Unit 1 Quizzes
Under the Uniform Securities Act, which of the following is an investment adviser? A) An investment adviser representative B) An individual who provides financial advice over the Internet with no recommendations based on specific investment situations of individual clients C) A broker-dealer who receives no compensation for investment recommendations D) A firm with no office in the state that has provided specific investment advice to 10 noninstitutional clients within the state during the past 12 months
D A firm with no office in the state that provides investment advice is an investment adviser in the state if its clients exceed the de minimis level of five noninstitutional (retail) clients within the state in the past 12 months. Providing investment advice to 10 retail clients makes this firm an investment adviser and requires registration in the state. A broker-dealer is not required to register as an investment adviser unless it receives special compensation for providing investment advice. Individuals who publish general advice (no specific recommendations to individual clients) in hard copy form, electronic communications, or otherwise are not required to register as investment advisers. Investment adviser representatives work for investment advisers and are specifically excluded from the definition.
Under the Investment Advisers Act of 1940, which of the following is TRUE about the use of the term "investment counsel" by investment advisers? A) The use of the term is prohibited under any circumstances. B) Advisers may use the term without restriction as long as they are registered. C) Advisers may use the term only if they are attorneys. D) Advisers may use the term only if their principal business is acting as an investment adviser and a substantial part of their business consists of providing continuous advice based on a client's individual needs.
D Advisers may use the term "investment counsel" only if two conditions are met: rendering investment advice must be their principal business and a substantial part of that business must be providing investment supervisory services—that is, continuous advice based on the individual needs of each client.
Under the provisions of the Uniform Securities Act, it is NOT necessary for an investment adviser to register when it A) has a place of business in the state but has conducted business with 3 individual investors during the preceding 12 consecutive months B) has a place of business in the state but deals exclusively with federal covered advisers C) is headquartered in a state where it conducts most of its business with broker-dealers only D) has no place of business in the state and deals with savings and loan associations only
D An adviser who has no place of business in the state and deals only with savings and loan associations is not required to register with the state securities Administrator. ***An adviser with a place of business in the state must register with the Administrator whether clients are exclusively broker-dealers or federal covered advisers and regardless of the number of clients.***
Under the Uniform Securities Act, Paul must register as a state-registered investment adviser if he A) opens an investment advisory business as a sole proprietor in New Jersey with the intention of advising individual clients on the advisability of investing in securities. Paul will have $100 million in AUM within 120 days of opening. B) sells registered securities on a commission basis for a registered broker-dealer C) becomes a full-time employee of AAA Investment Advisers, Inc., where he will advise clients whose assets under his discretion will exceed $200 million D) opens an investment advisory business as a sole proprietor in New Jersey with the intention of advising individual clients on the advisability of investing in securities. Paul will have $90 million in AUM within 120 days of opening.
D Being in the business of advising individual clients on the advisability of investing in securities requires one to register as an investment adviser, either with the state or the SEC. The key is the assets under management. If a new IA reasonably believes that he will have AUM of at least $100 million within the first 120 days of registering, he is permitted to register with the SEC. Of course, if it reaches $110 million, then SEC registration is required. Reaching $90 million is not enough and, therefore, registration with the state would be the only option here. As a full-time employee of AAA Investment Advisers, Inc., he would have to register as a registered investment adviser representative and will not be a registered investment adviser (the firm). Selling registered securities under the supervision of a broker-dealer would require an agent registration with the state and the SEC.
In which of the following cases could revocation of the registration of an IAR lead to disciplinary action against the investment adviser employing that individual? A) The IAR failed to make full disclosure of a previous felony conviction on the Form U4. B) The firm supplied the IAR with a copy of its Code of Ethics and administered regular training on its contents. C) The IAR was found guilty of first degree murder. D) The firm was found guilty of failure to supervise.
D In most cases, disciplinary action against an investment adviser representative (unless the individual is filling an executive position) will not have a direct impact on the investment advisory firm. The major exception is when the IAR's actions leading to the revocation can be shown to have be aided by the firm's failure to supervise.
