65 Unit 1 - Regulation of Investment Advisors, Including State-Registered and Federal Covered Advisors

Foreign advisors must have under ___ AUM and under ___ clients to be exempt from registration?

$25M, 15 Retail clients (none of whom are investment companies)

What does ADV part 2A contain

- compensation agreements (fees, commission) - types of clients (retail, institutional, pensions) - types of investments - strategies employed - analysis methods (funides, technical) - educational and business background of the people who offer advice - audited balance sheet if maintaining custody or prepaying fees

What is Form ADV Part 1?

- location of principal office - location of books and records - form of business - method of business - maintaining custody - details of all officers, directors, and partners - disciplinary history

State registered advisors must file ADV part _____ with the administrator

1 and 2 in each state they are registering

An exemption exists for IAs to Private Funds who manage ___ or ___

150M or Less

How long must IA records and copies of advertisements be kept until

5 Years

Midwest Advisory Services has $175 million in assets under management and has offices in 10 Midwest states. Regarding recordkeeping requirements, Midwest must meet those of A) the SEC B) the state with the most stringent financial requirements C) the state in which its principal office is located D) each state in which it has a place of business

A With $175 million in AUM, Midwest is a federal covered adviser. As such, all financial requirements, bonding, recordkeeping, and so forth requirements are those of the SEC, not any of the states.

Under the Uniform Securities Act, which of the following is an investment adviser? A) Tom writes a newspaper column that analyzes and recommends securities. B) 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. C) The Trust Department of ABC Bank provides investment advice to its clients. D) Jane advises customers regarding the value of gold and silver coins.

B 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).

A consent to service of process required by an Administrator is A) an agreement to perform all services and duties that the Uniform Securities Act (USA) requires of those individuals covered by the USA B) a legal procedure that authorizes the Administrator to issue injunctions C) 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) a formal statement declaring that an investment adviser will comply with all advertising requirements of the USA

C 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.

Which of the following statements are TRUE? A federal covered adviser sells federal covered securities only. Federal covered advisers are advisers with federally imposed exemptions from state registration as investment advisers. A federal covered security is exempt from registration with the SEC. Federal covered securities include those issued by investment companies registered under the Investment Company Act of 1940. A) I and III B) III and IV C) II and IV D) I and II

C A federal covered adviser is an adviser with a federally imposed exemption from state registration. Securities issued by investment companies registered under the Investment Company Act of 1940 are included in the definition of a federal covered security.

Does studying for this bullshit exam suck? A.) yeah B.) yeah C.) yeah D.) yeah

C Yes, it does

The responsibility for administering the Investment Advisers Act of 1940 lies with A) FINRA. B) the Administrator. C) the Investment Advisers Association (IAA). D) the SEC.

D

The document that gives the Administrator the right to process complaints against a registrant is known as A) a writ of habeas corpus B) a durable power of attorney C) an injunction D) a consent to service of process

D The consent to service of process gives the Administrator the right to process legal complaints against the applicant.

Giving a legal opinion on a municipal security indenture is investment advice. (T/F)

False

The Investment Advisors Act of 1940 is a Federal or State Law

Fed

What groups did SEC release IA-1092 expand the definition of IA to

Financial Planners, Pension Consultants, Sports and Entertainment Representatives

Advisors to Venture Capital funds need not register

I know das right

Section 203 of the IAA of 1940 meets the USA definition of an

IA

What does the L.A.T.E exclusion stand for

Lawyers, Accountants, Teachers, Engineers

Is a federal covered security exempt from registration with the SEC

NO

Is there an exclusion for advisors whose only clients are banks?

NO there is NO exclusion

If a person offering advice on securities has no place of business in a state and deals only with institutional investors or other investment adviser registration is...

NOT required

How does a private fund qualify under the 3(c)(1) issuer

No more than 100 investors, all qualifies nad must have 1.1M with firm or NW of over 2.2M (excluding primary residence

AUM thresholds for State, SEC, or both registrations

OVER $110M - must be SEC registered BETWEEN $110M-100M - can be either state or SEC UNDER $100M - must be state

What part of the ADV satisfies the brochure requirement

Part 2

If a Broker-dealer charges a specific fee for investment advice they must...

REGISTER as an IA

When do registrations become effective?

Registrations become effective at noon on the 30th calendar day after the date of filing if there are no denial orders or pending proceedings.

What does a company do if they fall below the $110M AUM threshhold?

They have a buffer of $20M so if they drop below $90M they must withdrawal from the SEC registration and register with the state

Form PF must be filled out by SEC registered advisors with at least 150M in private AUM

True

Definition of IA under the Uniform Securities Act

Under the Uniform Securities Act, an investment adviser is a person, corporation, partnership, or sole proprietorship who, in the regular course of business, advises others as to the advisability of selling securities.

An exemption exists for IAs solely to ___ ___ firms`

Venture Capital

Are advisors to registered investment companies requires to be SEC registered?

Yes

Is a trust account considered a retail account and can affect the de minimis exclusion?

Yes

A advisor to a probate fund with $160M AUM...

needs to register as an IA because the limit is $150M, anything under 150M and the advisor does NOT have to register

An injunction can only be issued by

a court NOT the Administrator, it can NEVER be issued by an Administrator

Does an employee benefit plan of at least $1M and up count as a retail client according to the de minimis exclusion?

an employer benefit plan of $1M+ DOES NOT count as a retain client

foreign advisers who limit themselves to fewer than 15 clients a year (none of whom can be investment companies), do not advertise or hold themselves out to be investment advisers and have less than $25 million in AUM in the United States...

are exempt from registration

broker-dealers are generally exempt from having to register as investment advisers unless they

charge a separate fee for account management or advice

What are the only two things an Administrator can request from a Federal covered IA

copy of ADV and filing fee

Trust companies are specifically _______ from the definition of an IA

excluded

Advisers whose clients are limited to insurance companies are...

exempt from registration

a person whose securities advice is confined to securities issued or guaranteed by the Treasury is..............

exempt from registration

institutional accredited investors would qualify the adviser for...

exemption from registration

If the adviser manages a registered investment company, the adviser must be

federal covered

Insurance companies, banks, and government instrumentalities DO NOT COUNT TOWARDS THE DE MINIMIS LIMIT

gotcha bruv

When was the term federal covered advisors coined

in 96 by the NSMIA

If the person serves as a pension consultant with $200 million or more in AUM, the person has the

option of registering with the SEC not the state

What is Investment Council

principal business of the person is as an investment adviser and a substantial part of the business is providing investment supervisory services

Under the Uniform Securities Act, all of the following persons with no place of business in the state are exempt from registration as an investment advisers EXCEPT A) advisers who have conducted business with no more than 6 individual clients in the state within the last 12 months B) advisers who deal exclusively with investment companies registered under the Investment Company Act of 1940 C) advisers who deal exclusively with federal covered investment advisers located in the state D) advisers who deal exclusively with savings banks located in the state

A stupid fvcking question is trying to trick you bruv The de minimis rule for a registered investment adviser who has no place of business in the state is fewer than 6 clients. Doing business with 6 clients within the last 12 months exceeds this de minimis amount, and therefore, the exemption from registration does not exist. All others listed as possible answers are institutional or professional types of investment client. If a registered investment adviser works only with this type of client, an exemption from registration in that state exists as long as the registered investment adviser has no place of business in that state.

What is a consent to service

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.

The chief compliance officer (CCO) of a registered investment adviser would generally not have responsibility for the actions of A) an investment adviser representative of the firm. B) an agent registered with an affiliated broker-dealer. C) supervisory personnel of the firm. D) ministerial personnel of the firm.

B The CCO of an investment adviser is responsible for compliance with all relevant rules and procedures applying to all personnel of the investment adviser. Agents with an affiliated broker-dealer come under the supervisory jurisdiction of the compliance officer of that BD.

According to the Investment Advisers Act of 1940, the SEC must either grant investment adviser registration or begin proceedings to determine whether registration should be denied within how many days of filing? A) 60 B) 45 C) 90 D) 30

B The SEC is required by the Investment Advisers Act of 1940 to either grant an adviser registration or begin proceedings to determine whether the registration should be denied within 45 days of application.

Under the Uniform Securities Act, which of the following must register with the state securities Administrator? A) Investment advisers to an investment company registered under the Investment Company Act of 1940 B) Investment advisers with a place of business in the state and less than $100 million in assets under management C) Investment advisers without an office in the state whose clients are exclusively insurance companies D) Investment advisers who have $100 million or more under management

B Under the USA, an investment adviser with a place of business in the state must register with the state securities Administrator, regardless of who the clients are, unless they are federal covered advisers. Advisers without an office in the state, or whose clients are exclusively insurance companies, are not defined as investment advisers in that state under the USA. An adviser who manages an investment company that is registered under the Investment Company Act of 1940 or who has $100 million or more under management, are federal covered investment advisers that do not register with the states. Once the $100 million level is reached, the adviser has the choice of state or SEC registration until hitting $110 million.

