63 - 2 - Final - part C (IA IAR)

Financial requiernments of IAR

- not net worth requiered -if IAR has discretionary athoridy then bond may be requiered

IAR advertises to public meeting with prospective clients out of state

-advertise is solicite -prospective clients out of state -requiered to have office must register

IAR passing through to and contacts clients to tell them available to meet up

-contacts clients out of state and notifies them will be passing through the town (not an advertisement to public) - assume exisiting clients -exempt from registration out of state

types of investment advisors

-financial planners - make recommendations for individuals personal finance -pernsion consultants - advise employee benefit plans -and sports / entertainment reps. - investment tax budgeting and money managment for entertainers and sports people

B/D offering this wrap fee must disclose to clients

-how much fee is and what it covers -whether fees are negotiable - any fees client may pay in addtion to the wrap fee ***-a statement that says it may be cheaper for clients to to purcahse advice separately

IAR

-makes recommendations gives advice on securities*** -manages client accounts -determines which advice should be given -solicits/negotiates for the sale of advisery services -supervices employees who perform the above

what is not included in the def of IA

- IAR -*Federal covered advisers registered with the SEC - LATE (lawyers, accountants, teachers, and engineers) whose advisory services are incidental/not a major part to their professional practices (NOT A REGULAR BUSINESS not advertised as IA and does on regular basis) -banks, savings, and trust companies -B/D whose advisory services are incidental to their B/D business and who receive NO special compensation for the advice. -general print, tv, and radio -any other person admin specifies

de minimis exemption

- applies ONLY to IA or IAR -IA can have 5 or less customers not in the state of its business during thepast year

*federal covered IA are thoes who are requiered to

-not defined as an IA by the IA Act of 1940 -manages an investment company registerd under the act of 1940 regardless of amount of AUM -register with the SEC

T or F if a fed covered IA only deals with clients who are insitutions they DO NOT have provide notice filing to admin

-notice filing is just a way of the admin to make money on fees. a federal covered IA gives notice to admin/state that it will be selling sec in its state. of course it pays a fee to notice the adim; admin wants to make $. *notice filing is NOT requiered if clients are institutions. -the admin can request all documents submitted to the SEC for the federal covered IA registration

Automatic registration IAR

-partners officers directors submit theri info with the ADV form part 1A so they do not have to re apply seperate this does not mean that they do not have to take exam. NOTE not all partners directors ... will be auto registered. ONLY those who are performing function that requiers them to registered as an IAR

which of the following is considered a place of business of a IAR 1-An office from which the representative regularly provides advisory services to clients. 2-A location published in a professional directory, indicated on business cards, or telephone book listing that identifies it as a place where the representative will be available to meet or communicate with clients. 3-A hotel or auditorium at which the representative has advertised to the public that he will be available to conduct advisory business at that site. 4-A hotel meeting room identified only to current clients as a place the representative will be available to conduct advisory business.

1,2,3 anything publically advertised a location where business is done on a regular basis

Which of the following are required to register with a state Administrator? 1-Investment adviser representatives of federal registered advisers who have natural person clients and have a place of business in the state. 2-An investment adviser who has no place of business in the state and has 5 advisory clients in the state. 3-An employee of a federal registered investment adviser who has no natural person clients and is limited to performing administrative functions.

2 only The investment adviser representatives of a federal registered adviser are required to register in each state in which they do business

*Under the NSMIA, the term "federal covered adviser" includes a person: A-registered with the SEC under the Investment Advisers Act of 1940. B-registered as an investment adviser in 2 or more states. C-excluded from the definition of an investment adviser under the Investment Advisers Act of 1940. D-required to register with the state Administrator.

A and C A-registered with the SEC under the Investment Advisers Act of 1940. C-excluded from the definition of an investment adviser under the Investment Advisers Act of 1940.

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 subsidiary of a bank holding company located in the state that manages $70 million in assets. C) A commercial bank with a place of business in the state that advises clients on investment matters. D) An accountant located in the state who offers general securities advice as an incidental part of his business.

A bank holding company's investment subsidiary that manages less than $100 million in assets is an investment adviser subject to the Uniform Securities Act (USA **commercial bank is excluded from the definition of investment adviser whereas a bank holding company subsidiary is not. An accountant located in the state that offers general securities advice as an incidental part of his business is not an investment adviser.

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

A) A broker/dealer who receives a flat fee for analyzing a customer's investment objectives and recommending a portfolio of securities.

