IACCP Practice Exam 2

Question 1

Item ID: IT000017
Which THREE are consistent with Form ADV amendment requirements under the Investment Advisers Act of 1940? (Choose three.)

A. Update Form ADV Part 1 annually and file within 90 days of adviser’s fiscal year end.
B. Amend Form ADV Part 1 within three months of a change in control or in executive officers.
C. File amendments to Form ADV Part 1 electronically via the IARD system.
D. Upload Form ADV Part 2 amendments to the SEC via the IARD system.

Answer 1

A. Update Form ADV Part 1 annually and file within 90 days of adviser’s fiscal year end.
B. Amend Form ADV Part 1 within three months of a change in control or in executive officers.
C. File amendments to Form ADV Part 1 electronically via the IARD system.

Question 2

Item ID: IT000030
XYZ Investment Adviser has been found to have engaged in numerous prohibited activities. Which THREE measures may the SEC impose? (Choose three.)

A. Censure
B. Suspension
C. Revocation of registration
D. Criminal indictment

Answer 2

A. Censure
B. Suspension

D. Criminal indictment

Question 3

Item ID: IT000031
Which THREE items must be included on an order memorandum as required by the Books and Records Rule under the Investment Advisers Act of 1940? (Choose three.)

A. Identification of discretionary/non-discretionary authority.
B. Name of the individual entering the order.
C. Date the order was entered with the broker.
D. Name of the exchange involved.

Answer 3

A. Identification of discretionary/non-discretionary authority.
B. Name of the individual entering the order.
C. Date the order was entered with the broker.

Question 4

Item ID: IT000037
Which activity is NOT a retention requirement of the Books and Records Rule under the Investment Advisers Act of 1940?

A. All books and records must be maintained and preserved in an easily accessible place for five years from the end of the fiscal year in which the record was created.
B. All records must be maintained for the first two years in an appropriate office of the adviser.
C. Duplicate copies of any electronic records must be maintained.
D. Corporate records must be maintained with the attorney of record.

Answer 4

D. Corporate records must be maintained with the attorney of record.

Question 5

Item ID: IT000055
An investment adviser stopped advertising its small cap composite performance in 2004. It must maintain all worksheets used to calculate that performance through year end:

A. 2006
B. 2009
C. 2014
D. 2015

Answer 5

B. 2009

Question 6

Item ID: IT000075
Which example is INSUFFICIENT to support a finding of fraud under the Investment Advisers Act of 1940?

A. Directing trades to a broker that refunds back a portion of client commissions to the firm.
B. Allocating trades to benefit those accounts paying the highest fees or the firm’s proprietary account.
C. Paying an adviser’s operating costs with funds received from a broker for client reimbursements.
D. Violating a client’s sector guidelines due to capital appreciation in that particular sector.

Answer 6

D. Violating a client’s sector guidelines due to capital appreciation in that particular sector.

Question 7

Item ID: IT000090
Sam travels weekly from his Alabama office to Georgia to meet with clients at his vacation home. Under the Investment Advisers Act of 1940, the vacation home would technically be considered:
A. A principal place of business.
B. An office of supervisory jurisdiction.
C. A place of business.
D. A convenient meeting place for his clients.

Answer 7

C. A place of business.

Question 8

Item ID: IT000140
States have the authority to enforce which TWO of the following for SEC-registered advisers? (Choose two.)

A. Additional books and records requirements.
B. Advisory notice filing.
C. Errors and omissions insurance.
D. Investment Adviser Representative registrations.

Answer 8

B. Advisory notice filing.

D. Investment Adviser Representative registrations.

Question 8

Item ID: IT000122
In determining materiality for purposes of disclosing disciplinary information in Form ADV Part 2, all of the following are considered EXCEPT the:

A. proximity of the person to the investment function.
B. nature of the infraction that lead to the disciplinary event.
C. severity of the disciplinary sanctions.
D. degree of internal control weakness surrounding the event.

