IACCP (QE)
SEC-registered advisers that have proxy voting authority for clients must do which TWO of the following? (Choose two.) A. Adopt procedures to ensure proxies are voted in the best interest of clients. B. Disclose to clients information about the firm's proxy policies and procedures on Form ADV Part 2. C. Create a proxy voting committee to address conflict situations. D. Provide information to clients on how their proxies were voted.
A. Adopt procedures to ensure proxies are voted in the best interest of clients. D. Provide information to clients on how their proxies were voted.
Which THREE situations require an SEC-registered adviser to disclose in Form ADV Part 2 any financial condition that might impair its ability to meet contractual commitments to clients? (Choose three.) A. Adviser has discretionary authority B. Adviser requires prepayment of more than $1,200 in fees per client, six months or more in advance C. Adviser has custody of client funds or securities D. Adviser has custody of client assets and has received a qualified opinion from its public accountant
A. Adviser has discretionary authority B. Adviser requires prepayment of more than $1,200 in fees per client, six months or more in advance C. Adviser has custody of client funds or securities
What does the SEC Investment Adviser Codes of Ethics Rule require access persons to submit? A. An annual holdings report that must be current within 45 days of submission. B. Quarterly transaction reports within 10 days of quarter end. C. A certification that the employee does not hold any private placements. D. A request for pre-approval of all brokers used.
A. An annual holdings report that must be current within 45 days of submission.
Which situation would trigger a violation of the SEC Pay-to-Play Rule? A. An individual who has become a covered associate within the last three months makes a $1,000 contribution to an elected official, whom the individual is also soliciting as an advisory client. B. An investment adviser makes a contribution of $50.00 to a government elected official responsible for selecting investment advisers. C. An investment adviser directs its counsel to make a contribution of $50.00 to a government elected official responsible for selecting investment advisers. D. An investment advisory firm pays another registered investment adviser to solicit government clients on its behalf.
A. An individual who has become a covered associate within the last three months makes a $1,000 contribution to an elected official, whom the individual is also soliciting as an advisory client.
To fall within the Section 28(e) safe harbor of the Securities Exchange Act of 1934, which TWO activities are an investment adviser required to do if it pays higher commissions in order to receive soft dollar products? (Choose two.) A. Make a good faith determination that commissions paid are reasonable for products received. B. Make disclosure in Form ADV Part 2 regarding its soft dollar practices. C. Document mixed use allocations in writing. D. Ensure that research is used to benefit all client accounts.
A. Make a good faith determination that commissions paid are reasonable for products received. B. Make disclosure in Form ADV Part 2 regarding its soft dollar practices.
In the final release adopting the Compliance Programs Rules, the SEC indicated which TWO are required of the individual designated as Chief Compliance Officer (CCO)? (Choose two.) A. Must be competent and knowledgeable regarding the Investment Advisers Act of 1940. B. Must oversee SEC examinations of the adviser. C. Must be empowered to enforce the written policies and procedures. D. Must be conversant with the federal securities laws.
A. Must be competent and knowledgeable regarding the Investment Advisers Act of 1940. C. Must be empowered to enforce the written policies and procedures.
What are the basic requirements for addressing violations in policies and procedures under the Investment Advisers Act and Investment Company Act Compliance Programs Rules? A. Prevent, detect, correct B. Collect, inspect, affect C. Infer, deter, procure D. Design, align, refine
A. Prevent, detect, correct
Which statement is TRUE about disclosing a firm's disciplinary history in Form ADV Part 1A? A. SEC-registered investment advisers may limit their disclosure of any disciplinary event to 10 years following the date of the event. B. State-registered investment advisers may limit their disclosure of any disciplinary event to 10 years following the date of the event. C. Investment advisers are not required to disclose a prior bankruptcy petition to clients. D. SEC-registered investment advisers are required to report arbitration claims.
A. SEC-registered investment advisers may limit their disclosure of any disciplinary event to 10 years following the date of the event.
Which statement is TRUE with regard to a directed brokerage relationship? A. Specific Form ADV disclosure must be made as a result. B. The investment adviser is relieved of its fiduciary duties. C. Directed transactions must always be executed first. D. Soft dollar credits falling within Exchange Act Section 28(e) are prohibited.
A. Specific Form ADV disclosure must be made as a result.
In performing due diligence on a potential solicitor, the investment adviser must ensure that the solicitor: A. is not subject to any statutory disqualification. B. is not acting as a solicitor for an unregistered adviser. C. has passed the Series 65 exam. D. is registered in appropriate states.
