Closed Book Exam 1

Front 1

According to SEC Release IA-1092, an IAR/RR who intends to implement a plan using only products offered by a given broker-dealer must inform the client that ______________

Back 1

The plan's implementation may be limited as a result.

Front 2

In order to share in a customer's account, an agent must obtain permission from ________

Back 2

Their employer and the customer in writing, and share proportionately.

Front 3

Efficient Market Hypothesis portfolio

Back 3

Buy and hold and systematic rebalancing.

Front 4

Sector Rotation portfolio

Back 4

Moving of investments from sector to sector in aticipation of a change in the economy.

Front 5

Modern Portfolio Theory

Back 5

Diversifying across various asset classes to enhance returns w/o increasing risk.

Front 6

An Administrator may require an investment adviser to file ________ along with its initial ADV application?

Back 6

The firm's current financial condition.

Front 7

Exempt Reporting Advisers (ERAs)

Back 7

Venture capital advisers and private fund advisers with AUM of less than $150 million are exempt from registration as an adviser with the SEC and/or state Administrator.

Must still pay fees and report public info via IARD/FINRA system

Front 8

A change in advisory fees is a ________ change.

Back 8

Material.

Front 9

ADV Part 2 must be amended within ___ days.

Back 9

30

Front 10

The __________ has a fiduciary duty to manage the assets in a reasonable manner and to act in the best interest of the __________.

Back 10

Trustee / Beneficiaries

Front 11

The Administrator may require federal covered investment advisers to notice file if _________

Back 11

They transact business with more than 5 non institutional clients over a 12 month period.

Front 12

Notice filing is NOT a from of ______________

Back 12

Registration

Front 13

Notice Filing

Back 13

The process of a federal covered adviser sharing information with the Administrator that it has filed with the SEC.

Front 14

BDs and/or their agents are always required to notify clients if the fees that they are going to be charged are ____________ or ____________.

Back 14

excessive or out of the ordinary

Front 15

Investment Adviser representative

Back 15

Persons who are associated with an IA and make recommendations, manage accounts, solicit, or negotiate the sale of IA services, or supervise any persons who engage in these activities.

No requirement for a person to be an employee or to be solely dedicated to sales to meet the definition of IAR

Front 16

Roth IRAs are funded with ________

Back 16

After-tax dollars.

Front 17

Withdrawals from a Roth IRA will be classified as qualified distributions only if it has been ________ since the account was opened and funded.

Back 17

5 years

Front 18

Roth IRA qualified distributions are tax free after what age?

Back 18

59 1/2

Front 19

Business Continuity Plan

Back 19

I. How the firm will communicate with regulators

II. Mission-critical systems

III. That the plan must be reviewed by the firm annually.

Front 20

The Investment Company Act of 1940 regulates ________, __________, and ____________.

Back 20

investment companies and their investment adviser, custodian bank, and distributor.

Front 21

SEC customer confirmation info required to be disclosed.

Back 21

The capacity in which the BD acted (agent or principal), the amount of commission received by the BD for an agency trade, and the settlement date of the trade.

Front 22

NASAA internet advertising legend requirement

Back 22

(1) A BD, agent, or IAR may transact business in the state only if first registered, excluded, or exempted from state reg requirements.

(2) Follow-up, or individualized responses to persons in this state by a BD agent, or IAR that involve either the effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made absent compliance with state registration requirements, or an applicable exemption or exclusion.

Front 23

IPOs are usually registered by ___________ type of offering.

Back 23

Registration by coordination

Front 24

Mutual funds and listed securities are __________ covered securities.

Back 24

Federal covered securities; therefore, are exempt from state state registration.

Front 25

Intrastate offerings are commonly registered by ___________.

Back 25

Qualification.

Front 26

An investment adviser must record the personal securities transactions that are effected by its officers, directors, partners, and employees by no later than:

Back 26

Must be recorded by no later than 10 days after the end of the calendar quarter in which the transaction occurred.

Front 27

Characteristics of value stocks are:

Back 27

High dividend yield, low price-to-book ratio, and/or low p/e ratios

Front 28

Form BD requires what information?

Back 28

Whether the applicant has been charged or convicted of a crime, any minor rule violations (SRO violations of $2,500 or less), and social security number if applicant is an individual.

Front 29

USA- An administrator may accept a deposit of _______ or ________ in lieu of a surety bond.

Back 29

Cash and securities.

(Admin may determine the type of securities acceptable for deposit but may not disallow securities)

Front 30

Upon the sale of a primary residence, a portion of any capital gains are _______ from taxation. If single the first $_________ from the sale are excluded. $___________ for joint tax return.

Back 30

Excluded, $250,000 and $500,000

Front 31

An adviser with AUM of $100 million can register with who?

Back 31

The SEC or state Administrator

Front 32

An adviser with AUM of $110 million is considered a ___________.

Back 32

Federal covered adviser and is required to register with the SEC.

May remain as long as AUM > $90 million

Front 33

Firms that provide advice to an investment company, or firm that provide advisory service in 15 or more states are categorized as ___________.

Back 33

Federal covered advisers.

Front 34

A whole life insurance policy may be referred to as:

Back 34

Permanent, ordinary, or straight life insurance.

Front 35

An executor is ____ to obtain any outside advice in the exercise of his fiduciary duty.

Back 35

Free.

(permission is not required)

Front 36

Who is permitted to participate in a tax-sheltered annuity established under IRS 403(b)?

Back 36

An employee of a school district and certain nonprofit organizations.

Tax-sheltered annuities are funded pre-tax and give an immediate deduction.

Front 37

As an investment adviser, you are required to record and keep a record of every transaction in a security for a client's account within:

Back 37

10 days of the end of each quarter, excluding direct obligations of the U.S. government.

Front 38

NASAA's model rules require that advisory fees be:

Back 38

Disclosed and be reasonable based on industry standards.

(if excessive and client agrees, may still be a violation.)

Front 39

SEC Release 1092 states that:

Back 39

Sports and entertainment reps who provide investment advice to their clients are IAs and subject to the Investment Adviser Act.

(Incidental advice only applies to LATE)

Front 40

Contributions that are made to public charities or private foundations are __________.

Back 40

Tax-deductible (pre-tax)

Front 41

NASAA's IA contract disclosure requirements:

Back 41

(1) All fees and services provided

(2) The term of the contract

(3) A formula for computing the advisory fee

(4) The amount of prepaid fees to be returned in the event of an early termination of the contract

(5) The fact that no assignment of the contract will be made without the consent of the client

(6) Whether the contract grants discretionary power to the adviser

(7) The fee for managing equity securities may be higher than for fixed-income securities

Front 42

Under USA, any security that an investor receives as a bonus for purchasing another security is considered ____________.

Back 42

An offer of that security.

Front 43

the statue of limitations for criminal violations under USA is ____ years.

Back 43

5

Front 44

If an agent is terminated by his BD who must notify the Administrator and when?

Back 44

Both the agent and the BD promptly.

(in violation if not reported within 30 days)

Front 45

Tracking error

Back 45

Occurs when indexing, if a portfolio deviates from index's actual return.