Ch 4 State Regulations Governing Investment Advisers and IA Representatives Flashcards
True or False: An agent of a BD who solicits client trades is not considered an IAR under the USA.
True. There is no indication that the agent is managing accounts and charging a fee.
In lieu of an IA-prepared brochure, what document may be delivered to IA clients?
Part 2 of Form ADV
An individual employed by an IA to manage the research department is required to register as an ____ under the USA.
IAR - Investment Adviser Representative
When may an investment adviser charge fees that are different from other advisers?
When the fees are disclosed and are determined to be reasonable
True or False: An IA with fewer than 15 retail clients in the past 12 months is exempt from registering under the USA.
False. The USA de minimis exemption for advisers is five or fewer individual clients.
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.
Individuals employed by an IA who only perform ____________________ duties are excluded from registration under the USA.
clerical/ministerial duties
In general, does the USA allow an adviser to charge performance-based fees?
No. However, such fee arrangements may be permitted by rule or order of the Administrator.
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.
The application for withdrawal of registration of an agent or IAR becomes effective in _____ days.
30 days.
An IA is required to deliver the brochure to its clients by no later than the __________ of the contract.
signing of the contract.
Any material changes to Form ADV must be filed ___________.
promptly (within 30 days).
True or False: An Administrator will inspect all advisers’ books and records on an annual basis.
False. Administrators lack the resources to inspect all IAs’ books and records annually.
What is Part 2 of Form ADV?
The portion of an IA’s application that may be used to satisfy the Brochure Rule (disclosure requirement)
Does the de minimis exemption apply to BDs that have no place of business in a state?
No. The de minimis exemption only applies to IAs and IARs.
With what system do IAs file their registration applications?
The Investment Adviser Registration Depository (IARD)
How are advisory fees most commonly charged?
As a percentage of assets under management over a specific period
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: An IA is required to disclose the educational background of all of its IARs to its clients.
False
An ___________________________________ is to an investment adviser what an ________ is to a BD.
investment adviser representative (IAR) is to an investment adviser what an agent is to a BD.
Identify the acronym: IAR
Investment Adviser Representative
IA records must be kept for at least ____ years.
five years.
Is an adviser to a mutual fund considered an IA under the USA?
No, mutual funds advisers are federally covered and are excluded from the IA definition at the state level.
When does the SEC require an adviser to include its balance sheet in its ADV Part 2?
If the firm has custody of a client’s funds or collects prepaid fees of $1,200 or more, six months or more in advance
