SERIES 66- EXAMFX- Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices
A security traded on the New York Stock Exchange is NOT exempt from which Unifrom Securities Act (USA) requirement? A. Anti-fraud B. Registration C. Filing of advertising materials D. All of the above
A. Anti-fraud - A security traded on a national exchange is exempt from registration because of the federal covered exemption. Exempted securities also do not have to file advertising materials. The anti-fraud provisions of the Act cover all securities whether exempt or not.
When broker/dealers effect trades for the accounts of others, they are acting in what capacity?
Agency - When a firm trades for the accounts of others, they are acting in an agency capacity. In this capacity, they are also known as the broker.
When an investment advisory contract has provisions that allow for early termination, contract assignment, or discretionary trading authority, such provisions must be:
Stated in clear terms that the client can understand
An Investment Adviser may charge a performance-based fee to a qualified purchaser. A qualified purchaser is a person with:
$1 million or more under management or net worth of at least $2 million - A qualified purchaser is a person with a million or more under management OR a net worth of at least $2 million.
Some broker/dealers that have no place of business in the state can be exempt from registration. Which of the following does NOT qualify for this exemption? A. A broker/dealer licensed in the state where it maintains a place of business and makes offers only to existing customers who are not residents of that state B. A broker/dealer that has a customer who moves to a state where the broker/dealer is not registered, but the client chooses to continue the brokerage arrangement C. A broker/dealer that only had 2 customers during the previous 12-month period D. A broker/dealer that transacts business only with other broker/dealers, issuers, institutional buyers. or financial institutions
B. A broker/dealer that has a customer who moves to a state where the broker/dealer is not registered, but the client chooses to continue the brokerage arrangement - Broker/dealers who have a customer who moves to a state where the broker/dealer is not registered and has no place of business are exempt from registration only if the customer does not conduct any further transactions with the same broker/dealer.
According to the Uniform Securities Act, investment adviser advertising must: A. Be pre-approved by the SEC B. Not violate the Invest Advisers Act of 1940 C. Be submitted to FINRA within 10 days of first use D. Adhere to the advertising provisions of the USA
B. Not violate the Invest Advisers Act of 1940 - Under the USA, investment adviser advertising that violates the Investment Adviser Act of 1940 is illegal.
All of the following are defined as "persons" under the Uniform Securities Act (USA) EXCEPT: A. Unincorporated businesses B. Partnerships C. Any individual, living or deceased D. Estates
C. Any individual, living or deceased - Deceased individuals are not included in the definition of a person under the USA.
ABC Investment Advisers is experiencing financial difficulty. Which of the following clients are they required to notify pursuant to the USA? A. A client who has signed a promissory note for $1,000 B. A client who has prepaid $250 in advisory fees C. A client who has paid $1,000 for last year's services D. A client who has prepaid $500 for the next 6 months
D. A client who has prepaid $500 for the next 6 months - When an investment adviser becomes financially impaired, any clients who have prepaid $500 or more for at least the next 6 month's services must be notified of the financial impairment.
Notice filings apply to:
Federal covered investment advisers
An Investment Advisory Brochure must disclose:
Must disclose all material information to a prospective client. - An Investment Advisory Brochure is a full disclosure document that must be provided to a prospective client at least 48 hours prior to enter into an advisory contract. It may alternately be furnished at the signing of the contract if the customer is giver a 5-day free-look period which they may opt out of the contract without cost.
When a brokerage firm is acting as a dealer, it is acting in the capacity of a:
Principal - As a dealer firm is acting as a principal while buying and selling securities for its own account
The Uniform Prudent Investor Act sets:
Sets standards by which investment advisers would manage discretionary accounts.
In a stock trading account, "churning" is defined as effecting transactions solely to generate commissions. A similar practice with regard to mutual funds is known as:
Switching - Switching refers to the practice of periodically moving a client from one fund family to another for the purpose of generating commissions.
An estate executor wants to establish an account to deposit assets from a deceased's estate and earn some returns while the estate is settled. What is true when opening this account?
The account is opened in the name of the estate - An estate is a person an may open an account with a broker/dealer with proper executor authorities.
A security will be registered by qualification. What may an agent say to a prospective buyer?
The security will be registered in the State
What is true concerning a registered agent who switches employers?