Under the Investment Advisers Act of 1940, which of the following is included in the definition of an investment adviser? A) A professional research analyst who holds himself out to the public as an expert in trading the Euro and other foreign currencies B) A bank that advertises to the public that it offers a complete line of trust services C) A research service that offers advice on the value of gold D) A lawyer who advertises to the public that he offers comprehensive legal and investment advice to high-net-worth individuals
D Lawyers are the "L" in the LATE exclusion from the definition of investment adviser, but that is true only when any investment advice is strictly incidental. Once the lawyer advertises the offering of investment advice, it is not longer an incidental activity and the exclusion is lost. Banks are always excluded. The advice must be on securities to meet the definition. Neither the gold nor the foreign currencies are securities so the research service and the research analyst are not defined as investment advisers.
An agent and a broker-dealer maintain wrap fee accounts for several of their customers. Which of the following registrations is required? A) The agent must be registered as an investment adviser. B) Only the registered principal would need to be registered in the state(s) in which they do business. C) Neither the broker-dealer nor the agent is required to have any license other than their regular securities license. D) The firm must register as an investment adviser.
D Once a broker-dealer handles wrap fee accounts, it loses the exclusion from the definition of investment adviser. Therefore, the firm must be registered with either the state or the SEC. Any agents handling these accounts would be registered as investment adviser representatives.
An investment adviser (IA) has its primary office in State A. They have branches in states B and C, and they advertise in states D, E, and F. What net capital requirements must they meet? A) All the states combined B) Whichever state is the highest C) The state where the largest number of its clients reside D) Where its principal office is located
D The Administrator of every state, other than State A, follows the rule that every investment adviser that has its principal place of business in a state other than his state need maintain only the minimum capital as required by the state in which the investment adviser maintains its principal place of business, provided the investment adviser is licensed in that state (State A) and is in compliance with that state's minimum capital requirement.
According to the Investment Advisers Act of 1940, the SEC must either grant investment adviser registration or begin proceedings to determine whether registration should be denied within how many days of filing? A) 30 B) 60 C) 90 D) 45
D The SEC is required by the Investment Advisers Act of 1940 to either grant an adviser registration or begin proceedings to determine whether the registration should be denied within 45 days of application.
*** Who of the following would NOT qualify for an exemption from registration under the Investment Advisers Act of 1940? A A person whose only advisory clients are insurance companies B A person whose only offices are in a single state, whose only clients are residents of that state, and who does not render advice on securities traded on a national exchange C A person who only gives advice to venture capital funds D An accountant whose advice is incidental to her accounting business and for which no separate fee is charged.
D This is tricky (as is the exam). The accountant is excluded from the definition. Therefore, there is no reason for her to be exempt. The other three choices are investment advisers who qualify for one of the exemptions described previously.
Both the Investment Advisers Act of 1940 and SEC Release IA-1092 specifically exclude from the definition of "investment adviser" certain persons who provide investment advice solely incidental to the practice of their profession. Which of the following would NOT by definition qualify for this exclusion? I. An accountant who provides high-tax-bracket clients with a useful chart showing them how to compute the tax-equivalent yield for municipal bonds II. A divorce attorney who, after obtaining settlements for clients, provides them with a list of suggested investment alternatives encouraging them to be prudent with their newfound wealth III. A university professor who provides investment advice for a substantial fee to fewer than 15 clients during any consecutive 12-month period, none of whom is an investment company III. An economist who consults with very large corporate employee benefit plans on how to best invest their funds A) II and III B) I and IV C) I and II D) III and IV
D) III and IV The university professor loses the exclusion as soon as the advice is no longer incidental to the practice of the profession (which it clearly is here, regardless of the number of clients). The list of professions qualifying for the exclusion does not include an economist, who in this case would be included in the definition as a pension consultant. The key to remember is the acronym "LATE"—lawyer, accountant, teacher, and engineer.
