Series 66 - Unit 1 (Session 1, 2 & 3) next 300

Which of the following is a method of compensation available to investment advisers under contract to registered investment companies that is not normally available to those who advise individual investors? A) Performance fees. B) Commissions. C) Percentage of assets under management. D) Hourly rate.

A) Performance fees Advisers under contract to registered investment companies may be compensated on a performance-fee basis. This form of compensation is only permissible when managing the accounts of certain qualified individual investors.

XYZ Securities Co. is ​simultaneously ​registering as a broker-dealer with the SEC​ and several states.​ Which of the following statements regarding its registration under the Uniform Securities Act is CORRECT? A) XYZ's registration in the various states will be accomplished through coordination. B) State registrations expire annually on December 31.

B). State registrations expire annually on December 31. State registration for all categories of securities professionals expires on December 31 of each year.​ It is securities that register using coordination, not securities professionals.

Recent rule changes to the Investment Advisers Act of 1940 require all of the following EXCEPT: A) written compliance policies and procedures. B) appointment of a chief compliance officer (CCO). C) independent review of an advisory firm's compliance procedures. D) annual compliance review.

C) independent review of an advisory firm's compliance procedures

To register a sole proprietorship as an investment adviser in a state, the application for initial registration (Form ADV) must be filed with the appropriate party. This application must include: I. a consent to service of process. II. the appropriate fees. III. any information to be furnished or disseminated to any client or prospective client. IV. a copy of the articles of incorporation for the business.

I, II, III To register as an investment adviser in a state, Form ADV is filed with the Administrator or with a central registration depository designated by the Administrator. The application must include, among other things, a consent to service of process, appropriate fees, and the brochure or any other information that will be used to solicit clients. Sole proprietorships are not incorporated.

An investment adviser would be exempt from registration under the Uniform Securities Act if it had no place of business in this state and its only clients were: I. banks. II. insurance companies. III. registered investment companies. IV. other investment advisers.

I, II, III, and IV

The industry is concerned about the protection of both firm and customer data. It would be acceptable to store this information I. on a cloud-based server II. in paper form III. on computer disks IV. on microfiche

I, II, III, and IV. As long as the proper protections are taken, any of these are acceptable as a storage medium for customer and firm records.

The SEC determines that misleading statements have been made in a registration statement. In addition, material information has been omitted. Which of the following persons could face civil liability charges? I. The attorney who prepared the registration statement II. A member of the board of directors who did not sign the registration statement III. The issuer's CEO IV. The underwriter of the issue

I, II, III, and IV. Every person who signed the registration statement is liable under the Securities Act of 1933. In addition, any director, whether or not that individual's signature is on the registration statement; the attorney; the accountant; and the underwriter. Among the required signatures is that of the CEO.

Which of the following would be considered a nonissuer transaction as defined in the Uniform Securities Act? I. Gates Williams, the largest shareholder in Maxihard Corporation, sells 100,000 shares in a registered secondary transaction. II. Buffy Warren, the largest shareholder in Barkshire Mathaway, purchases an additional 50,000 shares on the NYSE. III. In its capacity as a market maker, XYZ Securities sells 200 shares of Gemco common stock to the corporate treasurer of Gemco, buying for the company's investment account. IV. Gemco, traded on the Nasdaq Stock Market, sells 5,000 shares of its stock to XYZ Securities, a registered market maker in Gemco stock. The stock was donated to Gemco by a former officer of the firm.

I, II, and III. A nonissuer transaction is one in which the issuer does not receive the proceeds of the sale. When a stockholder sells his shares, he is the one who receives the money, not the issuer. Purchases are never considered issuer transactions because the money is going out, not coming in. When an issuer sells shares, whether in a primary or secondary transaction (as is the case with the donated shares), if it receives the proceeds, it is an issuer transaction.

Investment advisers, as fiduciaries, have ethical obligations to act in their client's best interests and in an ethical manner. Engaging in which of the following practices would be unethical, although not fraudulent, for an investment adviser? I. Lending money to a client with full and fair disclosure. II. Recommending securities transactions based on research supplied to him by a third party without disclosing this fact to his clients. III. Supplying to his clients research reports prepared by a third-party firm without disclosing the source of the reports. IV. Charging significantly higher fees for the identical services offered by other advisers.

I, III, and IV Lending money to a client (even with full and fair disclosure), supplying clients with research reports prepared by a third-party firm without disclosing the source of the report, and charging significantly higher fees for the identical services offered by other advisers are all considered unethical practices. Recommending securities transactions based on third-party research, without disclosing this fact to clients, is not unethical or deceptive.

Is compensation earned on dealings with clients listed on on Form ADV Part 2B?

NO.

If an investment adviser registered in 3 states Announces that the first 50 new clients to sign up will receive a 25% discount on their fees for the first year, is this discrimination and prohibited?

This is not considered discrimination, because the discount applies equally to all (if they are among the first 50).

When are performance fees allowed?

When the client has at least $1 million under management or a personal net worth of at least $2.1 million.

XYZ Securities is a broker-dealer based in Wisconsin with offices in no other state. In addition to its Wisconsin clients, XYZ has 30 retail customers living in Illinois. During the winter, if 10 existing customers vacation in Florida for up to 7 weeks at a time, XYZ Securities is a broker-dealer in:

Wisconsin and Illinois Under the USA, XYZ Securities is a broker-dealer in Wisconsin because it maintains an office there. XYZ Securities is also a broker-dealer in Illinois because with 30 Illinois retail (non-institutional) customers, registration is required even if there is no physical office in Illinois. Because none of XYZ's clients has taken up residence in Florida, such clients are transients rather than residents. Thus, XYZ Securities is not a broker-dealer in Florida subject to the state's registration requirements.

When does the withdrawal provision apply?

when the brochure for a state registered IA, is not delivered at least 48 hours prior to (not after) the signing of the contract