Unit 1 Flashcards
When are IAR supposed to notify the administrator when employment is terminated or begun.
Only state-registered investment advisory firms are required to notify the appropriate state Administrator when employment is terminated or begun. In the case of investment adviser representatives of federal covered advisers, notification is the responsibility of the adviser representative. Investment adviser representatives of both state and federal registered investment advisers must be registered with the appropriate state Administrator(s) unless otherwise exempted. In the case of agents, not only the broker-dealers but also the agents must notify the Administrator.
When must the Form ADV be amended?
The SEC requires prompt amendment of any material information changes on Form ADV (e.g., names, location, control, custody, organization) and also requires nonmaterial amendments within 90 days of the end of the adviser’s fiscal year.
How are performance based fees be based on?
A performance-based fee must be based on capital gains minus capital losses, include both realized and unrealized gains and losses and must reflect a time period of no less than 12 months. The client must be above the net worth requirements of $2.1 million. The rule requires that the performance be measured against a recognized benchmark but does not specify one.
According to the USA, a sale includes:
Under the Uniform Securities Act, a sale includes every contract of sale, contract to sell, or disposition of a security for value
How long after an application for registration as an IA will become effective?
a registration will automatically take effect at noon on the 30th day after the application was filed.
If the Administrator believes that a violation of the act has occurred or is about to occur, the Uniform Securities Act grants the office the power to:
The Administrator has the power to issue cease and desist orders, apply to courts for temporary or permanent injunctions or restitution to investors, or have the court appoint receivers over a violator’s assets.
Under which of the following circumstances does NASAA allow an investment adviser to charge performance-based fees?
I. The client must initially have $1 million under management or a net worth of $2.1 million.
II. Compensation paid in this way must be for gains reduced by losses.
III. Disclosure must be made that the fee arrangement may create an incentive for the investment adviser to make investments that are riskier or more speculative than would be the case in the absence of a performance fee.
Under the Uniform Securities Act, most books and records of investment advisers must be maintained for
5 years, the first 2 readily accessible
The most common way in which to distinguish whether social media content is static or interactive is
the ability for others to change it
What happens if the registration of an agent is revoked?
Revocation of the registration of that agent’s broker-dealer will result in that agent’s effective registration being put “on hold.”
Under the USA, how long must BD’s maintain their records?
The USA specifies that most broker-dealer records must be maintained for three years.
Exempt transactions would include:
Unsolicited orders, regardless of the nature of the security, are always exempt transactions. Transactions by a fiduciary (other than the custodian in a minor’s account) are always exempt transactions. In order for the sale to the pension fund to qualify, the fund must have assets of no less than $1 million.
An Administrator has specific authority under the USA to:
I. suspend the registration of a security if the suspension is in the public interest and the offering has excessive commissions.
II. issue emergency injunctions to prevent a violation of the act.
III. enforce subpoenas in the state at request of an Administrator of another state for alleged violations that occurred in another state.
IV. require that the proceeds from an offering be held in escrow until issuer receives a certain percentage of the sale of the securities offered.
I, III and IV
Under the USA, an agent may file for a review of an Administrator’s revocation order within how many days of revocation?
60 days
Markups (just read explanation on reverse side)
Higher than average markups or commissions are not prohibited if they are justifiable and disclosed. However, in this case, there would appear to be no justification because the customer bought a round lot, the normal trading unit of stock. The firm is a market maker, so the security is being sold from their inventory and the stock is on the company’s recommended list.
FinCEN Form 112, the Currency Transaction Report, is filed with the:
Department of the Treasury.
There are 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are:
I. commissions;
II. markups and markdowns; and
III.advisory fees for those firms that are also registered as investment advisers.
Administrator’s power (flip)
Even though the Administrator’s power to deny a registration is limited to convictions within the past ten years, any conviction of a felony or securities-related misdemeanor must be disclosed. Failure to disclose a bankruptcy filing is cause for disciplinary action on the part of the Administrator. A suspension by FINRA would be reason for the Administrator to initiate a review. Investment advisers may employ investment adviser representatives as independent contractors.
When an Administrator acts summarily to postpone or suspend a registration of a security, which of the following statements is (are) TRUE under the Uniform Securities Act?
I. The suspension will not go into effect until after a hearing.
II. The registrant must be promptly notified of the action and given an opportunity for a hearing.
III. A hearing must be held within 15 days of written request of the registrant.
Acting summarily means acting without prior notice. An Administrator who has grounds may postpone or suspend a registration by issuing a stop order. The registrant must be promptly notified of the action and of the opportunity for a hearing. The hearing must be held within 15 days of a written request, and the suspension will remain in effect until final disposition.
What is a consent to service of process?
The consent to service of process gives the Administrator the right to process legal complaints against the applicant.
