Part 1 - Laws & Regulations
D) I and II Third-party solicitors must provide a copy of the investment adviser's brochure (Form ADV Part 2A), as well as a copy of the solicitor's brochure. The solicitor's script must be approved by the IA, and only the SEC receives a copy of the Form ADV Part 1.
A federal covered investment adviser employs the services of a third-party solicitor. The Investment Advisers Act of 1940 would require the solicitor to deliver I. a copy of the IA's brochure II. a copy of the solicitor's brochure III. a copy of the solicitor's script IV. a copy of the IA's Form ADV Part 1 A) II and IV B) I, II, and IV C) I and III D) I and II
C) The state Under the Dodd-Frank Bill, until a pension fund manager has at least $200 million in AUM, registration with the states is required. Once the $200 million level is reached, SEC registration becomes an option.
A pension consultant who advises corporate retirement plans with assets of $135 million must register with which of the following? A) Either the state or the SEC B) Both the state and the SEC C) The state D) SEC
A) direct participation programs.
A sales assistant employed by a full service broker-dealer would be required to register as an agent when accepting orders for A) direct participation programs. B) commodity futures contracts. C) gold coins. D) fixed annuities.
A) send a detailed financial report to the Administrator by the close of business Monday Notification is made by the end of the following business day, then a detailed report the day after that.
A state-registered investment adviser maintains custody of client funds and securities. On Thursday, the chief financial officer of the firm informs the chief compliance officer that their net worth is $31,578. Under the provisions of the Uniform Securities Act, the firm would A) send a detailed financial report to the Administrator by the close of business Monday B) need to increase the amount of their surety bond C) do nothing, as their net worth is far in excess of the minimum requirement of $10,000 D) send a detailed financial report to the Administrator by the close of business Friday
C) Account closing fees
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) Markups and markdowns B) Advisory fees C) Account closing fees D) Commissions
A) promptly Any material change that affects an investment adviser's ADV must be filed promptly with the SEC (or Administrator if state-registered) and a change of address would certainly be material.
ABC Advisers, a federal covered investment adviser, is moving the firm's headquarters to a new office park in the suburbs. ABC is required to file this change with the SEC A) promptly B) within 60 days C) within 90 days D) within 30 days
D) II and IV An investment adviser required to register with the SEC under the Investment Advisers Act of 1940 must submit its Form ADVs to the SEC. In some cases, the Form ADV will also be filed with the state Administrator, but that is state law, not a federal requirement. A balance sheet must be submitted with Part 2 if the adviser receives "substantial" prepayments of fees. Part 2 may be used as an investment adviser's disclosure brochure to clients.
According to the Investment Advisers Act of 1940, which of the following statements regarding Part 2 of Form ADV are TRUE? I. It must be filed with the state Administrator. II. A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, 6 or more months in advance. III. Certain minimum business and education qualifications must be met before an investment adviser can file. IV.It may be used to satisfy the brochure requirements of the act. A) I, II, and IV B) I and IV C) I, II, and III D) II and IV
A) broker-dealer B offers a private placement to 15 regular public customers and closes the offering at the end of 30 days An unregistered private placement may be offered to no more than 10 prospective purchasers, with the exception of financial institutions and other broker-dealers.
All of the following situations are exempt transactions complying with the requirements of the USA EXCEPT A) broker-dealer B offers a private placement to 15 regular public customers and closes the offering at the end of 30 days B) the executor of an estate liquidates 1,000 shares of IBM held by the estate C) broker-dealer A has put together a syndicate of 15 insurance companies and pension funds to purchase the entire issue of XYZ Corporation's preferred stock D) Mammoth Mutual Fund purchased 250,000 shares of common stock in a nonissuer transaction
D) state Administrators do not require consent to service of process to be submitted with notice filings for covered securities The Administrator will require the filing of a consent to service of process with any securities registration. If required by the Administrator, notice filing is the procedure followed by federal covered securities. Any security may be registered by qualification, and coordination is the simultaneous registration with the SEC and the states.
