Unit 2
Under the Uniform Securities Act, if the Administrator does not deny an application for registration and no disciplinary proceeding is underway in regard to it, how many days after filing the application as an investment adviser representative does registration generally become effective? A) 30 B) 7 C) 5 D) 10
A) 30 Registration becomes effective 30 days after the application is filed unless the Administrator begins a proceeding or issues a stop order before that time. The Administrator may specify an earlier date, or if an application must be amended, the Administrator may extend the date to 30 days after the amendment was filed.
Under the Investment Advisers Act of 1940, which of the following is excluded from the definition of a person associated with an investment adviser? A) A clerk in an investment advisory firm B) A majority stockholder of an investment advisory firm C) A minority partner of an investment advisory firm D) An employee who manages client accounts for an investment advisory firm
A) A clerk in an investment advisory firm Employees with no investment advisory functions, such as clerks and administrative personnel, are excluded from the definition of associated person.
Which of the following statements best describes an investment supervisory service as described by the Investment Advisers Act of 1940? A) An investment adviser provides continuous advice based on the client's individual needs. B) No actions are taken in client accounts without first being approved by a senior supervisory person. C) An investment advisory firm offers nondiscretionary services on a non-client-specific basis. D) An investment adviser sends monthly newsletters to 200 clients offering nonspecific advice.
A) 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.
Which of the following is required to register as an investment adviser with the state securities Administrator? A) An investment advisory firm that opens an office in the state with less than $100 million in assets under management B) A newly formed investment advisory firm with $145 million in assets under management C) A person with no office in the state whose only advisory clients are investment companies and banks in the state D) The author of a book on money and banking that was sold to residents of the state in which it is published
A) An investment advisory firm that opens an office in the state with less than $100 million in assets under management An investment adviser must register in a state if it manages less than $100 million in assets. Publishers of general circulation books are exempt from state registration, as are advisers with no offices in the state whose only customers are institutions, such as banks and investment companies, in the state. Investment advisers with $110 million or more in assets under management must register with the SEC, not the state Administrator.
Under the terms of the Uniform Securities Act, which of the following is an investment adviser for purposes of state regulatory jurisdiction? A) An investment advisory subsidiary of a bank holding company located in the state that manages $20 million in assets B) A commercial bank with a place of business in the state that advises clients on banking matters C) An accountant located in the state who offers general securities advice as an incidental part of his business D) A federal covered adviser with clients in the state
A) An investment advisory subsidiary of a bank holding company located in the state that manages $20 million in assets A bank holding company's investment advisory subsidiary that manages $20 million in assets is an investment adviser subject to the Uniform Securities Act (USA). Under the language of the USA, a commercial bank is excluded from the definition of investment adviser whereas a bank holding company subsidiary is not. While a federal covered adviser is an investment adviser in practice (that is, it performs the functions of an adviser), it is excluded from the definition of an investment adviser under the USA to avoid duplicate regulation. An accountant located in the state that offers general securities advice as an incidental part of his business is not an investment adviser.
According to the Uniform Securities Act, which of the following would be defined as an investment adviser representative? I. John, who opens an investment advisory firm where he devotes his time exclusively to management responsibilities as the sole proprietor of the firm II. Paul, who works for a firm soliciting investment management accounts on behalf of several different investment managers III. Margaret, who works as a commission sales agent for a broker-dealer IV. Mark, an employee of AAA Broker-Dealers, who solicits brokerage clients for commissions on the basis of research conducted by his firm's securities analyst A) I and II B) II and IV C) I and IV D) II and III
A) I and II Paul, who works for a firm soliciting investment management accounts for several investment managers, would be defined as an investment adviser representative because he is acting in the capacity of a sales agent for investment advisers. John, as the owner of a sole proprietorship, is both an investment adviser and the firm's only investment adviser representative. Margaret would not be defined as an investment adviser representative because she functions as a registered agent for a broker-dealer. If she sold investment advice for the broker-dealer's investment management subsidiary, she then would be defined as an investment adviser representative. An agent of a broker-dealer, earning commissions on security sales, is not an IAR even if his primary selling tool for the brokerage business is the firm's outstanding research department.
Under the NSMIA, the term "federal covered adviser" includes a person I. registered with the SEC under the Investment Advisers Act of 1940 II. registered as an investment adviser in two or more states III. excluded from the definition of investment adviser under the Investment Advisers Act of 1940 IV. required to register with the state Administrator A) I and III B) I and IV C) II and IV D) II and III
A) I and III The NSMIA defines "federal covered adviser" as a person who is either required to register with the SEC under the Investment Advisers Act of 1940 or who is specifically excluded from the definition of "investment adviser" under that act. Registration with the state Administrator is not required of a federal covered adviser. If an investment adviser who otherwise would not qualify for SEC registration would be required to register in 15 or more states, the Dodd-Frank Act makes that adviser eligible for federal registration.
Which of the following situations would require registration as an investment adviser? I. A broker-dealer provided investment research services to a customer and charged a fee for the service. II. An agent of a broker-dealer recommends the purchase of ABC securities to a customer, who then purchases 100 shares, and the agent earns a commission. III. A broker-dealer has its agents prepare complete financial plans for customers for a nominal fee. The plans recommend specific securities transactions, and when the customers place orders, the agents earn commissions on those securities transactions. IV. A broker-dealer charges its customers for collecting dividends and maintaining their accounts in addition to commission charges for transactions executed. A) I and III B) I only C) I, III, and IV D) I, II, III, and IV
A) I and III Under the Uniform Securities Act, broker-dealers and their agents are not defined as investment advisers if their performance is solely incidental to the conduct of a brokerage business, and no special compensation is received for the advisory services. A broker-dealer charging for research advice is charging for advisory services, which would require registration as an investment adviser. Preparing a complete financial plan for a customer goes beyond being solely incidental to conducting a brokerage business and would require registration as an investment adviser because a fee was charged, even if only a nominal one. Although not asked in this question, those agents would also have to register as IARs. Recommendations of securities purchases are incidental to conducting a brokerage business and would not require registration as an investment adviser if no fees are charged for the advice. Broker-dealers may charge for clerical services provided to customers, but clerical services are not considered investment advisory services.
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, II, and III B) I and IV C) I only D) I, II, III, and IV
A) 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.
