Fed and State Reg of Advisers (Registration Procedures under Federal Law) Flashcards Preview

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Flashcards in Fed and State Reg of Advisers (Registration Procedures under Federal Law) Deck (22):
1

Under the Investment Advisers Act of 1940, unless delayed by the SEC, registration of an investment adviser becomes effective how many days after filing?

A) 90 days.
B) 45 days.
C) 30 days.
D) 60 days.

B) 45 days.

This is one of the differences between the Uniform Securities Act and the Investment Advisers Act of 1940. Registrations become effective at noon on the 30th day after filing under the Uniform Securities Act. They become effective 45 days after filing, unless delayed by the SEC, under the Investment Advisers Act of 1940.

2

Which of the following is NOT included in Form ADV Part 2A?

A) Educational background of the adviser.
B) Investment policy of the adviser.
C) Types of investments made by the adviser.
D) States in which the investment adviser is registered or intends to register.

D) States in which the investment adviser is registered or intends to register.

ADV Part 2A is the brochure that investment advisers must deliver to clients; it describes the investment adviser's fees, educational background, investment policies, and types of investments made. The states in which the adviser is registered or intends to be registered in are not contained in ADV Part 2A. If the IA is registering with the SEC, on Part 1A, they list only the largest five offices (in terms of numbers of employees). If state registered, they list each state they will be registering in or are already registered in.

3

If a state-registered investment adviser moves to another location, the Administrator must be notified:

A) within 15 days.
B) within 30 days.
C) promptly.
D) within 7 days.

C) promptly.

An address change must be communicated promptly to the Administrator.

4

Under the Investment Advisers Act of 1940, an adviser's registration usually becomes effective how many days after it is filed?

A) 45 days.
B) 10 days.
C) 20 days.
D) 30 days.

A) 45 days.

In the absence of any denial order or pending proceedings, registrations of federal covered investment advisers (and broker/dealers) will become effective on the 45th calendar day after the date of filing (the date received in the SEC's office). The SEC may specify an earlier date.

5

A federal covered IA files a petition for bankruptcy. The firm must:

A) notify the SEC immediately.
B) notify the Administrator immediately.
C) notify all of its clients immediately.
D) do nothing until the court decides the disposition of the firm's assets.

A) notify the SEC immediately.

As a federal covered investment adviser, the responsible regulatory body is the SEC.

6

ABC Advisers, a federal covered investment adviser, is moving the firm's headquarters to a new office park in the suburbs. ABC is required to file this change with the SEC:

A) within 90 days.
B) promptly.
C) within 30 days.
D) within 60 days.

B) promptly.

Any material change that affects an investment adviser's ADV must be filed promptly with the SEC (or Administrator if state covered) and a change of address would certainly be material.

7

Under the Investment Advisers Act of 1940, which of the following is TRUE about the use of the term "investment counsel" by investment advisers?

A) Advisers may use the term only if their principal business is acting as an investment adviser and a substantial part of their business consists of providing continuous advice based on a client's individual needs.
B) The use of the term is prohibited under any circumstances.
C) Advisers may use the term only if they are attorneys.
D) Advisers may use the term without restriction as long as they are registered.

A) Advisers may use the term only if their principal business is acting as an investment adviser and a substantial part of their business consists of providing continuous advice based on a client's individual needs.

Advisers may use the term "investment counsel" only if two conditions are met: rendering investment advice must be their principal business, and a substantial part of that business must be providing investment supervisory services-that is, continuous advice based on the individual needs of each client.

8

An investment adviser renews its registration with the SEC by filing:

A) a certificate of good standing along with the renewal fee.
B) an annual updating amendment.
C) Forms ADV Part 1 and Part 2.
D) an annual audited balance sheet.

B) an annual updating amendment.

Investment advisers renew their registration with the SEC by filing an annual updating amendment within 90 days (including weekends and holidays) of the end of their fiscal year. An important part of the annual updating amendment is the computation of assets under management (AUM) which confirms the adviser's continued eligibility for SEC registration.

9

According to the Investment Advisers Act of 1940, the SEC must either grant investment adviser registration or begin proceedings to determine whether registration should be denied within how many days of filing?

A) 30 days.
B) 60 days.
C) 90 days.
D) 45 days.

