Chapter 6 Part 5

Question 1

Solicitors may receive a fee from the adviser for the solicitation of advisory clients if the following conditions are met

Answer 1

The adviser is registered; There is no outstanding SEC order suspending, limiting, or barring the solicitor’s activities; There is a written agreement between the solicitor and the investment adviser.

Question 2

If the solicitor is an associated person, such as a partner, officer, director, or cn1ployee of the investment adviser, or another entity affiliated with the adviser, this relationship

Answer 2

must be disclosed to the client

Question 3

Often solicitors are nonemployees, such as attorneys and accountants, who arc in a position to direct clients to investment advisers. When these nonaffiliated persons solicit for the adviser, the following conditions must be met

Answer 3

“The agreement between the adviser and solicitor must describe the solicitation activities and compensation arrangement; The solicitor must provide the client with the adviser’s brochure and a separate solicitor disclosure document at the time of the solicitation; The adviser must receive a signed acknowledgment from the client confirming receipt of both
the adviser’s and solicitor’s disclosure documents”

Question 4

The solicitor’s disclosure document must disclose the

Answer 4

names of the adviser and solicitor, the nature of the relationship, the terms of the compensation, and any amount charged to the customer above the adviser’s normal fee to pay for the solicitation of the account

Question 5

When soliciting only impersonal advisory activities,

Answer 5

no disclosure to clients is required

Question 6

impersonal advisory services are not intended to meet the

Answer 6

investment objectives or needs of specific clients or express an opinion on the investment merits of specific securities. In all other solicitations, disclosure is required

Question 7

The Investment Advisers Act and associated SEC rules do not require the solicitor to register as an investment adviser as long as

Answer 7

the solicitor’s activities are limited to merely referring clients to a registered investment adviser

Question 8

However, the majority of state securities regulators define the solicitation or referral of investment advisory clients as an

Answer 8

investment advisory activity requiring the registration of the solicitor as an investment adviser or investment adviser representative

Question 9

“FCA excluded from definition

”

Answer 9

Bank and bank holding companies (not savings and loan associations or investment adviser subsidiaries of a bank); Professionals whose investment advice is incidental to the practice of their profession (LATE): Lawyer, Accountant, Teacher, and Engineer; Broker-dealers and their representatives; Publishers of regular and general circulation; U.S. government securities advisers; Any other person designated b the SEC

Question 10

FCA exempt from registration

Answer 10

Local exemption–All clients are residents of the state where the advisers office is located and gives no advice on exchange-listed securities; Insurance exemption—All clients are insurance companies