Units 3 and 4

Which of the following conditions would most likely meet compliance standards of state regulators? A)Training both supervisory personnel and agents on the difference between interactive and static content B)Maintaining an under-the-radar system of monitoring social media use by its agents is permissible when determining compliance with NASAA's rules. C)Requiring only those in a supervisory role need to recognize the difference between business and non-business communications. D)At a minimum, a firm that permits use of social media sites, holding biennial training as part of its continuing education obligations.

A)Training both supervisory personnel and agents on the difference between interactive and static content Before allowing associated persons to use social media for business purposes, a firm's policies and procedures must provide for personnel training and education relating to the parameters of permitted use. Both supervisory personnel and agents need to understand the difference between interactive and static content, between business and non-business communications. A firm should consider requiring training in the use of social media before permitting use. At a minimum, a firm that permits use of social media sites must hold annual training as part of its continuing education obligations.

When a brokerage firm sells stock from its own inventory, it is acting in the capacity of A)a principal, and charges a markup B)an agent, and charges a commission C)an agent, and charges a markup D)a principal, and charges a commission

A)a principal, and charges a markup A broker-dealer that purchases securities for, or sells securities from, its inventory is acting in the capacity of a principal. Principals charge markups on sales from inventory. When acting in the capacity of agent (facilitating a transaction between a buyer and seller), the broker-dealer receives a commission.

Consent of the client before completion of a trade made between the firm and a client must be made when A)an investment adviser will be acting in the capacity of a principal B)a broker-dealer will be acting in the capacity of an agent C)a broker-dealer will be acting as a contra-party to the trade D)a broker-dealer will be acting in the capacity of a principal

A)an investment adviser will be acting in the capacity of a principal In those uncommon cases where an investment adviser acts in the capacity of a principal (or agent) with an advisory client, consent of the client before completion of the transaction is required. In the case of broker-dealers, disclosure of capacity, (acting as a broker [agency] or dealer [principal]) on the trade confirmation, but not consent, is needed.

A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclose all of the following fees EXCEPT A)commissions on unsolicited trades B)account transfer fees C)charges for wiring funds D)account maintenance fees

A)commissions on unsolicited trades There are 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are: 1) commissions; 2) markups and markdowns; and 3) advisory fees for those firms that are also registered as investment advisers.

Under the Uniform Securities Act, the Administrator may designate another officer to A)serve subpoenas B)issue a cease and desist order C)set recordkeeping requirements D)grant registration exemptions

A)serve subpoenas An official designated by the Administrator may serve subpoenas since that is basically an administrative function: however, an Administrator may not designate another official to grant registration exemptions or issue cease and desist orders. The recordkeeping requirements are set by law and cannot be altered by the Administrator.

An agent is discussing an equity index annuity purchase with a client. The agent explains that there are several which she feels are equally suitable for the client, but one of the companies is offering a trip for 2 to Las Vegas for reaching certain sales goals. She continues by stating that this sale will put her over the goal and win her the trip. If the client purchases that annuity, the agent A)should pack her bags for the trip; she earned it B)should pack her bags and leave the firm before the compliance department learns of her actions C)should only sell what is suitable for the client based on all available information D)will probably be disciplined for failure to disclose the potential conflict of interest

A)should pack her bags for the trip; she earned it The annuity recommended by the agent is offering an incentive. The agent is clearly disclosing that fact to the client and, if the client goes ahead and makes the purchase, it is with full knowledge of the potential conflict of interest. The question states that the agent considers this annuity, along with others, to be suitable.

In order for the Administrator to suspend an agent's registration, compliance with the requirements of the Uniform Securities Act would NOT require that A)the agent receives court-appointed defense counsel if she can't afford her own B)notice is given of the proposed action and hearing C)notification is given to the employing broker-dealer of the final order D)the agent is presented with an opportunity for a hearing

A)the agent receives court-appointed defense counsel if she can't afford her own The Administrator may by order summarily postpone or suspend registration, pending final determination of any proceeding under the USA. The hearing is not in a formal court so there is no court to appoint defense counsel. Upon the entry of the order, the Administrator shall promptly notify the applicant or registrant, as well as the employer or prospective employer, if the applicant or registrant is an agent or investment adviser representative, that it has been entered and of the reasons therefor and that within fifteen days after the receipt of a written request, the matter will be set down for hearing. Since the law states that the employer will be notified once the action commences, it should be obvious that once the suspension order becomes final, the employer will be notified.