The registration of an investment adviser would automatically register which of the following as investment adviser representatives? I. Directors II. Officers III. Partners A) I, II, and III B) II and III C) I and III D) I and II
A) I, II, and III Section 202 (a) of the Uniform Securities Act states, "Registration of an investment adviser automatically constitutes registration of any investment adviser representative who is a partner, officer, or director, or a person occupying a similar status or performing similar functions." I would have preferred that the question indicate that these individuals are acting in a capacity that would require their registration, but on the exam, it probably won't be that clear.
The term "investment adviser representative" includes which of the following? I. A receptionist for an adviser II. An employee who solicits new business for an adviser III. A supervisor who oversees employees who manage client portfolios for an adviser IV. An investment advisory firm registered in the state of Texas A) II and III B) I and III C) I, II, III, and IV D) I, II, and IV
A) II and III An investment adviser representative is always an individual person. Employees who solicit business on behalf of investment advisers and those persons who supervise other employees are investment adviser representatives.
State laws provide for exclusions from the definition of investment adviser. Which of the following persons is specifically excluded under the Uniform Securities Act? A) Investment adviser representatives B) Economists whose advice is strictly incidental to their professional activity C) Broker-dealers receiving special compensation D) Bank subsidiary offering investment advice
A) Investment adviser representatives The USA specifically excludes IARs from its definition of investment adviser. Excluded are banks but not subsidiaries offering investment advice. Once broker-dealers receive special compensation, such as in a wrap fee program, they lose their exclusion. Economists are not included in the list of exclusions.
Which of the following statements is CORRECT? A) State-registered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. B) A state-registered investment adviser collecting fees of $500 for 6 months or more in advance, is considered to be receiving a substantial prepayment. C) Federal covered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. D) Both state-registered and federal covered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients.
A) State-registered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. It is only state-registered investment advisers who must provide audited balance sheets to clients for whom they maintain custody. In order to be considered a substantial prepayment of fees, state laws require that they be more than $500 for 6 or more months in advance.
James Stillman is an investment adviser representative with Rock, Feller, and Standard (RFS), a covered adviser with its principal office in State O. Stillman works out of an office in State P and has 4 retail clients there. In addition, Stillman has 25 retail clients in State D, 6 retail clients in State M, and 1 retail client in State O. Stillman would be required to register as an investment adviser representative in A) State P. B) States P and O. C) States D and M. D) States P, D, and M.
A) State P. As an IAR for a federal covered investment adviser, Stillman is required to register only in those states in which he (Stillman) has a place of business. Although Stillman has clients in several states, the question tells us that his place of business is the office in State P. Please note that, as long as an IAR with a covered adviser does not maintain a place of business in a state, there is no numerical limit on the number of clients he can have and still be exempt from registering in that state.
Pontourny Advisory and Investment Services (PAIS) is a federal covered investment adviser. Its principal office is in State X. PAIS also maintains branch offices in States Y and Z. Brenda is the manager of the branch office in State Y. Some of the individuals being supervised by Brenda have clients in States X and Y, and others have clients in States Y and Z. Brenda must register as an IAR in A) State Y B) States X, Y, and Z C) States X and Y D) States Y and Z
A) State Y Those who supervise the activities of investment adviser representatives are themselves defined as IARs. An IAR representing a federal covered investment adviser need only register in the state or states in which she (the IAR) has a place of business. There is nothing in this question to suggest that Brenda has a place of business anywhere other than in State Y, where her branch office is located. Remember, when it comes to federal covered advisers, registration of their IARs is dependent on the IAR's place of business, not the location of their clients.
Under which of the following circumstances may attorneys and accountants claim an exclusion from the definition of investment adviser under the Investment Advisers Act of 1940? A) The advice is incidental to the practice of their profession. B) They advertise that they are available to provide investment advice. C) The investment advisory activities have grown to represent 30% of their business. D) They charge a separate fee for the provision of investment advice from that received for their professional services.
A) The advice is incidental to the practice of their profession. Under the Investment Advisers Act of 1940, lawyers, accountants, teachers, and engineers (LATE) giving investment advice that is incidental to their professions are not considered investment advisers. If they receive a fee for the advice, hold themselves out to the public as doing so, or offer excessive advice that is no longer incidental to their practice (as 30% of the practice would indicate), they lose this exclusion and must register as investment advisers.
A federal covered IA files a petition for bankruptcy. The firm must A) notify the SEC immediately B) do nothing until the court decides the disposition of the firm's assets C) notify all of its clients immediately D) notify the Administrator immediately
A) notify the SEC immediately As a federal covered investment adviser, the responsible regulatory body is the SEC.
An investment adviser hires 2 individuals to solicit new customers for the firm's wealth management service. Under the USA, A) registration as investment adviser representatives is required B) they may begin soliciting as soon as they have passed their licensing examinations C) each of them would have to register as an investment adviser D) soliciting is generally prohibited
A) registration as investment adviser representatives is required The definition of investment adviser representative includes individuals who solicit for the firm's advisory business.
The purpose of the Investment Advisers Act of 1940 is to provide A) standards at the federal level for the regulation of investment advisers B) minimum standards of performance for those registered as investment advisers C) regulation for investment companies and their operations D) standards among the various states for the regulation of investment advisers
A) standards at the federal level for the regulation of investment advisers The purpose of the Investment Advisers Act of 1940 is to provide federal standards for the regulation of investment advisers. Providing standards among the various states for the regulation of investment advisers is the purpose of the Uniform Securities Act. Providing regulation for investment companies and their operations is the purpose of the Investment Company Act of 1940.
A person may NOT engage in business as an investment adviser in a state unless A) the person is registered as an investment adviser or is otherwise exempt from registration B) organized as a corporation or partnership C) the person is registered as a broker-dealer D) the person's only accounts are investment companies
A) the person is registered as an investment adviser or is otherwise exempt from registration A person must register as an investment adviser in order to engage in business as an adviser, unless a specific exemption or exclusion applies. If the adviser only manages investment companies, it is federal covered and, therefore, exempt from state registration, but that choice would suggest that that is the only way one could act as an investment adviser. The form of business can be anything from a sole proprietorship to a C corporation.
The term "investment counsel" can be used by investment advisers A) with a primary business of rendering investment advice B) who are also registered as broker-dealers C) who are registered with the SEC under the Investment Advisers Act of 1940 D) who are also attorneys
A) with a primary business of rendering investment advice While this choice is only half correct, under the Investment Advisers Act of 1940, the term "investment counsel" may be used by any adviser that meets two standards: the adviser performs investment supervisory services, and the adviser provides advice as the primary business of the firm. No other special qualifications or registrations are needed.
