Series 65: Unit 9 Exam

Under the NASAA Model Rule on financial requirements for investment advisers, investment advisers who have custody of customer funds are usually required to have a net worth in the amount of A. $50,000. B. $5,000. C. $10,000. D. $35,000.

$35k The NASAA Model Rule on financial requirements for investment advisers, unless an exception exists, requires an investment adviser with custody of customer funds or securities to have a minimum net worth in the amount of $35,000. If the adviser does not have custody of customer funds or securities but does have discretionary power over customer accounts, the minimum net worth amount is reduced to $10,000. In the event the adviser wishes to post a bond​ because it doesn't meet the net worth requirement​, ​it must be an amount determined by the Administrator based upon the number of clients and the total assets under management of the investment adviser.

Which of the following would NASAA consider to be a substantial prepayment of fees? A. $600 covering the entire contract year B. $600 covering the next calendar quarter C. $1,000 covering the next month D. $500 covering the next six months

$600 covering the entire contract year NASAA defines a substantial prepayment of fees to be more than $500 six or more months in advance. A payment of $600 covering a full year qualifies on both points; it is more than $500 and for more than six months. A payment of $500 covering the next six months meets the time requirement, but it is not more than $500. Payments of $600 for the next quarter or $1,000 for the next month meet the dollar amount but not the time requirement.

Under the Uniform Securities Act, investment advisers are exempt from registration in a state where they have no office if they direct business communications with no more than five retail clients within A. 6 months. B. 12 months. C. 30 days. D. 2 years.

12 months If investment advisers have no office in a state, they are not defined as investment advisers and are exempt from registration if either of the following conditions applies: their only clients within the state are other investment advisers or broker-dealers, financial institutions (banks, savings and loans, trusts), institutional investors (certain pension funds, insurance companies, investment companies), or government agencies or other political entities; or they have no more than five clients within the state in a 12-month period (de minimis exemption).

According to the Investment Advisers Act of 1940, the SEC must either grant investment adviser registration or begin proceedings to determine whether registration should be denied within how many days of filing? A. 45 B. 30 C. 90 D. 60

45 The SEC is required by the Investment Advisers Act of 1940 to either grant an adviser registration or begin proceedings to determine whether the registration should be denied within 45 days of application.

According to the Investment Advisers Act of 1940, for how many years must books and records be maintained for an account after the end of the year in which the last transaction occurred? A. 2 years B. 5 years C. 10 years D. 1 year

5 years Those investment advisers registered with and regulated by the Securities and Exchange Commission (SEC) must adhere to SEC Rule 204-2 regarding the maintenance of records. The rule states the required records must be kept for five full years from the end of the fiscal year during which the last entry was made on the record. The first two years, records must be kept in the principal office of the adviser and the balance of the time, easily accessible. They are subject to SEC examination at any time.

Under the Investment Advisers Act of 1940, which of the following would be excluded from the definition of an investment adviser? A. The publisher of an investment advisory newsletter who plans issues based on market events B. A broker-dealer that manages clients' portfolios for a fee C. A bank that charges a fee for providing investment advice D. An individual who makes recommendations regarding which types of securities would meet a client's investment objectives but who does not recommend specific securities

A bank that charges a fee for providing investment advice

Under the Uniform Securities Act, which of the following persons has to register as an investment adviser? A. A broker-dealer who gives investment advice that is incidental to the course of its business and for which no special compensation is received B. An attorney who writes a legal opinion for a municipal bond indenture C. A broker-dealer who gives advice for which he charges a specific fee D. An agent of a broker-dealer who gives investment advice within the course of his duties with the firm, for which a fee is charged

A broker-dealer who gives advice for which he charges a specific fee Broker-dealers need not register as investment advisers unless they charge a separate fee for providing investment advice. If the advice is strictly incidental and without a separate charge, the broker-dealer is not an investment advisor. Attorneys are not investment advisers, provided their investment advice is incidental to their practice. Giving a legal opinion on a municipal security indenture is not investment advice. Agents giving advice for which a fee is charged must register as investment adviser representatives and their broker-dealers as investment advisers.

Which of the following is not a person as defined by the Uniform Securities Act? A. A child prodigy for whom his mother, as custodian, opened an account at a major securities firm B. A small unincorporated investment club C. XYZ Dry Cleaners, Inc., whose shareholders all work on the premises and also offer financial advice to customers who request it D. Guelph, a small city outside of Toronto, Ontario, that maintains an investment account at a brokerage house to invest surplus funds

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.

The document that gives the Administrator the right to process complaints against a registrant is known as A. a writ of habeas corpus. B. an injunction. C. a durable power of attorney. D. a consent to service of process.

A consent to service of process The consent to service of process gives the Administrator the right to process legal complaints against the applicant.

A broker-dealer with an office in this state would be defined as an investment adviser if it charges which of these? 1. Commissions for selling securities 2. Commissions for selling securities while offering investment advice incidental to the sale of the securities 3. A fee for selling investment research and additional fees in the form of commissions for the sale of securities 4. Fees for investment research sold exclusively to institutions located in this state

A fee for selling investment research and additional fees in the form of commissions for the sale of securities & fees for investment research sold exclusively to institutions located in this state A broker-dealer would be considered an investment adviser if it has a place of business in this state and if it charges a fee for selling investment research or any other form of investment advice, even to institutions. If a person is in the business of selling research for a fee, that person or firm meets the definition of an investment adviser. If a broker-dealer charges commissions for selling securities and offers investment advice incidental to the sale of the securities, the broker-dealer is not an investment adviser because it is not compensated for the research.

The term private fund, as defined under federal and state law, would not apply to A. a hedge fund. B. a venture capital fund. C. an issuer that would be an investment company, as defined in Section 3 of the Investment Company Act of 1940, but for section 3(c)(1) or 3(c)(7) of that act. D. a leveraged ETF.

A leveraged ETF ETFs are publicly traded. Hedge funds and venture capital funds meet the definition of a private fund, which is "an issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940, but for section 3(c)(1) or 3(c)(7) of that act."

The Investment Advisers Act of 1940 requires every registered investment adviser to have a chief compliance officer (CCO). This individual is responsible for ensuring compliance with the firm's Code of Ethics by all of these except A. a nonaffiliated broker-dealer through whom the majority of the firm's trades are executed. B. clerical and ministerial employees of the firm. C. investment adviser representatives employed by the firm. D. investment adviser representatives who are independent contractors.

A nonaffiliated broker-dealer through whom the majority of the firm's trades are executed The CCO is responsible for compliance with the firm's Code of Ethic by every employee, registered or not, and any nonemployee who is registered with the firm, such as independent contractors. Broker-dealers the investment advisory firm uses for trade execution are beyond the scope of the IA's supervision.

Which of the following statements are true? 1. 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. 2. 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. 3. 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. 4. Broker-dealers who supply incidental investment advice and make securities recommendations to customers who pay commissions for the execution

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 & 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 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.

