66 Unit 1 PArt 1

custody

"Custody" means possession (even temporarily) of a client's funds or securities. It includes authority over a client's bank account for any type of disbursement, but does not include the acceptance by the adviser of prepaid advisory fees.

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

$35,000

Which one, if any, of these transactions will be treated as a prohibited transaction under the provisions of the ERISA legislation? A) An investment adviser using the interest from plan assets to cover the adviser's office expenses. B) The plan fiduciary permitting a plan participant to use part of his vested interest to purchase commercial real estate. C) A loan between a 401(k) plan and plan participant. D) The furnishing of office space to a plan trustee for reasonable compensation and fair rental value.

(A) An investment adviser, as a fiduciary and disqualified person under the plan, is prohibited from using plan assets in payment of personal obligations (such as outstanding office expenses). Loans from a 401(k) plan to a participant are not prohibited transactions. The plan trustee may rent space from the plan (one of the plan's assets is an office building). Speaking of real estate, participants in a retirement plan may purchase real estate with their funds provided that the real estate is not used for the benefit of any related person.

USAAdvisers is registered in 10 midwestern states. Regarding financial requirements, USAAdvisers must meet those of A) the state with the most stringent financial requirements B) each state in which it has a place of business C) the state in which its principal office is located D) the SEC

(C) Unlike broker-dealers, investment advisers register with either the SEC or the state(s), but never both. Therefore, we know this must be a state-registered adviser not under the jurisdiction of the SEC. Under the Uniform Securities Act, when it comes to financial requirements, bonding, recordkeeping, and so forth, as long as the adviser meets the requirements of the state in which the principal office is located the other states have no further claim.

Question ID: 1177507 The Uniform Securities Act provides an exemption from registration as an investment adviser for which of the following persons who have no place of business in the state? Advisers who deal exclusively with broker-dealers Advisers who deal exclusively with insurance companies Advisers who deal exclusively with investment companies Advisers who have no more than 5 clients in that state in a 12-month period

) I, II, III, and IV

Exempt from registration provisions of the Securities Act of '33

-commercial paper, bankers acceptances (<270 days) -national and state bank securities -state and municipal bonds

Under the Securities Act of 1933, a registration statement of an issue must contain

-the business of the issuer -the identity of the officer and directors and the extent of their holdings in the issuer -the current balance sheet and profit/loss statements

In a qualified plan, if the employer makes all of the contributions, the employee's cost basis is:

0 Because the employee has not made any contributions, the cost basis is zero. In any qualified plan, if all of the contributions are in pretax dollars, the cost basis is zero no matter who contributes the money.

Which of the following statements concerning conflicts of interest under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers are TRUE? 1Where a conflict of interest exists, an adviser must decline taking on the client. 11A conflict of interest is defined as anything that may impair the impartiality of the advice being rendered. 111An investment adviser who receives a fee for investment advice, and whose investment adviser representatives are paid commissions from broker-dealers, presents a conflict of interest that must be disclosed.

11 and 111

The capital asset pricing model (CAPM) is used by many to assess the expected return of a security. If the current risk-free rate is 2%, the current return on the market is 10%, and a particular stock's beta is 1.5 with a standard deviation of 3.2, the expected return would be

14% The formula for this computation is as follows: 10% (the return on the market is a beta of 1.0) minus the risk-free rate of 2% or 8%. Then, multiply that by the beta of this stock (1.5) to arrive at 12%. That is, the stock should return 12% above the risk-free rate of 2%, or 14%. The standard deviation is not relevant to this computation.

An investor purchases a 6% callable senior lien mortgage bond at par. Exactly two years later, the bond is called at $102½. The investor's total return is

14.5%. Total return consists of income plus gain. Buying this bond at par and having it called at $102½ results in a $25 gain. With a 6% coupon, there will be four semiannual interest payments of $30 in a two-year holding period. Adding the $25 + $120 = $145 total return on an investment of $1,000 which = 14.5%. Please note that the question didn't ask for the annualized rate of return. That would be approximately 7.25% per year.

The Zxion Corporation has just distributed a 7½ to 1 split of its common stock. Prior to the split, Zxion had EPS of $15, the market price of Zxion common stock was $225 per share, and the price of its $75 par preferred stock was $82.50. As a result of the split, the price-to-earnings (P/E) ratio is now

15 x 1. A stock split does not change the P/E ratio because both the stock's price and its earnings decline by the same proportion. In this question, after the 7.5 to 1 split, the market price will drop to $30 per share ($225 ÷ 7.5) and the earnings per share are now $2 per share ($15 ÷ 7.5). That 30:2 is still a 15-to-1 P/E ratio.

Which of the following are required in order to be in compliance with the recordkeeping requirements of the Uniform Securities Act? Broker/dealers must maintain customer ledgers for three years. Investment advisers must keep partnership records for three years after the partnership is terminated. Agents must keep customer records for three years. Investment adviser representatives must maintain records for five years A) III and IV B) II and IV C) I, II, III, and IV D) I and II Your answer, I, II, III, and IV, was incorrect. The correct answer was: I and II Recordkeeping requirements for broker/dealers are three years and partnership articles and any amendments, articles of incorporation, charters, minute books, and stock certificate books of an investment adviser and of any predecessor, shall be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise. There are no recordkeeping requirements for agents or IARs. Reference: 10.8 in the License Exam Manual.

3 YEARS record keeping requirements for customer ledgers, 3 YEARS for PARTNERSHIP DISSOLUTION for BD! Recordkeeping requirements for broker/dealers are three years and partnership articles and any amendments, articles of incorporation, charters, minute books, and stock certificate books of an investment adviser and of any predecessor, shall be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise. There are no recordkeeping requirements for agents or IARs. Reference: 10.8 in the License Exam Manual.

403(b) plan

403(b) plan is a special type of tax-favored retirement plan allowed for nonprofit entities. Amounts contributed to 403(b) plans are often invested in annuity contracts, so these plans are sometimes referred to as tax-sheltered annuities.

With regard to the keeping of records, the Uniform Securities Act states that investment advisers must keep records for

5 years, the first 2 in the principal office of the adviser For state-registered investment advisers, records must be kept for a total of 5 years. For the first 2 of those years, they must be located in the principal office of the adviser.

On April 15, 2010 ABC Advisers Inc., made application for registration as an investment adviser with state X. Absent a denial or stop order, registration will become effective

5/15/2010 If no denials or stop orders are in effect and no proceedings are pending to do so, registration automatically takes effect at noon on the 30th day after the application was filed.

How quickly must you roll over a lump sum from a plan into an IRA

60 days of the distribution date

Richard purchased a 30-year bond for 103½ with a stated coupon rate of 8.5%. What is the approximate yield to maturity for this investment if Richard receives semiannual coupon payments and expects to hold the bond to maturity?

8.24% No calculation is necessary here. Why not? Because anytime a bond is purchased at a premium over par (103½% is a premium), the YTM must be less than the nominal (coupon) rate. There is only one choice lower than 8.5%. It isn't about your computational skills; it is about your understanding the relationship between prices and yields.

Under the Uniform Securities Act, an investment adviser is exempt from registration if he has no place of business in a state and his only clients are any of these EXCEPT A) individuals meeting the accredited investor standard B) other investment advisers C) investment companies D) broker-dealers

A

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

A

According to the Investment Advisers Act of 1940, which of the following statements regarding Part 2 of Form ADV are TRUE?

A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, 6 or more months in advance. It may be used to satisfy the brochure requirements of the act. 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.

Which of the following situations would require registration as an investment adviser?

A broker-dealer provides investment research services to a customer and charges a fee for the service An agent of a broker-dealer prepares a complete financial plan for a customer with a one-time charge of $950. The plan recommends specific securities transactions, which the customer orders. The agent earns commissions on the securities transactions

To enforce the Securities Act of 1933, the SEC may: conduct formal investigations. issue cease and desist orders. refer evidence to the attorney general for possible criminal prosecution.

A difference between the Uniform Securities Act and the Securities Act of 1933 is who enforces them. The Uniform Securities Act is enforced by the state Administrators, while the federal acts are enforced by the SEC. In complying with its enforcement responsibilities, the SEC may make, amend, and rescind rules, issue cease and desist orders, administer oaths, conduct investigations, take evidence, and subpoena witnesses, books, and records. The SEC may also seek temporary or permanent injunction from the courts, file civil suits, and refer evidence to the attorney general for criminal prosecution.

top heavy 401(k) plan

A plan is considered top heavy when more than 60% of the plan assets are held in the accounts of employees meeting the definition of key employee.

what is a benefit to an employee of a business offering a safe harbor 401(k) using a non-elective formula?

A safe harbor 401(k) with a non-elective formula is one in which the employer must contribute a minimum of 3% of each employee's earnings, whether or not the employee participates in the plan. Furthermore, those contributions are immediately vested. As a result, these plans offer a safe harbor from being tested for being top heavy, but this is a benefit for the employer, not the employee.

Security (Definition)

A security is any note, stock, bond, certificate of interest, or participation in any profit sharing arrangement, investment contract, certificate of deposit for a security, interest in oil, gas, or mining rights, or any investment commonly considered a security. (Generally, it is an investment contract wherein the investor is passive and expects a return on the investment through the efforts of others.) The definition of a security does not include direct ownership of real estate, commodities futures contracts (e.g., corn, wheat), collectibles, precious metals, or life insurance or annuity contracts that have fixed payouts.

An investment adviser must meet the net worth requirements of the Administrator. When doing the computation, which of the following assets would be included?

A sofa in the reception area For purposes of this Rule, the term "net worth" means an excess of assets over liabilities. But net worth does not include the following as assets: goodwill, franchise rights, patents, copyrights, marketing rights, and all other assets of intangible nature; home, home furnishings, automobile(s), and any other personal items not readily marketable in the case of an individual; advances or loans to stockholders and officers in the case of a corporation; and advances or loans to partners in the case of a partnership. So, what's the deal with the sofa? Because the choice specifically says that it is in the reception area, we must assume that it is not a "home" furnishing, rather one in the office and those are not excluded assets

Dividend growth model

A stock valuation model that deals with dividends and their growth, discounted to today

An IA who has no office in a state is exempt from registration in a state if, during any 12-month period, he has no more than how many retail clients in the state? A) 5 B) 20 C) 10 D) 35

A) 5

Which of the following is most likely to be excluded from the definition of an adviser under the IA Act of 1940? A) A commercial bank that regularly handles the financial affairs of its customers B) A teacher who makes reference to specific securities Ina course on corporate finance and accepts compensation from those who seek his advice as a result of his course C) An accountant who,as part of his practice, offers semifinal securities advice D) An adviser who recommends government securities but also issues research reports on corporate securities

A) A commercial bank that regularly handles the financial affairs of its customers

Under the terms of the USA, which of the following is an investment adviser for purposes of state regulatory jurisdiction? A) An investment subsidiary of a bank holding company located in the state that manages $20 million 8in assets B) A federal covered adviser with clients in the state C) A commercial bank with a place of business in the state that advises clients on banking matters D) An accountant located in the state who offers general securities advice as an incidental part of his business.

