Fed and State Reg of Advisers (Investment Adviser Rep) Flashcards Preview

Series > Fed and State Reg of Advisers (Investment Adviser Rep) > Flashcards

Flashcards in Fed and State Reg of Advisers (Investment Adviser Rep) Deck (38):
1

Alvin Hill is an IAR with Kapco Advisers, Inc., a covered investment adviser with offices in New York City, Chicago, and Los Angeles. Alvin is registered in the states of New York, New Jersey, and Connecticut. Alvin has clients who move to San Diego and officially become California residents. Once settled there, they decide to open an advisory account for each of their children. What are Alvin's options?

A) Obtain a California registration and handle all of the accounts.
B) Continue to do business as usual with the existing clients as well as open the children's account because Alvin does not have a place of business in California.
C) Continue to do business as usual with the existing clients but have the children's new accounts serviced by a Kapco IAR registered in California.
D) Have a Kapco IAR who is licensed in California take over the existing account and open the new accounts for the children.

B) Continue to do business as usual with the existing clients as well as open the children's account because Alvin does not have a place of business in California.

Under Section 203A of the Investment Advisers Act of 1940, an investment adviser representative of a covered investment adviser is required to register only in those states in which that IAR maintains a place of business. Even though the firm has a California office, nothing here indicates that Alvin plans to establish one there. If Alvin had been associated with a state registered IA, then, once the clients had been residents of California for 30 days, Alvin would either have had to register there in order to continue the client relationship, or turn the business over to an IAR who was "legal" in that state.

2

If an investment adviser representative transacting business in a state terminates employment with a state registered investment adviser, which of the following statements is TRUE?

A) The representative must notify the Administrator promptly.
B) Both the representative and the investment adviser must notify the Administrator promptly.
C) The representative must notify the Administrator within 30 days.
D) The investment adviser must notify the Administrator promptly.

D) The investment adviser must notify the Administrator promptly.

The investment adviser is required to notify the Administrator promptly. In the case of an investment adviser representative with a federal covered adviser, the representative is the only one responsible for notifying the Administrator because the firm has no relationship with the state.

3

Which of the following statements are TRUE?

1. When an investment adviser representative begins or terminates employment with an adviser registered under the USA, only the investment adviser must notify the Administrator.
2. When an investment adviser representative begins or terminates employment with a federal covered adviser, only the investment adviser representative must notify the Administrator.
3. When an agent of a broker/dealer leaves the firm, only the broker/dealer must notify the Administrator.
4. When an investment adviser representative or a registered agent of a broker/dealer terminates employment, notice must be given to the Securities and Exchange Commission.

1. When an investment adviser representative begins or terminates employment with an adviser registered under the USA, only the investment adviser must notify the Administrator.
2. When an investment adviser representative begins or terminates employment with a federal covered adviser, only the investment adviser representative must notify the Administrator.

When an investment adviser representative begins or terminates employment with a state registered IA, the employing investment adviser must promptly notify the Administrator. In the case of a federal covered IA, only the IAR gives notice to the Administrator. However, when an agent of a broker/dealer begins or terminates employment, both the agent and the broker/dealer must promptly notify the Administrator. Notice to the SEC is not required.

4

If an investment adviser representative of a federal covered adviser that transacts business in a state terminates employment with that investment adviser, which of the following statements is TRUE?

A) Both the representative and the investment adviser must notify the Administrator.
B) No notice to the Administrator is required.
C) The representative must notify the Administrator.
D) The investment adviser must notify the Administrator.

C) The representative must notify the Administrator.

It is the investment adviser representative's responsibility to notify the Administrator. The advisory firm is not registered with the state; only the representative is registered.

5

When an investment adviser representative terminates employment with a federal covered investment adviser and then registers with a different federal covered investment adviser in the state where the individual has an office:

A) only the investment adviser representative must notify the Administrator promptly.
B) the investment adviser representative and the federal covered advisers must notify the Administrator promptly.
C) the investment adviser representative and the employing adviser must notify the Administrator promptly.
D) only the terminating investment adviser must notify the Administrator.

A) only the investment adviser representative must notify the Administrator promptly.

If you are working for a registered investment adviser within a specific state, that state securities administrator wants to know who you are. The problem becomes a question of who is responsible for notifying the State Securities Administrator of your employment. A federal registered investment adviser is exempt from registration at the state level and therefore has very little contact with the state. If you go to work for a federal registered investment adviser, it becomes your duty to notify the State Securities Administrator that you are working there as well as when you terminate.

