Customer Protection

Question 1

Either a bank or savings association that has deposits insured by the federal deposit insurance corporation (FDIC)

Answer 1

Qualified custodian

Question 2

In absence of a rule, an advisor must notify the administrator on form _____ that it has custody

Answer 2

Form ADV

Question 3

How often must an investment advisor provide a client statements listing their existing balance and individual securities?

Answer 3

At least quarterly

Question 4

What is one major benefit to an investment advisor using a qualified custodian?

Answer 4

The custodian is sending quarterly reports to the client, that administrative burden is lifted from the investment advisor

Question 5

True or false. If an investment advisor wishes to maintain custody of customer funds or securities, and state law does not prohibit doing so, the advisor must give written notice to the administrator

Answer 5

True

Note. Do not choose the answer on the exam that states “ must obtain permission from the administrator”

All that is required is notification on the original or amended form ADV

Question 6

Is the physical possession or control of funds and securities

Answer 6

Custody

Question 7

Our only required to provide receipts anytime they accept customer assets

Answer 7

Broker dealers

This is unlike Investment Advisors who generally are unable to accept Direct Delivery of customer Securities or funds except under the limited conditions described

Question 8

True or false. If a broker dealer affiliated with an investment advisor maintains custody of the investment advisors customers funds, nasaa says that investment advisor is considered to be maintaining custody

Answer 8

True. That means all the custody rules apply, beginning with notifying the administrator

Question 9

A Securities professional exercises discretion when determining anyone or all of the following in a customer’s account

Answer 9

Asset, action, amount.

Question 10

Note

Answer 10

Whether a broker dealer or an investment advisor, all discretionary orders must be reviewed and approved by designated supervisory person on the day of the trade. Approval prior to the trade is not required

Question 11

Test topic alert

Answer 11

Determining the price or the time for entry of a customer order is not discretion does not need written authorization