All of the following statements are consistent with the Uniform Securities Act EXCEPT A) state Administrators may require federal covered investment companies to file documents with the Administrator using a procedure known as notice filing B) any security may be registered with the state by the procedure known as registration by qualification C) a security for which a registration statement is filed under the Securities Act of 1933 may simultaneously register with the state by the procedure known as registration by coordination D) state Administrators do not require consent to service of process to be submitted with notice filings for covered securities
A) Both Andrew and the firm must notify the Administrator of Andrew's resignation promptly.
Andrew voluntarily leaves his position as an agent with Gibraltar Securities. Which of the following best describes the reporting requirements relative to this termination? A) Both Andrew and the firm must notify the Administrator of Andrew's resignation promptly. B) Only the firm must notify the Administrator, and must do so within 30 days of Andrew's resignation. C) Notification to the Administrator is not required, presuming that Andrew was not terminated for cause. D) Only Andrew must notify the Administrator, and must do so within 30 days of his resignation.
A) a report of the amount of the federal covered security sold in the state
As a federal covered security, the KAPCO Growth Fund is required to notice file under the laws of State A. State A's Administrator can require the issuer to provide copies of A) a report of the amount of the federal covered security sold in the state B) proxy statements C) a listing of the officers and directors of the issuer D) the schedule of compensation to the fund manager
B) a gift of warrants. Even though a gift is not normally a sale or an offer to sell, when it is of a warrant, a right, or any convertible security, it is considered to be an offer to sell the underlying security.
As defined in the Uniform Securities Act, the term "offer to sell" would include A) a gift of nonassessable stock. B) a gift of warrants. C) the sale of U.S. Treasury bills. D) the attempt to sell gold coins.
B) I, II, III, and IV
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following must be included in an advisory contract? I. Whether the contract grants discretionary power to the adviser II. The term of the contract III. A clause preventing assignment without consent IV. The formula used for computing the fee A) I, II, and IV B) I, II, III, and IV C) I and II D) II only
D) When the trade that is made is unrelated to the advisory relationship Under normal circumstances, when acting in an advisory capacity, client consent must be obtained no later than completion of the trade. However, in a case like this where the transaction is strictly based on the broker-dealer relationship rather than on the advisory one, no consent is necessary.
Damon Raymond is an agent with ABC Investment Planning, a registered broker-dealer and investment adviser. Under what circumstances would Damon not have to obtain client consent when ABC Investment Planning is acting in a principal capacity? A) Only if the client terminates the advisory relationship B) When the client has given ABC blanket permission to engage in this type of transaction C) Never D) When the trade that is made is unrelated to the advisory relationship
C) maintains custody of customer funds and or securities. The Form ADV-E (E for surprise Examination) must be completed by investment advisers that have custody of client funds or securities and that are subject to an annual surprise examination.
Holly Cavendish is an IAR with Remington, Fairchild, and Hume, a federal covered investment adviser. Holly's manager tells her that he will be busy for a couple of hours working on completing the Form ADV-E. This tells Holly that her firm A) is undergoing a special evaluation by its clients. B) is reporting certain errors discovered by management. C) maintains custody of customer funds and or securities. D) will be changing to state registration.
Among the actions the Administrator is authorized to take against a person's registration are revocation, bar, or restriction of activity.
Under the Uniform Securities Act, as a result of a hearing, the disciplinary actions that may be taken by the Administrator include which of the following? I. Revocation of a registration II. Bar from employment with any registrant III. Restriction on a registrant's performance of any activity in the advisory or brokerage business A) I and III B) II and III C) I and II D) I, II, and III
D) II and III Under federal regulations, if an investment adviser intends to pay a third party (nonemployee) solicitor to solicit clients for investment advisory services, the investment adviser must be properly registered with the SEC, there must be a written agreement between the investment adviser and the solicitor, and there can be no outstanding or pending orders or disciplinary actions against the solicitor involving finance or dishonesty. The solicitor does not have to be registered as a registered investment adviser representative because he is not representing the registered investment adviser in the giving of investment advice, in the management of accounts, or in the supervision of anyone else working for the registered investment adviser in these areas.
