Under the USA, what is the length of time an investment adviser's records must remain readily accessible?
A) 5 years total; the first 2 years in the adviser's principal office
B) 7 years total; and kept in the adviser's office for 2 years
C) 5 years total
A) 5 years total; the first 2 years in the adviser's principal office
An investment adviser is organized as a corporation under the laws of State A, where its principal office is located. Under the NASAA Recordkeeping Requirements for Investment Advisers Model Rule, the firm is required to preserve all of the following reco
C) Partnership articles and any amendments
While NASAA model rules require all four of these records to be kept for the life of the firm plus three years, in this case, only the partnership articles are unnecessary. The investment adviser is organized as a corporation, not as a partnership, and so there is no partnership agreement.
Which of the following is true regarding the powers of the Administrator?
A) The Administrator may require a broker-dealer with discretionary authority to post a bond and may require the broker-dealer to maintain a minimum net capital
B) The Administrator
A) The Administrator may require a broker-dealer with discretionary authority to post a bond and may require the broker-dealer to maintain a minimum net capital
Assuming that any investment advice provided to customers is incidental to their professional practice, which of the following would not be excluded from the definition of an investment adviser under the Uniform Securities Act?
A) An engineer
B) An attorn
C) An economist
This exclusion applies to lawyers, accountants, teachers, and engineers (LATE)
According to the Uniform Securities Act, when must the consent to service of process be filed with the State Administrator?
A) With the application and renewal
B) Once the registration is effective
C) With the application
D) Every 2 years
C) With the application
*irrevocable and does not need to be renewed
A firm is registered as a broker-dealer under the Uniform Securities Act. The firm is considering charging customers a fee for managing client accounts in addition to receiving compensation for processing transactions on a discretionary basis. Which of th
B) I and III
If the firm decides to charge an account management fee (investment adviser fee), it must register as an investment adviser. A registered investment adviser may charge a separate fee for investment advice as long as the fee is reasonable.
The Administrator may set all of the following requirements for a registered broker-dealer, EXCEPT:
A) Minimum net capital
B) Qualifying examinations of the firm
C) Posting of surety bonds
D) Qualifications of control persons in the firm
B) Qualifying examinations of the firm
Qualifying exams are set for individuals, not for firms.
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Under the Uniform Securities Act, the person responsible for enforcing a state's securities laws could be known as all of the following, except:
A) Issuer
B) Administrator
C) Commissioner
D) Secretary
A) Issuer
Define Institutional Buyer
Institutional buyers are entities who make security transactions on a large scale for their own accounts or for institutional clients
(I.e. insurance or investment companies, trust companies, broker-dealers, investment advisers, banks, savings institutions, and employee pensions and profit-sharing plans)
Define Qualified Purchaser
A natural person (and their spouse) or a family-owned company with investments worth at least 5 million dollars, a trust fund backed by qualified purchasers with investments worth at least 5 million dollars, or an institution with investments of at least 25 million dollars.
What do firms charge when they act in an "agency" capacity for the accounts of others?
A firm that is in the business of effecting transactions for the accounts of others is acting in an "agency" capacity as a broker and charges a commission.
If I firm were to effect transactions for its own account, in what capacity are they acting in?
Acting in a "principal" capacity as a dealer
Explain the difference between "Broker" & "Dealer"?
Broker - works in an agency capacity for others accounts and charges a commission
Dealer - works in a principal capacity for its owns account, buying securities to add to it's own account and then selling them to investors and charging a mark-up
List the persons specifically excluded from the definition of a broker-dealer under the USA:
- Agents
- Issuers (except when transacting business in securities other than its own)
- Bank, savings institutions, or trust companies
A person creating an inventory of securities to sell to others is acting in the capacity of a:
A) Agent
B) Issuer
C) Dealer
D) Broker
C) Dealer
Canadian Broker-Dealers and Agents:
- when is registration effective?
- what is the renewal schedule to continue to do business in a state?
- Must be a member of a self-regulatory organization in Canada
- Registration becomes effective on the 30th day after an application is filed
- Must be renewed annually by December 31st to continue doing business in a state
Upon registration, Canadian broker-dealers and agents must:
- Maintain provincial or territorial registration in good standing
- Broker-dealers must maintain membership in an SRO in good standing and provide the Administrator, upon request, with books and records relating to business in the state
- Inform the Administrator of any criminal action taken as a result of regulatory action involving fraud, theft, deceit, or misrepresentation
Under the Uniform Securities Act, an individual might be an agent if she represents which two of the following?
I. Institutional purchasers
II. Issuers
III. Investment advisers
IV. Broker-Dealers
A) I and IV
B) II and IV
C) I and III
D) II and III
B) II and IV
What is a surety bond?