A) An investment subsidiary of a bank holding company located in the state that manages $20 million 8in assets

Which of the following persons is NOT excluded from the definition of an IA if their advice given is incidental to the individual's profession? A) Economist B) Teacher C) Lawyer D) Engineer

A) Economist

Under the IA Act of 1940, which of the following is (are) excluded from the definition of an IA? I. The publisher of a financial newsletter on a paid subscription basis, which contains only general securities recommendations II. Persons whose investment advice relates solely to issues distributed or guaranteed by the US government. III. A lawyer who charges a separate fee for investment advice that is provided as a separate part of the business. A) I and II B) I, II, and III C) III only D) I only

A) I and II

Which of the following meet(s) the compensation test for defining IAs under SEC Release 1A-1092? I. An insurance agent sells a life insurance policy and receives a commission on that policy. During the sale of the insurance policy, the agent provides some securities investment advice. II. Subscription payments received by a publisher of a newsletter providing impersonal securities-related advice. III. Your next door neighbor recommends the purchase of a certain security from his broker, which you eventually do. A) I and II B) II only C) I, II, and III D) I only

A) I and II Compensation may take the form of payments for subscriptions, salaries, or commissions. Nothing in the neighbor's advice involves compensation

Which of the following situations would require registration as an investment adviser? I. A BD provided investment research services to a customer and charged a fee for the service. II. An agent of a BD recommend the purchase of ABC securities to a customer, who then purchases 100 shares, and the agent earns a commission. III. An agent of a BD prepares a complete financial plan for a customer for a nominal charge. The plan recommends specific securities transactions, which the customer orders. The agent earns commissions on the securities transactions IV. A BD charges its customers for collecting dividends and maintaining their accounts in addition to commission charges for transactions executed A) I and III B) I only C) I, I, III, and IV D) I, III and IV

A) I and III

Under the USA, which of the following is (are) excluded from the definition of an IA when providing investment advice solely incidental to the business? I. Lawyer II. Accountant III. Engineer IV. Teacher A) I, II, III and IV B) I, II and IV C) II and IV D) I and III

A) I, II, III and IV

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

A) I, II, III, and IV

In defining an IA under SEC Release 1A-1092, which of the following would meet the business standard? I. A person who advertises himself as an IA II. A person who provides securities-related advice ona frequent or regular basis III. A person who receives separate or additional compensation for securities-related advice A) I, II, and III B) II and III C) III only D) I and II

A) I, II, and III

In which of the following third-party transactions would an investment adviser be required to make disclosure to the client of compensation received> I. An IA recommends an affiliated realtor to a client and receives compensation from the realtor. II. An IA, who is also an agent for an insurance company, sells policies from the company to his clients. III. An adviser who is affiliated with a BD receives commissions on sales recommended to clients through the BD A) I, II, and III B) II only C) I only D) I and III

A) I, II, and III

Under SEC Release 1A-1092, which of the following has (have) met the test of providing advice or analysis concerning securities? I. A stockbroker calls a client and recommends the purchase of a certain stock II. A lawyer recommends against purchasing shares of a mutual fund in favor of another investment III. A publisher of an investment newsletter provides general information and recommendations concerning securities. A) I, II and III B) I only C) I and II D) I and III

A) I, II, and III

State laws provide for expulsions from the definition of IA. Which of the following persons it's specifically excluded under the USA? A) IAR B) Economists whose advice is strictly incidental to their professional activity C) BDs receiving special compensation D) Bank subsidiary offering investment advice

A) IAR

Under SEC Release IA-1092, the term IA does NOT include which of the following? I. A BD who charges for investment advice II. A publisher of a financial newspaper III. A person who sells security analysis IV. A CPA who, as an incidental part of his practice, suggests tax-sheltered investments to wealthier clients A) II and IV B) I and IV C) I and III D) II and III

A) II and IV

The purpose of SEC Release 1A-1092 is to: I. Unify the requirements of the USA and the IA Act of 1940 II. clarify the Securities Exchange Act of 1934 III. clarify the activities that would subject a person to regulation under the IA Act of 1940. A) III only B) I only C) II only D) I and II

A) III only

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 IA? A) Yes, because he provides investment advice on a more than incidental basis B) YEs, because he could receive commission income from investment clients C) No, because he is a CPA D) No, because he falls under the de minis exemption having relatively few clients

A) Yes, because he p

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?

An adviser rendering advice to no more than 10 individual clients within a 12-month period (tricky but this is it because its more than 5)

As defined in the IA Act of 1940, all of the following would be considered IAs EXCEPT: A) a professional plumber with excellent stock market skills who as a hobby and without pay, manages portfolios for 8 of his neighbors. B) a civil engineer making investment decisions for $5 million held in escrow while a bridge for which she is the project manager is being constructed, C) a portfolio manager who limits advice to municipal securities exclusively D) a tax attorney who manages investment portfolios for 50 clients.

A) a professional plumber with excellent stock market skills who as a hobby and without pay, manages portfolios for 8 of his neighbors.

Registration as an IA is required for any firm in the business of giving advice on the purchase of: A) convertible bonds B) gold coins C) rare convertible automobiles D) apartments undergoing a conversion to condominiums

A) convertible bonds

An IA need not register in a state if it has: A) no place of business in the state and only advises three insurance companies located in the state B) no place of business in the state, does not direct business communications in the state, and advises more than five high-net-worth individuals located in the state C) a place of business ion the state and advises fewer than five banks D) a place of business in the state and only advises employee benefit plans with more than $1 million

A) no place of business in the state and only advises three insurance companies located in the state

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 US government is: A) not required to be a registered Investment adviser in the state B) required to be a registered agent in the state C) required to be a registered investment adviser in the state D) required to be a registered investment adviser representative in the state

A) not required to be a registered investment adviser in the state.

Kappa Investment Advisers currently has $138 million in AUM and has offices in Colorado and Utah. Kapco's only clients in Utah are 2 insurance companies domicile do in that state. Kapco has no office in New Mexico but does service the accounts of 3 middle-class individuals. Kapok recently has opened an advisory account for a pension plan for a corporation located in Montana. Under the USA, Kapco would have to register with: A) the SEC B) the Administrator in the states of Montana and New Mexico C) the Administrator in each state in which it does business. D) the Administrator in the states of Colorado and Utah

A) the SEC

Starflier Mutual Fund, regulated under the Investment Company Act of 1940, wishes to change its investment policy. It may do so with approval of:

Changes in investment policy require a vote of the majority of outstanding shares for approval

Under the USA, which of the following are excluded from the definition of IA, provided the advice is incidental to their profession? I. Banks II. Lawyers III. BDs IV. Teachers A) II and III B) I and III C) I and IV D) II and IV

D) II and IV

Under the IA 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: I. Any economic benefit II. A fee paid directly for the investment advice portion of their services III. A commission on the sale of real estate when it is part of a total financial plan for a client that includes securities advice A) I and II B) I, II, and III C) II and III D) I and III

B) I, II, and III

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

B) I, II, and III

Dodd Frank has to do with

AUM

Who is not eligible to contribute to a traditional IRA

Individuals who are age 70½ or older may not contribute to a traditional IRA. They are required to begin taking withdrawals at that time. However, there is no age limit on the Roth IRA.

The procedure for entering an order to purchase a security for the account of a customer is to complete an order ticket. Which of the following would be found on an order ticket?

Account number, execution price, time of order entry, time of execution or cancellation, and terms and conditions of the order Customer name and/or address would never be on an order ticket and that knocks out three of the choices.

Under certain conditions, the Uniform Securities Act provides that an Administrator may require a minimum net worth standard be met by an investment adviser. Which of the following would be an allowable asset in the computation of an investment adviser's net worth?

Accounts receivable

accredited investors

Accredited investors are financial institutions, wealthy persons meeting specific requirements, and (for a particular issue) persons involved in the management of the issuer.

When computing a company's quick ratio, which of the following assets is NOT counted?

Inventory The formula for the quick ratio takes the quick assets (all current assets other than inventory) and then divides that by the current liabilities. Or, it takes all of the current assets, subtracts the inventory, and divides the remainder by the current liabilities.

Which of the following activities is most likely to be considered by the SEC as meeting the business standard element in the definition of an IA? A) Advertising investment services but receiving no separate compensation for the services B) Giving specific investment advice only on rare isolated occasions C) Advertising investment services to the public and providing them routinely D) Issuing reports on macroeconomic conditions

C) Advertising investment services to the public and providing them routinely

an advisor who has custody of a clients fund must"

Advisers who have custody must segregate a client's securities and keep them in a safe place, deposit client funds in bank accounts which contain only client funds (may be combined in one account, but complete records must be kept), report to clients at least every three months with a statement, and annually arrange for an unannounced audit by an independent accountant that will report the audit results to the SEC. All clients must be notified in writing of the location of their securities or funds and of any changes to the location. It is not necessary to notify the client before the move to obtain the client's specific written authority to move the fund. The original custodial agreement includes that authority at the discretion of the adviser.

Affiliated Persons

Affiliated persons are any investment company directors, officers, employees, or owners of 5% or more of the voting shares of stock, and/or any persons controlling or controlled by such persons.

Affiliated persons under the investment company act of 1940

Affiliated persons may not have any dealings with the investment company (outside of contractual obligations and the purchase or redemption of shares of the investment company), such as buying securities, furniture, real estate, or other property from the company or selling such property to the company.

Which of the following securities issues must be registered with the SEC under the Securities Act of 1933? Publicly traded DPPs. Variable annuities. Open-end funds. Closed-end funds.

All of them! All of these are NONEXEMPT. In general, exempt issues include municipal securities, U.S. government securities, bank issues, and nonprofit organization securities. The securities in this question are all nonexempt.

Early distributions from a 401(k) plan

Although individuals can make penalty-free withdrawals from an IRA to purchase a principal residence, this exception does not apply to withdrawals from a 401(k) plan. The penalty for withdrawals from a 401(k) plan taken before age 59½ is waived only in the cases of death, disability, qualified domestic relations orders (QDROs), medical expenses, certain period payments, and corrections of excess contributions.

Opening an IRA

An IRA contribution can only be made by someone who has earned or otherwise eligible income. Earned income is defined as salary, wages, commissions, and tips. Alimony, (but not child support) is considered eligible income for an IRA. Individuals can contribute to an IRA even if they are covered by a corporate pension plan or Keogh plan. Although a contribution can be made, it may or may not be deductible depending on the individual's income. Dividends and capital gains are not considered earned income.

Investment Policy Statement

An Investment Policy Statement (IPS) is designed to describe the plan's investment goals and investment strategies. It typically identifies levels of risk acceptable in the construction of a portfolio. An IPS establishes the strategic framework utilized by the fiduciary to manage a portfolio.

what is would be considered when determining whether excessive trading has occurred in a client's account?

An agent is engaging in unethical conduct if she induced a client to trade securities too frequently in view of the financial resources, investment objectives, and character of the client's account. Frequent trading and trading in large amounts is not necessarily wrong. It is only wrong if the trades are not suitable for a particular client. Thus, the only factor listed that must be considered in determining whether trading is excessive is the nature of the client's financial objectives.

Which of the following statements are TRUE?

An agent may never be simultaneously employed by multiple broker-dealers. An agent must submit separate registrations for each broker-dealer with which he is registered.

associated persons

An associated person is either an officer or a broker/dealer employee who represents the broker/dealer in soliciting the purchase or sale of securities. Associated person also includes any individual authorized to accept customers' orders for the broker/dealer.

A state-registered investment adviser with $18 million under management is preparing a new registration application seeking federal registration with SEC. She may do so if she expects the funds under management to grow to $100 million within how many days?

An existing investment advisory firm registered on the state level may apply for registration with SEC as a federal covered adviser if the firm expects to be eligible for federal registration within 120 days. In the reverse situation, a firm that drops below the $90 million minimum has 180 days to withdraw from SEC registration and register with the state(s).

