Midterm set 3

Under the Investment Advisers Act of 1940, which of the following statements are TRUE regarding the investment adviser's relationship with a broker-dealer?
I The investment adviser must disclose if it recommends the use of a specific broker-dealer to effe

B

An investment adviser is looking to offer advisory services to new clients. Which statement is TRUE regarding delivery of the Brochure and Brochure Supplement?
A. Only the Brochure is required to be delivered to a new customer at, or prior to, entering in

C.The best answer is C. The "Brochure Rule" obligates an investment adviser to give a potential customer the disclosure document (Part 2A of Form ADV) and the Brochure Supplement (Part 2B of Form ADV) at or prior to entering into a contract to provide adv

All of the following are defined as "professionals" that are excluded from the definition of an investment adviser under the Uniform Securities Act EXCEPT:
A. lawyers
B. engineers
C. teachers
D. geologists

D

Under NASAA rules, each Registered Investment Adviser must establish, implement and maintain a Business Continuity and Succession Plan that is based on the:
A. investment adviser's business model including the size of the firm, types of services provided,

A

An adviser with $13,000,000 of assets under management has its main offices in Illinois and branch offices in Wisconsin, Indiana, and Missouri. Which statement is TRUE regarding registration of the adviser?
A. The adviser must register only in Illinois
B.

B. The best answer is B. This adviser does not qualify as a "federal covered adviser" because it does not have at least $100,000,000 of assets under management. Therefore, it must register in each State where it has a physical location and in each State w

A registered broker-dealer has an employee who is not registered as an agent in that State. The employee wishes to sell municipal bonds in that State. Which statement is TRUE?
A. The employee is permitted to sell municipal bonds because the securities are

D

Which of the following can cause the Administrator to deny an application for registration?
A. The applicant was convicted of a Driving Under the Influence misdemeanor 4 years ago
B. The applicant plead guilty to a minor traffic violation 2 years ago
C. T

C

An advertisement published by an investment adviser may contain a(n):
A. chart that, by itself, gives buy and sell signals for different securities
B. paid testimonial from a well-known celebrity that is a long-term customer of the firm
C. offer to furnis

D

Lincoln Investments is registered as a broker-dealer and as an investment adviser. When opening an account for a customer, the firm has the customer sign a statement that discloses that transactions recommended by Lincoln Advisers are effected through Lin

C

Which of the following would be defined as an "agent" under the Uniform Securities Act?
I A firm that only sells municipal securities of that State to residents of that State
II A salesperson who only sells federal covered securities to residents of that

The best answer is D. To cut through the clutter here, an agent is always an individual, whereas a firm is always a broker-dealer (or an investment adviser). In Choices I and III, the firms are broker-dealers, In Choices II and IV, the individuals are age

Under the Investment Advisers Act of 1940, if an investment adviser has an impaired financial condition, this must be disclosed to customers:
A. by all investment advisers
B. only by investment advisers that take custody of customer funds; or those that a

B

If the mails or other means of interstate commerce are used to offer securities, then the Securities Act of 1933 requires that:
A. non-exempt securities be registered with the SEC
B. exempt securities be registered with the SEC
C. both non-exempt and exem

A

Which of the following is NOT defined as a federal covered adviser?
A. An adviser to insurance companies registered in the State
B. An adviser to investment companies registered with the Securities and Exchange Commission
C. An adviser that manages $100,0

A

An "offer" or "offer to sell" would include which of the following?
I A sale of a security
II An offer of a security
III An offer of an interest in a security
IV The solicitation of an offer to buy a security
A. I only
B. II and III
C. II, III, IV
D. I, I

C

Which of the following securities is (are) NOT considered to have an issuer?
I Collateral trust certificate
II Equipment trust certificates
III Fractional interests in oil and gas programs
IV Certificates of interest in a gravel mining program
A. I and II