Federal law (Investment Adviser Act of 1940) Exclusions
FIRST 4 ARE THE SAME AS STATE EXCLUSIONS - Any bank, bank holding company, savings institution, or trust company - LATE Lawyer, Accountant, Teacher, Engineer - Any BD whose performance of such services is incidental to its business (as long as receives No special compensation such as when offering wrap fee programs) AND Agents of BD's - Publisher if the publication is (1) of general nature (2) genuine/disinterested info as opposed to promotional (3) General/regular circulation NOT timed with specific market activity - Any person whose advice/analysis is related only to securitiies that are a direct obligation of, or guaranteed byt the U.S.
Which of the following statements are TRUE? I A federal covered adviser sells federal covered securities only. II Federal covered advisers are advisers with federally imposed exemptions from state registration as investment advisers. III A federal covered security is exempt from registration with the SEC. IV Federal covered securities include those issued by investment companies registered under the Investment Company Act of 1940.
II and IV A federal covered adviser is an adviser with a federally imposed exemption from state registration. Securities issued by investment companies registered under the Investment Company Act of 1940 are included in the definition of a federal covered security.
Federal Law Exemptions (even though the following are defined as investment advisers, they are exempt from registration requirements)
Intra state advisors (only within 1 state): Clients only in the same state as home office AND does NOT give advice on securities listed on any national exchange (NYSE) Advisers to Insurance Companies: Only clients are insurance companies NOTE: Advisers whose clients are banks are not exempt under federal law (but are exempt under state law)
State Law Exemptions
Investment advisers exempt from registration with the state Administrator are those who have *no place of business in the state but are registered in another state*, provided their only clients in the state are: -broker-dealers registered under the act; other investment advisers; -institutional investors; -existing clients who are not residents but are temporarily in the state; -limited to 5 or fewer clients, other than those previously listed, resident in the state during the preceding 12 months (called the de minimis exemption);
DODD-FRANK AND ASSETS UNDER MANAGEMENT - Small, Mid Size, Large AUM and the requirements
Large Investment Advisers- those advisers with at least $100 million or more in assets under management, are eligible for SEC registration; once AUM reach $110 million, registration with the SEC is mandatory. Mid Size Investment Advisers- those with AUM of at least $25 million but not $100 million. Generally, these advisers are prohibited from SEC registration and must register with the state. Just as with any other category, **advisers to an investment company registered under the Investment Company Act of 1940 register with the SEC.** A mid-size firm can qualify for SEC registration several other ways. A mid-sized adviser is not prohibited from registering with the SEC: 1. if the adviser is not required to be registered as an investment adviser with the securities Administrator of the state in which it maintains its principal office and place of business; 2. if registered, the adviser would not be subject to examination as an investment adviser by that securities Administrator; 3. if the adviser is required to register in 15 or more states; or 4. if the adviser elects to take advantage of the buffer (described following). Small Investment Advisers- This category includes advisers with AUM of less than $25 million. Unless the investment adviser is an adviser to an investment company registered under the Investment Company Act of 1940, registration with the SEC is prohibited and, unless exempted under state rules, registration with the state is required. However, if the adviser would be required to register in 15 or more states, the prohibition is lifted, and registration with the SEC would be permitted instead.
SEC Release IA-1092
SEC Release IA-1092 interprets the definition of investment adviser under the Investment Advisers Act of 1940 to include financial planners, pension consultants, and others who offer investment advice as part of their financial practices.
Substantial Prepayment (Different for state/Federal)
Substantial Prepayment for State registered investment adviser is $500 for a contact period of 6 months or more (prepayment needs to cover more than 6 months Substantial Prepayment under Investment Advisers Act of 1940 is $1,200
The Exchange Act states that a person is presumed to control an IA organized as a corporation if the person directly or indirectly as the right to vote more than _____% of a class of the corporations voting securities or that of a partnership
The Exchange Act states that a person is presumed to control an IA organized as a corporation if the person directly or indirectly as the right to vote more than 10% of a class of the corporations voting securities or that of a partnership
When a new IA files for registration, if that IA believes that it will have at least ___ in AM within the first ___ days, it is eligible to register with the SEC, even if their AUM is way below that on day one.