Define: Investment Advisers

An investment adviser representative is any partner, officer, director, associate, or employee who participates in or supervises the advisory functions of the adviser. Thus, anyone who decides what advice should be given, those who supervise investment adviser representatives, and those who seek out business for an advisory firm are considered investment adviser representatives. Third-party solicitors may or may not be considered adviser representatives, but this solicitor is an employee. Remember, an investment adviser can be either an individual or a company. An investment adviser representative must always be an individual.

In which of the following cases is the exemption from registration with the SEC not based on the value of assets under management?

An investment adviser that acts as an adviser solely to 1 or more venture capital funds.

An offer to sell

An offer to sell is any activity in an effort to dispose of a security for value. The issuance of warrants or convertible securities to anyone or stock rights to existing shareholders is considered an offer to sell the underlying security because, unlike stock dividends, mergers, and bona fide loans, they involve the payment of money to acquire the stock, thereby making them an offer to sell.

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:

Any material change that affects an investment adviser's ADV must be filed promptly with the SEC (or Administrator if state covered) and a change of address would certainly be material.

Which issues require a prospectus

Any primary offering, unless the security is exempt, requires timely delivery of a prospectus. Treasury notes and private placements are exempt. Open-end investment companies are a continuous primary offering.

Prospectus definition

Any written communication that offers a security for sale-including a newspaper and media communications, such as radio and television offers-is considered a prospectus. This definition excludes individual offers made orally and discussions between an agent and a customer. A publicity release that describes a security, a newsletter from a brokerage firm announcing the availability of a security, and an advertisement in a newspaper describing the benefits of a certain mutual fund may be considered prospectuses. A telephone call from an agent to a client advising the purchase of a security is not considered a prospectus because it involves an individual telephone solicitation between an agent and a client.

A broker/dealer is registered in State W, but its principal, and only place of business, is in State L. What can each administrator do?

As long as a broker/dealer is registered in a state, the Administrator of that state has the jurisdiction to perform an onsite unannounced (surprise) examination (audit). In those cases where there is no place of business in the state, as in this question, the examination takes place at the principal office where the Administrator will view records pertaining to clients residing in State W.

Although many advisers to private funds are exempt from registration, larger ones generally register with the SEC. SEC-registered investment advisers with at least $150 million in private fund assets under management use which form to report information about the private funds that they manage? A) Form ADV Part 1A B) Form PF C) Form 13F D) Form D

B

The term exempt reporting adviser refers to A) advisers whose only clients are insurance companies B) advisers that rely on either the venture capital fund adviser exemption or the private fund adviser exemption C) advisers who are registered on the state level, but who file their Form ADVs through the IARD D) broker-dealers who are considered investment advisers solely because they offer wrap fee accounts

B

Under the IA Act of 1940, for which of the following is an IA required to disclose to clients the amount of compensation he will receive? I. Commissions on recommended securities transactions II. Commissions on insurance sales III. Incentives from the issuer of a recommended security A) I and II B) II and III C) I, II, and III D) I and II

C) I, II and III

The USA provides either an exclusion from the definition or an exemption from registration as an IA for certain persons. Which of the following would be required to register? A) A teacher who teaches a course in the local high school on consumer economics. B) A CFP who provides a full range of financial planning to clients on a fee-only basis C) An engineer employed by an oil company selling limited partnership interests to public investors who provides estimates of recoverable reserves. D) A bank trust officer with less than $250 million in assets under management

B) A CFP who provides a full range of financial planning to clients on a fee-only basis

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 1A-1092? A) The Secretary of the US Treasury who, as part of his official duties, comments on conditions in the financial markets and their future investment implications B) A financial planner who 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 no cash benefits such as vacations, computers, and office space. C) A retired chief investment officer of a well-known investment management company who, 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 who gives free lectures on sound investment practices and makes specific securities recommendations based on a. Qualitative model he has developed.

B) A financial planner who 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 no cash benefits such as vacations, computers, and office space.

Under both state and federal law, there are a number of exclusions from the definition of IA. 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 publisher of a newsletter that is paid to make reports to be used in the sale of specific securities C) A CPA who gives high-tax bracket clients a chart showing the tax equivalent yield of municipal bonds. D) An economist who teaches a course in fundamental analysis at a local community college

B) A publisher of a newsletter that is paid to make reports to be used in the sale of specific securities

Which of the following would NOT be considered to be in the business of an IA? A) A person compensated for the investment advice, but who provides the advice only to institutions B) An accountant who provides occasional investment advice bu receives no separate fee for the service C) A person compensated for investment advice, although this service is not a primary part of the business D) A person who provides investment advice but is compensated only through commissions on the sale of stock.

B) An accountant who provides occasional investment advice bu receives no separate fee for the service

Under the IA Act of 1940, which of the following is excluded from the definition of IA? A) Pension consultants B) Attorneys for whom providing investment advice is incidental to the practice of their profession C) Publishers of investment newsletters D) Sports of entertainment representatives

B) Attorneys for whom providing investment advice is incidental to the practice of their profession

An investment adviser is required to disclose to a client the amount of compensation received from which of the following third parties? I. Compensation on the client's transactions executed through a BD II. Compensation received from an issuer of a security recommended to the client III.Compensation received from any nonsecurities products recommended to the client A) II only B) I, II, and III C) I and II D) I only

B) I, II, and III

According to the Uniform Securities Act, a person representing an issuer in the sale of which of the following securities would have to be registered as an agent?

Securities issued by a federal credit union An individual is exempt from registering as an agent only when representing the issuer in one of the limited group of five exempt securities, or in any exempt transaction. Oddly enough, a federal credit union is not on that list.

Which of the following would meet the definition of IA under the USA? I. A BD charging a separate fee for investment advice II. The publisher of a weekly newsmagazine, sold in newsstands, that contains at least 5 stock recommendations per issue III. A civil damages attorney who advertises that he is available to assist clients in suggesting appropriate investments for their successful claims IV. A finance teacher at a local community college who offers weekend seminars on comprehensive financial planning at a very reasonable price A) I, II and III B) I, III, and IV C) I only D) I, II, III, and IV

B) I, III, and IV

In response to an evolving marketplaces the SEC, through Release 1A-1092, expanded the coverage of the definition of IA to include: I. BD offering wrap fee programs II. Financial Planners III. Life insurance agents IV. Pension consultants A) III and IV B) II and IV C) I and II D) I and III

B) II and IV

Under IA-1092, an IA: I. Makes advice his principal activity II. Makes advice his regular activity III. is compensated directly for advice IV. Is compensated directly or indirectly for advice A) II and III B) II and IV C) I and III D) I and IV

B) II and IV

Based on the IA Act of 1940, which of the following would be excluded from the definition of an investment adviser? I. A lawyer who advertises financial planning services II. Persons whose advice relates solely to government securities III. An accountant who receives separate fees for providing investment advice A) I and III B) II only C) II and III D) I only

B) II only

Which of the following is (are) required to register with a state Administrator? I. An adviser who only provides impersonal investment advice through newspaper columns, magazine articles, or financial publication of general and regular circulation II. Investment adviser representatives of federal registered advisers who have natural person clients and have a place of business in the state III. An investment adviser who has no place of business in the state and has five advisory clients in the state IV. A person who is an officer of a federal registered investment adviser who has no natural person clients A) I, II, III, and IV B) II only C) II and III D) I only

B) II only

Both the IA Act of 1940 and SEC Release !a-1092 specifically exclude from the definition of IA certain persons who provide investment advice solely incidental to the practice of their profession. Which of the following would NOT by definition qualify for this exclusion? I. An accountant who provides high tax bracket clients with a useful chart showing them how to compute the tax equivalent yield for municipal bonds II. A divorce attorney who, after obtaining settlements for clients, provides them with a list of suggested investment alternatives encouraging them to be prudent with their newfound wealth. III. A university professor who provides investment advice for a substantial fee to fewer than `5 clients during any consecutive 12-month period, none of whom is an investment company IV. An economist who consultes with very large corporate employee benefit plans on how to best invest their funds A) II and III B) III and IV C) I and IV D) I and II

B) III and IV

Which of the following are not specifically excluded from the definition of an IA under the USA? I. An IAR of an advisory firm who makes securities recommendations on a regular basis for compensation II. A temporary employee hired to assist in administrative responsibilities of an advisory firm III. Any person who is a federal covered investment adviser IV. A person whom on a regular basis for compensation, offers specific investment advice to clients as to the value of securities A) II and III B) IV only C) I and IV D) II and IV

B) IV only

When, if ever, would a BD be required to register as an IA? A) never B) If it changes distinct fees for investment advice or management C) If it is not registered with the SEC D) Always

B) If it changes distinct fees for investment advice or management

Which of the following is specifically excluded from the definition of an IA providing the investment advice is solely incidental to the business in which the person is engaged? A) Sports representative who advises on securities for a fee B) Industrial Engineer C) Pension MAnager D) Movie star's business manager who handles the star's investment portfolio.

B) Industrial engineer

As defined in SEC Release 1A-1092, which of the following is a pension consultant? A) A person who provides securities-related advice for compensation B) Persons suggesting portfolio managers to administrators of employee benefit plans C) A person who charges a fee for advising retirees on how to maximize their pension payouts D) A person who prepares a plan for a client's future based on analyzing needs, objectives, tax situations, and resources

B) Persons suggestions portfolio managers to administrators of employee benefit plans

In 1987, the SEC promulgated release 1A-1092. One of the significant effects of the release was to expand the definition of investment adviser to include some financial planners. However, a financial planner would not be considered an IA when: A) he does financial planning as part of offering a wrap fee program as a licensed agent of a BD B) the extent of his planning is limited to wills, estates and trust creation. C) 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 D) there is an upfront fee charged for creating a comprehensive financial plan, even when the plan is not put into place

B) the extent of his planning is limited to wills, estates, and trust creation.

Which of the following is an IA? A) A bank that purchases securities on behalf of its custodial accounts B) A lawyer with sophisticated investment experience who gratuitously offers his clients advice on the value of securities. 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 columnist for a major news magazine who writes on the business and economic functions of banking institutions.

C) A retired mechanical engineer who offers investment advice in his areas of expertise to a small number of clients for a fee

Rule 503 of Reg D

Securities sold under Regulation D of the Securities Act of 1933 are private placements and, under the NSMIA, are considered federal covered securities.

Which of the following must register as an investment adviser under the IA Act of 1940? A) A person who provides advice to people who are investing in antique furniture B) A person who provides advice to insurance companies on their portfolios C) A person who provides advice to people who are investing in companies registered under the Investment Company Act of 1940 D) A person who provides advice to people who are investing in coin collections

C) A person who provides advice to people who are investing in companies registered under the Investment Company Act of 1940

Sharon Smith is an agent for Highwater Securities, a broker-dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act,

Sharon must be registered in State X in order to accept the order

Who is covered by the Securities Exchange Act of 1934?

B/D & Transfer Agents - NOT investment advisers The Securities Exchange Act of 1934 regulates broker/dealers and transfer agents. Investment advisers are regulated under the Investment Advisers Act of 1940 (and, to a certain extent, the Investment Company Act of 1940), whereas pension plans in the private sector are regulated under ERISA.

Bank holding company securities

Bank holding company securities are not exempt from registration requirements under the Securities Act of 1933. Treasury securities, agency securities (such as GNMA-pass through certificates), and municipal securities (such as revenue bonds) are exempt from registration requirements under the act.

