Module 2 Flashcards
What are the three tests used too determine if an individual will be considered an investment adviser under the IAA?
- Advice
- Business
- Compensation
Under the IAA, what is meant by advice?
- Giving advice
- Issuing reports
- Making recommendations
List the 3 guidelines used to determine if an individual is in the business of providing investment advice within the context of the IAA.
- Is the investment advice solely incidental to a non investment advisory principal of business of the person giving advice?
- How specific is the advice? (The more specific, the more likely the person is in the business of giving investment advice.)
- Is special compensation received for providing investment advice?
In determining if an individual is to be classified as an investment adviser, does compensation have to be in the form of a separate fee charged for investment advisory activities for this test to be met?
No… it can be a fee relating to total services, a commission, etc. benefit. The issue is one of receipt of economic benefit.
List the 6 categories of investment advisers that are exempt from registering?
- A bank or bank holding company
- Lawyer, accountant, engineer, or teacher whose performance of advisory service is solely INCIDENTAL to the practice of his or her profession.
- A broker or dealer whose performance of advisory services is solely incidental to his or her conduct as broker or dealer–and receives no special compensation for the advice.
- A publisher of a bonafide newspaper or financial publication of general and regular circulation
- A person whose advice is limited to the securities backed by the U.S. Government.
- Other persons designated by the SEC
List the 3 primary types of investment advisers that are exempt from registering even though they fall under the definition of an investment adviser.
- An instrastate adviser in unlisted securities (securities that are not listed in national exchanges.
- Advisor whose clients are solely insurance companies
- A private adviser
Which type of private adviser is exempt from registration? (3 types)
- A person during the previous 12 months who had fewer than 15 clients.
- A person that does not hold him//herself out to the general public as an adviser.
3.
If a individual is required to register as an Investment Adviser, what guidelines would be used to determine whether one should register at SEC or state level?
- To register with the SEC, the individual needs to have anywhere between $100 Million to $110 Million.
- An individual is mandated if they at minimum $110 million in assets or higher
- If an individual has less than $100 Million then they are required to register with the state.
List the seven Principles of the Code of Ethics enforced by the CFP board?
- Integrity
- Objectivity
- Competence
- Fairness
- Confidentiality
- Professionalism
- Diligence
What is integrity defined under the Principle Code of Ethics?
Integrity demands honesty and candor, which cannot be subordinated to personal gain or advantage.
What is objectivity under the principle code of ethics?
Objectivity requires intellectual honesty and impartiality.
What is competence defined under Principle Code of Ethics?
- Attaining and maintaining an adequate level of knowledge and skill.
- Application of knowledge and skill when providing service to clients.
- Wisdom to recognize limitations of a particular knowledge or skill which would enable you to consult with other professionals or refer your clients to other professionals.
What is fairness defined under Principle Code of Ethics?
Fairness requires:
- Impartiality
- Intellectual Honesty
- Disclosure of material conflicts of interest
What is confidentiality defined under Principle Code of Ethics?
Confidentiality means ensuring that information is only accessible to those authorized to have access.
What is professionalism defined under Principle Code of Ethics?
Professionalism requires behaving with dignity and courtesy to clients, fellow professionals, and others in business-related activities.