When an agent transfers directly from one B/D to another, the Administrator must be promptly notified by the agent, the old employer and the new employer - An agent's registration is not in effect during any period when he is not employed by a registered B/D. The agent, old employer, and new employer are all required to notify the Administrator when employment begins or terminates.
An investor owned stock in the corporation where he was an officer. Two days before it was made public that the company would file for a financial restructure, he sold his stock for $50,000. After the news became public, the stock would have been worth $10,000. What is the maximum civil penalty that can be imposed on this investor according to the Insider Trading Act of 1988?
$120,000 - The Act allows a maximum of 3 times the profit gain or loss avoided.
Persons convicted of willful violations under the Uniform Securities Act are subject to criminal penalties up to:
$5,000 fine and/or 3 years imprisonment
Which of the following are acceptable forms of recordkeeping as established by the NASAA? 1. Paper or hard copy 2. Microfilm or microfiche 3. Maintained by customer 4. Public access website
1 and 2 Only
When does the Administrator have the right to subpoena the records of an agent or broker/dealer?
If there is a suspicion that a violation has occurred - The Administrator has subpoena rights of records if there is any suspicion that a violation has occurred. This is the most correct answer of the choices given.
What is an incorrect statement regarding the cancellation or withdrawal of registrations?
The Administrator may cancel a registration if securities-related legal proceedings are being pursued against the registrant - A registration can NOT be terminated while any legal proceedings against the registrant are underway.
On Sept. 1, 2016, an investor discovered that 6 months ago his agent sold him a non-exempt unregistered security that resulted in a substantial loss. Under the Securities Act of 1933, how long does the investor have to file a civil lawsuit?
Until Sept. 1, 2017 - The Securities Act of 1933 states that an investor may bring civil suits within 1 year of discovery of a violation or within 3 years of the date the violation occurred, whichever is earlier. This investor has 1 year from the date of discovery (Sept. 1 2017) since that is the earlier date.
Which of the following is NOT an "offer to sell" or "sale" under the Uniform Securities Act? A. Subscription rights given to shareholders for different securities than those purchased B. A stock bonus given in conjunction with a securities transaction C. A stock dividend distributed to shareholders D. Stock warrants given to buyers of debt offerings
C. A stock dividend distributed to shareholders - A stock dividend distributed to existing shareholders is NOT defined as an offer or sale under the Act.
Which of the following are most likely EXCLUDED from the definition of an investment adviser representative? A. A minority partner in an advisory partnership B. An employee of an advisory firm who performs managerial functions C. An employee of an advisory firm who performs ministerial functions in portfolio selection D. A partner in an advisory firm that is active in the management of the business
C. An employee of an advisory firm who performs ministerial functions in portfolio selection - Employees of investment advisers who perform only clerical or administrative duties are excluded from the definition of an investment adviser representative.
A federal covered investment adviser must retain all of the following documents for a period of 5 years EXCEPT: A. Records of Code of Ethics violations B. Records of the securities holdings and transactions of access persons C. Signed acknowledgments from its customers attesting to their receipt of the Code of Ethics D. Code of Ethics
C. Signed acknowledgments from its customers attesting to their receipt of the Code of Ethics - An adviser must retain signed acknowledgments from its supervised person and employees, not customers.
What is the timeframe for filing relevant Suspicious Activity Reports? A. Within 90 days of the initial discovery B. Within 90 days of the suspicious transaction C. Within 30 days of initial discovery D. within 30 days of the suspicious transaction
C. Within 30 days of initial discovery - Relevant SAR reports must be filed with FinCEN within 30 days of initial discovery of a suspicious transaction.
Which of the following persons is NOT required to file a Consent to Service of Process with the state administrator? A. Investment adviser B. Broker/dealer C. Investment adviser representative D. Agent for an issuer
D. Agent for an issuer - Agents, broker/dealers, IAs and IARs are all required to file Consent to Service of Process with the state administrator. Issuer agents who are exempt from registration are not required to do so.
With respect to advisory fees, and investment adviser may not charge the client a fee that: A. Exceeds the planned rate of return on the portfolio to be managed B. Results in a declining balance on an asset management account C. Includes finance charges on an account balance maintained by the client D. Is considered unreasonable by a prudent individual
D. Is considered unreasonable by a prudent individual - An investment adviser may not charge a client fee that would be considered unreasonable by a prudent individual or not competitive.