If a federal covered investment adviser intends to pay a third party solicitor to solicit clients for investment advisory services, which of the following must be TRUE? I. The solicitor must be a registered investment adviser representative with the state. II. The registered investment adviser must be properly registered as an investment adviser under the Investment Advisers Act of 1940. III. There must be a separate written agreement between the solicitor and the registered investment adviser. IV. The agreement between the solicitor and the registered investment adviser is contained as part of the investment adviser's brochure. A) I and III B) II and IV C) I and IV D) II and III
C) Are no prospectus delivery requirements for this transaction Because this is a secondary market transaction in a listed stock, there is no requirement that a prospectus be delivered to the customer.
If a public customer plans to purchase stock in a company that has been listed on a stock exchange for the past year in a regular-way secondary transaction, when must the customer receive the prospectus? A) No later than 3 days from the settlement date B) Before the settlement date C) Are no prospectus delivery requirements for this transaction D) Before the order entry
B) equipment trust certificates issued by a regulated common carrier Although each of these is considered an exempt security under the Uniform Securities Act (state laws), only the securities of a regulated common carrier carry an exemption from federal registration.
In 1933, Congress passed the Securities Act which required the registration of new issues before their offering to the public. However, the law contained a number of exemptions, including that for A) corporate common stock listed on the NYSE B) equipment trust certificates issued by a regulated common carrier C) obligations of the Canadian government D) stock issued by regulated insurance company
C) It may choose to register with either the D.C. Administrator or the SEC. Pension consultants providing advisory services to employee benefit plans having at least $200 million of assets may register with the SEC (even though the consultant does not itself have those assets under management) If an investment adviser only gives advice on securities issued or guaranteed by the U.S. government, it is excluded from the definition of investment adviser and doesn't register anywhere, but that is not the same as having the government as your only client.
Jefferson, Adams, and Washington (JAW) is a pension consulting firm whose only office is on Constitution Avenue in Washington, D.C. JAW has only one advisory client—a U.S. government employees pension fund with assets of $4 billion. What are this firm's registration requirements? A) It must register with the SEC because the AUM is so high. B) It does not have to register because its only client is the U.S. government. C) It may choose to register with either the D.C. Administrator or the SEC. D) It can only register with the SEC because the District of Columbia is not a state.
D) register with State A
Mary, who is licensed as an agent in State A, got a promotion and will turn her clients over to Julie, who is licensed only in State B. Before Julie can take over the accounts, she must A) receive permission from each of those clients B) register with FINRA C) register with the NYSE D) register with State A
B) who was an affiliate of the adviser
NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers would consider the adviser to be engaging in an unethical business practice if he loaned money to a client other than one A) who was in the money-lending business B) who was an affiliate of the adviser C) who was an immediate family member of the adviser D) borrowing under the same terms and conditions as the client could find at a commercial bank
D) it must be disclosed that performance-based fees may motivate the investment adviser to assume greater investment risk than would apply with other compensation methods Only NASAA requires this disclosure. The SEC assumes that any investor meeting the qualifications is aware of the greater risk entailed, so no disclosure is necessary here.
Regarding performance-based fees charged by covered investment advisers, all of the following statements are correct EXCEPT A) performance-based fees may be charged against the assets of a closed-end investment company listed on the NYSE B) performance-based fees are generally prohibited C) to determine performance, the results of the client's investment portfolio must be compared against an appropriate index or benchmark D) it must be disclosed that performance-based fees may motivate the investment adviser to assume greater investment risk than would apply with other compensation methods
A) I, II, III, and IV
Securities issued by which of the following would be exempt from the registration requirements of the Uniform Securities Act? I. Nonprofit organization II. Exchange-listed security III. Federal savings and loan association IV. Federal credit union A) I, II, III, and IV B) I and IV C) I and II D) III and IV
A) I, II, and IV Only needs to show performance for 1 year, not 3.
The SEC has determined that advertising regarding past recommendations made by investment advisers is misleading if I. results do not reflect the deduction of fees II. actual market conditions during the referenced period are not disclosed III. the advertisement did not reflect performance for a minimum period of 3 years IV. the advertisement did not disclose that it applied to only a specific group of clients A) I, II, and IV B) I and II C) II and IV D) I, II, III, and IV
C) matched orders Although all of these practices are prohibited, only matched orders are an attempt to manipulate market prices.
