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Series 66 > Unit 1 (7) > Flashcards

Unit 1 (7) Flashcards

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Series 66 flashcards
1
Q

You are an investment advisor if you:

A

Give advice to others on securities
Do so on a regular basis
Receive a fee for the advice

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2
Q

You DONT supervise if you

A

Provide market timing recs but no ongoing supervision
Impersonal advice like a newsletter
Make initial asset allocation without continuous regular monitoring
Provide advice intermittently or periodically, like upon client request or on a specific date like once a quarter

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3
Q

An IA has a client that is an investment company, how must the IA register?

A

The IA must be federally registered with the SEC

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4
Q

Are wrap accounts excluded?

A

No. The BD exclusion does not apply to wrap fee accounts

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5
Q

Holding company

A

Organized to invest in and manage other corporations. A bank holding company’s primary asset is a bank

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6
Q

You supervise if you

A

Have discretionary authority over and provide ongoing supervisory services OR you don’t have discretionary authority but you do select or make recommendations and you are responsible for arranging or affecting the sale

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7
Q

How long is securities registration good for?

A

One year from the registration date.

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8
Q

When does a successor firm pay a fee?

A

The first renewal date.

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9
Q

Sports and entertainment rep

A

If you give advice on investing, tax planning, budgeting, or money management, you’re an IA. If you just get commission for helping someone, you’re not an IA. But if you tell them what to do with their money then you are.

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10
Q

IA federal exclusion from registration

A

First four are the same - Fifth is different

  1. Bank, bank holding company, savings institution, trust cos
  2. LATE
  3. BD whose advice is incidental and receives no special compensation
  4. Publishers of newspapers
  5. Person whose advice is solely related to treasuries
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11
Q

You advertise to meet prospective clients in a hotel. Does that count as a place of business?

A

Yes. You would need to be registered in order to meet prospective clients in that state. However, you can meet current clients at a hotel if you’re just passing through. De minimis would apply in that situation. Can’t do biz with more than 5 clients in 12 months

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12
Q

When do registrations of persons expire?

A

The first December 31st after registration, with annual renewal after that.

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13
Q

Federal covered IA falling below 90mil does what?

A

Register with the state(s)

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14
Q

When do professional registrations/withdrawals take place under the USA?

A

At noon 30 days after the completed application

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15
Q

Wrap fee accounts

A

Charges a fee for investment advisory and brokerage execution services. Not based on each transaction. Must disclose that wrap fee accounts may cost more or less than doing each transaction separately. BD exclusion doesn’t apply to wrap fee accounts.

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16
Q

Institutions include

A

Banks, trust cos, savings and loan, insurance co, investment co (mutual fund), employee benefit plan > 1mil, gov agencies or instrumentalities

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17
Q

Federal exemptions for IAs

A
  1. Intrastate advisor within one state. Clients and office in that state. Cannot advise on national exchanges
  2. Insurance companies are your only clients
    Think “I I captain” for federal exemptions
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18
Q

Are institutions persons?

A

Yes

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19
Q

Which of these doesn’t fall under the definition of bank under state and federal law?
Savings institution
Savings and loan
Foreign bank

A

Savings and loan and foreign banks do not meet the definition of a bank under state and federal law. A savings institution is a bank under state and federal law.

20
Q

IA has no office in the state. How many institutional clients can it have in that state?

A

Unlimited number of institutional clients without registering with the state.

21
Q

State IA exclusions under the USA

A
  1. Bank, bank holding company, savings institution, trust co’s
  2. LATE
  3. BD whose performance of these services is incidental and receive no special compensation
  4. Publishers of general newspaper. Disinterested commentary, not promotional. General and regular circulation
  5. IARs
  6. Federal covered advisors
  7. Any other person the administrator chooses
22
Q

AUM of 110mil or more

A

Reg with SEC as federal covered advisor

23
Q

State Exemptions for IA registration

A

Registered in a diff state and no place of biz in this state. Your only clients are:

  1. BDs
  2. Other IAs
  3. Institutional investors
  4. Snowbird exemption
  5. De minimis - 5 or fewer clients within prev 12mo
  6. Anyone else the administrator exempts
24
Q

Are credit unions, investment subsidiaries of a bank, or bank holding companies excluded under the USA?