Which of the following statements is NOT true of investment advisers under the Uniform Securities Act? A) Only written advice concerning investments is covered by the act. C) Compensation is a key factor in determining whether a person is required to register as investment adviser. D) Investment advisory contracts must be in writing.

A) Only written advice concerning investments is covered by the act. can be direct or indirect TV print radio reports semiar

event granted news letter

cannot be exempt of the deff. of IA. **Is an IA and must register as such because the news letter was issue as a result of a specific market event

client that exempt the IA from registration

insitutional clients in the state of no business -banks savings trusts agencies employee benefit plans +1MIL assets exiting clients on vacation in the state of no business -snowbird / vacation / MBA de minimis exemption: limit of 5 or less out of state clients during the past year

LATE

laywers, accountants, teachers, and engineers who's advice is incidental to their profession are not IA -must provide direct or indirect advice for direct or indirect compensation as a business -must advertise as an IA to the public

investment advice solely incidental

not as a major part of business no required to register

General print, tv, and radio

not considered IA and does not have to register IF it provides general information and NO advice about a specific client situation or a specific security.

IARs for federal covered registration

must be registered where the individual natrual person has a place of business - an office where the IAR regularly provides services -any location at which the investment advisor rep. provides services or solicites meets or communicates with clients

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) under no circumstances if there is no place of business in the state. B) he had more than five non-institutional clients who were residents of the state. C) his website was seen by residents of the state. D) he had more than five institutional clients domiciled in the state.

B) he had more than five non-institutional clients who were residents of the state.

An investment adviser is registered in New Jersey and has offices in Georgia and Arkansas. One of their IARs lives in Georgia and in addition to his local clients, has one client who lives in Arkansas. The IAR would be required to register in: A) Georgia and Arkansas. B) Georgia, Arkansas and New Jersey. C) Georgia. D) Georgia and New Jersey.

C) Georgia. de minimus rule exemption applies to IA IAR 5 or less clients

An individual employed by a federal covered adviser would be required to become registered as an IAR in the state if A) the only clients receiving the individual's advice are insurance companies located in states where the individual does not maintain a place of business B) the only function performed by the individual is preparing the layout of a research report prepared by the firm C) the only clients receiving the individual's advice are large pension plans organized for employees of municipalities located in the state where that individual maintains an office

C) the only clients receiving the individual's advice are large pension plans organized for employees of municipalities located in the state where that individual maintains an office -to be exempt must have inst. clients outside of state pension plan must have 1 mil of assets or more

Charles & Goode located in illinois has had less than 100 mil until this year it has 120 mil of AUM

must register with SEC within 90 days -hit the mark of 110 or greater AUM -if goes down to 90 AUM must register with state 180 days

Charles & Goode has 120 MIL in AUM most of their clients are from illinois, but they have 3 individual clients in Wisconsin and 30 non institutional cilents in Indiana

must register with SEC within 90 days SEC registration = no registration in any state only notice filing after becoming federal covered IA, Charles & Goode does NOT have to register with ANY STATES including illinois where its head office is!!! -just have to notify that you will be providing advice in the state to the admin and pay the filing fee plus if admin wants documents u provide everthing sent to the SEC

An individual functioning as an IAR for a federal covered IA, with no place of business in this state, would be required to register in this state if: A) he only dealt with investment companies located in the state. B) he had a time-share in the state. C) the investment adviser had a small office in the state. D) he made frequent sales trips to the state.

D) he made frequent sales trips to the state. making sales trips to a state is considered to be having a place of business in the state. It makes no difference what kind of clients the IAR serves. Under the Uniform Securities Act, making sales trips to a state is considered to be having a place of business in the state

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

D) the state in which its principal office is located

NSMIA

national securities markets improvement acts -eliminates the need to register with both the state and SEC for IA -small IA register with state -large IA register with SEC

T or F 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.

False if not included in the def of IA under the 1940 act... then the person is a federal covered advisor and subject to the SEC rules not the admin

T or F A person with a place of business in the state who transacts business exclusively for the accounts of banks and savings institutions is not a broker/dealer under the Uniform Securities Act.

False - is a B/D the question does not say that the Inst. clients are out of state, therefore we assume they are in the same state. A person who conducts business exclusively with banks and savings institutions is a broker/dealer 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.

a publisher that has a newsletter and chargest a subscription fee the newsletter does not provide specific advice about the needs of any subscriber registration IA requered?

no because it is not a newsletter with specific information for a specific client

a california registered IA has no office in any other state. The business transacted with other IA in Oregon would the california IA have to register?

NO B/D to out of state institutional is exempt

T or F 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.