For larger accounts, a broker-dealer is least likely to waive its normal fee for A)transferring the account to another broker-dealer B)the annual account maintenance charge C)wiring funds to the client's bank D)safekeeping of funds or securities in the account

A)transferring the account to another broker-dealer Although there is no official standard, larger accounts tend to have many of the smaller fees waived. However, if the client is moving the account to another firm, it is likely that the transfer fee will be charged.

An agent may determine which securities to purchase or sell for a client when A)written discretion authority has been received by the broker-dealer before executing the first discretionary transaction B)written or oral discretion authority has been received by the broker-dealer within 10 days of the initial discretionary transaction C)written or oral discretion authority has been received by the broker-dealer before executing the first discretionary transaction D)written discretion authority has been received by the broker-dealer within 10 days of the initial discretionary transaction

A)written discretion authority has been received by the broker-dealer before executing the first discretionary transaction No broker-dealer or any of its employees shall exercise any discretionary power in any customer's account or accept orders for an account from a person other than the customer without first obtaining written authorization from the customer. It is an investment adviser who may act with oral consent for a period of 10 days from the initial discretionary trade.

Under the USA, a state securities Administrator can I. start an investigation against a registrant even if a violation has not yet occurred II. subpoena witnesses living in the Administrator's state only III. subpoena witnesses living outside the state IV. begin an investigation only after a violation of the act has occurred A)II and IV B)I and III C)II and III D)I and II

B)I and III Under the USA, the Administrator has a broad investigative authority and may begin an investigation against a registrant before a violation has occurred, and may subpoena witnesses in any state.

To comply with the regulations regarding customer identification programs, the minimum identifying information that must be obtained from each customer before opening an account includes I. name II. verbal assurance that the customer is of legal age III. a street address, unless the primary mailing address is a PO Box located in the state of residence IV. a Taxpayer Identification Number (TIN) A)I and II B)I and IV C)III and IV D)II and III

B)I and IV Mere verbal assurance that the customer is of legal age is not sufficient; the actual date of birth must be obtained. A PO Box is never acceptable without a physical address. In addition, the identity of the person opening the account must be verified through documentation such as an unexpired driver's license or passport.

Under the Uniform Securities Act, the Administrator has the power to deny, suspend, or revoke the registration of an issue if it is in the public interest and I. the issuer discloses in the prospectus that there is virtually no chance that the company's business model will be successful and investors should anticipate losing their entire investment II. the Administrator of another state has revoked the issue's registrationan III. officer of the registrant has been convicted of a securities related crime IV. the prospectus contains misstatements of nonmaterial information A)I and III B)II and III C)I and II D)II, III and IV

B)II and III If the Administrator of another state has revoked an issue's registration, the USA considers that just cause for denial in this state. Conviction of an officer of the issuer for a crime related to the securities industry will invariably lead to denial or revocation. Disclosure that the company is not expected to be successful is not a cause for denial; all that is required is full disclosure. Misstatements of material information would be cause for action by the Administrator, but nonmaterial, by definition, does not impact an investor's decision-making process.

As defined in the Uniform Securities Act, the term "offer" or "offer to sell" includes all of the following EXCEPT A)a purported gift of assessable stock B)a loan with a stated interest rate payable upon demand C)an offer of convertible securities and warrants D)an offer of a special stock dividend in return for additional payments

B)a loan with a stated interest rate payable upon demand A loan is not a sale of a security for value and is explicitly excluded from the definition of offer or offer to sell. Although a stock dividend is normally excluded from the terms, "offer" and "sale", when additional payment is required, we now have an offer that must be accepted before there is a sale. An offer of a convertible bond or warrant is an offer of both the bond or warrant as well as the underlying stock. It is only a sale when the offer is accepted. The USA defines a purported gift of assessable stock as both an offer and a sale.

In general, a broker-dealer will disclose any changes to its fee schedule A)when requested by the client B)by notifying clients of the change in advance C)within 30 days following the change D)to the Administrator and then to the clients

B)by notifying clients of the change in advance Most broker-dealers disclose fee changes at least 30 days in advance and there is no requirement whatsoever to notify the Administrator.

