Series 65 Unit 1
Investment advisory contract
-fed: oral or written prices just have to be reasonable -state: only written prices have to be competitive -both acts: services provided if custody, amount of advisory fee and how to compute it, if discretion is allowed, change of partnership if smaller owned
An applicant for registration as an investment adviser discloses on Form ADV that it plans to use palm readers to help determine investments most suitable for their clients. Under the Uniform Securities Act, the Administrator
A denial of registration must be based on the concept of law. There are stated reasons, such as felony convictions, outstanding injunctions, and insolvency. Although it is required to disclose methods of analysis used, the Administrator is not empowered to pass judgment on them.
A federal covered investment adviser has which of the following obligations regarding the state in which it maintains its principal place of business?
A federal covered investment adviser is required to notify the Administrator of its federal covered status and pay any state-required fees. The state may require examinations, such as the Series 65 or 66, but not a net worth in excess of that required under federal law.
Advisers that manage $110 million or more in customer assets are required to do which of the following?
Advisers that manage $110 million or more in customer assets are federal covered advisers and are required to register with the SEC under the Investment Advisers Act of 1940. In addition, they are normally required to file notice in each state where they conduct business. There are no bonding requirements for federal covered advisers.
Which of the following securities is most likely to register by qualification in the state of Virginia?
Although any issuer may register its securities at the state level by qualification, this cumbersome means of registration is mainly used in conjunction with intrastate (single state) offerings. If a security is offered by a corporation beyond its own home state, the issuer must register with the SEC at the federal level. Registration by qualification, while permitted, would be an unlikely choice.
Paradime Investment Group (PIG), an SEC-registered broker-dealer with offices in 22 states, has recently begun offering a wrap fee program. When promoting this new program to existing brokerage clients, it would be appropriate to point out that the wrap fee charges cover which of the following services?
Although firms can bundle a number of items into their wrap fee accounts, the two primary services that are always present are advisory service and execution of trades. Research reports and seminar fees are items that are usually provided by broker-dealers to investment advisers as soft-dollar compensation.
An investor who resides in New York reads a newspaper ad for advisory services in a newspaper published in New Jersey. More than 80% of the newspaper's circulation is in the state of New York. According to the Uniform Securities Act, an offer has been made in
An offer is not made when a newspaper is circulated but not published in the state nor if it is published in the state but has more than 2/3 of its circulation outside of the state.
The Uniform Securities Act is designed to protect the general public and not restrict investment activities of institutional or professional investors. Any offer or sale to any of the following would be considered exempt from the registration and advertising filing requirements of the USA EXCEPT
Any offer or sale to a bank, savings institution, trust company, insurance company, investment company as defined in the Investment Company Act of 1940, pension or profit-sharing trust, or other financial institution or institutional buyer, or to a broker-dealer, whether the purchaser is acting for itself or in some fiduciary capacity is considered an exempt transaction. Corporate chief executive officers are individual investors under the USA. Transactions in their personal investment accounts are therefore not exempt from the provisions of the act.
Joan, who has a PhD in economics, has been employed as an agent by Gibraltar Securities for the past 15 years. Missing academic life, she resigns from the broker-dealer and accepts a position as an economics professor at a state university. Which, if any party, is required to notify the state securities Administrator of this change?
Both Joan and the firm
Included in the Investment Advisers Act of 1940 are a number of different recordkeeping requirements. Wealth Preservation Specialists is a covered adviser that is organized as a partnership. If the firm were to dissolve, partnership agreements must be kept for
Both the Investment Company Act of 1940 (applicable here because this is a covered adviser) and the NASAA Model Rule on Recordkeeping require that investment advisers maintain certain records, such as partnership agreements and corporate articles of incorporation, for a period of no less than 3 years after dissolution.
Certain documents belonging to a federal covered investment adviser must be kept for a period of time after the enterprise closes. Those documents are
Broker-dealers and investment advisers must keep certain records for a period of 3 years after the termination of the business. How and where those records are maintained is the responsibility of the firm, not the regulators. This is a separate requirement from the one that has active broker-dealers keeping records for 3 years and investment advisers for 5.
written material copy to communication with clients
Fed- 1o or more state- 2 or more
While several methods of registration are described under the Uniform Securities Act, which of the following would be most appropriate for an investment company registered with the SEC under the Investment Company Act of 1940?
