Disclosure: Form ADV and IA Perf & Advertising

Question 1

1. Which activity would be considered “continuous and regular supervisory or
   management”?
   a. Scheduled quarterly rebalancing
   b. Recommending third-party managers to a client with the discretionary
   authority to hire and fire the managers
   c. Providing investment recommendations to a client with the client
   implementing the transaction
   d. Passively tracking an index and rebalancing at pre-determined periods

Answer 1

b. Recommending third-party managers to a client with the discretionary
authority to hire and fire the managers

Question 2

2. A firm is considered to have custody if which THREE criteria are TRUE: (Choose
   three) :
   a. The firm directly or indirectly holds client funds or securities
   b. The firm has signatory power over a client’s checking account
   c. The firm is “operationally independent” from its related person
   d. The firm has general power of attorney over a client’s account

Answer 2

a. The firm directly or indirectly holds client funds or securities
b. The firm has signatory power over a client’s checking account
d. The firm has general power of attorney over a client’s account

Question 3

3. An investment adviser, in determining whether a legal or disciplinary event is
   “material,” should consider which THREE factors (Choose three):
   a. The severity of the sanction
   b. The time elapsed
   c. The individual’s education and experience
   d. The distance of the entity or individual from the advisory function

Answer 3

a. The severity of the sanction
b. The time elapsed
d. The distance of the entity or individual from the advisory function

Question 4

4. A Form ADV Part 2B Brochure Supplement must be prepared and delivered for all
   supervised persons EXCEPT those who:
   a. Formulate investment advice and have direct client contact
   b. Have discretionary authority as part of an investment team with no direct
   client contact
   c. Have discretionary authority over client assets and have direct client contact
   d. Have discretionary authority over client assets without direct client contact

Answer 4

b. Have discretionary authority as part of an investment team with no direct
client contact

Question 5

5. Which THREE Form ADV Part 2A “Brochure” delivery requirements are TRUE?
   (Choose three):
   a. The Brochure must initially be delivered to new or prospective clients before
   or at the time they enter into an advisory agreement.
   b. The Brochure or a summary of material changes must be delivered on an
   annual basis.
   c. The Brochure, including a summary of any material changes, must be
   delivered to clients within 120 days of the adviser’s fiscal year end or an
   adviser may deliver a summary of material changes with an offer to provide a
   complete copy of the updated brochure upon request.
   d. Advisers having no material change summary to deliver are required to
   deliver a brochure to their existing clients that year with a summary
   indicating that there were no material changes.

Answer 5

a. The Brochure must initially be delivered to new or prospective clients before
or at the time they enter into an advisory agreement.
b. The Brochure or a summary of material changes must be delivered on an
annual basis.
c. The Brochure, including a summary of any material changes, must be
delivered to clients within 120 days of the adviser’s fiscal year end or an
adviser may deliver a summary of material changes with an offer to provide a
complete copy of the updated brochure upon request.

Question 6

6. Which TWO Schedule 13D requirements are TRUE? (Choose two)
   a. Schedule 13D must be filed within 45 days of the end of the calendar year in
   which the obligation arose
   b. Copies of Schedule 13D must be provided to each exchange where the
   security is traded as well as to the issuer
   c. Required amendments to Schedule 13D must be made “promptly”
   d. Required amendments to Schedule 13D must be made within 10 days

Answer 6

b. Copies of Schedule 13D must be provided to each exchange where the
security is traded as well as to the issuer
c. Required amendments to Schedule 13D must be made “promptly”

Question 7

7. Which THREE Form 13H disclosures are TRUE? (Choose three)
   a. Large traders are defined as persons whose transactions in exchange-listed
   securities equal or exceed two million shares or $200 million during any
   calendar day.
   b. Market participants can voluntarily register as large traders even if they have
   not yet effected transactions equal to or greater than the identifying level of
   transactions.
   c. A firm must file an initial form 13H within 10 days of first effecting aggregate
   transactions equal to or greater than the identifying activity level.
   d. After filing an initial Form 13H, large traders must file Form 13H with the SEC
   within 45 days of the end of each calendar year.