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 30 days C) promptly D) within 90 days

C

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) a consent to service of process D) an injunction

C

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 SEC C) the investment adviser the IAR represents D) the Administrator

C

Under theUSA, which of the following is included in the definition of an IA? A) publisher that receives a yearly subscription fee for a newsletter that provides nonspecific investment advice B) bank that offers investing counseling to its high net worth customers C) A BD who receives a flat fee for analyzing a customer's investment objectives and recommending a portfolio of securities D) Antiques dealer who receives a fee for ad vision customer as to the value of antiques and rare coins

C) A BD who receives a flat fee for analyzing a customer's investment objectives and recommending a portfolio of securities

Which of the following parties is most likely to be considered an IA under the IA Act of 1940? A) Dow Jones, Inc., publisher of "The Wall Street Journal" B) An expert in fixed income securities whose only clients are individuals and whose only recommendations deal with securities issued or guaranteed by the US Treasury C) A CPA who manages investment accounts for 50 clients and charges hourly fees for the service. D) The trust department of Citibank, which handles billions of dollars in trust assets

C) A CPA who manages investment accounts for 50 clients and charges hourly fees for the service.

Under the IA Act of 1940, who of the following would be considered to be in the business of rendering investment advice? A) An agent who receives no separate compensation for investment advice but who takes commissions on recommended trades B) An individual who provides investment advice to family members, but receives no compensation C) A financial planner who charges no fee for developing a financial plan, but takes commissions on recommended trades D) An accountant who provides investment advice to clients as an incidental part of the business.

C) A financial planner who charges no fee for developing a financial plan, but takes commissions on recommended trades

Which of the following persons does NOT meet the definition of providing investment advice as a business outlined in SEC Release IA-1092? A) Attorney who advertises the availability of investment advice B) 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 BD C) A management consultant whose only investment advice is suggestion 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) A management consultant whose only investment advice is suggestion to a couple of small business clients who had invested their surpluses in speculative securities that they should find something less risky

As interest rates rise, the opportunity cost of holding cash

increases At higher interest rates, the opportunity cost of holding cash increases, and firms and households will desire to hold less cash and more interest-bearing financial assets.

Under the USA, which of the following persons do NOT have to register as an IA? I. BD who gives advice for which he charges a specific fee. II. Agent of a BD who gives fee-based investment advice independent of his duties for the BD III. BD who gives investment advice that is incidental to the course of its business and for which no special compensation is received. IV. Attorney who writes a legal opinion for a municipal bond indenture. A) I and II B) II and IV C) III and IV D) I and III

C) III and IV

Under the IA Act of 1940, who is not excluded from the definition of IA when their investment advice is solely incidental to the individual's profession? A) engineers B) teachers C) insurance agents D) attorneys

C) Insurance agents

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) A financial planner who provides advice on many types of financial instruments, including securities, and receives commissions on the sale of life insurance C) Insurance agents who discuss the merits of life insurance verses nonsecurities financial instruments and who receive commissions on the sale of life insurance only D) An insurance agent who provides advice regularly, but such advice represents a small portion of her business.

C) Insurance agents who discuss the merits of life insurance verses nonsecurities financial instruments and who receive commissions on the sale of life insurance only

Which of the following statements is NOT true of investment advisers under the USA? A) Investment advice includes advice regarding the value of securities as well as recommendations to buy or sell B) Compensation is a key factor in determining whether a person is required to register as an IA C) Only written advice concerning investments is covered by the act D) Investment advisory contracts must be in writing.

C) Only written advice concerning investments is covered by the act

An agent and a BD maintain wrap fee accounts for several of their customers. Which of the following registrations is required? A) neither the BD nor the agent is required to have any license other than their regular securities license B) Only the registered principal would need to be registered in the state(s) in which they do business. C) the firm must register as an investment adviser D) the agent must be registered as an investment adviser

C) The firm must register as an investment adviser

Under the USA, all of the following are excluded from the definition of an IA EXCEPT: A) banks B) a federal covered adviser C) an individual providing advice on municipal bonds D) BDs and their agents

C) an individual providing advice on municipal bonds

Under the USA, all of the following persons may provide investment advice incidental to their normal business without requiring registration as an IA EXCEPT a(n): A) lawyer B) engineer C) economist D) teacher

C) economist

The sole proprietor of an insurance business that exclusively provides advice on fixed income annuity contracts: A) must register as a BD with the SEC B) must register as an IAR under the USA C) need not register under any securities laws D) must register as an IA under the IA Act of 1940

C) need not register under any securities laws

Under the USA, an accountant who charges hourly fees for securities recommendations in the regular course of his account practice is: A) included in the definition of an IA because accountants are not among the professionals excluded from the definition B) not included in the definition of an IA because he receives an hourly rate instead of a commission C) included in the definition of an IA because he is compensated for giving investment advice in the regular course of business D) not included in the definition of an investment adviser because he is an accountant

C) no place of business in the state and only advises three insurance companies located in the state

As defined in the Uniform Securities Act, an agent is a(n)

individual who represents an issuer of nonexempt securities in nonexempt transactions individual who sells nonexempt securities as a representative of a registered broker-dealer

In order to compute an investor's after-tax return on a corporate bond, all of the following are necessary EXCEPT

inflation rate The after-tax return is computed by taking the total return (appreciation plus income) and taking the investor's tax rate into consideration. The inflation rate is necessary for the inflation-adjusted or real rate of return.

Under the Uniform Securities Act, the definition of an investment adviser does NOT include

investment adviser representatives lawyers and accountants whose investment advisory services are solely incidental to their practices broker-dealers who offer investment advice on an incidental basis without special compensation for the advice provided federal covered investment advisers

Under the Uniform Securities Act, all of the following are specifically excluded from the definition of a broker-dealer EXCEPT

investment advisers Banks, issuers, agents, and certain out-of-state broker-dealers are excluded from the definition of broker-dealer. However, investment advisers frequently also carry registration as a broker-dealer.

Which of the following individuals does not come under the supervisory regimen of an investment adviser? A) A financial planner registered with the firm as an IAR, but maintaining a separate financial planning practice as an independent contractor B) An individual in the mailroom who has fewer than 6 retail advisory clients C) The CPA engaged to perform the annual audit D) A CFA® preparing the firm's research reports

C. because the CPA has to be by an independent accountant

Under the Investment Advisers Act of 1940, which of the following would be excluded from the definition of an investment adviser? A) A broker-dealer that managed clients' portfolios for a fee B) The publisher of an investment advisory newsletter that plans issues based on market events C) A bank that charged a fee for providing investment advice D) An individual who made recommendations regarding which types of securities would meet a client's investment objectives but who did not recommend specific securities

C. banks usually always excluded

A state registered investment adviser with discretionary authority over client accounts discovered on Monday, that the firm's net worth is below the required amount. He must notify the administrator and then file a report no later than the:

Close of business Tuesday and close of business wednesday. Unless otherwise exempted, every investment adviser registered or required to be registered under the Act shall by the close of business on the next business day notify the Administrator if such investment adviser's net worth is less than the minimum required. After transmitting such notice, each investment adviser shall file by the close of business on the next business day a report with the Administrator of its financial condition.

When shares of a closed-end investment company are purchased by an investor, the investor pays...

Closed-end investment company shares are priced based on supply and demand. The ask is the price that investors will pay for purchasing shares and the bid is what investors receive when selling. Investors will also pay a commission as this is what the broker charges for executing the transaction. Shares of open-end investment companies are bought and redeemed based on NAV, but that is not so of closed-end companies.

Question ID: 1177606 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 and Utah. bc it has under 100 mill in assets so not federal covered. so it must register in each state it has an office

commercial paper

Commercial paper may qualify as an exempt security if the minimum denomination is $50,000, it has a maturity of not more than 270 days, and it is rated in 1 of the 3 highest rating categories by a nationally recognized rating agency.

A company has paid a dividend every quarter for the past 20 years. If the stock's price has fallen dramatically over the past quarter, but the dividend has remained the same, it may be concluded that

Current dividend yield is income dividend divided by price. If the price of a stock decreases and the dividend remains the same, dividend yield will increase.

When is SEC registration optional?

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.

Out-of-state investment advisers with no office in this state are not required to be registered if only advising A) on stocks listed on the NYSE B) on growth issues C) on preferred stock D) insurance companies

D

States may require investment advisers who are registered with the SEC to do each of the following EXCEP A) pay state notice filing fees B) file any documents with the state that are filed with the SEC C) file a consent to service of process D) maintain net capital requirements

D

Under the Uniform Securities Act, which of the following statements is TRUE regarding registration of an investment adviser if the application has not been amended? A) Unless specified earlier, registration becomes effective no sooner than 15 days after the application is filed. B) Unless specified earlier, registration becomes effective no later than 90 days after the application is filed. C) Unless specified earlier by the Administrator, the registration becomes effective at noon on the 60th day after application. D) Unless specified earlier by the Administrator, the registration becomes effective no later than noon on the 30th day after application.

D

Question ID: 1181053 With respect to the recordkeeping rules under the USA, which of the following statements is NOT correct? A) Broker-dealers must maintain records of trade blotters for a minimum of 3 years. B) Investment advisers must maintain copies of all powers of attorney and other evidences of the granting of any discretionary authority by any client to the adviser for a minimum of 5 years. C) Broker-dealers must maintain records of electronic communications for a minimum of 3 years. D) Following termination of the business, investment advisers organized as corporations must maintain copies of their articles of incorporation for a minimum of 5 years.

D only 3 years

Under the USA, IAs are exempt from registration Ina. State where they have no office if they direct business communications with no more than 5 retail clients within: A) 6 moths B) 30 days C) 2 years D) 12 months

D) 12 months

Under SEC Release 1A-1092, which of the following is included in the definition of an IA? A) A research service that offers advice on the value of gold B) A professions research analyst who holds himself out to the public as an expert in trading the Euro and other foreign currencies C) A bank that advertises to the public that it offers a complete line of trust services D) A lawyer who advertises to the public that he offers comprehensive legal and investment advice to high net worth individuals

D) A lawyer who advertises to the public that he offers comprehensive legal and investment advice to high net worth individuals

Under the IA Act of 1940, which of the following is considered an IA? A) A syndicated columnist who gives weekly reports and recommendations on investments B) A person who publishes a regular newsletter of advice on US Treasury bonds and other US government securities C) The trust officer of a commercial bank who manages investment accounts for clients D) A lawyer who specializes in consulting on investing securities

D) A lawyer who specializes in consulting on investing in securities

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

D) A retired aeronautical engineer who charges a nominal fee for holding seminars on opportunities in aerospace stocks

Which of the following is specifically excluded from the definition of an IA under the IA Act of 1940, when that person's investment advice is solely incidental to the practice of their profession? A) Pension consultant B) Athlete's financial manager C) Financial planner D) Aeronautical engineer

D) Aeronautical angineer

Harrison is a 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 IA because he holds a recognized financial planning credential. B) Harrison is not required to register as an IA because he holds a recognized financial planning credential. C) Harrison is not required to register as an IA because his securities advice is purely incidental to his overall planning activities D) Harrison is required to register as an IA because he regularly offers advice and receives compensation for advice concerning securities and investments, and holds himself out as a financial planner.

D) Harrison is required to register as an IA because he regularly offers advice and receives compensation for advice concerning securities and investments, and holds himself out as a financial planner.