An investment adviser wants to name a successor firm to fill an unexpired portion of a yearly registration. The application is submitted, and the registration is granted. Shortly thereafter, the administrator learns that the successor firm was not in existence at the time of the application. Which of the following will most likely happen? A. Charges will be filed against the successor firm B. The registration of both the investment adviser and the successor firm will be revoked C. The successor adviser will need to file a new independent registration D. Nothing, This is legal
D. Nothing, This is legal - If a broker/dealer or investment adviser wants to name a successor firm to fill an unexpired portion of yearly registration, a new application is required, but no additional fees are due. It is not required that the successor firm be in existence at the time of the application.
The Administrator has the authority to do any of the following EXCEPT: A. Issue a cease and desist order to stop the sale of advisory services if another Federal agency issued a similar order B. Subpoena persons for investigations C. Seek injunctions against persons violating the Act D. Suspend registration of persons solely if it is "in the public interest"
D. Suspend registration of persons solely if it is "in the public interest" - The Administrator may suspend or revoke a registration if it is in the public's best interest AND there is just cause in accordance with the Uniform Securities Act, not solely because it is in the public good. All other statements are true.
Which of the following statements is NOT true concerning the De Minimis rule and its application to agents? A. The agent's broker/dealer must be registered in the state of the business transaction, and the agent must be registered in at least one other state B. An agent can conduct business with a current client who is in the state temporarily C. It only applies to agents who are eligible to register in the state D. The agent may transact business for up to 90 days in a state in which his registration is still pending
D. The agent may transact business for up to 90 days in a state in which his registration is still pending - The agent must be eligible to register in the state; the agent's broker/dealer must be registered in the state; the agent must be registered with FINRA, and must already be registered in at least one other state. If an agent's application is pending in that state, the agent can effect transactions for up to 30 days for a client who has moved to that state. An agent can conduct business with a current client who is temporarily in the state.
Which of the following is a guaranteed security? A. Money market fund B. Prefunded corporate bond C. Collateralized bond D. U.S. savings bond
D. U.S. savings bond - Guaranteed securities are guaranteed as to payments of dividends and interest. U.S. government securities, such as savings bonds, are guaranteed securities.
Unless renewed, registrations expire:
Each December 31st - Most states have annual expirations on December 31st, regardless of filing date.
An adviser/agent uses a compensation plan that incorporates both advisory fees and commission on the securities that he markets. What is true concerning this arrangement?
He must disclose how the fees and commissions are charged and calculated prior to giving any investment advice - Since thus form of compensation plan can often have a potential conflict of interest on the part of the adviser, the adviser must disclose how his compensation is generated prior to starting the advisory relationship.
A Canadian broker/dealer has an existing Canadian client who relocates to Chicago. The broker/dealer continues to transact business with this customer in her tax-qualified account. What is a true statement regarding this situation?
If the customer opens a taxable account, the broker/dealer and the representative must register with the SEC and with Illinois - Neither the broker/dealer nor the registered representative must register with the SEC if the customer's business is limited to exempt securities and/or exempt transactions. They must register with the SEC and any state in which they are transacting business if they open a place of business in the United States, OR their existing relocated customer is transacting business in an account other than a tax-qualified account.
Where must an agent be registered?
In each state in which he effects securities transactions
Which of the following are specifically excluded from the definition of a security? 1. Fixed annuties 2. Commodities futures contracts 3. Multilevel distributorships 4. Commodity options contarcts
1 and 2 Only - Fixed contracts and futures are not securities.
The administrator may: 1. Initiate a private investigation 2. May require written statements under oath 3. May impose a jail sentence 4. May enforce a subpoena
1 and 2 Only - The administrator petitions the court system to enforce subpoenas. The administrator refers criminal cases to the court system for prosecution.
Which of the following is NOT a government-issued security? 1. REIT 2. Treasury stock 3. Municipal bonds 4. Ginnie Mae
1 and 2 Only - Treasury stock is a corporate security. REITs are not government securities.
Under which of the following circumstances may a state administrator cancel an investment adviser representative's (IARs) registration? 1. The IAR is deceased 2. The IAR has been found guilty of a securities related felony 3. Letters the administrator sent to the IAR are returned marked "addressed unknown" and the IAR's phone is disconnected 4. The IAR's investment adviser filed Form ADV-W
1 and 3 Only - The administrator may cancel a registered person's registration of a person who is no longer in existence, found to be mentally incompetent or cannot be located.