Answer 7

b. Market participants can voluntarily register as large traders even if they
have not yet effected transactions equal to or greater than the identifying
level of transactions.
c. A firm must file an initial form 13H within 10 days of first effecting
aggregate transactions equal to or greater than the identifying activity level.
d. After filing an initial Form 13H, large traders must file Form 13H with the
SEC within 45 days of the end of each calendar year.

Question 8

8. Which communication is LEAST likely to be considered an “advertisement” according
   to the SEC Advertising Rule and SEC staff interpretation PRIOR TO MAY 2021?
   a. A book published by an investment adviser discussing its services, investment
   methods and performance
   b. A written response to a client who requested specific information about an
   unprofitable past recommendation
   c. An investment adviser’s website
   d. A radio announcement by an adviser offering a securities analyses

Answer 8

b. A written response to a client who requested specific information about
an unprofitable past recommendation

Question 9

9. Which THREE criteria must be met before an adviser can publish third party social
   media commentary PRIOR TO MAY 2021? (Choose three)
   a. The commentators’ ability to include public commentary must not be
   restricted.
   b. The adviser must have the ability to affect which public commentary is
   included or how it is presented on the Site.
   c. The Site must allow for the viewing of all public commentary.
   d. The Site must allow for the update of new commentary on a real-time basis.

Answer 9

a. The commentators’ ability to include public commentary must not be
restricted.
c. The Site must allow for the viewing of all public commentary.
d. The Site must allow for the update of new commentary on a real-time
basis.

Question 10

10. PRIOR TO MAY 2021, according to the Clover Capital Management, Inc. no-action
    letter, which advertisement would be considered misleading?
    a. Suggests or makes claims about the potential for profit and loss.
    b. Discloses whether and to what extent the results portrayed reflect the
    reinvestment of dividends and other earnings.
    c. Reflects the deduction of advisory fees, brokerage or other commissions and
    any other expenses a client would have paid or actually paid.
    d. Compares the model or actual results to an index without disclosing all
    material facts relevant to the comparison.

Answer 10

d. Compares the model or actual results to an index without disclosing all
material facts relevant to the comparison.

Question 11

11. The CFA Institute’s Global Investment Performance Standards (GIPS®) requires an
    investment firm to follow which TWO guidelines to claim compliance? (Choose two)
    a. Make available a full list of firm composites and make each composite
    performance available upon request.
    b. Calculate composite returns by asset weighting the individual portfolio
    returns at least annually.
    c. Calculate all returns after the deduction of the actual trading expenses
    incurred during the period.
    d. Do not include cash and cash equivalents returns in total return calculations.

Answer 11

a. Make available a full list of firm composites and make each composite
performance available upon request.
c. Calculate all returns after the deduction of the actual trading expenses
incurred during the period.

Question 12

12. PRIOR TO MAY 2021, an advertisement that includes prior performance would not,
    in and of itself, be misleading if which THREE of the following conditions were
    satisfied? (Choose three)
    a. The advertisement is consistent with staff interpretations with respect to the
    advertisement of performance results.
    b. All accounts that were managed in a substantially similar manner are
    advertised unless the exclusion of any such account would not result in
    materially higher performance.
    c. The advertisement does not contain references to the fact that the
    performance results were from accounts managed at another entity.
    d. The person or persons who manage accounts at the successor adviser were
    also primarily responsible for achieving the prior performance results.

Answer 12

a. The advertisement is consistent with staff interpretations with respect to
the advertisement of performance results.
b. All accounts that were managed in a substantially similar manner are
advertised unless the exclusion of any such account would not result in
materially higher performance.
d. The person or persons who manage accounts at the successor adviser
were also primarily responsible for achieving the prior performance results.