Kapco Investment Advisers currently has $18 million in assets under management and has offices in Colorado and Utah. Kapco's only clients in Utah are two insurance companies domiciled in that state. Kapco has no office in Washington but does service the accounts of three middle-class individuals. Kapco has recently opened an advisory account for a pension plan for a corporation located in Montana. Under the Uniform Securities Act, Kapco would have to register with the Administrator in the state of Colorado Montana Utah Washington A) III and IV B) I and II C) I and III D) I and IV

C With less than $100 million in assets under management and no investment company clients, Kapco cannot qualify as a federal covered adviser. Therefore, the firm must register in each state in which it maintains an office, regardless of the nature of its clientele in that state. Registration would not be required in Washington because there is no office and Kapco qualifies for the de minimis exemption. Kapco would not be required to register in Montana because there is no office and its only client is an institution.

Which of the following firms would be a federal covered adviser? A) XYZ Broker-Dealer with custody over $50 million of clients' invested assets B) DEF Fund Managers, a corporation managing an unregistered hedge fund with $20 million in assets C) GHI Consultants, a sole proprietorship managing $15 million belonging to high-net-worth individuals D) ABC Money Managers, a partnership with $112 million under management

D The structure of the adviser is irrelevant; if assets under management equal $110 million or more, SEC registration is required. If the investment company is registered under the Investment Company Act of 1940, the adviser must be registered, regardless of size. The hedge fund is an unregistered fund, so the rule does not apply. A broker-dealer is excluded from the definition of investment adviser if investment advice is incidental to its business. Custody has nothing to do with giving advice.

Included in the Investment Advisers Act of 1940 are a number of different recordkeeping requirements. Wealth Preservation Specialists is a covered adviser that is organized as a partnership. If the firm were to dissolve, partnership agreements must be kept for A) 5 years after the dissolution B) 5 years from the date of organization C) the lifetime of the firm D) 3 years after the dissolution

D ​Both ​​the Investment Company Act of 1940 ​(applicable here because this is a covered adviser) and the NASAA Model Rule on Recordkeeping ​require that investment advisers maintain certain records, such as partnership agreements and corporate articles of incorporation, for a period of no less than 3 years after dissolution.

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) December 31, 2017 B) January 18, 2018 C) February 28, 2018 D) March 30, 2018

C The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal-year end.

When the annual updating amendment filed by a state-registered investment advisory firm indicates that the $110 million threshold has been reached, the firm has ___ days to register with the SEC

90

Under the Uniform Securities Act, most books and records of investment advisers must be maintained for A) 5 years, the first 2 in the firm's principal office B) 2 years C) 3 years, the first 2 in the firm's principal office D) 1 year

A

Under the Uniform Securities Act, a person who exclusively provides advice on commodities is A) not a registered investment adviser B) a registered insurance agent C) a registered investment adviser representative D) an options representative

A A person who only provides advice on commodities is not a registered investment adviser. To be an investment adviser under the Uniform Securities Act, advice must be given on securities. The act specifically excludes commodities from the definition of security.

The agreement that the Administrator can receive subpoenas on behalf of a registered agent, broker-dealer, or investment adviser involved in any securities sale that violates the Uniform Securities Act is A) the consent to service of process B) the agreement to actionable offenses C) the right of retribution D) the right of rescission

A Every applicant for registration and every issuer must file an irrevocable consent to service of process appointing the Administrator as attorney to receive service of any lawful process in any civil suit, action, or proceeding. It has the same legal effect as if the person had been served personally.

All of the following have legal standing as persons under the Uniform Securities Act EXCEPT A) minor children B) trusts where the interests of the beneficiaries are evidenced by a security C) joint-stock companies D) unincorporated organizations

A The definition of a person under the act includes, among others, individuals, joint-stock companies, unincorporated organizations, and trusts where the interests of the beneficiaries are evidenced by a security. Minor children are not persons under the act.

Leslie is an IAR with Financial Visions (FV), a federal covered investment adviser. Leslie operates Innovative Financial Solutions (IFS), a separate financial planning company with its own office in State W. Should Leslie be found guilty of fraudulent business activities, FV would A) be immune from State W's Administrator's jurisdiction because it is a federal covered adviser. B) be subject to possible disciplinary action brought by the State W Administrator if it could be shown that FV failed to supervise Leslie's activities. C) possibly have its State W registration suspended. D) claim that IFS is a separate entity over which FV has no responsibility.

B Under the doctrine of respondent superior, an investment adviser is responsible for the actions of any of its registered IARs, even those who operate an independent financial planning firm (independent contractors). Although, as a federal covered adviser, FV doesn't have a registration that can be suspended, state administrators do have jurisdiction over covered advisers when fraud is involved.

Under the Investment Advisers Act of 1940, which of the following are exempt from the requirements for registration? Foreign investment advisers with fewer than 15 clients per year who do not hold themselves out as investment advisers to the public and have less than $25 million in AUM in the United States Investment advisers who conduct all of their business in 1 state and who do not provide advice on securities listed on an exchange and have no private funds as clients Investment advisers whose only clients are banks A) II only B) I and II C) I only D) I, II, and III

B Usually, anyone who meets the federal definition of investment adviser must be registered with the SEC. Some investment advisers are not excluded from the definition but are exempt from the registration requirements of the SEC. One example is an adviser whose clients are all residents of the state in which the adviser maintains its principal office who renders no advice on any exchange-listed security and does not give advice to any private funds. Advisers whose clients are limited to insurance companies are exempt from registration, as are foreign advisers who limit themselves to fewer than 15 clients a year (none of whom can be investment companies), do not advertise or hold themselves out to be investment advisers and have less than $25 million in AUM in the United States. There is no exclusion for advisers whose only clients are banks.

Emmet opened an investment advisory service 3 years ago and raised $50 million in capital from family, friends, and contacts and then closed to new investors. If Emmet's stock picks expanded assets under management to $110 million, Emmet A) is not required to take any action B) must register with the SEC C) must update his registration with the state Administrator D) must register for the first time with the state Administrator

B When the annual updating amendment filed by a state-registered investment advisory firm indicates that the $110 million threshold has been reached, the firm has 90 days to register with the SEC.

As long as an IA limits clientele to these four groups in a state they do not have to register

Banks, other IA's, Broker-Dealers, and Insurance companies

A federal covered investment adviser has which of the following obligations regarding the state in which it maintains its principal place of business? It must notify the Administrator of its SEC registration. It must pay state-required filing fees. Its adviser representatives are exempt from state-required exams. It must maintain net worth equal to the higher of federal requirements or those of the state. A) II only B) I only C) I and II D) I, II, III, and IV

C A federal covered investment adviser is required to notify the Administrator of its federal covered status and pay any state-required fees. The state may require examinations, such as the Series 65 or 66, but not a net worth in excess of that required under federal law.

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 and III B) I and II C) I, II, and III D) II and III

C 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.

Under the Uniform Securities Act, if no denial or proceedings are pending, when does an investment adviser registration become effective? A) When the Administrator so orders, but not to exceed 90 days B) No sooner than 15 days C) 60 days after application or an amendment is filed D) When the Administrator so orders, but not to exceed 30 days

D Registrations become effective at noon on the 30th calendar day after the date of filing if there are no denial orders or pending proceedings.

The National Securities Markets Improvement Act of 1996 (NSMIA) A) created a national market system B) overcame the restrictions of selling securities in interstate commerce C) created the concept of fraud, as used in the Uniform Securities Act D) defined the term "federal covered adviser"

D The NSMIA defined the term "federal covered adviser," referring to advisers who must register with the SEC or who are excluded from the definition of "investment adviser" under the Investment Advisers Act of 1940. Fraud is a legal concept and is prohibited by the Uniform Securities Act. Selling securities in interstate commerce is not fraudulent, provided the antifraud provisions securities laws are observed. The roots of a national market system began with the Securities Amendments Act of 1975.

Under the Investment Advisers Act of 1940, who is not excluded from the definition of investment adviser when their investment advice is solely incidental to the individual's profession? A) Engineers B) Teachers C) Attorneys D) Insurance agents

D The persons excluded from the definition of investment adviser when advice is provided solely incidental to their profession include lawyers (attorneys), accountants, engineers, and teachers. Insurance agents are not included in this group and are not excluded from the definition.

Which of the following statements are TRUE? A federal covered adviser sells federal covered securities only. Federal covered advisers are advisers with federally imposed exemptions from state registration as investment advisers. A federal covered security is exempt from registration with the SEC. Federal covered securities include those issued by investment companies registered under the Investment Company Act of 1940. A) II and IV B) I and III C) I and II D) III and IV

A A federal covered adviser is an adviser with a federally imposed exemption from state registration. Securities issued by investment companies registered under the Investment Company Act of 1940 are included in the definition of a federal covered security.