A surety bond is considered a type of insurance used to cover some of the damages that may result from legal action taken against the agent. The administrator will require the agent to post a surety bond if an agent will have discretionary authority over a client's funds or securities.
What is the ABC test used to determine?
ABC Test is used to define who is an investment adviser. A person must pass the ABC test: provides Advice about securities as a Business for Compensation.
What is Release IA-1092?
The SEC, in consultation with state regulators communicated using the Release IA-1092 to further clarify and define an Investment Advisor
Explain compensation for Broker-Dealers vs Investment Advisors as pertained to advice?
- A broker-dealer provides advice on securities as its business, and it is compensated based on a completed transaction or trade.
- An investment adviser provides advice on securities as its business, and it is compensated based only on the advice given.
According to the Uniform Securities Act, all of the following characteristics are necessary parts of the definition of an investment adviser, except:
A) Being in the business of providing investment advice
B) Having discretionary authority over clients' a
B) Having discretionary authority over clients' accounts
Investment advisers meet the ABC test�they provide advice about securities as a business and they are compensated for the advice given. Managing client accounts on a discretionary basis is one of the things an investment adviser might do, but you can meet the definition of an IA without having discretionary authority.
Which of the following best describes an investment adviser's relationship with a customer?
A) Adversarial
B) Disinterested
C) Fiduciary
D) Principal
C) Fiduciary
List the Uniform Securities Act exclusions from the definition of Investment Advisor:
- Investment Advisor Representative
- LATE (lawyers, accountants, teachers, engineers)
- Broker Dealers and their Agents that give incidental advice (it is not a regular service provided)
- Banks, saving institutions & trust companies
- Publishers of paper or electronic media (unless providing advice to specific clients then not excluded)
- Federal covered investment advisers
Fill in the blanks. Determine if the following example is a Broker Dealer or an Investment Advisor or Both?
ABC Investment Firm provides securities advice to several customers who live in the state. ABC Investment Firm receives compensation from transacti
- ABC Investment Firm is a Broker-Dealer & Investment Advisor
- must be registered as BOTH
Fill in the blanks. Determine if the following example is a Broker Dealer or an Investment Advisor or Both?
XYZ Brokerage provides securities advice to several customers who live in the state. XYZ Brokerage receives compensation from transacting several t
- XYZ Brokerage is a Broker-Dealer
- is NOT an Investment Adviser
1. Are there (Exclusions or Exceptions or None) from the definition of an investment adviser?
2. Are there (Exclusions or Exceptions or None) from the requirement for Investment Advisers to register with the State Administrator?
1. There are NO Exclusions from the definition of an IA
2. There are Exceptions from registration with the state even though it meets the definition of IA
What is the standard application for Investment Adviser Registration?
The standard application is filed through who when completed?
- Form ADV
- filed through a designee such as the Investment Adviser Registration Depository (IARD)
Determine if the individual is considered an investment adviser representative (IAR) under the USA or excluded/exempt from the definition or registration:
- Zoe is employed by a federal covered adviser. She manages the securities accounts of about 50 clie
Answer: excluded/exempt from the definition or registration
Determine if the individual is considered an investment adviser representative (IAR) under the USA or excluded/exempt from the definition or registration:
- Alice is an actuary who works for an investment adviser located and registered in State X. Alice d
Answer: excluded/exempt from the definition or registration
Determine if the individual is considered an investment adviser representative (IAR) under the USA or excluded/exempt from the definition or registration:
- Jerry is a supervisor for an investment adviser located and registered in State X. The people he s
Answer: an investment adviser representative (IAR) under the USA
Determine if the individual is considered an investment adviser representative (IAR) under the USA or excluded/exempt from the definition or registration:
Horace is employed by a federal covered adviser. He has several large clients, one of which is in St
Answer: an investment adviser representative (IAR) under the USA
Which of the following allows legal papers served to an Administrator to have the same force as if they were served to an agent or other registrant?
A) Injunction in absentia
B) Consent to service of process
C) Administrative prerogative
D) Letter of resc
B) Consent to service of process
Jenny's application for registration as an agent was declared effective by the Administrator on July 15. If she does NOT renew her registration, it will expire:
A) July 15 of the following year
B) December 31 of the same year
C) December 31 of the followi
B) December 31 of the same year
Orders for denial, suspension, and revocation in the U.S. are based on the last how many years?
10 years
- convicted of a money or securities-related misdemeanor or ANY felony
Orders for denial, suspension, and revocation in a foreign jurisdiction are based on the how many years? .
5 years
- denying, suspending or revoking their right to transact securities business in that jurisdiction
The registration of an agent may be denied if it is in the public's best interest and the registrant has been convicted of a securities-related misdemeanor:
A) Within the past 10 years
B) Within the past 2 years
C) Within the past 5 years
D) Anytime in th
A) Within the past 10 years
An agent voluntarily withdraws a registration application with notice to the Administrator on September 15th. Assuming no revocation or suspension proceeding is pending, the withdrawal will become effective not later than:
A) November 15
B) October 15
C)
B) October 15
The withdrawal is effective no later than 30 days after receipt of an application to withdraw.
