Unit 1
As defined in the Uniform Securities Act, the term person would include ALL *a limited partnership a political subdivision an unincorporated association the executor of an estate for a deceased individual*
All of these would be included in the USA's definition of person. Not included are a minor, a deceased person, or someone judged mentally incompetent. U1LO1
Under the Uniform Securities Act, which of the following is an investment adviser? A) A) *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.* B) The Trust Department of ABC Bank provides investment advice to its clients. C) Jane advises customers regarding the value of gold and silver coins. D) Tom writes a newspaper column that analyzes and recommends securities.
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). U1LO1
Under the Uniform Securities Act, an accountant who charges hourly fees for securities recommendations in the regular course of his accounting practice is *included in the definition of an investment adviser because he is compensated for giving investment advice in the regular course of business*
An accountant who gives advice in the course of business and receives compensation, hourly or not, for providing the advice in the regular course of business falls within the definition of an investment adviser under the Uniform Securities Act. To be excluded, the advice must be on an incidental basis. U1LO1
Which of the following statements best describes an investment supervisory service as described by the Investment Advisers Act of 1940? D A) An investment adviser sends monthly newsletters to 200 clients offering nonspecific advice. B) An investment advisory firm offers nondiscretionary services on a non-client-specific basis. C) No actions are taken in client accounts without first being approved by a senior supervisory person. D) *An investment adviser provides continuous advice based on the client's individual needs.*
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. U1LO1
Blue-sky laws pertain to all of the following EXCEPT D A) the registration of securities within a state B) the registration of securities salespeople in a state C) the regulation of securities transactions in a state D) *the regulation of securities trading in other countries*
Blue-sky (Uniform Securities Act) laws refer to state securities regulation in the state. Blue-sky laws require new securities to be registered with the state and regulate trading of securities in a state. U1LO1
Which of the following investment advisers would be permitted to use the term "investment counsel"? A firm whose exclusive business is placing clients' assets into model portfolios
In order for the term "investment counsel" to be used, two criteria must be met. *First, the principal business of the adviser must be the rendering of investment advice. Second, the nature of the advice must meet the definition of investment supervisory service. That means giving continuous investment advice to clients based on their individual needs.* *That is frequently accomplished by selecting model portfolios most appropriate to the client's needs.* The financial planner clearly is not principally in the business of offering investment advice because he describes his service as offering a wide range of services, of which advice is only a part. The exam frequently uses that wording to indicate that advice is not the principal activity. While the publisher's principal business activity may be offering advice, nothing about the description indicates that individual client accounts are being monitored. U1LO1
Which of the following statements is *not true* of investment advisers under the Uniform Securities Act? A A) *Compensation is a key factor in determining whether a person is required to register as investment adviser.* B) Only written advice concerning investments is covered by the act. C) Investment advice includes advice regarding the value of securities, as well as recommendations to buy or sell. D) A natural person may register as an investment adviser.
One of the three prongs defining an investment adviser under both state and federal law is the *giving of investment advice.* *That advice can be in written or oral form.* Any person, as defined in the USA, may register as an investment adviser. Even though we tend to think of the investment adviser as the company you will be working for, a significant percentage of state-registered investment advisory firms are sole proprietorships (one-person shops). Investment advice includes advice as to the value of securities, as well as recommendations to buy or sell. Compensation is another one of the three prongs in determining whether a person is defined as an investment adviser. U1LO1
The responsibility for administering the Investment Advisers Act of 1940 lies with the SEC.
The Investment Advisers Act of 1940 is federal law and that comes under the jurisdiction of the SEC. U1LO1
Which of the following would meet the USA's definition of "person"? ALL An individual An unincorporated association A political subdivision
The USA's definition of person is extremely broad. Just remember the three nonpersons: minors, those who are deceased, and those declared mentally incompetent. U1LO1
Which of the following statements are TRUE? 1 and 3 1. *The Uniform Securities Act is not the actual law of any state or territory of the United States.* 2. The National Securities Markets Improvement Act of 1996 requires states and the federal government to have identical registration requirements. 3. *The state securities Administrator has responsibility for the enforcement and administration of a state's securities law.*
The Uniform Securities Act is not the actual law of any state or territory. Rather, it is model legislation that states use as a guide in drafting their own securities laws. Those laws give the responsibility to the state Administrator for enforcement and administration of those laws. The NSMIA's purpose is to eliminate dual registration, not to require identical laws. U1LO1
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 an investment adviser
The definition of investment adviser includes any person who for compensation engages in the business of advising others as to the value of securities or the advisability of buying, selling, or investing in securities or who, as a part of a regular business, publishes securities analyses or securities reports for individual investors on a paid subscription basis. U1LO1
To be defined as an investment adviser under the Uniform Securities Act, which of the following must apply? 1 and 2 1. *Compensation must be received.* 2. *Advice is provided regarding securities.* 3.Advice must be provided through direct written communication.
This question contains 2 of the 3 key "prongs" of the definition of investment adviser. *Those are that the person provides advice on securities and that the person receives compensation for rendering that advice. The advice may be provided orally or in writing.* *The third prong, not included here, is that the person must be "in the business" of providing investment advice.* U1LO1
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? 1 and 3 1. *The person regularly gives advice on securities.* 2. The person derives his earnings from executing transactions on recommended securities. 3. *The person receives compensation from rendering advice on securities.*
To be in the business of rendering investment advice, a person must regularly provide advice about securities and must be compensated for giving such advice. Those whose earnings are based on securities transactions are broker-dealers and/or agents. U1LO1
