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Flashcards in Fed and State Reg of Advisers (Books and Records Required) Deck (18):
1

Under the Uniform Securities Act, the recordkeeping requirements established by the Administrator for out-of-state investment advisers wishing to register in his state are subject to the limitations of

A) the Securities and Exchange Act of 1934
B) the Investment Advisers Act of 1940
C) the requirements set by each individual state
D) the requirements set by the Administrator of the adviser's home state

D) the requirements set by the Administrator of the adviser's home state

For state-registered investment advisers, requirements set by the Administrator are subject to the limitations of the requirements set by the Administrator of the adviser's home state. Covered advisers don't register in any state, only with the SEC (and come under the SEC's requirements set forth in the Investment Advisers Act of 1940).

2

The USA places a number of recordkeeping requirements on investment advisers. Records required to be kept by all state-registered investment advisers include all of the following EXCEPT:

A) a list of discretionary accounts.
B) a record by security showing each client's interest and location thereof.
C) bank records.
D) emails.

B) a record by security showing each client's interest and location thereof.

The key to this question is the requirement for all advisers. A security record is only required for those advisers who have custody of client assets.

3

With respect to the recordkeeping rules under the USA, which of the following statements is NOT correct?

A) Broker/dealers must maintain records of electronic communications for a minimum of three years.
B) Broker/dealers must maintain records of trade blotters for a minimum of three years.
C) Investment advisers must maintain copies of all powers of attorney and other evidences of the granting of any discretionary authority by any client to the adviser for a minimum of five years.
D) Following termination of the business, investment advisers organized as corporations must maintain copies of their articles of incorporation for a minimum of five years.

D) Following termination of the business, investment advisers organized as corporations must maintain copies of their articles of incorporation for a minimum of five years.

Partnership articles and any amendments thereto, articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor must be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise. Emails are treated as any other communication: three years for broker/dealers and five years for investment advisers.

4

Certain documents belonging to a federal covered investment adviser must be kept for a period of time after the enterprise closes. Those documents are:

A) the responsibility of the investment adviser.
B) sent to the Administrator for safekeeping.
C) sent to the SEC for safekeeping.
D) required to be shredded.

A) the responsibility of the investment adviser.

Broker/dealers and investment advisers must keep certain records for a period of three years after the termination of the business. How and where those records are maintained is the responsibility of the firm, not the regulators. This is a separate requirement from the one that has active broker/dealers keeping records for three years and investment advisers for five.

5

Under the Uniform Securities Act, most books and records of investment advisers must be maintained for:

A) three years, the first two readily accessible.
B) five years, the first two readily accessible.
C) one year.
D) two years.

B) five years, the first two readily accessible.

With few exceptions, the accounting records, correspondence, and advertising of investment advisers must be kept for a minimum of five years after the end of the year in which they were created, the first two years in a readily accessible place (on premises).

6

Under the Uniform Securities Act, if sent to 2 or more persons, a file must be maintained containing a copy of which of the following?

1. Bulletins.
2. Newspaper articles.
3. Notices.
4. Websites.

1. Bulletins.
2. Newspaper articles.
3. Notices.
4. Websites.

All of these types of communications, unless sent to persons connected with the investment adviser, require maintenance of a file containing a sample copy.

7

Included in the Investment Advisers Act of 1940 are a number of different recordkeeping requirements. Wealth Preservation Specialists is a covered adviser that is organized as a partnership. If the firm were to dissolve, partnership agreements must be kept for

A) three years after the dissolution
B) the lifetime of the firm
C) five years after the dissolution
D) five years from the date of organization

A) three years after the dissolution

​Both ​​the Investment Company Act of 1940 ​(applicable here because this is a covered adviser) and the NASAA Model Rule on Recordkeeping ​require that investment advisers maintain certain records, such as partnership agreements and corporate articles of incorporation, for a period of no less than three years after dissolution.

8

Federally-registered investment advisers are obligated to maintain certain books and records as specified by the SEC. Which of the following statements regarding adviser recordkeeping is NOT true?

A) Written records may be reduced to microfilm.
B) Records originally created on computer may be stored in electronic media.
C) Records must be kept for six years.
D) Records are subject to surprise audits by the SEC.

C) Records must be kept for six years.

Records of an adviser must be maintained for five years. Records are subject to surprise audits by the SEC, written records may be reduced to microfilm, and records originally created on a company's computer may be stored in electronic media.

9

Kapco Advisers, a federal covered investment adviser operating on a calendar year basis, published a list of recommended securities in January 2010. A copy of this must be maintained until at least:

A) 1/31/2015
B) 12/31/2015
C) 1/31/2012
D) 12/31/2012

B) 12/31/2015

Investment adviser records, including copies of advertisements, must be kept for at least five years from the end of the fiscal year in which the record originated; in this case, five years from the end of 2010.

10

Under the Investment Advisers Act of 1940, the records that must be maintained by an investment adviser may be kept in which of the following forms?

1. Hard copy.
2. Microfilm.
3. Computer disk.

1. Hard copy.
2. Microfilm.
3. Computer disk.

The Investment Advisers Act of 1940 provides for the storage of records in several ways. Records may be kept in hard copy, or the hard copy may be microfilmed or microfiched. Records originated on computer may be stored electronically.

11

Under the Investment Advisers Act of 1940, for how many years must records be kept after the end of the fiscal year in which an entry was made?

A) One year.
B) Two years.
C) Ten years.
D) Five years.

D) Five years.

