary office in State A. They have branches in states B and C, and they advertise in states D, E, and F. What net capital requirements must they meet? A) Whichever state is the highest B) All the states combined C) The state where the largest number of its clients reside D) Where its principal office is located

D

An investment adviser whose primary business is the rendering of investment advice providing investment supervisory services is entitled to use the term A) financial planner B) pension consultant C) senior adviser D) investment counsel

D

As defined in the Uniform Securities Act, an investment adviser A) must be organized as a corporation or a partnership B) is any person who, for compensation, engages in the business of advising issuers on methods of raising capital C) is any person who, for compensation, engages in the business of executing transactions in securities for others D) is any person who, for compensation, engages in the business of advising others as to the value of securities

D

Blue-sky laws pertain to all of the following EXCEPT A) the regulation of securities transactions in a state B) the registration of securities within a state C) the registration of securities salespeople in a state D) the regulation of securities trading in other countries

D

Under the Investment Advisers Act of 1940, for how many years must records be kept after the end of the fiscal year in which an entry was made? A) 10 years B) 1 year C) 2 years D) 5 years

D

Harrison is a Certified Financial Planner (CFP®) with an office in the state and a telephone directory listing under the category "Financial Planners." Harrison has, for fees, written more than 100 comprehensive financial plans for various individual clients. However, only 20% of the plans' content entails advice regarding securities and investments. Which of the following statements best describes Harrison's status as an investment adviser under the USA? A) Harrison is not required to register as an investment adviser because he holds a recognized financial planning credential. B) Harrison is required to register as an investment adviser because he holds a recognized financial planning credential. C) Harrison is not required to register as an investment adviser because his securities advice is purely incidental to his overall planning activities. D) Harrison is required to register as an investment adviser because he regularly offers advice and receives compensation for advice concerning securities and investments, and holds himself out as a financial planner.

D

Investment advisers who manage investment portfolios that total less than $100 million must register with A) the SEC only B) both a state and the SEC C) neither the SEC nor a state D) a state only

D

One of the exemptions from registration under state and federal law applies to investment advisers to private funds. One characteristic of all private funds is that A) they have assets of less than $150 million B) their advisers are exempt from filing reports on Form ADV C) they have no more than 100 investors D) they are not registered as investment companies

D

Reticent Asset Management (RAM) is claiming an exemption from registration with the state because it is an adviser to private funds. One of the requirements to qualify for this exemption is A) there can be no more than 10 investors during any 12-month period. B) private fund assets under management cannot exceed $110 million. C) all investors must be accredited. D) all investors must be qualified clients.

D

State laws provide for exclusions from the definition of investment adviser. Which of the following persons is specifically excluded under the Uniform Securities Act? A) Bank subsidiary offering investment advice B) Broker-dealers receiving special compensation C) Economists whose advice is strictly incidental to their professional activity D) Investment adviser representatives

D

The National Securities Markets Improvement Act of 1996 (NSMIA) A) created the concept of fraud, as used in the Uniform Securities Act B) overcame the restrictions of selling securities in interstate commerce C) created a national market system D) defined the term "federal covered adviser"

D

The USA provides either an exclusion from the definition or an exemption from registration as an investment adviser for certain persons. Which of the following would be required to register? A) A bank trust officer with less than $250 million in assets under management B) A teacher who teaches a course in the local high school on consumer economics C) An engineer employed by an oil company selling limited partnership interests to public investors who provides estimates of recoverable reserves D) A CFP® who provides a full range of financial planning to clients on a fee-only basis

D

The Uniform Securities Act would NOT provide an exemption from registration as an investment adviser to an investment adviser who A) has no place of business in the state and limits clientele to broker-dealers B) has no place of business in the state and limits clientele to banks and insurance companies C) has no place of business in the state and limits clientele to other investment advisers D) is an out-of-state investment adviser and directed business communications to fewer than 12 clients in the state in the past 12-month period

D

The chief compliance officer (CCO) of a registered investment adviser would generally not have responsibility for the actions of A) an investment adviser representative of the firm. B) supervisory personnel of the firm. C) ministerial personnel of the firm. D) an agent registered with an affiliated broker-dealer.

