Chapter 3 | Uniform Securities Act - Administration and Fraudulent Act

Which of the following are types of fees that are permissible for an Investment Adviser governed by the Uniform Securities Act? I. A one-time fee of $1,000 for a full financial analysis of a client including recommendations related to investments, portfolio balance, and debt management. II. A set monthly fee of $150 for active management of a mid-sized portfolio for a client. III. A set percentage of 2% of the average value or assets in a client's portfolio, billed on a monthly basis. IV. A set 50% performance-based fee, where the IA takes 50% of all profits from the account. A) I and IV only B) I, II, and III only C) I, II, and IV only D) I, II, III, and IV

*I, II, and III only* - An IAs fees must be fixed or must be based on the percentage of assets under management (fees cannot be tied to a certain percentage of profits, which would constitute a performance-based fee). [3.1]

According to the Uniform Securities Act, the disciplinary actions that may be taken by the Administrator include which of the following? I. Permanent revocation of a registration II. Bar from employment with any registrant III. Restriction on a registrant's performance of any activity in the advisory or brokerage business A) I and II B) I and III C) II and III D) I, II, and III

*I, II, and III* [3.2]

The Uniform Securities Act provides that which of the following statements is/are correct with regard to post registration provisions for registered IA's whose principal place of business is in a given state? I. The IA is responsible for scheduling the annual state examination of books and records with the Administrator. II. The filing of financial statements with the state may be a requirement. III. By rule or order, the IA must maintain certain records per the Administrator. IV. If the Form ADV becomes materially inaccurate, it is the IA's responsibility to update the form. A) I and IV only B) I, III, and IV only C) II, III, and IV only D) I, II, III, and IV

*II, III, and IV only* - IAs do not schedule their own examinations. [3.3]

Which of the following is true of an Administrator's authority to review the books and records of a firm registered in their state? a) The Administrator can review the books and records during specified times and at specified locations only. b) The Administrator can review the books and records at any time, but at specified locations only. c) The Administrator can review the books and records during specified times, but at any location, inside or outside of the state. d) The Administrator can review the books and records at any time and at any location, inside or outside of the state.

*The Administrator can review the books and records at any time and at any location, inside or outside of the state* - The records of registrants with a state are subject to the review of the Administrator at any time both inside or outside of the state as the Administrator deems necessary. [3.2]

ABC Corporation is a new company that just came out with an initial public offering. The company has applied for registration with the State of Washington. The Administrator of Washington has allowed the registration to become effective. ABC Corporation tells interested buyers that "the registration is now effective and securities may now be purchased in Washington". This statement by ABC Corporation would be viewed in what manner by the rules of the Uniform Securities Act and the Administrator in Washington? a) The statement is acceptable as is, since it does not imply approval, verification, or endorsement by the Administrator or the State of Washington. b) The statement is not acceptable, because it does imply approval, verification, and/or endorsement by the Administrator of the State of Washington. c) The statement is acceptable, and ABC Corporation can go as far as to say that the Administrator of Washington would not permit registration to be effective if there were any issues, misstatements, or untruths in the registration paperwork. d) The statement is not acceptable, because ABC Corporation is not permitted to imply that registration has been made effective.

*The statement is acceptable as is, since it does not imply approval, verification, or endorsement by the Administrator or the State of Washington* - Under the USA, a registrant is permitted to disclose that registration has become effective and that securities may now be sold. - This type of statement does not imply any kind of approval, verification, or endorsement by the Administrator or the State (any such implication of approval, verification, and/or endorsement would not be permitted). - Registrants ARE permitted to disclose that registrations have become effective. [3.1]

Are firms such as Investment Advisers and Broker-Dealers permitted to use electronic storage when it comes to meeting recordkeeping requirements under the Uniform Securities Act? a) Yes, firms are permitted to use electronically storage as long as certain criteria are met. b) Yes, firms are permitted to store records in any manner that the firm deems appropriate and cost-effective. c) No, firms are never permitted to store records electronically. d) No, firms are only permitted to store records electronically after withdrawing from registration in a given state.

*Yes, firms are permitted to use electronically storage as long as certain criteria are met* - Generally, these criteria include: 1. Duplication and storage in multiple locations 2. Inability to modify, alter, and/or delete within the required record retention period 3. Accessibility for prompt review by the Administrator [3.3]

According to the Uniform Securities Act, investment advisory contracts *must be ______*.

*in writing* - According to the USA, all investment advisory contracts must be in *WRITING*. [3.1]

An agent or broker-dealer can *______ guarantee* any customer against loss in any situation.

*never* [3.1]

The burden of proving an exemption or exception to a definition under the Uniform Securities Act is *placed on the ________*.

*person claiming the exemption or exception* [3.2]

Under the Uniform Securities Act, every investment advisory contract must be in writing and must include: A) that assignment of the contract is prohibited B) that the IA's liability is limited C) that the IA's compensation is based on a share of capital gains D) the specific time period for which services are contracted

*the specific time period for which services are contracted* - Assignment of the contract is permitted with the written consent of the client. - The IA may not limit its liability or as a general rule share in the capital gains of the accounts of clients. [3.1]

Under the Uniform Securities Act, penalties are limited to a *fine of ______, imprisonment of ______*, or a combination of both.

*$5,000 ; 3 years* [3.2]

If the terms of an advisory contract are changed, including changes in partners of the IA Firm which would create a new firm or changes in the Investment Adviser's address or telephone number, the firm must do which of the following? a) Have each client sign a new revised Advisory Contract b) Have each new partner sign a liability contract c) File the change with the SEC immediately d) File the change with the state's department of corporations immediately

*Have each client sign a new revised Advisory Contract* - Any change to the company's ownership must be disclosed to all clients and each client must sign an amended advisory contract with the firm. [3.1]

Under the Uniform Securities Act (USA), an agent of a broker-dealer who violates the USA may be subject to which of the following consequences? I. The agent may face an injunction II. The agent may face civil liabilities III. The agent may face criminal penalties IV. The agent may face revocation of registration A. I and III only B. II and IV only C. I, II, and IV only D. I, II, III, and IV

*I, II, III, and IV* [3.2]