Answer 8

A. proximity of the person to the investment function.

Question 9

Item ID: IT000144
An investment adviser manages accounts for: Mark Brown; Mark’s wife Beth; Beth’s IRA; Brown Industries, a firm entirely owned by Mark; the Brown Industries 401(k) plan; and two educational accounts for each of Mark and Beth’s minor children.

Under the Investment Advisers Act of 1940, how many “clients” (as opposed to accounts) does the adviser have?

A. 2
B. 3
C. 6
D. 7

Answer 9

B. 3

Question 10

Item ID: IT000150 What BEST describes how a wrap fee program charges fees?

A. A bundled fee covering advice and execution costs.
B. A brokerage commission based on the number of transactions.
C. An investment management fee bundled with custody fees.
D. Any negotiated fee.

Answer 10

A. A bundled fee covering advice and execution costs.

Question 11

Item ID: IT000335
Under the Investment Advisers Act of 1940, an investment adviser is restricted from paying referral fees exceeding $1,000 to an unaffiliated promoter UNLESS the adviser complies with which THREE requirements? (Choose three.)

A. The client must be provided by the adviser or promoter with certain disclosure statements regarding compensation and conflicts of interest.
B. The promoter discloses in writing to each client all disciplinary history with respect to activities regulated under the securities laws.
C. The promoter is not subject to statutory disqualification.
D. Any cash fee is paid pursuant to a written agreement.

Answer 11

A. The client must be provided by the adviser or promoter with certain disclosure statements regarding compensation and conflicts of interest.
C. The promoter is not subject to statutory disqualification.
D. Any cash fee is paid pursuant to a written agreement.

Question 12

Item ID: IT000331
Under the Investment Advisers Act of 1940, no person shall be deemed to have failed to reasonably supervise any person when which THREE are TRUE? (Choose three.)

A. The Chief Compliance Officer (CCO) reports directly to the firm’s Chief Executive Officer (CEO).
B. Compliance procedures have been established.
C. A system has been established for applying procedures, which would prevent and detect violations, as practicable.
D. The supervisor reasonably believes the procedures are being followed.

Answer 12

B. Compliance procedures have been established.
C. A system has been established for applying procedures, which would prevent and detect violations, as practicable.
D. The supervisor reasonably believes the procedures are being followed.

Question 13

Item ID: IT000480
Which TWO examples fall within the SEC’s definition of custody under the Investment Advisers Act of 1940? (Choose two.)

A. An investment adviser inadvertently receives a check drawn by a client made payable to a third party.
B. An investment adviser forwards securities certificates on behalf of its client via overnight delivery.
C. An investment adviser inadvertently receives client funds and returns them to the sender within 48 hours of receiving them.
D. An investment adviser acts as sole trustee of a trust in which the advisory client is beneficiary.

Answer 13

A. An investment adviser inadvertently receives a check drawn by a client made payable to a third party.
D. An investment adviser acts as sole trustee of a trust in which the advisory client is beneficiary.

Question 14

Item ID: IT000482
Which situation would trigger a violation of the SEC Pay-to-Play Rule?

A. A covered associate makes a campaign contribution of $50 to the Comptroller for the State of New York.
B. An investment adviser directs its counsel to make a campaign contribution of $200 to a government elected official responsible for selecting investment advisers.
C. An investment advisory firm pays another registered investment adviser to solicit government clients on its behalf.
D. A covered associate makes a $500 campaign contribution to an elected official, who has influence in selecting advisers for a government plan which the covered associate is also soliciting as an advisory client.

Answer 14

B. An investment adviser directs its counsel to make a campaign contribution of $200 to a government elected official responsible for selecting investment advisers.

Question 14

Item ID: IT000497
Adviser is being examined by the SEC in September. The SEC Examiner asks Adviser to provide financial records for the year to date. Adviser provides all records for the first two quarters, but informs the examiner that the firm updates its financial records quarterly, and cannot provide trial balances for July and August.
Is the Examiner likely to conclude that Adviser’s books and records are current?