Which of the following statements concerning the books and records of a state-registered investment adviser under the Uniform Securities Act is (are) true? Books and records must be maintained in the principal office of the adviser for the first two years. Books and records must be maintained in an easily accessible place for no less than five years from the end of the last fiscal year in which an entry was made. Copies of all investment letters, advertisements, or communications to two or more persons must be preserved for five years from the end of the fiscal year of the publication date. An adviser who ceases business continues to be responsible for the maintenance and preservation of certain records, such as corporate charters and minute books, for three years after termination of the enterprise. A) I, II, III, and IV B) I only C) I, II, and III D) II only

A All books and records required to be maintained by actively registered investment advisers—including investment letters, advertisements, or other communications to two or more persons (10 if the question dealt with federal law)—must be preserved in a readily accessible place for five years from the end of the fiscal year in which they were created or communicated. For the first two years, they must be maintained in the appropriate office of the adviser. The adviser remains responsible for the preservation of certain records, such as corporate charters and minute books or partnership agreements if operated in that business form, for three years after ceasing business.

Martin holds both the CPA and the CFP designations. Within the previous year, if he has provided portfolio advice to approximately 40 clients, is Martin required to register as an investment adviser? A) Yes, because he provides investment advice on a more than incidental basis. B) No, because he falls under the de minimis exemption having relatively few clients. C) No, because he is a CPA. D) Yes, because he could receive commission income from investment clients.

A Although Martin is an accountant, he provides investment advice on a more than incidental basis (typically regarded as more than 10 client contacts per year). Nothing indicates that Martin will be executing commissionable trades; only providing advice.

Under the Uniform Securities Act, which of the following investment advisers with no place of business in the state must register with the state as an investment adviser? A) An adviser rendering advice to no more than 10 individual clients within a 12-month period B) An adviser rendering advice solely to broker-dealers C) An adviser rendering advice to employee benefit plans with at least $1 million in assets D) An adviser managing more than $110 million in assets

A An investment adviser with no office in the state would be exempt from registration in the state if the adviser renders advice to no more than 5 noninstitutional clients (not 10) in a 12-month period. If an investment adviser has no office in the state, and renders advice solely to broker-dealers, insurance companies, banks, investment companies, governmental agencies, or employee benefit plans with assets of $1 million or more, the adviser is exempt from registration with the state. If the adviser manages assets of $110 million or more, the adviser would be required to register with the SEC, not the state.

Which of the following factors determine(s) whether a person is considered an investment adviser under the Investment Advisers Act of 1940? The specificity of the advice The business engaged in Whether compensation is received A) I, II, and III B) I and II C) II only D) I and III

A Any person who, for compensation, engages in the business of advising others concerning the purchase or sale of securities either directly or through publications is defined by the act as an investment adviser. The factors that make up the definition include whether the person advises others on securities; whether he does it as a regular business or as part of a business; and whether he receives compensation for doing so.

Under the Uniform Securities Act, Paul must register as a state-registered investment adviser if he A) opens an investment advisory business as a sole proprietor in New Jersey with the intention of advising individual clients on the advisability of investing in securities. Paul will have $90 million in AUM within 120 days of opening. B) opens an investment advisory business as a sole proprietor in New Jersey with the intention of advising individual clients on the advisability of investing in securities. Paul will have $100 million in AUM within 120 days of opening. C) becomes a full-time employee of AAA Investment Advisers, Inc., where he will advise clients whose assets under his discretion will exceed $200 million D) sells registered securities on a commission basis for a registered broker-dealer

A Being in the business of advising individual clients on the advisability of investing in securities requires one to register as an investment adviser, either with the state or the SEC. The key is the assets under management. If a new IA reasonably believes that he will have AUM of at least $100 million within the first 120 days of registering, he is permitted to register with the SEC. Of course, if it reaches $110 million, then SEC registration is required. Reaching $90 million is not enough and, therefore, registration with the state would be the only option here. As a full-time employee of AAA Investment Advisers, Inc., he would have to register as a registered investment adviser representative and will not be a registered investment adviser (the firm). Selling registered securities under the supervision of a broker-dealer would require an agent registration with the state and the SEC.

Under the Uniform Securities Act, which of the following persons has to register as an investment adviser? A) A broker-dealer who gives advice for which he charges a specific fee B) An attorney who writes a legal opinion for a municipal bond indenture C) An agent of a broker-dealer who gives investment advice within the course of his duties with the firm for which a fee is charged D) A broker-dealer who gives investment advice that is incidental to the course of its business and for which no special compensation is received

A Broker-dealers need not register as investment advisers unless they charge a separate fee for providing investment advice. If the advice is strictly incidental and without a separate charge, the BD is not an investment advisor. Attorneys are not investment advisers provided their investment advice is incidental to their practice. Giving a legal opinion on a municipal security indenture is not investment advice. Agents giving advice for which a fee is charged must register as investment adviser representatives and their BDs as investment advisers.

Under current regulations, registration with the SEC is optional for all of the following investment advisers EXCEPT A) CEF Investment Managers, LTD., a partnership managing a small registered closed-end investment company traded on the OTC Bulletin Board B) Midwestern Asset Managers, LLC, with $53 million in AUM, required to register in 17 states C) Grand Visions Advisers, a sole proprietorship with $104 million in AUM D) Employee Benefit Specialists, Inc., a pension consultant with $225 million in AUM

A Currently, registration with the SEC is mandatory (not optional) for any investment adviser managing a registered investment company (open or closed-end). It is optional for: pension consultants once their AUM reach $200 million; small and mid-size advisers who would be required to register in 15 or more states; and those advisers with at least $100 million in AUM, but not $110 million in AUM. Any of these choosing to register with the SEC are federal covered advisers and do not register with any state, although a notice filing may be required.

Under the Uniform Securities Act, all of the following are exempt from state registration as investment advisers EXCEPT A) financial planners who provide fee-based investment advisory services to clients B) publishers of financial publications that are not addressed to clients' specific individual investment situations C) investment adviser representatives D) investment advisers with no office in the state who only advise employee benefit plans with assets of more than $1 million

A Financial planners who provide fee-based investment advisory services to the public generally must register with their state securities Administrator, as long as their total assets under management are less than $100 million. Investment advisers with no office in the state, who only advise employee benefit plans with assets of more than $1 million, need not register with state securities Administrators. Investment adviser representatives do not register as investment advisers but as investment adviser representatives. Financial publishers who do not publish specific investment advice are exempt from state registration.

On last year's annual updating amendment filed with the SEC, Alpha Investment Advisers indicated that it had more than $140 million in assets under management. Due to a reduction in the size of the firm, this year's annual updating amendment shows that assets under management have fallen to the $75 million level and are expected to remain there. Which of the following actions are required for Alpha? A) Withdraw from SEC registration within 180 days of the adviser's fiscal year-end B) Withdraw from SEC registration within 90 days of the adviser's fiscal year-end C) Withdraw from SEC registration immediately D) Do nothing and continue as a federal covered adviser

A If an adviser reports on its annual updating amendment that it has less than $90 million under management and it is not otherwise eligible to register with the SEC, it must withdraw from SEC registration within 180 days of the adviser's fiscal year-end by filing Form ADV-W. The adviser could consult the securities departments of states in which it maintains offices or conducts business to determine the appropriate state registration requirements.

ABC Advisers changes its name to XYZ Advisers and also changes its location. Under the Investment Advisers Act of 1940, it must A) amend Form ADV promptly B) notify FINRA within seven days C) amend Form ADV in advance D) notify the Administrator

A If information on certain parts of Form ADV becomes out of date, a federal covered adviser must file a prompt amendment with the SEC (a state-registered adviser would have to do the same with the Administrator under the USA). Information requiring immediate amendment includes name, address, telephone number, organization type changes (corporation, sole proprietorship, and partnership), degree of control over clients' funds, sources of funding, management organization, or any information relating to disclosure to clients. If any other information on the form changes (nonmaterial information), the SEC requires the form to be amended within 90 days of the end of the adviser's fiscal year.

Which of the following investment advisers would be permitted to use the term "investment counsel"? A) A firm whose exclusive business is placing clients' assets into model portfolios B) A financial planner offering a wide range of services to his clients, including tax planning, estate planning, insurance planning, and investment advice C) A professional providing a market timing service with an annual subscription fee of $995, with this service attempting to maximize profits by suggesting entry and exit points for over 100 listed stocks D) An investment adviser who has been admitted to the bar in the state in which the firm's principal office is located

A In order for the term "investment counsel" to be used, two criteria must be met. First, the principal business of the adviser must be the rendering of investment advice. Second, the nature of the advice must meet the definition of investment supervisory service. That means giving continuous investment advice to clients based on their individual needs. That is frequently accomplished by selecting model portfolios most appropriate to the client's needs. The financial planner clearly is not principally in the business of offering investment advice because he describes his service as offering a wide range of services, of which advice is only a part. The exam frequently uses that wording to indicate that advice is not the principal activity. While the publisher's principal business activity may be offering advice, nothing about the description indicates that individual client accounts are being monitored.

