videos series 7

Question 1

performance compensation

Answer 1

generally not allowed unless

it is qualified client( 1 million under management or 2.1 million net worth not including house)

or executive officer or IAR

nasa requires disclosure of

1. incentive for taking greater risk
2. compensation may be on unrealized gains
3. why index was chosen

no rebating commissions on mutual funds

Question 2

cash referral soliciters under investment advisors act 1940 must have what

Answer 2

1. must have written agreement
2. description activies and compensation
3. agreement to provide advisors brochure and soliciters diclosure doc(disclose if higher cost will result)
4. IA recieves acknoledgement that both docs have been received

Question 3

what are soft dollars and what are allowable payments

and what is not

What form

Answer 3

getting something other than money for compensation

28E

1. research reports
2. software
3. services for benefits of clients
4. seminar registration fees

not

1. reimbursement for travel expenses and seminars
2. furnature, equipment and non customer related expenses
3. Rent

Question 4

what is Custody

What doesn’t need nw requirements

Answer 4

holding customer cash and securites
authority to dispurse funds without clients consent
automatic fee payments(don’t need to meet NW requrements if this is the case)

Question 5

custody rules

and what form

Answer 5

USA requires notification to admin unless state law prohibits custody

segregated and marked to identify ownership

location services and notification of changes

complete and accurate records of account activity/deposits

quarterly statements

if no qualifed custodian(bank or bd not aff)

a. surprise annual audit
b. ADV E(used when you have custody and outside audit)

Question 6

prudent investor rule

Answer 6

fiduciaries must use skill and caution

Question 7

splitting commissions

Written consent or client authroization?

Answer 7

must be with someone registered
same firm or affiliated

unless exception by administrator

NASAA’s Statement of Policy on Unethical or Dishonest Business Practices of Broker-Dealers and Agents permits commission sharing as long as the agents are properly registered with the same broker-dealer or one under common control. There is no requirement for the arrangement to be in writing, and the customer has no say so in this matter.

Question 8

sharing customer profits and losses

Answer 8

written consent of client and BD
only applies to agents

never BDS, IA’s IARs

Question 9

borrowing/ lending customers

Answer 9

can’t do unless customer in lending business or affiliate of the firm

banks ok, bank officers not, broker dealers can
mortage banks ok, mortage brokers not

we borrow from the bank…we DON’T LEND TO THEM

Question 10

larger than ordinary commissions

Answer 10

just need disclosure

Question 11

3rd party reports need to disclose when

Answer 11

the advisor provides clients with reports or recommendations prepared by 3rd party. KEy is its their recommendation.

Question 12

soliciting sales of unregistered non exempt securities

Answer 12

not ok unless exempt transaction

Question 13

can’t disclose confidential client info unless

Answer 13

client consent
court order
account for joint spouse

Question 14

insider trading

Answer 14

300% of profit or loss avoided as penalty

could go to jail for 20 years

Question 15

Form 13f

Answer 15

Discretion of 100 million or more of 13f securities

must file withinin 45 days of each calander quarter

Question 16

pay to play rules

Answer 16

can’t receive compensation for advisory services from a government entity for a period of 2 years after making a contribution to a politician from that state

there is diminimus
$350 if you can vote for person
$150 if you can’t

Question 17

regulation S-P

Answer 17

firms must adopt policies and procedures to address protection of nonpublic information

Question 18

customer vs consumer

Answer 18

customers have ongoing relationship

consumers have initial contact and no more after

this is part of regulation S-p

must send initial and annual notice to customers

must have easy way of op out. writing letter is not easy

Question 19

cash referral registration

Answer 19

3rd party soliciters not required to be registered as IAR(employees employed by advisor are)

soliciters for state registered advisors who are associated must register as IAR

Question 20

if no custody nassa requires that funds sent inadvertainly be returned

Answer 20

within 3 business days. same with 3rd party check

Question 21

who can use oral authorization for discretion

Answer 21

10 days after initial discretionary trade(bds can’t)

IAs

Question 22

3rd party soliciters

registration and can they receive compensation based on sales

Answer 22

does not need to be registered as IAR

can’t receive compensation based on sales

can’t be subject to a statutory disqualification

Question 23

3rd party reports exception

Answer 23

if advisor uses third party reports as a basis for its own recommendation or as support to its own recommendation to its client, it does not have to disclose this info

Question 24

compliance rules of investment advisors act of 1940 require

Answer 24

appointed CCO
annual compliance review
written compliance policies and procedures

Question 25

. You enter an order to purchase 1,000 shares and receive two 500-share confirmations, but they are not at the same price. Which of the following is the proper procedure for you to follow?

Answer 25

average of the two prices

Question 26

who is considered supervised person

Answer 26

All individuals working for an investment adviser who provide investment advice or management are considered supervised persons