A. is not subject to any statutory disqualification.
Which was NOT identified as a requirement for an investment adviser that intends to allocate an investment opportunity to a proprietary account in a block trade with other client accounts? A. The adviser's compliance officer must approve the order in writing. B. The adviser will prepare, prior to entering the order, a written allocation statement. C. Transaction costs for the order will be shared pro-rata based on each client's participation in the transaction. D. The adviser will identify that the block trade is consistent with its duty to achieve best execution.
A. The adviser's compliance officer must approve the order in writing.
Which THREE situations would require an investment adviser to disclose to the client that best execution might NOT be achieved? (Choose three.) A. The client has instructed the investment adviser to direct brokerage to a certain broker-dealer. B. The investment adviser pays up for research and other soft dollar benefits. C. The investment adviser requires the client to direct brokerage to a certain broker-dealer. D. The investment adviser manages the client's portfolio on a discretionary basis.
A. The client has instructed the investment adviser to direct brokerage to a certain broker-dealer. B. The investment adviser pays up for research and other soft dollar benefits. C. The investment adviser requires the client to direct brokerage to a certain broker-dealer.
In which THREE circumstances is an adviser deemed to have custody under the SEC Custody Rule? (Choose three.) A. The investment adviser is mistakenly sent a check payable to the client and returns it to the sender within five business days of receipt. B. The investment adviser deducts advisory fees from the client's account with the client's prior written consent. C. The investment adviser takes possession of a check drawn by the client that is payable to a third party. D. The investment adviser acts as one of three or more trustees in regards to an advisory client's account.
A. The investment adviser is mistakenly sent a check payable to the client and returns it to the sender within five business days of receipt. B. The investment adviser deducts advisory fees from the client's account with the client's prior written consent. D. The investment adviser acts as one of three or more trustees in regards to an advisory client's account.
Investment Adviser's President serves on the board of directors of XYZ, a publicly traded company. Adviser has approved the separate employment, established and tested a Chinese Wall to prevent information flowing between Adviser and XYZ, and has adopted a policy that it will not hold XYZ stock in client portfolios. In drafting its client disclosures, must Adviser disclose the President's relationship with XYZ? A. Yes, by disclosing the conflict and Adviser's procedures. B. Yes, but only in the Adviser's code of ethics. C. No, the conflict has been resolved. D. No, Adviser will not recommend XYZ to clients.
A. Yes, by disclosing the conflict and Adviser's procedures.
As used in the Clover Capital SEC no-action letter, the term "model" portfolio refers to: A. a hypothetical portfolio managed in real time. B. a hypothetical portfolio derived by applying current strategies to past results. C. all client portfolios in the same style that have no material restrictions. D. a single client portfolio that has no restrictions.
A. a hypothetical portfolio managed in real time.
Under the SEC Custody Rule, an adviser is NOT subject to a surprise annual examination by a qualified accounting firm if the: A. adviser directly debits advisory fees from clients' custodial accounts. B. adviser is granted general power of attorney by advisory clients. C. adviser or certain of adviser's employees serve as trustees to advisory clients. D. adviser provides bill-pay services to advisory clients.
A. adviser directly debits advisory fees from clients' custodial accounts.
ABC Advisers has a website, www.ABCAdvisers.com. The website includes the language: "ABC Advisers, a Registered Investment Adviser, provides financial planning and asset management services. The President of ABC Advisers, Fred Johnson, has 25 years of investment management experience. For a free consultation, please call ABC Advisers, RIA, at 800-555-0000." Which is a TRUE statement? ABC Advisers: A. cannot use the initials "RIA." B. cannot advertise via a website. C. must specify if it is SEC- or state-registered. D. cannot offer free services.
A. cannot use the initials "RIA."
An adviser runs a newspaper advertisement that contains the following statement from a client: "Your financial planning seminar changed my life." This advertisement is: A. prohibited because it contains a testimonial. B. permissible because the client is not named. C. prohibited because it does not disclose the possibility of loss. D. prohibited because the quote does not mention the client's performance.
A. prohibited because it contains a testimonial.
Which event would be deemed an assignment of an investment advisory contract? A. An adviser hires a new CEO to replace its current retiring CEO. B. An adviser is purchased by an unaffiliated adviser. C. Any public offering of an adviser's stock. D. An adviser organized as a corporation changes its structure to a partnership.
B. An adviser is purchased by an unaffiliated adviser
Which activity is NOT mandated for investment advisers that store required records electronically? A. Providing the SEC with prompt access, retrieval, and reproduction. B. Maintaining copies of all electronically stored records using WORM format. C. Arranging and indexing records to provide easy access and retrieval. D. Developing procedures to preserve and maintain records.
