checkpoint exams
Which of the following best describes the determination of a client's risk tolerance? A) The client's ability and willingness to take risk B) The client's willingness to take risk C) The client's net worth D) The client's ability to take risk
A) The client's ability and willingness to take risk
The use of futures to hedge against a price increase is best referred to as A) a neutral hedge B) a long hedge C) a trimmed hedge D) a short hedge
B) a long hedge
An investment adviser may borrow from all of the following clients EXCEPT A) a savings and loan association that has offered to finance new computers for the adviser's office B) a mortgage broker who helped the adviser negotiate mortgage terms for its office building C) a broker-dealer in conjunction with a margin account D) a commercial bank in conjunction with a mortgage on the office building from which the advisory operates
B) a mortgage broker who helped the adviser negotiate mortgage terms for its office building Mortgage brokers are not in the business of lending money; they help parties negotiate terms of a loan, which is why they are called brokers. The bank, brokerage, and savings and loan association are in the normal business of lending.
nder NASAA's Model Rule dealing with Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, an investment adviser would have to disclose that the firm was acting in a principal capacity when A) the trade was being executed by an officer or partner of the firm B) shares held in the account of an advisory client are purchased by the investment adviser C) directing a securities transaction to an affiliated broker-dealer D) engaging in an agency cross transaction
B) shares held in the account of an advisory client are purchased by the investment adviser
Many different investments offer the opportunity to reinvest income. If one were to compare the difference between interest-on-interest reinvestment plans and dividend and capital gain reinvestment plans, A) in both cases, all income is deferred until liquidation B) in the case of dividend and capital gains reinvestment plans, taxes are deferred until liquidation C) in both plans, all income is taxable in the year received, whether reinvested or not D) in the case of interest on interest plans, taxes are deferred until liquidation
C) in both plans, all income is taxable in the year received, whether reinvested or not
A fiduciary, acting in accordance with the UPIA, would choose investments on the basis of all of the following EXCEPT A) other resources of the beneficiaries B) needs for liquidity, regularity of income, and preservation or appreciation of capital C) transaction costs D) general economic conditions
C) transaction costs
One of your clients excitedly calls to inform you that his daughter has just been accepted for the coming year into the engineering program at one of the most respected universities in the country. She has been given a generous scholarship but that will leave the family short by about $100,000 for the 4-year program. You check the client's account and see that the current value is $25,000. The client offers to add another $25,000 and asks you if you think the account performance over the next 4 years can provide the necessary funds. You would probably reply A) this is wonderful news and you are pleased that the client has selected such a worthwhile goal B) his daughter should consider attending a community college instead C) the short time horizon is an investment constraint that will make reaching this goal highly unlikely D) that the goal seems attainable if the client is willing to assume the necessary risk
D) that the goal seems attainable if the client is willing to assume the necessary risk bc risk tolerance is the ability and tolerance to take risk...ability is connected to net worth
Under which of the following circumstances may an Administrator revoke a state registered investment adviser's registration? A) The adviser has been convicted of a nonsecurities-related felony. B) The adviser is no longer in business. C) The adviser has been declared mentally incompetent by a court of jurisdiction. D) The adviser cannot be located after a reasonable search by the Administrator.
The adviser has been convicted of a nonsecurities-related felony.
several requirements that must be met to qualify for HOH status. Some of them include the following:
You are unmarried or "considered unmarried" on the last day of the year. A "qualifying person" lived with you in the home for more than half the year (except for temporary absences, such as school). This is generally your children.
tactical or _____management
active
tactical
active management style
Barbell and ladder strategies have bonds maturing at regular intervals requiring an
active role in reinvesting the principal. - bullet not concerned with mechanics of collecting the matured principal and reinvesting it
If an advisory client receives a margin call from activity in his brokerage account, securities owned in the ________________ may be used by the affiliated broker-dealer to meet the margin deficiency.
advisory account
Risk elimination can be achieved if two securities with a perfect
negative correlation are combined. That is, when one goes up, the other goes down by the same amount. In other words, one is the antipode of the other.
strategic
passive management style
volume of trading causes the overall commission expense to be much higher for tactical than
strategic
The settlor, sometimes referred to as the grantor, is the person who establishes the
trust.
