Series 65 - Unit 1 Qs
If a federal covered adviser's fiscal year ends on November 30, 2017, it must file its annual updating amendment to its Form ADV no later than A) February 28, 2018 B) January 18, 2018 C) December 31, 2017 D) March 30, 2018
A) February 28, 2018 The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal-year end.
The Administrator may require which of the following from a federal covered adviser? I) copy of the IA's Form ADV II) filing of the IA's advertising in the state III) a listing of the IA's fee schedule IV) a filing fee
A) I and IV Even though Administrators have limited jurisdiction over federal covered advisers, they can require filing of a copy of the information filed by that IA with the SEC (the Form ADV), as well as a filing fee.
Which of the following statements is (are) true? A person with a place of business in the state who transacts business exclusively with banks and savings institutions is not an investment adviser under the Uniform Securities Act. A person excluded from the definition of investment adviser under the Investment Advisers Act of 1940 who offers investment advice to individual investors residing in this state, and has less than $25 million in assets under management, is subject to the jurisdiction of the state Administrator. A person included in the definition of an investment adviser under the Investment Advisers Act of 1940, who manages funds on a regular basis as a business headquartered in a state, is subject to payment of filing fees required by the state Administrator. Broker-dealers who supply incidental investment advice and make securities recommendations to customers who pay commissions for the execution of their trades are not investment advisers subject to state or federal registration. A) III and IV B) I and II C) II and III D) I and IV
A) III and IV A person who conducts business exclusively with banks and savings institutions is an investment adviser under the USA if he has a place of business in the state. Had the person no place of business in the state and conducted business exclusively with banks and savings institutions, he would not be considered a broker-dealer subject to the regulatory control of the state Administrator. Under the NSMIA, any person excluded from the definition of investment adviser under the Investment Advisers Act of 1940 is considered a federal covered adviser. Therefore, regardless of the amount of money under management, the state has no jurisdiction. A federal covered adviser may be subject to payment of state filing fees. Broker-dealers who supply investment advice incidental to their business and receive no special compensation for it are not investment advisers.
Under the Uniform Securities Act, which of the following is an investment adviser? A) Jill is an attorney specializing in estate planning who, as a side job, structures portfolios for the beneficiaries of her deceased clients at a reduced fee. B) The Trust Department of ABC Bank provides investment advice to its clients. C) Tom writes a newspaper column that analyzes and recommends securities. D) Jane advises customers regarding the value of gold and silver coins.
A) Jill is an attorney specializing in estate planning who, as a side job, structures portfolios for the beneficiaries of her deceased clients at a reduced fee. Although an attorney is generally excluded, Jill is giving investment advice for a fee in a manner that is not incidental to her legal practice. Jane's advice does not concern securities; banks are excluded from the definition; Tom's advice is not specific on the basis of the situation of each client (impersonal advice)
The Investment Advisers Act of 1940 requires every registered investment adviser to have a chief compliance officer (CCO). This individual would be responsible for ensuring compliance with the firm's Code of Ethics by all of these EXCEPT A) a nonaffiliated broker-dealer through whom the majority of the firms trades are executed B) investment adviser representatives who are independent contractors C) investment adviser representatives employed by the firm D) clerical and ministerial employees of the firm
A) a nonaffiliated broker-dealer through whom the majority of the firms trades are executed The CCO is responsible for compliance with the firm's Code of Ethic by every employee, registered or not, and any nonemployee who is registered with the firm, such as independent contractors. Broker-dealers the investment advisory firm uses for trade execution are beyond the scope of the IA's supervision.
A state-registered investment adviser with discretionary authority over client accounts discovered on Monday, that the firm's net worth is below the required amount. He must notify the administrator and then file a report no later than the A) close of business Tuesday, close of business Wednesday B) close of business Tuesday, close of business Friday C) close of business Monday, close of business Wednesday D) close of business Monday, close of business Friday
A) close of business Tuesday, close of business Wednesday Unless otherwise exempted, every investment adviser registered or required to be registered under the Act shall by the close of business on the next business day notify the Administrator if such investment adviser's net worth is less than the minimum required. After transmitting such notice, each investment adviser shall file by the close of business on the next business day a report with the Administrator of its financial condition.
The term "federal covered investment adviser" would apply to a person who A) is registered as such under the Investment Advisers Act of 1940 B) limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) C) is registered as such under the Investment Company Act of 1940 D) limits the advice offered strictly to securities issued or guaranteed by the U.S. government or 1 of its political subdivisions
A) is registered as such under the Investment Advisers Act of 1940. Only federal covered investment advisers register under the Investment Advisers Act of 1940. Even if the person only gives advice on exchange-listed securities (which are federal covered securities), that does not make the person federal covered. After all, if the AUM is under $100 million, registration is only possible with the state(s), unless meeting an exception. Although the term "federal covered adviser" does apply to those who limit their advice to securities issued or guaranteed by the U.S. government, it would not apply if advice is given on political subdivisions (states, cities, etc.).