B. Maintaining copies of all electronically stored records using WORM format.
An SEC-registered investment adviser is NOT required to disclose "material" disciplinary information in its Form ADV Part 1 after: A. 5 years B. 10 years C. 12 years D. 15 years
B. 10 years
An investment adviser is required to maintain which THREE records in connection with its code of ethics? (Choose three.) A. An electronic database of access persons' personal trading records. B. A record of violations of the code. C. A list of access persons. D. A copy of each supervised person's acknowledgement of receipt of the code.
B. A record of violations of the code. C. A list of access persons. D. A copy of each supervised person's acknowledgement of receipt of the code.
Which TWO are included in the definition of an "advisory affiliate" in Form ADV Part 1A? (Choose two.) A. A broker-dealer with whom advisory personnel are registered as representatives. B. Any person performing similar functions as an adviser's officers, partners, or directors. C. All employees directly or indirectly controlled by an adviser within the most recent two years. D. All persons directly or indirectly controlling or controlled by an adviser.
B. Any person performing similar functions as an adviser's officers, partners, or directors. D. All persons directly or indirectly controlling or controlled by an adviser.
If an investment adviser becomes ineligible for SEC registration, which document must be filed to terminate its registration? A. Form DRP B. Form ADV-W C. Form ADV Part 2A D. Form U5
B. Form ADV-W
Which TWO qualify as a "security" under the Investment Advisers Act of 1940? (Choose two.) A. Commodity futures B. Limited partnership interests C. Fixed annuities D. Variable annuities
B. Limited partnership interests D. Variable annuities
Pursuant to the Securities Exchange Act of 1934, Section 13(f) securities that must be reported on Form 13F generally include each of the following EXCEPT: A. Exchange-traded securities B. Mutual funds C. Exchange-traded funds D. NASDAQ-quoted securities
B. Mutual funds
Investment Adviser's trade allocation procedures allow for an allocation to be changed post-trade if it is in the best interest of its clients. Security X is appropriate for Adviser's Large Cap and All Cap portfolios. Large Cap accounts are greatly outperforming All Cap accounts. Portfolio Manager wants to use post-trade allocation to direct profitable trades to All Cap clients and unprofitable trades to Large Cap clients. Is this practice consistent with Adviser's duty to its clients? A. Yes, because balancing performance among many clients is consistent with Adviser's fiduciary duty. B. No, because Adviser is favoring a particular group of clients. C. Yes, because all clients must be treated fairly. D. No, because allocations may not be made post-trade.
B. No, because Adviser is favoring a particular group of clients.
According to Investment Company Act of 1940 Rule 3a-4 (Status of Investment Advisory Programs), which TWO activities is an adviser required to do? (Choose two.) A. Notify clients monthly of any investment changes to the model portfolio. B. Notify the client in writing at least quarterly to contact the adviser if suitability information has changed. C. Develop an Investment Policy Statement (IPS) for a client within two weeks of initial investment. D. Make a best effort attempt to contact the client to update suitability information at least annually.
B. Notify the client in writing at least quarterly to contact the adviser if suitability information has changed. D. Make a best effort attempt to contact the client to update suitability information at least annually.
Which THREE persons or firms may be excluded from having to register under the Investment Advisers Act of 1940? (Choose three.) A. Accountants whose advisory services pertain solely to incidental financial planning. B. Persons or firms whose advice and reports are related solely to U.S. government securities. C. Publishers of generally circulated, bona fide newspapers or financial journals. D. Domestic banks and bank holding companies.
B. Persons or firms whose advice and reports are related solely to U.S. government securities. C. Publishers of generally circulated, bona fide newspapers or financial journals. D. Domestic banks and bank holding companies.
ABSENT an exemption, Regulation S-P PROHIBITS the sharing of nonpublic personal information with any non-affiliated third party unless the firm performs which TWO actions? (Choose two.) A. Documents its privacy notice on its website in a clear and conspicuous manner. B. Provides an opt-out notice for consumers or customers. C. Provides notice of its privacy policy. D. Provides consumers with a privacy compliance checklist.
B. Provides an opt-out notice for consumers or customers. C. Provides notice of its privacy policy
An investment advisory firm is closing its business. What should the firm do with its corporate and organizational documents after termination of the firm entity? A. Retain the documents in an easily accessible place of which the SEC has been notified for five years. B. Retain the documents in an easily accessible place of which the SEC has been notified for three years. C. Dispose of the documents in a prudent manner, ensuring the personal identifying information is destroyed. D. Retain the documents for five years, two of which must be in an easily accessible place.