An Administrator has jurisdiction over an offer to sell securities if it is made in a newspaper published out of state
under no circumstances
The statute of limitations for civil liability is the earlier of
3 years after the date of the sale or 2 years after discovery of the violation. In this case, the earliest date is 3 years after the sale on September 1, 2014.
Persons convicted of willful violations of the act or knowingly filing a fraudulent document under the act may be subject to imprisonment and/or fines for each violation. The maximum penalties are
3 years in jail and/or $5,000 in fines. The statute of limitations under the Uniform Securities Act is 5 years.
Two securities with which of the following correlation coefficients could be combined to create a risk-free portfolio? A) -1.0 B) -0.5 C) 0.0 D) +1.0
A) -1.0
You are working with a client who received her divorce earlier this year. She has 2 young children, ages 4 and 7, who both live with her. In general, it would be most advantageous for her to file her federal income tax claiming what status? A) Head of Household B) Joint C) Married, but separated D) Single
A) Head of Household Taxpayers claiming the Head of Household filing status benefit from a higher standard deduction and lower tax rates than single taxpayers.
Which of the following describes an investment management style? A) Large capitalization B) Rebalancing C) Margin D) Current income
A) Large capitalization
Which of the following are asset classes? A) REITs B) Forward contracts C) Options D) Large cap stock funds
A) REITs
Which of the following statements about S corporations is NOT correct? A) S corporation status offers greater opportunity for raising additional capital than do other forms of business structure. B) An S corporation may have only 1 class of stock. C) Stockholders of S corporations are taxed on the net profits of the corporation, even if they do not receive taxable dividends. D) An S corporation may have no more than 100 shareholders.
A) S corporation status offers greater opportunity for raising additional capital than do other forms of business structure.
Sector rotation would most likely be employed by an investment adviser using which of the following investment styles? A) Tactical B) Contrarian C) Strategic D) Buy and hold
A) Tactical
Gloria wishes to set up a trust where income must be annually distributed to her daughter. She wants her daughter to pay any income taxes because she is in a lower tax bracket than Gloria is. What should Gloria do? A) Use a simple trust with her daughter as irrevocable beneficiary B) Use a complex trust with her daughter as irrevocable beneficiary C) Use a complex trust with her daughter as revocable beneficiary D) Use a simple trust with her daughter as revocable beneficiary
A) Use a simple trust with her daughter as irrevocable beneficiary
One of your customers notices that the short interest on KAPCO common stock is high. When she asks you for an interpretation, you should tell her that this signals A) a bullish outlook B) a bearish outlook C) a shortage of enough stock to go around D) that a change in interest rates is coming
A) a bullish outlook
The term private fund would apply to all of the following EXCEPT A) a unit investment trust B) a hedge fund C) a liquidity fund D) a venture capital fund
A) a unit investment trust
As long as properly disclosed, a broker-dealer would be permitted to charge a fee for all of these EXCEPT A) solicitation of proxies B) annual maintenance fees C) wiring funds to the client's bank D) issuing a stock certificate
A) solicitation of proxies Broker-dealers are not permitted to charge for soliciting proxies—the issuer is responsible for reimbursing the broker-dealer for any of its expenses. All of the other charges are permitted if fully disclosed to clients.