C

Which of the following is EXEMPT from the requirement to register as an investment adviser in a State?
A. Federal covered adviser
B. Investment adviser representative
C. Trust company
D. Person with no place of business in the State who renders advice sol

D

An investment adviser is considered to be "in the business" of rendering investment advice under SEC Release IA-1092 if:
A. advice is rendered on non-exempt securities
B. giving advice on securities is one of the businesses of the firm
C. the firm adverti

C

Which TWO of the following are tests for whether registration as an investment adviser is required under the Uniform Securities Act?
I Whether the investment adviser has an office in that state
II Whether the investment adviser is an individual
III Whethe

B

All of the following State-registered advisers must file an annual audited financial statement with the Administrator within 120 days of completion of a surprise audit EXCEPT an adviser that:
A. accepts $500 or more of prepaid advisory fees, 6 months or m

D

Which of the following statements are TRUE regarding private placements under the Uniform Securities Act?
I No commissions can be paid for sales to individual investors
II No more than 10 prospective investors may be contacted
III General advertising is p

Private placements under State law differ from the Federal law private placement exemption. Under State law, a private placement is an offer of securities to no more than 10 persons, where no commissions can be paid for sales to individual investors (they

An investment adviser sends quarterly account statements to each of its clients instead of having the statements sent by the qualified custodian. Under the Investment Advisers Act of 1940, this is permitted as long as the:
A. adviser is subject to an annu

A

A customer that wishes to open a new account with an investment adviser gives the sales agent $6,000 in cash and tells the agent to "Buy securities that meet my investment objective." Which statements are TRUE?
I Accepting cash from a customer is consider

The best answer is C. Cash can be accepted from a customer. If the cash is an amount over $10,000, then the receipt must be reported to FinCEN (Financial Crimes Enforcement Network).

A customer submits a written complaint to your broker-dealer. Later, he changes his mind and asks that the complaint be returned. You should:
A. do nothing unless the customer makes a written request
B. return the original written complaint to the client

C

Under the Uniform Securities Act, which of the following are allowed forms of investment adviser compensation?
I Charging a flat fee only if the portfolio increases in value
II Charging an hourly rate which includes the time it takes to get to the client'

D

Investment adviser solicitors:
I must be registered with the SEC as investment advisers
II are not required to be registered with the SEC as investment advisers
III are required to be registered in the State as either an investment adviser or an adviser r

C

A management company has a net asset value of $8.59 per share. The fund's ask price is 5.3% lower than the net asset value. Which statement is TRUE?
A. The fund must be closed-end
B. The fund is no-load
C. The fund must be open end
D. The fund's assets ar

A

The State Administrator is empowered to do which of the following?
I Administer oaths
II Subpoena witnesses
III Conduct investigations
IV Require the production of documents
A. I and II only
B. III and IV only
C. I, II, III
D. I, II, III, IV

D

A Federal covered investment adviser registered under the Investment Advisers Act of 1940 wants to include an exculpatory clause in the advisory contract. Which statement is TRUE about this?
A. The clause is permitted because this is a Federal covered adv

C

Internet communications by agents of broker-dealers will NOT be considered to be offers of securities transactions in a State as long as the:
I communication is limited to "general" information
II agent's affiliation with the broker-dealer is prominently

D

If an investment adviser is recommending that a customer buy a security, that the adviser will sell to the customer out of its own inventory, which of the following statements are TRUE?
I This is a "principal transaction"
II This is an "agency cross trans

A

The registration of a broker-dealer automatically constitutes the registration of any agent who is a(n):
A. partner of the firm
B. secretary of the firm
C. analyst of the firm
D. employee of the firm

A

Under the Securities Exchange Act of 1934, member firms are responsible for which of the following?
I Registering with the SEC
II Maintaining minimum net capital requirements and reporting net capital to the SEC
III Sending the member firm's financial sta

D

All of the following are exempt securities under the Securities Act of 1933 EXCEPT:
A. U.S. Government bonds
B. Listed securities
C. Commercial paper
D. Municipal bonds