Under current law, which of the following would not be required to register as an investment adviser in a state? A. A person who deals exclusively with broker-dealers in that state but maintains no place of business within the boundaries of the state B. A person whose home office is in the state and who manages less than $90 million in assets C. A person who has directed advice relating to securities to six individuals in that state within the past 12 months even though he has no place of business within the state D. A person who limits advisory services exclusively to issuers of securities in that state while maintaining no office therein

A person who deals exclusively with broker-dealers in that state but maintains no place of business within the boundaries of the state

The Uniform Securities Act's definition of investment adviser would include A. a person who, on a regular basis for compensation, offers specific investment advice to clients as to the value of securities. B. an investment adviser representative of an advisory firm who makes securities recommendations on a regular basis for compensation. C. a temporary employee hired to assist in administrative responsibilities of an advisory firm. D. any person who is a federal covered investment adviser.

A person who, on a regular basis for compensation, offers specific investment advice to clients as to the value of securities A person who, on a regular basis for compensation, offers specific investment advice to clients as to the value of securities meets the three-prong test as an investment adviser.

Under both state and federal law, there are a number of exclusions from the definition of investment adviser. Which of the following would not qualify for an exclusion? A. A publisher of a newsletter that is paid to make reports to be used in the sale of specific securities B. A personal injury attorney who recommends that clients consult with a CFP® for advice on how to deal with the large settlements they receive C. A CPA who gives high-tax-bracket clients a chart showing the tax-equivalent yield of municipal bonds D. An economist who teaches a course in fundamental analysis at a local community college

A publisher of a newsletter that is paid to make reports to be used in the sale of specific securities Although there is an exclusion for publishers, the publication must be of general and regular circulation, and the publisher cannot be the recipient of compensation from the issuers of any securities covered.

An investment adviser must meet the net worth requirements of the Administrator. When doing the computation, which of the following assets would be included? 1. A sofa in the reception area 2. The value of the copyright on an investment manual authored by the investment adviser 3. The reputation of the investment adviser 4. Patents held by the investment adviser on a stock-tracking software program

A sofa in the reception area 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, it's one in the office, and those are not excluded assets.

Investment advisers who manage investment portfolios that total less than $100 million must register with A. a state only. B. neither the SEC nor a state. C. the SEC only. D. both a state and the SEC.

A state only Investment advisers (IAs) 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."

Which of the following firms would be a federal covered adviser? A. DEF Fund Managers, a corporation managing an unregistered hedge fund with $20 million in assets B. XYZ Broker-Dealer with custody over $50 million of clients' invested assets C. GHI Consultants, a sole proprietorship managing $15 million belonging to high-net-worth individuals D. ABC Money Managers, a partnership with $112 million under management

ABC Money Managers, a partnership with $112 million under management The structure of the adviser is irrelevant; if assets under management equal $110 million or more, SEC registration is required. If the investment company is registered under the Investment Company Act of 1940, the adviser must be registered, regardless of size. The hedge fund is an unregistered fund, so the rule does not apply. A broker-dealer is excluded from the definition of investment adviser if investment advice is incidental to its business. Custody has nothing to do with giving advice.

Which of the following firms in the business of rendering investment advice for compensation would be considered a federal covered adviser? A. ABC Money Managers, a partnership with $115 million under management B. DEF Fund Managers, a corporation managing an unregistered hedge fund with $10 million in assets C. JKL Pension Consultants, a management firm providing services to employee benefit plans, which currently has $179 million under management D. GHI Consultants, a sole proprietorship managing $82 million belonging to high-net-worth individuals

ABC Money Managers, a partnership with $115 million under management It makes no difference what the structure of the adviser is. As long as the assets under management are $110 million or more, SEC registration is required. If the investment company is registered under the Investment Company Act of 1940, the adviser must be registered, regardless of size. The hedge fund is an unregistered fund, so the rule does not apply to it. Pension consultants are not eligible for SEC registration until their AUM reaches $200 million.

Under certain conditions, the Uniform Securities Act provides that an Administrator may require a minimum net worth standard to be met by an investment adviser. Which of the following would be an allowable asset in the computation of an investment adviser's net worth? A. Advances or loans to partners in the case of an investment adviser organized as a partnership B. Accounts receivable C. Copyrights D. Accounts payable

Accounts receivable For purposes of the USA, the term net worth means an excess of assets over liabilities, as determined by generally accepted accounting principles. Accounts receivable are a current asset, while accounts payable are a current liability. The USA specifically disallows intangibles, such as copyrights and goodwill, and advances or loans to partners (or officers if a corporation) are excluded as well.

An investment adviser (IA) is registered in States A and B, with its principal office in State B. The Administrator of State A can request to see A. advertisements run in State A B. internal communications regarding the company's participation in a local charitable event. C. sales records relating to clients who are residents of State B. D. proof that the IA meets State A's financial and recordkeeping requirements.

Advertisements run in State A

Which of the following activities is most likely to be considered by the SEC as meeting the business standard element in the definition of an investment adviser? A. Issuing reports on macroeconomic conditions B. Providing investment advisory services but limiting the clientele to immediate family members C. Giving specific investment advice on only rare and isolated occasions D. Advertising investment advisory services to the public and providing them routinely

Advertising investment advisory services to the public and providing them routinely

Under the Investment Advisers Act of 1940, which of the following is true about the use of the term investment counsel by investment advisers? A. Advisers may use the term only if their principal business is acting as an investment adviser and a substantial part of their business consists of providing continuous advice based on a client's individual needs. B. Advisers may use the term without restriction, as long as they are registered. C. The use of the term is prohibited under any circumstances. D. Advisers may use the term only if they are attorneys.

Advisers may use the term only if their principal business is acting as an investment adviser and a substantial part of their business consists of providing continuous advice based on a client's individual needs. Advisers may use the term investment counsel only if two conditions are met: rendering investment advice must be their principal business, and a substantial part of that business must be providing investment supervisory services—that is, continuous advice based on the individual needs of each client.

Under the Uniform Security 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 have conducted business with no more than 6 individual clients in the state within the last 12 months. C. advisers who deal exclusively with investment companies registered under the Investment Company Act of 1940. D. advisers who deal exclusively with federal covered investment advisers located in the state.

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 retail 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 type of investment clients. 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.

Under the Uniform Securities Act, all of the following persons with no place of business in the state are exempt from registration as investment advisers except A. advisers who deal exclusively with investment companies registered under the Investment Company Act of 1940. B. advisers who deal exclusively with savings banks located in the state. C. advisers who deal exclusively with federal covered investment advisers located in the state. D. advisers who have conducted business with no more than six individual clients in the state within the last 12 months.

Advisers who have conducted business with no more than six 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 six clients. Doing business with six 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 clients. If a registered investment adviser works only with these types of clients, an exemption from registration in that state exists as long as the registered investment adviser has no place of business in that state.