The DERP Corporation has an outstanding convertible bond issue with a conversion price of $125 per share. If the current market price of the bond is 80, the parity price of the stock is A) $125.00 per share B) $100.00 per share C) $64.00 per share D) $156.25 per share
B) $100.00 per share 1000 (par)/125 (conversion p)=$8 800/8=$100 per share
A securities analyst reviewing a corporation's financial statements notes that the enterprise has total current assets of $10 million, inventory of $4 million, cash on hand of $2 million, total current liabilities of $8 million, and net income of $15 million. The company's acid-test ratio is closest to A) 1.50 to 1 B) 0.75 to 1 C) 1.25 to 1 D) 1.00 to 1
B) 0.75 to 1
If the expected return on the market is 20% and the risk-free rate is 4%, a stock with a beta coefficient of 0.8 would have an expected rate of return under CAPM of A) 16.0% B) 16.8% C) 19.2% D) 12.8%
B) 16.8% The formula is the risk-free rate (.04) plus the product of the stock's beta (.8) and the difference between the expected return on the market and the risk-free rate(.20 - .04). .04 + .8(.16) or .04 +.128 = .168
Ownership in a corporation is evidenced by holding share of the company's A) bonds with a first mortgage on the property B) common or preferred stock C) common stock only D) warrants
B) common or preferred stock
Each of the following could cause an investor to be subject to the alternative minimum tax EXCEPT A) interest received on private activity municipal bonds B) interest received on school district GO bonds C) accelerated depreciation taken on certain property D) excess intangible drilling costs
B) interest received on school district GO bonds
Liquidity risk would be greatest for an investor whose portfolio was primarily composed of A) Nasdaq stocks B) municipal bonds C) ADRs listed on the NYSE D) municipal bond UITs
B) municipal bonds
Some analysts use the discounted cash flow to determine the theoretical value of a debt security. Under DCF, the bond price can be summarized as the sum of the A) future value of the par value repaid at maturity plus the future value of the coupon payments B) present value of the par value repaid at maturity plus the present value of the coupon payments C) present value of the par value repaid at maturity plus the future value of the coupon payments D) future value of the par value repaid at maturity plus the present value of the coupon payments
B) present value of the par value repaid at maturity plus the present value of the coupon payments A bond's price can be calculated using the present value approach.
One reason that a private equity fund may operate under the Section 3(c)(7) exemption of the Investment Company Act of 1940 is that A) greater liquidity would be assured B) investors would only need to be accredited rather than qualified C) it would be able to have more than 100 investors D) registration would not be required of the investment adviser
C) it would be able to have more than 100 investors
Although investing in managed investment companies can provide many benefits, investors should be aware that disadvantages could include all of these EXCEPT A) unpredictability of tax consequences B) high expenses C) limited liquidity D) poor management performance
C) limited liquidity open end and closed end are the 2 categories of managed investment companies
In most cases, the only money lenders on the exam will be
banks and broker-dealers.
The UPIA is the legal guide for
fiduciaries, who must act with skill and caution in the best interest of their clients.
The trustee administers the trust and could be the
grantor but does not have to be.
the federal law does permit oral contracts, whereas the USA requires that all initial and renewal contracts be
in writing.
NASAA defines a substantial prepayment of fees to be more than
$500, 6 or more months in advance.
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, oral discretionary authority is permitted to be used in a customer's account for the first
10 business days after the date of the first transaction. Following that 10 days, the rule requires written authorization to be on hand for any future discretionary trading.
If an investment adviser representative commits a criminal violation of the Uniform Securities Act, she is subject to legal action for
5 years after the alleged violation
Under the USA, an agent may file for a review of an Administrator's revocation order within how many days of revocation?
60 days
after age 66 (current full retirement), the SS benefit grows at an annual rate of
8%
In contrast to the strategic approach, tactical asset allocation A) continuously adjusts the asset allocation and class mix in an attempt to take advantage of change market conditions B) is used to determine an appropriate allocation based on the long-term financial goals of the client C) consistently provides higher net returns whether the market is performing well or in decline D) offers significant commission savings by generally qualifying for a lower commission schedule than a strategic manager
A) continuously adjusts the asset allocation and class mix in an attempt to take advantage of change market conditions
If the required rate of return is less than anticipated in a present value calculation, the effect would be that the A) present value would be higher B) future value would be lower C) yield to maturity (YTM) would decrease D) present value would be lower
A) present value would be higher As a simple example, if you need $100,000 18 years from now for your newborn's college education and you expect to earn 8%, you'll have to deposit approximately $25,000 now (present value) to reach the goal. However, if it turns out that the earnings rate is less than anticipated, say only 4%, then you would have to deposit twice as much presently.
