Session 3 Quizzes

The BJS Advisory Service maintains no custody of customer funds or securities, requires no substantial prepayments of fees, and does not have investment discretion over clients' accounts. Which of the following would have to be promptly disclosed to clients? I. the SEC has entered an order barring the executive vice president of the firm from association with any firm in the investment business II. BJS has just been fined $3,500 by the NYSE III. A civil suit has just been filed against BJS by one of its clients alleging that BJS made unsuitable recommendations. A. I and II B. I and III C. II and III D. none of the above

A.

Under the Uniform Securities Act, registration with the state could be required of which of the following? A. a financial planner or other person who provides investment advisory services to others for compensation B. a publisher of a bona fide newspaper, news magazine, or business or financial publication or general and regular circulation C. a federal covered investment adviser D. any person who the Administrator excludes by rule or order

A.

What type of qualified custodians do NASAA rules permit to hold investment advisory clients' funds or securities? I. FDIC insured banks and saving associations II. Federal covered investment advisers III. Registered broker-dealers IV. Transfer agents for NYSE listed corporations A. I and III B. I and IV C. II and III D. II and IV

A.

Which of the following advisers would be deemed to have custody of customer funds or securities as defined in the Investment Advisers Act of 1940? A. the adviser receives the proceeds of sales in the customer's account B. the adviser receives a fee of $1,500 as a prepayment for the next contract year C. the adviser has investment discretion over the account D. all of the above

A.

One respect in which NASAA treats the handling of discretionary authorization by an investment adviser differently from the SEC is that A. NASAA has a requirement that all discretionary orders be approved before entry B. NASAA allows use of oral discretion for the first 10 business days after the date of the first transaction C. an investment adviser is prohibited from opening discretionary account without prior notification to the Administrator D. a federal covered adviser may not be cited for churning a discretionary account by an Administrator

B.

Seven Seas Strategic Advisers (SSSA) maintains a place of business in 11 states and is registered with the SEC. As defined in the Investment Advisers Ac of 1940, the office from which control of the activities of SSSA takes place is known as the A. Office of Supervisory Jurisdiction (OSJ) B. Principal office and place of business C. home office D. executive office

B.

Which of the following investment advisers would be permitted to use the term investment counsel? A. a financial planner offering a wide range of services to his clients, including tax planning, estate planning, and insurance planning, as well as investment advice B. a professional providing a market timing service with an annual subscription fee of $495 ( this service attempts to maximize profits by suggesting entry and exit points for over 100 listed stocks) C. a firm whose exclusive business is placing heir client's assets into model portfolios D. all of the above

C.

Which of the following state registered investment advisers would be required to furnish an audited balance sheet as part of its disclosure statement? I. the adviser's fee is automatically debited form the client's account II. the adviser receives its fee each year in advance in the amount of $900 III. the client's securities are held by a broker-dealer with whom the adviser has an affiliate relationship A. I and II B. I and III C. II and III D. I, II, and III

C.

An investment adviser registered in the state G is obligated to maintain certain books and records as specified by the Uniform Securities Act. Which of the following statements regarding adviser record keeping is NOT true? A. records originally created on computer may be stored in electronic media. B. Records are subject to surprise audits by the State G Administrator C. written records may be reduced to microfilm D. records must be kept for six years

D.

Which of the following are unlawful or prohibited practices for an investment adviser under the Investment Advisers Act of 1940? I. Making an untrue statement of a material fact in a registration application with the SEC II. Stating that the firm's ability and qualifications have been approved by the US governement III. stating that the firm is registered under the Investment Advisers Act of 1940 IV. Representing that the firm is an investment counselor when it does not normally render investment advice A. I, II and IV B. I and III C. II and IV D. I, II, III, and IV

A.

Which of the following fee arrangements is legal under the Investment Advisers Act of 1940? A. Adviser A charges an annual fee of 0.05% of the value of the client's account, due on the first day of the client's fiscal year B. Adviser B charges an annual fee of 0.075%, guaranteed to be waived if the value of the account does not increase durng the year C. Adviser C charges an annual fee of 0.05% to be waived if the account does not grow by at least 5% during the year D. Adviser D guarantees the annual fee will be waived if the account decreases in value while under his management

A.

Which of the following investment advisers are exempt from registration under the Investment Advisers Act of 1940? I. An adviser whose only clients are insurance companies II. An adviser who maintains offices in only one state, advises only residents of that state (non of whom is a private fund), and gives advice relating to only tax-exempt municipal bonds III. An adviser whose only clients are banks A. I and II B. I and III C. II and III D. I, II and III

A.

