Unit 2 Flashcards
Sharon Smith is an investment adviser representative with Highwater Advisers, a federal covered investment adviser with its principal office in State X. Sharon provides advisory services to a bank located in State X, a state in which she has no place of business. Under current regulations,
A) because Sharon has no place of business in State X, she does not have to register as an IAR in State X.
B) because Sharon has a client in State X, registration as an IAR would be required in State X.
C) because Sharon’s client is a bank, she does not have to register as an IAR in State X.
D) because Highwater’s principal office is in State X, Sharon would be required to register as an IAR in State X.
A) because Sharon has no place of business in State X, she does not have to register as an IAR in State X.
(The key is that Sharon is an IAR for a covered IA. When that is the case, the IAR is only required to register in states where she (the IAR) maintains a place of business. Sharon does not have a place of business in State X so no registration is required there. The fact that the client is a bank is of no relevance nor is the location of her employer’s principal office.)
Long Range Planning (LRP) is a covered investment adviser doing business in all 50 states. Fred Fergus is an IAR with LRP and splits his time between an office in State A and State D. Fred has retail clients as follows:
I. 16 clients in State A II 12 clients in State B III. 6 clients in State C IV. 4 clients in State D Fred would have to register as an IAR in
A) States A and C
B) States A, B, and C
C) States B and C
D) States A and D
D) States A and D
(In the Investment Advisers Act of 1940, it states that “no law of any State requiring the registration, licensing, or qualification as an investment adviser or supervised person of an investment adviser shall apply to any person that is registered under section 203 as an investment adviser, or that is a supervised person of such person, except that a State may license, register, or otherwise qualify any investment adviser representative who has a place of business located within that State.” Therefore, when employed by a covered adviser, the only time that state registration is required is when the individual functioning as an IAR has a place of business in the state. Had this been an IAR with a state-registered adviser, registration in all of the states would have been required (the de minimis would not cover State D because there is a place of business there).)
Which of the following people would not meet the definition of a person associated with an investment adviser?
A) A brokerage firm that is considered to be the parent of a registered investment adviser
B) An individual who solicits potential clients to open advisory accounts
C) The typist responsible for operating the desktop publishing system that prepares the investment adviser’s weekly research bulletins
D) A vice president of a registered investment adviser
C) The typist responsible for operating the desktop publishing system that prepares the investment adviser’s weekly research bulletins
(People in strictly clerical or administrative positions are not considered to be associated persons of an investment adviser. Expect to see several variations of this theme on the exam.)
DEF Investment Advisers, organized as a partnership, is currently registered with State Y. Marjorie is one of the partners and is registered as an IAR. If DEF were to register with State Z,
A) Because DEF is a state-registered investment adviser, Marjorie could only register in State Z if she was a resident of the state.
B) Marjorie would be required to complete an application for IAR registration with State Z.
C) Marjorie would automatically be registered as an IAR in State Z.
D) Marjorie’s registration as an IAR in State Z would become effective after passing the Series 65 or Series 66 exam.
C) Marjorie would automatically be registered as an IAR in State Z.
(When DEF’s registration becomes effective in State Z, those individuals included in the filing are granted automatic registration – they don’t have to file an individual Form U4. That filing includes the names and other pertinent information about all of the partners, officers, or directors who are already acting as IARs. Please note, it is not any IAR, it is only those listed or, as the rule states, those occupying a similar status, etc., who receive this treatment.)
When applying for registration as an investment adviser representative, which of the following must be disclosed?
A) Highest educational level achieved and the institution attended.
B) Complete employment history for the past 5 years.
C) Residential history for the past 3 years.
D) Certain financial information such as any unsatisfied judgments or liens against the applicant.
D) Certain financial information such as any unsatisfied judgments or liens against the applicant.
(This question probably contains more detailed information than will be covered on the exam. Negative financial information, such as unsatisfied judgments or liens and bankruptcy filings must be disclosed. Employment history for the past 10 years and residential history for the past 5 years must be shown. If, during the past 10 years, the applicant was a full-time student, then that must be shown, but that is the extent of educational information required.)
Esther Watson has recently been hired by Robinson, Ibbotson, Carlson and Hanson (RICH), an investment adviser registered with the SEC. RICH has offices in 17 states and Esther works in the branch located in State A. If no exemption is available, Esther will have to register as an IAR with
A) the Administrators of each of the 17 states.
B) the Administrator of State A.
C) the FINRA.
D) the SEC because RICH operates in more than 15 states.
B) the Administrator of State A.
(Unless qualifying for an exemption, employees of investment advisers must register as an IAR in any state in which they have a place of business. This is a state-level registration so the SEC or FINRA are not involved in any way.)
Which of the following is required to effectuate annual renewal of the registration of an investment adviser representative affiliated with a federal covered adviser?
A) Consent to service of process
B) Form U4
C) Renewal notice to the SEC
D) State licensing fee
D) State licensing fee
(All investment adviser representatives are registered with the states, not the SEC. Renewal requires the payment of the annual renewal registration or licensing fee. The consent to service of process is a permanent document submitted with the initial application for registration.)
An investment adviser representative of a federal covered investment adviser registers with
A) the NASAA.
B) the Administrator.
C) the SEC.
D) the FINRA.
B) the Administrator.
(Registration of IARs is done solely on the state level. IARs register with the Administrator of each state in which they are required to be registered.)
Jay Cooke is an investment adviser representative with a state-registered investment adviser. Jay operates out of an office in State Y. He would be required to register in State Z if, during the previous 12 months, he had
A) 6 or fewer retail clients who were residents of State Z.
B) fewer than 6 retail clients who were residents of State Z.
C) 5 or fewer retail clients who were residents of State Z.
D) no more than 5 retail clients who were residents of State Z.
A) 6 or fewer retail clients who were residents of State Z.
(The de minimis exemption applies when, during the preceding twelve-month period, the IAR has had no more than 5 retail clients. There are 3 ways of stating that:
- No more than 5
- Five or fewer
- Fewer than 6)