The term exempt reporting adviser refers to A. advisers who are registered on the state level but who file their Form ADVs through the IARD. B. advisers whose only clients are insurance companies. C. advisers who rely on either the venture capital fund adviser exemption or the private fund adviser exemption. D. broker-dealers who are considered investment advisers solely because they offer wrap fee accounts.

Advisers who rely on either the venture capital fund adviser exemption or the private fund adviser exemption

Under state law, all of the following investment advisers are exempt from registration except A. advisers solely to private funds with less than $150 million in assets under management in the United States. B. advisers whose only clients are insurance companies. C. advisers solely to venture capital funds. D. foreign private advisers with no place of business in the United States and less than $25 million in assets under management.

Advisers whose only clients are insurance companies 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. Please note that if the choice had said the investment adviser had no place of business in the state and the adviser's only clients were insurance companies (or several of the other institutional investors where the exemption applies), registration would not be required.

Unless renewed, the registration of which of the following securities professionals expires on December 31? 1. Agents 2. Broker-dealers 3. Investment advisers 4. Investment adviser representatives

Agents, broker-dealers, investment advisers, and investment adviser representatives

Under the Investment Advisers Act of 1940, which of the following investment advisers is not exempt from federal registration? A. All of Paula's clients are private funds, and she has total assets under management of $200 million with less than $25 million of that belonging to foreign investors. B. All of John's clients reside in his home state, and John offers no advice on any exchange-listed securities. He manages $50 million in assets, and none of his clients are private funds. C. Marie maintains her only office in Paris, France, deals with fewer than 15 clients (none of whom is a registered investment company) in private funds advised by Marie, has AUM in the United States of less than $25 million, and does not hold herself out as an investment adviser in the United States. D. ABC Advisers, with offices in four states, deals exclusively with insurance companies.

All of Paula's clients are private funds, and she has total assets under management of $200 million with less than $25 million of that belonging to foreign investors

Which of the following investment advisers (IAs) would be required to register with the state? A. An IA who expects to have $132 million in AUM within 120 days B. An IA whose annual updating amendment showed a drop in AUM from $109 million to $87 million C. An IA who is under contract to manage a registered investment company D. An IA whose annual updating amendment showed a drop in AUM from $141 million to $99 million

An IA whose annual updating amendment showed a drop in AUM from $109 million to $87 million 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 would not be considered to be in the business of an investment adviser? A. A person compensated for investment advice, although this service is not a primary part of the business B. A person who provides investment advice but is compensated only through commissions on the sale of stock C. A person compensated for investment advice, but who provides the advice only to institutions D. An accountant who provides occasional investment advice but receives no separate fee for the service

An accountant who provides occasional investment advice but receives no separate fee for the service In applying the business standard, the following criteria are used: (1) Does the person hold himself out as an investment adviser, or does he provide investment advice on a frequent or regular basis? (2) Does the person receive any compensation, regardless of whether it is paid separately or included in any other compensation? (3) If the person engages in other financial service activities in connection with the advice, it cannot be used to avoid the business standard. In looking at these criteria, it would appear that all choices listed are considered investment advisers. However, under exclusions from the definition, accountants who give advice solely incidental to the conduct of their profession and who receive no special compensation for this advice are excluded from the definition along with lawyers, engineers, teachers, and broker-dealers.

The chief compliance officer (CCO) of a registered investment adviser would generally not have responsibility for the actions of A. ministerial personnel of the firm. B. supervisory personnel of the firm. C. an agent registered with an affiliated broker-dealer. D. an investment adviser representative of the firm.

An agent registered with an affiliated broker-dealer The CCO of an investment adviser is responsible for compliance with all relevant rules and procedures applying to all personnel of the investment adviser. Agents with an affiliated broker-dealer come under the supervisory jurisdiction of the compliance officer of that broker-dealer.

Under the Uniform Securities Act, all of the following may provide investment advice incidental to their normal business without requiring registration as an investment adviser except A. an engineer. B. a lawyer. C. an economist. D. a teacher.

An economist The Uniform Securities Act (and the Investment Advisers Act of 1940, as well) does not exclude economists from the definition of investment adviser, as it does lawyers, accountants, teachers, and engineers who give advice that is incidental to the practice of their profession. Remember the acronym LATE—lawyers, accountants, teachers, and engineers. Do not be fooled by the E in economist.

Under the Uniform Securities Act, all of the following persons may provide investment advice incidental to their normal business without requiring registration as an investment adviser except A. an economist. B. a teacher. C. an engineer. D. a lawyer.

An economist The Uniform Securities Act does not grant an economist exemption from registration, but it does offer an exemption to teachers, lawyers, and engineers if the investment advice is incidental to their business—thus the acronym LATE for lawyers, accountants, teachers, and engineers.

Which of the following is not considered to be in the business of investment advising? A. An insurance agent who provides investment advice regularly, but such advice represents a small portion of her business B. A financial planner who provides advice on many types of financial instruments, including securities, and receives commissions on the sale of life insurance C. A person who prepares reports about securities in general D. An insurance agent who discusses the merits of whole life insurance verses nonsecurities financial instruments and who receives commissions on the sale of life insurance only

An insurance agent who discusses the merits of whole life insurance verses nonsecurities financial instruments and who receives commissions on the sale of life insurance only Please note that this question is not asking, "Who is an investment adviser?" It is asking about one of the three prongs—being in the "business." The insurance agent who discusses the merits of whole life insurance does not sell investment advice or securities, only insurance policies. The insurance agent does not hold herself out as an adviser, nor does she provide advice on securities. If a person advertises as one who provides investment advice or engages in providing investment advice or analyses on a regular basis (even if not the person's principal business activity), the person is considered in the business of giving investment advice. If the person receives any compensation that represents a clearly definable charge, commission, or fee for such advice (whether paid separately or not), she is considered in the business. If the person engages in other financial activities in connection with the advice, it cannot be used to avoid the business standard.

Under the Uniform Securities Act, a person whose business model is selling reports on a subscription basis concerning specific securities to investors based on their individual objectives will be defined as A. an investment adviser. B. a journalist. C. a broker-dealer. D. an agent.

An investment adviser The definition of investment adviser includes any person who (1) for compensation, engages in the business of advising others as to the value of securities or the advisability of buying, selling, or investing in securities or (2) as a part of a regular business, publishes securities analyses or securities reports for individual investors on a paid-subscription basis.

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. An investment adviser sends monthly newsletters to 200 clients offering nonspecific advice. C. An investment advisory firm offers nondiscretionary services on a non-client-specific basis. D. No actions are taken in client accounts without first being approved by a senior supervisory person.

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.

An investment adviser is eligible to register with the SEC if it A. has more than 100 investment adviser representatives. B. has rendered advice to more than 5 retail clients during the most recent 12-month period. C. would be required to register in at least 10 different states. D. anticipates acquiring at least $100 million in assets under management within the next 120 days.