When an investment adviser representative's permanent residence address changes, updates must be made to the information on file with the regulatory bodies. The proper procedure to be followed is A. File a Form U4 within 30 days B. File a Form U4 within 45 days C. File a Form U5 within 30 days D. File a Form U5 within 45 days
A. Amendments are made to the Form U4 and must be filed within 30 days. The Form U5 is for terminations.
Wealth Management Experts (WME) is an investment adviser registered in State X, the location of its only offices. During the past 12 months, WME has directed investment advice to 6 individual clients in State Y. This means that WME A. is required to register in State Y because it has exceeded the de minimis limit B. is not required to register in State Y because it is within the de minimis limit C. does not need to register in State Y if that state has a reciprocal licensing arrangement with State X D. would be required to register in State Y as soon as advice was directed to a single retail client
A. What is the de minimis exemption? It is available to an investment adviser who does not maintain a place of business in the state and limits its business to 5 or fewer retail clients who are legal residentsin the state during the preceding 12 months. That would make A the correct answer because 6 is above the limit of 5. There is no such thingas a reciprocal licensing arrangement between states. How would things change if the question was worded to say that there were 6 clients, 3 of whom were retail and the other 3 insurance companies? In that case, no registration would be required because the retail clients are within the de minimis limit, and there is no limit on the number of institutional clients an investment adviser can have in a state without the need to register (as long as there is no place of business in the state).
With regard to the keeping of records, the Uniform Securities Act states that investment advisers must keep records for A) 5 years B) 5 years, the first 2 in the principal office of the adviser C) 3 years D) 3 years, the first 2 in the principal office of the adviser
B) 5 years, the first 2 in the principal office of the adviser For state-registered investment advisers, records must be kept for a total of 5 years. For the first 2 of those years, they must be located in the principal office of the adviser.
Which of the following is NOT a person as defined by the Uniform Securities Act? A) Guelph, a small city outside of Toronto, Ontario, that maintains an investment account at a brokerage house to invest surplus funds. B) A child prodigy for whom his mother, as custodian, opened an account at a major securities firm. C) XYZ Dry Cleaners, Inc., whose shareholders all work on the premises and also offer financial advice to customers who request it. D) A small unincorporated investment club.
B) A child prodigy for whom his mother, as custodian, opened an account at a major securities firm. Under the Uniform Securities Act, the term "person" has a specific meaning. "Person" refers to an individual, corporation, association, joint-stock company, trust, unincorporated organization, government, or political subdivision of a government. A minor child, is not a person legally capable of entering into contracts. Adults must open custodial accounts on behalf of minor children.
Which of the following persons are included in the definition of investment adviser? A) A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation B) A financial planner or other person that provides investment advisory services to others for compensation C) Any person that the Administrator excludes by rule or order D) A bank whose deposits are insured by the FDIC
B) A financial planner or other person that provides investment advisory services to others for compensation A financial planning firm or other person that, as an integral component of other financially related services, provides investment advisory services for compensation is an investment adviser. A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation, a bank, or any other person that the Administrator specifies by rule or order are excluded from the definition of an investment adviser.
According to the Investment Advisers Act of 1940, which of the following is always a natural person? A) The city of Chicago B) An investment adviser representative C) A broker-dealer D) An investment adviser
B) An investment adviser representative Natural persons are human beings. An adviser representative must be an individual. Although there are broker-dealers and investment advisers organized as a sole proprietorship, almost all are structured under some type of business form. A city is never an individual.
Which of the following statements regarding registration of investment advisers is (are) TRUE under the Investment Advisers Act of 1940? I. If any material information filed in the registration becomes inaccurate, an amendment must be filed promptly. II. If any nonmaterial information filed on Form ADV changes, an amendment must be filed within 90 days of the end of the fiscal year. III. Material information requires a prompt amendment, but nonmaterial changes do not require amendment. A) II only B) I and II C) III only D) I only
B) I and II The SEC requires prompt amendment of any material information changes on Form ADV (e.g., names, location, control, custody, organization) and also requires nonmaterial amendments within 90 days of the end of the adviser's fiscal year.
Which of the following statements are TRUE? I. The Uniform Securities Act is not the actual law of any state or territory of the United States. II. The National Securities Markets Improvement Act of 1996 requires states and the federal government to have identical registration requirements. III. The state securities Administrator has responsibility for the enforcement and administration of a state's securities law. A) I, II, and III B) I and III C) II and III D) I and II
B) I and III The Uniform Securities Act is not the actual law of any state or territory. Rather, it is model legislation that states use as a guide in drafting their own securities laws. Those laws give the responsibility to the state Administrator for enforcement and administration of those laws. The NSMIA's purpose is to eliminate dual registration, not to require identical laws.
Registration of an investment adviser automatically confers registration on I. officers, partners, and directors of the firm who are functioning as IARs II. any employee who is functioning as an IAR III. clerical employees handling back-office operations IV. an employee who will be soliciting clients for the adviser A) I, II, and III B) I only C) I, II, III, and IV D) I and III
B) I only Under Section 202(a) of the Uniform Securities Act, registration of an investment adviser automatically constitutes registration of any investment adviser representative who is a partner, officer, or director, or a person occupying a similar status or performing similar functions. This only applies to those individuals who are listed on the firm's Form ADV Part 1, so we're limited to officers, partners, directors, or anyone else doing that type of job, regardless of what this IA has chosen to use as the title.
Which of the following are not investment advisers under the Uniform Securities Act? I. Joe advises customers regarding the value of gold and silver coins. II. The trust department of ABC Bank provides investment advice to its clients. III. Tammy writes a newspaper column in which she analyzes and recommends securities. IV. Jack is an investment adviser representative. A) II, III, and IV B) I, II, III, and IV C) I and IV D) I and II
B) I, II, III, and IV 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 investment adviser representative (IAR) is specifically excluded from the definition of an investment adviser.
The Uniform Securities Act authorizes the state Administrator to require I. either oral or written qualification examinations of investment adviser representatives and officers of investment adviser partnerships or corporations II. officers of investment advisers to pass a qualification examination III. an applicant for initial registration to publish an announcement of the application in one or more specified newspapers published in the state IV. investment adviser representatives to pass a qualification examination A) I and II B) I, II, III, and IV C) III and IV D) I only
B) I, II, III, and IV The state Administrator may require qualification examinations for officers of investment advisers, as well as its representatives, and may require them to publish an announcement in one or more newspapers published in the state. The Administrator may also require either an oral or written examination.
