Chapter 5 Part 4 Flashcards
an adviser is required only to satisfy the minimum financial requirement of the state in which
its principal office is located
If the investment adviser’s net worth drops below the minimum established by the Administrator, the adviser must notify the Administrator about the deficiency by
the end of the next business day and file a report of its financial condition by the end of the following business day. (Note that net worth equals the adviser’s assets minus its liabilities.)
no bond maybe required of any adviser whose minimum financial requirements exceed the
amount required by the Administrator
The Administrator may require that investment advisers provide clients with any information that would be in
the public’s best interest or useful for the protection of advisory clients.
advisers must provide clients with a copy of Form ADV Part 2 or the firm’s brochure. This disclosure document is required under the
Brochure Rule of the Investment Advisers Act of 1940, which also applies under the USA
Advisers must disclose to clients all
material, legal, or disciplinary actions that have occurred within the preceding 10 years. Hemember, any legal or disciplinary event that reflects negatively on an adviser’s integrity must be disclosed
disclosure of SRO proceedings is not required unless
the fine levied exceeded $2,500
A financial condition of the investment adviser that may reasonably impair its abilily to meet commitments to clients must also be disclosed if the investment adviser
Has discretionmy authority over client accounts; Has custody of client funds or securities; Requires prepayment of more than $500 in fees, six months or more in advance. Failure to make the required disclosures is considered fraudulent.
Advisers with custody must also maintain
Journals of securities transactions and movements; Separate client ledgers; Copies of confirmations; Records by security showing each client’s interest and location
Unless otherwise directed by the Administrator, all required records must be preseived for a period of
five years in an easily accessible location. Records must be maintained at the appropriate office for the first two years
The following persons are excluded from the definition of investment adviser according to the Uniform Securities Act
lnvestment adviser representatives; Banks, savings institutions, or trust companies, Professionals whose investment aduice is incidental to the practice of their professions (LATE): Lawyers Accountants Teachers Engineers; Any other person designated by the Administrator
An exclusion is available to a broker-dealer or agent of a broker-dealer as long as any investment advice provided is within the
scope of the broker-dealer’s business and there is no special compensation for the advice. Brokerage commissions do not constitute special compensation unless a clearly definable portion is for investment advice
Firms offering wrap accounts arc not afforded the broker-dealer exemption. They must register as
investment advisers and treat these clients as any other advisory client
An exemption is available for a publisher of a
read in book
Even though some newsletters offer impersonal investment advice, if the publications are not of general circulation, the newsletter writers
may need to register as investment advisers.
