Unit 13

Question 1

When completion of the transaction happens

Answer 1

2nd business day after trade is made

Question 2

Agency cross transaction

Answer 2

Adviser acts both as an agent for its advisory client and the party on the other side (investment advisor and broker-dealer)

Question 3

In addition to prior written consent, a client must be sent (3)

Answer 3

1. Nature of the transaction
2. The date and time of the transaction
3. The source and amount of any remuneration to be received by the IA (or IAR) in connection with the transaction.

Question 4

What must an adviser not do in an agency cross transaction?

Answer 4

Recommend a transaction to both parties of a trade

Question 5

What are not part of the NASAA fee disclosure template (3)

Answer 5

Commissions, markups and markdowns, and advisory fees

Question 6

Does registration equal approval?

Answer 6

No, you are registered with a governing body but that doesn’t mean that authority “approves” of you

Question 7

Can securities professionals guarantee return on any security?

Answer 7

No

Question 8

If a broker-dealer forms a subsidiary that registers as an investment adviser, what must existing clients do?

Answer 8

Enter into a new contract for advisory services

Question 9

Can clients agree to waive their right to sue?

Answer 9

No, this is null and void

Question 10

If investment advisers organized as a partnership, what must clients be notified of

Answer 10

Change involving minority of the partners

Question 11

What Part 2A of Form ADV is

Answer 11

Firm brochure

Question 12

What Part 2A Appendix 1 of Form ADV is

Answer 12

Wrap Fee Program Brochure

Question 13

What Part 2B of Form ADV is

Answer 13

Brochure Supplement

Question 14

Any federal covered investment adviser whose agreement requires substantial prepayment of fees must include what in their ADV Part 2A

Question 15

An adviser using wrap fee programs must furnish what to clients

Answer 15

Part 2A, Appendix 1

Question 16

f the question does not specify federal or state registered, you should assume they are asking about what

Answer 16

State-registered adviser

Question 17

When a free, updated firm brochure must be delivered to each client

Answer 17

Within 120 days of end of fiscal year

Question 18

Advisers are required to deliver the brochure to the client at least how many hours before entering into an advisory contract

Answer 18

48 hours

Question 19

Three categories of clients to whom the IA is not required to deliver supplements

Answer 19

1. Clients to whom the IA is not required to deliver a firm brochure to
2. Clients who receive only impersonal investment advice, even if they receive a firm brochure ($500 subscription)
3. Individual clients who are any executive officers, directors, trustees, or general partners, or people serving in a similar capacity, of that firm

Question 20

Brochures must be updated… (2)

Answer 20

1. Each year at the time of filing the annual updating amendment
2. Promptly, whenever any information in the brochure becomes materially inaccurate.

Question 21

Entanglement

Answer 21

Firm had part in authorship of content

Question 22

Adoption

Answer 22

Use of content or a link that is solely the creation of someone else

Question 23

Prohibited actions by a broker-dealer

Answer 23

Leaving out risk factors, highlighting key points

Question 24

5 disclosures advisors must make to advertise

Answer 24

1. Advertisements must clearly and prominently disclose whether the person giving the testimonial or endorsement (the “promoter”) is a client
2. That cash or non-cash compensation was provided for the testimonial or endorsement
3. 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
4. Solicitors may be considered promoters for purpose of the rule
5. 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

Question 25

New term used instead of solicitor

Answer 25

Promoter

Question 26

Is the like feature considered a testimonial

Answer 26

Yes could be

Question 27

When an agent recommends a proprietary mutual fund to a client, it is considered what

Answer 27

A potential conflict of interest

Question 28

What does Administrator require that a broker-dealer’s social media policies be

Answer 28

Communicated to writing and communicated firmwide

Question 29

If a registered investment adviser withdraws from the partnership to form his own separate partnership, what must IA do

Answer 29

Notify client’s of departure within a reasonable period

Question 30

Difference between partnerships and corporations on disclosing employees leaving

Answer 30

Corporations need not disclose that employed individuals left the firm, partnerships do

Question 31

Can agents correct execution orders in customer accounts

Answer 31

No, only broker dealer can make changes when mistakes happen

Question 32

What an IA that uses a website is required to do (2)

Answer 32

1. Maintain a copy of the screens used on its site in the firm’s advertising file.
2. Place copies of new screens into the firm’s advertising file each time a change is made.

Question 33

Are solicitors generally registered as investment advisors

Answer 33

No

Question 34

A corporation offering securities registered under the Act of 1933 may make which statements (2)

Answer 34

1. The SEC has released our securities for sale to the public.
2. The SEC has declared this prospectus effective.

Question 35

When an agent recommends a proprietary mutual fund to a client what it is considered

Answer 35

Conflict of interest

Question 36

Three primary expenses involved with brokerage accounts that are not included in the fee disclosure template

Answer 36

1. Commissions
2. Markups and markdowns
3. Advisory fees for those firms that are also registered as investment advisers.

Question 37

How material conflicts of interest need to be disclosed

Answer 37

In written form