6

Because of failing economic conditions, Kapco Advisers, an adviser with slightly less than $120 million in assets under management, lays off a registered investment adviser representative. In this case, who would notify the state Administrator of the termination?

A) The IAR's new employer.
B) The IAR.
C) Kapco Advisers.
D) Both Kapco and the IAR.

B) The IAR.

With more than $110 million in assets under management, Kapco is a federal covered adviser. In that case, the IAR is the one who notifies the Administrator of being terminated.

7

Which of the following regarding the registration of investment advisers and their representatives is TRUE?

A) ABC Advisers, Inc., registered with the Administrator, employs an investment adviser representative who left the employment of another investment advisory firm 6 months ago. ABC must notify the Administrator of this association promptly.
B) ABC Advisers, Inc., is an investment advisory firm registered with the Administrator; therefore, its representatives need not be registered with the Administrator.
C) XYZ Advisers, Inc., is a federal covered investment advisory firm registered with the SEC; therefore, its representatives need not be registered with the Administrator.
D) An investment adviser representative, terminated his employment with ABC Advisers and, 6 months later, was employed as an advisory representative by KLM, a federal covered adviser. Each firm is required to notify the Administrator of each event.

A) ABC Advisers, Inc., registered with the Administrator, employs an investment adviser representative who left the employment of another investment advisory firm 6 months ago. ABC must notify the Administrator of this association promptly.

Only state registered investment advisory firms are required to notify the appropriate state Administrator when employment is terminated or begun. In the case of investment adviser representatives of federal covered advisers, notification is the responsibility of the adviser representative. Investment adviser representatives of both state and federal registered investment advisers must be registered with the appropriate state Administrator(s) unless otherwise exempted. In the case of agents, not only the broker/dealers but also the agents must notify the Administrator.

8

Under the Uniform Securities Act, which of the following statements regarding the employment of investment adviser representatives by a state registered investment adviser is (are) TRUE?

1. The investment adviser must notify the Administrator whenever a representative is terminated.
2. An investment adviser is not required to notify the Administrator when a representative begins employment.
3. The registration of a representative is effective only as long as the individual is employed by a registered investment adviser.

1. The investment adviser must notify the Administrator whenever a representative is terminated.
3. The registration of a representative is effective only as long as the individual is employed by a registered investment adviser.

Whenever an individual begins or ends employment with a state registered investment adviser, the investment adviser must notify the Administrator. A representative's registration is only valid while employed by a registered investment adviser.

9

Gibraltar Advisers is a federal covered investment adviser with offices in 13 states. However, Nancy, a Gibraltar employee who solicits accounts for Gibraltar out of an office in one of those states, is required to complete the NASAA examination and register at the state level. Why might this occur?

A) The Uniform Securities Act requires investment adviser representatives employed by federal covered advisers, including solicitors, to register at the state level regardless of whether the firm is required to register at the state level, as long as the IAR has a place of business in the state.
B) All employees of Gibraltar must register at both the state and federal level.
C) The state securities Administrator has stricter standards than federal standards and requires investment associates to register at the state level.
D) The state securities Department is required to register all individuals serving professionally in the investment industry.

A) The Uniform Securities Act requires investment adviser representatives employed by federal covered advisers, including solicitors, to register at the state level regardless of whether the firm is required to register at the state level, as long as the IAR has a place of business in the state.

Certain individuals employed by investment advisers, including those whose only function is to solicit advisory business, are deemed to be investment adviser representatives. Even though the firm does not have to register in any state, IARs must register in each state in which they have a place of business.

10

The term "investment adviser representative" includes which of the following?

1. A receptionist for an adviser.
2. An employee who solicits new business for an adviser.
3. A supervisor who oversees employees who manage client portfolios for an adviser.
4. An investment advisory firm registered in the state of Texas

2. An employee who solicits new business for an adviser.
3. A supervisor who oversees employees who manage client portfolios for an adviser.

An investment adviser representative is always an individual person. Employees who solicit business on behalf of investment advisers and those persons who supervise other employees are investment adviser representatives.

11

Which of the following persons are required to register in a particular state?

1. An investment adviser who manages client accounts in excess of $100 million in value.
2. An investment adviser who manages client accounts and has less than $25 million in total assets under management.
3. An adviser to investment companies registered under the Investment Company Act of 1940.
4. An investment adviser representative with a place of business in the state.