According the the Securities Exchange Act of 1934, how long much the following records be kept by Broker-Dealers?
1. Customer correspondence and trade confirmations?
2. Trade blotters and customer account records?
3. Written customer complaints?
4. All th
1. at least 3 years
2. at least 6 years
3. at least 4 years
4. the first 2 years
List the records that broker-dealers are required to keep for the life of the firm, plus 3 years after terminations of the business?
- Articles of partnership or incorporation
- Minute Books
- Stock certificates books
- Any amendments
All of the following are listed on the order ticket, except?
A) Account Number
B) Type of order
C) Ticker symbol
D) Customer's name
D) Customer's name
The USA requires investment advisers to retain required books and records:
A) For 3 years
B) Until December 31 of the year in which they were created
C) For 2 years
D) For 5 years
D) For 5 years
Generally, for the first 2 years, the records must be kept in the principal office of the IA.
QRS Brokerage, a registered broker-dealer, filed a registration statement with State A, which became effective one week ago. When will QRS be required to renew its registration?
A) By December 31st of the current year
B) Within one year of the effective d
A) By December 31st of the current year
Which of the following broker-dealers is not exempt from registration in State B?
A) S Broker-Dealer, located in State A, processing trades for Margaret who lives in State B
B) M Brokerage, located in State A which is assisting ABC Corporation, located in
A) S Broker-Dealer, located in State A, processing trades for Margaret who lives in State B
The only firm required to register as a broker-dealer in State B would be S BD. Since they are processing trades for a customer who lives in State B, S must be registered in State B. An easy way to remember this is the following: A broker-dealer is a broker-dealer as soon as they open an office in a state and/or they deal with retail customers who live in that state.
Which of the following is considered a dealer?
A) An issuer
B) A bank
C) A person engaged in the business of effecting transactions in securities using its own account
D) An agent
C) A person engaged in the business of effecting transactions in securities using its own account
When a broker-dealer is acting as dealer, it is buying for or selling from its inventory account in a principal capacity.
Who among the following is NOT considered an agent?
A) An officer not selling securities
B) Representatives of broker-dealers selling non-exempt securities
C) Clerical employee at a broker-dealer approved to take sales orders
D) Representatives of broker-
A) An officer not selling securities
An agent is a salesperson. An officer, partner, director, or employee of a broker-dealer who does not sell, or try to sell, securities, and is involved in management or administration only, is not an agent. A representative of a broker-dealer selling exempt or non-exempt securities is an agent, and must register. Broker-dealer employees authorized to take orders are agents.
An applicant for registration as an investment adviser representative has received notice of a summary postponement of their registration. The applicant must be granted a hearing and that hearing must be scheduled:
A) Verbally within 10 days
B) Verbally w
D) In writing within 15 days
Any party named in an Administrator's order to deny, suspend, or revoke a registration may request a hearing on the order. The request must be made in writing and the hearing scheduled within 15 days of the order. At a hearing, the Administrator must provide their reasons for the order, including any findings of fact or law used to support the order.
According to the USA, all of the following persons would not fall under the definition of an investment adviser, EXCEPT:
A) A Savings and Loan
B) A fee-based investment management firm with $131 million in assets
C) Publishers which provide custom-tailore
C) Publishers which provide custom-tailored, written asset allocation plans for wealthy clients
Banks, trust companies and S&Ls are excluded from the definition of IA. Federal covered advisers (those SEC-registered advisers with assets exceeding $110 million) are excluded from the definition of investment adviser under the Uniform Securities Act, since they are regulated by the SEC. Publishers who give advice based on the specific situations of individual customers are considered advisers. They are excluded only if their written advice is not based on the specific situation of the customer.
Which of the following is a secondary market transaction?
A) An issuer transaction
B) A transaction between issuer and underwriter
C) A subsequent issue of new stock from a corporation
D) A broker-dealer buys stock on the NYSE to hold in inventory
D) A broker-dealer buys stock on the NYSE to hold in inventory
A secondary or non-issuer transaction does not directly or indirectly benefit the issuer.
Under the Uniform Securities Act, the definition of an investment adviser does not include:
I - A broker-dealer who offers wrap accounts to high net worth customers
II - A person with no place of business in a state who does not offer advisory services to
C) II and III
A broker-dealer selling wrap accounts is receiving specific compensation for investment advice and is an investment adviser. Certified financial planners who provide investment advice as part of their business are investment advisers. Federal covered advisers are excluded from the definition of an investment adviser under the Uniform Securities Act, and persons who have no place of business in a state nor offer advisory services in that state are not investment advisers.