In addition to transaction costs (e.g., commissions or markups), most broker-dealers have a schedule of miscellaneous fees. The purpose of these fees is to A)build in a hidden markup B)help to reimburse the broker-dealer for expenses incurred in performing the transaction or a service for the client C)keep commissions low while making up the difference with fees D)increase the broker-dealer's net income

B)help to reimburse the broker-dealer for expenses incurred in performing the transaction or a service for the client Executing a transaction for clients frequently incurs expenses that commissions don't cover, such as clearing fees and execution facility fees. There are services performed for clients, such as postage and handling, for which expenses are incurred. Although charging these fees does have a positive effect on the firm's bottom line, they are designed for reimbursement purposes, not as an additional source of income.

A client of a broker-dealer files a civil suit claiming damages for sale of an unregistered security. During the proceedings, the client suffers a fatal stroke. The suit A)is dismissed B)is continued by the deceased's executor C)is continued by the deceased's spouse D)may not be continued after the death of one of the parties to the suit

B)is continued by the deceased's executor Death of a party to a suit does not end the suit. Unless the account was specified as a joint account with rights of survivorship, the executor of the deceased's estate will continue the suit.

If, in the opinion of the Administrator, an agent is about to engage in a prohibited activity, the Administrator may A)issue an injunction B)issue a cease and desist order C)arrest the agent D)suspend the agent's registration pending the outcome of a hearing

B)issue a cease and desist order If the Administrator suspects a prohibited action is about to take place, a cease and desist order will be issued in an attempt to prevent that activity. Should the agent refuse to halt, then the Administrator will apply to the courts for an injunction. Suspension of registration takes place after a hearing, and the Administrator does not have the power to arrest anyone.

​Fusion Financial is a broker-dealer registered in States A, B and C with its home office in State B. A complaint is filed against the firm by a client who resides in State A. Under the powers granted under the Uniform Securities Act, the Administrator of State B could do all of the following EXCEPT A)gather evidence from State A B)issue an injunction against Fusion Financial C)subpoena witnesses from State C D)gather evidence from State B

B)issue an injunction against Fusion Financial ​​An Administrator has the power to gather evidence both within and outside of the home state as well as subpoena evidence and witnesses in any state.​ Only the courts can issue an injunction.​

The state securities Administrator has the authority to A)amend or alter the Uniform Securities Act B)make, amend, or rescind rules,forms, and orders necessary to administer the USA C)issue and enforce an injunction against a registered party D)issue a ruling under its authority with no requirement to publish that ruling

B)make, amend, or rescind rules,forms, and orders necessary to administer the USA A state securities Administrator may issue a ruling or order to comply with the blue-sky laws of the state and designate the use of certain forms, but does not have authority to amend or alter the Uniform Securities Act itself. All rules and forms of the Administrator must be published. Only the courts can issue injunctions.

An applicant for registration as an investment adviser discloses on its application to the Administrator that it plans to use palm readers to help determine which investments are most suitable for their clients. Under the Uniform Securities Act, the Administrator A)is empowered to deny this application for just cause B)may only justify denial for reasons listed in the Uniform Securities Act C)will request that the applicant furnish past performance records to determine whether this method of investment analysis has merit D)will probably turn to the SEC for guidance

B)may only justify denial for reasons listed in the Uniform Securities Act A denial of registration must be based on the concept of law. There are stated reasons for denial, such as felony convictions, outstanding injunctions, and insolvency. Where in the USA does it say an adviser can't use palm readers, a ouija board, or a Magic 8 Ball? Although disclosure of methods of analysis is required, the Administrator is not empowered to pass judgment on the merits of those methods. The USA does state that the Administrator is empowered to "condition a particular applicant's registration as a broker-dealer upon his not transacting business as an investment adviser if the Administrator finds that he is not qualified as an investment adviser." But, nowhere in this question does it indicate that the applicant is, or is applying for, registration as a broker-dealer.

Under the Uniform Securities Act, all of the following must be disclosed in an investment advisory contract EXCEPT A)whether or not discretion will be exercised B)other states in which the investment adviser is registered C)a provision prohibiting the investment adviser from being compensated based on a share of capital gains D)the manner in which the advisory fee will be computed

B)other states in which the investment adviser is registered There is no requirement to advise clients of any other states in which the investment adviser is represented. The presence (or absence) of discretion must always be disclosed. Unless the question specifically refers to the rare cases when performance fees are permitted, always read the question as if they are prohibited.

The most common way in which to distinguish whether social media content is static or interactive is A)the ability for others to link to it B)the ability for others to change it C)the ability for others to comment on it D)the ability for others to like it

B)the ability for others to change it Static content can only be changed by the originator (or someone under that person's control).