All of the following are exempt from registration requirements with the SEC under the Investment Advisers Act of 1940 as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 EXCEPT A) investment advisers with $110 million or more in assets under management B) an adviser with 50 clients, none of whom is a private fund, all within one state, that furnishes no advice on exchange-listed securities C) investment advisers whose only clients are insurance companies D) someone who gave investment advice to 11 private funds throughout the Midwest last year and has total assets under management of $120 million

A Investment advisers with $110 million or more of assets under management are subject to registration with the SEC under the Investment Advisers Act of 1940 and the Dodd-Frank Act. Federal exemptions apply to advisers whose clients are all in one state, whose principal office is in that state, and whose clients (none of whom are private funds) are not furnished advice on exchange-traded securities. Private fund managers are exempt from SEC registration until their AUM in the U.S. reaches $150 million.

In October 1987, the SEC promulgated Release IA-1092, which had the effect of broadening the definition of investment adviser. As a result of the Release, which of the following would be included in the definition? Commercial banks offering comprehensive financial planning for their high-net-worth clients Entertainment agents earning a fee for negotiating contracts for their clients and then placing a portion of the client's royalties into investment-grade bonds or large-cap stocks as market conditions dictate Persons who receive a nominal fee for assisting employee benefit plan administrators select investment managers for the plan's assets Lawyers who prepare trust agreements for clients with large securities holding with a goal of minimizing estate taxes A) II and III B) I and IV C) II and IV D) I and II

A Once the entertainment agent makes investment decisions for a client who is paying fees for overall services rendered, that agent now comes under the IA-1092 definition of investment adviser. Similarly, any person who is compensated for giving investment-related advice to employee benefit plans is considered a pension consultant and is required to register under IA-1092. Banks are never IAs, and the lawyer is merely doing legal and tax work.

Which of the following statements is not true of investment advisers under the Uniform Securities Act? A) Only written advice concerning investments is covered by the act. B) Investment advice includes advice regarding the value of securities, as well as recommendations to buy or sell. C) Compensation is a key factor in determining whether a person is required to register as investment adviser. D) A natural person may register as an investment adviser.

A One of the three prongs defining an investment adviser under both state and federal law is the giving of investment advice. That advice can be in written or oral form. Any person, as defined in the USA, may register as an investment adviser. Even though we tend to think of the investment adviser as the company you will be working for, a significant percentage of state-registered investment advisory firms are sole proprietorships (one-person shops). Investment advice includes advice as to the value of securities, as well as recommendations to buy or sell. Compensation is another one of the three prongs in determining whether a person is defined as an investment adviser.

Which of the following is NOT considered to be in the business of investment advising? A) Insurance agents who discuss the merits of whole life insurance verses nonsecurities financial instruments and who receive commissions on the sale of life insurance only B) A financial planner who provides advice on many types of financial instruments, including securities, and receives commissions on the sale of life insurance C) A person who prepares reports about securities in general D) An insurance agent who provides investment advice regularly, but such advice represents a small portion of her business

A Please note that this question is not asking "who is an investment adviser?" It is asking about one of the 3 prongs - being in the "business". The insurance agent who discusses the merits of whole life insurance does not sell investment advice or securities, only insurance policies. The insurance agent does not hold herself out as an adviser nor does she provide advice on securities. If a person advertises as one who provides investment advice or engages in providing investment advice or analyses on a regular basis (even if not the person's principal business activity), the person is considered in the business of giving investment advice. If the person receives any compensation that represents a clearly definable charge, commission, or fee for such advice (whether paid separately or not), she is considered in the business. If the person engages in other financial activities in connection with the advice, it cannot be used to avoid the business standard.

Which of the following would be excluded from the definition of investment adviser under the Uniform Securities Act? A) The publisher of a weekly newsmagazine, sold on newsstands, that contains at least 5 stock recommendations per issue B) A civil damages attorney who advertises that he is available to assist clients in suggesting appropriate investments for their successful claims C) A finance teacher at a local community college who offers weekend seminars on comprehensive financial planning at a very reasonable price D) A broker-dealer charging a separate fee for investment advice

A Publishers of general circulation newspapers and magazines are excluded from the definition of investment adviser. A broker-dealer loses its exclusion the moment it offers advice for a separate charge, as does an attorney who holds himself out as offering investment advice. Normally, a teacher is excluded, but not when charging for advice, as would appear to be the case here. On this examination, the term "comprehensive financial planning" always includes securities advice.

Foster Advisers, based in New Jersey, manages $135 million in funds for New Jersey-based clients. As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which of the following statements best describes the registration requirement for Foster Advisers? A) Foster Advisers is required to register as an adviser with the SEC and notify the Administrator of the New Jersey Department of Securities of its operation. B) Foster Advisers is required to register with both the SEC and the Administrator of the New Jersey Department of Securities. C) Foster Advisers is required to register as an adviser with the SEC and has no requirement to notify the Administrator of the New Jersey Department of Securities. D) Foster Advisers is required to register with the Administrator of the New Jersey Department of Securities.

A Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, investment advisers with $110 million or more in assets under management must register with the SEC. These advisers are called federal covered advisers. Investment managers who manage less than $100 million must register with the state Administrator. Advisers with at least $100 million but less than $110 million of assets under management have the option to register with either their state Administrator or with the SEC. Once the $110 million level is reached, registration with the SEC is mandatory. With $135 million under management, Foster Advisers must register with the SEC. Foster Advisers is subject to the additional requirement of notifying the administrators of the securities departments of states in which it maintains offices or clients of its operations. At the state level, a notification fee (but not registration) is generally required. One aim of the NSMIA was to eliminate dual registration of investment advisers with the states and the SEC. Investment advisers are not required to register at both state and federal levels.

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) a substantial part of his business is providing investment supervisory services B) it maintains custody of customer funds and/or securities C) it maintains its registration by filing an updating amendment to its Form ADV annually D) it receives SEC approval to use the definition

A 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).

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) not required to be a registered investment adviser in the state B) required to be a registered investment adviser in the state C) required to be a registered investment adviser representative in the state D) required to be a registered agent in the state

A This question is referring to a federal covered adviser. The futures contracts are not securities, but, of course, the U.S. government securities are. However, 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. The fact that this person is excluded under the Investment Advisers Act of 1940 makes that person federal covered under the NSMIA and not subject to state regulation as an investment adviser.

Harrison is a Certified Financial Planner (CFP®) with an office in the state and a telephone directory listing under the category "Financial Planners." Harrison has, for fees, written more than 100 comprehensive financial plans for various individual clients. However, only 20% of the plans' content entails advice regarding securities and investments. Which of the following statements best describes Harrison's status as an investment adviser under the USA? A) Harrison is required to register as an investment adviser because he regularly offers advice and receives compensation for advice concerning securities and investments, and holds himself out as a financial planner. B) Harrison is not required to register as an investment adviser because his securities advice is purely incidental to his overall planning activities. C) Harrison is not required to register as an investment adviser because he holds a recognized financial planning credential. D) Harrison is required to register as an investment adviser because he holds a recognized financial planning credential

A Under the Uniform Securities Act, an investment adviser is a person, corporation, partnership, or sole proprietorship who, in the regular course of business, advises others as to the advisability of selling securities. Harrison holds himself out as a financial planner and normally includes a section on investments in his plans. Furthermore, Harrison is compensated for his services—yet another standard of the definition, investment adviser. Under the USA, certain recognized professional designations are exempt from having to qualify by passing the licensing exam but not from registration.

Long-Term Financial Solutions, Inc. (LTFSI), an investment adviser registered in five states, files a Form ADV-W indicating the business is closing. It is being acquired by another federal covered adviser, Gold and Sylver Advisers, LLC. Which of the following statements is correct? A) LTFSI is responsible for ensuring that a copy of the LTFSI corporate charter is preserved for at least three years after the acquisition. B) As the successor firm, Gold and Sylver Advisers must keep copies of the LTFSI corporate charter for at least three years after LTFSI's acquisition. C) Gold and Sylver will not have to amend their Form ADV Part 1 until the filing of their annual updating amendment. D) Gold and Sylver must notify all clients of LTFSI that their advisory contracts have been assigned.

A When an investment adviser ceases to exist, either through going out of business or being succeeded by another firm (as is the case here), it is their responsibility to ensure that articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor be preserved until at least three years after termination of the enterprise. Although it is true the contracts have been assigned to the successor firm (Gold and Sylver), the consent for that had to be obtained by LTFSI. A change of this nature requires prompt amendment to the Form ADV Part 1.

