Series 65 Unit 6
Broker-dealers are required to furnish clients with a fee disclosure document. All of the following are true statements about that document except A) it must be filed with the Administrator of the state in which the broker-dealer's principal office is located. B) changes to the fee schedule may be shown on the firm's website. C) it must be up-to-date. D) changes to the fee schedule must be announced in advance.
A.
Strategic Capital Asset Managers (SCAM) is preparing its Form ADV Part 2B relating to certain individuals. On this form, SCAM must disclose all of the following information EXCEPT A) compensation earned on dealings with clients B) the fact that any listed person has no formal education after high school C) disciplinary information about material events within the past 10 years D) the name, title, and telephone number of the individual supervising any listed person
A. It is compensation beyond that paid by the client (such as a sales award or other prize) that must be disclosed.
Under the antifraud provisions of the Investment Advisers Act of 1940, an investment adviser must disclose to clients A) the number of clients with whom the adviser does business B) the association between the investment adviser and the broker-dealer with whom the overall investment plan will be implemented C) that the adviser has never been subject to disciplinary action or censure by the SEC D) that any transactions made on the adviser's own account are consistent with the advice given to clients
B.
Disclosure to customers of an investment adviser's control relationships is required in agency transactions principal transactions exempt transactions A) I and II B) I and III C) I, II, and III D) II only
C.
The Investment Advisers Act of 1940 requires delivery of a brochure containing information about the adviser's background and business practices in all of the following situations EXCEPT when the service provided is an individual supervisory service when the client is an investment company when the contract is for an impersonal advisory service requiring payment of less than $500 when the client is an individual with a net worth of more than $1 million A) I and II B) II, III, and IV C) I, III, and IV D) II and III
D. A disclosure brochure is not required to be delivered if the client is a registered investment company, or if the advisory service is of an impersonal nature and costs less than $500. A brochure is required when the service provided is an individual supervisory service and the client's net worth has no bearing on brochure delivery requirements.
An investment adviser representative for ABC Money Managers, a wholly owned IA subsidiary of ABC Securities, Inc., sold 1,000 shares of registered securities traded on the NYSE to one of her advisory clients. ABC Securities charged commissions for both the buyer and the seller of these securities. This is known as A) a prohibited practice B) an agency cross transaction C) an arbitrage transaction D) a fraudulent practice
B
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, requirements of advisory contracts include which of the following? They must be renewed on an annual basis. They must describe the amount of any prepaid fee that will be returned to the client in the event the contract is terminated. They must prohibit assignment of the contract without the client's consent. A) I, II and III B) II and III C) I and III D) I and II
B. There is no requirement that advisory contracts be renewed on an annual basis. Contracts can be written for any length agreed upon. Advisory contracts must describe the amount of any prepaid fee that will be returned to the client if the contract is terminated and must prohibit assignment without the client's consent.
Tim, Jim, and Kim are equal partners in TJK Investment Advisers, a general partnership. Tim decides to sever his relationship with the other partners and work for a different firm. When, if at all, must the clients of TJK be notified of Tim's departure? A) It is not necessary to notify TJK's clients of Tim's departure, because the advisory will continue to serve its clients as before. B) TJK must notify its clients of Tim's departure within 15 days of Tim's severance from the firm. C) TJK must notify its clients of Tim's departure within a reasonable period after his severance from the firm. D) TJK must notify its clients of Tim's departure within 30 days of Tim's severance from the firm.
C.
A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclose all of the following fees EXCEPT A) account inactivity fee B) issuance of a stock certificate C) advisory fees D) charges for late payments
C. There are 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are: commissions; markups and markdowns; and advisory fees for those firms that are also registered as investment advisers.
Strategic Capital Asset Managers (SCAM) is an investment adviser that is registered in 5 states. In lieu of preparing a fancy brochure, SCAM is permitted to provide its clients with a copy of its A) Annual renewal form provided to the SEC B) Form ADV Part 2, Appendix 1 C) Form ADV Part 1 and Part 1B D) Form ADV Part 2A and Part 2B
D. The Form ADV Part 2 (both parts) is acceptable for use as the firm's brochure. Part 1 is for registration purposes, and Part 1B is only used by state-registered advisers (as this firm is). Part 2, Appendix 1 is used for investment advisers who offer wrap fee programs. As a state-registered investment adviser, SCAM does not file any forms with the SEC.