LinkedIn is a popular social media tool for business people. The nature of the information posted poses risks for investment advisers because of the prohibition against testimonials. A step that advisers should consider taking to minimize the risk of an improper endorsement appearing on their page is A)only allow clients to endorse an adviser for a new skill that does not already appear on the adviser's profile B)to select "No" for the "I want to be endorsed" feature under the "Skills and Expertise" section on their LinkedIn profile C)only allow clients to endorse an adviser for a skill that is already listed on his profile D)only allow unsolicited recommendations from clients to be shown on the page

B)to select "No" for the "I want to be endorsed" feature under the "Skills and Expertise" section on their LinkedIn profile If you do a good job, it is only natural that your clients want to say good things about you. Unfortunately, that can lead to a violation of the rule against testimonials for IAs and IARs. The LinkedIn service allows people to either endorse a listed individual's skills (or add new ones) or post recommendations. Either of these would not be acceptable. The safest thing to do is turn off the ability to endorse skills.

If the Administrator has summarily suspended an investment adviser representative's registration, the registrant may request a hearing by written request and the hearing will be granted within A)45 days B)30 days C)15 days D)60 days

C)15 days When an Administrator summarily suspends a registration, the registrant has a right to a hearing if the request is made in writing. The hearing must be granted within 15 days of receipt of the request. Registration of professionals takes place at noon of the 30th day and an appeal for review of an Administrator's order must be filed within 60 days.

A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclosing which of the following fees? A)Advisory fees B)Markups and markdowns C)Account closing fees D)Commissions

C)Account closing fees It is very common for a broker-dealer to charge a fee for processing the closing of an account. There are 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are commissions; markups and markdowns; and advisory fees for those firms that are also registered as investment advisers.

Which of the following statements is TRUE? A)An Administrator may not refuse a registrant's request to hold hearings in private. B)All administrative hearings under the USA must be held in a court of competent jurisdiction. C)An Administrator may, at the request of a registrant, hold hearings in private. D)Hearings of an Administrator must be held in public.

C)An Administrator may, at the request of a registrant, hold hearings in private. An Administrator has the discretion to hold hearings in private. A registrant cannot demand that a hearing be held in private. Administrative hearings are administrative actions, and are conducted by the Administrator, not the courts.

ABC Securities is a broker-dealer registered with the SEC and domiciled in State X. ABC Securities would not be defined as a broker-dealer in State Y under the Uniform Securities Act if it had no offices in State Y and I. its only clients were insurance companies II. it had contact with fewer than 6 State Y residents in any 12-month periodi III. ts only offer to State Y residents was through radio advertisements originating in State X but received in State Y IV. it occasionally engaged in firm commitment underwriting with issuers based in State Y A)II and III B)I and II C)I, III and IV D)III and IV

C)I, III and IV A broker-dealer with no office in the state is not defined as a broker-dealer in that state if its only business is with institutions, other broker-dealers, and issuers when engaged in underwriting their securities. When a radio or TV broadcast originating in one state is received in another state, it is only considered to be an offer in the state of origination, in this case, State X. Unlike investment advisers, there is no de minimis for broker-dealers.

Differences between static and interactive content on social media include I. Only static content can be reused by others II. Only static content needs pre-approval III. Only static content can be changed by the person who originated it IV. Only interactive content can be commented on by others A)I and IV B)I and III C)II and IV D)II and III

C)II and IV Static content requires pre-approval. Interactive content can be reused by others and can be commented on by others. Both static and interactive content can be changed by its originator, but static can only be changed by its originator and interactive by the originator or others.

Opening a margin account involves significant documentation. Which of those documents discloses the interest rate charged by the broker-dealer, including the method of interest computation and situations under which interest rates may change? A)The interest computation agreement B)The hypothecation agreement C)The loan consent agreement D)The credit agreement

C)The loan consent agreement It is the credit agreement that discloses the terms of the credit extended by the broker-dealer, including the method of interest computation and situations under which interest rates may change.

Nifty Advisers Group made an announcement on its website that the firm was going to create a Facebook account to keep all its clients and prospective clients updated on the market. To get the word out, Nifty sent an email notice to its current clients and asked them to please refrain from airing complaints through that account; any negative comments would be addressed through the normal channels. Also, contained in the email was an announcement that all "likes" would receive a one-time 5% decrease in the client's quarterly fees. For this campaign, which of the following are NOT true? A)Third-party use of the "like" feature on an investment adviser's social media site could be deemed a testimonial. B)Even though the rules do not prohibit testimonials for broker-dealers, they are strictly forbidden for use by investment advisers. C)This would not be considered a testimonial and therefore permitted under the regulations. D)Currently there has been no comment from NASAA concerning the use of "likes".