B

All of the following statements are true if the SEC sends a deficiency letter to the issuer regarding an issue in registration EXCEPT:
A. disclosure in the registration documents is not complete
B. the issuer must file an amendment with the SEC to cure th

D

The State Administrator is permitted to inspect a broker-dealer or investment adviser:
A. only if the broker-dealer's or investment adviser's office is located in that Administrator's state
B. only if the office location is the headquarters of the broker-

C

All of the following are "issuer" transactions EXCEPT the:
A. sale of a new issue of bonds by a corporation
B. trade of 100 shares of stock on an exchange floor
C. sale of mutual fund shares to a customer
D. sale of Treasury Bills by the U.S. Government

B

An agent would be denied registration for all of the following reasons EXCEPT the agent:
A. is insolvent
B. failed to pay registration filing fees
C. was convicted of a securities misdemeanor 11 years ago
D. is not affiliated with a broker-dealer

C

An investment in a common enterprise for profit, with management provided by a third party" is the definition for a(n):
A. Agent
B. Investment Adviser
C. Security
D. Broker Dealer

C

If the Securities and Exchange Commission sets the effective date for a new issue in registration, which of the following statements are TRUE?
I All proper documents have been filed with the SEC
II Additional documents must be filed with the SEC
III The S

B

Upon filing a withdrawal of registration with the State, the Administrator can commence a revocation or suspension proceeding for up to:
A. 1 year from the effective date of the withdrawal
B. 2 years from the effective date of the withdrawal
C. 3 years fr

A

Which of the following statements is TRUE regarding an investment adviser that solely follows and recommends NYSE listed securities?
A. The adviser is subject to either State or Federal registration depending upon the amount of assets under management
B.

A

In connection with a new issue offering, a broker-dealer would be permitted to send which of the following to a customer if it were accompanied by a copy of the final prospectus?
A. An internal report prepared by the issuer that projects increasing produc

D

An insurance agent refers potential clients to an investment adviser and receives a referral fee from the adviser for each client that signs an advisory contract. Which statement is TRUE?
A. The insurance agent must disclose the fact that he or she will r

A

All of the following orders must be retained as a record by broker-dealers EXCEPT:
A. executed orders
B. unexecuted orders
C. canceled orders
D. subscription orders

D

Which statements are TRUE about registration as an agent?
I Registration becomes invalid if the agent terminates employment with the broker-dealer
II Registration is valid immediately after passing the Uniform Securities Exam
III Registration is valid unt

C

A research report on an issuer CANNOT be published by the underwriter of that issuer's securities for the time period encompassing:
I 10 days following the effective date for an initial public offering
II 20 days following the effective date for an initia

A

Which of the following would MOST likely be an investment adviser that is State registered?
A. Certified Financial Planner
B. Adviser with assets under management of $100 million
C. Investment Company
D. Trust Company

A

Which of the following individuals would be defined as an "agent" under the Uniform Securities Act?
A. A secretary who works for an agent taking telephone messages to buy and sell securities
B. A sales associate who accepts orders for limited partnership

B

An investment adviser makes an offer to send, by mail, a "free" analysis covering his top 50 stock picks in an advertisement. In order for an individual to get the report, the adviser could require that individual to:
A. fill out a questionnaire detailing

D

A registered representative with a broker-dealer makes recommendations of securities to a customer, and charges a commission on each trade. Which statement is TRUE?
A. This person must register with the State as an investment adviser representative
B. Thi

The best answer is C. Broker-dealers and their registered representatives are excluded from the definition of an investment adviser as long as they do not charge separately for advisory services. Thus, a broker-dealer can charge a commission on each recom

To protect against identity theft and theft of funds, client instructions received electronically must be:
A. encrypted
B. authenticated
C. monitored
D. refused

B

Which of the following is (are) defined as a "broker-dealer" under the Uniform Securities Act?
I A person who effects securities transactions for its own account
II A person who effects securities transactions for the account(s) of others
III An agent of