Which of the following persons are required to register in a particular state? I. An investment adviser who manages client accounts in excess of $100 million in value II. An investment adviser who manages client accounts and has less than $25 million in total assets under management III. An adviser to investment companies registered under the Investment Company Act of 1940 IV. An investment adviser representative with a place of business in the state A) I and II B) II and IV C) III and IV D) I and III
B) II and IV With certain exceptions not mentioned in the choices, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, advisers who manage clients with a total of less than $100 million under management are required to register with the state Administrator. Under Dodd-Frank, those who advise registered investment companies are required to register with the SEC and are exempt from state registration. Those who manage at least $100 million, but not $110 million, have the choice of registering with either the state or the SEC. Investment adviser representatives with a place of business in the state register with the state. It makes no difference if they represent a federal coverered or a state-registered investment adviser.
Washington, Adams, and Jefferson, Inc. (WAJI) is an investment adviser whose principal and only office is in Alexandria, VA. WAJI's sole business is advising institutional investors. Rutherford Buchanan is employed by the firm in the main office and has the responsibility of servicing the firm's bank and insurance company clients. Which of the following statements is correct regarding Rutherford's licensing requirements? A) Rutherford is exempt from registration because he has fewer than 6 retail clients. B) Rutherford cannot register as an IAR of WAJI because providing advice exclusively to institutions exempts the firm from registration. C) Rutherford is exempt from registration because his only clients are institutions. D) Rutherford must register as an IAR of WAJI with the state of Virginia.
B) Rutherford cannot register as an IAR of WAJI because providing advice exclusively to institutions exempts the firm from registration. Regardless of whom the clients are, Rutherford has a place of business in Virginia and that requires registration with the Administrator as an IAR. If WAJI does business in other states where it does not have a place of business, it is exempt from registration because the only clients are institutions. If WAJI is not registered in the state, Rutherford can't register as their IAR. The de minimis exemption for fewer than 6 retail clients only applies when there is no place of business in the state.
Which of the following statements is (are) true? I. A person with a place of business in the state who transacts business exclusively with banks and savings institutions is not an investment adviser under the Uniform Securities Act. II. A person excluded from the definition of investment adviser under the Investment Advisers Act of 1940 who offers investment advice to individual investors residing in this state, and has less than $25 million in assets under management, is subject to the jurisdiction of the state Administrator. III. A person included in the definition of an investment adviser under the Investment Advisers Act of 1940, who manages funds on a regular basis as a business headquartered in a state, is subject to payment of filing fees required by the state Administrator. IV. Broker-dealers who supply incidental investment advice and make securities recommendations to customers who pay commissions for the execution of their trades are not investment advisers subject to state or federal registration. A) I and IV B) III and IV C) II and III D) I and II
B) III and IV A person who conducts business exclusively with banks and savings institutions is an investment adviser under the USA if he has a place of business in the state. Had the person no place of business in the state and conducted business exclusively with banks and savings institutions, he would not be considered a broker-dealer subject to the regulatory control of the state Administrator. Under the NSMIA, any person excluded from the definition of investment adviser under the Investment Advisers Act of 1940 is considered a federal covered adviser. Therefore, regardless of the amount of money under management, the state has no jurisdiction. A federal covered adviser may be subject to payment of state filing fees. Broker-dealers who supply investment advice incidental to their business and receive no special compensation for it are not investment advisers.
Which of the following is specifically excluded from the definition of an investment adviser providing the investment advice is solely incidental to the business in which the person is engaged? A) Sports representative who advises on securities for a fee B) Industrial engineer C) Pension manager D) Movie star's business manager who handles the star's investment portfolio
B) Industrial engineer Lawyers, accountants, engineers, teachers, and broker-dealers whose advice is incidental to their profession and who do not charge a separate fee for investment-related advice are excluded from the definition under the Investment Advisers Act of 1940.
Pontourny Advisory and Investment Services (PAIS) is a federal covered investment adviser. Its principal office is in State X. PAIS also maintains branch offices in States Y and Z. Brenda is the manager of the branch office in State Y. Some of the individuals being supervised by Brenda have clients in States X and Y, and others have clients in States Y and Z. Brenda must register as an IAR in A) States X and Y B) State Y C) States Y and Z D) States X, Y, and Z
B) State Y Those who supervise the activities of investment adviser representatives are themselves defined as IARs. An IAR representing a federal covered investment adviser need only register in the state or states in which she (the IAR) has a place of business. There is nothing in this question to suggest that Brenda has a place of business anywhere other than in State Y, where her branch office is located. Remember, when it comes to federal covered advisers, registration of their IARs is dependent on the IAR's place of business, not the location of their clients.
If an investment adviser representative of a federal covered adviser that transacts business in a state terminates employment with that investment adviser, which of the following statements is TRUE? A) The investment adviser must notify the Administrator. B) The representative must notify the Administrator. C) No notice to the Administrator is required. D) Both the representative and the investment adviser must notify the Administrator.
B) The representative must notify the Administrator. It is the investment adviser representative's responsibility to notify the Administrator. The advisory firm is not registered with the state; only the representative is registered.
Under the Uniform Securities Act, which of the following is TRUE regarding registration of investment adviser representatives? A) Representatives are automatically registered when they become employed by a registered investment adviser. B) To register, a representative must submit a completed application for registration, a filing fee, and a signed consent to service of process. C) A representative's registration remains in effect even during a period when the representative is not employed by a registered investment adviser. D) Registration in the state where a representative has his business office enables the representative to do business in any state.
B) To register, a representative must submit a completed application for registration, a filing fee, and a signed consent to service of process. In general, representatives are not automatically registered when they become employed by an adviser. To register, they must file an application, a consent to service of process, and a filing fee. Registration is not effective during any period when the representative is not employed by a registered adviser, and the Administrator must be notified when a representative's employment begins or ends. Representatives must be registered in each state in which they do business.
As written in the Investment Advisers Act of 1940, a "person associated with an investment adviser" is any partner, officer, or director of such investment adviser (or any person performing similar functions), or any person directly or indirectly controlling or controlled by such investment adviser, including any employee of such investment adviser. Persons associated with an investment adviser whose functions are clerical or ministerial are not included in this definition. Based on that definition, all of the following would be associated persons except A) a senior officer of an investment adviser responsible for marketing the adviser's services as opposed to making investment advisory decisions. B) an employee of the firm with a degree in communications whose job is the graphic design of the investment adviser's research publications. C) an individual employed by an investment adviser to solicit new advisory clients, compensated at a rate of $500 for each new account. D) a silent partner in an advisory firm organized as a general partnership.