Steve works for the Haggard County School Board. Part of Steve's job is soliciting sales of HCSB bonds to mutual funds and hedge funds. According to the USA, Steve is:
A) An issuer
B) An agent
C) Not an agent
D) A broker-dealer
C) Not an agent
Steve is an individual representing the issuer of a security in attempting to effect securities transactions. Since the securities Steve is selling are exempt securities (bonds issued by a school board would be considered municipal securities) he is not considered to be an agent under the USA.
Concerning the USA's regulation regarding an investment adviser's record preservation, what form of record retention is permissible?
A) Electronic storage is acceptable as long as means of making a paper copy is available on the premises
B) Paper copies a
A) Electronic storage is acceptable as long as means of making a paper copy is available on the premises
An investment adviser may store records electronically as long as they have a means of making a paper copy on the premises. An investment adviser must retain most records for 5 years, the first 2 years in a principal office.
Which of the following employees of an advisory firm would be required to register with the Administrator as an IAR?
A) A margin clerk with access to confidential customer financial data
B) The Chief Information Officer
C) The VP of Human Resources
D) The
D) The director of training, who supervises new salespeople during their probationary period
Any person who provides investment advisory services, or who supervises persons who do so on behalf of an IA, must register as an IAR.
Which of the following is an example of an issuer transaction?
A) Exempt transaction
B) Initial public offering
C) Secondary market transaction
D) Investor to investor transaction
B) Initial public offering
In an issuer or primary market transaction, the proceeds of the sale, or benefits of the transaction, go to the issuer of the security. New issues of securities, as well as transactions between an issuer and underwriter, are examples of issuer or primary market transactions.
Which of the following statements is true regarding periodic examinations of a broker-dealer's books and records by representatives of the Administrator?
A) A broker-dealer's records in the state only are subject to examination
B) A broker-dealer's record
B) A broker-dealer's records both in the state and outside the state are subject to examination
S & T, LLC, wishes to register as an investment adviser in State A. The firm will not hold custody of customer assets, but will accept discretionary authority. Which of the following is NOT likely to be required by the Administrator?
A) An audited balance
A) An audited balance sheet
IAs who have discretionary authority but not custody must maintain a net worth of not less than $10,000 and must submit a balance sheet to the Administrator; there is no requirement that the balance sheet be audited unless the IA holds custody of customer assets.
Unless exempt or excluded, an investment adviser and investment adviser representative must always be registered:
A) In the state of their principal residence only
B) With NASAA
C) In the states in which they conduct business
D) In the counties where they
C) In the states in which they conduct business
When payments are made out of production from titles or leases, it is considered to be a:
A) Non-issuer transaction
B) Issuer transaction
C) Secondary market transaction
D) Underwriter transaction
A) Non-issuer transaction
A Certificate of Participation or Interest in an oil, gas, or mining title or lease is not considered to have an issuer. Payments from the production of these titles or leases do not benefit an issuer and are categorized as non-issuer transactions.
According to the Uniform Securities Act and NASAA's Model Rule on Investment Adviser Recordkeeping Requirements, which of the following are true regarding an investment adviser's books and records?
I - Regulators can spot check an IA's books and records?
B) I and IV
The Administrator is permitted to spot check a firm's records and is not required to provide prior notice of an upcoming inspection. IAs must keep all required records in a readily accessible location for at least 5 years from the end of the fiscal year in which the last entry in the record was made; the most recent 2 years must be kept in the IA's principal office. Broker-Dealers retain most records for 3 years; the first 2 years in an easily accessible location.
An agent does NOT include a person who:
A) Only advises others on their investment portfolio for compensation
B) Is a sales representative soliciting a sale of corporate stock with a prospect
C) Is a broker-dealer's managing partner who helps wealthy clie
A) Only advises others on their investment portfolio for compensation
Agents of broker-dealers are often called registered representatives or sales representatives. Partners of broker-dealers who are involved in buying and selling securities for clients are agents. A sales assistant who accepts phone orders must be registered as an agent.
A firm who charges a fee based upon an investment advisory contract would be defined as:
A) A contracted investment agent
B) A financial planner
C) A registered representative
D) An investment adviser
D) An investment adviser
According to the USA, a small investment adviser whose place of business is not within the state does not have to be registered in the state if which of the following are true?
I - The adviser's only clients within the state are banks
II - The adviser doe
C) I only
An investment adviser need not be registered in a state if the adviser's place of business is not within that state and its only clients in that state are institutional investors, such as banks. Corporations (II) are not institutional investors and only pension funds with at least $1,000,000 in assets are institutional investors. The limitation on clients is 5, not 15.
Under the Uniform Securities Act, which of the following need not register in a state even if engaged in effecting securities transactions as a business?
I - A registered agent who lives outside the state, but routinely conducts securities transactions in
A) IV