Under the IA Act of 1940, which of the following criteria are considered in determining whether a person is in the business of rendering investment advice? I. The person regularly gives advice on securities II. The person derives his earnings from executing transactions on recommended securities III. The person receives compensation from rendering advice on securities A) I, II, and III B) I and II C) II and III D) I and III

D) I and III

T be defined as an IA under the USA, which of the following must apply? I. Compensation must be received II. Advice is provided regarding securities III. Advice may be provided through direct oral communication or in writing A) I and II B) I and III C) II and III D) I, II, and III

D) I, II and III

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

D) I, II and III

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

D) II and III

The IA Act of 1940 excludes from the definition of "Investment Adviser" person whose advice: I. Relates solely to municipal issues II. Relates solely to issues issued by or guaranteed by the US Treasury III. Is solely incidental to their professional practice as an aeronautical engineer IV. Is limited to fewer than 15 clients in any 12-month period, none of whom is a registered investment company A) I, II and IV B) III and IV C) I, II, III, and IV D) II and III

D) II and III

A registered BD offers investment advice as an incidental part of its commission business. One of its agents charges for investment advice as a freelance investment adviser outside the scope of his employment at the firm. Which of the following statements are TRUE? I. The BD must register as an IA II. The agent must register as an IA III. The agent need not register as an IA IV. The BD need not register as an IA A) III and IV B) I and III C) I and II D) II and IV

D) II and IV

The IA Act of 1940 contains the basic definition of persons who are required to register with the SEC as IAs. Which of the following persons would be included in the listing of those who must register? I. A person who gives advice to investors on collectibles that are most likely to appreciate in value in the next 10 years. II. 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. III. 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 IV. 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) I and II B) III only C) I, II, and IV D) III and IV

D) III and IV

Under which of the following circumstances may attorneys and accountants claim an exclusion from the definition of IA under the IA Act of 1940? I. They charge a separate fee for the provision of investment advice from that received for their professional services. II. They advertise that they are available to provide investment advice III. The advice is incidental to the practice of their profession. IV. The investment advisory activities have grown to represent 30% of their business A) I and III B) I, II and IV C) II only D) III only

D) III only

Which of the following would NOT be considered an investment adviser under Release IA-1092? A) A retired banker who solicits business and advises former clients on a monthly basis as to the specific investment merits of banking securities and receives compensation for his services B) An agent for an athlete who negotiates contracts for a baseball player, as well as advises the client on securities, but does not have discretionary authority over the athlete's securities account C) A pension consultant who advises a defined contribution plan alternative methods of funding the plan and the relative merits of a selected list of investment managers D) The president of an investment club who provides research and advice to the members of his club on a regular basis as an integral part of his duties

D) The president of an investment club who provides research and advice to the members of his club on a regular basis as an integral part of his duties

A person is excluded from the definition of an IA under the IA Act of 1940 if the investment advice and reports are restricted to: A) bank and insurance company securities B) securities listed on a national stock exchange C) foreign securities D) US government securities

D) US government securities

Under the IA Act of 1940, which of the following are excluded from the definition of an IA? A) Insurance companies B) Attorneys who advise on securities (only) for a fee C) Accountants who advise on securities (only) for a fee D) All banks that are not investment companies

D) all banks that are not investment companies

Registration as an IA or IAR under the USA is required of a(n): A) officer of a trust company handling investments for trust accounts B) tax attorney who, as an incidental part of his tax advise, recommends that his high tax bracket clients investigate the use of municipal bonds in their portfolios C) agent of a BD who recommends model portfolios to clients in exchange for them executing their trades through him D) 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) 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.

A BD is NOT considered an IA if the: A) firm's investment advice is limited to 10 or fewer people. B) firm has less than 15 advisory accounts totaling less than $1 million C) firm is registered under the IA Act of 1940 D) investment advisory services are incidental to the BD's business and no special compensation is received.

D) investment advisory services are incidental to the BD's business and no special compensation is received.

Under the USA, a person who exclusively provides advice on commodities is: A) a registered insurance agent B) an options representative C) a registered IAR D) not a RIA

D) not a RIA

Under the IA Act of 1940, the exclusion for providing investment advice that is solely incidental to the practice of a profession is NOT available to: A) teachers B) engineers C) attorneys D) real estate agents

D) real estate agents

In search of higher returns, many investors have turned to alternative investments, such as structured products. Non-exchange-traded structured securities products (SSPs) typically have

some form of embedded derivatives It is commonplace for SSPs to use derivatives, such as options. There is no insurance coverage and, unless listed for trading such as an ETN, low or no liquidity. These are highly complex products and would not be suitable for the average conservative investor.

An insider is

Securities Exchange Act of 1934 defines an insider as an officer, director, or stockholder owning more than 10% of a company's outstanding voting equity. The definition also includes anyone else who has or could have access to insider information, such as immediate family members. Merely being someone's neighbor does not automatically classify someone as an insider. Any professional who takes part in preparing the registration statement is automatically considered to have insider information.

Under the Investment Advisers Act of 1940, which of the following powers does the SEC have at its disposal to enforce the act?

In enforcing the Investment Advisers Act, the SEC may investigate, administer oaths, subpoena witnesses, books, and records, issue and make rules, issue stop orders, hold hearings, and seek court injunctions against persons who have violated or are about to violate any provisions of the act. The SEC may also file civil actions in the federal court system in enforcing the provisions of the act, or refer information to the U.S. Justice Department for criminal prosecution

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

December 31, 2020

Which of the following employer-sponsored plans is NOT covered by ERISA?

Deferred compensation Deferred compensation plans are not ERISA-covered plans; that is what gives them greater flexibility than a covered plan.

discretion

Discretion is the ability to pick the Asset (the specific security), the Action (buy or sell) or the Amount (the number of shares or bonds). Time and price are not discretionary and nothing can take place until the proper papers have been received and documented.

Which of the following is not a market cap-weighted index?

Dow Jones Industrial Average The Dow Jones Industrial Average is a price-weighted index. All other options are market cap-weighted indexes.

ERISA 404 (c)

ERISA Section 404(c) relieves the employer of fiduciary responsibility for investment decisions made by employees. To qualify for this protection, employees must enjoy the benefits and risks of their decisions (individual accounts), have the right to exercise independent control over the account, and have a sufficiently broad range of choices to make the right of control meaningful. Section 404(c) has nothing to do with the employee's length of employment.

When must an IA send clients his/her brochure?

Each client must receive the brochure no later than entering into the advisory contract SEC rules require that a brochure, or summary of material changes, if any, must be delivered to all clients within 120 days of the end of the adviser's fiscal year. If there are no material changes, a brochure does not have to be sent. The summary includes an offer to provide a copy of the updated brochure and information on how the client may obtain it. There is no 48-hour rule under federal law as there is for state law and, in any event, that law has a 48-hour in advance requirement. Only when the charge for the impersonal advice is $500 per annum or more is there a requirement to deliver the brochure.

Fundamental analysis

Earnings potential and risk associated with a particular firm

Exempt or not exempt? An agent sells U.S. Treasury notes to an individual client.

Even though the bonds are an exempt security, the sale to an individual client is not an exempt transaction. Sales to institutions, sales by fiduciaries, or unsolicited transactions are all exempt.

Under the Uniform Securities Act, the recordkeeping requirements established by the Administrator for out-of-state investment advisers wishing to register in his state are subject to the limitations of A) the requirements set by each individual state B) the Securities and Exchange Act of 1934 C) the Investment Advisers Act of 1940 D) the requirements set by the Administrator of the adviser's home state Your answer, the Investment Advisers Act of 1940, was incorrect. The correct answer was: the requirements set by the Administrator of the adviser's home state

For state-registered investment advisers, requirements set by the Administrator are subject to the limitations of the requirements set by the Administrator of the adviser's home state. Covered advisers don't register in any state, only with the SEC (and come under the SEC's requirements set forth in the Investment Advisers Act of 1940). Reference: 10.9.1 in the License Exam Manual.

IRA Suitability

Growth stocks provide potentially long-term returns suitable for a retirement account. An individual opening a new IRA won't have sufficient funds to properly diversify other than by purchasing shares of an investment company. IRA distributions are 100% taxable, which makes the investment in tax-exempt securities unsuitable. Insurance is not permitted in an IRA account and speculative options are inappropriate.

In which of the following cases would the Uniform Securities Act require registration of an investment adviser who had no place of business in the state?

He had more than 5 noninstitutional clients who were residents of the state.

Which of the following is (are) NOT exempt from registration as an investment adviser representative in the state in which they maintain a place of business? A certified financial planner who prepares financial plans and whose only compensation is commissions An insurance agent who prepares comprehensive financial plans and receives commissions on any insurance products purchased by his clients A broker-dealer with extensive business in the state A mutual fund company with offices and clients in the state

I and II NOT I only A certified financial planner who prepares financial plans for commissions must register in the state as an investment adviser representative because the commissions represent compensation for advice. An insurance agent who prepares comprehensive financial plans for commissions is also acting in the capacity of an investment adviser representative and must register accordingly. In both cases, these individuals are holding themselves out as offering investment advice because, at least in the eyes of the USA, there is no such thing as a comprehensive financial plan that does not involve securities. The commissions they receive are considered indirect compensation for the rendering of investment advice. Broker-dealers and mutual fund companies are not investment advisers under the Uniform Securities Act. Insurance Agent here IS a a financial advisor here because NO such thing as a comprehensive investment plan without securities

While registration as an agent is pending, the individual would be permitted to send out confirmations of order executions to customers accept unsolicited orders only ask registered agents to explain their sales techniques to him offer exempt securities only

I and III While registration is pending, the only activity that the future agent may engage in is clerical, administrative or related to training.

An investment adviser representative may perform which of the following functions? Solicit for advisory business Manage advisory accounts Make specific securities recommendations Supervise those who render advice

I, II, III, and IV

A state Administrator may require an applicant for registration to do which of the following? Furnish information about any SEC adjudications in the past Pay a registration fee Pass a qualification examination Place an advertisement in one or more newspapers circulated in the state

I, II, III, and IV In general, the application for registration will request information about any disciplinary actions, such as an adjudication by the SEC at any time in the past, and require an applicant to pay a fee, pass an examination, or place an advertisement in a local newspaper before granting registration.

Under the Uniform Securities Act, which of the following are elements in the definition of an investment adviser? Advice as to investments must be in writing, not given orally. Advice must relate to the value of securities or recommendations to purchase or sell securities. There must be compensation for services rendered.

II and III NOT I, II and III Investment advice DOESNT have to be in writing An investment adviser provides advice related to securities for compensation. However, the advice may be given orally or in writing.

The Administrator may: I. deny a registration if the registrant does not have sufficient experience to function as an agent. II. limit a registrant's functions to that of a broker/dealer if, in the initial application for registration as an investment adviser, the registrant is not qualified to act as an adviser. III.take into consideration that the registrant will work under the supervision of a registered investment adviser or broker/dealer in approving a registration. IV. deny a registration, if it is prudent in view of a change in the state's political composition.

II and III The Administrator may deny, suspend, or revoke a registration for many reasons, but they must be in the interest of the public. The Administrator may determine that an applicant, in his initial application for registration for an investment adviser, is not qualified to act as an adviser and thus limit the registration to that of a broker/dealer. The Administrator can also take into consideration whether the registrant will work under the supervision of a registered investment adviser or broker/dealer when approving an application. Lack of experience is insufficient reason for denial.

