Unit 1 missed questions
Under the Investment Advisers Act of 1940, which of the following statements regarding an adviser's registration is TRUE? A) If the adviser ceases to act as an adviser or goes out of business, the SEC will cancel the registration. B) Registrations become effective in 30 days unless delayed by the SEC. C) Withdrawal from registration is done on Form ADV-W and takes effect 45 days after filing. D) Registrations expire on December 31 of each year.
A)If the adviser ceases to act as an adviser or goes out of business, the SEC will cancel the registration.
A federal covered investment adviser has which of the following obligations regarding the state in which it maintains its principal place of business? I. It must notify the Administrator of its SEC registration. II. It must pay state-required filing fees. III. Its adviser representatives are exempt from state-required exams. IV. It must maintain net worth equal to the higher of federal requirements or those of the state. A) I and II B) I, II, III, and IV C) II only D) I only
A) I and II A federal covered investment adviser is required to notify the Administrator of its federal covered status and pay any state-required fees. The state may require examinations, such as the Series 65 or 66, but not a net worth in excess of that required under federal law.
Under the Uniform Securities Act, which of the following investment advisers with no place of business in the state must register with the state as an investment adviser? A) An adviser managing more than $110 million in assets B) An adviser rendering advice to no more than 10 individual clients within a 12-month period C) An adviser rendering advice to employee benefit plans with at least $1 million in assets D) An adviser rendering advice solely to broker-dealers
B) An adviser rendering advice to no more than 10 individual clients within a 12-month period An investment adviser with no office in the state would be exempt from registration in the state if the adviser renders advice to no more than 5 noninstitutional clients (not 10) in a 12-month period.
Advisers that manage $110 million or more in customer assets are required to do which of the following? I. Register with the Securities Exchange Commission II. File notice with FINRA III. Post a bond in an amount specified by the appropriate regulatory body IV. File notice with the state in which their principal office is located if notice filing is required by the Administrator A) II and IV B) I and IV C) II and III D) I and III
B) I and IV There are no bonding requirements for federal covered advisers.
Create A Large Legacy (CALL), Inc., is a state-registered investment adviser with offices in States X, Y, and Z. CALL currently does not have a place of business in State W, but does have 5 retail clients who are residents there. Opening an account for which of the following prospective clients domiciled in State W would now require CALL to register in State W? A) A county in State W desiring advice on investment over $250,000 of surplus funds B) A small community bank depositing $500,000 C) A trust having 4 minor children as beneficiaries with total trust assets of $5 million D) An insurance company account with an opening balance of $750,000
C) A trust having 4 minor children as beneficiaries with total trust assets of $5 million Regardless of the assets involved, a trust account, unless one for an employee benefit plan with at least $1 million in assets, is considered a retail rather than institutional client.
Under the Uniform Securities Act, requirements for registration as an investment adviser in a state include which of the following? I. The Administrator may require an announcement of the application for registration in one or more newspapers in the state. II. Minimum financial requirements for federal covered advisers with a place of business in the state who have custody of customer funds and/or securities, or have discretionary authority over customer accounts. III. For those needing a surety bond, it must provide that any customer who can prove a violation is entitled to collect against the bond. A) II and III B) I, II, and III C) I and III D) I and II
C) I and III A published announcement may be required by the Administrator. The Administrator may not impose any financial requirements upon federal covered advisers (other than to pay a fee when notice filing). The USA has specific wording requiring that customers who can prove they were the subject of a violation by the IA are entitled to collect against the bond.
An investment adviser who has custody of customer funds and securities discovers that her net worth has dropped below the required minimum under the rules of the state Administrator. Under NASAA rules, the adviser must I. notify the Administrator by close of business after the day of discovery II. file a report of its financial condition no later than close of business the day after notification III. include in the report of financial condition a statement as to the number of client accounts IV: cease doing business A) I and IV B) I only C) I, II, and III D) I, II, III, and IV
C) I, II, and III As a condition of the right to continue business, the adviser must notify the Administrator by close of business after the day of discovery. No later than close of business the day after notification, the adviser must file a report of its financial condition, which must include statements regarding the number of client accounts.