One of the asset allocation classes is fixed income securities. When an IAR is determining which securities to fill that portion of the client's portfolio, which of the following would NOT be included? A) Municipal bonds B) Preferred stock C) Mortgage-backed securities D) Treasury bonds
B) Preferred stock Although generally referred to as a fixed income security due to its fixed dividend, for asset allocation purposes, preferred stock is included in the equity class.
vWhen opening an account for a trust, which of the following sets of terms are synonymous? A) Beneficiary—trustee B) Settlor—grantor C) Grantor—trustee D) Trustee—settlor
B) Settlor—grantor
An investment adviser is doing some research on a company and notices that the current market price is $21 per share. The most recently reported EPS is $3 and the company is paying a $.19 quarterly dividend. On the balance sheet, the company is carrying a significant amount of cash. This company would probably be attractive to this adviser if his investment style was A) passive B) growth C) value D) contrarian
B) growth
The alternative minimum tax becomes a consideration when a taxpayer has so-called tax preference items. Included in that definition is A) overtime pay from a job B) interest from private activity bonds C) interest from U.S. Treasury bonds D) tips received while working at a restaurant
B) interest from private activity bonds
If a new client has $200,000 to invest and wants to retire in 15 years, which of the following client information is least necessary for an adviser to recommend a suitable investment program? A) The amount of income he requires for his retirement years B) The age of the client C) Current income and cash flow requirements D) Tolerance toward risk
C) Current income and cash flow requirements
A 45-year-old investor wants the greatest possible monthly income with the preservation and stability of capital as secondary objectives. Which of the following investments would you recommend? A) Growth mutual fund B) Growth and income fund C) Long-term bond fund D) Money market mutual fund
C) Long-term bond fund If you want income, you invest in bonds, especially those with longer maturities.
An investor does not wish to attempt to time the market, so she invests $300 each month into the GEMCO Growth Fund. Over the past 5 months, her purchase prices have been $10, $12, $15, $20, and $25. On the basis of this information, if she were to stop investing at this point and sell her shares 2 months from now when the NAV is $15 per share and the public offering price is $15.79, it would be CORRECT to state that her A) proceeds were $15.79 per share B) realized loss would be $1.40 per share C) cost basis for tax purposes was $14.71 D) average cost per share was $16.40
C) cost basis for tax purposes was $14.71
An example of an interest-on-interest reinvestment program is A) reinvesting the earnings on a bond UIT B) reinvesting the interest received on a bond C) interest left to compound on a bank-insured certificate of deposit D) reinvesting the dividends distributed on a bond fund
C) interest left to compound on a bank-insured certificate of deposit
Unless an exemption applies, under the Investment Advisers Act of 1940, an investment adviser is required to A) maintain a bond for an amount based on the assets under management B) furnish a statement of the total dollar amounts of securities bought and sold each year to customers C) provide each advisory client with a brochure or a summary of material changes within 120 days of the end of its fiscal year D) furnish an audited balance sheet each year to customers for whom the advisor maintains custody
C) provide each advisory client with a brochure or a summary of material changes within 120 days of the end of its fiscal year
When it comes to safeguarding confidential information pertaining to the account(s) of an individual customer or family, the rules deal primarily with what is called a covered account. A key factor in determining if an account meets the definition is A) the ability of the customer to make a one-time wire to a foreign bank account owned by a family member B) if the customer owns the underlying security on which the call option is sold C) the ability of the customer to move funds out of the account on multiple occasions D) that the account is in the name of an institutional customer
C) the ability of the customer to move funds out of the account on multiple occasions
An agent has a conservative investor looking for income. The agent recommends a bond of a company the investor has never heard of. To allay the client's fear of loss, the agent states that the payment of interest and principal is guaranteed by a well-known blue chip company. Under the Uniform Securities Act, A) a guaranteed security only guarantees payment of interest or dividends B) the agent is possibly committing fraud C) the agent is describing a guaranteed security D) agents should always recommend securities that are familiar to the investor
C) the agent is describing a guaranteed security A guaranteed security is one where the interest and principal (in the case of a bond) are guaranteed by a third party. If a guaranteed stock, it is the dividends that are the subject of the third-party guarantee.