When a new IA files for registration, if that IA believes that it will have at least $100 million in AM within the first 120 days, it is eligible to register with the SEC, even if their AUM is way below that on day one.
When a state registered IA report AUM at ____ or more on the annual updating amendment, the IA must withdraw from the states and register with the SEC within ____ days 10 Million Buffer
When a state registered IA report AUM at $110 million or more on the annual updating amendment, the IA must withdraw from the states and register with the SEC within 90 days
When an SEC registered IA reports less than ___ in AUM on the annual updating amendment, the IA must withdraw its registration with the SEC and register with the appropriate states within ___ days. 20 Million Buffer
When an SEC registered IA reports less than $90 million in AUM on the annual updating amendment, the IA must withdraw its registration with the SEC and register with the appropriate states within 180 days. Can stay registered with SEC down to 90 million
State law Exclusions
- Any bank, bank holding company, savings institution, or trust company (limited to U.S banks/ Bank holding companies)(exclusion NOT available for Credit unions and investment adviser subsidiaries of banks or bank holding companies) - LATE Lawyer, Accountant, Teacher, Engineer whose advice is solely incidental to profession - Any BD whose performance of such services is incidental to its business (as long as receives No special compensation such as when offering wrap fee programs) - Agents of BDs - Publisher if the publication is (1) of general nature (2) genuine/disinterested info as opposed to promotional (3) General/regular circulation NOT timed with specific market activity - Investment Adviser Representatives -Any person who is a federal covered adviser
Federal Covered Adviser
- Those registered with the SEC because they are eligible ($100 million in assets under management) or required to register with the SEC because they meet the minimum threshold of assets under management (currently $110 million); - Those under contract to manage an investment company registered under the Investment Company Act of 1940, e.g., a mutual fund, regardless of the amount of assets under management; and - Those not registered with the SEC because they are excluded from the definition of an investment adviser by the Investment Advisers Act of 1940. (The most tested example of this case is the investment adviser whose advice is limited solely to securities issued by the U.S. government or one of its agencies.)
Other Exceptions Under Dodd-Frank - The SEC is permitted to grant exceptions to advisers from the prohibition on registering with the SEC
- pension consultants, but only those with at least $200 million under control—the SEC picked that number to ensure that, to register with the SEC, if desired, the consultant's activities are "significant enough to have an effect on national markets;" - Those mid-size advisers with at least $100 million in AUM, but less than $110 million in AUM who elect to register with the SEC rather than the state(s) (this buffer will be described following);
4 parts of form ADV are:
1A-Must be completed by ALL advisers registering with the SEC or any of the state securities authorities 1B-Required by state securities authorities (Not SEC) 2A-Investment Adviser Brochure(Investment Strategy) 2B-delivered with 2A , brochure supplement with info about certain supervised persons (B-Bodies people who work there)
A person is excluded from the definition of investment adviser under the Investment Advisers Act of 1940 if the investment advice and reports are restricted to A) U.S. government securities B) foreign securities C) bank and insurance company securities D) securities listed on a national stock exchange
A Among the exclusions found in the act is one for persons whose advice relates exclusively to securities issued or guaranteed by the U.S. government.
Under the Uniform Securities Act, an accountant who charges hourly fees for securities recommendations in the regular course of his accounting practice is A) included in the definition of an investment adviser because he is compensated for giving investment advice in the regular course of business B) included in the definition of an investment adviser because accountants are not among the professionals excluded from the definition C) not included in the definition of an investment adviser because he receives an hourly rate instead of a commission D) not included in the definition of an investment adviser because he is an accountant
A An accountant who gives advice in the course of business and receives compensation, hourly or not, for providing the advice in the regular course of business falls within the definition of an investment adviser under the Uniform Securities Act. To be excluded, the advice must be on an incidental basis.