The Uniform Securities Act prohibits broker-dealers from engaging in activity that has the effect of manipulating stock market prices. These would include: A) churning B) selling unregistered nonexempt securities C) matched orders D) higher than reasonable commissions or markups
A) a trustee operating in a fiduciary capacity in the state
The Uniform Securities Act requires that a consent to service of process be filed by each of the following EXCEPT A) a trustee operating in a fiduciary capacity in the state B) an applicant for registration as an investment adviser in the state C) an applicant for registration as a broker-dealer in the state D) an issuer that proposes to offer a security in the state
B) standards at the federal level for the regulation of investment advisers The purpose of the Investment Advisers Act of 1940 is to provide federal standards for the regulation of investment advisers. Providing standards among the various states for the regulation of investment advisers is the purpose of the Uniform Securities Act. Providing regulation for investment companies and their operations is the purpose of the Investment Company Act of 1940.
The purpose of the Investment Advisers Act of 1940 is to provide A) minimum standards of performance for those registered as investment advisers B) standards at the federal level for the regulation of investment advisers C) regulation for investment companies and their operations D) standards among the various states for the regulation of investment advisers
C) An adviser may use a report prepared by someone else if the source of the report is disclosed. When mailing research from third parties disclosure of the source needs to be made, but not when making recommendations.
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following statements regarding the distribution of reports prepared by 3rd parties that are not affiliated with the adviser is TRUE? A) An adviser need not disclose the author of any outside 3rd-party report unless the client asks. B) An adviser is prohibited from basing recommendations on work that is wholly the product of someone else's efforts. C) An adviser may use a report prepared by someone else if the source of the report is disclosed. D) An adviser is required to disclose any source of information used in making recommendations to clients.
B) the Securities Act of 1933 Registration by coordination is a form of state registration that coordinates state registration of a security with simultaneous federal registration of that security. Securities are registered at the federal level under the Securities Act of 1933.
Under Section 303 of the Uniform Securities Act, in order for an issue to register using coordination, it must simultaneously register under the provisions of A) the Investment Company Act of 1940 B) the Securities Act of 1933 C) the Securities Exchange Act of 1934 D) the Uniform Securities Act
D) The adviser must report the location of funds or securities at 6-month intervals.
Under the Investment Advisers Act of 1940, which of the following statements is NOT true regarding custody of a client's funds or securities? A) The adviser must arrange for an audit of the client's accounts at least once annually and arrange for the results to be forwarded to the SEC. B) Client securities must be segregated and kept safe. C) The adviser must be named as agent or trustee for a client's account or else use a qualified custodian. D) The adviser must report the location of funds or securities at 6-month intervals.
D) II and IV Checks made out to a third party must be forwarded to that party within 3 business days of receipt or the IA will be considered to be maintaining custody. In the case of certificates or checks made out to the IA, return must be made within 3 business days of receipt in order to avoid custody issues; they are never forwarded.
Under the NASAA Model Custody Rule, an investment adviser would be considered to have custody of client assets if that adviser inadvertently receives I. a check from a client made out to the IA and does not return the check within 24 hours II. a check from a client made out to a third party and does not forward the check within 3 business days III. stock certificates from a client and does not forward them within 3 business days IV. stock certificates from a client and does not return them within 3 business days A) II and III B) I and IV C) I, II and IV D) II and IV
C) II, III, and IV
Under the National Securities Markets Improvement Act of 1996, which of the following describe federal covered securities? I. A security registered under the USA II. A security registered under the Investment Company Act of 1940 III. A security of a company traded on the Nasdaq Stock Market IV. A security issued by the U.S. government A) I and II B) II and IV C) II, III, and IV D) II and III
A) The issuer can use an online questionnaire to qualify potential investors
Under the Regulation D, Rule 506(b) private placement offering exemption, which of the following statements is true? A) The issuer can use an online questionnaire to qualify potential investors B) The issue may be sold to an unlimited number of nonaccredited investors. C) The rule allows general solicitations but no advertising. D) The exemption is forfeited if there are any sales to nonaccredited investors.
