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Intro to FP > Financial Service Regulations > Flashcards

Financial Service Regulations Flashcards

1
Q

When must you present the brochure?

A

48 hours before an investment advisory contract is signed OR at the time of signing

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2
Q

If you put CFP or CFA on form ADV what else do you have to put?

A

The minimum qualifications required to obtain those

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3
Q

Does compensation go on ADV?

A

Yes - any compensation that may be earned from providing products and services

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4
Q

Where would other business activities that involve substantial pay be disclosed?

A

Form ADV

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5
Q

Would expenses be listed on form ADV?

A

Yes any expenses the client may incur - 12b 1 fees, sales loads

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6
Q

Public Censure

A

punishable written reproach of the respondent’s behavior published in press release or other form of publicity selected by the DEC

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7
Q

Private Censure

A

unpublished written reproach issued to a censured respondent
-would happen before public censure

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8
Q

Non Administrative Order

A

DEC may order remedial education or work

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9
Q

Interim Suspension

A

temporary sanction does NOT preclude the CFP board from imposing final sanction

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10
Q

Does an interim suspension preclude CFP from imposing final sanction?

A

No

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11
Q

If you have a series 6 and obtain life and annuity licenses, can you sell variables?

A

Yes

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12
Q

Are Blue Sky Laws federal or state?

A

State

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13
Q

What can you sell with series 6?

A

Mutual Funds, Variable Annuities, Variable LI, UIT, Muni Fund Securities like 529 and LGIP

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14
Q

Can you sell stocks with series 6?

A

No - cant sell stocks bonds or etfs

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15
Q

What license do you need to sell securities at the state level

A

Series 7 and 63

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16
Q

What does Series 63 test cover

A

principals of state securities regulation

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17
Q

Can a CFP or CFP substitute for series 65?

A

Yes most states will allow this

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18
Q

Who regulates form ADV?

A

The SEC

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19
Q

If you forget to provide form ADV who would you be in trouble with?

A

The SEC

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20
Q

Who are exempted under the definition of investment advisor?

A

-Accountants or lawyers whose investment advice is “solely incidental” to the practice of their profession.
-Publishers of financial publications that have regular and general circulation
-Banks that are not investment companies

-Persons whose advice relates only to securities issued or guaranteed by the U.S. government

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21
Q

The Investment Advisers Act of 1940

A

requires that PERSONS or FIRMS advising others about securities investment must REGISTER WITH SEC. (who else had to register in the 40s)
MALPRACTICE

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22
Q

The Securities Investor Protection Act of 1970

A

is designed to protect individual investors from losses as a result of BROKERAGE FAILURES (what happened in 1970?)

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23
Q

The Securities Act of 1933

A

provides for protection from misrepresentation, deceit, and other FRAUD in the SALE OF NEW SECURITIES

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24
Q

3 Prong Test

A

-PROVIDES GENERAL OR SPECIFIC ADVICE 🗣️
-IN THE BUSINESS OF OFFERING INVESTMENT ADVICE 👨‍💼
-RECEIVES COMPENSATION 💰

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25
Q

Investment Advisor Act of 1940 states you need a license from what organization?

A

FINRA

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26
Q

Purpose of Investment Advisor Act of 1940

A

protect the public from MALPRACTICE by paid Advisors

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27
Q

RIAS with less than $110 million AUM register with who

A

Their state

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28
Q

RIAS with over 110 mil in AUM register with who

A

SEC

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29
Q

Are you required to disclose compensation as specific dollar amounts or percentages?

A

No - unless the client requests it

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30
Q

When a CFP® professional files a single bankruptcy and denies that it demonstrates an inability to manage responsibly their financial affairs what happens

A

the factual basis for the denial is submitted to CFP Board and the Complaint for Single Bankruptcy will proceed to a HEARING

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31
Q

If you’re an RR but you’re also registered as at an Insurance firm what type of compensation would you likely receive?

A

Not fee only - you’re more than likely making commission at the insurance firm

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32
Q

Could you potentially purchase a home from a client?

A

Yes but there is a material conflict of interest that may impair the CFP® professional’s ability to offer objective advice, and the CFP® professional must DISCLOSE and manage this conflict of interest

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33
Q

Brokerage Firms

A

firms that charge a fee or commission for executing buy and sell orders submitted by another firm or individual

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34
Q

Transfer agent

A

person or company who maintains the records of registered securities

35
Q

Clearing agencies

A

facilitate the validation, delivery and settlement of securities transactions

36
Q

Who does the Investment Advisor Act of 1940 regulate?

A

Investment Advisors

37
Q

Investment Advisor act of 1940 defines securities as

A

stocks, bonds, mutual funds, certificates of deposit, limited partnership ownership interests, variable LI, variable annuity

38
Q

Who oversees FINRA?