B) an employee of the firm with a degree in communications whose job is the graphic design of the investment adviser's research publications. Graphic design would be considered a clerical function. All of the other choices describe persons who meet the definition.
Sharon Smith is an investment adviser representative with Highwater Advisers, a federal covered investment adviser with its principal office in State X. Sharon provides advisory services to a bank located in State X, a state in which she has no place of business. Under current regulations, A) because Sharon's client is a bank, she does not have to register as an IAR in State X. B) because Sharon has no place of business in State X, she does not have to register as an IAR in State X. C) because Sharon has a client in State X, registration as an IAR would be required in State X. D) because Highwater's principal office is in State X, Sharon would be required to register as an IAR in State X.
B) because Sharon has no place of business in State X, she does not have to register as an IAR in State X. The key is that Sharon is an IAR for a covered IA. When that is the case, the IAR is only required to register in states where she (the IAR) maintains a place of business. Sharon does not have a place of business in State X so no registration is required there. The fact that the client is a bank is of no relevance nor is the location of her employer's principal office.
The Uniform Securities Act would NOT provide an exemption from registration as an investment adviser to an investment adviser who A) has no place of business in the state and limits clientele to banks and insurance companies B) is an out-of-state investment adviser and directed business communications to fewer than 12 clients in the state in the past 12-month period C) has no place of business in the state and limits clientele to broker-dealers D) has no place of business in the state and limits clientele to other investment advisers
B) is an out-of-state investment adviser and directed business communications to fewer than 12 clients in the state in the past 12-month period An adviser is exempt from state registration if it has no place of business in the state and limits clientele to other investment advisers, banks and insurance companies, or broker-dealers. There is a de minimis exemption, but it is for no more than 5 (not 12) clients during a 12-month period.
An investment adviser need not register in a state if it has A) no place of business in the state, does not direct business communications in the state, and advises more than 5 high-net-worth individuals located in the state B) no place of business in the state and only advises 3 insurance companies located in the state C) a place of business in the state and only advises employee benefit plans with more than $1 million D) a place of business in the state and advises fewer than 5 banks
B) no place of business in the state and only advises 3 insurance companies located in the state An investment adviser need not register in a state if it has no place of business in the state and advises such institutional clients as insurance companies or banks. The number of clients is irrelevant as long as they all are of an institutional nature. Without exception, the USA requires an investment adviser to register in a state if it has a place of business in the state. With no place of business in the state, registration would not have been required regardless of the number of banks who were clients. With 5 or fewer noninstitutional clients, regardless of their net worth, no registration would be necessary under the de minimis provisions of the USA.
Some registered investment advisers are federal covered, while others register on a state by state basis. In the case of a state-registered investment adviser having its only office in Oregon with no offices in any other state, the authority of the office of the Administrator would include A) the Idaho Administrator requiring registration of IARs who make telephone calls to residents of Idaho B) requiring IARs to pass a qualification exam C) requiring the IA to renew its consent to service of process when paying the annual fee D) requiring each IAR to provide a statement of financial condition
B) requiring IARs to pass a qualification exam As you know from being here right now, this test is required by the Administrator. What about the Idaho Administrator? Well, maybe the IARs are making 5 or fewer calls in any 12-month period. Maybe they are calling institutional clients domiciled in Idaho. In any event, if you have to choose between an answer that is 100% right all of the time (qualification exams) and one that is right only some of the time. Go for the 100%.
An individual who has passed the NASAA examination for registration as an investment adviser representative may begin soliciting advisory clients A) within 48 hours B) when informed by the investment adviser that the representative's registration is effective C) when informed by the Administrator that the representative's registration is effective D) immediately
B) when informed by the investment adviser that the representative's registration is effective Passing the exams does not automatically give one an effective investment adviser representative's license. Notice is received by the investment adviser from the appropriate state and/or federal authorities and then, in accordance with that firm's procedures, advisory activity may start. The Administrator does not have direct contact with the individual.
When an investment adviser registers in a new state, who of the following is automatically registered as IARs? A. Any employee who is functioning as an IAR in at least one state B. Officers, partners, and directors of the firm who are functioning as IARs C. Clerical employees stuffing the envelopes with research reports D. Any employee who will be soliciting clients for the adviser
B. As we just stated, the "automatic registration" provision applies to those officers, partners, and directors of the IA who are already IARs in at least one state.
Which of the following individuals would be defined as an investment adviser representative? A. Melinda, one of the firm's research analysts, who has no contact with public clients B. Johnny, an employee who makes cold calls soliciting fornew advisory clients C. Mel, who prepares client account statements D. Jane, who is the firm's VP of HR services
B. One of the functions making a supervised person an IAR is soliciting for new business. Research personnel are not considered IARs unless they have client relationships. Mel's job is purely clerical and, even though Jane is a vice president, the HR department is far removed from anything to do with giving investment advice.
Under the Investment Advisers Act of 1940, for how many years must records be kept after the end of the fiscal year in which an entry was made? A) 1 year B) 2 years C) 5 years D) 10 years
C) 5 years Records must be kept for a full 5 years — the first 2 years in a in the firm's principal office — and are subject to SEC examination at any time. The 5-year requirement governs records of business activities. Additional rules require the articles of incorporation or partnership documents of the advisory firm and other business organizational documents to be kept for 3 years after termination of the enterprise.
Under the Uniform Securities Act, which of the following is NOT an investment adviser representative? A) A director in a state-registered investment advisory firm who determines specific recommendations for clients B) A vice president of a state-registered investment advisory firm who supervises employees who solicit clients for the firm C) A clerk employed by a state-registered investment advisory firm D) A natural person representing an SEC-registered investment advisory firm who has a place of business in the state and manages the account of a single client
C) A clerk employed by a state-registered investment advisory firm Clerical and ministerial personnel are specifically excluded from the definition of investment adviser representative. Specifically included in the definition are directors, officers, partners, associates, and employees of state-registered advisers who carry out investment advisory or solicitation functions or who supervise those functions. Also included in the definition are persons who perform similar functions for SEC-registered advisers and who have a place of business in the state.
Which of the following is an investment adviser? A) A columnist for a major news magazine who writes on the business and economic functions of banking institutions B) A bank that purchases securities on behalf of its custodial accounts C) A retired mechanical engineer who offers investment advice in his areas of expertise to a small number of clients for a fee D) A lawyer with sophisticated investment experience who gratuitously offers his clients advice on the value of securities
C) A retired mechanical engineer who offers investment advice in his areas of expertise to a small number of clients for a fee Even though an engineer is part of the acronym LATE, a retired or active mechanical engineer who offers investment advice to clients for a fee falls within the definition of investment adviser under the Uniform Securities Act. The LATE exclusion only applies to incidental advice given in the practice of a profession.