C) III only A prospectus is a communication made in writing or by radio or TV that offers a security for sale. An oral offer would therefore not be a prospectus. Tombstone advertisements are specifically excluded from the definition of prospectus.
Under the Securities Act of 1933, the definition of prospectus includes I. an offer of a security made orally II. a tombstone advertisement for a security III. an offer of a security made in a personal letter A) II and III B) I and III C) III only D) I, II, and III
D) Debentures of First Newtown Bank Holding Corporation Bank holding company securities are not exempt from registration requirements under the Securities Act of 1933. Treasury securities, agency securities, and municipal securities are exempt from registration requirements under the act.
Under the Securities Act of 1933, which of the following securities is required to register with the SEC? A) Tupelo Mississippi Bridge revenue bonds B) 5-year Treasury notes C) GNMA pass-through certificates D) Debentures of First Newtown Bank Holding Corporation
D) not required to be a registered investment adviser in the state Futures are not securities US gov securities are securities but the Investment Advisers Act of 1940 specifically excludes from the definition of "investment adviser" a person whose securities advice is confined to securities issued or guaranteed by the Treasury.
Under the USA, a person who is in the business of providing advice on trading futures contracts in addition to advising clients on securities issued or guaranteed by the U.S. government is A) required to be a registered investment adviser in the state B) required to be a registered agent in the state C) required to be a registered investment adviser representative in the state D) not required to be a registered investment adviser in the state
B) capital gains When a security is guaranteed, that means that someone other than the issuer has guaranteed timely payment of interest and principal on a debt security, or the payment of dividends on an equity security. No one ever guarantees that the investor will have a capital gain.
Under the USA, the term guaranteed refers to all of these EXCEPT A) principal B) capital gains C) dividends D) interest
A) the names of all the owners of the company's stock seems a wee bit excessive
Under the Uniform Securities Act, a registration statement of an issuer must contain all of the following information EXCEPT A) the names of all the owners of the company's stock B) the identity of the officers and directors and the extent of their holdings in the issuer C) the current balance sheet and profit/loss statements D) the business of the issuer
B) II and III 10 non-institutional persons, not 10 persons
Under the Uniform Securities Act, which of the following statements are TRUE regarding private placements? I. They are offered to no more than 10 persons in a state in a 12-month period. II. They may be offered to an unlimited number of institutional investors. III. Institutional buyers need not be purchasing for investment. A) I and II B) II and III C) I and III D) I, II, and III
B) A radio broadcast advertising a security was made from a neighboring state. Radio or TV broadcasts made from outside the state do not come under the Administrator's jurisdiction. The letter sent from out of state does because the offer is being made in this state.
Under which of the following circumstances would the Administrator of this state not have jurisdiction? A) A mass mailing offering a security for sale was made in this state. B) A radio broadcast advertising a security was made from a neighboring state. C) A television broadcast advertising a security for sale was made from this state. D) A letter offering a security for sale was sent to a client in this state from an agent in another state.
C) Assessable Assessable stock is a stock that is issued below its par or stated value. The issuer and/or creditors have the right to assess the shareholder for the deficiency. All stock issued today is nonassessable.
What is the term used to describe a common stock issued below its par value? A) Below book B) Subpar C) Assessable D) Nonassessable
B) I and II An agent subject to an order must file for a judicial review of the Administrator's final order within 60 days.
When an Administrator issues a final order, an agent subject to the order may I. obtain a review of the order in an appropriate court of law II. request that additional evidence be presented to the court III. request a hearing 90 days after the final order IV. not appeal a court's decision A) III and IV B) I and II C) I and III D) II and III
B) The Uniform Securities Act's exemption for such transactions is narrower than the comparable federal exemption because offers are limited to a smaller number of nonqualified offerees.
When comparing the limited offering exemption under federal law with that of the exemption in the Uniform Securities Act, which of the following statements is TRUE? A) The statutory resale restriction is the same under both state and federal law. B) The Uniform Securities Act's exemption for such transactions is narrower than the comparable federal exemption because offers are limited to a smaller number of nonqualified offerees. C) The federal law does not permit compensation on investments made by retail investors while the state law does. D) The federal law permits purchases by both accredited and nonaccredited investors, while state law limits offers solely to those who are accredited investors.
