Chapter 5 Part 2 Flashcards Preview

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Flashcards in Chapter 5 Part 2 Deck (20):
1

Appendix I of Form ADV Part 2A is filed by advisers that

sponsor a wrap fee program

2

A wrap fee program is an arrangement between

"broker-dealers and affiliated
mid unaffiliated investment advisers (or portfolio managers). Customers are provided with discretionary investment advisory, execution, clearing, and custodial services all wrapped into one package. This all inclusive wrap fee is often determined by the amount of assets under management"

3

In addition to completing Appendix 1

Schedule H of the form is provided and must be completed and filed with the appropriate regulator. This schedule contains instructions on how to prepare a wrap fee brochure. Schedule H must be accompanied by the adviser's wrap fee brochure.

4

Schedule F is the

narrative section of Form ADV Part 2. Advisers are required to supplement their responses to those questions with narrative disclosures on Schedule F. All state-registered advisers are required to file Schedule F with their Form ADV Part 2.

5

Schedule G contains instructions relating to the manner in which

"an audited balance sheet should be prepared. It is not a document that advisers will file with the
regulators. If the adviser is required to file an audited balance sheet with a state regulator, the adviser should ask the regulator whether its balance sheet should be audited in accordance with the instructions to Schedule G"

6

An audited balance sheet is required if

The adviser has custody of client funds or securities; The adviser has full discretionary authority over a client's account; The adviser solicits prepayment of advisory fees: Federal-registered advisers who have more than $1,200 in fees per client, six months or more in advance; State-registered advisers who have more than $500 in fees per client, six months or more in advance

7

Form ADV-E is filed by

independent public accountants following the audit of the adviser's books. This is required by advisers who have custody of client funds and securities. The auditor must submit Form ADV-E to the SEC within 120 days following the completion of the audit

8

The same clients who receive the firm's brochure must also receive

a brochure supplement

9

Form Adv Part 2 includes

"Disciplinary history of all supervised persons, if the action occurred during the last 10 years. Any individual who directly interacts with clients or who has discretionary authority over the
account must be included, Additional economic benefit (compensation) received by the registered individual from sources other than the IAR's firm, Method of how the investment adviser supervises the IARs, including how the IA monitors the advice given by the supervised individual to the client"

10

The brochure supplement must be delivered to the client

either prior to or at the time that the person described in the supplement begins to advise the client. The adviser must send the client an updated brochure supplement anytime something material changes, such as the disciplinary history of one of the employees assigned to the client's account

11

If the material normally contained in the supplement is already covered in the firm's brochure

there is no need to provide a separate document. The firm is also not required to provide a brochure supplement to qualified clients--i.e., clients that are also officers, directors or otherwise affiliated with the firm (except for clerical or administrative employees)

12

Advisers registering with the states must file a copy of the brochure supplement for

each person doing business in that state through the IARD system

13

Advisers registered with the SEC are not required to

file their brochure supplements, and it is not included in the annual updated amendment. However, the adviser must retain the supplement for its own records and must be able to produce it when requested by the regulator

14

Advisers are exempt from providing a brochure and other documentation if the client they contract with is a:

Registered Investment Company, or Business Development Company

15

if the adviser provides only impersonal advisory services

no documentation is required as long as the clients pay less than $500 per year

16

Impersonal advisory services render

financial advice that is not tailored to the objectives of specific clients or do not consist of statistical information with opinions as to the investment merits of specific securities.

17

Advisers that are filing for a full or partial withdrawal of registration must file

"Form
ADV-W\vith the appropriate regulator. A full withdrawal is for a firm withdrawing from all
jurisdictions in which it is registered and no longer operating as an investment adviser. A partial withdrawal is for a firm withdrawing registration in some, but not all, of the jurisdictions in which it is registered"

18

A partial withdrawal must he implemented within

90 days of an investment adviser's fiscal year-end if its assets under management require registration at the federal level

19

Advisers are allowed to maintain SEC registration if its AUM fall to

$90 million. However, if its AUM fall below that threshold, the adviser has 180 days following the end of an investment adviser's fiscal year to register with the state

20

Advisers with general partners or managing agents who are nonresidents of the U.S. must submit

Form ADV-NR. This form appoints the Secretary of the SEC, or equivalent state official(s), as the adviser's agent for the receipt of legal papers

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