66 Kap Flashcards
when an investment advisor acts in the capacity of a principal, what is needed from the client
consent
under the dodd frank wall street reform and consumer protection act, who is required to register as an investment advisor in a particular state
an advisor who manages client accounts with less than 100 million
what effect does the filing of a lawsuit have on an application with the administrator for a particular state.
nothing
can an adminstrator deny registration if illegal activity is conducted in the state
yes
when an individual registered with a BD has a change of residence, an amended u4 must be filed
within 30 days
who can be agents
only individuals can be agents. A person who sells securites for a BD is an agent.
what do identity thieves do
borrow money in the name of the compromised individual. They don’t lend it.
criminal penalties for violations of uniform securities act
5000 fine, 3 years prison, or both
can an adminstrator issue an injunction
no
a brochure or summary of material changes, if any must be delivered to all clients within
120 days of the end of the advisers fiscal year
the brochure delivery requirement does not apply to investment companies or clients who are
serbiced on an impersonal basis, such as a newsletter with an annual cost that must be less than 500
profits and losses may be shared even if no financial contribution from agent occurs
yes as long as the agent has the consent of the customer and the employing BD
For federal covered investment advisers, a prepayment in excess of $1,200 and for periods of 6 months or more in advance (substantial prepayment) requires the adviser
to submit an annual audited balance sheet as part of its ADV Part 2 (and brochure).
When an investment adviser ceases to exist, either through going out of business or being succeeded by another firm (as is the case here), it is their responsibility to
ensure that articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor be preserved until at least 3 years after termination of the enterprise.
ADV Part 2A is
the brochure that investment advisers must deliver to clients; it describes the investment adviser’s fees, investment policies, and types of investments made.
recordkeeping requirements for agents or IARs?
no
The term “investment counsel” can be used by investment advisers
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.
To be in the business of rendering investment advice, a person must
a person must regularly provide advice about securities and must be compensated for giving such advice. Those whose earnings are based on securities transactions are broker-dealers and/or agents
The release establishes 3 criteria in defining an investment adviser
First, the person must provide advice, reports, or analyses concerning securities. Second, the person must be in the business of providing securities-related advice or analyses. Third, the person must receive compensation. Investment advising does not have to be the person’s principal business. They need only hold themselves out as advisers and provide investment advice on a frequent or regular basis.
Wills, estates, and trusts in relation to being called an investment advisor
Wills, estates, and trusts are not securities, so any advice given on them does not make one an investment adviser
Compensation may take the form of, but is not limited to
fees, subscriptions, salaries, or commissions. Any economic benefit, whether paid directly or indirectly for the investment advice, meets the test.
Under the Investment Advisers Act of 1940, which of the following are exempt from the requirements for registration?
I. Foreign investment advisers with fewer than 15 clients per year who do not hold themselves out as investment advisers to the public and have less than $25 million in AUM in the United States
II. Investment advisers who conduct all of their business in 1 state and who do not provide advice on securities listed on an exchange and have no private funds as clients
III. Investment advisers whose only clients are banks
1 and 2
However, if an agent provides investment advice outside the scope of employment at the broker-dealer
must be registered
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 NASAA Model Rule on financial requirements for investment advisers, unless an exception exists, requires an adviser who does not have custody of customer funds or securities but has discretionary power over customer accounts to have a minimum net worth of
10000
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
35000
Investment adviser records, including copies of advertisements, must be kept for at least
5 years from the end of the fiscal year in which the record originated
Under the Advisers Act, as modified by the Dodd-Frank Act, advisers are exempt from SEC registration if they
they manage less than $100 million in assets and have no investment company clients.
The annual updating amendment to Form ADV must be filed within
90 days of fiscal year end
Although venture capital 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
Both the Investment Company Act of 1940 (applicable here because this is a covered adviser) and the NASAA Model Rule on Recordkeeping require that investment advisers maintain certain records, such as partnership agreements and corporate articles of incorporation, for a period of no less than
3 years
A consent to service of process required by an Administrator is
an agreement whereby a registrant will be bound by any legal action or subpoena served on the Administrator as if it had been served on the registrant
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.
advisers who must provide audited balance sheets to clients for whom they maintain custody
state registered investment
An investment adviser to a private fund wishes to qualify for the exemption offered under the Uniform Securities Act when the fund has no more than 100 investors. In order to qualify,
every investor must have either at least $1 million in assets managed by the investment adviser, or a net worth, excluding the value of the primary residence, in excess of $2.1 million
An investment adviser with no office in the state would be exempt from registration in the state if the adviser renders advice to no more than
5 noninstitutional clients
Under the Investment Advisers Act of 1940, which of the following are excluded from the definition of an investment adviser?
definition: banks or trust companies;
publishers of bona fide publications of general circulation (newspapers and magazines); persons advising about certain securities (U.S. government or agency issues);
broker-dealers not receiving special compensation for giving advice;
LATE
Once a broker-dealer handles wrap fee accounts
it loses the exclusion from the definition of investment adviser. Therefore, the firm must be registered with either the state or the SEC. Any agents handling these accounts would be registered as investment adviser representatives.
_____who have custody of clients’ securities are required to provide audited balance sheets to their clients.
state registered investment advisors
The Uniform Securities Act defines any individuals associated with an investment adviser as investment adviser representatives if they
manage accounts or portfolios, determine securities recommendations, or supervise personnel engaged in the above activities, including any partner, officer, or director who offers advice concerning securities. Persons who manage client accounts or portfolios, determine securities recommendations, or supervise personnel engaged in the above activities are investment adviser representatives.
Clerical and ministerial personnel are specifically excluded from the definition of
investment advisor
Under Section 202(a) of the Uniform Securities Act, registration of an investment adviser automatically constitutes registration of any investment adviser representative who is a
partner, officer, or director, or a person occupying a similar status or performing similar functions.
Under the Uniform Securities Act, registrations must be renewed every
dec 31
A broker-dealer, investment adviser, or agent who has discretion over or, in the case of broker-dealers and advisers, custody of funds or securities may be required to
post a bond
The license of an agent expires when she ceases to be employed by the broker-dealer or issuer for whom she was previously licensed. who needs to notify the administrator
Both the agent and the former broker-dealer are required to notify the Administrator promptly.
Under the Uniform Securities Act, broker-dealers must register in any state where they
engage in securities transactions with individual investors.