Which of the following are not specifically excluded from the definition of an investment adviser under the Uniform Securities Act? An investment adviser representative of an advisory firm who makes securities recommendations on a regular basis for compensation A temporary employee hired to assist in administrative responsibilities of an advisory firm Any person who is a federal covered investment adviser A person who, on a regular basis for compensation, offers specific investment advice to clients as to the value of securities

IV only Clerical and ministerial personnel, full-time or temporary, are not included in the definition of either investment adviser representatives (supervised persons) or investment advisers. Other persons associated with an investment adviser, including officers of the firm, are generally considered to be investment adviser representatives. An investment adviser representative is not an investment adviser in the same manner that an agent is not a broker-dealer. A federal covered adviser is not, for definitional purposes, considered an adviser under the USA to avoid duplicate regulation by both the state and the federal government.

what 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?

If an individual is in the business of providing advice and receives any economic benefit, such benefit is considered compensation under Release IA-1092. Since 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 three 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.

Under federal law, the statute of limitations for civil liability is:

In the federal regulations, the statute of limitations for a civil action is the sooner of one year after discovery or three years after the action. Under the USA, it is the sooner of two years after discovery or three years after the action.

Kapco Advisers, a federal covered investment adviser operating on a calendar year basis, published a list of recommended securities in January 2010. A copy of this must be maintained until at least: A) 1/31/2015 B) 1/31/2012 C) 12/31/2012 D) 12/31/2015 Your answer, 1/31/2015, was incorrect. The correct answer was: 12/31/2015 Investment adviser records, including copies of advertisements, must be kept for at least five years from the end of the fiscal year in which the record originated; in this case, five years from the end of 2010. Reference: 10.9.1 in the License Exam Manual.

Investment adviser records, including copies of advertisements, must be kept for at least five years from the end of the fiscal year in which the record originated; in this case, five years from the end of 2010. Reference: 10.9.1 in the License Exam Manual.

Which of the following is (are) required to register with a state Administrator?

Investment adviser representatives of federal registered advisers who have natural person clients and have a place of business in the state

Performance fee eligible

It is not permissible to trade this account on a performance basis; the investment adviser representative must be paid on commission or through a fixed fee arrangement. Under the Investment Advisers Act of 1940, performance fees are allowed only for clients with a minimum of $1 million invested or a minimum net worth of $2 million.

If a federal covered adviser's fiscal year ends on October 31, 2017, it must file its annual updating amendment to its Form ADV no later than

January 29, 2018 The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal-year end.

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.

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 adviser representative is specifically excluded from the definition of an investment adviser.

The Uniform Securities Act holds that persons performing certain activities shall be registered as investment adviser representatives. That requirement would apply to which of the following?

John, who opens an investment advisory firm where he devotes his time exclusively to management responsibilities as the sole proprietor of the firm

Long-term Financial Solutions, Inc. (LTFCI), a federal covered registered investment adviser, files a Form ADV-W indicating the business is closing. It is being acquired by another federal covered adviser, Goldin and Sylver Advisers, LLC. As the successor firm, Goldin and Sylver Advisers A) must keep copies of the LTFCI corporate charter for at least three years after LTFCI's termination B) must keep copies of the LTFCI corporate charter for at least five years after LTFCI's termination C) is under no obligation to maintain any of LTFCI's corporate records. D) must notify all clients of LTFCI that their advisory contracts have been assigned Your answer, must notify all clients of LTFCI that their advisory contracts have been assigned, was incorrect. The correct answer was: must keep copies of the LTFCI corporate charter for at least three years after LTFCI's termination

Keep records 3 THREE YEARS after TERMINATION When an investment adviser ceases to exist, either through going out of business or being succeeded by another firm (as is the case here), articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor must be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise. Although it is true the contracts have been assigned to the successor firm (Goldin and Sylver), the consent for that had to be obtained by LTFCI. Reference: 10.9.1 in the License Exam Manual. THREE YEARS AFTER TERMINATION Partnership articles and any amendments thereto, articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor must be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise. Emails are treated as any other communication: three years for broker/dealers and five years for investment advisers. Reference: 10.9 in the License Exam Manual.

Long-Term Financial Solutions, Inc. (LTFSI), a federal covered registered investment adviser, 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?

LTFSI is responsible for ensuring that a copy of the LTFSI corporate charter is preserved for at least 3 years after the acquisition.

defined contribution plans

Money-purchase pension plans, 401(k) plans, and qualified profit-sharing plans are all examples of defined contribution plans.

Under the Uniform Securities Act, which of the following is an agent?

Mr. Blodgett, an employee of XYZ Manufacturing Corporation, receives commissions when he represents XYZ in the issuance of securities exclusively to existing employees, partners, and directors of the corporation.

Under the USA, what are the requirements for a preorganization subscription to be exempt?

No payment may be made by any subscriber. No commission may be paid to anyone for soliciting potential subscribers. There may be no more than ten subscribers.

Discretion orders

Nothing other than oral permission is necessary in order for an agent to use discretion as to time and or price. owever, time and/or price discretion are only good for that day - those are considered "day" orders, so the agent is able to use judgment, but the order must be placed during the day it was received.

A closed-end investment company is registered under the Investment Company Act of 1940. Its shares trade on the Nasdaq Stock Market. To qualify their shares for sale in the state, they would probably use:

Notice Filing: Regardless of where shares of this closed-end investment company trade, like all investment companies registered under the Investment Company Act of 1940, it is a federal covered security. The company is basically exempt from state registration and is only required to follow a procedure known as notice filing.

If a broker dealer offers wrap accounts, do they need additional registration

Once a broker/dealer handles wrap fee accounts, it loses the exclusion from the definition of investment adviser. Therefore, the firm must be registered with either the state or the SEC. Any agents handling these accounts would be registered as investment adviser representatives.

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) five years from the date of organization B) the lifetime of the firm C) three years after the dissolution D) five years after the dissolution Your answer, five years after the dissolution, was incorrect. The correct answer was: three years after the dissolution ​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 three years after dissolution.

PARTNERSHIP RECORDS FOR IAs 3 YEARS 3 THREE YEARS FROM DISSOLUTION for IA no record keeping requirements for IARs 3 YEARS FOR BD DISSOLUTION 5 FIVE YEARS FOR advisor records, advertisements 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 three years after dissolution.3

A margin account could be opened for which of the following?

Partnership There is no legal reason why a partnership (or other business structure) cannot open a margin account. A margin account could never be opened for retirement accounts, Coverdell ESAs, and UTMA/UGMA accounts.

​An individual with a place of business in State A manages client assets on behalf of a ​covered investment adviser​. ​This individual wishes to expand his client base by working one day per week out of the firm's office in State B. Which of the following actions must the person take to practice within that particular state?

Pay state registration fees if required by the Administrator Individuals with a place of business in a state, managing client assets while employed by federal covered investment advisers, must register as investment adviser representatives in that state (or any others in which they, the IAR, maintain a place of business). Registration WILL generally involve paying the registration fees. Because this individual is already registered in State A, it is not necessary to pass another exam to become registered in another state.​ It is the investment adviser who ​may be required to notice file with the Administrator.

Securities Information Processor

Persons in the business of providing information on securities transactions or quotes of securities prices on a continuing basis through a computer network, wire service (ticker tape), or other publications, such as The OTC Markets Group Inc (Pink Sheets) are considered securities information processors. Excluded are newspapers, magazines, or other publications of a general and regular circulation, SROs, banks, broker/dealers, or others who provide such information as part of their normal activities.

How does a person who only advises investment companies need to register?

Persons that act as advisers to investment companies registered under the Investment Company Act of 1940, regardless of their size, are required to register with the SEC. At $100 million, advisers are eligible to register with the SEC; at $110 million, they must. Persons who only give advice related to U.S. government securities are specifically excluded from the definition of investment adviser under the Investment Advisers Act of 1940.

When a broker-dealer's registration under the Uniform Securities Act is revoked, which of the following occur?

Registrations of agents of that firm are no longer in effect.

Rule 482

Rule 482 describes a form of allowable mutual fund advertising, commonly referred to as an omitting prospectus.

IA disclosures

SEC Release 1A-1092 requires certain disclosures under the antifraud provisions of the Investment Advisers Act. They must disclose an affiliation with a securities broker/dealer if the advisory service is independent of the broker/dealer; the adviser only recommends products offered by the broker/dealer; the adviser will be compensated by the broker/dealer for the transaction; or the products recommended by the adviser are available from other broker/dealers. The adviser must also disclose personal securities transactions if they are designed to take advantage of the market impact caused by recommendations to clients or if personal transactions are inconsistent with the advice given to clients. Advisers must disclose the amount of compensation received from transactions through any broker/dealer, from any issuer, and from sales of nonsecurities products. They are not required to disclose all personal transactions.

Form PF must be filed by

SEC-registered advisers with at least $150 million in private fund assets under management

The USA places a number of recordkeeping requirements on investment advisers. Records required to be kept by all state-registered investment advisers include all of the following EXCEPT: A) emails. B) a record by security showing each client's interest and location thereof. C) a list of discretionary accounts. D) bank records. Your answer, bank records., was incorrect. The correct answer was: a record by security showing each client's interest and location thereof. The key to this question is the requirement for all advisers. A security record is only required for those advisers who have custody of client assets. Reference: 10.9 in the License Exam Manual.

SECURITY RECORD ONLY REQUIRED FOR IAs WITH CUSTODY OF ASSETS The key to this question is the requirement for all advisers. A security record is only required for those advisers who have custody of client assets. Reference: 10.9 in the License Exam Manual.

Searching Out New Growth (SONG) is a venture capital fund. As such, all of the following statements are true EXCEPT

SONG must have less than $150 million in assets in the fund Although venture capital funds are included in the general definition of private funds, unlike the private equity fund, there is no ceiling on the size of the fund before the adviser loses the exemption. Advisers to VC funds are exempt from registration. The funds themselves do not register with the SEC under the Investment Company Act of 1940 (and don't register with the states as well). These investments do not offer ready liquidity.

Section 13(d) of the Securities Exchange Act of 1934

Section 13(d) of the Securities Exchange Act of 1934 requires filing of a Schedule 13D once a person becomes an owner of more than 5% of the outstanding voting shares of a reporting company. Form 144 is only filed when securities are sold.

Sale of an exempt security to an individual, exempt?

Solicited trades with individuals are not exempt transactions, even when the security being traded is exempt. Transactions between issuers and underwriters or between underwriters are exempt from registration and advertising filing requirements. A bona fide pledge of securities is not a transaction and this question is looking for a nonexempt transaction. Transactions with banks, savings and loan associations, and other financial institutions are exempt from registration and advertising filing requirements.

Which of the following investment strategies is used to determine an appropriate allocation based on the long-term goals and risk tolerance of the client?

Strategic asset allocation In strategic asset allocation, once the allocation is determined, it remains relatively constant until some change to the investor's objectives occurs. Periodically, the portfolio is rebalanced to reflect any changes in market conditions.

Technical analysis

Studying historical stock prices and volume

Which of the following meet(s) the compensation test for defining investment advisers under SEC Release 1A-1092?

Subscription payments received by the publisher of an investment newsletter, available by subscription only, that provides impersonal securities related advice. An insurance agent sells a life insurance policy and receives a commission on that sale. As a result, the agent agrees to provide advice on structuring the insured's investment portfolio at no additional cost.

Who does ERISA cover?

The Employee Retirement Income Security Act (ERISA) protects employees in the private sector of the economy. It does not cover public sector employees. Traditional and Roth IRAs are not covered under ERISA - there is no employer/employee relationship.

Under the Securities Exchange Act of 1934, which body regulates the extension of credit for nonexempt securities?