Which of the following bond strategies is the least active? A) Yield curve B) Barbell C) Ladder D) Bullet
D) Bullet The bullet strategy involves investing in bonds at various intervals with all of the bonds maturing at or about the same time (such as when a child is entering college). As such, the only activity is buying bonds every couple of years.
One of your customers purchased a variable life insurance contract through your firm. After 14 years, he had deposited $15,000 in premiums, and his death benefit had grown to $80,000. Shortly after taking out a loan against cash value of $10,000, he was killed in an automobile accident. What will be the tax consequences of this situation to the death benefit? A) The first $15,000 is tax-free with the excess being treated as a long-term capital gain. B) His beneficiary must pay taxes on the amount of the death benefit that is over and above the cost base of $15,000 plus the unpaid loan. C) His beneficiary must pay taxes on the amount of the death benefit that is over and above the cost base of $15,000. D) His beneficiary need not pay taxes on the death benefit.
D) His beneficiary need not pay taxes on the death benefit.
A deceased individual with 2 surviving children and a spouse, had established a trust for his family. The trust document appointed both children as co-trustees. The surviving spouse is to receive current income, and his 2 children will receive equal shares of the remaining principal upon the spouse's death. As the adviser to the account, you A) focus on generating income for the spouse B) focus on increasing principal for the children C) attempt to generate reasonable income while keeping the principal intact for the children D) follow the instructions of the trustees
D) follow the instructions of the trustees
Open- and closed-end investment companies have all of the following in common EXCEPT A) they compute their net asset values B) they have stated investment objectives C) they actively manage their portfolios D) they trade their shares in the secondary market
D) they trade their shares in the secondary market
A customer's net worth equals
assets minus all liabilities. Salary and mortgage payments are income and expense items and are not part of net worth.
Interest-on-interest reinvestment is, as the term implies, the practice of
compounding earnings by reinvesting them. This is traditionally the way a bank savings account or certificate of deposit builds in value.
John was convicted 5 years ago of failure to pay child support, a misdemeanor in his home state. John would now like to register as an IAR in a neighboring state where that crime is considered a felony. Under the Uniform Securities Act, the Administrator of the neighboring state will
disregard that conviction when determining John's qualifications for registration
The equation for the CML uses the:
expected return of the portfolio; risk-free rate; return on the market; standard deviation of the market; and standard deviation of the portfolio.
if the beneficiary is irrevocable, the trust is subject to
income tax taxed to the beneficiary
Simple trusts must annually distribute
income to the beneficiaries. Complex trusts do not.
An adviser's registration may be canceled if the adviser is found to be
mentally incompetent, cannot be located, or is no longer in business.
A covered account is an account, primarily for personal, family, or household purposes, that involves or is designed to permit
multiple payments or transactions. Where the money goes is less of a factor than the frequency of transactions.
Advisers are limited to borrowing money from clients that are in the
normal business of lending or entities that are affiliated with the IA.
A purchaser of a security where a violation of the USA occurred may recover
original purchase price plus legal costs and interest, less any earnings already received.
buying shares directly from the client who owns them places the IA in the position of being 1 of the
principals This is an action that must be disclosed in writing to the client no later than completion of the transaction. Consent of the client is also necessary to act in this fashion.
One way in which the penalty for a civil infraction differs from that for a criminal one is that in the civil case, the guilty party cannot
receive a jail sentence
If an adviser committed a felony or participated in unethical business practices, its registration will be
revoked, not canceled.
S corporations are flow-through vehicles, so any earnings are taxable to
shareholders, whether or not they are paid out as dividends. An S corporation may have no more than 100 shareholders and may issue only 1 class of stock so its ability to raise large amounts of capital is rather limited.