Under SEC Release IA-1092, a financial planner would not be considered an investment adviser when A) the extent of his planning is limited to wills, estates and trust creation B) he is a licensed insurance agent and credits the commission earned on the sale of insurance policies included in a comprehensive financial plan against the fee charged for the plan C) he does financial planning as part of offering a wrap fee program as a licensed agent of a broker-dealer D) there is an up-front fee charged for creating a comprehensive financial plan, even when the plan is not put into place

A Wills, estates, and trusts are not securities, so any advice given on them does not make one an investment adviser. Look for the term "comprehensive financial plan" because that always includes securities advice and, as long as a fee is charged, even when the advice is not followed, registration as an IA (or perhaps IAR) is required. Wrap fee programs may only be offered by IAs or IARs.

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

B A broker-dealer who receives fees for investment recommendations is an investment adviser because that fee is considered special compensation relating to securities advice. The antiques dealer provides non-securities-related advice. Publishers may provide generic investment advice without registering as investment advisers. Commercial bankers are excluded from the definition of an investment adviser.

A broker-dealer with an office in this state would be defined as an investment adviser if it charges: commissions for selling securities commissions for selling securities while offering investment advice incidental to the sale of the securities a fee for selling investment research and additional fees in the form of commissions for the sale of securities fees for investment research sold exclusively to institutions located in this state A) II and III B) III and IV C) I and II D) I and IV

B A broker-dealer would be considered an investment adviser if it has a place of business in this state and if it charges a fee for selling investment research or any other form of investment advice, even to institutions. If a person is in the business of selling research for a fee, that person or firm meets the definition of an investment adviser. If a broker-dealer charges commissions for selling securities and offers investment advice incidental to the sale of the securities, the broker-dealer is not an investment adviser because it is not compensated for the research.

Under the Investment Advisers Act of 1940, an adviser is required to be registered with the SEC if A) the adviser is the publisher of a news magazine of general and regular circulation B) the adviser's clients are investment companies registered under the Investment Company Act of 1940 C) the adviser's clientele is exclusively federal credit unions and the adviser has less than $100 million in assets under management D) the adviser's advice relates solely to securities issued or guaranteed by the U.S. government.

B Advisers to registered investment companies are required to be SEC-registered. Under the Advisers Act, as modified by the Dodd-Frank Act, advisers are exempt from SEC registration if they manage less than $100 million in assets and have no investment company clients. Persons are excluded from the Advisers Act definition of investment adviser if they are publishers of news or business/financial publications of general and regular circulation or if their advice relates solely to U.S. government securities.

A state-registered investment adviser suddenly incurs a liability that materially affects its net worth, causing it to drop below the required minimum. Which of the following statements is TRUE? A) The investment adviser must notify the Administrator promptly. B) The​ ​investment adviser must notify the Administrator​ by the close of business on the following business day​. C) The ​investment adviser ​must increase its surety bond to make up the deficiency. D) The ​investment adviser is not required to file​ ​an amendment to its registration with the Administrator.

B Although most notifications involving emergency type situations require prompt notification, when an investment adviser's net worth is below the requirement, the NASAA Model Rule is a bit different. Unless otherwise exempted, as a condition of the right to transact business in the state, every investment adviser registered with the state 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 after that, a report with the Administrator of its financial condition.

Under the Uniform Securities Act, which of the following are NOT considered investment advisers or investment adviser representatives in this state? An individual who sells advisory services in several states, including this one, for AAA Advisers, Inc. United Trust Company of America An agent for a broker-dealer advising customers for a fixed separate fee stated as a percentage of the customer's assets under management An investment adviser with no office in the state that does business exclusively with other investment advisers located in the state A) I, II, III, and IV B) II and IV C) I and II D) IV only

B An agent for a broker-dealer advising customers for a fixed fee, stated as a percentage of the customer's assets under management, is acting as an investment adviser representative. An individual who sells advisory services for AAA Advisers, Inc., is an investment adviser representative. A trust company is not an investment adviser under the USA. An investment adviser with no office in the state and does business exclusively with other investment advisers located in that state is also excluded as an investment adviser under the USA.

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) as a federal covered investment adviser, the flyers would need filing with the SEC B) these flyers could not be mailed until PIGGI was registered in States A and B C) these flyers could be mailed, but no accounts can be opened until PIGGI is registered in States A and B D) as long as PIGGI did not maintain an office in either of these states, the flyers could be mailed

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

An investment adviser who has custody of customer funds and securities discovers that her net worth has dropped below the required minimum under the rules of the state Administrator. Under NASAA rules, the adviser must notify the Administrator by close of business after the day of discovery file a report of its financial condition no later than close of business the day after notification include in the report of financial condition a statement as to the number of client accounts cease doing business A) I, II, III, and IV B) I, II, and III C) I only D) I and IV

B As a condition of the right to continue business, the adviser must notify the Administrator by close of business after the day of discovery. No later than close of business the day after notification, the adviser must file a report of its financial condition, which must include statements regarding the number of client accounts.

The Administrator may require which of the following from a federal covered adviser? copy of the IA's Form ADV filing of the IA's advertising in the state a listing of the IA's fee schedule a filing fee A) II and III B) I and IV C) I and II D) I, II, III, and IV

B 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 would have to register as an investment adviser under the Uniform Securities Act? A) An economics professor who occasionally gives a lecture to business groups about the stock market B) A retired aeronautical engineer who charges a nominal fee for holding seminars on opportunities in aerospace stocks C) An accountant who advises clients about investments as an incidental part of services D) A trust company

B Excluded from the definition are banks, publishers of general paid circulation publications (newspapers or magazines), investment adviser representatives, and certain professionals (lawyers, accountants, engineers, teachers) if the advice is incidental to their profession and no additional compensation is charged. In the case of the engineer, the advice is not incidental and is being given for compensation.

Which of the following statements describes a person who provides investment advice on a regular basis but does not charge fees, yet would be considered an adviser under Release IA-1092? A) The secretary of the U.S. Treasury, as part of his official duties, comments on conditions in the financial markets and their future investment implications. B) A financial planner sold his business and spends his time consulting with pension plans on whether to retain or hire new investment managers based on their performance. He does not charge fees; however, those managers retained as a result of his recommendations routinely provide him with noncash benefits such as vacations, computers, and office space. C) A retired chief investment officer of a well-known investment management company, without compensation, writes a column in a general circulation newspaper commenting on the value of investing in equity securities; many readers find his advice useful and become clients of his former investment management company. D) A wealthy college professor gives free lectures on sound investment practices and makes specific securities recommendations based on a quantitative model he has developed.

B If an individual is in the business of providing advice and receives any economic benefit, such benefit is considered compensation under Release IA-1092. Because the financial planner is in the business of giving advice to pension plans, actually provides that advice, and is compensated for it, he meets all 3 elements in the definition of an adviser. The noncash benefit, as in this case, need not come directly from the beneficiary of the services to be considered compensation. The college professor, the chief investment officer, and the secretary of the Treasury do not receive separate compensation, nor are they in the business of providing investment advice.

John Law is the owner of Mississippi Advisory Services (MAS), an independent financial planning organization. Law is registered as an investment adviser representative of SSC Securities and Investments, registered as a broker-dealer, and an investment adviser with the SEC. Supervision over Law's advisory activities is the responsibility of A) MAS's CCO. B) SSC's CCO. C) the SEC. D) John Law.

B It is common for independent financial planners to establish their own business entity and "hang" their registration as an IAR with another firm (as is the case in this question). The rules emphasize that these independent contractors are under the supervision of the carrying firm's CCO in the same way that inhouse IARs are.

Which of the following statements is CORRECT? A) Both state-registered and federal covered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. B) State-registered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. C) Federal covered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. D) A state-registered investment adviser collecting fees of $500 for 6 months or more in advance, is considered to be receiving a substantial prepayment.

B It is only state-registered investment advisers who must provide audited balance sheets to clients for whom they maintain custody. In order to be considered a substantial prepayment of fees, state laws require that they be more than $500 for 6 or more months in advance.

Which of the following are not investment advisers under the Uniform Securities Act? Joe advises customers regarding the value of gold and silver coins. The trust department of ABC Bank provides investment advice to its clients. Tammy writes a newspaper column in which she analyzes and recommends securities. Jack is an investment adviser representative. A) II, III, and IV B) I, II, III, and IV C) I and II D) I and IV

B Joe's advice does not concern securities. Banks are exempt from the definition. Tammy's advice is neither specific nor based on the situation of each client (impersonal advice). An investment adviser representative (IAR) is specifically excluded from the definition of an investment adviser.