D) 45 days.

The SEC is required by the Investment Advisers Act of 1940 to either grant an adviser registration or begin proceedings to determine whether the registration should be denied within 45 days of application.

10

All of the following information is required on the SEC registration Form ADV EXCEPT the:

A) personal securities holdings of the principals and associated persons of the firm.
B) name of the adviser's business.
C) form of business organization
D) basis on which the adviser will be compensated.

A) personal securities holdings of the principals and associated persons of the firm.

The registration Form ADV does not require the disclosure of the personal securities holdings of the firm's principals. Form ADV requires the name of the adviser's business and form of business organization. In addition, Form ADV specifically requires information on how the adviser will be compensated.

11

If a federal covered adviser's fiscal year ends on October 31, 2014, it must file its annual updating amendment to its Form ADV no later than:

A) 29-Jan-15
B) 31-Dec-14
C) 28-Feb-15
D) 30-Mar-15

A) 29-Jan-15

The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal year end.

12

If a federal covered adviser's fiscal year ends on November 30, 2014, it must file its annual updating amendment to its Form ADV no later than:

A) 28-Jan-15
B) 30-Mar-15
C) 28-Feb-15
D) 31-Dec-14

C) 28-Feb-15

The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal year end.

13

Which of the following statements regarding registration of investment advisers is (are) TRUE under the Investment Advisers Act of 1940?

1. If any material information filed in the registration becomes inaccurate, an amendment must be filed promptly.
2. If any nonmaterial information filed on Form ADV changes, an amendment must be filed within 90 days of the end of the fiscal year.
3. Material information requires a prompt amendment, but nonmaterial changes do not require amendment.

1. If any material information filed in the registration becomes inaccurate, an amendment must be filed promptly.
2. If any nonmaterial information filed on Form ADV changes, an amendment must be filed within 90 days of the end of the fiscal year.

The SEC requires prompt amendment of any material information changes on Form ADV (e.g., names, location, control, custody, organization) and also requires nonmaterial amendments within 90 days of the end of the adviser's fiscal year.

14

With respect to a federal covered adviser, which of the following statements is NOT true?

A) Within 45 days after filing Form ADV, the SEC will either grant the registration or institute proceedings to determine whether the application should be denied.
B) If material misstatements are contained in an adviser's registration documents, the SEC may censure, suspend for up to 12 months, limit the activities of, or revoke the adviser's registration.
C) Withdrawal of its registration by an adviser will become effective on the 45th day after the request.
D) An investment adviser must file an annual updating amendment to the Form ADV within 90 days of its fiscal year-end.

C) Withdrawal of its registration by an adviser will become effective on the 45th day after the request.

Withdrawal of the registration by a federal covered adviser will become effective on the 60th day after the withdrawal request. The annual filing of the annual updating amendment basically serves as a renewal by indicating that the adviser still meets the eligibility requirements for registration with the SEC.

15

Under the Investment Advisers Act of 1940, which of the following statements regarding an adviser's registration is TRUE?

A) Withdrawal from registration is done on Form ADV-W and takes effect 45 days after filing.
B) If the adviser ceases to act as an adviser or goes out of business, the SEC will cancel the registration.
C) Registrations become effective in 30 days unless delayed by the SEC.
D) Registrations expire on December 31 of each year.

B) If the adviser ceases to act as an adviser or goes out of business, the SEC will cancel the registration.

Under the Investment Advisers Act of 1940, registrations become effective 45 days after filing, unless delayed by the SEC, and remain effective until withdrawn by the adviser or canceled, suspended, or revoked by the SEC. The SEC will cancel a registration if the adviser is no longer in existence or in the business. Although the ADV-W is the form for withdrawal, it becomes effective upon acceptance by the IARD, provided however that the investment adviser’s registration continues for a period of 60 days after acceptance solely for the purpose of commencing a proceeding regarding any violation of the Act.

16

Which of the following statements best describes an investment supervisory service as described by the Investment Advisers Act of 1940?

A) No actions are taken in client accounts without first being approved by a senior supervisory person.
B) An investment adviser provides continuous advice based on the client's individual needs.
C) An investment adviser sends monthly newsletters to 200 clients offering nonspecific advice.
D) An investment advisory firm offers nondiscretionary services on a nonclient specific basis.