Federal covered securities (those listed on the NYSE, the NYSE American LLC (formerly known as the American Stock Exchange [AMEX]), and the Nasdaq Stock Market) are exempt from registration under the USA. However, the states are permitted to assess fees and some require filing of certain information. This is notice filing and most commonly occurs with investment companies registered under the Investment Company Act of 1940.
An investment adviser must meet the net worth requirements of the Administrator. When doing the computation, which of the following assets would be included?
For purposes of this Rule, the term "net worth" means an excess of assets over liabilities. But net worth does not include the following as assets: goodwill, franchise rights, patents, copyrights, marketing rights, and all other assets of intangible nature; home, home furnishings, automobile(s), and any other personal items not readily marketable in the case of an individual; advances or loans to stockholders and officers in the case of a corporation; and advances or loans to partners in the case of a partnership. So, what's the deal with the sofa? Because the choice specifically says that it is in the reception area, we must assume that it is not a "home" furnishing, rather one in the office and those are not excluded assets.
Which of the following is not included in the definition of broker-dealer as found in the Uniform Securities Act?
In the Uniform Securities Act, it specifically states: "Broker-dealer" means any person engaged in the business of effecting transactions in securities for the account of others or for his own account. "Broker-dealer" does not include (1) an agent, (2) an issuer, (3) a bank, savings institution, or trust company. Attorneys are excluded from the definition of investment adviser, as long as their advice is incidental to their legal practice, but that exclusion does not apply to the term "broker-dealer". Even though credit unions engage in banking activity, they are not included in the exclusion. Being an investment adviser does not exclude a person from the need to register as a broker-dealer if that person is performing the functions of a BD.
Mr. Beale buys 10M 6.6s of 10 at 67. What will his annual interest be?
Interpret "10M" as "$10,000 worth of." Beale receives the nominal yield of the bonds, which is 6.6% of $10,000. The M is from the roman numeral for 1,000.
Kapco Advisers, a federal covered investment adviser operating on a calendar-year basis, published a list of recommended securities in January 2015. A copy of this must be maintained until at least
Investment adviser records, including copies of advertisements, must be kept for at least 5 years from the end of the fiscal year in which the record originated—in this case, 5 years from the end of 2015.
Under state law, all of the following investment advisers are exempt from registration except
It is the federal law, the Investment Advisers Act of 1940, that exempts investment advisers from registration if their only clients are insurance companies. State law does not have that exemption. Among other exemptions, the Uniform Securities Act exempts investment advisers whose only clients are private funds. This would include the foreign private advisers and advisers to venture capital funds.
USATrade Securities, a FINRA member broker-dealer, is registered in 10 Midwest states. Regarding financial requirements, USATrade must meet those of
It may be assumed that a broker-dealer member of FINRA is also registered with the SEC. As such, when it comes to financial requirements, bonding, recordkeeping, and so forth, the SEC's requirements always trump those of the states.
Jessica is an investment adviser representative for an SEC-registered investment adviser. She lives in State X and receives a letter from a former college friend requesting a contribution to the friend's political campaign for governor of State Y. As it happens, Jessica's firm provides advisory services to State Y's employee retirement fund and Jessica actively solicits business from other state agencies. Which of the following actions would be permitted to Jessica under the SEC's pay-to-play rule without causing any concerns to her firm?
Jessica's solicitation activities define her as a covered employee. The rule allows covered employees to make contributions of up to $350 per official or candidate per election in which they can vote, or $150 for other elections. Because the friend is running for governor in a state that Jessica cannot vote, the lower limit applies.
Which of the following investment advisers would be required to register with the state?
No IA can remain registered with the SEC with assets under management (AUM) of less than $90 million (except those who manage registered investment companies). It takes $100 million in AUM to be able to initially register with the SEC; thereafter, the IA must maintain at least $90 million to remain SEC-registered.
Which of the following is considered a sale of securities under the Uniform Securities Act?
Redemption of mutual fund shares is always treated as a sale by the redeeming shareholder. The exchange of securities in a merger is not considered a sale under the act. Any disposition (liquidation) of securities that involves cash consideration, or in which the shareholder has a choice of cash or securities, is a sale.
An individual is employed by a federal covered investment adviser for the sole purpose of giving advice related to monitoring investment portfolios, but only to qualified employee benefit plans. Under the Uniform Securities Act, this individual is
Regardless of whom the advice is given to, unless there is some kind of exemption involved, individuals working for IAs (state or federal) must register as IARs in at least one state. It makes no difference if the plan is qualified or not.
