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S 66 > Ch. 4 > Flashcards

Ch. 4 Flashcards

1
Q

Under the IA Act of 1940, when must a balance sheet be provided to a client?

A

A balance sheet must be provided if the IA collects prepaid fees of $1,200 or more, six months or more in advance.

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2
Q

T/F: An Administrator will inspect all advisors books and records on an annual basis.

A

False. Administrators lack the resources to inspect all IA‘s books and records annually. 

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3
Q

An IA is required to deliver the brochure to his clients by no later than the____Of the contract.

A

Signing

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4
Q

Does the de minimus exemption apply to investment advisor representatives?

A

Yes

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5
Q

Under the USA, are banks and bank holding companies excluded from the IA definition?

A

No. Banks, savings institutions and trust companies are excluded, but bank holding companies are not.

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6
Q

If a BD’s net capital falls below the required minimum, it must notify the administrator within___business days.

A

One

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7
Q

Is there a registration exemption for IAR’s doing business in a state is employed by and IA registered in another state?

A

Yes, if the IAR has no office in the state and has five or fewer retail clients in the state in the past 12 months.

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8
Q

T/F: an advisor to a mutual fund must register in the state in which the fund is domiciled.

A

False. A federal covered advisor must be registered within the SEC, not a state.

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9
Q

Individuals employed by an IA, who only perform______duties are excluded from registration under the USA.

A

Clerical/ministerial

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10
Q

As it applies to a BD or IA, what does the term “exclusion” mean in the USA?

A

Exclusion signifies that a person does not meet the definition of a BD or IA in the state.

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11
Q

Is an employee of a BD, who solicits new customers for an IA considered an IAR?

A

Yes. According to the USA, any person who solicits investment advisory service is considered an IAR.

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12
Q

T/F: the manager of an IA is human resource department is considered an IAR.

A

False. The managers responsibilities do not include providing advice about securities or managing accounts.

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13
Q

How are advisory fee is most commonly charged?

A

As a percentage of assets under management over a specific period.

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14
Q

When does the SEC require an advisor to include it’s balance sheet and it’s ADV part two?

A

If the firm has custody of a clients funds or accepts prepaid fees of $1200 or more, six months or more in advance.

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15
Q

IAs file their applications Electronically through the______.

A

Investment Advisor registration depository

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16
Q

Identify some nonmaterial/routine changes to form ADV.

A

A change in the number of discretionary accounts, or a change in the dollar amount under management by the advisor.

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17
Q

An IAR of a state registered IA has no office in New Jersey, but has six clients who live in New Jersey. Must you register in New Jersey?

A

Yes. IARs of a state regulated IA register, where they have an office and where they have six or more individual clients.

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18
Q

Under the USA, the de minimus exemption limits an IA to know more than___clients within the previous___months.

A

Five; 12

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19
Q

List the four categories of professionals who are excluded from the IA definition.

A

Lawyers, accountants, teachers, and engineers remember LATE

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20
Q

May the administrator set minimum net worth requirements for IA?

A

Yes, but no state may impose a requirement that exceeds the requirement of the IAs home state.

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21
Q

If an IA meets the IA definition in a state, when is it exempt from registration under the USA?

A

If it has no office in the state, and it has institutional clients only or five or fewer retail clients in the last 12 months

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22
Q

In place of a surety bond, the administrator will accept a deposit of_____or_______.

A

Cash; securities

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23
Q

For how long does the registration of state registered advisors remain in effect?

A

Until December 31, unless renewed by the advisor

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24
Q

Is an advisor to a mutual fund considered an investment advisor under the USA?

A

No, mutual fund advisors are federally covered and are excluded from the investment advisor Definition at the state level.

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25
Q

In general, does the USA allow an advisor to charge performance-based fees?

A

No. However, such fee arrangements may be permitted by rule or order of the administrator.

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26
Q

T/F: the USA classifies an agent of a BD, who also manages wrap accounts as an investment advisor.

A

No. Investment advisors are firms, not individuals.

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27
Q

An _________is to an investment advisor What an_____is to a BD.

A

Investment advisor representative; investment advisor

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28
Q

Any material changes to form ADV must be filed________.

A

Promptly within 30 days

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29
Q

List some of the records that must be retained by an investment advisor for five years.

A

Journals, blotters, ledgers, position, records, and trade confirmations

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30
Q

And investment advisor representative has an office in State a and has four clients who reside in the state. Is the investment advisor representative required to register and state a?

A

Yes, since the investment advisor representative has an office in State A. The client number is not relevant because of the office location.

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31
Q

T/S: an investment advisor with five or fewer retail client in the state in the past 12 months must register under the USA.

A

False. No registration is required as long as the investment advisor has no place of business in the state.