B) An investment adviser provides continuous advice based on the client's individual needs.

An investment supervisory service is an individualized service delivered to a specific client on a continual basis. General nonspecific advice given across the board is deemed impersonal advisory services. Only when an investment adviser provides investment supervisory service, and the adviser's principal business activity is the giving of advice, may the term "investment counsel" be used.

17

ABC Advisers changes its name to XYZ Advisers and also changes its location. Under the Investment Advisers Act of 1940, it must:

A) amend Form ADV promptly.
B) notify FINRA within seven days.
C) notify the Administrator.
D) amend Form ADV in advance.

A) amend Form ADV promptly.

If information on certain parts of Form ADV becomes out of date, a federal covered adviser must file a prompt amendment with the SEC (a state covered adviser would have to do the same with the Administrator under the USA). Information requiring immediate amendment includes name, address, telephone number, organization type changes (corporation, sole proprietorship, and partnership), degree of control over clients' funds, sources of funding, management organization, or any information relating to disclosure to clients. If any other information on the form changes (nonmaterial information), the SEC requires the form to be amended within 90 days of the end of the adviser's fiscal year.

18

The term "investment counsel" can be used by investment advisers:

A) who are also registered as broker/dealers.
B) who are registered with the SEC under the Investment Advisers Act of 1940.
C) with a primary business of rendering investment advice.
D) who are also attorneys.

C) with a primary business of rendering investment advice.

While this choice is only half correct, under the Investment Advisers Act of 1940, the term "investment counsel" may be used by any adviser that meets two standards; the adviser performs investment supervisory services; and the adviser provides advice as the primary business of the firm. No other special qualifications or registrations are needed.

19

An investment adviser whose primary business is the rendering of investment advice providing investment supervisory services is entitled to use the term:

A) pension consultant.
B) senior adviser.
C) investment counsel.
D) financial planner.

C) investment counsel.

The term investment counsel may only be used by those advisers whose primary function is the rendering of investment advice with individual continuous monitoring of the accounts.

20

A federal covered registered investment adviser who receives compensation for advice and whose business is primarily as an investment adviser may describe its business as investment counsel if:

A) a substantial part of his business is providing investment supervisory services.
B) it maintains its registration by filing an updating amendment to its Form ADV annually.
C) it receives SEC approval to use the definition.
D) it maintains custody of customer funds and/or securities.

A) a substantial part of his business is providing investment supervisory services.

The Investment Advisers Act of 1940 prohibits the use of the term "investment counsel", unless the principal business of the person is as an investment adviser and a substantial part of the business is providing investment supervisory services (i.e., continuous advice for individual client portfolios).

21

Which of the following investment advisers would be permitted to use the term "investment counsel"?

A) A professional providing a market timing service with an annual subscription fee of $995; this service attempts to maximize profits by suggesting entry and exit points for over 100 listed stocks.
B) An investment adviser who has been admitted to the bar in the state in which the firm's principal office is located.
C) A firm whose exclusive business is placing clients' assets into model portfolios.
D) A financial planner offering a wide range of services to his clients, including tax planning, estate planning, insurance planning, and investment advice.

C) A firm whose exclusive business is placing clients' assets into model portfolios.

To use the term "investment counsel", two criteria must be met. First, the principal business of the adviser must be the rendering of investment advice. Second, the nature of the advice must meet the definition of investment supervisory service. That means giving continuous investment advice to clients based on their individual needs. That is frequently accomplished by selecting model portfolios most appropriate to the client's needs. The financial planner clearly is not principally in the business of offering investment advice because he describes his service as offering a wide range of services, of which advice is only a part. The exam frequently uses that wording to indicate that advice is not the principal activity. While the publisher's principal business activity may be offering advice, nothing about the description indicates that individual client accounts are being monitored.

22

The Administrator may require which of the following from a federal covered adviser?

1. copy of the IA’s Form ADV.
2. filing of the IA’s advertising in the state.
3. a listing of the IA’s fee schedule.
4. a filing fee.

1. copy of the IA’s Form ADV.
4. a filing fee.

Even though the Administrator has limited jurisdiction over federal covered advisers, they can require filing of a copy of the information filed by that IA with the SEC (the Form ADV) as well as a filing fee.

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