Which of the following are required for an initial application for registration as an investment adviser? A consent to service of process A fee Disclosure as to whether the applicant will have discretionary powers over client funds and/or securities Disclosure as to whether the applicant will have custody of client funds or securities
All of the above
Under the Investment Advisers Act of 1940, which of the following are excluded from the definition of an investment adviser? A) Attorneys who advise on securities (only) for a fee B) Banks and trust companies C) Accountants who advise on securities (only) for a fee D) Insurance companies
B) Banks and trust companies The act excludes the following from the definition: banks or trust companies; publishers of bona fide publications of general circulation (newspapers and magazines); persons advising about certain securities (U.S. government or agency issues); broker-dealers not receiving special compensation for giving advice; and persons whose advice is incidental to their profession, such as lawyers, accountants, engineers, and teachers
Under the Uniform Securities Act, all of the following are excluded from the definition of an investment adviser EXCEPT A) a federal covered adviser B) an individual providing advice on municipal bonds C) banks D) broker-dealers and their agents
B) an individual providing advice on municipal bonds Providing advice on municipal bonds (even though they are exempt securities) does not entitle one to an investment adviser exclusion.
Which of the following statements regarding the SEC's power to revoke the registration of an investment adviser is TRUE? A) Revocation would occur, with appropriate notice, when a firm's annual updating amendment was received by the SEC 120 days after the end of the registrant's fiscal year. B) If it is determined that an investment adviser is insolvent, the SEC may revoke the registration. C) Failure to adequately supervise a person associated with the adviser could be cause for the SEC to revoke the firm's registration. D) An investment adviser receiving substantial prepayment of fees from 50% of its clients that fails to include a copy of its balance sheet in its brochure delivered to all clients would give the SEC cause for beginning revocation proceedings.
C) Failure to adequately supervise a person associated with the adviser could be cause for the SEC to revoke the firm's registration. Failure to supervise, if proven, is one of the most common causes for disciplinary action against a broker-dealer or investment adviser. Insolvency is not a cause for revocation under the Investment Advisers Act of 1940, but it is for a state-registered investment adviser (it's tough to keep these straight; please see Appendix A). A late ADV annual updating amendment might be cause for some action but almost certainly not a revocation; it is not that serious an offense. The balance sheet would only have to be part of the disclosure statement (brochure) given to those from whom substantial prepayment of fees is received.
Form PF must be filed by A) SEC-exempt reporting advisers B) SEC-registered advisers with no more than $150 million in private fund assets under management C) SEC-registered advisers with at least $150 million in private fund assets under management D) state-registered private fund managers, regardless of the amount of assets under management
C) SEC-registered advisers with at least $150 million in private fund assets under management Form PF is the form used by those private fund managers who are registered with the SEC and whose private fund AUM reaches or exceeds the $150 million threshold. Exempt reporting advisers are, as the term implies, exempt from reporting. State-registered advisers don't report on the form because, among other things, if they reached the $150 million mark, they'd have to register with the SEC.
A federal covered registered investment adviser who receives compensation for advice and whose business is primarily as an investment adviser may describe its business as investment counsel if A) it receives SEC approval to use the definition B) it maintains custody of customer funds and/or securities C) a substantial part of his business is providing investment supervisory services D) it maintains its registration by filing an updating amendment to its Form ADV annually
C) a substantial part of his business is providing investment supervisory services The Investment Advisers Act of 1940 prohibits the use of the term "investment counsel," unless the principal business of the person is as an investment adviser and a substantial part of the business is providing investment supervisory services (i.e., continuous advice for individual client portfolios).
A federal covered IA files a petition for bankruptcy. The firm must A) notify all of its clients immediately B) do nothing until the court decides the disposition of the firm's assets C) notify the SEC immediately D) notify the Administrator immediately
C) notify the SEC immediately As a federal covered investment adviser, the responsible regulatory body is the SEC.
One of the exemptions from registration under state and federal law applies to investment advisers to private funds. One characteristic of all private funds is that A) they have assets of less than $150 million B) their advisers are exempt from filing reports on Form ADV C) they are not registered as investment companies D) they have no more than 100 investors
C) they are not registered as investment companies Private funds lose that distinction if they become registered as investment companies under the Investment Company Act of 1940. It is the adviser to a private fund who has a limitation on the amount of AUM, not the fund. In some cases, specifically when using the 3(c)(7) exemption, there is no limit to the number of investors. In many cases, the advisers to these funds, although exempt from registration, are considered exempt reporting advisers and must file a Form ADV Part 1 answering most of the questions on the Form.
Under the Uniform Securities Act, a state-registered investment adviser whose only office was in State N would NOT have to register in State O if its only clients were A) 6 or fewer retail clients B) individual accredited investors C) trust companies D) complex trusts
C) trust companies A state-registered investment adviser can make use of the de minimis exemption if it has no place of business in a state and its only clients are institutions, such as bank and trust companies, investment companies, and insurance companies. Don't confuse a trust with a trust company—trusts are not institutions unless it specifically states a pension or profit-sharing trust, and even then, it only qualifies if it has assets of not less than $1 million. No individual, regardless of wealth, is an institution and the de minimis limit is fewer than 6 (sometimes shown as 5 or fewer).
