Unit 9 (7 Questions)
How much of AUM needed to be registered by the SEC
-100-110M minimum 110M+ Required
National Securities Markets Improvement Act (NSMIA)
-Purpose- Enacted to eliminate conflict between federal and state securities law - Covers- Federal covered securities and federal covered Investment Advisors -Results- States cannot require registration of securities transaction, or investment adviser covered by or excluded by federal legislations
net worth required of investment advisers with discretionary authority
10,000
How many states needed to be federally covered if cannot have 100M
15 or more
net worth required of investment advisers with Custody authority
35,000
Under the Investment Advisers Act of 1940, an adviser's registration usually becomes effective how many days after it is filed?
45
How many days does a IA have to register with the SEC once they've Reach 110m
90 Days
Which of the following situations would require registration as an investment adviser?
A broker-dealer provided investment research services to a customer and charged a fee for the services., A broker-dealer has its agents prepare complete financial plans for customers for a nominal fee. The plans recommend specific securities transactions, and when the customers place orders, the agents earn commissions on those securities transactions.
Both the Investment Advisers Act of 1940 and SEC Release IA-1092 specifically exclude from the definition of investment adviser certain persons who provide investment advice solely incidental to the practice of their profession. Which of the following would not by definition qualify for this exclusion?
A university professor who provides investment advice for a substantial fee to fewer than 15 clients during any consecutive 12-month period, none of whom is an investment company, An economist who consults with very large corporate employee benefit plans on how to best invest their funds
Federal Exempt AD 2 (Advisors to Insurance Companies)
Advisers whose only clients are insurance companies are exempt.
Which of the following statements best describes an investment supervisory service as described by the Investment Advisers Act of 1940?
An investment adviser provides continuous advice based on the client's individual needs.
Which of the following would meet the USA's definition of federal covered adviser?
An investment adviser who is registered under Section 203 of the Investment Advisers Act of 1940
required to register as an investment adviser with the state securities Administrator
An investment advisory firm that opens an office in the state with less than $100 million in assets under management
If a federal covered adviser's fiscal year ends on November 30, 2022, it must file its annual updating amendment to its Form ADV no later than
December 31, 2022. The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal year-end.
IS the Investment Company Federal or State Law
Federal Law under the Jurisdiction of the SEC
Under the Investment Advisers Act of 1940, for how many years must an investment adviser maintain the records required by regulation?
Five years
EXEMPT FROM USA BUT NOT FEDERAL!!!
Foreign government, insurance company securities, federal covered security
Investment Company Act of 1940
Governs the regulation of packaged products such as mutual funds, closed-end funds, and unit investment trusts
Federal Exempt AD 1 (Interstate Advisors)
Intrastate advisers are investment advisers who operate solely within one state. These advisers are exempt from registration if all of their clients are residents of the same state where the adviser has their main office and only place of business, and they don't provide advice about securities listed on national exchanges (like the New York Stock Exchange). For example, an adviser would qualify for this exemption if all their clients and business were in Georgia, and they didn't offer advice on nationally listed securities.
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?
It must be bona fide, containing disinterested commentary without promotional material., It must be of a general and impersonal nature.
exclude from the definition of investment adviser certain persons who provide investment advice solely incidental to the practice of their profession (LATE)
Lawyer, Accountant, Teacher, Engineer
Uniform Securities Act
Model act that state securities laws are based on. Designed to prevent fraud and maintain faith in capital markets through registration of securities, agents, broker-dealers, and investment advisers. Main purpose is to provide necessary protection to investors.
Form ADV
Registration from for an investment adviser
when must a IA Obtain a Surety Bond
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
not included in Form ADV Part 2A
States in which the investment adviser is registered or intends to register
The responsibility for administering the Investment Advisers Act of 1940 lies with
The SEC
Under the Investment Advisers Act of 1940, which of the following criteria are considered in determining whether a person is in the business of rendering investment advice?
The person regularly gives advice on securities., The person receives compensation from rendering advice on securities.
A pension consultant who advises corporate retirement plans with assets of $135 million must register with which of the following?
The state 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.
An investment adviser (IA) has its primary office in State A. It has branches in States B and C, and it advertises in States D, E, and F. What net capital requirements must it meet?
