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Module 9 (Financial Advisor Regulation) Flashcards

1
Q

Are financial planners regulated by the federal or state government or neither?

A

Neither

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2
Q

What law or Act controls the regulation of a financial planner?

A

Investment Advisors Act of 1940

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3
Q

What are the 3 things that will have to be in place for the Investment Advisors Act of 1940 to apply?

A
  1. The person is giving advice about securities
  2. The person is in a business that provides securities
  3. The person is being paid
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4
Q

Name 8 types of securities.

A
  • stocks
  • mutual funds
  • bonds
  • insurance products
  • options
  • derivatives
  • commercial paper
  • limited partnerships
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5
Q

The Investment Advisors Act of 1940 has many ways to determine if a financial planner is in business. But what are the two key ways the book speaks about?

A
  1. Checks the public view and see if they view the planner as a business that sales securities
  2. Looks at business cards and advertising
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6
Q

True or false.
Fees for advice as well as commissions on securities, do they both count as compensation under the Investment Advisors Act of 1940?

A

Yes

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7
Q

Who do investment advisors register with?

A

SEC

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8
Q

If you are not considered an investment advisor you do not have

A

register with SEC

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9
Q

Investment Advisors who are exempt from registration ____________ required to register with the SEC.

A

are not

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10
Q

If you are required to register with the state, are you required to register with the SEC?

A

No

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11
Q

A bank or bank holding company is _____ considered an investment advisor.

A

not

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12
Q

Is someone who only performs incidental investment services (e.g. Lawyer, engineer, teacher, or accountant) considered an investment advisor?

A

No

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13
Q

Is a broker or dealer performing services outside of their practice, and gets no special compensation, considered an investment advisor?

A

No

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14
Q

Is someone that gives advice only on US government securities considered an investment advisor?

A

No

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15
Q

An investment advisor whose clients reside in their home state and they don’t provide advice on securities listed on the national exchange, do they have to register with the SEC?

A

No

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16
Q

An investment advisor who’s clients are only insurance companies, do they have to register with the SEC?

A

No

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17
Q

Does an investment advisor who has less than 15 clients within 12 month span have to register with the SEC?

A

No

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18
Q

An investment advisor who is a director, employee, or volunteer of a charity required to register with the SEC?

A

No

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19
Q

Does a commodity trading advisor not acting as an investment advisor required to register with the SEC?

A

No

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20
Q

Advisors with less than $100 million assets under management has to register with the…

A

state.

The state determines this every year

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21
Q

Who are the 6 groups of advisors that must register with the SEC?

A

– Advisers who already registered because their investment company is already registered.
– If your office is in Wyoming or outside of the US
– Rating organizations that are registered as advisers (Moody’s)
– Internet investment advisors
– Pension consultants that has more than $50 million in assets
– Start up advisers that are expected to be eligible for registration with the SEC within 120 days

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22
Q

If a financial planner is subject to the SEC regulation, they are responsible for the following…

RRCAUDA

A 
– Registration
– Recordkeeping
– Charging fees
– Assigning contracts
– Using labels
– Delivering brochures
– Avoiding fraud
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23
Q

Advisers are required to comply with the Investment Advisors Act of 1940 and become a registered investment advisor by completing form…

A

ADV.

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24
Q

Under Form ADV, fees that are charged are based on…

A

the assets you have under management.

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25
Q

What are the two parts under Form ADV?

A

Part I – general information regarding the applicant/clients

Part II – types of services/fees/transactions

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26
Q

Registered Investment Advisors must comply with a 17-step…

A

recordkeeping requirement.

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27
Q

Advisers must retain cancel checks, financial statements, and bank statements for…

28
Q

Registered Investment Advisors must retain written communication and written agreement sent to…

29
Q

If the recordkeeping requirements are violated, what type of penalties are available as a repercussion?

A

Civil and criminal

30
Q

Investment advisors must have policies reducing the likelihood of…

A

insider trading.

31
Q

Develop a written policy, communicate the policies to the employees, assign responsibilities to supervisors, and establish a monitoring mechanism are all requirements of…

A

Insider trading

32
Q

A registered investment advisor is prohibited from assigning client responsibilities to another advisor. However, under what conditions can the assignment of responsibilities take place?

A

With the clients consent

33
Q

Advisers cannot use ________ after name. But they can use…

A

RIA

Registered investment advisor

34
Q

At a federal level, is an advisor required to take an exam?

35
Q

The “brochure rule” requires delivery of a disclosure statement to both…

A

current and potential clients.

36
Q

Brochure disclosure statements must be provided in…

37
Q

Disclosure statements must be delivered to a prospective client within ____ hours of entering into an investment advisory agreement.

38
Q

When delivering a disclosure statement you can also provide the client with Part II of Form ADV once. After that, you only need to…

A

Offer it to the client.

39
Q

The _______________________ prohibit the defrauding of any client.

A

anti-fraud provisions

40
Q

The anti-fraud provisions indicate that the investment advisor has a _________________ duty to the client.

41
Q

Anti-fraud provisions applies to __________________________, regardless of whether they are registered with the SEC.

A

all investment advisors

42
Q

The anti-fraud provisions can apply in situations in which conduct didn’t involve a ________________________.

A

securities transaction.

43
Q

Conflicts of interest are extensively addressed under the…

A

anti-fraud provisions.

44
Q

Most states impose more extensive registration requirements then those at the…

A

federal level.

45
Q

Most states impose a registration requirement that advisors have to pass _________________ NASD or in a NASAAS exams.

A

one or more

46
Q

Some states review contracts, disclosure statements, and literature provided to the…

A

client’s.

47
Q

Some states require the advisor to attach audited financial statements to the…

A

application.

48
Q

Many states require a minimum amount of capital before…

A

approving registration.

49
Q

________________ exam is generally a requirement by state registered investment advisor’s in most states.

50
Q

____________________ exam is administered by the North American Securities Administrators Association.

51
Q

Series 65 exam has a pass rate of…

52
Q

In most states, a CFP professional or CFA charter holder is _________ from taking the…

A

exempt

Series 65 Exam.

53
Q

The Investment Advisors Act prohibits purchases or sales of securities without certain _____________ to clients.

A

disclosures

54
Q

A __________________ organization is authorized to regulate the conduct and activities of their members.

A

self-regulatory

55
Q

A self-regulatory organization is subject to oversight by the…

A

government.

56
Q

Financial planners do not have a separate…

A

self-regulatory organization.

57
Q

Registered Investment Advisors are regulated by the…

58
Q 
NYSE
AMEX
CBOE
NASDAQ
FINRA
A

Considered self-regulatory organizations

59
Q

The SEC itself is not a self regulatory organization, but it _______________ many self-regulatory organizations.

60
Q

A fiduciary has a ______________ to a client.

A

duty of responsibility

61
Q

Is the FDIC considered a self-regulatory organization?

62
Q

An advisor may be a fiduciary even without _____________ over the clients assets.

A

discretionary control

63
Q

Breach of fiduciary duty can lead to…

A

– Civil/criminal lawsuit

– Disciplinary action by professional society

64
Q

Registered Investment Advisor

CFP professional or CFA charter holder or anyone making security recommendations are all considered…

A

fiduciaries

65
Q

Insurance agent
Registered representative Commission-only planners
An Instructor on educational information
Are all considered…

A

non fiduciaries

CHFC HS 300 (15 decks)

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