The Investment Advisers Act of 1940 excludes certain persons from the definition of an investment adviser if their performance of advisory services is solely incidental to their professions. This exclusion would apply to all of the following EXCEPT A. an accountant B. an economist C. an electrical engineer D. a college professor teaching a course on economics

B.

Which two of the following statements regarding investment advisory contracts demonstrate compliance with the Uniform Securities Act? I. ABC Investment Advisers, organized as a partnership with 5 equal partners, admits 2 additional partners on a proportionate basis, but fails to obtain consent of its clients II. DEF Investment Advisers, organized as a partnership with 7 equal partners, has 4 of those partners simultaneously leave, but the firm continues to operate as before while failing to obtain consent of its clients. III. GHI Investment Advisers, organized as a corporation with 5 equal shareholders, has 3 of them pledge their GHI stock as collateral for a bank loan, but the firm fails to obtain consent of its clients IV. JKL Investment Advisers, organized as a corporation with 5 equal shareholders, has 3 of them sell their shares to the remaining 2 owners, but the firm fails to obtain consent of its clients A. I and II B. I and IV C. II and III D. II and IV.

B.

Which of the following statements is (are) TRUE regarding advertising by an investment adviser? I. free offers must be free of cost or any other obligation II. all advertisements where the copy will be seen by 10 or more people must be filed with the SEC III. past specific recommendations may be shown, but only if they include all recommendations for at least the previous 12 months and make very clear that past performance is not any assurance of the future A. I only B. I and II C. I and III D. II and III

C.

Which of the following statements regarding the use of a hedge clause by an investment adviser is CORRECT? A. the adviser's brochure must always contain at least one hedge clause. B. a properly worded hedge clause may be used to minimize the investment adviser's fiduciary responsibility C. a hedge clause that limits the investment adviser's liability for losses causes by conditions and events beyond its control, such as war, strikes, and natural disasters, would generally be acceptable to the administrator D. a hedge clause that limits liability to acts done in bad faith or pursuant to willful misconduct but also explicitly provides that rights under state or federal law cannot be relinquished would generally be acceptable to the Administrator

C.

Which of the following would NOT be included in the safe harbor provisions of Section 28(e) of the Securities Exchange Act of 1934? A. Proprietary research B. Third Party research C. Rent D. Seminar registration fees

C.

Which of the following would meet the definition of investment adviser under the Uniform Securities Act? I. A broker-dealer making a separate charge for investment advice II. The publisher of a weekly magazine, sold on newsstands, that contains at least 5 stock recommendations per issue III. A civil damages attorney who advertises that she 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 only B. I, II, and III C. I, III, and IV D. I, II, III, and IV

C.

XYZ advisers has its principal office in State A. XYZ maintains custody of customer securities and they wish to open an office in State B. They have been informed that the Administrator of State B requires all investment advisers that take custody to maintain a minimum net worth of $65,000. Which of the following statements is CORRECT? A. XYZ will have to meet state B's Net worth requirements if it wishes to register there. B. XYZ can register in State B only if they cease taking custody. C. As long as XYZ meets the net worth requirements of State A, it can register in any other state. D. In lieu of meeting State B's requirements, a surety bond may be posted

C.

Foster Advisers operates as an investment adviser that is registered in a state where the Administrator, by rule, prohibits investment advisers from holding custody of client funds and securities. This means that Foster Advisers may NOT A. refer clients to an affiliated broker-dealer B. manage client accounts on a discretionary basis C. examine customers' stock certificates D. have physical custody over it clients' monies and ceritificates

D.

If an investment adviser registered under the Investment Advisers Act of 1940 maintains custody of customer funds or securities, which of the following is TRUE? A. a surety bond will be required B. the independent public accountant engaged to verify client funds and securities must give appropriate notice to the adviser before doing the verification. C. the adviser must, on an annual basis, provide his clients for whom he maintains custody a list of all securities held in custody by the firm D. if the firm changes the location of safekeeping , all affected clients must be notified promptly

D.

When an investment adviser with discretion over a client's account directs trade executions to a specific broker-dealer and uses the commission dollars generated to acquire software that analyzes technical market trends, it is known as A. hard-dollar compensation B. indirect compensation C. investment discretion D. soft-dollar compensation

D.