Under SEC Release 1A-1092, which of the following has (have) met the test of providing advice or analysis concerning securities? I A stockbroker calls a client and recommends the purchase of a certain stock. II A lawyer recommends against purchasing shares of a mutual fund in favor of another investment. III A publisher of an investment newsletter provides general information and recommendations concerning specific securities. A) I, II, and III B) I and II C) I only D) I and III
A Any person who gives advice (positive or negative, specific or general) or issues reports or analyses concerning specific securities meets the criterion of providing advice. This does not mean that these examples qualify for the definition of investment adviser. They only qualify for the first criterion. For example, a lawyer may be exempt from the definition if she provides advice incidental to the profession and does not receive compensation, but may still meet the first criterion. Likewise, if the stockbroker's only compensation is commissions from securities transactions, the exclusion is in effect.
Under the Investment Advisers Act of 1940, which of the following is included in the definition of an investment adviser? A) A lawyer who advertises to the public that he offers comprehensive legal and investment advice to high-net-worth individuals B) A bank that advertises to the public that it offers a complete line of trust services C) A research service that offers advice on the value of gold D) A professional research analyst who holds himself out to the public as an expert in trading the Euro and other foreign currencies
A Lawyers are the "L" in the LATE exclusion from the definition of investment adviser, but that is true only when any investment advice is strictly incidental. Once the lawyer advertises the offering of investment advice, it is not longer an incidental activity and the exclusion is lost. Banks are always excluded. The advice must be on securities to meet the definition. Neither the gold nor the foreign currencies are securities so the research service and the research analyst are not defined as investment advisers.
According to the Investment Advisers Act of 1940, how can records of the investment adviser's business be stored during the first 2 years? I In written form on site II On microfilm on site III On magnetic tape or computer on site IV On computer disks at an offsite storage facility that requires 30 days' notice to retrieve A) I, II, and III B) II and III C) I, II, III, and IV D) I only
A The act requires certain records of business activities to be kept for 5 years (the first 2 in a readily accessible place subject to SEC examination at any time). *Records originated on paper may be microfilmed or microfiched, and records originated on computer may be stored electronically.* The USA has the same rule, and in both cases, the key point is that any storage vehicle used must be able to generate a "hard" copy while the examiner is present. One other requirement applies to computer disks and that is that they cannot be rewritten.
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.
Under the Investment Advisers Act of 1940, which of the following is (are) excluded from the definition of investment adviser? I The publisher of a financial newsletter on a paid subscription basis, which contains only general securities recommendations II Persons whose investment advice relates solely to issues distributed or guaranteed by the U.S. government III A lawyer who charges a separate fee for investment advice that is provided as a separate part of the business A) I and II B) III only C) I, II, and III D) I only
A Under the Investment Advisers Act of 1940, publishers of bona fide publications, such as financial newsletters, on a paid subscription basis with regular circulation are excluded as long as the publication does not contain recommendations of specific securities. One thing to look for on the exam is if the publication is market-event driven. That is, publication is not regular and is based on current events affecting the securities markets. In that case, the exclusion does not apply. Another exclusion is for persons whose advice relates solely to issues distributed or guaranteed by the U.S. government. One of the most tested exclusions is L.A.T.E. where lawyers, accountants, teachers, and engineers are excluded, but that is only the case when the advice is given as a an incidental part of their professional practice. A lawyer charging a separate fee for advice cannot claim that it is incidental.
Advisers Act & USA rules state that a person is presumed to control an IA organized as a corporation if the person directly or indirectly as the right to vote _____% or more of a class of the corporations voting securities or that of a partnership
Advisers Act & USA rules state that a person is presumed to control an IA organized as a corporation if the person directly or indirectly as the right to vote 25% or more of a class of the corporations voting securities or that of a partnership
Under the SEC Release IA-1092, who of the following would be considered to be in the business of rendering investment advice? A) An individual who provides investment advice to family members, but receives no compensation B) A financial planner who charges no fee for developing a financial plan, but takes commissions on recommended trades C) An agent who receives no separate compensation for investment advice but who takes commissions on recommended trades D) An accountant who provides investment advice to clients as an incidental part of the business
B A financial planner who takes commissions from a broker-dealer on recommended trades is considered to be compensated for giving advice and is therefore in the business of rendering investment advice. Agents and broker-dealers who do not charge separately for advice are excluded from the definition of investment adviser. Lawyers, accountants, teachers, and engineers are not considered to be in the business of rendering investment advice, as long as any advice given is incidental to the practice of the profession.