A. No, because the SEC’s position is that financial records should be updated promptly.
B. No, because the SEC’s position is that financial records should be updated weekly.
C. Yes, because the Books and Records rule is silent on when records should be updated.
D. Yes, because financial records are not mentioned in the books and records rules of the Investment Advisers Act of 1940.

Answer 14

D. Yes, because financial records are not mentioned in the books and records rules of the Investment Advisers Act of 1940.

Question 15

Item ID: IT000493-1
Adviser manages securities and non-securities investments for four very wealthy clients. Each client’s portfolio is as follows:
Client 1 - 70% in securities, 10% in cash, 20% in real estate
Client 2 - 60% in securities, 10% in cash, 30% in real estate
Client 3 - 50% in securities, 5% in cash, 45% in real estate
Client 4 - 40% in securities, 5% in cash, 55% in real estate

How many of these clients’ entire portfolios can be included in the calculation of Adviser’s Regulatory Assets Under Management (RAUM)?

A. 1
B. 2
C. 3
D. 4

Answer 15

C. 3

Question 16

Item ID: IT000025 Under the SEC Investment Adviser Codes of Ethics Rule, access persons must obtain pre-approval for which TWO types of personal securities transactions? (Choose two.)

A. Acquisition of securities in IPOs.
B. Trades in securities held in clients’ accounts.
C. Mutual fund purchases if the adviser acts as adviser for the fund.
D. Participation in private placements.

Answer 16

A. Acquisition of securities in IPOs.
D. Participation in private placements.

Question 17

Item ID: IT000498-1
Which TWO of the following advisory clients are eligible to be charged a performance-based fee? (Choose two.)

A. An individual with a net worth of $3 million, excluding the primary residence.
B. A registered investment company with $500,000 under management.
C. An individual with $1.5 million under the adviser’s management.
D. An individual with $750,000 under the adviser’s management, and a primary residence worth $1.5 million.

Answer 17

A. An individual with a net worth of $3 million, excluding the primary residence.
C. An individual with $1.5 million under the adviser’s management.

Question 18

Item ID: IT000074
Under the SEC Investment Adviser Codes of Ethics Rule, what is an adviser REQUIRED to do?

A. Train all personnel on the policies and procedures contained in the adviser’s code.
B. Impose fines or penalties for violations of the adviser’s code.
C. Require each supervised person to acknowledge in writing receipt of the adviser’s code.
D. Require annual recertification from each supervised person that they have re-read the adviser’s code.

Answer 18

A. Train all personnel on the policies and procedures contained in the adviser’s code.

Question 19

Item ID: IT000093
A portfolio manager actively trades securities in her personal account that are also held in client accounts that she manages.
The Chief Compliance Officer is aware of this and should track which TWO potential activities of the portfolio manager, according to best practices? (Choose two.)

A. Taking investment opportunities from a client for the portfolio manager’s benefit.
B. Frontrunning.
C. Effecting agency cross transactions.
D. Failing to provide disclosure in connection with directed brokerage arrangements.

Answer 19

A. Taking investment opportunities from a client for the portfolio manager’s benefit.
.B. Frontrunning.

Question 20

Item ID: IT000170
Investment Adviser manages portfolios of illiquid stocks. Adviser permits its access persons to trade in securities also held in client accounts. Adviser collects records of personal transactions at the end of each calendar quarter. Compliance Officer discovers that Portfolio Manager has historically been purchasing securities for her disclosed accounts that rightfully belonged in client accounts. Portfolio Manager is disciplined and affected clients are made whole.

Has Adviser met its duty to supervise?

A. Yes, because Portfolio Manager was not a principal of the firm.
B. Yes, because Adviser met all books and records requirements.
C. No, because personal trading procedures were inadequate.
D. No, because pre-clearance of all trades is required by the SEC Codes of Ethics Rule.