With regard to a federal covered investment adviser, which of the following statements regarding the Form ADV Part 2A is correct? A. it must be delivered no later than 48 hours before entering into an advisory contract B. it must be delivered no later than upon receipt of a client's funds C. it must accompany the ADV Part 1 A when being delivered to new clients D. an investment adviser must deliver to each client, a copy of the most recent ADV Part 2A no later than at the time of entering into the advisory agreement

D.

With regard to the brochure rule of the Investment Adviser Act of 1940, which of the following are exempt from the delivery requirement of that rule? A. an adviser whose only clients are registered investment companies B. an adviser whose only clients are insurance companies C. an adviser who only provides impersonal advisory services at an annual charge of less than $500 D. All of the above

D.

Prompt notification to the Administrator must be made when A. a federal covered adviser with a place of business in the state relocates that office to a different city in the state B. there is a change to the marital status of an agent C. a non-exempt issuer's dividend is reduced D. there is a materiel change to any info contained in a broker-dealer's app for registration that is on file with the state

D.

Protection of customer confidential information is an obligation of the I. agent servicing the customer's account II. broker-dealer maintaining the account III. customer IV. investment adviser in an advisory account A. I and II B. II and IV C. III and IV D. I, II, III, and IV

D.

A broker-dealer's cybersecurity procedures should address all of the following EXCEPT A. the music played while customers are placed on hold B. office desktop computers C. agent's personal smartphones used on occasion to communicated with clients D. remote access to servers or workstations via a virtual private network (VPN)

A.

ABC Advisers is a federal covered IA. John Oldman has been responsible for keeping the firm's form ADV updated for the last 40 years. John has suddenly announced his immediate retirement. This would require A. prompt filing of an amended ADV with the SEC indicating the change in contact person B. prompt filing of an ADV-W with the SEC indicating the change of contact person C. filing of amended ADV within 90 days of the end of the adviser's fiscal year giving notice of the change of contact person D. filing of the ADV-W within 90 days of the end of the adviser's fiscal year giving notice of the contact person

A.

An investment adviser registered with the state wishes to take custody of client's funds or securities. Which of the following statements best describes NASAA rules regarding notification to the Administrator? A. the adviser must supply prompt notification to the Administrator by immediately updating its Form ADV B. the adviser must notify the Administrator within 90 days of the end of its fiscal year by updating its Form ADV C. if the adviser will be using a qualified custodian, no notification is necessary D. prompt notification to the Administrator is made by the independent accounting firm performing the adviser's annual surprise audit

A.

Under the Investment Advisers Act of 1940, an investment adviser would be prohibited from engaging in which of the following practices, even if disclosed in writing to the customer? A. putting the adviser's own interests before those of the customer B. providing advice to the customer and receiving compensation for the resulting sale of products C. employment with a broker-dealer and also serving as an investment adviser D. using advice she provides to customers regarding securities transactions as a basis for her own investment account trades

A.

A. An adviser that must register under the Uniform Securities Act OR B. does not Broker-dealer that charges a fee for providing investment advice over and above commissions from securities transactions

A. An adviser that must register under the Uniform Securities Act

A. An adviser that must register under the Uniform Securities Act OR B. does not Investment adviser that manages $10 million in assets

A. An adviser that must register under the Uniform Securities Act

All of the following statements regarding the USA's minimum financial requirements of an investment adviser are correct EXCEPT A. advisers maintaining custody of customer funds and/or securities must have a net worth of $35,000 B. advisers maintaining discretion over client accounts must have net worth of $35,000 C. advisers accepting substantial prepayments of fees must have a positive net worth D. advisers whose only custody of client funds is the ability to have direct deduction of fees are exempt from the net worth and bonding requirements

B.

An investment adviser has engaged a website designer. What may the designer include on the website? A. Client testimonials B. a general description of the types of investment advisory programs offered by the firm C. recommendations on specific stocks D. recommendations on specific managed investments such as mutual funds

B.

An investment adviser runs an advertisement in the business section of the local newspaper. The ad describes the nature of the firm's model portfolio and indicates that it has outperformed the overall market by 800% over the past 10 years, and therefore, they guarantee that their clients will more than keep pace with inflation. At the bottom of the ad, in smaller print is the following statement: results are not guaranteed. Past performance is not indicative of future results. These results are not normal and cannot be expected to be repeated. This is an example of a(n) A. properly worded disclaimer B. improper hedge clause C. violation of an investment adviser's fiduciary responsibilitiy D. wrap fee account

B.

