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Series 66 > Ch 4 State Regulations Governing Investment Advisers and IA Representatives Part II > Flashcards

Ch 4 State Regulations Governing Investment Advisers and IA Representatives Part II Flashcards

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Series 66 flashcards
1
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

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2
Q

Part 2 of Form ADV may be used as the disclosure document that is provided to the IA’s ________.

A

clients.

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3
Q

True or False: The manager of an IA’s human resources department is considered an IAR.

A

False. The manager’s responsibilities do not include providing advice about securities or managing accounts.

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4
Q

True or False: If an IA’s clients are institutions (e.g., banks and BDs), it is exempt from registration under the USA.

A

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

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5
Q

All investment advisory contracts must be in writing and include the ______________ for which services are contracted.

A

length of time

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6
Q

True or False: A BD that promotes wrap accounts to its 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.

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7
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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8
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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9
Q

What record must an investment adviser maintain regarding its IARs?

A

The initial application for each IAR

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10
Q

IAs with no place of business in a state, and whose clients are ____________ are not required to register in that state.

A

institutions

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11
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 its fiscal year end

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12
Q

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

A

Yes

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13
Q

When is Form ADV-W filed?

A

When an adviser withdraws its registration

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14
Q

Is an IA always required to include a balance sheet in Part 2 of its Form ADV?

A

No. A balance sheet is required if the IA collects prepaid fees or has discretion.

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15
Q

Investment advisers with custody must have an annual audit done by a(n) ____________________.

A

independent CPA.

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16
Q

An IAR with no place of business in a state must register in the state if he has more than ____ retail clients there.

A

five retail clients there.

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17
Q

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

A

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

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18
Q

True or False: An IA firm that is acquired by a competitor must pay a new filing fee.

A

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

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19
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.

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20
Q

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

A

The client’s account statement

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21
Q

If an IA is registered with the SEC, is registration required in any state in which it intends to do business?

A

No. The National Securities Markets Improvement Act (NSMIA) exempts federal covered advisers from state registration.

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22
Q

An IAR of a state-registered IA has no office in NJ, but has six clients who live in NJ. Must she register in NJ?

A

Yes. IARs of state-regulated IAs register where they have an office and where they have six or more individual clients.

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23
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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24
Q

Investment advisers typically charge fees that are based on the _______ _____ over a specified period.

A

average value

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25
Q

An IAR of a federal covered adviser has no office in NY, but has six clients who live in NY. Must he register in NY?

A

No. IARs of federal covered advisers are only required to register in states in which they have an office.

26
Q

True or False: The USA classifies an agent of a BD who also manages wrap accounts as an IA.

A

No. IAs are firms, not individuals.

27
Q

ADV Part I is a disclosure document for use by the _____ and the ________________.

A

SEC and the Administrator.

28
Q

What is Form ADV?

A

The form filed by investment advisers for registration

29
Q

What types of changes are considered material changes that require prompt amendment of an adviser’s Form ADV?

A

Significant items, such as a name or location change

30
Q

A surety bond may be required if an investment adviser has _____________ or __________ of client assets.

A

discretion or custody

31
Q

For how long must an IA maintain records?

A

Five years

32
Q

If an IA’s office is in State A, but its only clients are insurance companies, with whom must it register?

A

With the Administrator in State A. IAs whose only clients are insurance companies are exempt from SEC registration.

33
Q

An 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).

34
Q

True or False: An IA with five or fewer retail clients in the state in the past 12 months must register under the USA.

A

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

35
Q

Does an IA 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 of an IA’s clients have $1 milllion under management.

36
Q

True or False: An adviser to a mutual fund must register in the state in which the fund is domiciled.

A

False. A federal covered adviser must be registered with the SEC, not a state.

37
Q

Give some examples of qualified custodians.

A

Broker-dealers, banks and trust companies. IAs may also be custodians, but usually are not.

38
Q

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

A

Yes. The Administrator may not set a requirement that exceeds the IA’s home state.

39
Q

True or False: An IA must physically deliver its brochure to clients at least annually.

A

False. At a minimum, the IA must (in writing) offer to deliver its brochure annually.

40
Q

What types of changes are considered significant changes for an adviser’s Form ADV?

A

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

41
Q

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

A

five days

42
Q

True or False: A BD making recommendations about investing in various securities is an IA under the USA.

A

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

43
Q

The publisher of a financial publication that provides personalized advice is considered a(n) __________________.

A

investment adviser.

44
Q

Identify some non-material (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 adviser

45
Q

Under the USA, the de minimis exemption limits an IA to no more than ____ clients within the previous ___ months.

A

five clients within the previous 12 months.

46
Q

May the Administrator set minimum net worth requirements for IAs?

A

Yes, but no state may impose a requirement that exceeds the requirement of the IA’s home state.

47
Q

What is Form ADV-NR?

A

Form required for IAs with general partners who are non-U.S. residents; gives the SEC the right to receive legal papers

48
Q

An IAR of a federal covered adviser has an office in State B with 4 clients who live in State B. Where must he register?

A

He must register in State B since he has an office in the state. The number of clients is not relevant.

49
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.

50
Q

Under the Investment Advisers Act of 1940, when must an IA renew its registration?

A

Within 90 days from the IA’s fiscal year-end

51
Q

When does an Administrator require an adviser to include its balance sheet in its ADV Part 2?

A

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

52
Q

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

A

An investment adviser representative (IAR)

53
Q

When must a federal adviser file an updating amendment to determine continued eligibility for SEC registration?

A

Within 90 days of the end of the adviser’s fiscal year.

54
Q

Give some examples of institutional investors.

A

Banks, S&Ls, insurance or investment companies, investment advisers, or entities with at least $50 million in assets

55
Q

An IAR has an office in State A and has 4 clients who reside in the state. Is the IAR required to register in State A?

A

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

56
Q

Under the USA, all IA contracts must be __________ and must disclose __________ provided and related ______.

A

in writing and must disclose services provided and related fees.

57
Q

Is an adviser 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.

58
Q

In place of a surety bond, the Administrator will accept a deposit of _______ or _____________.

A

cash or securities.

59
Q

When should routine changes to an adviser’s ADV be filed?

A

Within 90 days of the end of the adviser’s fiscal year

60
Q

An annual updating admendment of Form ADV is filed with the SEC within __ days of the adviser’s fiscal year end.

A

90 days

Series 66 (21 decks)

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