A death benefit payable on a life insurance policy or contract is not subject to
taxation. The insurance company will deduct the balance of the $10,000 loan before it releases the death benefit to the beneficiary, but that does not affect the tax consequences.
Nothing other than oral permission is necessary in order for an agent to use discretion as to time and or price. However, time and/or price discretion are only good for
that day—those are considered "day" orders, so the agent is able to use judgment, but the order must be placed during the day it was received.
In agency cross transactions
the firm is acting as an agent—that's the reason for the term.
the beneficiary revocable, the trust is subject to grantor trust rules and the income will be taxed
to the grantor
When looking at an individual's income statement, which of the following would be included? A) Child support B) Alimony C) Stocks and bonds D) Jewelry
B) Alimony An individual receiving alimony as part of a divorce decree entered into prior to January 1, 2019, must report that as income for tax purposes. The ex-spouse paying the alimony treats that as a deduction from income.
If an investor is in the highest federal income tax bracket and is subject to the alternative minimum tax, which of the following securities should an agent recommend? A) Treasury bond B) Corporate bond C) General obligation bond D) Industrial revenue bond
C) General obligation bond
The MNO Manufacturing Company, headquartered in Springfield, has just filed for bankruptcy. Under federal bankruptcy law, which of the following would have highest priority with the bankruptcy trustee? A) Holders of first lien, senior preferred stock B) Holders of mortgage bonds C) Employee wages earned within the 180 days prior to the bankruptcy filing D) Property taxes owed to the city of Springfield
B) Holders of mortgage bonds
Which of the following attributes of common stock best describes why internal rate of return (IRR) is not generally used to determine the return on common stock? A) No net present value B) Uneven cash flows, no maturity date and price C) Uneven cash flows D) Uneven cash flows and no maturity
B) Uneven cash flows, no maturity date and price
An agent's client calls on Monday to discuss the current market situation. They discuss how 100 shares of KAPCO common stock would be an appropriate addition to the client's portfolio. On Thursday, the client calls and tells the agent to place an order for the KAPCO stock at whatever price the agent feels is best. The agent waits until Friday, purchasing the stock at a price $2 per share below Thursday's low. In this case the agent acted A) properly because the agent saved the client money B) properly because the agent used discretion as to price and time C) improperly; the order cannot be placed without prior written authorization allowing discretion D) improperly; the order should have been placed on Thursday
D) improperly; the order should have been placed on Thursday
When selling securities, agents are prohibited from enacting transactions that are not recorded on the
broker-dealer's books unless the transactions are authorized in writing by the broker-dealer prior to execution. Failure to do this is known as selling away. Receipt of notification is not the same as authorization.
Even though short interest represents the number of share sold short (typically by bearish investors), technical analysts believe that when it gets high, it is a
bullish indicator
There are 2 principals in every securities trade: the
buyer and the seller
ne of the offshoots of the capital asset pricing model (CAPM) is the Capital Market Line (CML). The equation for the CML uses which of the following? A) Alpha B) Standard deviation C) Correlation coefficient D) Beta
B) Standard deviation
An individual opens an account with your firm. She tells you that upon her death, she wants any assets in the account to be divided equally among her 3 children. She also wants the ability to change the allocation in the event that conditions change and 1 of the children is in greater need than the others, but she does not want to incur any significant legal expense. You would suggest that the account be opened A) as a joint account with tenants in common B) under a discretionary power C) as an individual TOD account D) as a joint account with right of survivorship
C) as an individual TOD account TOD, the term used for transfer on death, will allow this client to fulfill her wishes.