Anticipates acquiring at least $100 million in assets under management within the next 120 days IAs must have at least $100 million in AUM in order to register with the SEC. If it is reasonable to expect reaching that level within the next 120 days, SEC registration is allowable now. One of the exceptions that would permit small and mid-size advisers to register with the SEC is if they would have to register in at least 15 states, not 10.

Leslie is an IAR with Financial Visions (FV), a federal covered investment adviser. Leslie operates Innovative Financial Solutions (IFS), a separate financial planning company with its own office in State W. Should Leslie be found guilty of fraudulent business activities, FV would A. be subject to possible disciplinary action brought by the State W Administrator if it could be shown that FV failed to supervise Leslie's activities. B. be immune from State W's Administrator's jurisdiction because it is a federal covered adviser. C. possibly have its State W registration suspended. D. claim that IFS is a separate entity over which FV has no responsibility.

Be subject to possible disciplinary action brought by the State W Administrator if it could be shown that FV failed to supervise Leslie's activities Under the doctrine of respondeat superior, an investment adviser is responsible for the actions of any of its registered IARs, even those who operate an independent financial planning firm (independent contractors). Although, as a federal covered adviser, FV doesn't have a registration that can be suspended, state administrators do have jurisdiction over covered advisers when fraud is involved.

Under the Uniform Securities Act, if sent to two or more persons, a file must be maintained containing a copy of which of the following? 1. Bulletins 2. Newspaper articles 3. Notices 4. Websites

Bulletins, newspaper articles, notices, and websites All of these types of communications, unless sent to persons connected with the investment adviser, require maintenance of a file containing a sample copy.

Under current regulations, registration with the SEC is optional for all of the following investment advisers except A. Grand Visions Advisers, a sole proprietorship with $104 million in AUM B. CEF Investment Managers, LTD., a partnership managing a small, registered, closed-end investment company traded on the OTCQB. C. Employee Benefit Specialists, Inc., a pension consultant with $225 million in AUM. D. Midwestern Asset Managers, LLC, with $53 million in AUM, required to register in 17 states

CEF Investment Managers, LTD., a partnership managing a small, registered, closed-end investment company traded on the OTCQB Currently, registration with the SEC is mandatory (not optional) for any investment adviser managing a registered investment company (open- or closed-end). It is optional for 1. pension consultants once their AUM reach $200 million; 2. small and mid-size advisers who would be required to register in 15 or more states; and 3. those advisers with at least $100 million in AUM, but not $110 million in AUM. Any of these choosing to register with the SEC are federal covered advisers and do not register with any state, although a notice filing may be required.

An investment adviser is required to disclose any financial condition that is reasonably likely to impair its ability to meet contractual commitments to their clients in any of the following cases except when the adviser A. has discretionary authority. B. charges performance-based fees to qualified clients. C. requires substantial prepayment of fees. D. maintains custody.

Charges performance-based fees to qualified clients

As used in the Uniform Securities Act, which of the following entities would be included in the term "institutional investor"? 1. Individuals who are accredited investors 2. Closed-end investment companies traded on the OTC Link (formerly known as the Pink Sheets) 3. Insurance companies 4. Open-end investment companies

Closed-end investment companies traded on the OTC Link (formerly known as the Pink Sheets), insurance companies, & open-end investment companies Institutional investors include banks, insurance and investment companies, and certain employee benefit plans. Although each of these is included in the term "accredited investor", that term as used in federal law (the term is not found in the USA) also includes certain individuals, and they would never be considered institutional investors under the USA.

Under the Investment Advisers Act of 1940, the exclusion for providing investment advice that is solely incidental to the practice of a profession is available to all of the following EXCEPT: A. economists. B. attorneys. C. accountants. D. teachers.

Economists An exclusion from the definition of an investment adviser is given to engineers, teachers, lawyers, and accountants whose advice is incidental to their normal profession and who do not charge fees for the advice. Economists (unless excluded as teachers) are not eligible for this exclusion.

Under the Investment Advisers Act of 1940, for how many years must an investment adviser maintain the records required by regulation? A. One year B. No requirement C. Three years D. Five years

Five years The Investment Advisers Act of 1940 requires records to be kept readily accessible for a period of five years from the end of the fiscal year in which the records were made. The records must be kept in the principal office of the firm for the first two years and are subject to SEC examination at any time.

With respect to the recordkeeping rules under the Uniform Securities Act, which of the following statements is not correct? A. Investment advisers must maintain copies of all powers of attorney and other evidence of the granting of any discretionary authority by any client to the adviser for a minimum of five years. B. Following termination of the business, investment advisers organized as corporations must maintain copies of their articles of incorporation for a minimum of five years. C. Investment advisers must maintain records of electronic communications for a minimum of five years from the end of the year in which the communication was made. D. Investment adviser representatives have no recordkeeping responsibilities.

Following termination of the business, investment advisers organized as corporations must maintain copies of their articles of incorporation for a minimum of five years

A state-registered investment adviser organized as a corporation is required to preserve a copy of its articles of incorporation A. for three years after the termination of the enterprise. B. for three years after the end of the fiscal year in which the most recent entry was made. C. for five years after the end of the fiscal year in which the most recent entry was made. D. where they are easily accessible for two years in the firm's principal office.

For three years after the termination of the enterprise NASAA's Model Rule on recordkeeping requires partnership articles and any amendments, articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor to be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise.

Under the Investment Advisers Act of 1940, which of the following are exempt from the requirements for registration? 1. Foreign investment advisers with fewer than 15 clients per year, who do not hold themselves out as investment advisers to the public and who have less than $25 million in AUM in the United States 2. Investment advisers who conduct all of their business in one state, do not provide advice on securities listed on an exchange, and have no private funds as clients 3. Investment advisers whose only clients are banks

Foreign investment advisers with fewer than 15 clients per year, who do not hold themselves out as investment advisers to the public and who have less than $25 million in AUM in the United States & investment advisers who conduct all of their business in one state, do not provide advice on securities listed on an exchange, and have no private funds as clients Usually, anyone who meets the federal definition of investment adviser must be registered with the SEC. Some investment advisers are not excluded from the definition but are exempt from the registration requirements of the SEC. One example is an adviser whose clients are all residents of the state in which the adviser maintains its principal office who renders no advice on any exchange-listed security and does not give advice to any private funds. Advisers whose clients are limited to insurance companies are exempt from registration, as are foreign advisers who limit themselves to fewer than 15 clients a year (none of whom can be investment companies), do not advertise or hold themselves out to be investment advisers, and have less than $25 million in AUM in the United States. There is no exclusion for advisers whose only clients are banks.

