Unit 13 Flashcards
Communications with Customers/Prospects
When completion of a transaction happens
2nd business day after trade is made
Agency cross transaction
Adviser acts both as an agent for its advisory client and the party on the other side (investment advisor and broker-dealer)
In addition to prior written consent in transaction, a client must be sent (3)
- Nature of the transaction
- The date and time of the transaction
- The source and amount of any remuneration to be received by the IA (or IAR) in connection with the transaction.
What must an adviser not do in an agency cross transaction?
Recommend a transaction to both parties of a trade
What are not part of the NASAA fee disclosure template (3)
Commissions, markups and markdowns, and advisory fees
Does registration equal approval?
No, you are registered with a governing body but that doesn’t mean that authority “approves” of you
Can securities professionals guarantee return on any security?
No
If a broker-dealer forms a subsidiary that registers as an investment adviser, what must existing clients do?
Enter into a new contract for advisory services
Can clients agree to waive their right to sue?
No, this is null and void
If investment adviser is organized as a partnership, what must clients be notified of
Change involving minority of the partners
What Part 2A of Form ADV is
Firm brochure
What Part 2A Appendix 1 of Form ADV is
Wrap Fee Program Brochure
What Part 2B of Form ADV is
Brochure Supplement
Any federal covered investment adviser whose agreement requires substantial prepayment of fees must include what in their ADV Part 2A
An adviser using wrap fee programs must furnish what to clients
Part 2A, Appendix 1
f the question does not specify federal or state registered, you should assume they are asking about what
State-registered adviser
When a free, updated firm brochure must be delivered to each client
Within 120 days of end of fiscal year
Advisers are required to deliver the brochure to the client at least how many hours before entering into an advisory contract
48 hours
Three categories of clients to whom the IA is not required to deliver supplements
- Clients to whom the IA is not required to deliver a firm brochure to
- Clients who receive only impersonal investment advice, even if they receive a firm brochure ($500 subscription)
- Individual clients who are any executive officers, directors, trustees, or general partners, or people serving in a similar capacity, of that firm
Brochures must be updated… (2)
- Each year at the time of filing the annual updating amendment
- Promptly, whenever any information in the brochure becomes materially inaccurate.
Entanglement
Firm had part in authorship of content
Adoption
Use of content or a link that is solely the creation of someone else
Prohibited actions by a broker-dealer (2)
- Leaving out risk factors 2. Highlighting key points
5 disclosures advisors must make to advertise
- Advertisements must clearly and prominently disclose whether the person giving the testimonial or endorsement (the “promoter”) is a client
- That cash or non-cash compensation was provided for the testimonial or endorsement
- Brief statement of any material conflicts of interest on the part of the person giving the testimonial or endorsement resulting from the adviser’s relationship with such person
- Solicitors may be considered promoters for purpose of the rule
- Investment advisers also must enter into a written agreement with promoters, except where the promoter is an affiliate of the adviser or the promoter receives de minimis compensation
New term used instead of solicitor
Promoter
Is the like feature considered a testimonial
Yes could be
When an agent recommends a proprietary mutual fund to a client, it is considered what
A potential conflict of interest
What does Administrator require that a broker-dealer’s social media policies be
Communicated to writing and communicated firmwide
If a registered investment adviser withdraws from the partnership to form his own separate partnership, what must IA do
Notify client’s of departure within a reasonable period
Difference between partnerships and corporations on disclosing employees leaving
Corporations need not disclose that employed individuals left the firm, partnerships do
Can individual agents correct execution orders in customer accounts
No, only broker dealer can make changes when mistakes happen
What an IA that uses a website is required to do (2)
- Maintain a copy of the screens used on its site in the firm’s advertising file.
- Place copies of new screens into the firm’s advertising file each time a change is made.
Are solicitors generally registered as investment advisors
No
A corporation offering securities registered under the Act of 1933 may make which statements (2)
- The SEC has released our securities for sale to the public.
- The SEC has declared this prospectus effective.
When an agent recommends a proprietary mutual fund to a client what it is considered
Conflict of interest
Three primary expenses involved with brokerage accounts that are not included in the fee disclosure template
- Commissions
- Markups and markdowns
- Advisory fees for those firms that are also registered as investment advisers.
How material conflicts of interest need to be disclosed
In written form