Question 13

13. As a fiduciary, an investment adviser owes its clients all duties EXCEPT:
    a. An affirmative duty of good faith
    b. An affirmative obligation to employ reasonable care to avoid misleading
    clients
    c. Full and fair disclosure of material facts
    d. A duty of integrity and res ipsa loquitur

Answer 13

d. A duty of integrity and res ipsa loquitur

Question 14

Form ADV Part 2A does NOT need to be delivered to which THREE entities? (Choose
three)
a. Business development companies
b. Registered investment companies
c. Person who receives impersonal advisory services costing less than $1200
per year
d. Person who receives impersonal advisory services costing less than $500 per
year

Answer 14

a. Business development companies
b. Registered investment companies
d. Person who receives impersonal advisory services costing less than $500
per year

Question 15

15. All of the adviser’s responsibilities regarding private fund reporting in Schedule D are
    TRUE EXCEPT:
    a. Advisers must report on private funds that are advised by affiliates.
    b. Advisers sponsoring a master-feeder arrangement are permitted to submit
    one Schedule D for the master fund and all feeder funds.
    c. Advisers with a principal office and place of business outside the U.S. can
    omit a Schedule D for a private fund that is not organized in the U.S., or
    offered to, or owned by U.S. persons.
    d. Advisers must complete Section 7.B. of Schedule D for each private fund that
    it (and not a related person) advises.

Answer 15

a. Advisers must report on private funds that are advised by affiliates.

Question 16

16. Which TWO Form PF updates are TRUE? (Choose two)
    a. If a firm is no longer required to file Form PF, then it must file its final filing
    no later than the last day on which its next Form PF would be timely.
    b. Large liquidity fund advisers must file annual updates within 60 calendar days
    after the end of their fiscal year.
    c. Large hedge fund advisers are not required to file annual updates but instead
    file quarterly updates for the fourth quarter.
    d. Large hedge fund advisers must file annual updates within 60 calendar days
    after the end of their fiscal year.

Answer 16

a. If a firm is no longer required to file Form PF, then it must file its final filing
no later than the last day on which its next Form PF would be timely.
c. Large hedge fund advisers are not required to file annual updates but
instead file quarterly updates for the fourth quarter.

Question 17

17. Which THREE Form ADV Part 2A Appendix 1 “The Wrap Fee Program Brochure”
    criteria are TRUE? (Choose three)
    a. The firm must disclose whether related persons are portfolio managers in the
    wrap program.
    b. The firm must disclose any conflicts of interest that may be present.
    c. The firm is required to give a wrap fee program brochure to each client of the
    wrap fee program upon request only.
    d. The firm must disclose whether related portfolio managers are subject to the
    same selection and review criteria as unaffiliated managers who participate
    in the program.

Answer 17

a. The firm must disclose whether related persons are portfolio managers in
the wrap program.
b. The firm must disclose any conflicts of interest that may be present.
d. The firm must disclose whether related portfolio managers are subject to
the same selection and review criteria as unaffiliated managers who
participate in the program.

Question 18

18. PRIOR TO MAY 2021,the SEC staff did not recommend enforcement action against
    an adviser for only using gross performance numbers in one-on-one presentations to
    wealthy prospective clients and consultants, provided that the adviser furnishes
    which TWO in writing at the time of the presentation: (Choose two)
    a. Disclosure that the investment advisory fees are disclosed in the Investment
    Advisory Contract.
    b. Disclosure that the client’s return will be reduced by the advisory fees and
    any other fees it may incur in the management of its advisory account.
    c. Disclosure that the performance figures will reflect the deduction of
    investment advisory fees.
    d. A representative example (in the form of a table, chart, graph, or narrative)
    that shows the effect an investment advisory fee, compounded over a period
    of years, could have on the total value of a client’s portfolio.

Answer 18

b. Disclosure that the client’s return will be reduced by the advisory fees and
any other fees it may incur in the management of its advisory account.
d. A representative example (in the form of a table, chart, graph, or
narrative) that shows the effect an investment advisory fee, compounded
over a period of years, could have on the total value of a client’s portfolio.

Question 19

19. Form ADV Part 1A Schedules A and B request information on executive officers as
    well as direct and indirect owners of the firm. Which Schedules A and B requirement
    is TRUE:
    a. Advisers must report indirect owners with 5% or more ownership interest in
    their firms on Schedule A.
    b. Advisers must report direct owners with 5% or more ownership interest in
    their firms on Schedule B.
    c. Advisers must report indirect owners with 25% or more ownership interest in
    their firms on Schedule A.
    d. Advisers must report indirect owners with 25% or more ownership interest in
    their firms on Schedule B.

Answer 19

d. Advisers must report indirect owners with 25% or more ownership interest
in their firms on Schedule B.