Records must be kept for a full five years — the first two years in a readily accessible place — and are subject to SEC examination at any time. The 5-year requirement governs records of business activities. Additional rules require the articles of incorporation or partnership documents of the advisory firm and other business organizational documents to be kept for three years after termination of the enterprise.

12

According to the Investment Advisers Act of 1940, how can records of the investment adviser's business be stored during the first two years?

1. In written form on site
2. On microfilm on site
3. On magnetic tape or computer on site
4. On computer disks at an off-site storage facility that requires 30 days' notice to retrieve

1. In written form on site
2. On microfilm on site
3. On magnetic tape or computer on site

The act requires certain records of business activities to be kept for five years (the first two in a readily accessible place subject to SEC examination at any time). Records originated on paper may be microfilmed or microfiched, and records originated on computer may be stored electronically. The USA has the same rule and, in both cases, the key point is that any storage vehicle used must be able to generate a "hard" copy while the examiner is present. One other requirement applies to computer disks and that is that they can not be re-written.

13

Under the Investment Advisers Act of 1940, for how many years must an investment adviser maintain the records required by regulation?

A) One year.
B) Three years.
C) No requirement.
D) Five years.

D) Five years.

The Investment Advisers Act requires records to be kept for a full 5 years. The records must be kept in a readily accessible location for the first 2 years and are subject to SEC examination at any time.

14

According to the Investment Advisers Act of 1940, for how many years must books and records be maintained for an account after the end of the year in which the last transaction occurred?

A) Five years.
B) One year.
C) Two years.
D) Ten years.

A) Five years.

Those investment advisers registered with and regulated by the Securities and Exchange Commission (SEC) must adhere to SEC Rule 204-2 regarding the maintenance of records. The rule states the required records must be kept for five full years from the end of the fiscal year during which the last entry was made on the record. The first two years, records must be kept in the principal office of the adviser and the balance of the time, easily accessible. They are subject to SEC examination at any time.

15

Which of the following statements concerning the books and records of an investment adviser under the Investment Advisers Act of 1940 is (are) TRUE?

1. Books and records must be maintained in the principal office of the adviser for the first two years from the origination date.
2. Books and records must be maintained in an easily accessible place for no less than five years from the end of the last fiscal year in which an entry was made.
3. Copies of all investment letters, advertisements, or communications to ten or more persons must be preserved for five years from the end of the fiscal year of the publication date.
4. An adviser who ceases business continues to be responsible for the maintenance and preservation of records for the balance of any required period and must notify the SEC of the address at which the required records will be maintained.

1. Books and records must be maintained in the principal office of the adviser for the first two years from the origination date.
2. Books and records must be maintained in an easily accessible place for no less than five years from the end of the last fiscal year in which an entry was made.
3. Copies of all investment letters, advertisements, or communications to ten or more persons must be preserved for five years from the end of the fiscal year of the publication date.
4. An adviser who ceases business continues to be responsible for the maintenance and preservation of records for the balance of any required period and must notify the SEC of the address at which the required records will be maintained.

All books and records required to be maintained-including investment letters, advertisements, or other communications to ten or more persons-must be preserved in a readily accessible place for five years from the end of the fiscal year in which they were created or communicated. For the first two years they must be maintained in the appropriate office of the adviser. The adviser remains responsible for the preservation of the records for the period required after ceasing business, generally three years, and must notify the SEC of their exact location.

16

The Uniform Securities Act requires that broker/dealers and investment advisers maintain certain records relating to their business operations. If the firm wished to upgrade to a modern system, such as disk storage:

A) the most modern form currently permitted is microfilm or microfiche.
B) they must keep their records in paper form.
C) they must obtain approval from the Administrator prior to determining their method of record retention.
D) they could do so if the system met certain requirements including that the information on the disk could not be altered.

D) they could do so if the system met certain requirements including that the information on the disk could not be altered.

Computer disk storage is acceptable provided that a printed copy can be readily obtained and the information on the disk can not be overwritten.

17

Long-term Financial Solutions, Inc. (LTFCI), a federal covered registered investment adviser, files a Form ADV-W indicating the business is closing. It is being acquired by another federal covered adviser, Goldin and Sylver Advisers, LLC. As the successor firm, Goldin and Sylver Advisers

A) must keep copies of the LTFCI corporate charter for at least three years after LTFCI’s termination
B) must keep copies of the LTFCI corporate charter for at least five years after LTFCI’s termination
C) must notify all clients of LTFCI that their advisory contracts have been assigned
D) is under no obligation to maintain any of LTFCI’s corporate records.

A) must keep copies of the LTFCI corporate charter for at least three years after LTFCI’s termination

When an investment adviser ceases to exist, either through going out of business or being succeeded by another firm (as is the case here), articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor must be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise. Although it is true the contracts have been assigned to the successor firm (Goldin and Sylver), the consent for that had to be obtained by LTFCI.

18

An investment adviser sends a notice offering a research report she has recently prepared to a group of new members of the local Lions Club. Under the NASAA Model Rule on recordkeeping for investment advisers, she must keep a copy of the notice along with

A) a copy of the full roster of the local chapter
B) the names of those members to whom the report was sent
C) the date the Administrator approved the research report
D) a memorandum describing the list and its source

D) a memorandum describing the list and its source

If an investment adviser sends any notice, circular, or other advertisement offering any report, analysis, publication, or other investment advisory service to more than 10 persons , the investment adviser shall not be required to keep a record of the names and addresses of the persons to whom it was sent, except if the notice, circular, or advertisement is distributed to persons named on any list, the investment adviser shall retain with the copy of the notice, circular, or advertisement a memorandum describing the list and its source.

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