C)This would not be considered a testimonial and therefore permitted under the regulations. Please note that this question is looking for the statement that is NOT true - in other words, find the false statement. In March 2014, the SEC, but not NASAA, published an interpretive release dealing with testimonials for investment advisers using social media. Included in that release is the statement that third-party use of the "like" feature on an investment adviser's social media site could be deemed to be a testimonial if it is an explicit or implicit statement of a client's experience with the adviser.

Which of the following documents must an existing customer sign to establish a discretionary account? A)Customer's agreement B)New account application C)Trading authorization D)Options agreement

C)Trading authorization To establish a discretionary account, the agent must receive written authorization from the customer(s) in whose name(s) the account has been established. An existing customer has already completed the new account application and signed any required customer agreements.

Under the USA, an investment adviser's current clients must be delivered a brochure A)quarterly if the adviser has both discretion and custody B)annually​, but only​ if the adviser has neither custody nor discretion C)annually whether or not the adviser has custody or discretion D)within 48 hours of renewal

C)annually whether or not the adviser has custody or discretion Unless there have been no material changes, a copy of the adviser's brochure or brochure supplement must be delivered to all current clients,(except those who are exempt from the brochure delivery requirements {impersonal advise costing less than $500 per year and investment companies registered under the Investment Company Act of 1940}), within 120 days of the end of the adviser's fiscal year. Custody or discretion is irrelevant to this question. Under the USA, all advisory contracts, both initial and renewal, must be in writing.

Under the USA, all of the following statements are true regarding investment advisory contracts EXCEPT that they A)must be in writing B)must disclose the method used for computing the adviser's fee C)cannot allow for prepaid advisory fees D)can only allow fees to be performance related under certain limited circumstances

C)cannot allow for prepaid advisory fees Nothing in the USA prohibits prepaid advisory fees. The contract must describe the nature of these fees and the circumstances, if any, under which any or all of the prepaid fee may be returned in the event of early cancellation of the contract. The USA requires initial and renewal contracts to be in writing and must disclose the method used for computing the adviser's fee. There are certain circumstances, such as an investor with a net worth of at least $2.1 million, where performance-based fees are permitted.

The customer identification program (CIP) requires that certain information relating to new customers be obtained. Included in that requirement for individual clients who are citizens of the United States are all of the following EXCEPT A)Social Security number B)actual date of birth C)current employment status D)a physical address

C)current employment status The 4 primary requirements of the CIP are the individual client's name, physical address, DOB, and SSN. Although current employment status would be asked as part of opening a new account, that is not a CIP requirement.

First Securities Advisers, Inc., a subsidiary of First Securities Broker-Dealers, Inc., requires customers to have a minimum of $250,000 under management and charges them 1% in advisory fees based on the amount of assets in their accounts. Clients also pay commissions for securities transactions in their accounts at First Securities Broker-Dealers, Inc. First Securities Advisers, Inc., has A)violated the Uniform Securities Act by charging commissions in addition to advisory fees B)violated the Uniform Securities Act by charging excessive advisory fees C)not violated the prohibition against performance fees D)violated the prohibition against charging performance fees

C)not violated the prohibition against performance fees First Securities Advisers Inc. has not violated the prohibition against charging performance fees because it did not base its fees on a share of capital gains or losses in their clients' accounts. First Securities charged on the basis of assets under management. The 1% in advisory fees charged appears reasonable. The commissions charged by the affiliated broker-dealer have nothing to do with the question. The client would have to pay commissions wherever the transactions were executed.

Under the Uniform Securities Act, a sale includes all of the following EXCEPT a A)contract of sale B)contract to sell C)pledge of securities for the purpose of obtaining a margin loan D)disposition of a security for value

C)pledge of securities for the purpose of obtaining a margin loan Under the Uniform Securities Act, a sale includes every contract of sale, contract to sell, or disposition of a security for value. A pledge of securities is not a sale because the title to the shares is not transferred; it is merely assigned.

If it is in the public interest, under the Uniform Securities Act, an agent's registration may be suspended by the Administrator for all of the following reasons EXCEPT A)it has been discovered that the agent is not properly supervised B)the agent is enjoined by a court of law from engaging in the securities business C)the agent is accused of violations of the antifraud provisions of the USA D)the agent is convicted of willful violations of the USA

C)the agent is accused of violations of the antifraud provisions of the USA An accusation is not grounds for suspension, unlike convictions, court injunctions, and lack of supervision.

