IA - Regs

Question 1

LATE Exclusion
(State Law)

Answer 1

Lawyers
Accountants
Teachers
Engineers

Excluded From State Registration IF

Advice is Incidental
and
Doesn’t Charge a Fee for Advice

Question 2

Advisor’s Net Worth Includes
(State Law)

Answer 2

Only Business Assets
(MUST BE TANGIBLE ASSETS)

Not Personal
Home
Furnishings
Cars
etc…

Question 3

Who files FORM ADV-E

and

When must it be filed?
(State Law)

Answer 3

Filed by the auditor of IA if the IA has Custody of clients funds

Must be filed with in 120 days of the audit

Question 4

IA Brochure/ ADV must be given when

Answer 4

Federal - At time of sell

State - At time of sell
AND
if under 48 hrs before time of sell client must also be given
5 day penalty-free withdrawal period

Brochure OR ADV Part 2A
+
ADV Part 2B
Must be given

Question 5

When is IA Brochure/ADV not required to be given to new Client
(State Law)

Answer 5

If client is:
-An Investment Company
or
-Advice is “Impersonal” and cost less than $500/yr

Question 6

Qualified Client

Answer 6

An Individual with at least $1.1 million AUM
OR
$2.2 Million in net worth

IA’s can charge these people a Performance Based Fee
(under Federal Law)

Question 7

Qualified Purchaser

Answer 7

An individual who owns more than $5 million worth of securities

Question 8

Are Securities Sold to Qualified Purchasers Federal or State Covered

Answer 8

Federal

Question 9

IA’s can charge performance-based fee’s to whom
(Federal Law)

Answer 9

Only to Qualified Clients
(+$1.1 million AUM or +$2.2 million Net Worth)

Question 10

When IA is a Partnership
AND
Changes its Partners
it must…
(Federal Law)

Answer 10

Notify the Admin and its clients
(Assignment)

Question 11

What form do IA’s Use when Registering

Answer 11

Form ADV
(part 1)

Question 12

How to determine if IA needs State or Federal Registration

Answer 12

If they have an Investment Company as a client
= Federal
OR
If they are required to Register in +15 states
=Federal

if not:

Their AUM

-Under $100 million = State
-Over $110 million = Federal
-In-between 100-110 = IA gets to choose

Question 13

IA provides Advice to Private Funds

What’s the benchmark for determining if they are
Exempt Reporting Adviser (ERA) (Exempt)
(Federal)

Answer 13

Over $150 Million AUM = Not ERA
Under $150 Million = ERA

(I believe its AUM of the Private Fund Not Advisor)

Question 14

ERA’s must file with who and how?
(Federal)

Answer 14

Exempt from Federal Filing

Must file with State Admin
via
Notice Filing and Paying the state filing fee

Question 15

Are The following Required To Register (Federally)
-Hedge Funds
-Private Funds

Answer 15

Both are Exempt from Federal Registration
(Usually they have criteria they must meet)

Question 16

2 types of Private Funds that are Exempt from Registration
and their requirements for being exempt from registration
(basically how can they remain Private not Public)

(Federal Law)

Answer 16

Requirements for Both:
-No Felonies (usually)
-AUM under $150 million

3(C)1:
-No More Than 100 Investors
-Each Investor must be a “Qualified Client”
(Must Have either
+1.1 million AUM or
2.2 million Net Worth (Excluding Home))

3(C)7:
-No More Than 2000 Investors
-Each Investor must be a “Qualified Purchaser”
(Must Have +$5 million AUM)

Question 17

Does IAR leaving IA to go to another IA Constitute Assignment of Client Contracts
(Federal)

Answer 17

No

Question 18

When Performance-based Fee’s are Allowed they must be…?
(not the Qualified Client Rule)
(Federal)

Answer 18

when they are
-not misleading
and
-justified with appropriate records

Question 19

Books and records may be stored using cloud services as long as

Answer 19

-regulators are given notice within 24 hours
and
-have cost-free access

Question 20

IA is state Registered…

Which States Must an IAR register in
(State Law)

Answer 20

all states in which the IAR has a place of business
or
has more than five non-institutional clients

Question 21

IA is Federally Registered…

Which States Must an IAR register in
(State Law)

Answer 21

all states in which the IAR has a place of business
ONLY

(not ones where they
have more than five non-institutional clients)

Question 22

IAR Registers by filing which Form

Answer 22

Form U4

Question 23

Client of IAR gives IAR username/Password so the IAR can make trades

Does IAR now have:
-Limited/Full Discretion
-Custody

(Federal)

Answer 23

-Limited Discretion - Yes
-Custody - No

Question 24

Client lets IAR withdraw Funds / Securities from their Account

Does IAR now have:
-Limited/Full Discretion
-Custody

(Federal)

Answer 24

-Full Discretion - Yes
-Custody - Yes