The residual right of common stockholders refers to their right to A) examine the corporation's annual reports and other reports, and take legal action if irregularities are found B) vote in elections for the board of directors and in other important business decisions, such as changes to the charter C) claim company assets in bankruptcy after wages, taxes, creditors, and preferred shareholders have been paid D) receive all announced dividends in accordance with the number of shares held
C) claim company assets in bankruptcy after wages, taxes, creditors, and preferred shareholders have been paid
An agent made written disclosure to his employing broker-dealer that he intends to execute a series of private securities transactions with clients who do not have accounts with his broker-dealer. The agent did not acquire express written permission from the broker-dealer and did not receive compensation for executing the transactions, but did receive written acknowledgment of receipt of the agent's notice. In this case, the agent A) engaged in an agency cross transaction B) performed a matched trade as permitted under the rules C) is guilty of selling away D) is required to register as a broker-dealer
C) is guilty of selling away
One popular method of determining the value of certain securities is discounted cash flow. Using the DCF with the current discount rate at 3%, which of the following would be expected to have the highest market value? A) XYZ Corporation mortgage bond maturing in 10 years with a coupon of 4.5% B) Bay Area Rapid Transit Authority 4% revenue bond maturing in 15 years C) U.S. Treasury bond maturing in 20 years with a 4% coupon D) ABC Corporation debenture maturing in 25 years with a 5% coupon
D) ABC Corporation debenture maturing in 25 years with a 5% coupon When a bond is paying interest at a rate higher than the current market rate, the longer the investor will be receiving that higher rate, the higher the premium. Therefore, the 5% bond with 25 years to maturity will have the highest present value using the DCF.
Otto and Lucy set up a 529 plan to save funds for the college education of their daughter, Marangue, who is 14. What is the most suitable investment for the largest portion of their contribution? A) A growth stock fund B) A large-cap stock fund C) A long-term bond fund D) An intermediate term bond fund
D) An intermediate term bond fund MATCH THE time horizon to the investment offered
ABC Advisers, Inc., a federal covered investment adviser is a wholly owned subsidiary of ABC Corporation, a holding company that also owns ABC Securities, a full-service broker-dealer that is a member of the New York Stock Exchange and FINRA. One of the clients of ABC Advisers calls his IAR to explain that he has just received a margin call in his ABC Securities account. Under these circumstances, it would NOT be prohibited for the IAR to use securities owned in the advisory account to obtain a loan for this client A) if the client agreed to repay the loan within 30 days B) because ABC Advisers, Inc. is in the money lending business C) because the 2 firms are affiliated D) when the client has furnished ABC Advisers, Inc., with a proper discretionary trading authorization
C) because the 2 firms are affiliated
An investment adviser prepares a slick advertising piece containing the relevant information from the firm's Form ADV - Part 2. One of the firm's IARs secures a contract with a new client and presents the brochure at that time. While explaining the terms of their agreement, the IAR mentions that the client may withdraw within the first 48 hours without any penalty. Upon returning to the office, the IAR realizes that he forgot to have the client sign a receipt for the disclosure document. Under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, A) the IAR has acted in an unethical manner by giving incorrect information regarding the penalty-free withdrawal privilege B) there is no violation as long as the customer signs a waiver agreeing to these terms. C) there is a violation because the IAR failed to obtain the signed receipt. D) there is a violation because the brochure must be delivered at least 48 hours prior to entering into the contract.
A) the IAR has acted in an unethical manner by giving incorrect information regarding the penalty-free withdrawal privilege
An IAR concludes a successful meeting with a client by receiving oral authority to begin exercising discretion in the client's account. The IAR leaves the appropriate paperwork with the client and urges him to return it in the postage paid envelope as soon as possible. After returning to the office, the IAR enters the first discretionary order for this account, a purchase of $10,000 of CANCO common stock. Six days later, CANCO reports that it is going to miss its earnings estimates and the stock begins to fall. The IAR realizes that the best thing to do for the client is take the loss and get out before it gets worse, but the client has not yet returned the signed paperwork. In this case, A) the IAR has acted improperly from the outset by making the purchase prior to receiving the signed paperwork B) the investment adviser firm should apply to the Administrator for an extension of time C) the IAR may exercise his discretion as authorized and sell the CANCO D) the IAR must wait for the signed paperwork to be received
C) the IAR may exercise his discretion as authorized and sell the CANCO