In October 1987, the SEC promulgated Release IA-1092, which had the effect of broadening the definition of investment adviser. As a result of the Release, which of the following would be included in the definition? Commercial banks offering comprehensive financial planning for their high-net-worth clients Entertainment agents earning a fee for negotiating contracts for their clients and then placing a portion of the client's royalties into investment-grade bonds or large-cap stocks as market conditions dictate Persons who receive a nominal fee for assisting employee benefit plan administrators select investment managers for the plan's assets Lawyers who prepare trust agreements for clients with large securities holding with a goal of minimizing estate taxes A) II and IV B) II and III C) I and II D) I and IV

B Once the entertainment agent makes investment decisions for a client who is paying fees for overall services rendered, that agent now comes under the IA-1092 definition of investment adviser. Similarly, any person who is compensated for giving investment-related advice to employee benefit plans is considered a pension consultant and is required to register under IA-1092. Banks are never IAs, and the lawyer is merely doing legal and tax work.

The term "federal covered investment adviser" would apply to a person who A) limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) B) is registered as such under the Investment Advisers Act of 1940 C) limits the advice offered strictly to securities issued or guaranteed by the U.S. government or 1 of its political subdivisions D) is registered as such under the Investment Company Act of 1940

B 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 is NOT considered to be in the business of investment advising? A) A person who prepares reports about securities in general B) Insurance agents who discuss the merits of whole life insurance verses nonsecurities financial instruments and who receive commissions on the sale of life insurance only C) A financial planner who provides advice on many types of financial instruments, including securities, and receives commissions on the sale of life insurance D) An insurance agent who provides investment advice regularly, but such advice represents a small portion of her business

B Please note that this question is not asking "who is an investment adviser?" It is asking about one of the 3 prongs - being in the "business". The insurance agent who discusses the merits of whole life insurance does not sell investment advice or securities, only insurance policies. The insurance agent does not hold herself out as an adviser nor does she provide advice on securities. If a person advertises as one who provides investment advice or engages in providing investment advice or analyses on a regular basis (even if not the person's principal business activity), the person is considered in the business of giving investment advice. If the person receives any compensation that represents a clearly definable charge, commission, or fee for such advice (whether paid separately or not), she is considered in the business. If the person engages in other financial activities in connection with the advice, it cannot be used to avoid the business standard.

Under the Investment Advisers Act of 1940, the records that must be maintained by an investment adviser may be kept in which of the following forms? Hard copy Microfilm Computer disk A) I and III B) I, II, and III C) I only D) I and II

B The Investment Advisers Act of 1940 provides for the storage of records in several ways. Records may be kept in hard copy, or the hard copy may be microfilmed or microfiche. Records originated on computer may be stored electronically.

There are a number of exclusions from the definition of investment adviser. Which of the following would NOT qualify for an exclusion under the Uniform Securities Act? A) An accountant who conducts seminars on the tax benefits of contributing to IRAs, both traditional and Roth B) A teacher at the local high school who receives nominal compensation for giving investment advice to engineers C) A financial planner who conducts seminars for the local PTA, where he presents the benefits of term life insurance D) A lawyer who charges an hourly fee for preparing trust documents for individuals referred to her by an investment adviser

B The LATE exclusion applies when advice is given by one of the listed professionals on an incidental basis. When a teacher (or any of the others) is compensated specifically for giving advice, regardless of the amount, the exclusion is lost. To be defined as an investment adviser, one must give advice on securities; term life insurance is not a security. Similarly, preparing trust documents is not securities advice, even if the clients are referred by an investment adviser. Finally, one of the roles of an accountant is giving tax advice, and IRAs are not securities.

Who of the following is not exempt from registration as an investment adviser under the Investment Advisers Act of 1940? A) An adviser whose clientele consists solely of insurance companies B) 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 C) An adviser to seven private funds with total assets under management in the U.S. of $125 million D) 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 The intrastate exemption has no numerical limitation, only that all of the clients be residents of the state and none of the clients can be private funds. However, no advice may be given on securities traded on a national stock exchange which causes this State F adviser to lose the exemption. Under the federal law, an exemption from registration applies if the adviser's only clients are insurance companies. And, if an adviser's only clients are private funds (regardless of how many) and AUM in the United States is less than $150 million, that adviser is exempt as well.

An investment adviser registered with the SEC could use the term investment counsel if its principal business consists of rendering investment advice a substantial portion of its business involves investment supervisory services it maintains full investment discretion A) I, II and III B) I and II C) II and III D) I and III

B These are the 2 requirements for use of the term investment counsel. Although it can be a factor, exercising discretion is not a requirement of the definition. Many investment advisers exercise discretionary power over client accounts, but do not meet the two principal requirements for use of the term, investment counsel.

Registration with the state as an investment adviser would be required for a person with an office in this state who A) manages the portfolio of the KPF Balanced Fund, a registered open-end investment company with $22 million in net assets B) manages $13 million in assets for 4 clients C) only gives advice on securities issued by or guaranteed by the government of the United States D) serves as a pension consultant to the XYZ Employees Retirement Plan, covering 1,200 employees with total assets of $278 million

B Under the Dodd-Frank Bill, investment advisers with less than $100 million in assets under management must register with the states. If the adviser manages a registered investment company, the adviser must be federal covered. If the person serves as a pension consultant with $200 million or more in AUM, the person has the option of registering with the SEC. A person whose sole advice deals with U.S. government securities is excluded from the federal definition of investment adviser and, therefore, under the NSMIA, is considered a federal covered adviser.

Under the Uniform Securities Act, the term person would include a minor who has a valid U.S. passport a political subdivision an unincorporated association an inter vivos trust A) II and III B) III and IV C) II, III, and IV D) I and II

C The term person has an extremely broad definition. It is best to remember the three things that are not persons: minors, individuals who have been judged incompetent, and deceased individuals.

Under the Investment Advisers Act of 1940, which of the following is included in the definition of an investment adviser? A) A bank that advertises to the public that it offers a complete line of trust services B) A professional research analyst who holds himself out to the public as an expert in trading the Euro and other foreign currencies C) A lawyer who advertises to the public that he offers comprehensive legal and investment advice to high-net-worth individuals D) A research service that offers advice on the value of gold

C A lawyer who advertises to the public that he offers comprehensive legal and investment advice to high-net-worth individuals falls within the definition of an investment adviser because he offers investment services as an integral part of his practice.

Each of the following statements about post registration provisions is true EXCEPT A) investment advisers must comply with recordkeeping rules B) a correcting amendment to the Form ADV must be filed with the Administrator if any information filed becomes inaccurate or incomplete C) the securities Administrator does not have the authority to conduct an onsite examination of an investment adviser registered in his state if the adviser does not have an office in that state D) a registered investment adviser may be required to file advertisements

C Administrators have the authority to conduct an onsite examination of a registered investment adviser, even if there is no place of business maintained in the Administrator's state. Under the Act, Administrators may require the filing of advertising used by broker-dealers and investment advisers, who must also comply with certain recordkeeping requirements and file correcting amendments.

Which of the following would meet the USA's definition of federal covered adviser? An investment adviser who A) gives advice on federal covered securities B) does business on an interstate basis 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 All investment advisers registered under the Investment Advisers Act of 1940 are federal covered advisers. Doing business in more than one state (interstate) does not necessarily mean that the investment adviser is required to register with the SEC. As long as the AUM is under $100 million, the adviser registers with the appropriate states. Pension consultants are eligible to register with the SEC once their AUM reached $200 million, but it is not mandatory.

According to the Investment Advisers Act of 1940, which of the following statements regarding Part 2 of Form ADV are TRUE? It must be filed with the state Administrator. A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, 6 or more months in advance. Certain minimum business and education qualifications must be met before an investment adviser can file. It may be used to satisfy the brochure requirements of the act. A) I, II, and III B) I and IV C) II and IV D) I, II, and IV

C 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.

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) within 60 days B) within 90 days C) promptly D) within 30 days

C 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.

Under the Uniform Securities Act, an investment adviser is exempt from registration if the person has no place of business in a state and does not direct communication to more than 5 noninstitutional clients to more than 15 noninstitutional clients within 9 consecutive months within 12 consecutive months A) II and IV B) I and III C) I and IV D) II and III

C As long as communications are directed to no more than 5 noninstitutional clients in a 12-consecutive-month period and the adviser does not have a place of business in the state, an exemption from registration is provided.

Which of the following is an investment adviser? A) A columnist for a major news magazine who writes on the business and economic functions of banking institutions B) A bank that purchases securities on behalf of its custodial accounts C) A retired mechanical engineer who offers investment advice in his areas of expertise to a small number of clients for a fee D) A lawyer with sophisticated investment experience who gratuitously offers his clients advice on the value of securities

C Even though an engineer is part of the acronym LATE, a retired or active mechanical engineer who offers investment advice to clients for a fee falls within the definition of investment adviser under the Uniform Securities Act. The LATE exclusion only applies to incidental advice given in the practice of a profession.