C

A broker-dealer's agent that is registered in State A, wishes to sell a security in State B. Which of the following may be sold in State B without the agent being registered in State B?
I U.S. Government Agency Issues
II Commodity Futures
III Fixed Annuit

B

Under the Investment Advisers Act of 1940, when a Registered Investment Adviser is renewing its annual contract with customers, which is NOT required to be disclosed?
A. Business Address
B. Fees
C. History of RIA
D. Type of clients

C

Which of the following would be defined as an investment adviser under the Uniform Securities Act?
A. U.S. Trust Corp.
B. Washington Savings and Loan Corp.
C. AIM Investment Advisers, a firm with $400,000,000,000 of assets under management
D. Greenwich In

D

An investment adviser makes presentations to existing and prospective clients using a chart that determines when to buy or sell securities. In order to do this, the adviser must:
A. prominently disclose its performance history over the time period used in

B

The maximum permitted dollar amount that can be raised in a Private Placement under Rule 504 of Regulation D is:
A. $1,000,000
B. $5,000,000
C. $50,000,000
D. Unlimited

A

The President of an investment club makes recommendations of securities to the club's members. The securities to be purchased are chosen by a majority vote of the club's members. The President is not paid for this; but does get to eat free snacks that are

B

An application to register securities may be filed by all of the following EXCEPT a(n):
A. Broker-Dealer
B. Investment Adviser
C. Issuer
D. Officer of the company who is selling shares that are personally owned

B

Under the Uniform Securities Act, registration as an investment adviser is required for a(n):
I broker-dealer who renders advice on securities for a fee
II broker-dealer who makes recommendations of securities to customers
III investment newsletter of a g

C

A new broker-dealer has filed a registration application in the State. One of the officers listed in the application suddenly dies and another officer is appointed. This is:
A. not a material event and no amendment need be filed with the Administrator
B.

B

A pension consultant has been hired by an employee benefit fund to render advice for compensation. The adviser is exempt from the registration requirements of the Investment Advisers Act of 1940 if it takes any of the following actions EXCEPT:
A. retainin

The best answer is D. Pension consultants assist plan sponsors and trustees in:
determining the plan's investment objectives, investment restrictions, and asset allocations;
selecting money managers and mutual fund options; and
tracking investment perform

Under the Uniform Securities Act of 1956, as amended, an issuer is defined as any person:
A. engaged in the sale of new issue offerings to the public
B. who issues or proposes to issue a security.
C. engaged in the sale of non-exempt securities offerings

B

Which of the following is disclosed in Form ADV Part 1?
A. Investment policies of the adviser
B. Type of investments made by the adviser
C. Investment practices of the adviser
D. States in which the adviser is registered

D

Under the NASAA Statement of Policy on Dishonest and Unethical Business Practices, which of the following practices are prohibited?
A. Effecting a wash trade for a security that trades on the NYSE
B. Quoting a stock based on the price shown in today's Wal

D

Which statement concerning closed-end investment companies is TRUE? Shares are:
A. issued continually to investors
B. redeemed continually from investors
C. redeemed at net asset value
D. traded over-the-counter or on the stock exchanges

D

All of the following are considered to be an "offer to sell" a security EXCEPT:
A. offering to make the gift of an assessable security
B. offering to give a security as consideration for the purchase of another security
C. the offer of rights to purchase

D

Private placements are exempt transactions under the Securities Act of 1933 under the provisions of:
A. Regulation A
B. Regulation B
C. Regulation C
D. Regulation D

D

If an agent terminates his employment with a broker-dealer, when must the agent and the broker-dealer notify the State Administrator?
A. Promptly
B. Within 5 days
C. Within 10 days
D. Within 30 days

A

The Administrator is permitted to do all of the following during an investigation EXCEPT:
A. subpoena records of a person held in a neighboring State
B. subpoena individuals to testify who reside in a neighboring State
C. issue a restraining order against