D

The purpose of the Investment Advisers Act of 1940 is to provide A) regulation for investment companies and their operations B) standards among the various states for the regulation of investment advisers C) minimum standards of performance for those registered as investment advisers D) standards at the federal level for the regulation of investment advisers

D

The term "investment counsel" can be used by investment advisers A) who are registered with the SEC under the Investment Advisers Act of 1940 B) who are also registered as broker-dealers C) who are also attorneys D) with a primary business of rendering investment advice

D

The term "private fund", as defined under federal and state law, would not apply to A) a venture capital fund. B) a hedge fund. C) an issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940, but for section 3(c)(1) or 3(c)(7) of that act. D) a leveraged ETF.

D

There are waivers from the Series 65 exam requirement for certain professional designations. Among those qualifying for the waiver are individuals who are A) CLUs. B) MBAs. C) CPAs. D) CFP®s.

D

Under the Uniform Securities Act, an accountant who charges hourly fees for securities recommendations in the regular course of his accounting practice is A) included in the definition of an investment adviser because accountants are not among the professionals excluded from the definition B) not included in the definition of an investment adviser because he receives an hourly rate instead of a commission C) not included in the definition of an investment adviser because he is an accountant D) included in the definition of an investment adviser because he is compensated for giving investment advice in the regular course of business

D

Under the Uniform Securities Act, which of the following statements relating to the registration requirements of investment advisers is TRUE? A) A registration is automatically effective at noon, 30 days after the application has been filed. B) If an amendment to the registration is subsequently filed, the registration becomes effective 15 days after the amendment is filed. C) Registrations of securities professionals expire 1 year after their effective date, unless renewed. D) A registration becomes effective at noon, 30 days after the application has been filed, providing the registration is not in the process of denial.

D

When filing the consent to service of process, which of the following is TRUE? A) It expires simultaneously with the registration on December 31. B) It is not required of investment adviser representatives, only investment advisers. C) It must be filed annually on the dates specified by the Administrator. D) It is supplied with the initial registration and remains on file permanently.

D

Which of the following is NOT considered to be in the business of investment advising? A) An insurance agent who provides investment advice regularly, but such advice represents a small portion of her business B) A person who prepares reports about securities in general C) A financial planner who provides advice on many types of financial instruments, including securities, and receives commissions on the sale of life insurance D) Insurance agents who discuss the merits of whole life insurance verses nonsecurities financial instruments and who receive commissions on the sale of life insurance only

D

Which of the following is NOT included in Form ADV Part 2A? A) Investment policy of the adviser B) A description of how the adviser is compensated C) Types of investments made by the adviser D) States in which the investment adviser is registered or intends to register

D

Which of the following persons are included in the definition of investment adviser? A) A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation B) A bank whose deposits are insured by the FDIC C) Any person that the Administrator excludes by rule or order D) A financial planner or other person that provides investment advisory services to others for compensation

D

With regard to the keeping of records, the Uniform Securities Act states that investment advisers must keep records for A) 5 years B) 3 years, the first 2 in the principal office of the adviser C) 3 years D) 5 years, the first 2 in the principal office of the adviser

D

A person who renders investment advice solely with respect to securities issued by the U.S. government A) must be registered both with the SEC and the state B) is exempt from state registration under the Uniform Securities Act but must be federal registered under the Investment Advisers Act of 1940 C) need not be federal registered under the Investment Advisers Act of 1940 but must register in any state in which it has an office D) is excluded from the definition of investment adviser under federal law and is, therefore, exempt from state registration requirements

D A person who renders advice solely with respect to securities issued or guaranteed by the U.S. government is excluded from the definition of investment adviser under the Advisers Act and is therefore a federal covered adviser under the NSMIA of 1996.

Under the provisions of the Uniform Securities Act, it is NOT necessary for an investment adviser to register when it A) has a place of business in the state but deals exclusively with federal covered advisers B) is headquartered in a state where it conducts most of its business with broker-dealers only C) has a place of business in the state but has conducted business with 3 individual investors during the preceding 12 consecutive months D) has no place of business in the state and deals with savings and loan associations only

D An adviser who has no place of business in the state and deals only with savings and loan associations is not required to register with the state securities Administrator. An adviser with a place of business in the state must register with the Administrator whether clients are exclusively broker-dealers or federal covered advisers and regardless of the number of clients.

