GP Chap 9 Quiz: Financial Services Regs & Requirements. Flashcards
(10 cards)
If a CFP professional decides to become a RIA, which agency should he notify first?
A. FINRA
B. SEC
C. The CFP Board
D. His clients
E. His employing broker/dealer
B.
Advisers must first file with the SEC. Until the registration is complete, there is nothing to tell the broker/dealer. The CFP professional might not be employed by a broker-dealer.
Randy Jenkins, a plumber, has been successful in the stock market since the beginning of the bull market in March 2009. Although he earns a comfortable living as a plumber, he realizes he can earn money more easily by advising his friends and relatives all over the country on buying and selling specific stocks and charging them a fee for such advice. Randy has advised over ninety (90) friends this past year. Must Randy register as an investment adviser?
A. No, because he is only advising friends and relatives.
B. No, because he is not in the business of giving advice.
C. Yes, because is is in the business of giving advice.
D. Yes, because is is issuing reports on specific stock.
C.
Randy provides advice on securities for compensation (fees) to clients in multiples states.
Which of the following events arises from being registered as an investment advisor by the SEC?
A. A client advisory contract can be transferred to another investment adviser at any time.
B. A written disclosure brochure must be delivered to FINRA.
C. The individual can use the initials RIA after his or her name on business cards and stationery.
D. The individual must file an update From ADV Part I and Scheduel 1 with the SEC each year.
D.
The written disclosure must be delivered to SEC and DDINRA. An advisor cannot use the initials RIA.
Which of the following describes the sequence of the initial registration process to sell certain equity based products?
I. Registers with FINRA through a B/D on Form U-4
II. Central Registration Depository (CRD) System makes registration with FINRA uniform among states.
III. Associates with broker-dealer firm
IV. Passes appropriate exam(s)
A. I, II, III, IV
B. I, IV, II, III
C. III, IV, I, II
D. III, I, IV, II
D.
A representative is first hired by the FINRA firm, then files a U4, then passes exams, then receives a CRD number.
Jack Johnson advises clients to buy or sell specific securities and also provides written financial plans. He charges a fee for these services. Although he usually recommends that the client consider purchasing specific mutual funds and/or stocks, he does not sell any of these products to his clients. Does Jack have to register as an investment Adviser and/or as a representative with FINRA?
A. Neither, because he sells no products.
B. He must register as an Investment Advisor only
C. He must register with FINRA.
D. He must register as Investment Adviser and with FINRA as a representative.
B.
Nothing in the question implies that Jack receives commission. Thus, he needs not register with FINRA as a securities representative.
Sandy has earned her Series 6 and all applicable state licenses. She may not sell which of the following investments?
A. Variable Annuity
B. Variable Life Insurance
C. Mutual Fund traded on a major stock exchange
D. UIT (initial offering)
C.
Mutual funds do not trade on stock exchanges, but closed-ended funds do. To sell closed-ended funds (NYSE, etc.), Sandy needs a Series 7 license. A Series 6 license allows a representative to sell an initial UIT offering.
Jack Goodguy, CFP, your lifelong friend, recently obtained his Series 6 license. He joined a securities firm, Penny Stocks Unlimited. He is selling portfolios of individual stocks like a mutual fund to Florida retirees. what should you do?
A. You should turn this bum in because he is cutting into your market.
B. You should let it go. The SEC will catch up with him someday.
C. You should join the firm. This sounds like a good idea.
D. You should send an anonymous envelope to the SEC describing the violation.
E. You should notify the Board, SEC, FINRA, Florida Securities Department, etc. promptly even if this guy once saved your life at the old swimming hole.
E.
Jack only has a Series 6 license. He can’t recommend or sell individual securities.
Which of the following names, as shown on a business card, is permitted?
A. Abbie Danko, RIA
B. Abbie Danko, C.F.P
C. Abbie Danko, RIA (C)
D. Abbie Danko, CFP(R)
D.
C.F.P. is incorrect.
An ADV Part 1 must include which of the following items of information?
I. The applicant’s business address
II. Compensation
III. Background of the client
IV. The applicant’s business background
A. All of the above.
B. I, II, III
C. I, II, IV
D. I, IV
E. II, IV
D.
The Part 1 includes the business address and background. The Part 2 spells out the compensation arrangements.
Which of the following statements concerning federal securities law is correct?
A. The Securities Act of 1933 provides for protection from misrepresentation, deceit, and. other fraud in the sale of existing securities.
B. The Securities Investor Protection Act of 1970 is designed to protect individual investors from losses as a result of poor investment choices.
C. The Investment Advisers Act of 1940 requires that persons or firms advising others about securities investments must register with the Securities and Exchange Commission.
D. The Investment Advisers Act of 1940 assures the investor safety of investment in companies engaged primarily in investing, reinvesting, and trading in securities.
C.
Answer A is wrong because the 1933 Act regulates new securities, not previously issued securities. Answer D. is wrong because the Investment Advisors Act does not guarantee the safety of any security.