Which of the following regarding the registration of investment advisers and their representatives is TRUE? A) XYZ Advisers, Inc., is a federal covered investment advisory firm registered with the SEC; therefore, its representatives need not be registered with the Administrator. B) An investment adviser representative, terminated his employment with ABC Advisers and, 6 months later, was employed as an advisory representative by KLM, a federal covered adviser. Each firm is required to notify the Administrator of each event. C) ABC Advisers, Inc., registered with the Administrator, employs an investment adviser representative who left the employment of another investment advisory firm 6 months ago. ABC must notify the Administrator of this association promptly. D) ABC Advisers, Inc., is an investment advisory firm registered with the Administrator; therefore, its representatives need not be registered with the Administrator.
C) ABC Advisers, Inc., registered with the Administrator, employs an investment adviser representative who left the employment of another investment advisory firm 6 months ago. ABC must notify the Administrator of this association promptly. Only state-registered investment advisory firms are required to notify the appropriate state Administrator when employment is terminated or begun. In the case of investment adviser representatives of federal covered advisers, notification is the responsibility of the adviser representative. Investment adviser representatives of both state and federal registered investment advisers must be registered with the appropriate state Administrator(s), unless otherwise exempted. In the case of agents, not only the broker-dealers but also the agents must notify the Administrator.
Judy is in the business of giving general investment advice, suggesting appropriate asset allocation percentages, but not recommending specific securities. George's business model is giving investment advice and recommending specific securities. Assuming that both receive compensation, who must register as an investment adviser under the Uniform Securities Act? A) Only George B) Neither C) Both D) Only Judy
C) Both Two of the 3 critical elements in the definition of investment adviser are whether the person provides advice regarding securities and receives compensation for doing so. (The third element is "being in the business" and the question states that both are). Even without recommending specific securities, the fact that Judy suggests asset allocation percentages constitutes investment advice. Both Judy and George provide advice regarding securities for compensation and must register, unless specific exemptions apply.
There are waivers from the Series 65 exam requirement for certain professional designations. Among those qualifying for the waiver are individuals who are A) CPAs. B) CLUs. C) CFP®s. D) MBAs.
C) CFP®s. This is tricky. CFPs do qualify for the waiver. ChFCs (not CLUs) also qualify and those with the PFS—Personal Financial Specialist (granted by the American Institute of Certified Public Accountants), but not solely a CPA, qualify. MBA is not a professional designation. In general, the following designations allow for a waiver of the exam requirement: CFP®—CERTIFIED FINANCIAL PLANNER™ (granted by the CFP Board of Standards); CIC—Chartered Investment Counselor (granted by the Investment Adviser Association); ChFC®—Chartered Financial Consultant® (granted by the American College of Financial Services); PFS—Personal Financial Specialist (granted by the American Institute of Certified Public Accountants); and CFA®—Chartered Financial Analyst® (granted by the Chartered Financial Analyst Institute).
Which of the following is (are) NOT exempt from registration as an investment adviser representative in the state in which they conduct business? I. A Certified Financial Planner who prepares financial plans and whose only compensation is commissions II. An insurance agent who prepares comprehensive financial plans and receives commissions on any insurance products purchased by his clients III. A broker-dealer with extensive business in the state IV. A mutual fund company with offices and clients in the state A) I only B) I, II, III, and IV C) I and II D) III and IV
C) I and II A Certified Financial Planner who prepares financial plans for commissions must register in the state as an investment adviser representative. An insurance agent who prepares comprehensive financial plans for commissions is also acting in the capacity of an investment adviser representative and must register accordingly. In both cases, these individuals are holding themselves out as offering investment advice because, at least in the eyes of the USA, there is no such thing as a comprehensive financial plan that does not involve securities. The commissions they receive are considered indirect compensation for the rendering of investment advice. Broker-dealers and mutual fund companies are not investment advisers under the Uniform Securities Act.
Under the Uniform Securities Act, any partner, officer, or director of a registered investment adviser is an investment adviser representative if a function of the position involves I. offering advice concerning securities II. managing client accounts or portfolios III. determining securities recommendations for representatives to disseminate IV. supervising personnel engaged in advisory activities but not directly dealing with the public A) I, II and III B) I only C) I, II, III and IV D) I and II
C) I, II, III and IV The Uniform Securities Act defines persons associated with an investment adviser, who offers advice concerning securities, as an investment adviser representative. This includes any partner, officer, or director. The definition also includes persons who manage client accounts or portfolios, determine securities recommendations, or supervise personnel engaged in the above activities.
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 IV. An economist who consults with very large corporate employee benefit plans on how to best invest their funds A) I and IV B) I and II C) III and IV D) II and III
C) 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.
Long Range Planning (LRP) is a covered investment adviser doing business in all 50 states. Fred Fergus is an IAR with LRP and splits his time between an office in State A and State D. Fred has retail clients as follows: I. 16 clients in State A II. 12 clients in State B III. 6 clients in State C IV. 4 clients in State D Fred would have to register as an IAR in A) States B and C B) States A, B, and C C) States A and D D) States A and C
C) States A and D In the Investment Advisers Act of 1940, it states that "no law of any State requiring the registration, licensing, or qualification as an investment adviser or supervised person of an investment adviser shall apply to any person that is registered under section 203 as an investment adviser, or that is a supervised person of such person, except that a State may license, register, or otherwise qualify any investment adviser representative who has a place of business located within that State." Therefore, when employed by a covered adviser, the only time that state registration is required is when the individual functioning as an IAR has a place of business in the state. Had this been an IAR with a state-registered adviser, registration in all of the states would have been required (the de minimis would not cover State D because there is a place of business there).
Investment advisers who manage investment portfolios that total less than $100 million must register with A) both a state and the SEC B) neither the SEC nor a state C) a state only D) the SEC only
C) a state only Investment advisers who manage less than $100 million of investment assets are prohibited from registering with the SEC and are required to register with a state Administrator unless exempt under the laws of that state. Please do not confuse this with an SEC-registered IA whose AUM may drop to as low as $90 million with continued SEC registration allowed. Any question about that rule will state that AUM has "dropped."
An investment adviser is registered in States A and B with its principal office in State B. The Administrator of State A can request to see A) proof that the IA meets State A's financial and recordkeeping requirements B) internal communications regarding the company's participation in a local charitable event C) advertisements run in State A D) sales records relating to clients who are residents of State B
C) advertisements run in State A The Administrator of State A can request that advertisements placed in his state be filed because that is business relating to his state. As long as the IA meets the "home" state's financial and recordkeeping requirements, that is good everywhere.