An investment adviser need not register in a state if it has A) a place of business in the state and advises fewer than 5 banks B) a place of business in the state and only advises employee benefit plans with more than $1 million C) no place of business in the state, does not direct business communications in the state, and advises more than 5 high-net-worth individuals located in the state D) no place of business in the state and only advises 3 insurance companies located in the state

D An investment adviser need not register in a state if it has no place of business in the state and advises such institutional clients as insurance companies or banks. The number of clients is irrelevant as long as they all are of an institutional nature. Without exception, the USA requires an investment adviser to register in a state if it has a place of business in the state. With no place of business in the state, registration would not have been required regardless of the number of banks who were clients. With 5 or fewer noninstitutional clients, regardless of their net worth, no registration would be necessary under the de minimis provisions of the USA.

An investment adviser with no place of business in the state is exempt from registration with the state when making recommendations to all of the following EXCEPT A) St. Amelia's college endowment fund B) AAA Manufacturing Co., with respect to the quality of investment bankers available for an underwriting of AAA securities C) Amalgamated Bank D) when the recommendations are made exclusively to individual residents of the state who are accredited investors regarding new issues of exempt securities not registered in that state

D An investment adviser with no place of business in the state is not exempt from registration with the state when making recommendations to individual accredited investors who are residents of that state, even when the securities being recommended are exempt from registration. The Uniform Securities Act exempts investment advisers with no place of business in the state who deal with certain institutional customers such as banks, insurance companies, investment management companies, and employee benefit plans with assets in excess of $1 million. College endowments and other nonprofit organizations also carry exempt status, but not wealthy individuals. An adviser advising an issuer on the quality of potential underwriters does not fall within the definition of investment adviser under the Uniform Securities Act and is therefore exempt from registration.

Which of the following statements best describes an investment supervisory service as described by the Investment Advisers Act of 1940? A) An investment adviser sends monthly newsletters to 200 clients offering nonspecific advice. B) No actions are taken in client accounts without first being approved by a senior supervisory person. C) An investment advisory firm offers nondiscretionary services on a non-client-specific basis. D) An investment adviser provides continuous advice based on the client's individual needs.

D An investment supervisory service is an individualized service delivered to a specific client on a continual basis. General nonspecific advice given across the board is deemed impersonal advisory services. Only when an investment adviser provides investment supervisory service, and the adviser's principal business activity is the giving of advice, may the term "investment counsel" be used.

Which of the following is required to register in a state under the Uniform Securities Act? A)ABC State Bank, which provides investment advice in its branches throughout the state B)An investment adviser who has no place of business in the state and communicates with only 5 advisory clients in the state for the year C)A broker-dealer who has no place of business in the state and whose only clients in the state are limited to insurance companies, banks, and broker-dealers D)An investment adviser who has a place of business in the state and whose only clients in the state are insurance companies, banks, and broker-dealers

D Because the investment adviser has a place of business within the state and is acting as investment adviser in the state, it must register, regardless of the fact that the only clients are financial institutions. Notice that the state registration rules are different for broker-dealers and investment advisers. Banks are exempt from registration as broker-dealers or as investment advisers, as are investment advisers with no place of business in the state and fewer than 6 clients in the state in a 12-month period (de minimis standard).

Form PF must be filed by A) SEC-registered advisers with no more than $150 million in private fund assets under management B) SEC-exempt reporting advisers C) state-registered private fund managers, regardless of the amount of assets under management D) SEC-registered advisers with at least $150 million in private fund assets under management

D Form PF is the form used by those private fund managers who are registered with the SEC and whose private fund AUM reaches or exceeds the $150 million threshold. Exempt reporting advisers are, as the term implies, exempt from reporting. State-registered advisers don't report on the form because, among other things, if they reached the $150 million mark, they'd have to register with the SEC.