A state-registered investment adviser maintains custody of client funds and securities. On Thursday, the chief financial officer of the firm informs the chief compliance officer that their net worth is $31,578. Under the provisions of the Uniform Securities Act, the firm would A) do nothing, as their net worth is far in excess of the minimum requirement of $10,000 B) send a detailed financial report to the Administrator by the close of business Monday C) send a detailed financial report to the Administrator by the close of business Friday D) need to increase the amount of their surety bond
B A state-registered investment adviser who maintains custody of client assets must maintain net worth of at least $35,000 or a bond of the same amount (not both). If the net worth should fall below the minimum, by the close of the next business day after discovery (Friday in our example), notice of the deficiency must be sent to the Administrator of the state in which the principal office of the adviser is located. Then, by the close of business the day after that (Monday in our example), a detailed financial report, including the number of clients served by the adviser, must be sent to the Administrator. The firm would need to increase their net worth, not the bond. For discretion the net worth requirement is $10,000 An advisor can use a surety bond instead (in this case for both discretion or custody the requirement is 35K)
*** Alpha-Beta Advisers (ABA) has its principal office in State X. ABA limits its clientele to insurance companies that are authorized to do business in State X. Which of the following best describes the registration requirements for ABA? A) SEC only B) State X only C) Neither the SEC nor State X D) Both the SEC and State X
B Dealing exclusively with insurance companies makes this advisory firm exempt from registering with the SEC. However, unlike those who are excluded from the definition of investment adviser, being exempt does not make ABA a federal covered adviser. Although advisers dealing solely with institutions, such as insurance companies, are not deemed to be investment advisers in the state, that only applies when there is no place of business in the state. Obviously, with its home office in State X, that does not apply to ABA, so it would have to register in that state.
Under certain conditions, the Uniform Securities Act provides that an Administrator may require a minimum net worth standard be met by an investment adviser. Which of the following would be an allowable asset in the computation of an investment adviser's net worth? A) Advances or loans to partners in the case of an IA organized as a partnership B) Accounts receivable C) Accounts payable D) Copyrights
B For purposes of the USA, the term "net worth" means an excess of assets over liabilities, as determined by generally accepted accounting principles. Accounts receivable are a current asset, while accounts payable are a current liability. The USA specifically disallows intangibles, such as copyrights and goodwill, and advances or loans to partners (or officers if a corporation) are excluded as well.
Which of the following investment advisers would be required to register with the state? A) An IA who expects to have $132 million in AUM within 120 days B) An IA whose annual updating amendment showed a drop in AUM from $109 million to $87 million C) An IA who is under contract to manage a registered investment company D) An IA whose annual updating amendment showed a drop in AUM from $141 million to $99 million
B No IA can remain registered with the SEC with assets under management (AUM) of less than $90 million (except those who manage registered investment companies). It takes $100 million in AUM to be able to initially register with the SEC; thereafter, the IA must maintain at least $90 million to remain SEC-registered.
Which of the following is NOT considered to be in the business of investment advising? A) An insurance agent who provides investment advice regularly, but such advice represents a small portion of her business B) Insurance agents who discuss the merits of whole life insurance verses nonsecurities financial instruments and who receive commissions on the sale of life insurance only C) A person who prepares reports about securities in general D) A financial planner who provides advice on many types of financial instruments, including securities, and receives commissions on the sale of life insurance
B Please note that this question is not asking "who is an investment adviser?" It is asking about one of the ***3 prongs - being in the "business".*** The insurance agent who discusses the merits of whole life insurance does not sell investment advice or securities, only insurance policies. The insurance agent does not hold herself out as an adviser nor does she provide advice on securities. If a person advertises as one who provides investment advice or engages in providing investment advice or analyses on a regular basis (even if not the person's principal business activity), the person is considered in the business of giving investment advice. If the person receives any compensation that represents a clearly definable charge, commission, or fee for such advice (whether paid separately or not), she is considered in the business. If the person engages in other financial activities in connection with the advice, it cannot be used to avoid the business standard.