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32
Q

Who operates the IARD?

A

FINRA

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33
Q

Is the publisher of a newspaper required to register as an investment advisor?

A

No. Publishers are excluded from the investment advisor definition if the newspaper has a general circulation and gifts impersonal advice.

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34
Q

What is part two of form ADV?

A

The portion of an investment advisors application that may be used to satisfy the brochure rule/disclosure requirement.

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35
Q

What’s notice filing?

A

The process in which information that is filed with the SEC is also filed or shared with the administrator.

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36
Q

T/off: a publisher of financial magazine is considered an investment advisor under the USA

A

False. Publishers of newspaper/magazines are excluded from the IA definition.

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37
Q

Part two of form ADV may be used as a disclosure document that is provided to the IAs ______.

A

Clients

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38
Q

What document will an investment advisor regularly provide to his clients to notify them of the location of their securities?

A

The client account statement

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39
Q

Does the D minimus exemption apply to BD’s that have no place of business in a state?

A

No. The dominion miss exemption only applies to investment advisors and investment advisor representatives

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40
Q

What form do investment advisors file to register?

A

Form ADV

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41
Q

What types of changes are considered material changes that require prompt amendment of advisors form ADV?

A

Significant items, such as name or location change

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42
Q

When is form ADV – W filed?

A

When an advisor withdraws, it’s registration

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43
Q

If an investment advisor and is registered with the SEC, is registration required in any state in which intense to do business?

A

No. The national security’s market’s improvement act exempts federal covered advisors from state registration.

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44
Q

When was the federal advisor file and updating amendment to determine continued eligibility for SEC registration?

A

Within 90 days of the end of the advisers fiscal year.

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45
Q

T/off: a BD making recommendations about investing in various securities is an investment advisor under the USA.

A

False. Since the BD is not charging a fee for the advice, it is excluded from the IA definition.

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46
Q

For how long must an IA maintain records?

A

Five years

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47
Q

If an investment advisor is no longer eligible for SEC registration, it has____days to file ADV – W and register at the state level.

A

180 days

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48
Q

Is an IA always required to include a balance sheet and part two of its form ADV?

A

No. Abound she is required if the investment advisor collects, prepaid fees or has discretion.

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49
Q

What type of information will be found an investment advisors ADV part one?

A

Firm name, number of employees, nature of business, history of officer/directors, legal/disciplinary action in the past 10 years

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50
Q

Describe a wrap account.

A

An account that charges the client a single fee, that covers transaction execution, and account management

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51
Q

Investment advisors typically charge fees that are based on the_____ ____over a specified period.

A

Average value

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52
Q

Under the USA, all investment advisor contracts must be_____and must disclose_____provided and related____.

A

In writing; services; related fees

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53
Q

T/F: an investment advisor firm that is acquired by competitor, must pay a new filing fee.

A

False. The purchasing for must update its application, but paying a new fee is not required.

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54
Q

And investment advisor must maintain his books and records for a minimum of____years.

A

Five years

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55
Q

Identify the acronym: IARD

A

Investment advisor registration depository

56
Q

What made an investment advisor do with full discretion, but not with limited discretion?

A

Withdraw money from the account

57
Q

When and by whom is form ADV – E filed?

A

It is filed within 120 days from the completion of an audit of the investment advisors books; filed by the auditor.

58
Q

Identify the acronym: IAR

A

Investment advisor representative

59
Q

And IAR has no place of business in state a, but has six or more individual clients in state a. where must she register?

A

She must register in any state in which she has six or more individual clients, even if she has no office in the state

60
Q

When are nonmaterial/routine changes to form ADV required to be filed?

A

Routine items require an amendment within 90 days after the end of the investment advisors fiscal year

61
Q

What requirements me states impose on investment advisors that are registered with the SEC?

A
  1. file with the state, any documents that were filed with the SEC, 2. file consent to service of process, 3. pay state fees
62
Q

Under the USA, when must an investment advisor, provide a balance sheet to a client?

A

A balance sheet must be provided if the investment advisor, Calex prepaid fees of $500 or more, six months or more in advance.

63
Q

T/F: the CEO of an advisory firm who establishes investment policy for the firm, must register as an investment advisor.

A

Foss. The CEO is considered an investment advisor representative, not an investment advisor.

64
Q

An individual employed by an investment advisor to manage. The research department is required to register as an ______ under the USA.

A

Investment advisor representative

65
Q

What is the minimum educational requirements for any person who renders investment advice?

A

There is no minimum; however, the SEC an administrator may require disclosure of educational background.

66
Q

And IAR of a federal covered advisor has no office in New York, but has six clients who live in New York. Must he register in New York?

