Unit 1

IA-1092, an investment adviser

1. Makes advice his/her regular activity 2. Is compensated directly or indirectly for advice

Investment Council

1. Principal business of the adviser must be investment advice 2. Nature of advice must give continuous advice to clients based on their individual needs

Incidental basis

10 client contacts per year

How long does a broker dealer and IA have to keep records for after termination of business?

3 years

How long does a broker dealer have to keep records for?

3 years

Under the USA, all of the following are exempt from the definition of an IA except: 1. Banks 2. A federal-covered adviser 3. Broker dealers and their agents 4. An individual providing advice on municipal bonds

4. An individual providing advice on municipal bonds Providing advice on municipal bonds (even though they are exempt securities) does not entitle one to an investment adviser exclusion.

How long does a IA have to keep records for?

5 years

An individual has been employed by a broker-dealer to make cold calls to solicit prospects for the firm's new wrap fee program. Under the USA, it is true to state that this individual A) would be defined as an investment adviser representative B) is not defined as an investment adviser representative because he is only making cold calls C) would be permitted to use the term investment counsel D) does not need supervision because he is only making cold calls

A. As we know, when a broker-dealer offers wrap fee programs, the exclusion from the definition of investment adviser is lost. Any individual soliciting for that program would be considered an investment adviser representative and would need adequate supervision. Cold calling is about as far as you can get from the role of an investment counsel.

Under the Uniform Securities Act, when must a consent to service of process be filed with the Administrator? A) With the original application only B) With the original application and renewal C) It need not be filed, unless requested by the Administrator D) When a case is pending

A. Initial applications for registration must be accompanied by a consent to service of process. This document becomes a permanent part of the application and appoints the Administrator to accept subpoenas on behalf of the applicant.

The responsibility for administering the Investment Advisers Act of 1940 lies with: A) the SEC B) the Administrator C) FINRA D) the Investment Advisers Association (IAA)

A. The SEC. The Investment Advisers Act of 1940 is federal law, and that comes under the jurisdiction of the SEC.

Under the Uniform Securities Act, a person whose business model is selling reports on a subscription basis concerning specific securities to investors based on their individual objectives will be defined as A) an investment adviser B) a broker-dealer C) an agent D) a journalist

A. The definition of investment adviser includes any person who for compensation engages in the business of advising others as to the value of securities or the advisability of buying, selling, or investing in securities or who, as a part of a regular business, publishes securities analyses or securities reports for individual investors on a paid subscription basis.

A federal covered investment adviser registered with the SEC that has offices in 5 states must do which of the following? 1. Pay state filing fees if required by the Administrator 2. Notify the Administrator within 1 business day if net worth falls below the required minimum 3. Notice file in any of those states where required by the Administrator 4. Become licensed as a broker-dealer A) I and II B) II and III C) I and III D) II and IV

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 state. Federal covered advisers do not come under the financial or recordkeeping requirements of the state, only the SEC.

A consent to service of process required by an Administrator is

An agreement whereby a registrant will be bound by any legal action or subpoena served on the Administrator as if it had been served on the registrant. A consent to service is a formal legal agreement whereby a registrant will be bound by a legal action or subpoena served on the Administrator as if it had been served on the registrant. A consent to service is not an authorization to issue an injunction.

As used in the regulations, the term impersonal investment advice means

B) investment advisory services provided by means of written material or oral statements that do not purport to meet the objectives or needs of specific individuals or accounts

Under the Uniform Securities Act, if sent to 2 or more persons, a file must be maintained containing a copy of which of the following? Bulletins Newspaper articles Notices Websites A) I and II B) I, II, III, and IV C) I and IV D) II, III, and IV

B. All of these types of communications, unless sent to persons connected with the investment adviser, require maintenance of a file containing a sample copy.

A pension consultant who advises corporate retirement plans with assets of $135 million must register with which of the following? A) SEC B) The state C) Both the state and the SEC D) Either the state or the SEC

B. The State Under the Dodd-Frank Bill, until a pension fund manager has at least $200 million in AUM, registration with the states is required. Once the $200 million level is reached, SEC registration becomes an option.

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. A) I and II B) I and IV C) I, II, III, and IV D) II, III, and IV

C. 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.

Under the National Securities Markets Improvement Act of 1996 (NSMIA), states are prevented from 1. registering securities 2. establishing capital and custody requirements that exceed those provided for in the Securities Exchange Act of 1934 3. establishing recordkeeping requirements for broker-dealers or investment advisers that exceed those required under federal securities law 4. registering investment advisers

D. 2&3. The NSMIA streamlined much of federal and state securities law and specifically prevented dual regulation. As a result, states may not impose capital, custody, and recordkeeping requirements that exceed requirements under federal securities law. States can register securities and investment advisers that are not covered by the registration requirements of federal legislation.

Under the Uniform Securities Act, if not denied, an application for registration as investment adviser will generally become effective how soon after filing? A) 15 days B) Immediately C) 10 days D) 30 days

D. 30 days. If not denied and no disciplinary proceedings are instituted, an application for registration becomes effective at noon on the 30th day after being filed.

Investment Advisers Act of 1940

If the adviser ceases to act as an adviser or goes out of business, the SEC will cancel the registration

ABC Advisers, a federal covered IA is moving headquarters to a new office in suburbs, ABC is required to notify A. 60 days B. 30 days C. 90 days D. Promptly

Promptly. Any material change that affects an IA ADV must be filed promptly with the SEC (or Administrator if state-registered) and a change of business would certainly be material.

Section 201 of the Uniform Securities Act

Specifically excluded are those IAs with no place of business in the state who confine their advisory activities in the state to other investment advisers, federal covered advisers, broker-dealers, banks, trust companies, savings and loan associations, insurance companies, employee benefit plans with assets of not less than one million dollars ($1,000,000), and governmental agencies or instrumentalities. If, however, in addition to the two banks, the firm did advisory business with more than 5 retail clients who were residents of Colorado, then even with no place of business in the state, it would have to register.

Dodd-Frank Wall Street Reform and Consumer Protection Act Which of the following needs to register as an IA: 1. An adviser managing excess of $100M 2. An adviser managing less than $100M 3. An adviser to investment companies registered under the Investment Company Act of 1940 4. An adviser who acts a pension consultant to employee benefit plans with assets greater than $200M

Which of the following needs to register as an IA: 2. An adviser managing less than $100M

An investment adviser hires 2 individuals to solicit new customers for the firm's wealth management service. Under the USA,

registration as investment adviser representatives is required

An individual who has passed the NASAA examination for registration as an investment adviser representative may begin soliciting advisory clients

when informed by the investment adviser that the representative's registration is effective