Although many advisers to private funds are exempt from registration, larger ones generally register with the SEC. SEC-registered investment advisers with at least $150 million in private fund assets under management use which form to report information about the private funds that they manage? A. Form D B. Form PF C. Form ADV Part 1A D. Form 13F

Form PF

Shibboleth Research Associates (SRA) meets the definition of an investment adviser and wishes to register with the Securities and Exchange Commission. Assuming the firm meets the requirements, registration is accomplished by filing A. Form ADV-W. B. Form ADV Parts 1 and 2. C. Form ADV Part 1A and Part 1B. D. Form ADV Part 1A.

From ADV Part 1A Form ADV Part 1A is the form filed by all applicants for registration as an investment adviser. If the applicant is registering on the state level, Part 1B is also required. Part 2A is the brochure, and Part 2B is the brochure supplement. Both Part 2A and 2B are filed with the Administrator when registering in a state. But when registering with the SEC, those forms are not filed with the SEC but are maintained in the principal office of the adviser. Form ADV-W is used when withdrawing from registration.

Gibraltar Investment Advisers opened for business last week. Because of the clients brought over from previous affiliations of their investment adviser representatives, they have started with $94 million under management for various individual and corporate clients. They also signed a contract to manage an additional $10 million for a wealthy individual. Gibraltar will begin managing that individual's portfolio at the beginning of the next calendar quarter. Which of the following best describes Gibraltar's investment adviser registration requirements? A. Gibraltar must register with the state(s) and then, within 90 days of the receipt of the additional $10 million, must register with the SEC. B. Gibraltar's only option is to register at the state level because it currently manages less than $100 million in client funds. C. Gibraltar need not register as an investment adviser because it will manage funds for an institutional investor. D. Gibraltar would be eligible to register at the federal level.

Gibraltar would be eligible to register at the federal level

Under the Investment Advisers Act of 1940, the records that must be maintained by an investment adviser may be kept in which of the following forms? 1. Hard copy 2. Microfilm 3. Computer disk

Hard copy, microfilm, & computer disk The Investment Advisers Act of 1940 provides for the storage of records in several ways. Records may be kept in hard copy, or the hard copy may be microfilmed or microfiched. Records originated on a computer may be stored electronically.

Under the provisions of the Uniform Securities Act, it is not necessary for an investment adviser to register when it A. has a place of business in the state but has conducted business with three individual investors during the preceding 12 consecutive months. B. has no place of business in the state and deals with savings and loan associations only. C. has a place of business in the state but deals exclusively with federal covered advisers. D. is headquartered in a state where it conducts most of its business with broker-dealers only.

Has no place of business in the state and deals with savings and loan associations only. An adviser who has no place of business in the state and deals only with savings and loan associations is not required to register with the state securities Administrator. An adviser with a place of business in the state must register with the Administrator, whether clients are exclusively broker-dealers or federal covered advisers and regardless of the number of clients.

Which of these are true regarding a federal covered investment adviser? 1. He has $110 million or more in assets under management. 2. He manages an investment company registered under the Investment Company Act of 1940. 3. He limits his advice to securities listed on the NYSE. 4. He is affiliated with a federally chartered bank.

He has $110 million or more in assets under management & he manages an investment company registered under the Investment Company Act of 1940 Federal registration is generally required of any investment adviser managing at least $110 million in assets. The NSMIA provides that any investment adviser under contract to a registered investment company under the Investment Company Act of 1940 is required to register with the SEC as a federal covered adviser. Providing advice on federal covered securities listed on the NYSE does not make the adviser a federal covered adviser. Determining if one is a federal covered investment adviser is not based on affiliations; it is generally a function of AUM or managing an investment company.

Under IA-1092, which of these are true regarding an investment adviser? 1. He makes advice his principal activity. 2. He makes advice his regular activity. 3. He is compensated directly for advice. 4. He is compensated directly or indirectly for advice.

He is compensated directly for advice & he is compensated directly or indirectly for advice Under the SEC's release, the rendering of advice does not have to be a person's principal activity. Rather, it must be a regular activity, and compensation may be received directly or indirectly.

Which of the following statements regarding registration of investment advisers is true under the Investment Advisers Act of 1940? 1. If any material information filed in the registration becomes inaccurate, an amendment must be filed promptly. 2. If any nonmaterial information filed on Form ADV changes, an amendment must be filed within 90 days of the end of the fiscal year. 3. Material information requires a prompt amendment, but nonmaterial changes do not require amendment.

If any material information filed in the registration becomes inaccurate, an amendment must be filed promptly & if any nonmaterial information filed on Form ADV changes, an amendment must be filed within 90 days of the end of the fiscal year. 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.

Under the Uniform Securities Act, an investment adviser is exempt from registration if he has no place of business in a state and his only clients are any of these except A. other investment advisers B. investment companies C. individuals meeting the accredited investor standard D. broker-dealers

Individuals meeting the accredited investor standard Provided his clients are institutional investors and the adviser has no place of business in a state, he is not required to register as an investment adviser. Other than the de minimis or snowbird exemptions, there are no other cases where an IA serving individuals would not have to register.

Registering with a state Administrator is required for which of these? 1. An adviser who only provides impersonal investment advice through newspaper columns, magazine articles, or financial publications of general and regular circulation 2. Investment adviser representatives of federal registered advisers who have natural person clients and have a place of business in the state 3. An investment adviser who has no place of business in the state and has five advisory clients in the state 4. A person who is an officer of a federal registered investment adviser who has no natural person clients

Investment adviser representatives of federal registered advisers who have natural person clients and have a place of business in the state Under federal law, publishers of bona fide newspapers, magazines, and financial publications of general and regular circulation are excluded from the definition of an investment adviser. Under state law, the publication of investment advice that is not based on the specific investment situation of each client excludes the publisher from the definition of an investment adviser. Based on these definitions, the publisher of an investment advisory newsletter providing only impersonal investment advice available only on a subscription basis is not required to register under federal or state law. The investment adviser representatives of a federal registered adviser are required to register in each state in which they have a place of business. The Uniform Securities Act provides a de minimis standard exemption from state registration for advisers who have no place of business in a state and have fewer than six clients residing in the state. A person employed by and supervised by a federal registered investment adviser who is not an investment adviser representative with natural person clients (as defined by federal law) is not required to register with state Administrators.

Under the Uniform Securities Act, which of the following must register with the state securities Administrator? A. Investment advisers with a place of business in the state and less than $100 million in assets under management B. Investment advisers who have $100 million or more under management C. Investment advisers to an investment company registered under the Investment Company Act of 1940 D. Investment advisers without an office in the state whose clients are exclusively insurance companies

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 is a federal covered investment adviser that does 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.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, an investment adviser must register with the SEC if A. it would be required to register in 15 or more states. B. it limited its clients to insurance companies only C. its only place of business is outside of the United States, deals with fewer than 15 U.S.-based clients, and has less than $25 million in AUM in the United States. D. it has $35 million in client assets invested in cash or money market funds and $75 million of client assets invested in long-term bonds under management.