2. An investment adviser who manages client accounts and has less than $25 million in total assets under management.
4. An investment adviser representative with a place of business in the state.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, advisers who manage clients with a total of less than $100 million under management are required to register with the state Administrator. Under Dodd-Frank, those who manage client assets of $110 million or more or advise registered investment companies are required to register with the SEC and are exempt from state registration. Those who manage at least $100 million, but not $110 million, have the option of registering with either the state or the SEC. Investment adviser representatives with a place of business in the state register with the state, whether or not their employer is federal covered.

12

The registration of an investment adviser would automatically register as investment adviser representatives:

1. directors
2. officers
3. partners

1. directors
2. officers
3. partners

Section 202 (a) of the Uniform Securities Act states, “Registration of an investment adviser automatically constitutes registration of any investment adviser representative who is a partner, officer, or director, or a person occupying a similar status or performing similar functions.” I would have preferred that the question indicate that these individuals are acting in a capacity that would require their registration, but, on the exam, it probably won't be that clear.

13

Which of the following persons are investment advisers subject to state registration?

A) A financial planner or other person that provides investment advisory services to others for compensation.
B) A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation.
C) A federal covered investment adviser.
D) Any person that the Administrator excludes by rule or order.

A) A financial planner or other person that provides investment advisory services to others for compensation.

A financial planning firm or other person that, as an integral component of other financially related services, provides investment advisory services for compensation is an investment adviser. A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation, a federal covered investment adviser, or any other person that the Administrator specifies by rule or order, are excluded from the definition of an investment adviser.

14

An individual with a place of business in State A manages client assets on behalf of a ​covered investment adviser. ​This individual wishes to expand his client base by working one day per week out of the firm's office in State B. Which of the following actions must the person take to practice within that particular state?

A) Passing an oral or written examination
B) Complying with the notice filing requirements of the state
C) Becoming licensed as a broker-dealer
D) Register as an investment adviser representative in State B

D) Register as an investment adviser representative in State B

Individuals managing client assets while employed by federal covered investment advisers, must register as investment adviser representatives if they maintain a place of business in the state. Working on a regular schedule in the firm's office in State B, even if only once per week, constitutes maintaining a place of business in the state. Because this individual is already registered in State A, it is not necessary to pass another exam to become registered in another state.​ It is the investment adviser who ​may be required to notice file with the Administrator.

15

According to the Uniform Securities Act, which of the following must be registered as an investment adviser representative?

1. John, who opens an investment advisory firm where he devotes his time exclusively to management responsibilities as the sole proprietor of the firm.
2. Paul, who works for a firm soliciting investment management accounts on behalf of several different investment managers.
3. Margaret, who works as a commission sales agent for a broker/dealer.
4. Mark, an employee of AAA Broker/Dealers, who solicits brokerage clients for commissions on the basis of research conducted by his firm's securities analyst.

1. John, who opens an investment advisory firm where he devotes his time exclusively to management responsibilities as the sole proprietor of the firm.
2. Paul, who works for a firm soliciting investment management accounts on behalf of several different investment managers.

Paul, who works for a firm soliciting investment management accounts for several investment managers, must register as an investment adviser representative because he is acting in the capacity of a sales agent for investment advisers. John, as the owner, will be automatically registered as an investment adviser representative when his advisory firm registered as an investment adviser. Margaret need not register as an investment adviser representative because she functions as a registered agent for a broker/dealer. If she sold investment advice for the broker/dealer's investment management subsidiary, she then would have to register as an investment adviser representative. An agent of a broker/dealer, earning commissions on security sales, is not an IAR even if his primary selling tool for the brokerage business is the firm's outstanding research department.

16

Under the Uniform Securities Act, any partner, officer, or director of a registered investment adviser is an investment adviser representative if that individual does which of the following?

1. Offers advice concerning securities.
2. Manages client accounts or portfolios.
3. Determines securities recommendations for representatives to disseminate.
4. Supervises personnel engaged in the above activities but does not sell these services to the public

1. Offers advice concerning securities.
2. Manages client accounts or portfolios.
3. Determines securities recommendations for representatives to disseminate.
4. Supervises personnel engaged in the above activities but does not sell these services to the public

The Uniform Securities Act defines any individuals associated with an investment adviser as investment adviser representatives if they manage accounts or portfolios, determine securities recommendations, or supervise personnel engaged in the above activities, including any partner, officer, or director who offers advice concerning securities. Persons who manage client accounts or portfolios, determine securities recommendations, or supervise personnel engaged in the above activities are investment adviser representatives.