Defalcator Investment Advisers (DIA), registered in States A, K, and R, would be required to provide a balance sheet as part of its brochure if it charged fees of A) $500 for the next 3 months of advisory service. B) $1,000 for the next 3 months of advisory service. C) $500 for the next 6 months of advisory service. D) $1,000 for the next year's advisory service.
D) $1,000 for the next year's advisory service. State-registered investment advisers, who charge substantial prepayment of advisory fees, must include a balance sheet with their brochure. The definition of a substantial prepayment is: more than $500, 6 or more months in advance. The correct choice is the only one meeting both requirements. Remember, it isn't $500 or more, it is more than $500 and it must be for at least 6 months of service to count.
The Investment Advisers Act of 1940 would consider each of the following investment advisers to be exempt from registration EXCEPT A) an adviser who maintains an office in only one state, advises only residents of that state (none of whom is a private fund), and gives advice relating solely to securities not traded on any national exchange B) an adviser whose only clients are venture capital funds C) an adviser whose only clients are insurance companies D) an adviser whose only clients are banks
D) an adviser whose only clients are banks Advising banks only does not qualify one for the exemption. Advisers who only service insurance companies or venture capital funds are exempt, as are advisers performing intrastate who do not give advice to private funds or on listed securities.
A consent to service of process required by an Administrator is A) a legal procedure that authorizes the Administrator to issue injunctions B) an agreement to perform all services and duties that the Uniform Securities Act (USA) requires of those individuals covered by the USA C) a formal statement declaring that an investment adviser will comply with all advertising requirements of the USA D) an agreement whereby a registrant will be bound by any legal action or subpoena served on the Administrator as if it had been served on the registrant
D) an agreement whereby a registrant will be bound by any legal action or subpoena served on the Administrator as if it had been served on the registrant A consent to service is a formal legal agreement whereby a registrant will be bound by a legal action or subpoena served on the Administrator as if it had been served on the registrant. A consent to service is not an authorization to issue an injunction.
A federal covered investment adviser is a person A) registered with North American Securities Administrators Association (NASAA) B) exempt from regulation under the Securities Exchange Act of 1934 C) registered under the Uniform Securities Act D) registered, or excluded from the definition, under the Investment Advisers Act of 1940
D) registered, or excluded from the definition, under the Investment Advisers Act of 1940 Explanation A federal covered investment adviser refers to a natural person or firm registered under the Investment Advisers Act of 1940 or excluded from the definition of investment adviser under that act. A person registered under the Investment Advisers Act of 1940 is exempt from state registration or licensing requirements of state securities Administrators under the Uniform Securities Act. Federal covered investment advisers are not exempt from the antifraud provisions of the USA. Investment advisers, whether state or federal registered, do not register with NASAA.
Platinum Investment in Growth Group, Inc. (PIGGI) is registered in and has its principal office in State W. PIGGI has near-term plans to open offices in State A and B. In an effort to test the waters, PIGGI mails several hundred flyers to prospects in those 2 states. Under the Uniform Securities Act, A) these flyers could be mailed, but no accounts can be opened until PIGGI is registered in States A and B B) as long as PIGGI did not maintain an office in either of these states, the flyers could be mailed C) as a federal covered investment adviser, the flyers would need filing with the SEC D) these flyers could not be mailed until PIGGI was registered in States A and B
D) these flyers could not be mailed until PIGGI was registered in States A and B Any attempt to hold oneself out as offering investment advice as part of a business would require the person to be registered in the state, unless that person qualifies for an exclusion or exemption. Nothing in this question implies that an exclusion or an exemption applies. We know that PIGGI is not a federal covered investment adviser (and therefore does not need to file its flyers with the SEC) because we are told it is registered in State W—federal covered advisers don't register in any state. the term "investment counsel" may be used by any adviser that meets two standards: the adviser performs investment supervisory services, and the adviser provides advice as the primary business of the firm. No other special qualifications or registrations are needed. U1LO1
When is a security record need to be kept?
Only required for those advisers who have custody of client assets.
Under the Investment Advisers Act of 1940, persons who provide a variety of services, including investment advisory services, are considered to have received compensation for their advice when they receive: any economic benefit a fee paid directly for the investment advice portion of their services a commission on the sale of real estate when the agent advertises that she will give free advice regarding investing the proceeds from the sale of any home she lists A) I, II, and III B) I and II C) II and III D) I and III
a) All of the above The question is not asking "who is an investment adviser?" It is focusing on the compensation prong. Compensation may take the form of, but is not limited to, fees, payments for subscriptions, salaries, or commissions. Compensation does not have to be direct. An example of that holds for the real estate agent—she doesn't give advice unless you list your home with her.