It has $35 million in client assets invested in cash or money market funds and $75 million of client assets invested in long-term bonds under management

Under both state and federal law, the definition of investment adviser excludes certain publishers. To qualify for that exclusion, the publication must meet which of the following criteria? 1. It must be bona fide, containing disinterested commentary without promotional material. 2. It must be published on a schedule to coincide with market events. 3. It must be of a general and impersonal nature. 4. It must contain enough specific advice to enable the targeted recipient to construct an appropriate portfolio.

It must be bona fide, containing disinterested commentary without promotional material & it must be of a general and impersonal nature Under a decision of the U.S. Supreme Court, for a publisher to qualify for the exclusion, the publication must satisfy the following three elements: "(1) the publication must offer only impersonal advice, i.e., advice not tailored to the individual needs of a specific client, group of clients, or portfolio; (2) the publication must be 'bona fide,' containing disinterested commentary and analysis rather than promotional material disseminated by someone touting particular securities, advertised lists of stocks 'sure to go up,' or information distributed as an incident to personalized investment services; and (3) the publication must be of general and regular circulation rather than issued from time to time in response to episodic market activity or events affecting the securities industry."

Under the Uniform Securities Act, which of the following is an investment adviser? A. The trust department of ABC Bank provides investment advice to its clients. B. Jill is an attorney specializing in estate planning who, as a side job, structures portfolios for the beneficiaries of her deceased clients at a reduced fee. C. Tom writes a newspaper column that analyzes and recommends securities. D. Jane advises customers regarding the value of gold and silver coins.

Jill is an attorney specializing in estate planning who, as a side job, structures portfolios for the beneficiaries of her deceased clients at a reduced fee Although an attorney is generally excluded, Jill is giving investment advice for a fee in a manner that is not incidental to her legal practice. Jane's advice does not concern securities; banks are excluded from the definition; and Tom's advice is not specific on the basis of the situation of each client (impersonal advice).

States may require investment advisers who are registered with the SEC to do each of the following except A. file a consent to service of process. B. file any documents with the state that are filed with the SEC. C. maintain net capital requirements. D. pay state notice filing fees.

Maintain net capital requirements

Registration with the state as an investment adviser would be required for a person with an office in this state who A. manages the portfolio of the KPF Balanced Fund, a registered open-end investment company with $22 million in net assets. B. serves as a pension consultant to the XYZ Employees Retirement Plan, covering 1,200 employees with total assets of $278 million. C. manages $13 million in assets for four clients. D. gives advice only on securities issued by or guaranteed by the government of the United States.

Manages $13 million in assets for four clients

All of the following have legal standing as persons under the Uniform Securities Act except A. joint-stock companies. B. minor children. C. trusts where the interests of the beneficiaries are evidenced by a security. D. unincorporated organizations.

Minor children The definition of a person under the act includes, among others, individuals, joint-stock companies, unincorporated organizations, and trusts where the interests of the beneficiaries are evidenced by a security. Minor children are not persons under the act.

Under the Uniform Securities Act, a person who is in the business of providing advice on trading futures contracts and advising clients on securities issued or guaranteed by the U.S. government is A. not required to be a registered investment adviser in the state. B. required to be a registered investment adviser representative in the state. C. required to be a registered agent in the state. D. required to be a registered investment adviser in the state.

Not required to be a registered investment adviser in the state The Uniform Securities Act excludes futures contracts from the definition of security. To be defined as an investment adviser, the advice must be on securities. That brings us to the U.S. government securities. A person whose securities advice is limited to those issued or guaranteed by the U.S. government is included in the definition of a federal covered adviser. Federal covered advisers are included in the list of persons who are not deemed to be investment advisers under the USA. Therefore, this person is not considered an investment adviser in a state and is not required to register as one.

A federal covered IA files a petition for bankruptcy. The firm must A. notify the SEC immediately. B. notify all of its clients immediately. C. notify the Administrator immediately. D. do nothing until the court decides the disposition of the firm's assets.

Notify the SEC immediately As a federal covered investment adviser, the responsible regulatory body is the SEC.

Transparent Investment Advisers, Inc. (TIA), is registered in three states and has $55 million in assets under management. TIA maintains custody of customer securities. TIA's chief financial officer reports that the net worth of the firm has suddenly fallen to $28,000. This requires TIA to A. obtain a surety bond in the amount of $10,000. B. borrow $7,000 from the owners. C. obtain a surety bond in the amount of $7,000. D. issue $7,000 of stock.

Obtain a surety bond in the amount of $10,000 State-registered investment advisers who maintain custody of customer funds or securities must have a minimum net worth of $35,000. If the net worth should fall below that amount, the firm must immediately obtain a surety bond rounded to the next $5,000 to meet that level. In this case, the firm's deficiency is $7,000, and the next $5,000 that will cover that is a bond for $10,000. Borrowing money does not increase net worth, and even though TIA is a corporation, it would probably take too long to issue additional stock.

Which of the following statements is not true of investment advisers under the Uniform Securities Act? A. Investment advice includes advice regarding the value of securities, as well as recommendations to buy or sell. B. A natural person may register as an investment adviser. C. Compensation is a key factor in determining whether a person is required to register as an investment adviser. D. Only written advice concerning investments is covered by the act.

Only written advice concerning investments is covered by the act One of the three prongs defining an investment adviser under both state and federal law is the giving of investment advice. That advice can be in written or oral form. Any person, as defined in the USA, may register as an investment adviser. Even though we tend to think of the investment adviser as the company you will be working for, a significant percentage of state-registered investment advisory firms are sole proprietorships (one-person shops). Investment advice includes advice as to the value of securities, as well as recommendations to buy or sell. Compensation is another one of the three prongs in determining whether a person is defined as an investment adviser.

Peterson Financial Planning is a small personal financial planning partnership in Missouri that has $10 million in assets under management. As a result of the Dodd-Frank Act, which of the following statements best describes the registration requirement for Peterson Financial Planning? A. Peterson Financial Planning is required to register as an investment adviser with the SEC but has no requirement to register with the Administrator of the Missouri Department of Securities. B. Peterson Financial Planning is required to register as an adviser with the Administrator of the Missouri Department of Securities. C. Peterson is required to register as an adviser with both the SEC and the Administrator of the Missouri Department of Securities. D. Peterson Financial Planning is required to register as an investment adviser with the SEC and to notify the Administrator of the Missouri Department of Securities of its operation.

Peterson Financial Planning is required to register as an adviser with the Administrator of the Missouri Department of Securities With less than $25 million under management, Peterson Financial Planning is considered a "small" investment adviser and must register with the state. Advisers managing at least $25 million but less than $100 million are considered "mid-size" investment advisers and, unless qualifying for an exception, must also register with the state. Investment advisers with at least $100 million in AUM, but not $110 million, register with the SEC or the state. Once the $110 million level is reached, SEC registration is mandatory.