17

According to the Uniform Securities Act, which of the following is an investment adviser representative?

1. A clerical employee of the AAA Investment Management Company, an investment advisory firm registered in the state, that offers investment portfolio services to the public.
2. An employee of AAA Investment Management Company who is properly registered under the USA and supervises analysts who provide research to clients.
3. An employee of a federal covered adviser with an office in the state who offers investment advice to the public.
4. An agent of a broker/dealer with strong investment opinions who sells securities only on a commission basis

2. An employee of AAA Investment Management Company who is properly registered under the USA and supervises analysts who provide research to clients.
3. An employee of a federal covered adviser with an office in the state who offers investment advice to the public.

An investment adviser representative means any partner, officer, director, or other individual, except clerical or administrative personnel, who is employed by an investment adviser that is registered or required to be registered. Therefore, unregistered personnel are not investment adviser representatives. An employee who supervises analysts who deal with the public must be an investment adviser representative. The employee of the federal covered adviser with an office in the state is also an investment adviser representative. The agent is an agent of a broker/dealer, not an investment adviser representative.

18

An individual is currently registered as an agent with a broker/dealer. If the agent would like to offer wrap fee programs through the firm, all of the following statements are correct EXCEPT:

A) the broker/dealer would have to be registered as an investment adviser.
B) the agent would now come under a greater fiduciary responsibility.
C) the agent would have to become registered as an investment adviser.
D) the agent would have to become registered as an investment adviser representative.

C) the agent would have to become registered as an investment adviser.

Once the broker/dealer decides to offer wrap fee programs, it is no longer excluded from the definition of an investment adviser and would become required to register on either the state or federal level. The agent would now become an IAR of the firm and, as such, would now carry the additional fiduciary responsibility incurred in the advisory business.

19

An investment adviser hires 2 individuals to solicit new customers for the firm's wealth management service. Under the USA:

A) registration as investment adviser representatives is required.
B) they may begin soliciting as soon as they have passed their licensing examinations.
C) soliciting is generally prohibited.
D) each of them would have to register as an investment adviser.

A) registration as investment adviser representatives is required.

The definition of investment adviser representative includes individuals who solicit for the firm's advisory business.

20

Long Range Planning (LRP) is a covered investment adviser doing business in all 50 states. Fred Fergus is an IAR with LRP and splits his time between an office in State A and State D. Fred has retail clients as follows

16 clients in State A
12 clients in State B
6 clients in State C
4 clients in State D

Fred would have to register as an IAR in

States A and D

In the Investment Advisers Act of 1940, it states that "no law of any State requiring the registration, licensing, or qualification as an investment adviser or supervised person of an investment adviser shall apply to any person that is registered under section 203 as an investment adviser, or that is a supervised person of such person, except that a State may license, register, or otherwise qualify any investment adviser representative who has a place of business located within that State." Therefore, when employed by a covered adviser, the only time that state registration is required is when the individual functioning as an IAR has a place of business in the state. Had this been an IAR with a state registered adviser, registration in all of the states would have been required (the de minimis would not cover State D because there is a place of business there).

21

An individual has been employed by a broker/dealer to make cold calls to solicit prospects for the firm's new wrap fee program. Under the USA, this individual:

1. must obtain registration as an investment adviser representative.
2. must obtain registration as an agent of the broker/dealer.
3. is not required to obtain any registration because he is only making cold calls.
4. must be adequately supervised

1. must obtain registration as an investment adviser representative.
4. must be adequately supervised

Broker/dealers offering wrap fee programs must also have registration as an investment adviser. Under the USA, those individuals who solicit on behalf of an IA must register as IARs. Of course, the activities of any employee of any type, must always be under proper supervision.

22

Sally is registered as an agent with ABC Securities Co., a major brokerage house with offices in most states. ABC has recently introduced a fee-based asset management program and has asked Sally to devote one hour per day soliciting her existing clients for this program. Under the USA, Sally would:

A) not be required to obtain any additional licensing beyond her agent's registration.
B) be required to obtain registration as a registered investment adviser.
C) only be permitted to solicit those clients who currently have discretionary accounts with ABC.
D) be required to obtain registration as a registered investment adviser representative.