Under the provisions of the Uniform Securities Act, securities exempt from registration requirements include
Securities exempt from registration requirements include securities issued by the state or U.S. government; securities issued by foreign governments with whom the U.S. maintains diplomatic relations; and any securities issued by savings and loan or building and loan associations, insurance companies, and credit unions authorized to do business in this state.
Strategic Capital Asset Managers (SCAM) is an investment adviser that is registered in 5 states. In lieu of preparing a fancy brochure, SCAM is permitted to provide its clients with a copy of its
The Form ADV Part 2 (both parts) is acceptable for use as the firm's brochure. Part 1 is for registration purposes, and Part 1B is only used by state-registered advisers (as this firm is). Part 2, Appendix 1 is used for investment advisers who offer wrap fee programs. As a state-registered investment adviser, SCAM does not file any forms with the SEC.
One of the most significant features of the UPIA is the ability of a trustee to delegate investment decisions to a qualified third party. Delegation is permitted as long as the fiduciary to whom the powers are delegated
The UPIA specifically uses the terms, skill and caution, when describing the actions of the fiduciary. Other components of the UPIA state that, rather than viewing individual securities, the overall effect on the entire portfolio is considered. This means that high-risk securities can have a place, as long as the overall portfolio meets the objectives. That is the benefit of diversification, something that is considered essential to prudent investment of money belonging to others.
Under the Uniform Securities Act, which of the following statements is (are) TRUE regarding registration of broker-dealers and agents?
Those defined as broker-dealers must be registered with the state before transacting any securities business. An agent of a broker-dealer must become registered with the state before transacting business.
A pension consultant who advises corporate retirement plans with assets of $135 million must register with which of the following?
Under the Dodd-Frank Bill, until a pension fund manager has at least $200 million in AUM, registration with the states is required. Once the $200 million level is reached, SEC registration becomes an option.
Under the Investment Advisers Act of 1940, which of the following statements regarding an adviser's registration is TRUE?
Under the Investment Advisers Act of 1940, registrations become effective 45 days after filing, unless delayed by the SEC, and remain effective until withdrawn by the adviser or canceled, suspended, or revoked by the SEC. The SEC will cancel a registration if the adviser is no longer in existence or in the business. Although the ADV-W is the form for withdrawal, it becomes effective upon acceptance by the IARD, provided however that the investment adviser's registration continues for a period of 60 days after acceptance solely for the purpose of commencing a proceeding regarding any violation of the Act.
Under the USA, a state securities Administrator can
Under the USA, the Administrator has a broad investigative authority and may begin an investigation against a registrant before a violation has occurred and may subpoena witnesses in any state.
Under the Uniform Securities Act, the Administrator may require a broker-dealer to post a surety bond of
Unlike investment advisers where the USA specifies posting a surety bond in the amount of $35,000, the Uniform Securities Act does not specify an amount for broker-dealers. However, the NSMIA states that the Administrator may not require a broker-dealer be bonded in an amount above that set by the SEC. Furthermore, bonds will not be required of broker-dealers that maintain a specified net capital.
Under the rules of the Investment Advisers Act of 1940, which of the following need NOT be included in an investment advisory contract?
Written advisory contracts must contain the services to be provided; the term of the contract; the amount of the advisory fee or the formula used to compute it; provisions for refunds, if any, if the advisory fee is prepaid and the contract is terminated; provisions as to whether discretionary authority is given and to what extent; and provisions requiring the consent of the client to assign the contract. There is no requirement for including the past performance record of the adviser.
According to the Uniform Securities Act, an offer or a sale does not exist if it is
a reclassification of the issuer's securities a bona fide pledge or loan an act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding shares a stock dividend of stock other than the issuer's for which nothing of value was given
Under state law, all of the following investment advisers are exempt from registration except
advisers whose only clients are insurance companies.
BD and IA
can be both either a natural person or business entity
A famous tennis player offers to record a testimonial for an investment adviser for use in a television commercial. Under the Uniform Securities Act, the investment adviser may
not use the testimonial
A customer suspiciously makes deposits totaling $12,000 in 4 installments of $3,000 each. This attempt to circumvent the currency reporting rules is known as
structuring.
IAR Reg
whether fed or state IA always register w adminstrator