A

the SEC

39
Q

Who do you become licensed with to sell securities?

A

FINRA

40
Q

What does FINRA do

A

PROTECTS INVESTORS and market integrity, and ADMINISTERS EXAMS and LICENSES for those who sell securities

41
Q

RIAs under act of 1940 are held to what standard vs. those who are just registered to sell securities with FINRA

A

RIAs are held to a FIDUCIARY standard while if you’re just registered to sell securities with FINRA you’re just held to a SUITABILITY standard

42
Q

RIAs are held to what standard of conduct?

A

Fiduciary

43
Q

If you’re not registered as an RIA but you sell securities what standard applies?

A

Suitability

44
Q

What is another name for ADV part 2B

A

the brochure

45
Q

How often must you file ADV part 1?

A

every year

46
Q

What is in ADV Part 1?

A

General business information

47
Q

What is included in ADV part 2B?

A

background information, educational history, business experience, professional designations

48
Q

Fees are located in what part of ADV?

A

2A

49
Q

Who investigates RIA violations

A

The SEC

50
Q

SEC Criminal penalty limits

A

criminal penalty or imprisonment up to 5 years

51
Q

Who can the SEC penalize?

A

An individual or entity

52
Q

Is the penalty always the exact amount of gain that resulted?

A

No it can be a set amount or the gain that resulted from the violation

53
Q

What act is an offering of securities registered under?

A

The Securities act of 1933 which makes sense because that act is about fraudulent new issues

54
Q

A new issue is registered under the securities act of 1933 and what else?

A

State securities laws

55
Q

RIAs must comply with the rules of what act?

A

Investment Advisor Act of 1940

56
Q

Violations are categorized in what type of system?

A

3 tiered system - if it cant be classified under the 3 tiers the SEC can impose criminal penalty and up to 5 years in jail

57
Q

What securities issues are exempted?

A

-its listed on NYSE, American or Midwest stock exchange
- its issued by a BANK or SAVINGS institution
-think EXempeted EXchange

58
Q

Covered securities subject to regulation by whom

A

only Federal

59
Q

Securities NOT “covered” regulated by whom

A

federal and state regulation including registration and review

60
Q

Blue Sky Laws

A

state laws that protect against fraudulent sales practices

61
Q

41 states require registration how

A

state level registration and a broker dealer, registered rep, and security must be registered in the state they want to sell

62
Q

Registered rep passes what exam

A

series 63 and be registered in that state

63
Q

Revoking the license of a broker dealer or salesperson would fall under what (state specific)

A

Blue Sky Laws

64
Q

Other names for Securities act of 1933

A

Truth in securities law
the paper act

65
Q

Objectives of securities act of 1933

A

-Investors receive INFO about securities being offered for sale
-prohibits deceit, misrepresentations or other fraud

66
Q

What is the goal of registering securities

A

disclosure of important financial information

67
Q

What act defines a security?

A

Act of 1933

68
Q

What act determines when and how a security can be sold to public?

A

Act of 1933

69
Q

What securities dont need to be registered?

A

-private offerings to limited # of persons or institutions
-offerings of limited size
-intrastate offerings
-muni state and federal securities

70
Q

Do munis need to be registered?

A

No

71
Q

Securities act of 1934 created what

A

SEC

72
Q

SEC registers, regulated and oversees 4 things:

A

Brokerage firms, transfer agents, clearing agencies, SROs

73
Q

Non FINRA SROs

A

NYSE, American Stock exchange, NASDAQ

74
Q

Sarbannes Oxley expanded SEC regulation to what

A

auditors and lawyers

75
Q

Broker

A

any person engaged in the biz of effecting transactions in securities for others

76
Q

How do you determine if someone is a broker?

A

look at the activities the person or business performs

77
Q

Dealer

A

person engaged in biz of buying and selling securities for THEIR OWN ACCOUNT, through a broker or otherwise
-dealer deals from their own stash

78
Q

Trader buys and sells securities for whom

A

themselves

79
Q

A broker is a what and a dealer is a what

A

broker is an agent
dealer is a principal

80
Q

What would happen first, public or private censure?

A

Private

81
Q

Order of discipline

A
  1. Order continuing education
  2. Private Censure
  3. Public Censure
  4. Suspension for a period of time
  5. Permanently revoke CFP
82
Q

What 2 ways can you satisfy the brochure rule?

A

Provide ADV part 2 or
Provide an actual brochure with that information

83
Q

The 3 prong test to define an advisor is part of what act?

A

Investment Advisor Act of 1940

84
Q

How many days for reporting to client bankruptcy or public discipline?

A

90 days

Intro to FP (14 decks)

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