Reticent Asset Management (RAM) is claiming an exemption from registration with the state because it is an adviser to private funds. One of the requirements to qualify for this exemption is A) all investors must be accredited. B) there can be no more than 10 investors during any 12-month period. C) all investors must be qualified clients. D) private fund assets under management cannot exceed $110 million.
C) all investors must be qualified clients. On the state level, the exemption requires that all investors meet the USA's definition of qualified client. That means the investor must have a net worth of at least $2.1 million dollars or at least $1 million in assets under management with the adviser. This is a more stringent test than that for accredited investors. In addition, accredited investor is a federal term, and this question is about state law. There is no limit placed on the number of investors (don't confuse this with the private placement exemption for registration of the security). The limit on AUM is $150 million (this is not to be confused with the AUM limits on becoming registered with the SEC).
As written in the Investment Advisers Act of 1940, a "person associated with an investment adviser" is any partner, officer, or director of such investment adviser (or any person performing similar functions), or any person directly or indirectly controlling or controlled by such investment adviser, including any employee of such investment adviser. Persons associated with an investment adviser whose functions are clerical or ministerial are not included in this definition. Based on that definition, all of the following would be associated persons EXCEPT A) a senior officer of an investment adviser responsible for marketing the adviser's services as opposed to making investment advisory decisions. B) an individual employed by an investment adviser to solicit new advisory clients, compensated at a rate of $500 for each new account. C) an employee of the firm with a degree in communications whose job is the graphic design of the investment adviser's research publications. D) a silent partner in an advisory firm organized as a general partnership.
C) an employee of the firm with a degree in communications whose job is the graphic design of the investment adviser's research publications. Graphic design would be considered a clerical function. All of the other choices describe persons who meet the definition.
A person who renders investment advice solely with respect to securities issued by the U.S. government A) must be registered both with the SEC and the state B) is exempt from state registration under the Uniform Securities Act but must be federal registered under the Investment Advisers Act of 1940 C) is excluded from the definition of investment adviser under federal law and is, therefore, exempt from state registration requirements D) need not be federal registered under the Investment Advisers Act of 1940 but must register in any state in which it has an office
C) is excluded from the definition of investment adviser under federal law and is, therefore, exempt from state registration requirements A person who renders advice solely with respect to securities issued or guaranteed by the U.S. government is excluded from the definition of investment adviser under the Advisers Act and is therefore a federal covered adviser under the NSMIA of 1996.
An investment adviser representative of a federal covered investment adviser registers with A) the NASAA. B) the FINRA. C) the Administrator. D) the SEC.
C) the Administrator. Registration of IARs is done solely on the state level. IARs register with the Administrator of each state in which they are required to be registered.
Under the Uniform Securities Act, which of the following is NOT required to register as 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. Clerical and ministerial (administrative) personnel are specifically excluded from the definition of investment adviser representative. Specifically included in the definition are directors, officers, partners, associates, and employees of state-registered advisers who carry out investment advisory or solicitation functions or who supervise those functions. Also included in the definition are persons who perform similar functions for SEC-registered advisers and who have a place of business in the state.
Under the Uniform Securities Act, most books and records of investment advisers must be maintained for A) 1 year B) 2 years C) 3 years, the first 2 in the firm's principal office D) 5 years, the first 2 in the firm's principal office
D) 5 years, the first 2 in the firm's principal office With few exceptions, the accounting records, correspondence, and advertising of investment advisers must be kept for a minimum of 5 years after the end of the year in which they were created, the first 2 years in the firm's principal office (on premises).
Which of the following is (are) NOT exempt from registration as an investment adviser representative in the state in which they conduct business? I. A Certified Financial Planner who prepares financial plans and whose only compensation is commissions II. An insurance agent who prepares comprehensive financial plans and receives commissions on any insurance products purchased by his clients III. A broker-dealer with extensive business in the state IV. A mutual fund company with offices and clients in the state A) III and IV B) I, II, III, and IV C) I only D) I and II
D) I and II A Certified Financial Planner who prepares financial plans for commissions must register in the state as an investment adviser representative. An insurance agent who prepares comprehensive financial plans for commissions is also acting in the capacity of an investment adviser representative and must register accordingly. In both cases, these individuals are holding themselves out as offering investment advice because, at least in the eyes of the USA, there is no such thing as a comprehensive financial plan that does not involve securities. The commissions they receive are considered indirect compensation for the rendering of investment advice. Broker-dealers and mutual fund companies are not investment advisers under the Uniform Securities Act.
Under the Uniform Securities Act, any partner, officer, or director of a registered investment adviser is an investment adviser representative if that individual does which of the following? I. Offers advice concerning securities II. Manages client accounts or portfolios III. Determines securities recommendations for representatives to disseminate IV. Supervises personnel engaged in the above activities but does not sell these services to the public A) II and III B) I and IV C) I and II D) I, II, III, and IV
D) I, II, III, and IV The Uniform Securities Act defines any individuals associated with an investment adviser as investment adviser representatives if they manage accounts or portfolios, determine securities recommendations, or supervise personnel engaged in the above activities, including any partner, officer, or director who offers advice concerning securities. Persons who manage client accounts or portfolios, determine securities recommendations, or supervise personnel engaged in the above activities are investment adviser representatives.
Under the Uniform Securities Act, which of the following must register with the state securities Administrator? A) Investment advisers who have $100 million or more under management B) Investment advisers without an office in the state whose clients are exclusively insurance companies C) Investment advisers to an investment company registered under the Investment Company Act of 1940 D) Investment advisers with a place of business in the state and less than $100 million in assets under management
D) Investment advisers with a place of business in the state and less than $100 million in assets under management Under the USA, an investment adviser with a place of business in the state must register with the state securities Administrator, regardless of who the clients are, unless they are federal covered advisers. Advisers without an office in the state, or whose clients are exclusively insurance companies, are not defined as investment advisers in that state under the USA. An adviser who manages an investment company that is registered under the Investment Company Act of 1940 or who has $100 million or more under management, are federal covered investment advisers that do not register with the states. Once the $100 million level is reached, the adviser has the choice of state or SEC registration until hitting $110 million.
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) The state where the largest number of its clients reside C) Whichever state is the highest D) Where its principal office is located
D) Where its principal office is located 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.