A federal covered investment adviser is a person A. exempt from regulation under the Securities Exchange Act of 1934. B. registered with the North American Securities Administrators Association (NASAA). C. registered, or excluded from the definition, under the Investment Advisers Act of 1940. D. registered under the Uniform Securities Act.

Registered, or excluded from the definition, under the Investment Advisers Act of 1940 A federal covered investment adviser refers to a natural person or firm registered under the Investment Advisers Act of 1940 or excluded from the definition of investment adviser under that act. A person registered under the Investment Advisers Act of 1940 is exempt from state registration or licensing requirements of state securities Administrators under the Uniform Securities Act. Federal covered investment advisers are not exempt from the antifraud provisions of the USA. Investment advisers, whether state or federal registered, do not register with NASAA.

The Investment Advisers Act of 1940 excludes from the definition of "investment adviser" persons whose advice: 1. relates solely to municipal issues. 2. relates solely to issues issued by or guaranteed by the U.S. Treasury. 3. is solely incidental to their professional practice as an aeronautical engineer. 4. is limited to insurance companies only.

Relates solely to issues issued by or guaranteed by the U.S. Treasury & is solely incidental to their professional practice as an aeronautical engineer Among the exclusions from the definition of" investment adviser "under both state and federal regulations is the case where certain professionals, including engineers, render the advice in a manner solely incidental to the practice of their professions. Unique to the federal law is the exclusion granted to those persons whose advice deals exclusively with federal government issued or guaranteed issues. Advice to solely insurance companies qualifies one for an exemption from registration, but does not exclude the person from the definition of IA.

Searching Out New Growth (SONG) is a venture capital fund. As such, all of the following statements are true except A. SONG's investment adviser is exempt from registration. B. SONG must have less than $150 million in assets in the fund. C. SONG only issues securities that are, except in extraordinary circumstances, nonredeemable. D. SONG is not registered under the Investment Company Act of 1940.

SONG must have less than $150 million in assets in the fund Although venture capital (VC) funds are included in the general definition of private funds, unlike the private equity fund, there is no ceiling on the size of the fund before the adviser loses the exemption. Advisers to VC funds are exempt from registration. The funds themselves do not register with the SEC under the Investment Company Act of 1940 (and don't register with the states either). These investments do not offer ready liquidity.

Serenity Strategic Investments (SSI) is an investment adviser registered in four states. SSI's most previous annual updating amendment showed AUM of $108 million. Six months later, a favorable market resulted in SSI's AUM growing to $120 million. Unfortunately, several large clients left, so at the end of SSI's year, its AUM was down to $94 million. Which of the following statements is correct? A. SSI may remain SEC registered as long as AUM is at $90 million or more. B. SSI must become registered with SEC within 90 days of exceeding $110 million. C. SSI remains state registered because its AUM is less than $100 million. D. SSI has the choice of remaining state-registered or registering with the SEC.

SSI remains state registered because its AUM is less than $100 million. The key to answering this question is remembering that, for purposes of SEC registration, it is the AUM (technically known as the RAUM—regulatory AUM) shown on the annual updating amendment to Form ADV that is the determining factor. We are told that SSI is state registered, something permitted when reported AUM is $108 million, although it was eligible to register with the SEC. The midyear increase has no effect on registration, only that at the end of the year. Because SSI will report $94 million on the next annual update, it will remain state registered and does not have the option to register with the SEC because its AUM is below $100 million. The only time the $20 million buffer down to $90 million enables an investment adviser to remain registered with the SEC is just that—the IA is already registered with the SEC and can stay there.

An investment adviser with $20 million under management exercises investment discretion over client portfolios. If the firm's accounting manager were to discover that the firm's net worth was only $8,500, the USA would require the firm to do which of the following? 1. Cancel all discretionary powers 2. Immediately raise an additional $1,500 3. Send notice to the administrator before the close of business on the day following discovery 4. Send a financial report to the administrator before the close of business on the day following the sending of notice

Send notice to the administrator before the close of business on the day following discovery and send a financial report to the administrator before the close of business on the day following the sending of notice State-registered investment advisers maintaining discretion over client accounts must maintain a minimum net worth of $10,000. Any advisory firm whose net worth falls below required minimums is required to send notice to the Administrator no later than the close of business on the day following discovery. This notice must be followed up no later than the next business day with a complete financial report to the Administrator.

An individual registered as an agent with ABC broker-dealer has an independent financial planning practice. Hourly fees are charged for developing financial plans, and if the client wishes, he refers transactions to ABC broker-dealer and is paid commissions for products sold. The Investment Advisers Act of 1940 requires A. that the financial planner register as an adviser but not the broker-dealer. B. that ABC register as an investment adviser because it sells securities. C. that ABC register as an investment adviser but not the financial planner. D. neither the financial planner nor ABC to register as an investment adviser.

That the financial planner register as an adviser but not the broker-dealer

Which of the following individuals does not come under the supervisory regimen of an investment adviser? A. A CFA® preparing the firm's research reports B. A financial planner registered with the firm as an IAR but who maintains a separate financial planning practice as an independent contractor C. An individual in the mail room who has fewer than six retail advisory clients D. The CPA engaged to perform the annual audit

The CPA engaged to perform the annual audit

The final responsibility for ensuring that investment adviser representatives are adequately supervised is that of A. the Administrator. B. each investment adviser representative's immediate supervisor. C. the managing principal. D. the chief compliance officer.

The chief compliance officer It is the CCO who has the ultimate responsibility for ensuring that the firm has, and properly implements, adequate supervisory procedures. The immediate supervisor has the "first-line" responsibility, but the "buck stops" with the CCO.

The document that provides the Administrator with limited power of attorney to accept documents issued in investigation of registrants in the Administrator's state is: A. the consent to service of process. B. Form ADV Part 1B. C. the agent's licensing agreement. D. the hypothecation agreement.

The consent to service of process The consent to service of process conveys to the state Administrator the authority to accept a subpoena that has been filed against an agent.

Which of the following would not be considered an investment adviser under Release IA-1092? A. The president of an investment club who provides research and advice to the members of his club on a regular basis as an integral part of his duties B. A pension consultant who advises a defined contribution plan on alternative methods of funding the plan and the relative merits of a selected list of investment managers C. An agent for a professional athlete whose fee includes negotiating the player's contract as well as advising her on security selection for her retirement plan even though the agent does not have discretion over the account D. A retired banker who solicits business and advises former clients on a monthly basis as to the specific investment merits of bank stocks and who receives compensation for his services

The president of an investment club who provides research and advice to the members of his club on a regular basis as an integral part of his duties

Under both state and federal law, the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser is properly referred to as A. the office of supervisory jurisdiction (OSJ). B. the home office. C. the principal office and place of business. D. the registered office.