The Federal Reserve Board.-The Securities Exchange Act of 1934 empowered the Federal Reserve Board (FRB) to set margin requirements and regulate the use of credit to purchase securities. The FRB determines what issues may be purchased on margin and what percentage of the purchase price must be deposited by the purchaser.

Which of the following is responsible for administration of the Bank Secrecy Act?

The Financial Crimes Enforcement Network. Or FinCEN as it is more commonly printed.

Under the Insider Trading and Securities Fraud Enforcement Act of 1988, a person who has violated the prohibition against insider trading is liable for a civil penalty of:

The Insider Trading and Securities Fraud Enforcement Act of 1988 provides that the SEC may seek triple damages through the courts for violations of the insider trading rules. This means that the SEC may seek court action that imposes civil penalties of 3 times the profit gained or 3 times the loss avoided as a result of inside information.

Investment Company Act of 1940 prohibits

The Investment Company Act of 1940 generally prohibits mutual funds from making purchases on margin. There are exceptions to this rule, such as in the case of hedge funds. A fund is not prohibited from buying options or low-quality bonds. A mutual fund may invest in other mutual funds so long as it does not acquire more than 3% of the outstanding shares of the other fund.

Who determines the effective date if a security is registered by coordination?

The SEC A security is registered by coordination when there is a simultaneous federal and state registration. Under normal circumstances, once the SEC has declared the registration effective, it is also effective in those states where the registration was coordinated.

Who does the SEC have jurisdiction over?

The SEC has jurisdiction over exchanges, SROs, and all persons required to be registered under federal law. The SEC does not enforce state securities statutes, nor does it have jurisdiction over banks or savings and loans regarding their securities activities. Banking authorities, such as the Federal Reserve Board, the Federal Deposit Insurance Corporation, and others, regulate banks and savings and loans.

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?

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.

Securities Act of 1933

The Securities Act of 1933 regulates new issues of corporate securities sold to the public. The act is also referred to as the Full Disclosure Act, the Paper Act, the Truth in Securities Act, and the Prospectus Act. The purpose of the act is to require full, written disclosure about a new issue. The Securities Exchange Act of 1934 requires registration of exchanges with the SEC and enabled the FED to set margin requirements.

When must a final prospectus be delivered to the purchaser

The Securities Act of 1933, sometimes referred to as the "paper act", requires that an effective, or final prospectus be delivered to all purchasers of a new offering no later than with confirmation of the sale. It is not required that purchasers receive a red herring prospectus and only the SEC gets copies of the registration statement. Yes, they must be properly registered to make the offer (and sale), but that comes under the "people act", the Securities Exchange Act of 1934.

Margin regulations are determined by the Board of Governors of the Federal Reserve System. The authority for them to do so is found in the

The Securities Exchange Act of 1934 contains the authorization for the FED to regulate the use of credit in the securities business.

which act requires publicly traded corporations to issue annual reports?

The Securities Exchange Act of 1934 mandates that public issuers file annual and quarterly reports with the SEC.

The USA empowers Administrators to

The USA empowers Administrators to administer oaths, Sworn oaths typically occur in conjunction with hearings.

A registered broker-dealer offers investment advice as an incidental part of its commission business. One of its agents charges for investment advice as a freelance investment adviser outside the scope of his employment at the firm. Which of the following statements are TRUE?

The agent must register as an investment adviser. The broker-dealer need not register as an investment adviser.

Under the Investment Company Act of 1940, an investment company may initially retain the services of an investment adviser only with approval of:

The investment adviser's contract must be initially approved by a majority vote of the outstanding shares and a majority of the noninterested members of the board of directors. It is renewed annually by either a majority of the board or a majority of the outstanding shares. In addition, as with all contracts, initial and renewal, it requires a majority of the noninterested board members.

If an investment adviser representative is engaged in criminal activity while violating a rule under the Uniform Securities Act, but had no knowledge of the rule violated, the maximum penalty that may be imposed is a:

The maximum penalty for criminal violations is $5,000 and/or 3 years imprisonment. However, no prison sentence can be imposed if the person can prove he had no knowledge of the rule being violated.

Market Capitalization

The number of outstanding shares multiplied by the current market price per share and has nothing to do with the companys dividend policies

Penalty for not taking your RMD

The penalty for failure to make the correct amount of required minimum distribution is 50% of the difference between the minimum required amount and the actual distribution. In this case, this would be 50% of $5,000 ($15,000 − $10,000) or $2,500.

Under the Uniform Securities Act, which of the following are TRUE regarding the registration of a successor firm?

The successor firm need not be in existence when the application for registration is filed. The successor firm's registration will be effective for the unexpired portion of the year.

Which of the following statements best defines inflation risk?

The uncertainty that the value of an investor's assets will decrease as measured by real dollar purchasing power

The common stock of companies within which industry sector would be most adversely affected by an increase in the general level of interest rates?

The utilities industry Utilities are generally very heavily funded with debt. If interest rates go up, their new debt will be at higher interest rates, causing lower earnings available for common stocks.

Third-party solicitors must provide a copy of the investment adviser's brochure (Form ADV Part 2), as well as a copy of the solicitor's brochure. The solicitor's script must be approved by the IA, and only the SEC receives a copy of the Form ADV Part 1.

Third-party solicitors must provide a copy of the investment adviser's brochure (Form ADV Part 2), as well as a copy of the solicitor's brochure. The solicitor's script must be approved by the IA, and only the SEC receives a copy of the Form ADV Part 1.

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:

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 and not subject to state regulation as an investment adviser.

Which of the following are features of Class C mutual fund shares?

Typically charge no front-end load Typically impose lower CDSCs than Class B shares for a shorter period

performance based fee requirements

Under federal (and state) law, in order to qualify for a performance-based compensation program, the client must have either $1 million in assets managed by the adviser or a net worth of $2 million. This requirement is described in Rule 205-3 of the Investment Advisers Act of 1940 and the NASAA Model Rule makes reference to the federal rule. If using joint assets, only those with a spouse are allowed. Please note: This differs from meeting the net worth standard as an accredited investor. Under Rule 501 of Regulation D of the Securities Act of 1933, one can use assets owned jointly with persons other than a spouse to qualify as an accredited investor, but only to the extent of his or her percentage ownership of the account or property.

A pension fund manager who manages a $35 million dollar account must register with which of the following?

Under the Dodd-Frank Act, pension fund managers who manage $200 million or more are eligible to register with the SEC, so in this case, they would register with the state

statutory disqualification reasons

Under the Securities Exchange Act of 1934: Loss of a civil lawsuit, lack of experience, or being registered as an investment adviser does not cause statutory disqualification to be associated with a member of a self-regulatory organization such as FINRA. However, administrative sanctions, findings of criminal wrongdoing, court injunctions, etc., are cause for statutory disqualification.

roth ira RMD

Unlike the regular or traditional form of IRA, Roth IRAs are not subject to the minimum distribution rules upon the participant attaining age 70½. Rather, distributions need not be made until the death of the owner/participant. For a Roth IRA withdrawal to be entirely tax free, it must be made after a 5-year holding period and after the participant reaches age 59½

Which of the following securities is NOT exempt from the registration procedures of the Uniform Securities Act? A) General obligation bonds issued by a city located in this state. B) Variable annuities issued by an insurance company authorized to do business in this state. C) Bonds issued by a church operating as a nonprofit organization under IRS Code Section 501(c)(3). D) Common stock issued by a public utility company whose rates are subject to state regulation.

Variable annuities are not exempt from state registration because the payments from the annuity are dependent on the performance of a segregated fund invested in securities. Municipal securities and regulated public utilities are exempt from registration. Securities issued by religious and charitable organizations are exempt from registration under the USA.

Under the Uniform Securities Act, if no denial or proceedings are pending, when does an investment adviser registration become effective?

When the Administrator so orders, but not to exceed 30 days Registrations become effective at noon on the 30th calendar day after the date of filing if there are no denial orders or pending proceedings.

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?

Withdraw from SEC registration within 180 days of the adviser's fiscal year-end 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.

Mr. and Mrs. Walker are advisory clients of yours. Each of them is employed and covered by a qualified plan. Are they eligible for a roth IRA

Yes - they can open Roth IRAs and they can rollover distributions from the qualified plan, into the roth. Eligibility for a Roth IRA is not affected by participation in a qualified plan. Effective January 2008, distributions may be rolled over into a Roth in the same manner as they have always been into a traditional IRA.

A Schedule K-1 would be received by an individual with an ownership interest in all of the following except

a C corporation. C corporations pay tax on their earnings; the other business types listed here flow through the income to their owners. The owner's share of income (or loss) is reported to them on the Schedule K-1. A shareholder in a C corporation who receives dividends will have that reported on a Form 1099.

What can the state administrator require from federal covered advisers

a copy of the IA's Form ADV and a filing fee

The term "private fund", as defined under federal and state law, would not apply to

a leveraged ETF.

An investment adviser sends a notice offering a research report she has recently prepared to a group of 25 new members of the local Lions Club. Under the NASAA Model Rule on recordkeeping for investment advisers, the firm must keep a copy of the notice along with

a memorandum describing the list and its source If an investment adviser sends any notice, circular, or other advertisement offering any report, analysis, publication, or other investment advisory service to more than 10 persons, the investment adviser shall not be required to keep a record of the names and addresses of the persons to whom it was sent, except if the notice, circular, or advertisement is distributed to persons named on any list, then the investment adviser shall retain with the copy of the notice, circular, or advertisement a memorandum describing the list and its source.

Money Purchase Plan

a money purchase plan is a defined contribution plan established by the employer employee participation by making voluntary contributions to the plan is optional. Employees who contribute to the plan usually contribute a percentage of their income.

All of the following statements regarding registration of broker-dealers under the Uniform Securities Act are true EXCEPT

a successor firm is exempt from filing a consent to service of process until the renewal date When one firm succeeds another, no fees are due until renewal date. However, the successor firm must file a consent to service of process at the time it registers. Broker-dealers with discretionary authority may be required to post a surety bond or maintain minimum net capital. However, no state can impose financial or recordkeeping requirements that exceed those of the SEC. SO BDs with discretionary authority MAY be required to post a surety bond or meet maintain min net capital

Registration with the SEC as an investment adviser would be required for a person who

acts as the investment adviser to an investment company registered under the Investment Company Act of 1940

One of the most significant features of the UPIA is the ability of a trustee to delegate investment decisions to a qualified third party. Delegation is permitted as long as the fiduciary to whom the powers are delegated

acts with skill and caution. The UPIA specifically uses the terms, skill and caution, when describing the actions of the fiduciary. Other components of the UPIA state that, rather than viewing individual securities, the overall effect on the entire portfolio is considered.

An individual is an agent for a broker-dealer. He takes and passes the appropriate examinations and forms a sole proprietorship investment adviser. About a year later, he terminates his registration with the broker-dealer. This action would require

amending the Form ADV

The registration of a broker-dealer in this state would automatically register as an agent

an agent who sits on the board of directors of the broker-dealer

Under the USA, any individual used as a solicitor for an investment adviser is considered to be an employee ...

and thus requires registration as an IAR of that IA

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?

anyone hard copy, microfilm, computer disk

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

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.

The Investment Company Act of 1940 allows a majority vote of outstanding shares of a registered investment company to authorize the fund to:

borrow money from a commercial bank. change the objectives of the fund. change the nature of its business and cease to be an investment company.

