66-5 Flashcards
(51 cards)
What form is used to notify Administrators that an IA is maintaining custody of client assets?
Form ADV
What document, regularly provided to clients, will IAs use to notify clients of the location of their securities?
The client’s account statement
If an IA has custody or discretion, it must include a _________________ with their Form ADV and brochure.
balance sheet
True or False: According to the USA, investment advisers may generally charge performance-based fees.
False. Unless the Administrator deems the client qualified, performance-based fees are prohibited.
True or False: An IA that has full discretion over a client’s account at a separate BD is considered to have custody.
True
Before an IA may assign a client’s contract to another advisory firm, it must obtain _________________________.
the client’s consent
According to the USA, all investment advisory contracts must be in __________ form.
written form
Firms must keep client information confidential unless disclosure is authorized by the _______ or a ___________________.
the client or a regulatory authority
If an adviser has check-writing privileges in a client’s account, does this constitute custody?
Yes. Full discretionary control (having the ability to remove funds from the client’s account) is considered custody.
If an IA maintains custody of a client’s funds or securities, how often must account statements be provided to clients?
quarterly
If an IA maintains custody of client funds, are unannounced audits required?
Yes. IAs must arrange for unannounced audits on an annual basis.
An IA inadvertently receives client funds/securities and doesn’t return them within 3 business days. Is this custody?
yes
True or False: An IA maintaining custody of client assets need not notify the Administrator.
False. The Administrator must be notified in writing using Form ADV.
When an IA has custody, with whom are the assets held?
Assets are held by a qualified custodian. Clients must be notified of custodian’s name, address, and manner of holding.
Define “assignment” as it relates to IA contracts.
The transfer of ownership of a client’s account from one advisory firm to another. Client consent is required.
May an adviser release account information to the spouse of a client?
no, not without written authorization
Under the USA, all IA contracts must be __________ and must disclose __________ provided and related ______.
Under the USA, all IA contracts must be in writing and must disclose services provided and related fees.
What is required of an IA if the firm goes through a majority change in ownership?
The firm must obtain written permission of its clients to assign the contracts. If not, the contracts will be voided.
An IAR leaves his firm and his clients are distributed to other IARs. Is this an assignment of the contracts?
No. The contracts are still with the original IA firm. The change of IAR does not constitute an assignment.
In general, does the USA allow an adviser to charge performance-based fees?
No. However, such fee arrangements may be permitted by rule or order of the Administrator.
What is required of an IA to assign an advisory contract to another adviser?
written permission from the client
If an adviser exercises full discretionary control over a client’s account, does this constitute custody?
yes
An IA has custody if it inadvertently receives client securities and hasn’t returned them within ____ business days.
three
Is an exculpatory provision in an advisory contract permitted?
No. An exculpatory provision would serve to absolve an adviser from blame or liability and is prohibited.