Answer 20

C. No, because personal trading procedures were inadequate.

Question 21

Item ID: IT000326 Which TWO does the SEC Codes of Ethics Rule require of a new employee when submitting an Initial Holdings Report? (Choose two.)

A. A list of all security holdings whether they are reportable or not for purposes of personal securities transaction reporting.
B. The name of each bank or broker custodying the securities.
C. Initial Holdings Report submission within 10 days of becoming an access person.
D. Holdings and pricing information no older than 90 days from the date of hire.

Answer 21

B. The name of each bank or broker custodying the securities.
C. Initial Holdings Report submission within 10 days of becoming an access person.

Question 22

Item ID: IT000478-1
Which TWO are potential conflicts of interest that must be fully disclosed to clients? (Choose two.)

A. President serves on the Board of Directors of a publicly traded company.
B. President has an unpaid position as membership chair of local charity.
C. President follows the same investment advice he gives clients.
D. President is married to bond trader at another adviser.

Answer 22

A. President serves on the Board of Directors of a publicly traded company.
C. President follows the same investment advice he gives clients

Question 23

Item ID: IT000062
Which TWO are considered to be best practices when valuing a client’s securities holdings? (Choose two.)

A. Frequent reviews of valuation information to promptly identify any “stale” valuations.
B. A summary of valuation procedures in the firm’s investment management agreement.
C. Reliance on one of the firm’s Portfolio Managers to determine pricing for illiquid securities.
D. Disclosure in Form ADV Part 2 regarding procedures for correction of mis-priced securities.

Answer 23

A. Frequent reviews of valuation information to promptly identify any “stale” valuations.
B. A summary of valuation procedures in the firm’s investment management agreement.

Question 24

Item ID: IT000069
Which is NOT required when an investment adviser wants to engage in a riskless principal transaction with a client using an affiliated broker-dealer?

A. Sufficient disclosure to enable the client to give informed consent.
B. Approval from the client prior to settlement of the trade.
C. Sufficient Form ADV Part 2 disclosure on principal transactions.
D. All of the above are required.

Answer 24

D. All of the above are required.

Question 25

Item ID: IT000085
On which TWO occasions would directing trades to a specific broker-dealer in return for soft dollar products/research fall within the Securities Exchange Act of 1934 Section 28(e) safe harbor? (Choose two.)

A. When the adviser has investment discretion over the accounts that are traded to generate soft dollar credits.
B. When soft dollar credits are generated pursuant to commodity trades placed by the adviser.
C. When the research is also used to benefit accounts that are not traded to generate soft dollar credits.
D. When there is an agreement in place with the broker-dealer for the adviser to use soft dollar credits in a non-research capacity (e.g., bookkeeping or other administrative functions).

Answer 25

A. When the adviser has investment discretion over the accounts that are traded to generate soft dollar credits.
C. When the research is also used to benefit accounts that are not traded to generate soft dollar credits.

Question 26

Item ID: IT000116
Which THREE are required under directed brokerage disclosures in Form ADV Part 2? (Choose three.)

A. Conflicts arising from referral arrangements with the directed broker.
B. The adviser’s inability to obtain volume discounts.
C. The potential disparity in commissions among clients.
D. The commission schedule of the broker.

Answer 26

A. Conflicts arising from referral arrangements with the directed broker.
B. The adviser’s inability to obtain volume discounts.
C. The potential disparity in commissions among clients.

Question 27

Item ID: IT000378
An investment adviser allocates trades by creating an alphabetical list of all clients who will participate in a given trade. On one trade, the adviser will allocate trades to clients whose names begin with A, followed by those whose names begin with B, followed by those whose names begin with C, etc. until all clients own the security or the security is no longer available. On the next trade, the adviser reverses this process, starting with clients whose names begin with Z, followed by clients whose names begin with Y, etc. A client whose last name begins with M learns of this procedure and complains to the adviser that he is not being treated fairly.

Which statement is correct?