Registration with the SEC as an investment adviser would be required for a person who A) acts as the investment adviser to an investment company registered under the Investment Advisers Act of 1940 B) limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) C) limits the advice offered strictly to securities issued or guaranteed by the U.S. government D) acts as the investment adviser to an investment company registered under the Investment Company Act of 1940

D If a person acts under contract to an investment company registered under the Investment Company Act of 1940 (investment companies do not register under the Advisers Act; only advisers do) is required to register with the SEC. Excluded from the definition of investment adviser are those whose only advice deals with securities issued or guaranteed by the U.S. government. With the exception of managing a registered investment company, registration with the SEC is based on assets under management (AUM), not the type of security advised on. A person whose advice relates solely to securities on the NYSE is required to register with the SEC only if AUM reaches $110 million.

Which of the following firms in the business of rendering investment advice for compensation would be considered a federal covered adviser? A) DEF Fund managers, a corporation managing an unregistered hedge fund with $10 million in assets B) JKL Pension Consultants, a management firm providing services to employee benefit plans, and currently has $179 million under management C) GHI Consultants, a sole proprietorship, managing $82 million belonging to high-net-worth individuals D) ABC Money Managers, a partnership with $115 million under management

D It makes no difference what the structure of the adviser is. As long as the assets under management are $110 million or more, SEC registration is required. If the investment company is registered under the Investment Company Act of 1940, the adviser must be registered, regardless of size. The hedge fund is an unregistered fund, so the rule does not apply to it. Pension consultants are not eligible for SEC registration until their AUM reaches $200 million.

Under the Investment Advisers Act of 1940, which of the following is considered an investment adviser? A) The trust officer of a commercial bank who manages investment accounts for clients B) A syndicated columnist who gives weekly reports and recommendations on investments C) A person who publishes a regular newsletter of advice on U.S. Treasury bonds and other U.S. government securities D) A lawyer who specializes in consulting on investing in securities

D Publishers and writers of general, regular, paid circulation publications (newspapers and magazines) are excluded from the definition of investment adviser. Under the federal law, anyone giving advice dealing only with U.S. government securities is excluded from the definition, as are those who work for banks and trust companies. The lawyer is not excluded because the advice provided is not incidental to the profession; it is the lawyer's specialty.

Which of the following would be excluded from the definition of investment adviser under the Uniform Securities Act? A) A civil damages attorney who advertises that he is available to assist clients in suggesting appropriate investments for their successful claims B) A finance teacher at a local community college who offers weekend seminars on comprehensive financial planning at a very reasonable price C) A broker-dealer charging a separate fee for investment advice D) The publisher of a weekly newsmagazine, sold on newsstands, that contains at least 5 stock recommendations per issue

D Publishers of general circulation newspapers and magazines are excluded from the definition of investment adviser. A broker-dealer loses its exclusion the moment it offers advice for a separate charge, as does an attorney who holds himself out as offering investment advice. Normally, a teacher is excluded, but not when charging for advice, as would appear to be the case here. On this examination, the term "comprehensive financial planning" always includes securities advice.

Federally registered investment advisers are obligated to maintain certain books and records as specified by the SEC. Which of the following statements regarding adviser recordkeeping is NOT true? A) Written records may be reduced to microfilm. B) Records originally created on computer may be stored in electronic media. C) Records are subject to surprise audits by the SEC. D) Records must be kept for 6 years.

D Records of an adviser must be maintained for 5 years. Records are subject to surprise audits by the SEC, written records may be reduced to microfilm, and records originally created on a company's computer may be stored in electronic media.

Create A Large Legacy (CALL), Inc., is a state-registered investment adviser with offices in States X, Y, and Z. CALL currently does not have a place of business in State W, but does have 5 retail clients who are residents there. Opening an account for which of the following prospective clients domiciled in State W would now require CALL to register in State W? A) An insurance company account with an opening balance of $750,000 B) A small community bank depositing $500,000 C) A county in State W desiring advice on investment over $250,000 of surplus funds D) A trust having 4 minor children as beneficiaries with total trust assets of $5 million

D Regardless of the assets involved, a trust account, unless one for an employee benefit plan with at least $1 million in assets, is considered a retail rather than institutional client. Once the investment adviser goes over the de minimis limit of 5, registration with the state is required. Regardless of the assets involved, institutional clients, such as insurance companies, banks and government instrumentalities, do not count toward the de minimis limit.