C

A first time offering of securities to be sold only to residents of a particular state is exempt from:
A. federal registration
B. state registration
C. both federal and state registration
D. the anti-fraud provisions of federal and state law

A

An adviser that charges a performance fee to clients MUST disclose that such a fee arrangement:
A. gives the adviser the incentive to be more aggressive with the customer's asset management than if a fixed fee were charged
B. negates the fiduciary duty th

A

Which State-registered adviser is considered to have taken custody of client funds? An adviser:
I that accepts $300 of advisory fees
II that accepts $600 of advisory fees
III as a prepayment covering the upcoming 3 months
IV as a prepayment covering the u

D

Which Act can be used to coordinate a securities registration filing under the provisions of the Uniform Securities Act?
A. Securities Act of 1933
B. Securities Exchange Act of 1934
C. Securities Investor Protection Act of 1970
D. Securities Exchange Act

A

If an agent of a broker-dealer wishes to withdraw his registration, which of the following statements are TRUE?
I Both the agent and the broker-dealer must notify the Administrator
II Notification to the Administrator of the withdrawal must be made prompt

C

Under the Securities Exchange Act of 1934, an investment manager that has discretion over $100,000,000 or more of customer assets must file Form:
A. 10K
B. 10Q
C. 13D
D. 13F

The best answer is D. The Securities Exchange Act of 1934 requires investment managers that have discretion over $100,000,000 or more of customer assets to file a Form 13F with the SEC. The Form 13F is filed 45 days after the quarter ending where the advi

A Registered Investment Adviser is also a registered representative that manages a client's account. The customer is paying a fixed annual advisory fee and is paying a commission for each execution of a recommended trade, both of which have been disclosed

A

What is an example of a 12(b)-1 fee?
A. Cost of administrative services provided to shareholders
B. Cost of office rent for the staff of a mutual fund
Incorrect Answer C. Management fees paid to the fund adviser
D. Marketing fees paid for advertising the

The best answer is D. 12(b)-1 fees cover the cost of soliciting new investment to a mutual fund. Included in permitted 12(b)-1 expenses are trail commissions earned by representatives and fund marketing and advertising costs. The 12(b)-1 fees are charged

Under the NASAA Model Rule covering Investment Adviser records, the adviser's articles of incorporation must be retained for:
A. 3 years
B. 5 years
C. for the life of the firm plus an additional 3 years
D. for the life of the firm plus an additional 5 yea

C

Under the Investment Advisers Act of 1940, which of the following person(s) is (are) exempt from registration with the SEC?
I An investment adviser whose only clients are insurance companies
II An investment adviser whose only clients are investment compa

A

Which of the following statements is TRUE regarding an investment adviser who renders advice solely to investment companies? The investment adviser:
A. must register with the SEC only
B. must register with the State only
C. must register with the SEC and

A

If a new securities issue is being registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933, the easiest method of State registration is Registration by:
A. Coordination
B. Qualification
C. Filing
D. Certification

A

A customer has placed an order to buy 1,000 shares of ABC stock at the closing market price. In order to get the customer a lower execution price, the agent places an order to sell 100,000 shares of ABC at the end of the day. This is known as:
A. Front ru

C

A private fund adviser with less than $150 million of assets under management:
A. must register with the SEC
B. must report to the SEC
C. must register with, and report to, the SEC
D. is neither required to register with, nor report to, the SEC

B

Under NASAA rules, which of following are unethical practices when recommending a mutual fund to a customer?
I Recommending a letter of intent if the customer does not have the immediate funds to reach a breakpoint
II Not disclosing to a customer the sale

D

Registration of a security in a State is required if the:
A. security is exempt
B. security is offered in an exempt transaction
C. security has been registered with the Securities and Exchange Commission under the 1933 Act
D. offering does not fall under