An investment adviser takes custody of client's funds and securities. Client account statements must be sent no less frequently than A. monthly B. quarterly C. semiannually D. annually

B.

Omerta Transparent Advisers, Inc. (OTA), registered with the SEC as an investment adviser, wishes to pay an individual to act as a third party solicitor to solicit or refer new advisory clients. Under the provisions of the Investment Advisers Act of 1940, which of the following statements is TRUE regarding this relationship? A. the individual would be required to register as an IAR of OTA, Inc B. the individual would not be required to register as an IAR of OTA, Inc. C. the individual would be prohibited from registering as an IAR of OTA, Inc. D. The individual would only be required to register as an IAR of OTA, Inc. if compensated for the solicitation activities

B.

Registration as an investment adviser is required for any firm in the business of giving advice on the purchase of A. apartments undergoing a conversion to condiminums B. convertible bonds C. gold coins D. rare convertible automobiles

B.

Under which of the following circumstances would the SEC be permitted to cancel or revoke an investment adviser's registration? I. A registered investment adviser with no place of business in the state has fewer than 6 clients. II. the annual updating amendment has not been filed for the current fiscal year, and mail addressed to the investment adviser is returned with a notation "no forwarding address available" III. an investment adviser doing business in 10 states has been enjoined by a competent court of jurisdiction in one of those states from engaging in the securities business IV. a registered investment adviser is insolvent. A. I and II B. II and III C. II, III, and IV D. I, II, II and IV

B.

Which of the following is required to register as an investment adviser with the state securities Administrator? A. The author of a book on money and banking that was sold to residents of the state in which it it published. B. An investment advisory firm with $85 million in assets under management that opens an office in the state C. A person with no office in the state whose only advisory clients are investment companies and banks in the state. D. A newly formed investment advisory firm with $145 million in assets under management that has two offices in the state and serves exclusively individual clients

B.

Which of the following statements regarding cash referral fees to solicitors are CORRECT under the Investment Advisers Act of 1940? I. If the solicitation involves anything other than impersonal advisory services, disclosure must be made to the client regarding an affiliation between the adviser and the solicitor II. the agreement must be in writing III. the solicitor must not be subject to a statutory diqualification IV. the adviser's principal business activity must be the rendering of investment advice A. I and II B. I, II and III C. III and IV D. I, II , III, and IV

B.

Which of the following would be excluded from the definition of investment adviser under the Investment Advisers Act of 1940? I. A bank offering advice through its trust department II. A geologist giving advice on the potential prospects of an oil and gas limited partnership program III. A person whose only clients are individuals and whose only advice deals with securities which are direct obligation of the US gov't A. I and II B. I and III C. II and III D. I, II, and III

B.

Which of the following would justify an investment adviser's use of a full-service broker? I. Obtaining special reports dealing with economic projections from the broker II. Expense paid business trips paid for by the broker III. the use of the research analysis provided by the broker A. I and II B. I and III C. II and III D. I , II and III

B.

A. An adviser that must register under the Uniform Securities Act OR B. does not Publisher of a newspaper that renders general financial advice

B. does not

The Uniform Securities Act contains a number of definitions. A person who is in the business of rendering investment advice for compensation is known as A. a broker dealer B. a fiduciary C. an investment adviser D. an issuer

C.

A registered investment adviser has discretionary authority over client accounts. Its accounting department has just discovered that the firm's net worth is $8,500. Under the Uniform Securities Act, they I. must notify the Administrator of the net worth deficiency by the close of that day II. must notify the Administrator of the net worth deficiency by the close of the next business dya III. must file a financial report with the Administrator by the first business day following notice IV. may no longer exercise discretion until they increase their net worth A. I and III B. I and IV C. II and III D. II and IV

C.

An investment advisory contract need NOT include A. the fees and their method of computation B. a statement prohibiting assignment of client accounts without client consent C. the states in which the adviser is licensed to conduct business D. notification requirement upon change in membership if an investment partnership

C.

Ponzi Planning Associates (PPA) is an investment adviser register in the tri-state area of New York, New Jersey and Connecticut. PPA's principal office is located in Jersey City, JN. Which of the following statements is CORRECT? A. PPA must meet the bonding requirements of the SEC B. PPA must meet the bonding requirements of whichever of the three states is the most stringent C. the Connecticut Administrator can require PPA to submit advertisements placed in his state D. if the New York Admisnitrator wishes to examine the records of PPA, advance written notice must be given

C.