A registration fee: 1. Is required for all initial applications 2. Is not required for renewal applications 3. Will be refunded in full if the registration is denied 4. Will be partially refunded if he registration is denied
1 and 4 Only - Every state requires payment of a registration fee for all initial and renewal applications. If the registration is denied or withdrawn, the administrator may retain a portion of the fee.
An agent's deliberate omission of a fact in a securities transaction constitutes fraud: 1. If a reasonable person would base a decision on the omitted information 2. Only the information given was known to be true 3. Only if the offering is a new issue of a security 4. If the information is relevant to an investment decision
1 and 4 Only - Omission of material information constitutes fraud if a reasonable person would make a decision based on the information, regardless if the offering was a primary offering or secondary market transaction.
What are two true facts/statements concerning Investment Advisory contracts?
1. An Investment Advisory Brochure must be provided to the customer AND 2. If the contract is found to be in violation of provisions of the Act, it is void and unenforceable against the customer - A contract is required and must be preceded by a Brochure. Any contract that is in violation of the Act is unenforceable.
If the adviser inadvertently commingles client funds and securities with his own, what steps would the adviser be required to take?
1. Inform the state administrator in the principal state of residency by the end of the next business day AND 2. File a report with the state administrator by the day after notification of the deficiency - When the adviser inadvertently or intentionally commingles customer funds and securities with those if the adviser, it is required to notify the home state administrator by the end of business the next business day. Additionally, the adviser must file financial reports with the home state administrator by the end of business on the day following the notification.
The Prudent Man Rule dictates that fiduciaries must:
1. Make prudent investment decisions AND 2. Provide for the needs of the beneficiary - Customer approval is not required for each trade in a fiduciary account. Fiduciaries must make prudent investment decisions, which might not always include the most conservative alternative, and they must attempt to meet the needs of the beneficiary.
What are the two statements that are true regarding soft dollars?
1. Soft dollar relationships must be revised regularly and 2. Soft dollar expenditures are provided in exchange for potential securities transactions
Client account information must be kept confidential and may only be released under what circumstances?
1. Under a court order or legal decree AND 2. With the consent of the client
An administrator can deny registration to a person convicted of a misdemeanor involving securities or has been convicted of any felony within the past:
10 years - So, an administrator can NOT deny registration of someone who has violated these crimes 20 years ago.
An investment adviser must: 1. Be registered in each state 2. Be registered to receive compensation for advice 3. Provide advice, analysis, or reports concerning securities in the regular course of business 4. Offer incidental investment advice
2 and 3 Only - Large investment advisers are registered with the SEC. Small investment advisers are registered at the state level. Investment advisers must be registered to receive compensation for advice and provide advice, analysis, or reports concerning securities in the regular course of business.
Under the Uniform Securities Act, which of the following would be considered a person? 1. The beneficial owner of an UGMA 2. A government 3. A joint stock company 4. A recently deceased individual
2 and 3 Only - Under the Act, a person is defined as an organization or group, as well as an individual. The definition excludes minors and deceased individuals.
The definition of an investment adviser representative includes: 1. Employees of an investment adviser who solely perform clerical duties 2. An individual associated with an investment adviser who only manages accounts for others 3. Employees of investment advisers who only perform administrative duties 4. Investment adviser employees who supervise activities of IA representatives
2 and 4 Only
An Investment Advisory Brochure: 1. May be used in lieu of a written contract if it is complete and current 2. Must be furnished prior to execution of a written contract 3. If the only form of IA advertising permitted under the Uniform Securities Act 4. May be used in lieu of Form ADV part 2 if it is current and contains all required disclosures
2 and 4 Only - Either the IA brochure or form ADV part 2 must be furnished to a prospective client 48 hours prior to executing a contract. It may be presented at the time of contract execution if the client is given a 5-day free-look period in which to opt out without penalty.
Under the USA, when do registrations of persons become effective?
30 days from the filing date - Registrations under the Uniform Securities Act become effective 30 days from the filing date. If an amendment to the application is filed, the effective date is 30 days from the filing date of the amendment.
