Financial Service Regulations Flashcards
When must you present the brochure?
48 hours before an investment advisory contract is signed OR at the time of signing
If you put CFP or CFA on form ADV what else do you have to put?
The minimum qualifications required to obtain those
Does compensation go on ADV?
Yes - any compensation that may be earned from providing products and services
Where would other business activities that involve substantial pay be disclosed?
Form ADV
Would expenses be listed on form ADV?
Yes any expenses the client may incur - 12b 1 fees, sales loads
Public Censure
punishable written reproach of the respondent’s behavior published in press release or other form of publicity selected by the DEC
Private Censure
unpublished written reproach issued to a censured respondent
-would happen before public censure
Non Administrative Order
DEC may order remedial education or work
Interim Suspension
temporary sanction does NOT preclude the CFP board from imposing final sanction
Does an interim suspension preclude CFP from imposing final sanction?
No
If you have a series 6 and obtain life and annuity licenses, can you sell variables?
Yes
Are Blue Sky Laws federal or state?
State
What can you sell with series 6?
Mutual Funds, Variable Annuities, Variable LI, UIT, Muni Fund Securities like 529 and LGIP
Can you sell stocks with series 6?
No - cant sell stocks bonds or etfs
What license do you need to sell securities at the state level
Series 7 and 63
What does Series 63 test cover
principals of state securities regulation
Can a CFP or CFP substitute for series 65?
Yes most states will allow this
Who regulates form ADV?
The SEC
If you forget to provide form ADV who would you be in trouble with?
The SEC
Who are exempted under the definition of investment advisor?
-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
The Investment Advisers Act of 1940
requires that PERSONS or FIRMS advising others about securities investment must REGISTER WITH SEC. (who else had to register in the 40s)
MALPRACTICE
The Securities Investor Protection Act of 1970
is designed to protect individual investors from losses as a result of BROKERAGE FAILURES (what happened in 1970?)
The Securities Act of 1933
provides for protection from misrepresentation, deceit, and other FRAUD in the SALE OF NEW SECURITIES
3 Prong Test
-PROVIDES GENERAL OR SPECIFIC ADVICE 🗣️
-IN THE BUSINESS OF OFFERING INVESTMENT ADVICE 👨💼
-RECEIVES COMPENSATION 💰
Investment Advisor Act of 1940 states you need a license from what organization?
FINRA
Purpose of Investment Advisor Act of 1940
protect the public from MALPRACTICE by paid Advisors
RIAS with less than $110 million AUM register with who
Their state
RIAS with over 110 mil in AUM register with who
SEC
Are you required to disclose compensation as specific dollar amounts or percentages?
No - unless the client requests it
When a CFP® professional files a single bankruptcy and denies that it demonstrates an inability to manage responsibly their financial affairs what happens
the factual basis for the denial is submitted to CFP Board and the Complaint for Single Bankruptcy will proceed to a HEARING
If you’re an RR but you’re also registered as at an Insurance firm what type of compensation would you likely receive?
Not fee only - you’re more than likely making commission at the insurance firm
Could you potentially purchase a home from a client?
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
Brokerage Firms
firms that charge a fee or commission for executing buy and sell orders submitted by another firm or individual