A) I and II
When must an investment adviser disclose personal securities transactions to a client? I. If the adviser makes trades in his own account that are inconsistent with advice given to a client II. If the adviser makes trades that are designed to take advantage of the impact caused by recommendations to clients III. Investment advisers must disclose all personal transactions to clients A) I and II B) II only C) I only D) III only
A) II and IV
Which of the following describe indications of interest secured during the 20-day cooling-off period? I. Binding on the customer II. Nonbinding on the customer III. Binding on the broker-dealer IV. Nonbinding on the broker-dealer A) II and IV B) I and IV C) I and III D) II and III
C) ABC Money Managers, a partnership with $115 million under management Pension consultants are not eligible for SEC registration until their AUM reaches $200 million.
Which of the following firms in the business of rendering investment advice for compensation would be considered a federal covered adviser? A) DEF Fund managers, a corporation managing an unregistered hedge fund with $10 million in assets B) JKL Pension Consultants, a management firm providing services to employee benefit plans, and currently has $179 million under management C) ABC Money Managers, a partnership with $115 million under management D) GHI Consultants, a sole proprietorship, managing $82 million belonging to high-net-worth individuals
A) Banks "Broker-dealer" does not include (1) an agent, (2) an issuer, (3) a bank, savings institution, or trust company. Attorneys are excluded from the definition of investment adviser, as long as their advice is incidental to their legal practice, but that exclusion does not apply to the term "broker-dealer". Even though credit unions engage in banking activity, they are not included in the exclusion. Being an investment adviser does not exclude a person from the need to register as a broker-dealer if that person is performing the functions of a BD.
Which of the following is not included in the definition of broker-dealer as found in the Uniform Securities Act? A) Banks B) Attorneys C) Credit unions D) Investment advisers
C) A CPA who manages investment accounts for 50 clients and charges hourly fees for the service The Investment Advisers Act of 1940 excludes accountants providing investment advice from the definition of investment adviser only when the advice is given on an incidental basis and with no specific compensation. A publisher of periodicals of general circulation, whether or not the publication covers financial matters, is excluded from the definition, as is an adviser whose advice is exclusively limited to U.S. government securities. Banks are also excluded from the definition of investment adviser under the act.
Which of the following parties is most likely to be considered an investment adviser under the Investment Advisers Act of 1940? A) Dow Jones, Inc., publisher of The Wall Street Journal B) An expert in fixed-income securities whose only clients are individuals and whose only recommendations deal with securities issued or guaranteed by the U.S. Treasury C) A CPA who manages investment accounts for 50 clients and charges hourly fees for the service D) The trust department of Citibank, which handles billions of dollars in trust assets
C) I, II, III, and IV Any security issued by a bank that is federally regulated is exempt under the USA. State banks are exempt if regulated by that state. Municipal bonds are exempt if issued by a municipality in the United States or Canada.
Which of the following securities is (are) exempt from state registration and filing of advertising materials? I. New York City municipal revenue bonds II. Montreal bonds guaranteed by the province of Quebec III. Preferred stock of the National Bank, N.A., a member of the Federal Reserve System IV. Preferred stock of Local County Bank, organized and regulated solely by the banking laws of the state of Illinois A) IV only B) I only C) I, II, III, and IV D) I and III
B) I and II An Administrator can, on a summary basis, suspend a pending registration but may not issue a stop order without a prior notice and an opportunity for a hearing.
Which of the following statements (is)are TRUE? I. An Administrator can suspend a pending registration on a summary basis. II. An Administrator may not issue a stop order without prior notice and opportunity for a hearing. III. An Administrator may cancel a registration for the same reasons he revoked or suspended a registration. A) II and III B) I and II C) III only D) I only
A) It is an exempt transaction. Any offer or sale to a bank, savings institution, trust company, insurance company, investment company, or other financial institution, institutional buyer, or broker-dealer is an exempt transaction.
