USA - Business Practices Flashcards
Advisory contracts must be _____ and have ______
be in writing and have a defined term
Prepayment of fees is permitted. T/F
True
Refund for early terminations are permitted. T/F
True
If the firm is a partnership, any change in ownership must be _____
communicated promptly to customers
A change in a majority of partners requires _____
customer consent
A performance fee is allowed for _______
wealthy clients
Soft dollar arrangements are allowed as long as the “give backs” benefit the _____
adviser’s clients
An adviser can also collect _____ fees if they place client funds into a particular mutual fund
12b-1 fees
You cannot include hedge clauses in an advisory contract that are ______ or hold the adviser _____
unreasonable or hold the adviser harmless for misconduct
Each client must receive the adviser’s brochure and brochure supplement, also known as Form ADV part ____ and form ADV part _____
2A and 2B
The brochure and supplement must be delivered either _____ before signing, or if after, the customer has _____ to rescind the contract
48 hours before signing or has 5 days to rescind afterwards
If there is a material change to the brochure, it must be sent to the customer no later than _____ after fiscal year end
120 days
An adviser may not take custody of client assets if there is a specific ______ or, if no ____, then if they have not given ______
if there is a specific rule, or if no rule, if they have not given notice
In order to take custody, adviser must notify the state using form _____
ADV
Assets held by an adviser must be held by a ______ who must be _______ annually
custodian who must be audited annually
The IA must file audit results of the custodian within ______
120 days
Qualified custodians under the NASAA rules are:
- FDIC insured deposit taking institutions
- registered BDs
- registered futures commissions merchants
- foreign financial institutions
“Custody” also pertains to taking more than _____ in advance fees and accounts with full _____
more than $500 in advance fees and accounts with full POA
If funds received mistakenly are returned within _____, then not considered custody
3 days
Annual updates to ADV must be filed within _____ of fiscal year end; material changes filed within _____ of event
90 days of year end; 30 days of event (for Fed covered advisers, material change is required “promptly”)
Under NASAA rules, customer must sign margin agreement ______ after the first trade occurs
promptly
For discretionary accounts, written authority must be received no later than ______ after verbal authority is given (does not apply to BDs - Fed laws)
10 business days
For BDs, written authority for discretion must be received ______ to placing trades
prior
Payment for trades by a customer must be received no later than _____ after the trade date
5 days (S+2)
If account is frozen, customer can still trade but needs to _____
have the cash deposited up front
A loan amount to a customer with a margin account cannot exceed limits placed by ______
Reg T (for instance, since margin on a LEAP is 75%, then loan cannot exceed 25%)
If a customer wants securities transferred and shipped, must be ______
fully paid