A. The client is not being treated fairly because he never gets the benefit of being among the first to trade in any security.
B. The client is not being treated fairly because advisers must use a pro-rata allocation method every time.
C. The client is not being treated fairly because the adviser determined the allocation method in advance.
D. The client is being treated fairly because he will never be among the last to trade.

Answer 27

A. The client is not being treated fairly because he never gets the benefit of being among the first to trade in any security.

Question 27

Item ID: IT000166 Which activity is considered a principal transaction?

A. Purchase or sale for a client’s account from the adviser’s own account.
B. A transaction in which an adviser acts as a broker for both an advisory client and an unaffiliated party.
C. A trade that is aggregated for a number of advisory accounts.
D. A trade executed between two client accounts managed by the adviser.

Answer 27

A. Purchase or sale for a client’s account from the adviser’s own account.

Question 28

Item ID: IT000184 When aggregating proprietary trades with client trades, an investment adviser should, as a best practice:

A. Ensure the adviser’s proprietary trades get preferential treatment.
B. Prepare, before entering into an aggregated order, a written allocation statement.
C. Obtain the compliance officer’s approval within three business days after the day the order was allocated.
D. All of the above.

Answer 28

B. Prepare, before entering into an aggregated order, a written allocation statement.

Question 29

Item ID: IT000036
An adviser signs an agreement with a client on January 1 and delivers the disclosure brochure at that time. On March 1, the adviser hires a new Chief Financial Officer (CFO) with no outside affiliations. On July 1, the adviser amends its fee schedule. On October 1, the adviser updates the amount of client assets it manages by $50 million. Form ADV Part 2 is updated immediately after each event.

When must the investment adviser make actual delivery of an amended brochure?

A. Within 30 days of the adviser hiring a new CFO.
B. Within 60 days of when the adviser amends its fee schedule.
C. Within 120 days of the end of the adviser’s fiscal year.
D. Promptly, after the adviser updates the amount of client assets it manages.

Answer 29

C. Within 120 days of the end of the adviser’s fiscal year.

Question 29

Item ID: IT000043
Adviser’s Chief Executive Officer (CEO) receives a letter from a client. The letter accurately notes that Adviser has achieved “40% returns over the past year”. The CEO tells a potential client about this letter on a conference call. The CEO’s reference to the letter is:

A. a prohibited advertisement because it contains a testimonial.
B. a prohibited advertisement because it contains performance data without proper disclosures.
C. not considered an advertisement.
D. a prohibited advertisement because it refers to a client’s experience.

Answer 29

C. not considered an advertisement.

Question 30

Item ID: IT000071
Adviser A hires Portfolio Manager, who had previously been employed by Adviser Z, where Portfolio Manager had single-handedly managed several small-cap value portfolios. In order to advertise Portfolio Manager’s performance at Adviser Z, Adviser A must ensure that:

A. Adviser Z stops offering small cap portfolios.
B. Adviser Z agrees to give Adviser A performance records for all of Portfolio Manager’s clients so that Adviser A has a reasonable basis for the performance of Portfolio Manager.
C. Adviser Z has published GIPS-compliant presentations of its small cap portfolios during Portfolio Manager’s time there.
D. Adviser A only includes the performance of those clients who have moved their accounts to Adviser A.

Answer 30

B. Adviser Z agrees to give Adviser A performance records for all of Portfolio Manager’s clients so that Adviser A has a reasonable basis for the performance of Portfolio Manager.

Question 31

Item ID: IT000066 Adviser claims GIPS compliance in its performance marketing pieces but fails to include GIPS-required disclosures. However, all disclosures required by Rule 206(4)-1 are complete and correct. The SEC will likely consider the claim of GIPS compliance to be:

A. Fraudulent.
B. Immaterial.
C. Beyond the scope of its jurisdiction.
D. Adequately mitigated by the disclosures.

Answer 31

A. Fraudulent.

Question 32

Item ID: IT000083
Adviser is listed as the nation’s third best mid-cap growth adviser in a national ranking by an independent magazine. The ranking includes the manager’s net-of-fee performance numbers. Adviser orders reprints of the article to distribute to prospective clients.
What must Adviser do before distributing the reprints?