A state-registered investment adviser with discretionary authority over client accounts discovered on Monday, that the firm's net worth is below the required amount. He must notify the administrator and then file a report no later than the A) close of business Monday, close of business Friday B) close of business Monday, close of business Wednesday C) close of business Tuesday, close of business Friday D) close of business Tuesday, close of business Wednesday
D) close of business Tuesday, close of business Wednesday Unless otherwise exempted, every investment adviser registered or required to be registered under the Act shall by the close of business on the next business day notify the Administrator if such investment adviser's net worth is less than the minimum required. After transmitting such notice, each investment adviser shall file by the close of business on the next business day a report with the Administrator of its financial condition.
Under the Uniform Securities Act, all of the following persons with no place of business in the state are exempt from registration as an investment advisers EXCEPT A) advisers who deal exclusively with savings banks located in the state B) advisers who deal exclusively with investment companies registered under the Investment Company Act of 1940 C) advisers who deal exclusively with federal covered investment advisers located in the state D) advisers who have conducted business with no more than 6 individual clients in the state within the last 12 months
D) advisers who have conducted business with no more than 6 individual clients in the state within the last 12 months The de minimis rule for a registered investment adviser who has no place of business in the state is fewer than 6 clients. Doing business with 6 clients within the last 12 months exceeds this de minimis amount, and therefore, the exemption from registration does not exist. All others listed as possible answers are institutional or professional types of investment client. If a registered investment adviser works only with this type of client, an exemption from registration in that state exists as long as the registered investment adviser has no place of business in that state.
Registration as an investment adviser or investment adviser representative under the Uniform Securities Act is required of A) an officer of a trust company handling investments for trust accounts B) an agent of a broker-dealer who recommends model portfolios to clients in exchange for them executing their trades through him C) a tax attorney who, as an incidental part of his tax practice, recommends that his high-tax-bracket clients investigate the use of municipal bonds in their portfolios D) an economics professor at a local community college who gives lectures in the evenings to public groups about portfolio analysis for which he charges a nominal fee
D) an economics professor at a local community college who gives lectures in the evenings to public groups about portfolio analysis for which he charges a nominal fee If you are putting yourself out to the public as providing investment advice and charging a fee for doing so, you must register. The exceptions to this are if your giving of investment advice is incidental to your primary reason of doing business and if you are not charging specifically for the giving of that advice. Trust companies and their employees are specifically excluded from the definition of "investment adviser." A tax attorney making recommendations incidental to his legal practice and not charging specifically for the making of those recommendations is also not an investment adviser. The professor would have also been exempt from registration except for the fact that compensation was received for securities-related advice. Agents who are compensated only on the basis of recommended trades are not receiving special compensation and are, therefore, not considered to be in the business of giving advice.
Sally is registered as an agent with ABC Securities Co., a major brokerage house with offices in most states. ABC has recently introduced a fee-based asset management program and has asked Sally to devote one hour per day soliciting her existing clients for this program. Under the USA, Sally would A) only be permitted to solicit those clients who currently have discretionary accounts with ABC B) not be required to obtain any additional licensing beyond her agent's registration C) be required to obtain registration as a registered investment adviser D) be required to obtain registration as a registered investment adviser representative
D) be required to obtain registration as a registered investment adviser representative] Once ABC Securities Co. begins offering a fee-based asset management program, it loses its exclusion from the definition of investment adviser. One could assume that a national firm like this would probably become a federal covered adviser. If Sally wants to solicit anyone, existing clients or not, for this type of program, she could not do so until registered as an investment adviser representative.
Out-of-state investment advisers with no office in this state are not required to be registered if only advising A) on preferred stock B) on growth issues C) on stocks listed on the NYSE D) insurance companies
D) insurance companies It is not the securities they advise on but their clients that count. Out-of-state investment advisers with no office in this state must be registered under the Uniform Securities Act unless their only clients are insurance companies, registered investment companies, banks or other institutional investors, broker-dealers, and other investment advisers.
The sole proprietor of an insurance business that exclusively provides advice on fixed-income annuity contracts A) must register as an investment adviser under the Investment Advisers Act of 1940 B) must register as an investment adviser representative under the USA C) must register as a broker-dealer with the SEC D) need not register under any securities laws
D) need not register under any securities laws The sole proprietor of an insurance business need not register under the Uniform Securities Act or Investment Advisers Act. He provides advice on fixed-income annuities only, which are insurance products, not securities. Regulations under the USA, as well as federal securities laws, only apply to securities.
An IAR representing a state-registered investment adviser would NOT qualify for the de minimis exemption in a state if, over a 12-month period, she had A. 5 retail clients B. 5 or fewer retail clients C. fewer than 6 retail clients D. 6 or fewer retail clients
D. Because the maximum is 5 retail clients in a 12-month period, choice D with 6 clients is over the limit. Notice that, "fewer than 6" and "5 or fewer" mean the same thing.
Which of the following individuals would be required to register with the Administrator of a state? A. Walter, who represents a state-registered adviser, has no place of business in the state, and only serves existing clients who vacation in the state. B. May, who represents a covered adviser, has no place of business in the state and has 38 clients who reside in the state. C. Aliza, who represents a state-registered adviser, has no place of business in the state and had fewer than 6 individual clients who were residents of the state during the past 12 months. D. Joe, who represents a covered adviser, has a place of business in the state, and had 4 retail clients who were residents of the state during the past 12 months.
D. Even though he represents a federal covered adviser, once an IAR maintains a place of business in a state, Joe must register in that state regardless of the number of clients. Walter need not register because he qualifies for the snowbird exemption. May qualifies for the exemption as an IAR of a federal covered investment adviser. She is only required to register in those states where she maintains a place of business. Aliza qualifies for the de minimis exemption (fewer than 6 is the same as 5 or fewer).
Zack is an IAR with Unicorn Investment Advisers (UIA), an investment adviser registered in State W. Zack has accepted an employment offer from Elite Research Associates, (ERA), an investment adviser also registered in State W. What are the notification requirements to the State W Administrator? A. Zack is the only person who notifies the Administrator B. UIA is the only person who notifies the Administrator C. ERA is the only person who notifies the Administrator D. UIA and ERA notify the Administrator
D. This is bit sneaky. We've just told you to remember the "I" in IAR resembles the number 1 so only one person must notify. We also stated that if the IAR represents a state-registered investment adviser, the IA does the notification. In this specific instance, because two IA firms are involved, each of them must notify the Administrator; UIA that Zack is no longer under their control and ERA that Zack now is. This is just an example of how every rule has an exception.