The principal office and place of business

Under the Investment Advisers Act of 1940, the definition of investment adviser excludes which of these? 1. The publisher of a financial newsletter on a paid-subscription basis, which contains only general securities recommendations 2. Persons whose investment advice relates solely to issues distributed or guaranteed by the U.S. government 3. A lawyer who charges a separate fee for investment advice that is provided as a separate part of the business

The publisher of a financial newsletter on a paid-subscription basis, which contains only general securities recommendations & persons whose investment advice relates solely to issues distributed or guaranteed by the U.S. government Under the Investment Advisers Act of 1940, publishers of bona fide publications, such as financial newsletters, on a paid-subscription basis with regular circulation are excluded as long as the publication does not contain recommendations of specific securities. One thing to look for on the exam is if the publication is market-event driven. That is, publication is not regular and is based on current events affecting the securities markets. In that case, the exclusion does not apply. Another exclusion is for persons whose advice relates solely to issues distributed or guaranteed by the U.S. government. One of the most tested exclusions is LATE, where lawyers, accountants, teachers, and engineers are excluded, but that is only the case when the advice is given as an incidental part of their professional practice. A lawyer charging a separate fee for advice cannot claim that it is incidental.

USAAdvisers is registered in 10 Midwest states. Regarding financial requirements, USAAdvisers must meet those of A. the state in which its principal office is located. B. each state in which it has a place of business. C. the state with the most stringent financial requirements. D. the SEC.

The state in which its principal office is located Unlike broker-dealers, investment advisers register with either the SEC or the state(s), but never both. Therefore, we know this must be a state-registered adviser not under the jurisdiction of the SEC. Under the Uniform Securities Act, when it comes to financial requirements, bonding, recordkeeping, and so forth, as long as the adviser meets the requirements of the state in which the principal office is located, the other states have no further claim.

One of the exemptions from registration under state and federal law applies to investment advisers to private funds. One characteristic of all private funds is that A. their advisers are exempt from filing reports on Form ADV. B. they have no more than 100 investors. C. they have assets of less than $150 million. D. they are not registered as investment companies.

They are not registered as investment companies Private funds lose that distinction if they become registered as investment companies under the Investment Company Act of 1940. It is the adviser to a private fund who has a limitation on the amount of AUM, not the fund. In some cases, specifically when using the 3(c)(7) exemption, there is no limit to the number of investors. In many cases, the advisers to these funds, although exempt from registration, are considered exempt reporting advisers and must file Form ADV Part 1 answering most of the questions on the form.

Under the Uniform Securities Act, when do persons providing investment advice not have to register as investment advisers if they have no place of business in the state? 1. They limit their clientele to individuals who meet the accredited investor standards. 2. They deal only with institutional investors. 3. They have five or fewer noninstitutional clients in the state during any 12-month period. 4. They deal only with other registered investment advisers.

They deal only with institutional investors, hey have five or fewer noninstitutional clients in the state during any 12-month period, & they deal only with other registered investment advisers If a person offering advice on securities has no place of business in a state and deals only with institutional investors or other investment advisers, registration is not required. Also, if a person has no place of business in a state and has five or fewer noninstitutional clients in the state during any rolling 12-month period, they are not deemed to be investment advisers in that state under the USA. ​Please note that Choice I specifies individuals who are accredited investors. Although institutional accredited investors would qualify the adviser for the exemption, individuals do not.​

Which of the following describe requirements of the Investment Advisers Act of 1940 concerning the firm and customer records of an investment adviser? 1. They must be maintained in the principal office of the adviser for two years. 2. They must be maintained in the principal office of the adviser for three years. 3. They must be readily accessible for two years. 4. They must be readily accessible for five years.

They must be maintained in the principal office of the adviser for 2 yrs and they must be readily accessible for 5 yrs

Under the Uniform Securities Act, a state-registered investment adviser whose only office was in State N would not have to register in State O if its only clients were A. trust companies. B. six or fewer retail clients. C. complex trusts. D. individual accredited investors.

Trust companies A state-registered investment adviser can make use of the de minimis exemption if it has no place of business in a state and its only clients are institutions, such as banks and trust companies, investment companies, and insurance companies. Don't confuse a trust with a trust company—a trust is not an institution unless it specifically states a pension or profit-sharing trust, and even then, it only qualifies if it has assets of not less than $1 million. No individual, regardless of wealth, is an institution, and the de minimis limit is fewer than six (sometimes shown as five or fewer).

Under the Uniform Securities Act, which of the following are not required to register as investment adviser representatives in this state? 1. An individual who sells advisory services in several states, including this one, for AAA Advisers, Inc. 2. United Trust Company of America 3. An agent for a broker-dealer advising customers for a fixed separate fee stated as a percentage of the customer's assets under management 4. An investment adviser with no office in the state that does business exclusively with other investment advisers located in the state

United Trust Company of America & an investment adviser with no office in the state that does business exclusively with other investment advisers located in the state An agent for a broker-dealer advising customers for a fixed fee, stated as a percentage of the customer's assets under management, is acting as an investment adviser representative. An individual who sells advisory services for AAA Advisers, Inc., is an investment adviser representative. A trust company is not an investment adviser under the USA. An investment adviser with no office in the state doing business exclusively with other investment advisers located in that state is not required to register in that state as an investment adviser under the USA.

The term investment counsel can be used by investment advisers A. who are also attorneys. B. who are registered with the SEC under the Investment Advisers Act of 1940. C. with a primary business of rendering investment advice. D. who are also registered as broker-dealers.

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.

On last year's annual updating amendment filed with the SEC, Alpha Investment Advisers indicated that it had more than $140 million in assets under management. Due to a reduction in the size of the firm, this year's annual updating amendment shows that assets under management have fallen to the $75 million level and are expected to remain there. Which of the following actions is required for Alpha? A. Withdraw from SEC registration within 90 days of the adviser's fiscal year-end. B. Withdraw from SEC registration immediately. C. Do nothing and continue as a federal covered adviser. D. Withdraw from SEC registration within 180 days of the adviser's fiscal year-end.

Withdraw from SEC registration within 180 days of the adviser's fiscal year-end If an adviser reports on its annual updating amendment that it has less than $90 million under management and it is not otherwise eligible to register with the SEC, it must withdraw from SEC registration within 180 days of the adviser's fiscal year-end by filing Form ADV-W. The adviser could consult the securities departments of states in which it maintains offices or conducts business to determine the appropriate state registration requirements.

Which of the following does not meet the compensation test for defining investment advisers under SEC Release IA-1092? A. Subscription payments are received by a publisher of a newsletter providing impersonal securities-related advice. B. A real estate agent advertises that she will give free advice regarding investing the proceeds from the sale of any home she lists. C. Your next-door neighbor recommends the purchase of a certain security from his broker, which you eventually do. D. An insurance agent sells a life insurance policy and receives a commission on that policy. During the sale of the insurance policy, the agent provides some securities investment advice.

Your next-door neighbor recommends the purchase of a certain security from his broker, which you eventually do