A. Add all required performance advertising disclosures.
B. Provide a representative client list.
C. Disclose previous rankings in the same survey.
D. Offer to provide a fully-disclosed performance presentation upon client request.

Answer 32

A. Add all required performance advertising disclosures.

Question 33

Item ID: IT000135
An SEC-registered adviser compensates an independent accounting firm in the amount of $1,500 for a client referral. Which TWO statements are TRUE? (Choose two.)

A. Potential advisory registration requirements exist for the accounting firm and/or its personnel.
B. Disclosures relating to the arrangement need only be made if material.
C. Disclosure must reflect the nature of the fee paid to the accounting firm.
D. An oral agreement is sufficient between the adviser and the accounting firm.

Answer 33

A. Potential advisory registration requirements exist for the accounting firm and/or its personnel.
C. Disclosure must reflect the nature of the fee paid to the accounting firm.

Question 34

Item ID: IT000306
Investment advisers are NOT required to deliver a disclosure brochure to which TWO categories of clients? (Choose two.)

A. High net worth clients.
B. Clients for whom the adviser provides only impersonal advisory services for $500 or less per year.
C. Investment company clients.
D. Clients for whom the adviser provides only financial planning services.

Answer 34

B. Clients for whom the adviser provides only impersonal advisory services for $500 or less per year.
C. Investment company clients.

Question 34

Item ID: IT000204 Rule 206(4)-1 of the Investment Advisers Act of 1940 requires an adviser to provide conflict of interest disclosures or make sure a promoter provides disclosures for which type of client?

A. A prospective client solicited by an outside promoter.
B. A wrap fee program client.
C. An investment company client.
D. A client who receives only impersonal advisory services.

Answer 34

A. A prospective client solicited by an outside promoter.

Question 35

Item ID: IT000250
Adviser provides prospective clients with a list of all profitable securities that were owned by clients since Adviser’s initial registration in 1995, including each such security’s performance.
Which violation has occurred?

A. Specific investment recommendations were not presented in a fair and balanced manner.
B. Advertising back-tested performance.
C. Lack of GIPS disclosure.
D. Advertisement was not submitted to the Financial Industry Regulatory Authority (FINRA).

Answer 35

A. Specific investment recommendations were not presented in a fair and balanced manner.

Question 36

Item ID: IT000348 Which THREE are considered an advertisement under the SEC Advertising Rule? (Choose three.)

A. A radio segment announcing the new location of adviser firm.
B. A reprint of a Wall Street Journal column with comments from several of the adviser’s clients.
C. A graph of the client’s investment performance included on the client’s quarterly performance report.
D. An adviser’s quarterly newsletter distributed to current and prospective clients.

Answer 36

A. A radio segment announcing the new location of adviser firm.
B. A reprint of a Wall Street Journal column with comments from several of the adviser’s clients.
D. An adviser’s quarterly newsletter distributed to current and prospective clients.

Question 37

Item ID: IT000134
SEC Privacy Rule (Regulation S-P) REQUIRES that an adviser:

A. Ensure that safeguarding of customer records is addressed in the adviser’s Code of Ethics.
B. Adopt electronic surveillance to ensure safeguarding of customer records and information.
C. Maintain safeguarding policies and procedures for all of its service providers.
D. Adopt written policies and procedures designed to ensure safeguarding of customer records and information.

Answer 37

D. Adopt written policies and procedures designed to ensure safeguarding of customer records and information.

Question 38

Item ID: IT000449
You are the Chief Compliance Officer (CCO) of an SEC-registered investment adviser. Your firm permits sharing nonpublic information with third parties as disclosed in your privacy statement. The client has elected to opt out of the disclosure of information to non-affiliated third parties.

Which request does the SEC Privacy Rule (Regulation S-P) PREVENT you from honoring?

