66 - 1 Flashcards
Is a certified public accountant who provides tax advice considered an IA under the USA?
No, CPAs are excluded from the IA definition.
True or False: A publisher of a financial magazine is considered an IA under the USA.
False. Publishers of newspapers/magazines are excluded from the IA definition.
Is an organization that provides ratings of securities and is nationally known considered an IA under the USA?
No
Is an attorney who exclusively provides estate planning services considered an IA under the USA?
No. Provided the attorney’s advice is incidental to his profession, he is excluded from the IA definition.
True or False: A BD making recommendations about investing in various securities is an IA under the USA.
False. Since the BD is not charging a fee for the advice, it is excluded from the IA definition
True or False: According to the USA, a BD providing asset allocation plans to its clients for a fee is an IA.
True. Since the BD is receiving specific compensation for its advice, it is considered an IA.
True or False: The USA defines a bank providing investment recommendations to its clients as an IA.
False. Banks are excluded from the IA definition.
True or False: A firm producing investment research for BDs to deliver to clients is considered an IA under the USA.
True. Since advice is being provided, as a business, and compensation is received, the ABC test is met.
True or False: The USA classifies an agent of a BD who also manages wrap accounts as an IA.
No. IAs are firms, not individuals.
According to the USA, who is included under the term “person?”
Any legal entity, including individuals (clients/agents/IARs), BDs, IAs, issuers, corporations, and partnerships
What type of advice may lawyers, accountants, teachers and engineers provide and not be considered an IA?
Advice that is incidental to their profession. If a separate fee is charged for the advice, the exclusion is lost.
List the 4 categories of professionals who are excluded from the IA definition.
Lawyers, accountants, teachers, and engineers (remember L A T E)
As it applies to a BD or IA, what does the term “exclusion” mean in the USA?
Exclusion signifies that a person does not meet the definition of a BD or IA in the state.
What are the 3 components that must be met for a firm to be defined as an IA?
1) Provide advice regarding securities, 2) Do so as a business 3) Receive specific compensation (the ABC test)
Identify who IS NOT considered a person under the USA.
Minors, incompetents, securities, and the deceased
Under the USA, are banks and bank holding companies excluded from the IA definition?
No. Banks, savings institutions and trust companies are excluded, but bank holding companies are not.
Identify who is considered a person under the USA.
Business entities, issuers, estates, governments, individuals (e.g., clients, IARs and agents)
What is the 3 pronged test for determining whether a firm meets the IA definition?
A-B-C. A = advice/analyses, B = business, C = compensation
What type of advice may lawyers, accountants, teachers, and engineers provide and not be considered an IA?
Advice that is incidental to their profession. If a separate fee is charged for the advice, the exclusion is lost.
True or False: Bank holding companies are not considered IAs under the Investment Advisers Act of 1940.
True
True or False: Bank holding companies are excluded from the IA definition under the USA.
False
What is the general definition of an investment adviser?
A firm that provides advice/analyses regarding securities, as part of a business, and for compensation
According to the USA, who is included under the term person?
Any legal entity, including individuals (clients/agents/IARs), BDs, IAs, issuers, corporations, and partnerships
Under the IA Act of 1940, are banks and bank holding companies excluded from the IA definition?
Yes
True or False: Bank holding companies are not considered IAs under the USA.
False. They are excluded from the definition under the IA Act of 1940, not under the USA.
Identify the acronym: USA
Uniform Securities Act
Identify the acronym: IA
Investment Adviser
Identify the acronym: NSMIA
National Securities Markets Improvement Act
Identify the acronym: NASAA
North American Securities Administrators Association
What is the ABC Test for investment advisers?
The test that defines an IA as a firm that provides Advice as part of a Business for Compensation
Identify the acronym: RIA
Registered Investment Adviser
True or False: The states may make rules that are more restrictive than SEC (federal) rules.
False. NSMIA prohibits states from making requirements that are more restrictive than existing federal requirements.
Define investment supervisory services.
The giving of continuous advice as to the investment of funds on the basis of the individual needs of each client.
Is an accountant defined as an IA?
No. Accountants are excluded from the IA definition if their advice is incidental to their business.
Identify the acronym: LATE
Lawyers, Accountants, Teachers and Engineers—these are the professionals excluded from the IA definition.
Is the publisher of a newspaper required to register as an investment adviser?
No. Publishers are excluded if the newspaper has general circulation and any advice is impersonal and untailored.
List the entities that make up NASAA.
All 50 U.S. states, the U.S. Virgin Islands, Puerto Rico and the District of Columbia, Canada and Mexico
True or False: Washington D.C. is a member of NASAA.
True
True or False: The U.S. Virgin Islands are a member of NASAA.
True
True or False: Puerto Rico is a member of NASAA.
True
Define impersonal advisory services.
Services costing less than $500 per year that are not tailored to meet the investment objectives of a specific client