A

No. Investment advisor representatives of federal covered advisers are only required to register and states in which they have an office.

67
Q

In lieu of, an IA, prepared brochure, what document may be delivered to IA clients?

A

Part two of form ADV

68
Q

T/F: and advisors required to deliver only ADV part two when entering into a wrap fee program with a client.

A

False. For wrap accounts, the SEC requires I is to provide clients with special disclosure, ADV part 2A– appendix one.

69
Q

When does an administrator require an advisor to include its balance sheet and its ADV part two?

A

If the firm has custody of a clients funds or collects prepaid fees of $500 or more, six months or more in advance

70
Q

Investment advisors with custody, must have an annual audit done by a________.

A

Independent CPA

71
Q

T/F: An IA must physically deliver It’s brochure to clients at least annually.

A

False. At a minimum, the investment advisor must in writing, offer to deliver It’s brochure annually.

72
Q

Investment advisors with no place of business and estate, and his clients are_________are not required to register in that state.

A

Institutions

73
Q

An annual updating amendment of form ADV is filed with the SEC within ___days of the advisors fiscal year end.

A

90 days

74
Q

Does an investment advisor that only accepts clients with at least $1 million under management need to register?

A

Yes. There is no exemption on the state or federal level If all an investment advisors clients have $1 million under management.

75
Q

T/F: if a new investment advisors registration became effective on April one, it must renew on April 1of the following year.

A

False. State registration’s expire annually on December 31 and then must be renewed.

76
Q

When should significant changes to an advisors ADV be filed?

A

Promptly within 30 days

77
Q

If an advisor has check writing privileges in a client account, does this constitute custody?

A

Yes. Full discretionary, control, or having the ability to remove fun from the client account is considered custody.

78
Q

The publisher of a financial publication that provides personalized advice is considered a or an________.

A

Investment advisor

79
Q

T/F: according to the USA, a BD providing asset allocation plans to his clients for a fee is an investment advisor.

A

True. Since the BD is receiving specific compensation for his advice, it’s considered an IA.

80
Q

Give some examples of institutional investors.

A

Thanks, S&L’s, insurance or investment companies, investment advisors, or entities with at least $50 million in assets.

81
Q

T/F:A BD that promotes wrap accounts to his clients, must register as an IA under the USA.

A

True. Since the wrap account involves a fee for advice, the BD must register as an IA.

82
Q

T/S: an IA with fewer than 15 retail client in the past 12 months is exempt from registering under the USA.

A

False. Do USA di minimus exemption for advisors is five or fewer individual clients

83
Q

What type of advice, my lawyers, accountants, teachers and engineers, provide, and not be considered an IA?

A

Advice that is incidental to their profession. If a separate fee is charged for the advice, the exclusion is lost.

84
Q

Is there a limit to the amount of net worth of administrator may require of an IA?

A

Yes. The administrator may not set a requirement that exceeds the IAs home estate.

85
Q

What record must an investment advisor maintain regarding its IARs?

A

The initial application for each IAR

86
Q

T/F: an IA is required to disclose the educational background of all of its IAR’s to clients.

A

False

87
Q

T/S: a successor advisory, for must pay a new filing fee, but need not file a new application

A

False. The successor, firm us updated application, but not pay a new filing fee.

88
Q

When should routine changes to an advisors ADV be filed?

A

Within 90 days of the end of the advisers fiscal year.

89
Q

And IAR, with no place of business in the state must register in the state if he has more than___retail clients there.

A

Five

90
Q

What is the clients right If an investment advisor does not deliver the required brochure 48 hours prior to the signing of the contract?

A

The client may terminate the contract without penalty within five business days from the signing of the contract.

91
Q

If an IA’s office is in state a, but it’s only clients our insurance companies, with whom must it register?

A

With the administrator and state a period IAs whose only clients are insurance companies are exempt from SEC registration

92
Q

What is updated at the annual renewal of an IAs registration?

A

Assets under management, the number of accounts, clients, employees, and IA representatives

93
Q

Under the investment advisors act of 1940, when must an investment advisor renew it’s registration?

A

Within 90 days from the investment, advisors, fiscal year end.

94
Q

If a BD is promoting wrap accounts, does it need to register as an IA?

A

Yes. Selling wrap accounts is considered advisory service which requires registration.

95
Q

Is an accountant defined as an IA?

A

No. Accountants are excluded from the IA definition if their advice is incidental to their business.

96
Q

What is required of an IA if there has been a minority change in firm ownership?

A

Provide written notification to clients and the administrator

97
Q

IA records must be kept for at least_____years.

A

Five

98
Q

Is an advisor required to register in a state in which it has no office, but has accredited investors who reside there?

A

Yes. Since the USA does not recognize accredited, investors as institutional investors, IA registration is required.