D) be required to obtain registration as a registered investment adviser representative.

Once ABC Securities Co. begins offering a fee-based asset management program, it loses its exclusion from the definition of investment adviser. One could assume that a national firm like this would probably become a federal covered adviser. If Sally wants to solicit anyone, existing clients or not, for this type of program, she could not do so until registered as an investment adviser representative.

23

Which of the following are required to register with a state Administrator?

1. A person that only provides impersonal investment advice through newspaper columns, magazine articles, or a financial publication of general and regular circulation.
2. Investment adviser representatives of federal registered advisers who have natural person clients and have a place of business in the state.
3. An investment adviser who has no place of business in the state and has five advisory clients in the state.
4. An employee of a federal registered investment adviser who has no natural person clients and is limited to performing administrative functions

2. Investment adviser representatives of federal registered advisers who have natural person clients and have a place of business in the state.

Under state law, the publication of investment advice that does not provide advice based on the specific investment situation of each client excludes the publisher from the definition of an investment adviser. The investment adviser representatives of a federal registered adviser are required to register in each state in which they have a place of business. The act provides a de minimis standard exemption from state registration for advisers who have no place of business in a state and have fewer than six clients resident in that state. A person employed and supervised by an investment adviser who is not an investment adviser representative with natural person clients and whose work is confined to clerical or administrative functions is not required to register with state Administrators.

24

Which of the following would be considered an investment adviser representative under the Uniform Securities Act?

1. A senior supervisor who decides what investment advice should be given.
2. An executive who supervises investment advisers representative.
3. An employee who solicits clients for the firm

1. A senior supervisor who decides what investment advice should be given.
2. An executive who supervises investment advisers representative.
3. An employee who solicits clients for the firm

An investment adviser representative is any partner, officer, director, associate, or employee who participates in or supervises the advisory functions of the adviser. Thus, anyone who decides what advice should be given, those who supervise investment adviser representatives, and those who seek out business for an advisory firm are considered investment adviser representatives. Third-party solicitors may or may not be considered adviser representatives, but this solicitor is an employee. Remember, an investment adviser can be either an individual or a company. An investment adviser representative must always be an individual.

25

Judy is in the business of giving general investment advice, suggesting appropriate asset allocation percentages, but not recommending specific securities. George’s business model is giving investment advice and recommending specific securities. Assuming that both receive compensation, who must register as an investment adviser under the Uniform Securities Act?

A) Only Judy.
B) Neither must register.
C) Both must register.
D) Only George.

C) Both must register.

Two of the three critical elements in the definition of investment adviser are whether the person provides advice regarding securities and receives compensation for doing so. (The third element is “being in the business” and the question states that both are). Even without recommending specific securities, the fact that Judy suggests asset allocation percentages constitutes investment advice. Both Judy and George provide advice regarding securities for compensation and must register, unless specific exemptions apply.

26

Under the Uniform Securities Act, which of the following qualifies as an investment adviser representative?

A) An employee, although highly skilled in evaluating securities, solely performs administrative or clerical functions for an investment adviser.
B) An individual who renders fee-based advice on precious metals.
C) An agent who offers incidental advice on securities as part of his sales commissions.
D) A solicitor for an investment advisory firm who is paid a fee for his services.

D) A solicitor for an investment advisory firm who is paid a fee for his services.

If the goal is obtaining clients for the investment adviser, a solicitor is considered an investment adviser representative under the Uniform Securities Act. An employee who performs clerical or administrative functions only is not an investment adviser representative. Precious metals are not securities, and a person advising on them is not considered an IAR. An agent is a representative of a broker/dealer.

27

Which of the following is (are) NOT exempt from registration as an investment adviser representative in the state in which they conduct business?

1. A certified financial planner who prepares financial plans and whose only compensation is commissions.
2. An insurance agent who prepares comprehensive financial plans and receives commissions on any insurance products purchased by his clients.
3. A broker/dealer with extensive business in the state.
4. A mutual fund company with offices and clients in the state

1. A certified financial planner who prepares financial plans and whose only compensation is commissions.
2. An insurance agent who prepares comprehensive financial plans and receives commissions on any insurance products purchased by his clients.

