Chapter4: Communication And Compensation

Question 0

When documentation is provided

Answer 0

New clients-48hrs before contract or at time of entering into a contract if client can terminate within five days.
Existing clients-each year.

Question 1

The brochure rule

Answer 1

Requires written disclosure document to each advisory client or potential client. Or provide form ADV II Includes background information, services and fees, disclosure from compensation from a third party, whether iA exercises discretion over funds, types of clients and affiliation with broker dealers

Question 2

Special disclosures

Answer 2

If IA is principal for own account or as broker dealer for both client and another person on a securities transaction. Must have written consent

Question 3

Wrap fee(schedule H form)

Answer 3

Attached to ADV II, not include manage account programs or mutual fund asset programs. Fee charged to wrap account.

Question 4

Managed account programs

Answer 4

Traditional portfolio management services offered by money managers.

Question 5

Mutual fund asset allocation

Answer 5

Fee based on percentage of the total assets

Question 6

A wrap account

Answer 6

Not based in number of transactions, one fee for advisory services and brokerage trades

Question 7

Form 13 F

Answer 7

Over $100m or more in discretion

Question 8

SEC rules on contracts

Answer 8

Performance based fees are prohibited, not misleading on right to legal action, can’t force client to waive legal rights of IA act of 1940, forbids assigning contract without client consent.

Question 9

Uniform securities act on contracts

Answer 9

Disclose services and fees, conditions to assign to another party, requires consent to assign contract away.

Question 10

Advertising

Answer 10

Any letter, notice, circular, or other written communication to more than one person. Internet, radio, tv or anyother mass communications.

Question 11

Advertising may not

Answer 11

Refer to testimonials about advisor accept with consent, refer to possible recommendations, advertise as free if not completely, represent graph, chart, formula that by itself determines whether the client should buy or sell a securities.

Question 12

Clover capital letter

Answer 12

Performance advertising prohibited if it includes rests that don’t reflect fees and commissions, economic effects, and fails to reflect reinvestment if dividends and capital gains

Question 13

Solicitation

Answer 13

Can pay a fee to a person who solicits advisory clients only if iA is registered with SEC, and the solicitor is in good standing with law.

Question 14

Compensation

Answer 14

Fees permitted: based on percentage of AUM, flat annual dollar amount for services agreed upon, brokerage fees made for clients, wrap fees

Question 15

Performance based fees

Answer 15

Two types of clients, registered investment companies, individual with account value of 1mill or 750k and net worth of 1.5m

Question 16

Fulcrum fee

Answer 16

Fee paid based on benchmarks