The Investment Adviser Act of 1940 would permit investment advisory contracts to provide for I. assignment without the client's consent II. changes to be made in a partnership with notification to clients within a reasonable period of time III. compensation based on average assets under management over a particular time period A. I and II B. I and III C. II and III D. I, II, and III

C.

Under the NASAA Model Custody Rules, an investment adviser is deemed to have custody of customer funds or securities when A. securities inadvertently received are returned to the customer within 3 business days of receipt B. checks made payable to the investment adviser are returned to the customer within 3 business days of receipt C. checks made payable to an unrelated third party are returned to the customer within 3 business days of receipt D. checks made payable to an unrelated third party are forwarded to that third party within 3 business days of receipt

C.

Under the Uniform Securities Act, which of the following is NOT an investment adviser representative? A. a director of a state registered investment advisory firm who determines specific recommendations for clients B. an associate in an SEC- registered investment advisory firm who has a place of business in the state and manages the account of only one individual client C. a clerk employed by a state registered investment advisory firm D. a vice president of a state registered investment advisory firm who supervises employees who solicit clients for the firm

C.

A federal covered investment adviser inadvertently receives securities from a client. The custody rules of the Investment Advisers Act of 1940 would require the adviser to A. forward those securities to the qualified custodian within 3 business days after receipt B. keep those securities in its vault C. notify the SEC promptly D. return those securities to the sender within 3 business days after receipt

D.

Smith & Jones is a registered investment adviser under the Investment Advisers Act of 1940. It has 1,000 active clients. The firm maintains custody for 200 of their clients and exercises investment discretion for 400 of them. When preparing its brochure for annual distribution, it would need to include an audited balance sheet prepared by an independent accountant for A. the 200 clients for whom it maintains custody B. the 200 clients for whom it maintains custody, as well as the 400 for whom it exercises investment discretion C. all of its clients because it is an integral part of its brochure once it maintains custody for even 1 client d. none of its clients because the balance sheet requirement is only required when the firm collects fees in excess of $1,200, 6 or more months in advance

D.

The Investment Advisers Act of 1940 would permit an ADV to be filed by a(n) I. Corporation II. partnership III. sole propreietorship IV. unincorporated association A. I and II B. I, II and III C. II and III D. I, II, III, and IV

D.

Under Regulation S-P, if an investment adviser sends a customer an initial privacy notice that contains an opt-out provision, the firm may NOT disclose nonpublic, personal info about that customer for how many days from the mailing? A. 10 B. 15 C. 20 D. 30

D.

Under the Investment Advisers Act of 1940, all of the following are true regarding adviser record keeping EXCEPT A. the IA must keep records of transactions made for its own account as well as the account of investment adviser representatives lessen the likelihood of scalping B. computer--generated records may be stored in that format C. client account records must be maintained, including a list of recommendations made D. records must be maintained for a period of 2 years from the end of the fiscal year in which the last entry was made

D.

Under the Investment Advisers Act of 1940, an investment adviser is required to I. submit justification for continue registration to the SEC if their client base drops below 15 individuals for any consecutive 12 month period II. disclose, in their brochure, the number of clients they serve III. disclose, in their brochure supplements, the educational background, business experience and disciplinary history (if any) of the supervised persons who provide advisory services to the clients A. I and II B. I and III C. II and III D. III only

D.

Under the investment Advisers Act of 1940, A registered investment adviser who provides investment advisory services to individuals must A. have a minimum net worth of $100,000 B. limit the giving of advice to securities listed on major exchanges C. avoid maintaining control or custody of client funds and securities D. provide each new client with a disclosure statement or brochure no later than when entering in the advisory agreement

D.

True or False? An Administrator may not prevent custody of securities or funds if an adviser notifies the Administrator before taking custody

False

True or False? An administrative employee who receives specific compensation for offering investment advisory services is not an investment adviser representative

False

True or False? An adviser may not sell securities to its customers form its own proprietary account

False

True or False? An employee of an investment advisory firm is an investment adviser representative if his duties are confined to clerical activities

False

True or False? An investment adviser representative must register with the SEC if she has clients with assets of $110 million or more under management

False

True or False? A state-registered investment adviser maintaining custody of a customer's securities or funds and exercising discretion in the account is generally required to maintain a minimum net worth of $35,000

True

True or False? An employee of an investment advisory firm is an investment adviser representative if his duties involve making investment recommendations

True

True or False? Under USA antifraud provisions, an investment adviser is bound by the restrictions that apply to sales practices when engaged in sales activities

True