An investor is of the opinion that the recent bull market has run its course, and she wants to protect her portfolio consisting largely of equities with a market cap of less than $1 billion. Her best choice would be to

buy puts on the Russell 2000. When a bull market runs out of steam, a decline usually follows. The best way to protect her positions is purchasing a put option on a benchmark that represents her holdings. Because this investor's portfolio is so heavily invested in small-cap stocks, the appropriate benchmark for hedging would be the Russell 2000.

on determining that a registrant or applicant for registration is no longer in existence or has ceased doing business as either an agent or a broker/dealer, the Administrator may:

cancel the registration or application. A registration may be canceled if the registrant cannot be located, is found mentally incompetent, or has disbanded. This is known as non-punitive termination of registration. Suspension, revocation, and a cease and desist order are for violations of the Uniform Securities Act.

The Administrator may require which of the following from a federal covered adviser?

copy of the IA's Form ADV a filing fee

The First Fidelity Building and Loan association, organized in State A and authorized to do business in State B, has an offering of common stock being made in State B. In order for an individual selling the offering to be excluded from the definition of agent in State B, the individual

could not sell without being registered as an agent in State B Although securities issued by a building and loan association are included in the Uniform Securities Act's list of exempt securities, they are not included in the group of exempt securities where employees selling on behalf of the issuer are excluded from the definition of agent. Please see your LEM for the 5 categories of exempt securities that qualify for that exclusion.

Securities and Exchange Act of 1934

created the SEC and regulates the secondary market. (this may include extension of credit to customers)

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

deal only with institutional investors have five or fewer noninstitutional clients in the state during any 12-month period deal only with other registered investment advisers

An investment adviser to a private fund wishes to qualify for the exemption offered under the Uniform Securities Act when the fund has no more than 100 investors. In order to qualify,

every investor must have either at least $1 million in assets managed by the investment adviser, or a net worth, excluding the value of the primary residence, in excess of $2.1 million The 100 or less investors is technically known as advising a 3(c)(1) issuer. In that case, all the investors must be qualified buy meeting the net worth or assets managed by the adviser as stated. The $5 million is the requirement under federal law for an adviser seeking the federal exemption for a 3(c)(7) fund, which is not limited to 100 investors. Conviction of a felony within the past 10 years, not 12, will generally make one a "bad actor" and cause the exemption to be forfeited. Private fund advisers must keep the AUM under $150 million, not $110 million.

The exchange privilege offered by open-end investment companies allows investors to

exchange shares of one open-end fund for another in the same fund family at a net asset value basis Exchange privileges allow an investor to convert the value of shares held in one fund for those of an equal value in the same family.

403

filing requirements

In response to an evolving marketplace, the SEC, through Release IA-1092, expanded the coverage of the definition of investment adviser to include

financial planners and pension consultants

SEC has jurisdiction over

finra, stock exchnages and b/ds, the MSRB -- NOT the fed reserve system

Under the USA, a person who has passed the appropriate NASAA examination but whose license has not yet been issued can participate in

giving a seminar on the benefits of whole life insurance versus term insurance A person who has passed the NASAA exam cannot transact securities business until the Administrator notifies the employer that the registration is effective. Insurance, unless variable, is not a security.

All of the following are potential benefits of high frequency trading (HFT) except

greater trading opportunities for the small investor. With HFT, it is the smaller investors who lose out because they don't get access to the information as quickly.

A foreign private adviser is defined in the Dodd-Frank Act as any investment adviser that

has no place of business in the United States. has, in total, fewer than 15 clients and investors in the United States in private funds advised by the adviser. has aggregate AUM attributable to clients in the United States and investors in the United States in private funds advised by the adviser of less than $25 million.

Under the provisions of the Securities Exchange Act of 1934, the SEC may suspend trading on a national exchange by notifying the:

he SEC may suspend all trading on a specific exchange for up to 90 days with prior notification to the President of the United States and may summarily suspend securities trading in a registered security that is listed on a stock exchange for up to ten days if it believes such action to be in the public interest.

A federal covered investment adviser registered with the SEC that has offices in 5 states must do which of the following? i Pay state filing fees if required by the Administrator ii Notify the Administrator within 1 business day if net worth falls below the required minimum iii Notice file in any of those states where required by the Administrator iv Become licensed as a broker-dealer

i and iii. Although exempt from state registration, federal registered investment advisers must notice file and pay state filing fees (if required by the Administrator) to practice within a given stat

Under the Uniform Securities Act, which of the following are excluded from the definition of investment adviser, provided the advice is incidental to their profession? i Bankers ii Lawyers iii Broker-dealers iv Teachers

ii and iv

certified financial planners are...

investment advisers! 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.

A person who renders investment advice solely with respect to securities issued by the U.S. government

is excluded from the definition of investment adviser under federal law and is, therefore, exempt from state registration requirement

FinCEN Form 112, the Currency Transaction Repor

is filed with the department of treasury. Currency transactions in excess of $10,000 are reported electronically on FinCEN Form 112 to the Department of the Treasury.

mutual funds may not

mutual funds may not purchase securities on margin. A fund is not prohibited from buying options, low quality bonds, or other mutual funds, if the purchase is in line with the fund's objectives.

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 US government is

not required to be a registered investment adviser in the state.-- 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.

Under the NASAA Model Custody Rule, an investment adviser would be permitted to take or have custody of any securities or funds of any client if:

notification was given to the Administrator that he has or may have custody and custody was not prohibited by that state's rules. It is unlawful for any investment adviser to take or have custody of any securities or funds of any client if The Administrator, by rule, prohibits custody; or in the absence of rule, the investment adviser fails to notify the Administrator that he has or may have custody. It is true that there is a minimum net worth or bond required, but that is not part of NASAA's Custody Rule - those requirements are found in Model Rule 202(d)-1, NASAA's Minimum Financial Requirements For Investment Advisers.

Becky Biggins has an executive position with a large corporation that covers her under its defined benefit pension plan. This year, Becky's salary will top $235,000. Becky has no dependents and wishes to maximize funds that she can accumulate for her retirement. Becky coul

open a traditional IRA but would not be able to deduct her contributions not open a roth IRA Anyone with earned income can open a traditional IRA. Deductibility of contributions may be disallowed if the individual is covered under a corporate plan and has earnings in excess of a certain level. Becky's salary exceeds the maximum permitted for a single person so her contributions would be made with after-tax dollars. In the case of a Roth, nothing is deductible, so it doesn't matter if you are covered at work. However, Becky's salary is far in excess of the maximum permitted for a single person to contribute to a Roth IRA.

payroll deduction plan

payroll deduction plan is a retirement plan not subject to eligibility, vesting, or funding standards as required by ERISA plans. A payroll deduction plan is a nonqualified retirement plan. Profit-sharing, pension, and Keogh plans must have established standards.

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.

SEC Commissioners

policies of the SEC are determined by 5 commissioners. They are appointed by the President of the US with the advice and consent of the Senate to staggered 5 year terms (1 expires each year). NO 3 commissioners may belong to the same party and they may not engage in outside employment

All of the following statements regarding universal life insurance are correct EXCEPT

premiums are fixed for the life of the policy The single most distinguishing characteristic of universal life is the fact that premiums are flexible and not fixed.

Who must sign the registration statement when registering securities with the SEC

principal executives of the company involved with money and a majority of the board of directors are required to sign the registration statement attesting to the facts presented as being true to the best of their knowledge and belief. This includes the chief executive officer, chief financial officer, and a majority of the board, but not the chief operating officer.

According to the Uniform Securities Act, an offer or a sale does not exist if it is a(n):

reclassification of the issuer's securities. bona fide pledge or loan. act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding shares. stock dividend of stock other than the issuer's for which nothing of value was given

A sales agent who is only registered in Nebraska works for a broker-dealer that is registered in all 50 states. A customer who is a resident of North Dakota calls the representative in Nebraska and offers to purchase securities. Under the Uniform Securities Act, the agent should

reject the order because she is not registered in North Dakota Both the broker-dealer and the agent must be registered in each state where they plan to do business. Although the broker-dealer is properly registered, in order for the agent to accept the order, she must be registered in North Dakota. Even though the order is unsolicited, making this an exempt transaction, agents must still be licensed in the state where the client is a resident.

What can the SEC investigate?

the SEC may investigate any situation it believes may have violated federal securities laws, its own rules, and rules of the SROs (i.e., exchanges, FINRA, MSRB). The SEC does not enforce state securities statutes or state or federal banking laws.

Global Investment Strategies (GIS) is a broker-dealer registered in 6 states. GIS would have to meet the financial and recordkeeping requirements of

the Securities and Exchange Commission States can never impose requirement that exceed those of the SEC. We know this broker-dealer is SEC registered because once a firm registers in more than 1 state, it has to register on the federal level as well.

order tickets do not have

the customers name

The time value of money is part of the computation for

the internal rate of return One of the unique features of IRR is that it is a compounded rate using the time value of money.

An individual representing the issuer in the sale of that issuer's securities to the public would have to register in this state if

the issuer is a federal savings and loan association authorized to do business in this state

USAAdvisers is registered in 10 Midwest states. Regarding financial requirements, USAAdvisers must meet those of

the state in which its principal office is located Unlike broker-dealers, investment advisers register with either the SEC or the state(s), but never both. Therefore, we know this must be a state-registered adviser not under the jurisdiction of the SEC. Under the Uniform Securities Act, when it comes to financial requirements, bonding, recordkeeping, and so forth, as long as the adviser meets the requirements of the state in which the principal office is located, the other states have no further claim.

The issuance of a stop order by a state securities Administrator requires:

the subject of a stop order must be given the opportunity for hearing. As long as the stop order is in effect, the security subject to the order may not be sold to the public or the proscribed activity may not continue. Stop orders do not require an injunction by a court and the Administrator does not have authority to issue criminal charges.

One of the exemptions from registration under state and federal law applies to investment advisers to private funds. One characteristic of all private funds is that

they are not registered as investment companies Private funds lose that distinction if they become registered as investment companies under the Investment Company Act of 1940. It is the adviser to a private fund who has a limitation on the amount of AUM, not the fund. In some cases, specifically when using the 3(c)(7) exemption, there is no limit to the number of investors. In many cases, the advisers to these funds, although exempt from registration, are considered exempt reporting advisers and must file a Form ADV Part 1 answering most of the questions on the Form.

Under all of the following circumstances, the USA requires investment advisers with no place of business in the state to register EXCEPT

when an adviser only provides advice to registered investment companies An adviser that only provides investment advice to investment companies registered under the Investment Company Act of 1940 is federal covered and does not have to register in a state, regardless of whether or not it has a place of business there. An adviser that provides advice only to 401(k) plans or other tax qualified employee benefit plans with $1 million in assets (not $250,000) is not required to register in a state in which it does not have a place of business. The assets of the adviser is not what determines becoming a federal covered adviser; it is assets under management and the determining factor is the AUM now, not the range over the previous 10 years.

An individual who has applied for registration as an agent of a broker-dealer has just passed the Series 63 exam. This individual may begin soliciting brokerage clients

when informed by the broker-dealer that the agent's registration is effective NOT when informed by the Administrator that the representative's registration is effective Passing the Series 63 exam is the typical way an individual can meet the testing requirements to be an agent. Registration is not effective immediately upon passing. Notice is received by the broker-dealer from the appropriate state and/or federal authorities and then, in accordance with that firm's procedures, the firm determines when activity as an agent may start. The Administrator does not directly contact the individual. OFC the Admin doesnt contact the agent DIRECTLY