Foster Advisers, based in New Jersey, manages $135 million in funds for New Jersey-based clients. As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which of the following statements best describes the registration requirement for Foster Advisers? A) Foster Advisers is required to register as an adviser with the SEC and has no requirement to notify the Administrator of the New Jersey Department of Securities. B) Foster Advisers is required to register with the Administrator of the New Jersey Department of Securities. C) Foster Advisers is required to register with both the SEC and the Administrator of the New Jersey Department of Securities. D) Foster Advisers is required to register as an adviser with the SEC and notify the Administrator of the New Jersey Department of Securities of its operation.

D Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, investment advisers with $110 million or more in assets under management must register with the SEC. These advisers are called federal covered advisers. Investment managers who manage less than $100 million must register with the state Administrator. Advisers with at least $100 million but less than $110 million of assets under management have the option to register with either their state Administrator or with the SEC. Once the $110 million level is reached, registration with the SEC is mandatory. With $135 million under management, Foster Advisers must register with the SEC. Foster Advisers is subject to the additional requirement of notifying the administrators of the securities departments of states in which it maintains offices or clients of its operations. At the state level, a notification fee (but not registration) is generally required. One aim of the NSMIA was to eliminate dual registration of investment advisers with the states and the SEC. Investment advisers are not required to register at both state and federal levels.

An investment adviser to a private fund wishes to qualify for the exemption offered under the Uniform Securities Act when the fund has no more than 100 investors. In order to qualify, A) the fund's outstanding securities are owned exclusively by persons who, at the time of acquisition of such securities, are individuals with at least $5 million in investments B) the private fund adviser must have less than $110 million in private fund assets under management C) neither the private fund adviser nor any of its advisory affiliates have been convicted of a felony within the past 12 years D) every investor must have either at least $1 million in assets managed by the investment adviser, or a net worth, excluding the value of the primary residence, in excess of $2.1 million

D The 100 or less investors is technically known as advising a 3(c)(1) issuer. In that case, all the investors must be qualified by meeting the net worth or assets managed by the adviser as stated. The $5 million is the requirement under federal law for an adviser seeking the federal exemption for a 3(c)(7) fund, which is not limited to 100 investors. Conviction of a felony within the past 10 years, not 12, will generally make one a "bad actor" and cause the exemption to be forfeited. Private fund advisers must keep the AUM under $150 million, not $110 million.

Under the Uniform Securities Act, a person who is in the business of providing advice on trading futures contracts in addition to advising clients on securities issued or guaranteed by the U.S. government is A) required to be a registered investment adviser representative in the state B) required to be a registered agent in the state C) required to be a registered investment adviser in the state D) not required to be a registered investment adviser in the state

D The Uniform Securities Act excludes futures contracts from the definition of security. To be defined as an investment adviser, the advice must be on securities. That brings us to the U.S. government securities. A person whose securities advice is limited to those issued or guaranteed by the U.S. government is included in the definition of a federal covered adviser. Federal covered advisers are included in the list of persons who are not deemed to be investment advisers under the USA. Therefore, this person is not considered an investment adviser in a state and is not required to register as one.

Which of the following persons must register as an investment adviser under the Uniform Securities Act? A) An accountant who makes no pretense of providing investment advisory services but gives incidental advice to clients as a small part of accounting services provided B) An investment adviser representative with no place of business in the state who has dealt with 7 retail clients during the most recent 12 month period C) An investment adviser whose advice is limited to securities issued or guaranteed by the U.S. government and who has 3 places of business in the state D) An investment adviser who only serves institutional clients and whose only office is in this state

D The Uniform Securities Act requires those defined as investment advisers to register with the state. Accountants are excluded when their advice is incidental to their profession and no additional compensation is charged. Advisers whose only advice is on securities issued or guaranteed by the government are excluded from the definition of investment adviser under the Investment Advisers Act of 1940. This means they are federal covered investment advisers, not required to register with the Administrator even with offices in the state. As long as there is an office in the state, unless the adviser is federal covered (as described in the previous sentence), there is no exemption from registration in that state. The IAR has exceeded the de minimis limits and would have to register in the state, but as an IAR, not as an IA.