A certified financial planner who prepares financial plans for commissions must register in the state as an investment adviser representative. An insurance agent who prepares comprehensive financial plans for commissions is also acting in the capacity of an investment adviser representative and must register accordingly. In both cases, these individuals are holding themselves out as offering investment advice because, at least in the eyes of the USA, there is no such thing as a comprehensive financial plan that does not involve securities. The commissions they receive are considered indirect compensation for the rendering of investment advice. Broker/dealers and mutual fund companies are not investment advisers under the Uniform Securities Act.

28

Under the Uniform Securities Act, which of the following is NOT an investment adviser representative?

A) A clerk employed by a state registered investment advisory firm.
B) An associate in an SEC-registered investment advisory firm who has a place of business in the state and manages the account of a single client.
C) A director in a state registered investment advisory firm who determines specific recommendations for clients.
D) A vice president of a state registered investment advisory firm who supervises employees who solicit clients for the firm.

A) A clerk employed by a state registered investment advisory firm.

Clerical and ministerial personnel are specifically excluded from the definition of investment adviser representative. Specifically included in the definition are directors, officers, partners, associates, and employees of state registered advisers who carry out investment advisory or solicitation functions or who supervise those functions. Also included in the definition are persons who perform similar functions for SEC-registered advisers and who have a place of business in the state.

29

Under the Uniform Securities Act, all of the following are investment adviser representatives EXCEPT:

1. a receptionist/switchboard operator employed by ABD Advisers, Inc.
2. an account representative employed by ABD Advisers, Inc.
3. a vice president of ABD Advisers, Inc., who serves on the firm's advisory committee
4. ABD Advisers, Inc.
5. an employee who solicits new customers for ABD Advisers, Inc.

1. a receptionist/switchboard operator employed by ABD Advisers, Inc.
4. ABD Advisers, Inc.

The Uniform Securities Act defines an investment adviser representative as anyone who is a partner, officer, director, or other employee or person associated with an investment adviser other than clerical or ministerial personnel who (1) make recommendations or provide advice regarding securities, (2) manage accounts or portfolios of clients, (3) determine which recommendations or advice should be given, (4) solicits, offers, or negotiates for the sale of, or sells, advisory services, or (5) supervises any such persons. An individual or a firm may be registered as an investment adviser, but only an individual can be an investment adviser representative.

30

According to the Investment Advisers Act of 1940, which of the following is a always a natural person?

A) Broker/dealer.
B) Investment adviser representative.
C) Investment adviser.
D) City of Chicago.

B) Investment adviser representative.

Natural persons are human beings. An adviser representative must be an individual. Although there are broker/dealers and investment advisers organized as a sole proprietorship, almost all are structured under some type of business form. A city is never an individual.

31

KAPCO Advisers is registered as an IA with the SEC. Their only office is in New Jersey and all IARs are registered there. IAR Jones has ten clients who reside in Ohio; IAR Cohen has six clients who live in Kentucky; and IAR Brown has three clients who are Georgia residents. In addition, Brown conducts a quarterly presentation at the Augusta National Golf Club where he discusses current market developments. The seminar is restricted to Club members only. Which of the following is CORRECT?

1. Jones must register in OH.
2. Cohen must register in KY.
3. Brown must register in GA.
4. Because all three are registered in the state where KAPCO maintains its principal office, no further registrations are necessary for these IARs.

3. Brown must register in GA.

Under Section 203A of the Investment Advisers Act of 1940, any IAR with a federal covered adviser who has no place of business in a state is not required to register in that state even when the number of clients they have in a state exceeds the de minimis level. Holding a public seminar on a quarterly basis in the same location would be considered having a place of business in Georgia (even though attendance is limited to Club members only – they are still members of the general public).

32

Some registered investment advisers are federal covered while others register on a state by state basis. In the case of a state registered investment adviser having its only office in Oregon with no offices in any other state, the authority of the office of the Administrator would include:

A) requiring IARs to pass a qualification exam.
B) requiring each IAR to provide a statement of financial condition.
C) requiring the IA to renew its consent to service of process when paying the annual fee.
D) the Idaho Administrator requiring registration of IARs who make telephone calls to residents of Idaho.

A) requiring IARs to pass a qualification exam.

As you know from being here right now, this test is required by the Administrator. What about the Idaho Administrator? Well, maybe the IARs are making 5 or fewer calls in any 12 month period. Maybe they are calling institutional clients domiciled in Idaho. In any event, if you have to choose between an answer that is 100% right all of the time (qualification exams), and one that is right only some of the time, go for the 100%.