Form PF must be filed by A) state-registered private fund managers, regardless of the amount of assets under management B) SEC-registered advisers with no more than $150 million in private fund assets under management C) SEC-registered advisers with at least $150 million in private fund assets under management D) SEC-exempt reporting advisers
C) SEC-registered advisers with at least $150 million in private fund assets under management
Which of the following investment advisers would be permitted to use the term "investment counsel"? A) An investment adviser who has been admitted to the bar in the state in which the firm's principal office is located B) A financial planner offering a wide range of services to his clients, including tax planning, estate planning, insurance planning, and investment advice C) A professional providing a market timing service with an annual subscription fee of $995, with this service attempting to maximize profits by suggesting entry and exit points for over 100 listed stocks D) A firm whose exclusive business is placing clients' assets into model portfolios
D) A firm whose exclusive business is placing clients' assets into model portfolios In order for the term "investment counsel" to be used, two criteria must be met. First, the principal business of the adviser must be the rendering of investment advice. Second, the nature of the advice must meet the definition of investment supervisory service. That means giving continuous investment advice to clients based on their individual needs.
Which of the following statements best describes an investment supervisory service as described by the Investment Advisers Act of 1940? A) An investment advisory firm offers nondiscretionary services on a non-client-specific basis. B) An investment adviser sends monthly newsletters to 200 clients offering nonspecific advice. C) No actions are taken in client accounts without first being approved by a senior supervisory person. D) An investment adviser provides continuous advice based on the client's individual needs.
D) An investment adviser provides continuous advice based on the client's individual needs. An investment supervisory service is an individualized service delivered to a specific client on a continual basis. General nonspecific advice given across the board is deemed impersonal advisory services. Only when an investment adviser provides investment supervisory service, and the adviser's principal business activity is the giving of advice, may the term "investment counsel" be used.
Long-Term Financial Solutions, Inc. (LTFSI), a federal covered registered investment adviser, files a Form ADV-W indicating the business is closing. It is being acquired by another federal covered adviser, Gold and Sylver Advisers, LLC. Which of the following statements is correct? A) Gold and Sylver will not have to amend their Form ADV Part 1 until the filing of their annual updating amendment. B) As the successor firm, Gold and Sylver Advisers must keep copies of the LTFSI corporate charter for at least 3 years after LTFSI's acquisition. C) Gold and Sylver must notify all clients of LTFSI that their advisory contracts have been assigned. D) LTFSI is responsible for ensuring that a copy of the LTFSI corporate charter is preserved for at least 3 years after the acquisition.
D) LTFSI is responsible for ensuring that a copy of the LTFSI corporate charter is preserved for at least 3 years after the acquisition. When an investment adviser ceases to exist, either through going out of business or being succeeded by another firm (as is the case here), it is their responsibility to ensure that articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor be preserved until at least 3 years after termination of the enterprise.
Searching Out New Growth (SONG) is a venture capital fund. As such, all of the following statements are true EXCEPT A) SONG is not registered under the Investment Company Act of 1940 B) SONG's investment adviser is exempt from registration C) SONG only issues securities which are, except in extraordinary circumstances, non-redeemable D) SONG must have less than $150 million in assets in the fund
D) SONG must have less than $150 million in assets in the fund Although venture capital funds are included in the general definition of private funds, unlike the private equity fund, there is no ceiling on the size of the fund before the adviser loses the exemption. Advisers to VC funds are exempt from registration. The funds themselves do not register with the SEC under the Investment Company Act of 1940 (and don't register with the states as well). These investments do not offer ready liquidity.
A firm is registered as an investment adviser under the Investment Advisers Act of 1940. It has decided to raise its annual management fee from $1,500 to $1,800 and require that it be paid 1 year in advance instead of quarterly. The firm would A) continue doing business as before because the firm was already charging more than $1,200 per year B) be in violation of the law that prohibits pre-payments more than 6 months in advance C) need SEC permission to make this change D) now come under the requirement to include a balance sheet as part of its brochure
D) now come under the requirement to include a balance sheet as part of its brochure For federal covered investment advisers, a prepayment in excess of $1,200 and for periods of 6 months or more in advance (substantial prepayment) requires the adviser to submit an annual audited balance sheet as part of its ADV Part 2 (and brochure).
A federal covered investment adviser is a person A) registered with North American Securities Administrators Association (NASAA) B) exempt from regulation under the Securities Exchange Act of 1934 C) registered under the Uniform Securities Act D) registered, or excluded from the definition, under the Investment Advisers Act of 1940
D) registered, or excluded from the definition, under the Investment Advisers Act of 1940 A federal covered investment adviser refers to a natural person or firm registered under the Investment Advisers Act of 1940 or excluded from the definition of investment adviser under that act. A person registered under the Investment Advisers Act of 1940 is exempt from state registration or licensing requirements of state securities Administrators under the Uniform Securities Act.
The primary responsibility for supervising the activities of an investment adviser representative who is affiliated with a federal covered investment adviser lies with A) the investment adviser representative B) the SEC C) the Administrator D) the investment adviser the IAR represents
D) the investment adviser the IAR represents