An investment adviser wants to conduct business in this state but is not yet registered. What is the maximum number of clients that the adviser can solicit during a 12-month period before registration will be required?
5 - Investment advisers who have no place of business in the state and solicit no more than 5 retail clients in the state in a 12-month period are exempt from registration under the De Minimis rule
An offer to sell a security is made by a California television station. The ad is also viewed in Arizona. The offer to sell would fall under which state's jurisdiction? A. California B. Arizona C. Both D. Neither
A. California - Under the USA, the offer to sell would fall under the state in which the offer originated.
Which of the following is NOT a permissible soft dollar expenditure? A. Computer systems B. Educational seminars C. Subscriptions to securities publications D. Portfolio management software
A. Computer systems - Soft dollars may only be spent on items which directly benefit customers and not on overhead or items which benefit the investment adviser. Office furniture, computers, personnel, and travel expenses to educational seminars are not permissible.
Which of the following is NOT an exempt security under the Uniform Securities Act? A. Corporate bond trading on the OTC market B. U.S. Treasury notes C. Canadian provincial bonds D. NYSE common stock
A. Corporate bond trading on the OTC market - Over-the-counter securities are nonexempt and must be registered.
Which of the following statements regarding registration filing fees is FALSE? A. Fees may be waived only if there is a current surety bond in effect B. They are required with initial and renewal applications C. The Administrator may retain a portion of the fee if registration is denied or withdrawn D. Unless the fees are submitted, registration will not be granted or renewed
A. Fees may be waived only if there is a current surety bond in effect - The registration fee is required on all initial and renewal applications and is NOT waived if a surety bond is in effect.
All of the following employees of a broker/dealer are considered an agent under the Uniform Securities Act (USA) with the EXCEPTION of a person who: A. Gives securities quotations over the phone B. Performs the function of accepting customer orders C. Transacts business only in exempt securities D. Transacts business only in nonexempt securities
A. Gives securities quotations over the phone - An agent is a person that effects a securities transaction. Giving quotation does not affect a transaction and is exempt from the definition under the Act.
In order to reduce trade execution costs, an Investment Adviser combined several customer accounts that use the same model portfolio. Which of the following statements regarding combining customer accounts is correct? A. It is commingling and only permitted with prior written consent from the customers B. It is permissible as long as customers are notified in advance C. It is commingling and never permitted under any circumstances D. It is permissible as long as every customer receives a trade confirmation and quarterly statements
A. It is commingling and only permitted with prior written consent from the customers
A minority stockholder in an ABC Investment Adviser Corporation sells her stock to a new investor. With regards to client contracts, what is required? A. Nothing B. Written consent of the clients to assign their contracts C. Prior written notice to clients of the change in ownership D. Prompt written notice to clients of the change in ownership
A. Nothing - Changes in minority stock interest do not require any action. Changes in minority partnership interest require prompt written notice.
Which of the following is FALSE regarding performance-based fees? A. They are never allowed B. Fees based on total assets under management are not considered performance-based fees C. They may be assessed on persons with a net worth of at least $2,000,000 D. They may be assessed on persons with at least $1,000,000 in assets under management
A. They are never allowed - Under the circumstances listed in the answer choices, performance-based fees are permissible.
Administrators require that investment advisers provide full disclosure to clients at least 48 hours prior to entering into an advisory contract. This disclosure document is usually referred to as:
An Investment Advisory Brochure - The Investment Advisory Brochure is intended to provide the prospective client all material information concerning the advisory contract.
A registered investment adviser paid a large sum of money to settle a lawsuit. As a result, the firm's net worth fell to $22,000. The adviser has discretion over customer accounts; however, the client's funds are held at a large custodian bank. Under these circumstances what is the adviser required to do? A. Notify all of the clients that the adviser's net worth has fallen below $35,000 B. Do nothing C. File a report with the state administrator by the end of the next business day D. File a report with the state administrator on the day that the net worth falls below $35,000
B. Do nothing - Because the adviser does not have custody of a client's assets, the minimum capital requirement is $10,000, and the adviser is not required to do anything.