Under the Uniform Securities Act, Administrators of all of the following states have jurisdiction EXCEPT A)the state from which an offer to sell securities originated B)the state in which an offer to sell securities was accepted C)the state from which payment for the purchase of securities was made D)the state into which an offer to sell securities was directed

C)the state from which payment for the purchase of securities was made The state from which payment is made is not relevant in determining whether the Administrator of that state has jurisdiction.

Which of the following constitutes an offer or sale of stock? I. Solicitation of a tender offer by a corporation II. Gift of assessable stock III. Purchase of shares through the exercise of a warrant IV. Exchange of shares in a corporate reorganization, such as a merger A)I, II and IV B)I and II C)III and IV D)II and III

D)II and III A purported gift of assessable stock is considered to involve and an offer and sale under the USA because the corporation that issues assessable stock can bill shareholders for cash representing the par value shortfall at a future date. Upon the exercise of a warrant, the holder of the warrant purchases stock and the issuing corporation sells the stock. Under the Uniform Securities Act, the solicitation of tender offers by corporations and exchange of shares in corporate reorganizations are not sales.

Before taking any disciplinary action with respect to a registration under the Uniform Securities Act, the Administrator must always do which of the following? I. Obtain the approval of the appropriate state court II. Find that the action is in the public interest III. Cite a cause listed in the act A)I, II, and III B)I and III C)I and II D)II and III

D)II and III Disciplinary actions with respect to registration may be taken by the Administrator after a finding of public interest and cause. Court orders are required only for legal action, such as seeking an injunction or appointment of a receiver over an adviser's assets.

Which of the following would be included in the Uniform Securities Act's definition of a "sale"? A)Conveying, for value, precious metals to a jewelry distributor B)Sale of a large fixed annuity contract to a taxable institution C)Donation of interests in rights, warrants, or options on a nonexempt security D)Transfers, for value, of unit trusts to a nontaxable organization

D)Transfers, for value, of unit trusts to a nontaxable organization For a security to be sold, it must be exchanged for value. Fixed annuities and precious metals are not securities, so no security sale took place. Donating a security does not qualify as a sale.

One way to reduce the potential for conflicts of interest arising from offering agents the incentive of different compensation for different products is to create product agnostic compensation grids. These grids provide for A)a declining scale of compensation as production levels increase B)lower compensation for house products than those from the outside C)a list of prayers to be recited when the recommendations made aren't producing desired results D)a flat percentage of the revenue an agent generates, regardless of product recommended

D)a flat percentage of the revenue an agent generates, regardless of product recommended An agnostic compensation grid is sometimes referred to as a neutral grid. That is, regardless of the product being sold, the compensation level is the same.

A type of fraud using social media where the fraudsters pretend to be member of a group, sometimes using respected leaders of the group to spread the word about the scheme is known as A)group fraud B)relationship fraud C)ethnic fraud D)affinity fraud

D)affinity fraud This is a classic definition of how affinity fraud operates. Although it is frequently aimed at ethnic groups, there is no such term as ethnic fraud.

According to the Uniform Securities Act, the investment adviser brochure must include the business backgrounds of A)all employees of the adviser B)an affiliated broker-dealer C)institutional clients D)each member of the investment committee or group that determines general investment advice to be given to clients

D)each member of the investment committee or group that determines general investment advice to be given to clients The business background of these key individuals must be included in Part 2 of Form ADV and in the disclosure brochure. The business background of other employees, affiliated broker-dealers, and institutional clients need not be included in the brochure.

One major difference between the customer identification program (CIP) and the new account opening rules of the regulatory bodies is that A)the CIP requires a statement of the customer's goals while the regulators only require current financial information B)the CIP requires a residence address for individuals while the regulatory bodies will accept a PO Box C)the CIP only applies to individuals while the rules of the regulators apply to retail and institutional accounts D)the CIP requires date of birth while the regulators only require proof of legal age

D)the CIP requires date of birth while the regulators only require proof of legal age The CIP requires the actual date of birth, not just proof of legal age. The CIP has no interest in the goals of the investor, just the identity. In both cases, a PO Box may only be used after supplying a physical residence address and both the CIP and the rules of the regulators apply to retail and institutional accounts.