All of the following statements regarding the registration of an investment adviser in a state are true EXCEPT A) if the investment adviser is not an individual, any officer or partner active in the advisory business is automatically registered as an investment adviser representative B) the initial application must include a consent to service of process along with Form ADV and the appropriate fees C) the adviser's registration expires on December 31 each year D) the annual renewal process involves payment of the appropriate fees and refiling of the consent to service of process

D The consent to service is a permanent document that remains on file with the Administrator; it need not be resubmitted for yearly renewal. The initial application for registration must include a consent to service of process along with Form ADV and the appropriate fees. If the investment adviser is not an individual, all officers or partners of the business entity that play an active role in the giving or supervision of giving advice are automatically registered as IARs.

A pension consultant who advises corporate retirement plans with assets of $135 million must register with which of the following? A) Both the state and the SEC B) Either the state or the SEC C) SEC D) The state

D Under the Dodd-Frank Bill, until a pension fund manager has at least $200 million in AUM, registration with the states is required. Once the $200 million level is reached, SEC registration becomes an option.

If an investment adviser files an initial registration with a state on June 30, which of the following statements regarding the filing fee to be paid is TRUE? A) The fee will be prorated from the filing date. B) The fee will be prorated from the effective date. C) No filing fee is required until December 31. D) The full year's fee must be paid.

D While some states make exceptions for filings late in the year, under the USA there is no pro rating of filing fees. The full year's fee must be paid with the initial registration request.

Under the Uniform Securities Act, most books and records of investment advisers must be maintained for A) 1 year B) 2 years C) 3 years, the first 2 in the firm's principal office D) 5 years, the first 2 in the firm's principal office

D With few exceptions, the accounting records, correspondence, and advertising of investment advisers must be kept for a minimum of 5 years after the end of the year in which they were created, the first 2 years in the firm's principal office (on premises).

Under the Uniform Securities Act, which of the following is an investment adviser? A) The Trust Department of ABC Bank provides investment advice to its clients. B) Jane advises customers regarding the value of gold and silver coins. C) Tom writes a newspaper column that analyzes and recommends securities. D) Jill is an attorney specializing in estate planning who, as a side job, structures portfolios for the beneficiaries of her deceased clients at a reduced fee.

D Although an attorney is generally excluded, Jill is giving investment advice for a fee in a manner that is not incidental to her legal practice. Jane's advice does not concern securities; banks are excluded from the definition; Tom's advice is not specific on the basis of the situation of each client (impersonal advice).

Included in the Investment Advisers Act of 1940 are a number of different recordkeeping requirements. Wealth Preservation Specialists is a covered adviser that is organized as a partnership. If the firm were to dissolve, partnership agreements must be kept for A) the lifetime of the firm B) 5 years from the date of organization C) 5 years after the dissolution D) 3 years after the dissolution

D​ Both ​​the Investment Company Act of 1940 ​(applicable here because this is a covered adviser) and the NASAA Model Rule on Recordkeeping ​require that investment advisers maintain certain records, such as partnership agreements and corporate articles of incorporation, for a period of no less than 3 years after dissolution.

Advisers that manage $110 million or more in customer assets are required to do which of the following? Register with the Securities Exchange Commission File notice with FINRA Post a bond in an amount specified by the appropriate regulatory body File notice with the state in which their principal office is located if notice filing is required by the Administrator

I + IV

In which of the following cases would the Uniform Securities Act require registration of an investment adviser who had no place of business in the state? A) He had more than 5 noninstitutional clients who were residents of the state. B) He had more than 5 institutional clients domiciled in the state. C) His website was seen by residents of the state. D) Under no circumstances is registered required if there is no place of business in the state.

a

The USA places a number of recordkeeping requirements on investment advisers. Records required to be kept by all state-registered investment advisers include all of the following EXCEPT A) a list of discretionary accounts B) a record by security showing each client's interest and location thereof C) emails D) bank records

b

According to the Investment Advisers Act of 1940, which of the following statements regarding registration of investment advisers is TRUE? State registration is a requirement for federal registration. An investment adviser must be registered with the SEC to be registered at the state level.

neither