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Flashcards in Module 9 (Financial Advisor Regulation) Deck (65):
1

Are financial planners regulated by the federal or state government or neither?

Neither

2

What law or Act controls the regulation of a financial planner?

Investment Advisors Act of 1940

3

What are the 3 things that will have to be in place for the Investment Advisors Act of 1940 to apply?

1. The person is giving advice about securities
2. The person is in a business that provides securities
3. The person is being paid

4

Name 8 types of securities.

- stocks
- mutual funds
- bonds
- insurance products
- options
- derivatives
- commercial paper
- limited partnerships

5

The Investment Advisors Act of 1940 has many ways to determine if a financial planner is in business. But what are the two key ways the book speaks about?

1. Checks the public view and see if they view the planner as a business that sales securities
2. Looks at business cards and advertising

6

True or false.
Fees for advice as well as commissions on securities, do they both count as compensation under the Investment Advisors Act of 1940?

Yes

7

Who do investment advisors register with?

SEC

8

If you are not considered an investment advisor you do not have

register with SEC

9

Investment Advisors who are exempt from registration ____________ required to register with the SEC.

are not

10

If you are required to register with the state, are you required to register with the SEC?

No

11

A bank or bank holding company is _____ considered an investment advisor.

not

12

Is someone who only performs incidental investment services (e.g. Lawyer, engineer, teacher, or accountant) considered an investment advisor?

No

13

Is a broker or dealer performing services outside of their practice, and gets no special compensation, considered an investment advisor?

No

14

Is someone that gives advice only on US government securities considered an investment advisor?

No

15

An investment advisor whose clients reside in their home state and they don't provide advice on securities listed on the national exchange, do they have to register with the SEC?

No

16

An investment advisor who's clients are only insurance companies, do they have to register with the SEC?

No

17

Does an investment advisor who has less than 15 clients within 12 month span have to register with the SEC?

No

18

An investment advisor who is a director, employee, or volunteer of a charity required to register with the SEC?

No

19

Does a commodity trading advisor not acting as an investment advisor required to register with the SEC?

No

20

Advisors with less than $100 million assets under management has to register with the...

state.

(The state determines this every year)

21

Who are the 6 groups of advisors that must register with the SEC?

– Advisers who already registered because their investment company is already registered.
– If your office is in Wyoming or outside of the US
– Rating organizations that are registered as advisers (Moody's)
– Internet investment advisors
– Pension consultants that has more than $50 million in assets
– Start up advisers that are expected to be eligible for registration with the SEC within 120 days

22

If a financial planner is subject to the SEC regulation, they are responsible for the following...

RRCAUDA

– Registration
– Recordkeeping
– Charging fees
– Assigning contracts
– Using labels
– Delivering brochures
– Avoiding fraud

23

Advisers are required to comply with the Investment Advisors Act of 1940 and become a registered investment advisor by completing form...

ADV.

24

Under Form ADV, fees that are charged are based on...

the assets you have under management.

25

What are the two parts under Form ADV?

Part I – general information regarding the applicant/clients
Part II – types of services/fees/transactions

26

Registered Investment Advisors must comply with a 17-step...

recordkeeping requirement.

27

Advisers must retain cancel checks, financial statements, and bank statements for...

5 years.

28

Registered Investment Advisors must retain written communication and written agreement sent to...

clients.

29

If the recordkeeping requirements are violated, what type of penalties are available as a repercussion?

Civil and criminal

30

Investment advisors must have policies reducing the likelihood of...

insider trading.

31

Develop a written policy, communicate the policies to the employees, assign responsibilities to supervisors, and establish a monitoring mechanism are all requirements of...

Insider trading

32

A registered investment advisor is prohibited from assigning client responsibilities to another advisor. However, under what conditions can the assignment of responsibilities take place?

With the clients consent

33

Advisers cannot use ________ after name. But they can use...

RIA
Registered investment advisor

34

At a federal level, is an advisor required to take an exam?

No

35

The "brochure rule" requires delivery of a disclosure statement to both...

current and potential clients.

36

Brochure disclosure statements must be provided in...

writing.

37

Disclosure statements must be delivered to a prospective client within ____ hours of entering into an investment advisory agreement.

48

38

When delivering a disclosure statement you can also provide the client with Part II of Form ADV once. After that, you only need to...

Offer it to the client.

39

The _______________________ prohibit the defrauding of any client.

anti-fraud provisions

40

The anti-fraud provisions indicate that the investment advisor has a _________________ duty to the client.

fiduciary

41

Anti-fraud provisions applies to __________________________, regardless of whether they are registered with the SEC.

all investment advisors

42

The anti-fraud provisions can apply in situations in which conduct didn't involve a ________________________.

securities transaction.

43

Conflicts of interest are extensively addressed under the...

anti-fraud provisions.

44

Most states impose more extensive registration requirements then those at the...

federal level.

45

Most states impose a registration requirement that advisors have to pass _________________ NASD or in a NASAAS exams.

one or more

46

Some states review contracts, disclosure statements, and literature provided to the...

client's.

47

Some states require the advisor to attach audited financial statements to the...

application.

48

Many states require a minimum amount of capital before...

approving registration.

49

________________ exam is generally a requirement by state registered investment advisor's in most states.

Series 65

50

____________________ exam is administered by the North American Securities Administrators Association.

Series 65

51

Series 65 exam has a pass rate of...

80%.

52

In most states, a CFP professional or CFA charter holder is _________ from taking the...

exempt
Series 65 Exam.

53

The Investment Advisors Act prohibits purchases or sales of securities without certain _____________ to clients.

disclosures

54

A __________________ organization is authorized to regulate the conduct and activities of their members.

self-regulatory

55

A self-regulatory organization is subject to oversight by the...

government.

56

Financial planners do not have a separate...

self-regulatory organization.

57

Registered Investment Advisors are regulated by the...

SEC.

58

NYSE
AMEX
CBOE
NASDAQ
FINRA

Considered self-regulatory organizations

59

The SEC itself is not a self regulatory organization, but it _______________ many self-regulatory organizations.

oversees

60

A fiduciary has a ______________ to a client.

duty of responsibility

61

Is the FDIC considered a self-regulatory organization?

No

62

An advisor may be a fiduciary even without _____________ over the clients assets.

discretionary control

63

Breach of fiduciary duty can lead to...

– Civil/criminal lawsuit
– Disciplinary action by professional society

64

Registered Investment Advisor
CFP professional or CFA charter holder or anyone making security recommendations are all considered...

fiduciaries

65

Insurance agent
Registered representative Commission-only planners
An Instructor on educational information
Are all considered...

non fiduciaries