Where its principal office is located
Which of the following does not meet the compensation test for defining investment advisers under SEC Release 1A-1092?
Your next-door neighbor recommends the purchase of a certain security from his broker, which you eventually do. Compensation may take the form of, but is not limited to, fees, payments for subscriptions, salaries, or commissions. Compensation does not have to be direct. The commission on the insurance policy is considered indirect compensation covering the investment advice given by the insurance agent. The same logic holds for the real estate agent—she doesn't give advice unless you list your home with her. Nothing in the neighbor's advice involves compensation.
As defined in the Uniform Securities Act, the term person would include:
a limited partnership., a political subdivision., an unincorporated association., the executor of an estate for a deceased individual.
An investment adviser sends a notice offering a research report she has recently prepared to a group of 25 new members of the local Lions Club. Under the NASAA Model Rule on recordkeeping for investment advisers, the firm must keep a copy of the notice along with
a memorandum describing the list and its source.
exempt from registration
advisers whose only clients are insurance companies.
State Law AD Exemption 1 no place of business in the state but are registered in another state, provided their only clients in the state are:
broker-dealers registered under the act; other investment advisers; institutional investors; existing clients who are not residents but are temporarily in the state; limited to five or fewer clients, other than those listed above, resident in the state during the preceding 12 months (called the de minimis exemption); or any others the Administrator exempts by rule or order.
Form ADV Part 2A - Appendix 1
filed by advisers that sponsor a wrap fee program
Balance Sheet Rule
for federal covered investment advisers, a prepayment in excess of $1,200 and for periods of six months or more in advance (substantial prepayment) requires the adviser to submit an annual audited balance sheet as part of its Form ADV Part 2 (and brochure)
A state-registered investment adviser organized as a corporation is required to preserve a copy of its articles of incorporation
for three years after the termination of the enterprise.
To qualify for the exclusion of Publication from the Under both state and federal law the publication must meet (3)
he 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
Form ADV Part 1
information about an adviser's business, ownership, clients, employees, business practices, affiliations and any disciplinary events
A person who renders investment advice solely with respect to securities issued by the U.S. government
is excluded from the definition of investment adviser under federal law and is, therefore, exempt from state registration requirements.
An investment adviser need not register in a state if it has
no place of business in the state and only advises three insurance companies located in the state.
A federal covered IA files a petition for bankruptcy. The firm must
notify the SEC immediately.
A firm is registered as an investment adviser under the Investment Advisers Act of 1940. It has decided to raise its annual management fee from $1,500 to $1,800 and require that it be paid one year in advance instead of quarterly. The firm would
now come under the requirement to include a balance sheet as part of its brochure.
Scalping
practice whereby an investment adviser, before the dissemination of a securities recommendation, trades on the anticipated short-run market activity that may result from the recommendation.
Surety Bonds
provide for monetary compensation in the case of failure by bonded persons to perform certain acts, such as failure of a contractor to construct a building on time
When can an advisor use the term investment council
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.
A state-registered investment adviser maintains custody of client funds and securities. On Thursday, the chief financial officer of the firm informs the chief compliance officer that their net worth is $31,578. Under the provisions of the Uniform Securities Act, the firm would
send a detailed financial report to the Administrator by the close of business Monday.
The purpose of the Investment Advisers Act of 1940 is to provide
standards at the federal level for the regulation of investment advisers.
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:
the consent to service of process.
The primary responsibility for supervising the activities of an investment adviser representative (IAR) who is affiliated with a federal covered investment adviser lies with
the investment adviser the IAR represents.
To qualify for the exclusion of Publication from the Under both state and federal law the publication must meet (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;
To qualify for the exclusion of Publication from the Under both state and federal law the publication must meet (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
Platinum Investment in Growth Group, Inc., (PIGGI) is registered in and has its principal office in State W. PIGGI has near-term plans to open offices in States A and B. In an effort to test the waters, PIGGI mails several hundred flyers to prospects in those two states. Under the Uniform Securities Act,
these flyers cannot be mailed until PIGGI is registered in States A and B.
How much AUM needed to be registered by the SEC
under 100M