The chief compliance officer (CCO) of a registered investment adviser would generally not have responsibility for the actions of A) ministerial personnel of the firm. B) an agent registered with an affiliated broker-dealer. C) supervisory personnel of the firm. D) an investment adviser representative of the firm.
B The CCO of an investment adviser is responsible for compliance with all relevant rules and procedures applying to all personnel of the investment adviser. Agents with an affiliated broker-dealer come under the supervisory jurisdiction of the compliance officer of that BD.
Under the Uniform Securities Act, all of the following persons may provide investment advice incidental to their normal business without requiring registration as an investment adviser EXCEPT A) a lawyer B) an economist C) an engineer D) a teacher
B The Uniform Securities Act does not grant an economist exemption from registration, but it does offer an exemption to teachers, lawyers, and engineers if the investment advice is incidental to their business; thus the acronym LATE for lawyers, accountants, teachers, and engineers.
Registration with the state as an investment adviser would be required for a person with an office in this state who A) manages the portfolio of the KPF Balanced Fund, a registered open-end investment company with $22 million in net assets B) manages $13 million in assets for 4 clients C) only gives advice on securities issued by or guaranteed by the government of the United States D) serves as a pension consultant to the XYZ Employees Retirement Plan, covering 1,200 employees with total assets of $278 million
B Under the Dodd-Frank Bill, investment advisers with less than $100 million in assets under management must register with the states. If the adviser manages a registered investment company, the adviser must be federal covered. If the person serves as a pension consultant with $200 million or more in AUM, the person has the option of registering with the SEC. A person whose sole advice deals with U.S. government securities is excluded from the federal definition of investment adviser and, therefore, under the NSMIA, is considered a federal covered adviser.
Under the Uniform Securities Act, which of the following is an investment adviser? A) An investment adviser representative B) An individual who provides financial advice over the Internet with no recommendations based on specific investment situations of individual clients C) A firm with no office in the state that has provided specific investment advice to 10 noninstitutional clients within the state during the past 12 months D) A broker-dealer who receives no compensation for investment recommendations
C A firm with no office in the state that provides investment advice is an investment adviser in the state if its clients exceed the de minimis level of five noninstitutional (retail) clients within the state in the past 12 months. Providing investment advice to 10 retail clients makes this firm an investment adviser and requires registration in the state. A broker-dealer is not required to register as an investment adviser unless it receives special compensation for providing investment advice. Individuals who publish general advice (no specific recommendations to individual clients) in hard copy form, electronic communications, or otherwise are not required to register as investment advisers. Investment adviser representatives work for investment advisers and are specifically excluded from the definition.
Under the Uniform Securities Act, a person who exclusively provides advice on commodities is A) a registered investment adviser representative B) an options representative C) not a registered investment adviser D) a registered insurance agent
C A person who only provides advice on commodities is not a registered investment adviser. To be an investment adviser under the Uniform Securities Act, advice must be given on securities. The act specifically excludes commodities from the definition of security.
The National Securities Markets Improvement Act of 1996 (NSMIA) A) overcame the restrictions of selling securities in interstate commerce B) created the concept of fraud, as used in the Uniform Securities Act C) defined the term "federal covered adviser" D) created a national market system
C The NSMIA defined the term "federal covered adviser," referring to advisers who must register with the SEC or who are excluded from the definition of "investment adviser" under the Investment Advisers Act of 1940. Fraud is a legal concept and is prohibited by the Uniform Securities Act. Selling securities in interstate commerce is not fraudulent, provided the antifraud provisions securities laws are observed. The roots of a national market system began with the Securities Amendments Act of 1975.