99
Q

T/F: a person being compensated for providing clients with advice about securities is a broker dealer.

A

False. This person is considered an investment advisor.

100
Q

The electronic system used to register investment advisors is the_______________.

A

Investment Advisor registration depository

101
Q

If an IA has custody or discretion, it must include a_____ ____with it’s form ADV and brochure.

A

Balance sheet

102
Q

What is form ADV – E?

A

Form filed by an independent public accountant after auditing the records of an IA, maintaining custody of client assets

103
Q

The application for withdrawal for registration of an agent or IAR becomes effective in_____days.

A

30 days

104
Q

ADV part one is the disclosure document for use by the _______ and the ______.

A

SEC; administrator

105
Q

An IA is brochure must have the same information that appears and what part of form ADV?

A

Part two of form ADV

106
Q

What is form ADV?

A

The form filed by investment advisors for registration

107
Q

T/S: an agent of a BD, who solicit client trades, is not considered an IAR under the USA

A

True. There is no indication that the agent is managing accounts and charging a fee.

108
Q

Surety bond may be required if an investment advisor has_______or_____of client assets.

A

Discretion; custody

109
Q

All investment advisory contracts must be in writing and include the____for which services are contracted

A

Length of time

110
Q

If an investment advisor, contract, stipulates, cancellation penalties, a brochure must be provided ____Hours before the contract signing.

A

48

111
Q

When me and investment advisor charge fees that are different from other advisors?

A

When the fees are disclosed and are determined to be reasonable

112
Q

T/F: if an investment advisors clients are institutions such as banks and BD’s, it is an exempt from registration under the USA.

A

True. However, this is provided that it has no place of business in the state.

113
Q

The application for registration of an agent or IAR becomes effective in_____days.

A

30 days

114
Q

And IAR of a federal covered advisor has an office in State b with four clients who live in State b. Where must she register?

A

She must register in State b since she has an office in the state. The number of clients is not relevant.

115
Q

What is form ADV – NR?

A

Form required for investment advisors with general partners who are non-US residents; gives the SEC the right to receive legal papers

116
Q

What is not disclosed in the investment policy statement?

A

The advisers compensation. The statement does include the goals, objectives, and responsibilities of the advisor.

117
Q

T/S: the USA defines a bank providing investment recommendations to its clients as an IA.

A

False. Banks are excluded from the IA definition.

118
Q

Where do IAs Send their registration forms?

A

The investment advisor registration depository.

119
Q

With what system do investment advisors file the registration application?

A

The investment advisor registration depository

120
Q

What is the purpose of an annual updating amendment.

A

To determine if an IA is eligible for continued SEC registration; it is filed within 90 days of his fiscal year end

121
Q

What form is used to notify administrators that an IA is maintaining custody of clients assets?

A

Form ADV

122
Q

What type of advice may lawyers, accountants, teachers and engineers, provide, and not be considered an IA?

A

Advice that is incidental to their profession. If a separate fee is charged for the advice, the exclusion is lost.

123
Q

Is a certified public accountant who provides tax advice considered an IA under the USA?

A

No, CPAs are excluded from the IA definition.

124
Q

What types of changes are considered significant changes for an advisers form ADV?

A

Change in fees, custody, and the name or location of advisor

125
Q

When an IA initially registered, who is automatically considered registered?

A

The officers and directors of the advisory firm

126
Q

Who manages accounts, solicits services, or makes recommendations on behalf of a registered investment advisor?

A

An investment advisor representative

127
Q

T/F: An IA that maintains custody of customer assets must submit to an unannounced annual audit by a CPA.

A

True. At the completion of the audit, the CPA must file form ADV-E with the SEC.

128
Q

When does the de minimus exemption from registration apply for an IA that has no place of business in a state?

A

When an IA has no more than five non institutional clients who are residents of the state measured over 12 months

129
Q

Is an employee of a securities firm who manages accounts for a fee considered an IAR?

A

Yes

130
Q

Identify the acronym: LATE

A

Lawyers, accountants, teachers, and engineers (excluded from the IA definition)

131
Q

Is an attorney who exclusively provides estate planning services considered an IA under the USA?

A

No. Provided the attorneys advice is incidental to his profession, he is excluded from the IA definition.

132
Q

What is Form ADV-W?

A

The form filed by investment advisors to withdraw registration

133
Q

Give some examples of qualified custodians.

A

BDs, banks and trust companies. IAs may also be custodians, but are usually not.

134
Q

If an IA delivers a brochure at the time of contract signing, clients must be given _______ days to cancel without penalty.

A

Five

135
Q

Is an employee of an IA who answers the telephone and does clerical work considered an IAR?

A

No

S 66 (12 decks)

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