B. Retain the documents in an easily accessible place of which the SEC has been notified for three years.
The Investment Advisers Act of 1940 requires that written investment advisory agreements must address: A. proxy voting. B. assignment of the contract. C. brokerage arrangements. D. fees.
B. assignment of the contract.
What is TRUE with regard to the written policies and procedures under the scope of the Investment Advisers Act of 1940 Compliance Programs Rule? They must: A. be consolidated into a single document. B. be adequately customized, implemented and supervised. C. include a risk identification discussion. D. be distributed to all employees.
B. be adequately customized, implemented and supervised.
A Chief Compliance Officer (CCO) at an investment company would be required to provide a written report to the: A. designated SEC regional office. B. fund's board of directors. C. fund's audit committee. D. fund's CEO.
B. fund's board of directors.
Which statement regarding best execution is FALSE? A. If an investment adviser has a potential conflict of interest in its selection of a broker-dealer to execute securities transactions for its clients, it must disclose this conflict of interest. B. If an investment adviser exclusively uses an affiliated broker-dealer to place client trades, best execution might not be achieved. C. Best execution is measured by commission rate only. D. Advisers should establish criteria to measure execution results.
C. Best execution is measured by commission rate only.
According to the Investment Advisers Act of 1940, every investment adviser is required to prevent illegal insider trading by establishing, maintaining and enforcing written policies and procedures reasonably designed to: A. prevent the misuse of material client information. B. create Chinese Walls. C. prevent the misuse of material nonpublic information. D. create restricted lists and enforce black-out periods.
C. prevent the misuse of material nonpublic information.
Which is a legitimate reason for EXCLUDING a particular account from receiving a pro rata share of a partially executed aggregated order? A. ERISA accounts received their allocations before non-ERISA accounts. B. Clients with the largest volume of assets under management received the allocations first. C. Client's pro rata allocation did not meet the client's minimum trading lot size. D. Client relationships with the greatest longevity split the partial allocation.
C. Client's pro rata allocation did not meet the client's minimum trading lot size.
For which responsibility is the Chief Compliance Officer (CCO) ultimately accountable? A. Draft all written policies and procedures. B. Design and run annual compliance meetings. C. Enforce written policies and procedures and code of ethics. D. Independently test all procedures.
C. Enforce written policies and procedures and code of ethics.
Investment Adviser is introduced to Client by Broker. Client instructs Adviser in writing to place 50% trades in Client's account through Broker "subject to best execution". At the end of the year, Adviser discovers 75% of Client's trades were done through block trades at firms other than Broker's and only 25% of the trades have been placed through Broker. Has Adviser violated its fiduciary duty to Client? A. No, if Broker was not providing additional services to Client. B. Yes, if Broker was providing additional services to Client. C. No, if Adviser obtained more favorable price and service. D. Yes, if Adviser never thought that it would meet Client's target.
C. No, if Adviser obtained more favorable price and service.
Investment Adviser has managed Bob's account for many years. Bob notifies Investment Adviser that he has recently married Kate, and now Kate's three minor children are living with them. What is Investment Adviser required to do? A. Send Kate a copy of the current Form ADV Part 2. B. Meet with Kate to discuss her investment strategy. C. Reassess the suitability of Bob's current investment strategy. D. Count Kate and her children as separate clients
C. Reassess the suitability of Bob's current investment strategy.
As defined in Form ADV, all positions would be considered an advisory affiliate EXCEPT the investment advisory firm's: A. Head Trader B. Chief Financial Officer C. Systems Administrator D. Investment Adviser Representative
C. Systems Administrator
Investment Adviser manages a portfolio for Mr. Jackson, the President of Jackson Industries, a publicly traded company. Mr. Jackson informs Portfolio Manager that the stock price for Jackson Industries will likely decline in value when the quarterly earnings announcement is made. Portfolio Manager shorts Jackson Industries in his personal account and makes a large profit. Adviser did not require pre-clearance of these trades because Adviser does not hold Jackson Industries in client portfolios. Has Adviser failed to meet its duties under the Advisers Act? A. Yes, because Adviser must pre-clear all trades by portfolio managers. B. No, because it was Mr. Jackson who shared nonpublic information. C. Yes, because Adviser reasonably failed to detect insider trading. D. No, because Mr. Jackson suffered no losses.
C. Yes, because Adviser reasonably failed to detect insider trading.
Under the Advertising Rule, which TWO are required when an adviser provides a list of profitable past-specific recommendations? The list must: (Choose two.) A. be posted on the adviser's Web site. B. include all securities recommended for the past six months. C. be include disclosure that future recommendations will not necessarily be profitable. D. include all securities recommended for the past year.