Credible Investment Specialists (CIS) is a state-registered investment adviser with its only offices in State A. In which state(s) would registration be required? State A where the only clients are large pension plans State B where the only clients are banks State C where the only clients are insurance companies State D where there are 6 or fewer retail clients over any 12 month period A) II and III B) IV only C) I and IV D) I only

C For those investment advisers who are not federal covered, registration is always required in any state in which the firm maintains a place of business, regardless of the nature of its clientele. If there is not a place of business in the state, registration is not required when the clientele is limited to institutions, such as banks, insurance companies, and large employee benefit plans (at least $1 million in assets). Once the adviser has more than 5 retail clients in a state over a 12-month period, the de minimis exemption is lost and registration is required.

Under the Uniform Securities Act, persons providing investment advice do not have to register as investment advisers if they have no place of business in the state and they limit their clientele to individuals who meet the accredited investor standards deal only with institutional investors have 5 or fewer noninstitutional clients in the state during any 12-month period deal only with other registered investment advisers A) II only B) III and IV​ only​ C) I​, II, III, and IV D) II, III, and IV

C If a person offering advice on securities has no place of business in a state and deals only with institutional investors or other investment advisers, registration is not required. Also, if a person has no place of business in a state and has 5 or fewer noninstitutional clients in the state during any rolling 12-month period, they are not deemed to be investment advisers in that state under the USA. ​Please note that choice I specifies individuals who are accredited investors. Although institutional accredited investors would qualify the adviser for the exemption, individuals do not.​

Registration as an investment adviser or investment adviser representative under the Uniform Securities Act is required of A) a tax attorney who, as an incidental part of his tax practice, recommends that his high-tax-bracket clients investigate the use of municipal bonds in their portfolios B) an officer of a trust company handling investments for trust accounts C) an economics professor at a local community college who gives lectures in the evenings to public groups about portfolio analysis for which he charges a nominal fee D) an agent of a broker-dealer who recommends model portfolios to clients in exchange for them executing their trades through him

C If you are putting yourself out to the public as providing investment advice and charging a fee for doing so, you must register. The exceptions to this are if your giving of investment advice is incidental to your primary reason of doing business and if you are not charging specifically for the giving of that advice. Trust companies and their employees are specifically excluded from the definition of "investment adviser." A tax attorney making recommendations incidental to his legal practice and not charging specifically for the making of those recommendations is also not an investment adviser. The professor would have also been exempt from registration except for the fact that compensation was received for securities-related advice. Agents who are compensated only on the basis of recommended trades are not receiving special compensation and are, therefore, not considered to be in the business of giving advice.

Kapco Advisers, a federal covered investment adviser operating on a calendar-year basis, published a list of recommended securities in January 2015. A copy of this must be maintained until at least A) December 31, 2017 B) January 31, 2017 C) December 31, 2020 D) January 31, 2020

C Investment adviser records, including copies of advertisements, must be kept for at least 5 years from the end of the fiscal year in which the record originated—in this case, 5 years from the end of 2015.

The Investment Advisers Act of 1940 contains the basic definition of persons who are investment advisers. Which of the following persons would be included in the listing of those who must register? A person who gives advice to investors on collectibles that are most likely to appreciate in value in the next 10 years A chemical engineer who gave advice on new product ideas that was solely incidental to the practice of the profession and for which no compensation was received A person, while receiving compensation, described the advantages of certain types of managed investments, such as mutual funds and REITs, but did not recommend a specific investment A fee-based financial planner who, on the basis of current economic forecasts, had many of his clients liquidate their investment-grade bonds and purchase gold coins with the proceeds A) III only B) I, II, and IV C) III and IV D) I and II

C It is not necessary to recommend specific stocks, bonds, or other investment products by name to be included in the definition of investment adviser. Although a person receiving a fee to suggest gold coins to clients would not be an IA, in this case the financial planner is giving securities advice (liquidate the bonds) to invest in a non securities asset.

In which of the following cases is the exemption from registration with the SEC not based on the value of assets under management? A) An investment adviser that acts as an adviser solely to one or more national banks B) An investment adviser that acts as an adviser solely to private funds and has assets under management in the United States of less than $150 million C) An investment adviser that acts as an adviser solely to one or more venture capital funds D) An investment adviser with assets under management of less than $25 million

C It is only in the case of the adviser to venture capital funds where there is no dollar limitation on AUM. Private fund advisers with AUM of $150 million or more must register, and "small" investment advisers, those with less than $25 million in AUM, are generally prohibited from SEC registration. If the investment adviser's only clients are insurance companies, the adviser is exempt from SEC registration even if the firm has billions in AUM, but that exemption does not apply when the only clients are banks.

Create A Large Legacy (CALL), Inc., is a state-registered investment adviser with offices in States X, Y, and Z. CALL currently does not have a place of business in State W, but does have 5 retail clients who are residents there. Opening an account for which of the following prospective clients domiciled in State W would now require CALL to register in State W? A) A small community bank depositing $500,000 B) A county in State W desiring advice on investment over $250,000 of surplus funds C) A trust having 4 minor children as beneficiaries with total trust assets of $5 million D) An insurance company account with an opening balance of $750,000

C Regardless of the assets involved, a trust account, unless one for an employee benefit plan with at least $1 million in assets, is considered a retail rather than institutional client. Once the investment adviser goes over the de minimis limit of 5, registration with the state is required. Regardless of the assets involved, institutional clients, such as insurance companies, banks and government instrumentalities, do not count toward the de minimis limit.

The powers of the Administrator include the ability to determine A) maximum net capital requirements for broker-dealers B) minimum net worth requirements for agents who exercise discretion C) minimum net worth requirements for investment advisers D) surety bond requirements for investment advisers who do not exercise discretion or maintain custody

C The Administrator can determine minimum, not maximum, net capital for broker-dealers (but not in excess of SEC requirements) and, for investment advisers, net worth. If the investment adviser does not exercise discretion (or maintain custody), no surety bond is required. Agents who exercise discretion may need a surety bond, but not a minimum net worth.

The responsibility for administering the Investment Advisers Act of 1940 lies with A) the Administrator B) FINRA C) the SEC D) the Investment Advisers Association (IAA)

C The Investment Advisers Act of 1940 is federal law, and that comes under the jurisdiction of the SEC.

Under the NASAA Model Rule on financial requirements for investment advisers, investment advisers who have custody of customer funds are usually required to have a net worth in the amount of A) $5,000 B) $50,000 C) $35,000 D) $10,000

C The NASAA Model Rule on financial requirements for investment advisers, unless an exception exists, requires an investment adviser with custody of customer funds or securities to have a minimum net worth in the amount of $35,000. If the adviser does not have custody of customer funds or securities but does have discretionary power over customer accounts, the minimum net worth amount is reduced to $10,000. In the event the adviser wishes to post a bond​ because it doesn't meet the net worth requirement​, ​it must be an amount determined by the Administrator based upon the number of clients and the total assets under management of the investment adviser.

Perpetual Prosperity Advisers (PPI), a state-registered investment adviser, files an application to withdraw its registration as a registered investment adviser. Records pertaining to client accounts must be A) sent to the Administrator of the state in which PPI maintained its principal office. B) sent to the Administrator of the state in which the client was a resident. C) retained for the time period specified in the NASAA Model Rule on record keeping. D) destroyed once the withdrawal has become effective.

C The NASAA Model Rule on record keeping requires that records relating to an investment adviser's clients be retained for a period of 5 years from the end of the fiscal year in which the record was made. Those records must be retained even though the firm is no longer in business.

Under the National Securities Markets Improvement Act of 1996 (NSMIA), states are prevented from registering securities establishing capital and custody requirements that exceed those provided for in the Securities Exchange Act of 1934 establishing recordkeeping requirements for broker-dealers or investment advisers that exceed those required under federal securities law registering investment advisers A) I and IV B) III and IV C) II and III D) I and III

C The NSMIA streamlined much of federal and state securities law and specifically prevented dual regulation. As a result, states may not impose capital, custody, and recordkeeping requirements that exceed requirements under federal securities law. States can register securities and investment advisers that are not covered by the registration requirements of federal legislation.

What is the official designation of the person or agency that enforces the USA in each state? A) Transfer agent B) Registrar C) Administrator D) Issuer

C The USA specifies that a state's securities Administrator has the authority to enforce the act in that state. A transfer agent is the person or corporation responsible for recording the names and holdings of registered security owners.