Which of the following statements concerning the sale of securities by issuers to financial institutions is TRUE? A) It is an exempt transaction. B) It is a nonissuer transaction. C) It is a nonexempt transaction. D) It is an exempt security.
B) I and III
Which of the following statements describes the powers of the Administrator over the issuance of orders? I. A final order may be appealed in the appropriate court within 60 days of the order being issued. II. Appeal of a final order will act as a stay of the order, unless a court of competent jurisdiction rules to the contrary. III. No final order may be issued without the opportunity for a hearing. IV. Final orders must receive approval from the state legislature. A) I and IV B) I and III C) II and III D) II and IV
C) The adviser must arrange for the audit of client accounts by an independent public accountant on a systematic basis at least once a year. It has to be nonsystematic - SURPRISE VISIT
Which of the following statements regarding advisers who maintain custody over client accounts is NOT true? A) Advisers must send clients quarterly statements that itemize the funds and securities in the adviser's possession. B) If customer funds and securities are deposited in a bank, the bank account must only contain customer funds and identify the adviser who is acting as an agent for the customers. C) The adviser must arrange for the audit of client accounts by an independent public accountant on a systematic basis at least once a year. D) The adviser must maintain complete and accurate records of all accounts and ensure that the funds and securities are segregated by client.
A) Each client must receive the brochure no later than the entering into the advisory contract.
Which of the following statements regarding the Investment Adviser Act of 1940 and the adviser's brochure are CORRECT? A) Each client must receive the brochure no later than the entering into the advisory contract. B) Each client must receive the brochure no later than 48 hours after entering into the advisory contract. C) Advisers must deliver the brochure to clients for whom they offer impersonal advisory service only when the annual charge does not reach $500. D) Annual delivery of a summary of material changes relieves the adviser of the obligation to deliver a brochure.
D) The investment adviser has discretionary authority over the client's account.
Which of the following would NOT be considered evidence of custody of a client's funds or securities? A) The client makes a partial purchase, and the broker-dealer holds the securities until full payment is made. B) Client funds and securities are kept at a qualified custodian. C) The adviser writes checks on the client's account to pay for client's securities. D) The investment adviser has discretionary authority over the client's account.
D) II and III
Which of the following would be a nonissuer transaction? I. XYZ Corporation sells 100,000 shares of previously issued common stock out of its treasury. II. GEMCO Mutual Fund sells 100,000 shares of XYZ Corporation common stock out of its portfolio. III. Curt sells 1,000 shares of Giggle common stock to Chuck in an isolated transaction. IV. Dave reinvests his dividend into additional shares of GEMCO Mutual Fund. A) I and IV B) III and IV C) I and II D) II and III
C) is registered under section 203 of the Investment Advisers Act of 1940
Which of the following would meet the USA's definition of federal covered adviser? An investment adviser who A) does business on an interstate basis B) gives advice on federal covered securities C) is registered under section 203 of the Investment Advisers Act of 1940 D) serves as a consultant to pension funds with assets of $500 million
C) An adviser, specializing in stocks listed on the New York Stock Exchange, whose only place of business is in State F and whose only clients are 110 State F resident individuals
Who of the following is not exempt from registration as an investment adviser under the Investment Advisers Act of 1940? A) An adviser whose only office is in State G who deals only with State G residents, none of whom is a private fund, and does not deal in securities listed on any national securities exchange B) An adviser whose clientele consists solely of insurance companies C) An adviser, specializing in stocks listed on the New York Stock Exchange, whose only place of business is in State F and whose only clients are 110 State F resident individuals D) An adviser to seven private funds with total assets under management in the U.S. of $125 million
B) the investment adviser may not compensate a solicitor who is subject to a statutory disqualification.
With regard to an SEC-registered investment adviser employing the services of a solicitor, it would be correct to state that A) cash referral fees may be paid pursuant to a written or oral agreement to which the investment adviser is a party. B) the investment adviser may not compensate a solicitor who is subject to a statutory disqualification. C) referral fees may be paid only if the solicitor is also registered with the SEC. D) delivery of the solicitor's brochure must take place within five days after the entry into the advisory contract.
