Wrong/Low: Subject Financial Service Regulations Flashcards
Which of the following acts is prohibited by Section 206 of the Investment Advisers Act of 1940?
A. Performance fees.
B. Fulcrum fees.
C. Use of the term investment counsel.
D. Fraud or deceit.
D. Fraud or deceit.
Which of the following industries are typically more affected by recession with regard to production and employment?
I. Capital goods.
II. Consumer durable goods.
III. Consumer non-durable goods.
IV. Services.
A. I and II only.
B. I, II and IV only.
C. I, II and III only.
D. II, III and IV only.
A. I and II only.
Long-term capital intensive durable goods and capital investments are most affected when recession occurs. The impact is felt in terms of employment in these areas. Non-durables, consumer, and service areas are less impacted by these events. In other words, we may wait to buy a new car, but we will still buy groceries.
Which of the following statements about the selected industry relative to its regulatory body and the relationship between the two are true?
I. The insurance industry is primarily regulated by each of the 50 states.
II. The majority of banks are subject to federal regulation by the Federal Reserve System and the Federal Deposit Insurance Corporation.
III. Pension plan funds are primarily subject to federal regulation.
IV. The organized stock exchanges, such as the New York Stock Exchange, are primarily regulated by the federal government.
A. I, II and III only.
B. I and III only.
C. II and IV only.
D. I, II, III and IV.
D. I, II, III and IV.
Option “III” - Pension funds are governed by PBGC and ERISA rules as to reporting and requirements on the federal level.
Option “IV” - Organized stock exchanges are regulated by the Securities Exchange Commission (SEC).
The insurance industry is regulated at the _____ level, unless the insurance company wants to offer tax benefits, retirement benefits, or variable benefits, then other governing bodies will get involved.
State.
Then,
Tax: IRS.
Variable benefits: SEC.
Retirement benefits: ERISA.
Under the Investment Advisers Act of 1940, the ____ _____ must be given to clients at or before the time an advisory engagement is entered into.
disclosure brochure.
*Not two weeks after, for example.
An _____ is when you do find a reason not to be included, though you should be otherwise.
One of those is if you have less than 5 clients outside your state. Even if “it” is available, they do not get out of the Anti-fraud (Section 206) regulations.
Exception.
The ____ rule requires that a planner or advisor provide the client with all of the information as required at the meeting, or before the meeting, you enter into contract with them.
The Brochure Rule.
An example of an _____ is advisors whose only clients are insurance companies.
However, they must abide by Section 206 of the Act (the anti-fraud provision.)
Exemptions.
An ____ is when they need not register at all, and are not governed by the Act.
Examples:
-banks and bank holding companies that are not investment companies.
-accountants and teachers whos advice is incidental.
-advisers whos advice is related strictly to securities that are obligations of the US government.
Exceptions.