Which of the following persons does NOT meet the definition of providing investment advice as a business outlined in SEC Release IA-1092? A) A financial planner who provides specific investment advice as part of his fee- based services and also makes specific securities recommendations to his clients in his capacity as an agent for a broker-dealer B) Attorney who advertises the availability of investment advice C) A management consultant whose only investment advice is suggesting to a couple of small business clients who had invested their surpluses in speculative securities that they should find something less risky D) Accountant who charges clients an additional fee for providing investment advice

C The management consultant's advice to clients is more like personal opinion than investment advice as a business. In the other 3 choices, investment advice is offered as part of the individual's regular business. Lawyers, accountants, teachers, and engineers (LATE) are not generally considered investment advisers provided the advice is incidental to their regular profession.

Under SEC Release 1A-1092, which 3 standards are used to define an investment adviser? Provides advice, reports, or analyses concerning securities Is in the business of providing securities-related advice or analysis Receives compensation Is the principal business activity A) I, II, and IV B) II, III, and IV C) I, II, and III D) I, III, and IV

C The release establishes 3 criteria in defining an investment adviser. First, the person must provide advice, reports, or analyses concerning securities. Second, the person must be in the business of providing securities-related advice or analyses. Third, the person must receive compensation. Investment advising does not have to be the person's principal business. They need only hold themselves out as advisers and provide investment advice on a frequent or regular basis.

Under the Investment Advisers Act of 1940, which of the following are exempt from the requirements for registration? Foreign investment advisers with fewer than 15 clients per year who do not hold themselves out as investment advisers to the public and have less than $25 million in AUM in the United States Investment advisers who conduct all of their business in 1 state and who do not provide advice on securities listed on an exchange and have no private funds as clients Investment advisers whose only clients are banks A) I only B) II only C) I and II D) I, II, and III

C Usually, anyone who meets the federal definition of investment adviser must be registered with the SEC. Some investment advisers are not excluded from the definition but are exempt from the registration requirements of the SEC. One example is an adviser whose clients are all residents of the state in which the adviser maintains its principal office who renders no advice on any exchange-listed security and does not give advice to any private funds. Advisers whose clients are limited to insurance companies are exempt from registration, as are foreign advisers who limit themselves to fewer than 15 clients a year (none of whom can be investment companies), do not advertise or hold themselves out to be investment advisers and have less than $25 million in AUM in the United States. There is no exclusion for advisers whose only clients are banks.

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 Friday B) do nothing, as their net worth is far in excess of the minimum requirement of $10,000 C) need to increase the amount of their surety bond D) send a detailed financial report to the Administrator by the close of business Monday

D A state-registered investment adviser who maintains custody of client assets must maintain net worth of at least $35,000 or a bond of the same amount (not both). If the net worth should fall below the minimum, by the close of the next business day after discovery (Friday in our example), notice of the deficiency must be sent to the Administrator of the state in which the principal office of the adviser is located. Then, by the close of business the day after that (Monday in our example), a detailed financial report, including the number of clients served by the adviser, must be sent to the Administrator. The firm would need to increase their net worth, not the bond

Which of the following is NOT included in Form ADV Part 2A? A) Investment policy of the adviser B) A description of how the adviser is compensated C) Types of investments made by the adviser D) States in which the investment adviser is registered or intends to register

D ADV Part 2A is the brochure that investment advisers must deliver to clients; it describes the investment adviser's fees, investment policies, and types of investments made. The states in which the adviser is registered or intends to be registered are not contained in ADV Part 2A. If the IA is registering with the SEC, on Part 1A, it lists only the largest 5 offices (in terms of numbers of employees). If state-registered, it lists each state it will be registering in or is already registered in.

When, if ever, would a broker-dealer be required to register as an investment adviser? A) Never B) Always C) If it is not registered with the SEC D) If it charges distinct fees for investment advice or management

D Although broker-dealers are generally exempt from having to register as investment advisers, the exemption is not available if the broker-dealer imposes a separate fee for account management or advice.

Under both state and federal law, there are a number of exclusions from the definition of investment adviser. Which of the following would not qualify for an exclusion? A) A personal injury attorney who recommends that clients consult with a CFP® for advice on how to deal with the large settlements they receive B) A CPA who gives high tax bracket clients a chart showing the tax-equivalent yield of municipal bonds C) An economist who teaches a course in fundamental analysis at a local community college D) A publisher of a newsletter that is paid to make reports to be used in the sale of specific securities

D Although there is an exclusion for publishers, it must be of general and regular circulation and not be the recipient of compensation from the issuers of any securities covered.

The Uniform Securities Act would NOT provide an exemption from registration as an investment adviser to an investment adviser who A) has no place of business in the state and limits clientele to banks and insurance companies B) has no place of business in the state and limits clientele to other investment advisers C) has no place of business in the state and limits clientele to broker-dealers D) is an out-of-state investment adviser and directed business communications to fewer than 12 clients in the state in the past 12-month period

D An adviser is exempt from state registration if it has no place of business in the state and limits clientele to other investment advisers, banks and insurance companies, or broker-dealers. There is a de minimis exemption, but it is for no more than 5 (not 12) clients during a 12-month period.

In which of the following cases could revocation of the registration of an IAR lead to disciplinary action against the investment adviser employing that individual? A) The firm supplied the IAR with a copy of its Code of Ethics and administered regular training on its contents. B) The IAR was found guilty of first degree murder. C) The IAR failed to make full disclosure of a previous felony conviction on the Form U4. D) The firm was found guilty of failure to supervise.

D In most cases, disciplinary action against an investment adviser representative (unless the individual is filling an executive position) will not have a direct impact on the investment advisory firm. The major exception is when the IAR's actions leading to the revocation can be shown to have be aided by the firm's failure to supervise.

In which of the following cases is the exemption from registration with the SEC not based on the value of assets under management? A) An investment adviser with assets under management of less than $25 million B) An investment adviser that acts as an adviser solely to private funds and has assets under management in the United States of less than $150 million C) An investment adviser that acts as an adviser solely to one or more national banks D) An investment adviser that acts as an adviser solely to one or more venture capital funds

D It is only in the case of the adviser to venture capital funds where there is no dollar limitation on AUM. Private fund advisers with AUM of $150 million or more must register, and "small" investment advisers, those with less than $25 million in AUM, are generally prohibited from SEC registration. If the investment adviser's only clients are insurance companies, the adviser is exempt from SEC registration even if the firm has billions in AUM, but that exemption does not apply when the only clients are banks.

The primary responsibility for supervising the activities of an investment adviser representative who is affiliated with a federal covered investment adviser lies with A) the investment adviser representative B) the Administrator C) the SEC D) the investment adviser the IAR represents

D It is the obligation of every registered investment adviser, whether SEC or state-registered, to supervise its representatives.

Under the Uniform Securities Act, if no denial or proceedings are pending, when does an investment adviser registration become effective? A) When the Administrator so orders, but not to exceed 90 days B) 60 days after application or an amendment is filed C) No sooner than 15 days D) When the Administrator so orders, but not to exceed 30 days

D Registrations become effective at noon on the 30th calendar day after the date of filing if there are no denial orders or pending proceedings

An investment adviser has its home office in Wisconsin. Its only business is with trust companies, large employee benefit plans, and insurance companies. It has no place of business in Colorado but provides investment advice to two Denver banks, both chartered under Colorado banking laws. There is a new Administrator in Colorado, and it is his opinion that this IA should be required to register in his state. A careful reading of Section 201 of the Uniform Securities Act would indicate that A) the Administrator is correct and the firm must register B) this firm would be exempt from registration with the Colorado Administrator because it is doing business in more than one state C) as long as the IA does not have an office in Colorado, there are no conditions that would mandate registration there D) the firm does not have to register because it has no place of business in the state and its only clients are registered financial institutions

D Section 201 of the Uniform Securities Act specifies the conditions under which one is an investment adviser in the state. Specifically excluded are those IAs with no place of business in the state who confine their advisory activities in the state to other investment advisers, federal covered advisers, broker-dealers, banks, trust companies, savings and loan associations, insurance companies, employee benefit plans with assets of not less than one million dollars ($1,000,000), and governmental agencies or instrumentalities. If, however, in addition to the two banks, the firm did advisory business with more than 5 retail clients who were residents of Colorado, then even with no place of business in the state, it would have to register.

Which of the following statements regarding registration of investment advisers is (are) TRUE under the Investment Advisers Act of 1940? If any material information filed in the registration becomes inaccurate, an amendment must be filed promptly. If any nonmaterial information filed on Form ADV changes, an amendment must be filed within 90 days of the end of the fiscal year. Material information requires a prompt amendment, but nonmaterial changes do not require amendment. A) I only B) III only C) II only D) I and II

D The SEC requires prompt amendment of any material information changes on Form ADV (e.g., names, location, control, custody, organization) and also requires nonmaterial amendments within 90 days of the end of the adviser's fiscal year.

Does an adviser whose clients are all residents of the state in which the adviser maintains its principal office who renders no advice on any exchange-listed security and does not give advice to any private funds need to register?

No, they are exempt from SEC registration but they are included in the definition of an IA