33

Registration of an investment adviser automatically confers registration on:

1. officers, partners and directors of the firm who are functioning as IARs.
2. any employee who is functioning as an IAR.
3. clerical employees handling back office operations.
4. an employee who will be soliciting clients for the adviser.

1. officers, partners and directors of the firm who are functioning as IARs.

Under Section 202(a) of the Uniform Securities Act, registration of an investment adviser automatically constitutes registration of any investment adviser representative who is a partner, officer, or director, or a person occupying a similar status or performing similar functions. This only applies to those individuals who are listed on the firm’s Form ADV Part 1, so we’re limited to officers, partners, directors or anyone else doing that type of job, regardless of what this IA has chosen to use as the title.

34

An individual is employed by a federal covered investment adviser for the sole purpose of giving advice related to monitoring investment portfolios, but only to qualified employee benefit plans.

A) Registration as an IAR is required because the individual is rendering investment advice.
B) Registration as an IAR is not required because the plan is considered an institutional client.
C) Registration as an IAR is not required because the individual works for a federal covered investment adviser.
D) Registration as an IAR is required because the plan is qualified.

A) Registration as an IAR is required because the individual is rendering investment advice

Regardless of who the advice is given to, unless there is some kind of exemption involved, individuals working for IAs (state or federal), must register as IARs. It makes no difference if the plan is qualified or not.

35

An individual employed by a federal covered adviser would be required to become registered as an IAR in the state if

A) the only clients receiving the individual's advice are insurance companies located in states where the individual does not maintain a place of business
B) the only function performed by the individual is preparing the layout of a research report prepared by the firm
C) the only clients receiving the individual's advice are large pension plans organized for employees of municipalities located in the state where that individual maintains an office
D) the only clients receiving the individual's advice are banks located in states where the individual does not maintain a place of business

C) the only clients receiving the individual's advice are large pension plans organized for employees of municipalities located in the state where that individual maintains an office

Individuals performing the duties of an IAR for a federal covered investment adviser are only required to register in states in which they maintain a place of business. Although pension plans (as long as the total assets of the plan are at least $1 million) are considered institutional investors for exemption purposes, that exemption only applies when the individual has no place of business in the state.

36

An individual employed by or associated with an investment adviser that is registered or required to be registered under the Uniform Securities Act, or who has a place of business in this state and is employed by or associated with a federal covered adviser and whose only role is to solicit, offer, or negotiate for the sale of or sell investment advisory services would be considered

A) an IAR only if soliciting noninstitutional clients
B) a solicitor and required to register as an IAR
C) a solicitor and required to register as an IA
D) an administrative employee exempt from registration

B) a solicitor and required to register as an IAR

The term “investment adviser representative” is quite broad and includes any partner, officer, director of (or a person occupying a similar status or performing similar functions) or other individual employed by or associated with an investment adviser that is registered or required to be registered under the USA, or who has a place of business in this state and is employed by or associated with a federal covered adviser; and who does any of the following: (1) makes any recommendations or otherwise renders advice regarding securities, (2) manages accounts or portfolios of clients, (3) determines which recommendations or advice regarding securities should be given, (4) solicits, offers, or negotiates for the sale of or sells investment advisory services, or (5) supervises employees who perform any of the foregoing.

37

As used in the regulations, the term impersonal investment advice means

A) investment advisory services provided where the client does not know the identity of the investment adviser representative
B) investment advisory services provided strictly by subscription
C) investment advisory services provided by a team of advisers
D) investment advisory services provided by means of written material or oral statements that do not purport to meet the objectives or needs of specific individuals or accounts

D) investment advisory services provided by means of written material or oral statements that do not purport to meet the objectives or needs of specific individuals or accounts

This is the way the term is defined.

38

Which of the following individuals employed by an investment adviser would be required to be registered as an IAR?

A) An intern who receives no compensation whatsoever
B) The vice president of human resources
C) The night watchman
D) A chief compliance officer (CCO) who has no sales duties

D) A chief compliance officer (CCO) who has no sales duties

Any individual performing the functions of an investment adviser representative must be so registered. Among those duties is supervisory responsibility and the CCO has the job of ensuring that the firm and all of its employees follow the rules. Although executive officers are generally automatically registered as IARs, that is only the case when the job function is one involving activities relevant to IARs (and human resources is not one of them).

Decks in Series Class (76):