A CPA for XYZ Corp. knew in advance that XYZ would report a quarterly earnings loss. Based on this knowledge and prior to the release of the company's quarterly earnings report, the CPA sold short a large block of XYZ stock which drove down the price of the stock. Another investor who had entered an order to sell XYZ at the market around the same time sold at a very low price due to the CPA's block trade. What legal recourse does the investor has against the CPA? A. Disgorgement of trading profits from the CPA B. File a lawsuit for damages C. Fine the CPA $5,000,000 for insider trading D. Receive treble damages from the CPA
B. File a lawsuit for damages - This is an example of contemporaneous trading; investors who are harmed by insider trading can sue the violator for damages.
ABC securities is a broker/dealer located and registered in Connecticut. Many of its Connecticut customers spend the winter months in Florida. Beth, an agent with ABC, spend several weeks in a Miami hotel each winter, servicing ABC customers. Which of the following is true? A. If ABC has fewer than 3 customers who winter in Florida, it does not have to register in Florida B. Neither ABC nor Beth must register in Florida if Beth solicits no new business from Florida residents C. If Beth services fewer than 5 customers per year, she does not have to register in Florida D. Both ABC and Beth must be registered in Florida
B. Neither ABC nor Beth must register in Florida if Beth solicits no new business from Florida residents - If the broker/dealer only services existing customers who are temporarily in the state, neither the broker/dealer nor the representative have to register in the state.
Under the Uniform Securities Act, which of the following may be defined as a "person"? 1. An insurance policy 2. A minor 3. A business trust 4. A government body
3 and 4 Only - Business trusts and government bodies or political subdivisions are among the definitions of " a person" under the Act. Insurance policies are not persons. Minors are excluded from the definition because they may not legally enter a contract.
At the time a broker/dealer becomes registered, what is true regarding current officers, directors and partners in the firm?
If they act in the capacity of an agent, they automatically become registered as agents at that time
What is an FALSE statement with regard to the use of material facts in effecting transactions?
Material facts must be disclosed only if they would have a negative impact on the security's value - This is a FALSE statement. Material facts must be disclosed regardless if they have a positive or negative effect on the transaction.
An applicant passes the written examination required to become registered. Which describes the person's status?
Not yet registered - Applicants can not transact business until all required items are filed and the registration is granted by the administrator.
What is the name for a letter mailed to the State Administrator indicating an issuer's intent to sell federally covered securities in that state considered?
Notice Filing
Issuers engage in:
Primary transactions - When the issuer receives the money, it is a primary transaction.
An investment adviser representative (IAR) has a friend who is affiliated with a broker/dealer and who makes commission based on each transaction made. The friend told the IAR that she would split any commissions that result from the IAR's client's transactions. What is the IAR's duty regarding disclosures to her client?
She must disclose the affiliation and the commissions being paid - An investment adviser representative must disclose any material fact that is in the client's best interest to know. Any arrangement that the adviser has which generates fees or commissions falls into this category and requires disclosure.
The right of rescission under the civil liabilities provisions of the Act allows a customer to recover:
The cost of the securities plus interest less any income received from the security - Rights of rescission are available for civil violations under the Act, and allow the customer to recover the price paid for the securities plus interest, minus any income received from the security.
What best describes a situation where "soft dollars" "have been used"?
There is an alliance between specific broker/dealers and financial managers where the broker provides services in exchange for potential transactions - The concept behind soft dollars is that mutual fund managers form an alliance with specific broker/dealers who provide research or brokerage services in exchange for potential future transactions with that broker/dealer. Such alliances can cause a conflict of interest when abused.
What is the purpose of an underwriting due diligence meeting?
To determine if due diligence was exercised in all areas of the offering - All aspects of the offering are reviewed to determine if due diligence has been exercised in all areas.
Which form of registration is available only to seasoned companies in certain states?
Notification filing - Registration by filing is available only to well-established companies that can meet stringent financial requirements.
Under the Uniform Securities Act, the best definition of "guaranteed" is:
A security backed by a specific entity that guarantees payment of principal and interest or dividends when due
Over the last several months, a registered representative (RR) has been encouraging a client to trade in several different securities in excess of the client's normal trading behaviors. In this situation, the RR's behavior would be considered:
An illegitimate trade practice known as churning - The RR is engaged in a trade violation known as churning. Have the client trade actively in the market when it doesn't meet the client's investment objective, financial ability, or the character of the account is not allowed.