A. A request for a list of the client’s pending transactions from the custodian of the client’s account.
B. A subpoena for a copy of the client’s quarterly statement from an attorney representing the client’s ex-spouse.
C. A request for the client’s address from a firm that is sending out marketing flyers on behalf of the adviser.
D. A request for the client’s address and phone number from the client’s college alumni association.

Answer 38

D. A request for the client’s address and phone number from the client’s college alumni association.

Question 39

Item ID: IT000020 Which THREE activities are required of advisers under the Investment Advisers Act of 1940 Compliance Programs Rule? (Choose three.)

A. Adopt and implement written policies and procedures.
B. Review the policies and procedures on an annual basis.
C. Review past SEC deficiency letters.
D. Designate a Chief Compliance Officer.

Answer 39

A. Adopt and implement written policies and procedures.
B. Review the policies and procedures on an annual basis.
D. Designate a Chief Compliance Officer.

Question 40

Item ID: IT000052
Which requirement differentiates the Investment Advisers Act from the Investment Company Act Compliance Program Rules?

A. The requisite level of competency of the Chief Compliance Officer.
B. The requirement for an annual review of the compliance program.
C. The design and implementation of written policies and procedures.
D. The requirement for the Chief Compliance Officer to meet annually in executive session with the Board.

Answer 40

D. The requirement for the Chief Compliance Officer to meet annually in executive session with the Board.

Question 40

Item ID: IT000041
How can a Chief Compliance Officer (CCO) minimize the likelihood of being deemed a supervisor? By ensuring that:

A. Every unit or department has a formally designated supervisor who is not the CCO.
B. The CCO oversees every unit or department as its designated supervisor.
C. Every unit or department head reports directly to the adviser’s CEO as well as the CCO.
D. Every unit or department head reports compliance breaches directly to the adviser’s CEO.

Answer 40

A. Every unit or department has a formally designated supervisor who is not the CCO.

Question 41

Item ID: IT000049
Who determines the designation and compensation of an investment company’s Chief Compliance Officer (CCO)?

A. The investment company’s CEO.
B. The investment company’s board.
C. The investment company’s CFO.
D. Senior management of the investment company.

Answer 41

B. The investment company’s board.

Question 42

Item ID: IT000102
Which TWO records must be maintained under the recordkeeping requirements of the Advisers Act Compliance Programs Rule?
(Choose two.)

A. A copy of the investment adviser’s policies and procedures.
B. Any records created that document the investment adviser’s annual review.
C. A copy of the Chief Compliance Officer’s credentials.
D. Records documenting the Chief Compliance Officer’s compensation agreement.

Answer 42

A. A copy of the investment adviser’s policies and procedures.
B. Any records created that document the investment adviser’s annual review.

Question 42

Item ID: IT000359-1
Adviser has hired a new Chief Compliance Officer (CCO). CCO immediately begins to revise Adviser’s compliance program. However, four of his proposals are rejected by Adviser’s Chief Financial Officer (CFO).

Which of the four rejected proposals would indicate that a critical element of a strong CCO may be weakened?

A. CCO having final approval of new promoters.
B. CCO reporting directly to CFO.
C. CCO acting as supervisor for resolving trade errors.
D. CCO becoming a non-voting member of Best Execution Committee.

Answer 42

B. CCO reporting directly to CFO.

Question 43

Item ID: IT000414
Which THREE statements are TRUE regarding an SEC-registered investment adviser’s annual review of its policies and procedures? (Choose three.)

A. The adviser should keep any records documenting the annual review.
B. The annual review should include a determination of the adequacy of the adviser’s policies and procedures.
C. The annual review should assess the effectiveness of the adviser’s policies and procedures.
D. The annual review must be conducted by the adviser’s Chief Compliance Officer.

Answer 43

A. The adviser should keep any records documenting the annual review.
B. The annual review should include a determination of the adequacy of the adviser’s policies and procedures.
C. The annual review should assess the effectiveness of the adviser’s policies and procedures.