C. be include disclosure that future recommendations will not necessarily be profitable. D. include all securities recommended for the past year.
An adviser recommends unaffiliated money managers to clients. The adviser does not provide day-to-day management of the securities in the portfolios but does have the discretion to hire and fire managers. The adviser's services are BEST characterized on Form ADV Part 1A as: A. continuous and regular, but not supervisory or management services. B. supervisory or management services, but not continuous and regular. C. continuous and regular supervisory or management services. D. neither continuous and regular nor supervisory or management services.
C. continuous and regular supervisory or management services.
The fiduciary duty imposed on advisers under the Investment Advisers Act of 1940 can BEST be described as: A. providing equal disclosure to all clients. B. imposing an ERISA fiduciary standard. C. putting the client's interests ahead of the adviser's. D. acting in a custodial capacity.
C. putting the client's interests ahead of the adviser's.
Each person is defined as an "access person" under the SEC Investment Adviser Codes of Ethics Rule EXCEPT: A. any supervised person who has access to nonpublic information regarding any client's purchase or sale of securities. B. any supervised person who makes securities recommendations to clients. C. officers, directors, and partners of a firm whose primary business is providing investment advice. D. any supervised person who trades in securities for their own account.
D. any supervised person who trades in securities for their own account.
Adviser A and its president, Jones, conduct investment manager searches for institutional clients. Jones often refers his clients to Adviser B. Adviser B has provided financing for business ventures owned by Jones. Adviser B has also steered brokerage business to a brokerage firm owned by Jones' son. Which action should be taken by Adviser B? A. Adviser B may rely on disclosure in Adviser A's Form ADV about these business dealings. B. None since Jones had made his clients aware of Adviser B's business dealings with Jones and his son. C. None since Adviser A's referrals are not influenced by any of these business dealings. D. Adviser B should disclose these business dealings in its Form ADV Part 2 because they are material conflicts of interest.
D. Adviser B should disclose these business dealings in its Form ADV Part 2 because they are material conflicts of interest.
The Investment Advisers Act of 1940 defines the scope of the anti-fraud provisions as extending to: A. SEC-registered advisers and foreign advisers with a place of business in the U.S., whether registered or exempt. B. SEC-registered advisers and foreign advisers doing business in the U.S., whether registered or exempt. C. SEC-registered investment advisers. D. All investment advisers, whether registered or exempt.
D. All investment advisers, whether registered or exempt.
55. What is NOT true regarding the annual review under the Investment Advisers Act of 1940 Compliance Programs Rule? A. It is used to determine the adequacy of the firm's policies and procedures. B. It is used to determine the effectiveness of the firm's policies and procedures. C. Any document created to evidence the annual review must be retained. D. It must be summarized in a written report.
D. It must be summarized in a written report.
What are advisers required to report to the Financial Crimes Enforcement Division (FinCEN)? A. A potential client's refusal to provide personally identifying information. B. Frequent transactions that are not consistent with client's objectives or net worth. C. Each instance in which clients request a copy of their anti-money laundering file. D. One cash transaction OR two or more related cash transactions totaling more than $10,000.
D. One cash transaction OR two or more related cash transactions totaling more than $10,000.
According to the Form ADV Instructions for Part 1A, which is NOT an example of continuous and regular supervisory or management services of an account? When the investment adviser: A. allocates client assets among other investment advisers and has the discretionary authority to hire and fire those investment advisers. B. has discretionary authority over a client's account and provides ongoing management services with respect to that account. C. has discretionary authority to allocate the client assets among various mutual funds. D. consults with the client regarding investment recommendations and the client executes any resulting purchases and/or sales.
D. consults with the client regarding investment recommendations and the client executes any resulting purchases and/or sales.
A high net worth individual includes an individual with: A. managed assets of at least $500,000 and a net worth of at least $1,000,000. B. a net worth of at least $1,000,000. C. managed assets of at least $500,000. D. managed assets of at least $750,000.
D. managed assets of at least $750,000.
During an examination of XYZ Investment Advisers, the SEC discovers that two of Adviser's portfolio managers have been engaged in frontrunning client accounts. Neither Compliance nor Senior Management had any knowledge of the scheme. If Adviser can show to the SEC's satisfaction that it had developed and enforced procedures reasonably designed to prevent frontrunning, Adviser will be able to claim that, despite the violation, Adviser has met its duty to: A. assist the SEC. B. maintain required books and records. C. eliminate internal control deficiencies. D. supervise.
D. supervise.