Fundamentals Lesson 2

Question 1

If advisor AUM < $100M, must register with _____?
If advisor AUM > $110M, must register with ____?
If between $100M-$110M, ____?

Answer 1

State
SEC
Choose between the 2

Question 2

SEC doesn’t allow letters RIA after name. What can they use?

Answer 2

Registered Investment Advisor

Question 3

Investment Advisors Act of 1940 defines investment adviser as someone who is 1?
2?
3?

Answer 3

1. Providing Advice about securities
2. In the Business
3. For Compensation
   ABC

Question 4

In order for an advisor to register with SEC, must file ____?

Answer 4

ADV

Question 5

ADV Part 1

Answer 5

Investment business, ownership, clients, employees, business practices, affiliations, disciplinary events.
RIA must file annually

Question 6

ADV Part 2

Answer 6

Advisor’s compensation, fees, education, investment objectives, conflicts of interest, background of advisory personnel. In plain English. Update promptly if materially inaccurate.

Question 7

ADV Part 3

Answer 7

Contains CRS (Customer Relationship Summary)

Question 8

Exceptions to registration with SEC:

Answer 8

TABLEs and Incidental
Teachers
Accountants
Broker/Dealer
Lawyers
Engineers

Question 9

Exemptions to registration with SEC:

Answer 9

VIPs are SaFE
Venture capital
Insurance companies
Private funds <150M
home State
Foreign advisors
securities not on a national Exchange

Question 10

Brochure Rule

Answer 10

Written disclosures to every client including:
Services, fees, types of securities, education background, participation/interest in securities transactions

Given before or at time of contract
Summary of changes annually

Question 11

FINRA:
File using \_\_\_\_\_?
Must pass securities exam to sell:
Series 6: \_\_\_\_?
Series 7: \_\_\_\_?

Answer 11

File: Form U-4

6: Mutual funds, UITs, variable life insurance, & variable annuities
7: Everything except commodities & futures

Question 12

To be accredited investor you must:

Answer 12

1,2,3
$1 Million net worth excluding residence
$200,000 income if single each year for 2 years
$300,000 joint income each year for 2 years

Question 13

Reg BI: General obligation satisfied by:

Answer 13

Disclosure of obligation
Care obligation
Conflict of interest obligation
Compliance obligation

Question 14

Lesson 2 Review:
Harry started own financial planning practice. Preparing brochure for all prospects to market practice. Which is not required to appear according to brochure rule?

A. Full disclosure of conflicts of interest
B. Biography including education & investment philosophy
C. Detailed explanation of fees, commissions, & compensation for services
D. List of current clients as reference

Answer 14

D

Question 15

Lesson 2 Review:
In business of giving investment advice & going to become RIA. Which does he have to register with?

A. CFP Board
B. AICPA
C. NAIC
D. SEC or state of residence

Answer 15

D

Question 16

Lesson 2 Review:
Brad finished studying for series exams. Passed both series 6 & 7. Brad can sell all of the following except:

A. Mutual funds
B. Options
C. Variable life insurance
D. UITs

Answer 16

C

Question 17

Lesson 2 Review:
Which is required to register with FINRA?

A. ADV Part 1
B. ADV Part 2
C. U-4
D. ADV-W

Answer 17

C