C

A clause in an advisory agreement that limits an investment adviser's liability for the adviser's gross negligence or willful malfeasance is:
I a hedge clause
II a hold harmless clause
III enforceable under State law
IV unenforceable under State law
A. I

B

All of the following are relevant considerations when determining if a customer account has been churned EXCEPT the:
A. customer's investment objective
B. length of time that the customer had the account with that broker-dealer
C. character of the custome

B

The Administrator can be under the obligation to file a U-6 Form for all of the following EXCEPT:
A. a cease and desist order entered by the Administrator against an investment adviser representative
B. an injunction entered by a court of law in the State

C

An investment adviser is selling a Wrap Account where the assets are held in custody of the advisory firm. The Wrap Fee Brochure must include:
I information on investment advisory fees
II information on participation or interest in client transactions
III

D

If an investment adviser wishes to hire an individual to solicit business for the advisory firm:
I the solicitor must be registered as an agent of that investment adviser in the State
II the adviser must be registered with either the SEC or the State as a

C

An investment adviser will NOT be required to be registered with the SEC if the:
I adviser's only clients are investment companies
II adviser's only clients are insurance companies
III adviser is located in only 1 State and all of the adviser's clients re

B

Annual renewal of registration as an agent or an investment adviser in each State is made by filing:
A. Form U-4 within 30 days of the date that renewal statements are sent out
B. Form U-4 within 60 days of the date that renewal statements are sent out
C.

A

The Administrator can deny a registration as an investment adviser representative if the individual:
I is currently under suspension by FINRA
II has been expelled by FINRA
III was convicted of a disorderly conduct misdemeanor 8 years ago
IV was convicted

C

As a condition of registration as an agent or principal of a broker-dealer, all of the following statements are true EXCEPT:
A. an oral examination may be required
B. a written examination may be required
C. both an oral and written examination may be req

D

The Uniform Securities Act covers:
I Registration of securities in each State
II Registration of broker-dealers in each State
III Registration of investment advisers in each State
IV Registration of agents of broker-dealers and investment advisers in each

D

The Administrator would revoke the license of an agent for all of the following reasons EXCEPT the Administrator:
A. has attempted to locate the agent at his or her last known address and has determined that the agent is no longer at that location
B. find

C

An investment adviser enters into an arrangement with a broker-dealer where the adviser, in return for directing trades to that broker-dealer, will receive payments for order flow. The payment, of one cent for each trade, is conditioned upon the adviser d

B

Which of the following are national securities exchanges that MUST register with the SEC?
I NYSE
II AMEX (NYSE-MKT)
III PHLX
IV CBOE
A. I only
B. I and II
C. III and IV
D. I, II, III, IV

D

Under the Uniform Securities Act, an investment adviser is any person who is compensated for rendering advice about which of the following?
A. Investment contracts
B. Endowment policies
C. Annuity contracts that periodically pay a fixed amount
D. Bank iss

A

An individual wishes to form a broker-dealer as a sole proprietorship. Which of the following can the State require?
I Filing of a Form BD
II Consent To Service of Process
III Surety Bond
IV Posting of Minimum Net Capital
A. I and II only
B. III and IV on

D

An investment adviser that takes custody MUST send quarterly account statements to which of the following?
A. Customer mailing address
B. Qualified custodian mailing address
C. Investment adviser mailing address
D. All of the above

A

Under SEC Release IA-1092, which of the following are considered to be compensation to an investment adviser?
I Prepaid advisory fees that will be refunded in part if the contract is canceled
II Hourly advisory fees
III Fixed advisory fees
IV Commissions

D

A person makes an initial application for State registration on April 30th. Which statement is TRUE regarding the filing fee?
A. The fee will be pro-rated and only 4/12ths of the annual fee must be paid
B. The fee will be pro-rated and only 8/12ths of the

C

A person who offers or sells securities that result in a violation of Uniform State Law has civil liability to:
I buy back the security at the original purchase price
II pay any reasonable court and attorney's costs
III pay interest at the legal rate in t

D