A

No. The exclusion is for US Banks, bank holding companies, savings institutions, and trust companies

25
Q

Investment counsel

A

Principal business consists of rendering investment advice. Substantial portion of advisory business involves investment supervisory services.

26
Q

Is a non-US bank excluded under the USA?

A

No. The exclusion is limited to US banks

27
Q

Your client changes residence, how long do you have to register in that state?

A

30 days

28
Q

An IA exercising discretion needs

A

10k net worth or surety bond

29
Q

An IA exercising custody needs

A

35k net worth or surety bond

30
Q

Under the USA, IA records must be kept where and for how long

A

State registered IAs must keep records for 5 years and for the first 2 they must be kept in the main office of the IA

31
Q

If you are an IA that is a pension consultant to a fund with more than $200mil, do you have to register with the state?

A

No, if the IA acts as a pension consultant to a fund that is worth $200 mil, then you have the option to register with the SEC. Think about the amount under management - 200mil allows SEC registration

32
Q

If a BD offers investment advice for a separate charge, is it still excluded from the definition of IA?

A

No. As soon as a BD starts offering investment advice for a separate fee, it loses its exclusion

33
Q

Judy is in the business of giving general investment advice, suggesting appropriate asset allocation percentages, but not recommending specific securities. George gives investment advice and recommending specific securities. Who must register as an IA?

A

Both. Two of the three critical elements of investment advisor are whether the person provides advice regarding securities and receives compensation. The third element is “being in the business of” and the question states both are. Even if Judy doesn’t recommend specific securities, the fact that she suggests allocation % constitutes investment advice

34
Q

Judy is in the business of giving general investment advice, suggesting appropriate allocation percentages, but not recommending specific securities. Does she have to register as an IA?

A

Yes. Even without recommending specific securities, the fact that Judy suggests asset allocation percentages constitutes investment advice.

35
Q

An economist consults for a very large corporate employee benefit plan on how to best invest their $, Is he excluded from registration?

A

No. The LATE exclusion is lawyer, accountant, teacher, engineer. Economists are not included. He is acting as a pension consultant in this capacity

36
Q

Are the personal holdings of principals and associated persons required to be disclosed on form ADV?

A

No. It requires the name of the business, form of biz org, basis on which adviser will be compensated.

37
Q

A covered adviser organized as a partnership and the partnership dissolves - how long must the records be kept?

A

3 years from dissolution. Both state and federal law requires IAs to keep records on file for 3 years after dissolution.

38
Q

When talking about assets under management, SEC registered IAs have assets that may drop as low as 90mil

A

If it’s referencing this rule, look for something about the AUM dropping

39
Q

Does an individual who does not have direct contact with clients, like members of the board of directors, need to have their information in the brochure part 2A?

A

No. Only if the person has direct contact with clients or exercises discretion. The board would not need to be included

40
Q

Under the USA, the definition of person includes which of the following?

  1. An unincorporated investment club
  2. Individual who buys and sells for his own account
  3. Associations and partnerships whether they issue certificates or not
  4. The US Gov
A

All of these are persons

41
Q

On the exam, what are the only choices that are not persons?

A

Minors, deceased, and someone who has been declared mentally incompetent

42
Q

Is an unincorporated investment club a person under the USA?

A

Yes

43
Q

Do clerical and ministerial employees of the firm fall under the code of ethics enforced by the chief compliance officer?

A

Yes, everyone at the firm falls under this scope, whether they are registered or not.

44
Q

Does a non affiliated broker dealer fall under the preview of an IAs chief compliance officer?

A

No. Broker dealers used for execution are beyond the scope of the IAs supervision

45
Q

Do independent contracts come under the preview of the chief compliance officer at the firm?

A

Yes. Any employee, or non employee like an independent contractor come under the IAs supervision

46
Q

Is a political subdivision a person under the USA?

A

Yes

Series 66 (22 decks)

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