An investment adviser's compensation may come from: A. A percentage of capital gains in an account B. A percentage of all assets under management C. Commissions from trades effected for the customer D. All of the above
B. A percentage of all assets under management - An investment adviser may only receive compensation from the total assets under management. He may not share in the gains and losses or receive a commission on transactions in the account.
In which of the following accounts does an investment adviser NOT have custody of customer assets? A. The investment adviser may withdraw cash from the account B. The investment adviser has trading authority over the account C. The investment adviser has authority to withdraw securities from the account D. The investment adviser has authority to withdraw its advisory fee from the account
B. The investment adviser has trading authority over the account - Trading authority is not custody; custody is the ability to withdraw funds and securities.
An agent might already be registered with the state but in order for registration to be effective the agent needs to:
Become associated with a registered broker/dealer or an issuer - An agent's registration is in effect only while the agent has an association with a registered broker/dealer or issuer.
An agent might already be registered with the state, but in order for the registration to be effective the agent needs to:
Become associated with a registered broker/dealer or an issuer - An agent's registration is in effect only while the agent has an association with a registered broker/dealer or issuer.
Jack is an agent with Revco Securities in New York. Each winter, Jack visits Florida to service Revco clients who spend the winter months there. While servicing existing clients in Florida, Jack also solicits new business there. What is true for this situation?
Both Jack and Revco must register in Florida - Because Jack is soliciting new business in Florida, both Revco and Jack must register in Florida. If Jack only services existing customers who are temporarily in Florida, neither Revco nor Jack have to register in Florida.
When an adviser retains custody of a client's securities, certain disclosures must be made to the client. Which of the following is NOT a required disclosure? A. A quarterly statement listing the number of shares of all securities held by the adviser for the client B. A quarterly statement regarding the account value and the transactions which have occurred since the last statement C. A monthly statement listing all securities of which the adviser has custody D. An annual surprise audit statement by an independent accountant
C. A monthly statement listing all securities of which the adviser has custody - The adviser must send statements to a client on at least a quarterly basis which lists all securities that the adviser has custody of, the number of shares, the value of the account and all transactions that have occurred since the last statement was sent.
Which statement concerning an agent with multiple registrations is NOT true? A. The agent must submit separate registrations through each employing broker/dealer B. Both broker/dealers must agree to the dual registration C. Some states allow multiple registrations when the firms are under common control D. An agent may be employed by two broker/dealers only if they are located in separate states
D. An agent may be employed by two broker/dealers only if they are located in separate states - Some state administrators may prohibit multiple registrations unless the broker/dealers are affiliated.
An investment adviser is NOT required to deliver a brochure when providing: A. Investment advice to an individual with a net worth in excess of $2 million B. Investment advice to an institutional investor C. Advice to a client when the adviser does not have custody of the client's assets D. Impersonal investment advice for less than $500 per year
D. Impersonal investment advice for less than $500 per year - Advisers are NOT required to deliver a brochure if they enter into a contract with an investment company or for impersonal investment advice or if an adviser charges less than $500 a year.
Which of the following is TRUE concerning broker/dealer successor firm applications? A. A filing must be included with the successor firm registration application B. The term of the successor firm registration begins 30 days after the original firm ceases to do business C. The initial successor firm registration remains effective for 18 months unless otherwise directed by the Administrator D. The successor firm need not be in existence at the time of application
D. The successor firm need not be in existence at the time of application - A filing fee is not required with the initial application. The registration becomes effective on the date the original firm ceases to do business and remains in effect only thru the unexpired portion of the year.
You have a discretionary account with a new client. You recently noticed an opportunity with a stock that you thought would be perfect for your client's account, so you made a transaction to purchase 100 shares for the client. What must you do since this is the first trade on the account?
Obtain the client's written discretionary authority within 10 days of the trade date
An agent who is registered in Illinois works for a broker/dealer that is registered in all 50 states. One of her Ilinois clients owns a vacation home in Wisconsin and invites the agent to Wisconsin for a summer vacation. A Wisconsin neighbor meets the agent and wants the agent to handle his investments. Under what circumstances may the agent transact business with this neighbor?
The agent must file for registration in Wisconsin prior to doing business with the neighbor in Wisconsin - Because the agent is not registered in Wisconsin, she cannot solicit new business there. The agent must file for agent registration in Wisconsin before she may conduct business there.