True - not IV and not subject to state or fed reg as an IA. *incidental - no on a major basis no on a regular business * no additional fee charged for advice

compensation

a person who receives an economic benefit as a result of providing securities advice is an IA -can be direct or indirect -fees, commissions, and other payment related to the services

financial requiernments of IA

admin my requier min financial requiernments for STATE COVERED IA is called the net worth. the state IA only has to meet the financial requiernments of where its principal location is. -also may have to post bonds for custody (35) or discretionary athority (10) can be cash or securities

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?

advertising as an IA and has regular business service as IA charges fee

An agent opening a wrap account for a wealthy client may tell the customer that: A) wrap fees generally result in higher costs than separate charges for advice, management, and transactions. B) wrap account managers will generally outperform index funds. C) wrap fees may result in higher costs than separate charges for advice, management, and transactions.

agents are required to disclose to customers that wrap fees MAY result in higher costs than separate charges For those clients that are able to make use of all of the services provided, the costs will generally be lower

Under the Uniform Securities Act, the definition of an investment adviser does NOT include: 1-investment adviser representatives. 2-lawyers and accountants whose investment advisory services are solely incidental to their practices. 3-broker/dealers who offer investment advice on an incidental basis without special compensation for the advice provided. 4-federal covered investment advisers.

all the above

What is a IA

an person legal entity that solicites or provides advice services for a specific client on a regular basis and gets paid fees/commission as part of a business. KEY IA advertise to the public that they are an IA.

NSMIA/dodd frank cutt off point for state vs fed covered registration

based on assets under management AUM -small size IA - state (-25 mil) AUM - mid size IA - state (=25 to -100 mil) AUM -federally covered IA - SEC (=100+ mil) AUM *required SEC at 110 mil 90 days *requiered state at 90 mil 180 days

state vs federal covered IA

benefit of federal covered IA is that you DO NOT Have to register in any states just provide notice filing and if requested SEC papers state IA must register in the state it does business in or where it solicites for advisory services unless exempt transaction

fiduciary

custody a person appointed to hold and manage the assets for another person. -investment advisor - securities - executor of state -trustee

a california registered IA has no office in any other state. has provided advice for 5 retail clinets within the past year in New York. does the california IA have to register in new york?

de minimis exemption = 5 or less clients out of state within the past year or 12 months the IA does not have to register in new york unless it has more than 5 clients

SEC Release IA-1092

defines what an IA is financial planners, pension consultants, and sports and entertainment representatives IA is any person that: -provides investment advice/recommendations, reports, or analyses with respect to specific securities as a business -receives compensation directly or indirectly for thoes services

In response to an evolving marketplace, the SEC, through Release IA-1092, expanded the coverage of the definition of investment adviser to include: 1-broker/dealers offering wrap fee programs. 2-financial planners. 3-life insurance agents. 4-pension consultants.

financial planners sports enter pension consultants 2 and 4

what is not included in the def of IA - B/D

if B/D provides advice services that are incidental to its regular business and they receive NO seperate fee for the advice then it is NOT an IA a B/D that is seperatly compensated for advice is an IA and needs to register as such

termination procedures IAR

if state covered - IA tells admin if federal covered - IAR tells admin

registration for IAR is not effective when

not working for IA must be sponsored

ADV form A1 and A 2

provide information about the IA -location of business -location of books -form of business -if they maintain custody or discretion of client accounts -other business activities (B/D) -displanary history FED IA ONLY HAS TO COMPLETE A1 ... the State can request to see A1 for notice of filing

Charles & Goode has 90 MIL in AUM most of their clients are from illinois, but they have 3 individual clients in Wisconsin and 30 non institutional cilents in Indiana

should already be registered in Indiana and have an office there - exceeds the de minimus exemptin of 5 or less clients does not need to register in Wisconsin - de minimus exemption (5 or less clients out of state applies to IA and IAR)

Investment advisers who have less than $100 million in assets under management register at which of the following levels? State. Federal.

state only less than 100 mil state 100 mill = sec or state 110 must reg with state

ADV B1 and B 2

talk about customer related information - types of clients and their education and busienss background -compensation arrangements - methods of analysis used for giving advice (tech vs fundemental)

ADV form

the application that has to be filled to register as an IA four parts A1, A2 - information about the IA B1, B2 - customer related information federal covered IA only need to fill out A1

Wrap fee programs

when a B/D includes a wrap fee program and within that wrap free program they provide advice for securities then the B/D MUST be registered as an IA. no exemption when wrap fee includes advice.