Chapter 2: USA – Registration
This exemption allows an IA with no place of business to avoid registration if it has fewer than six retail clients in a state.
What is the de minimis exemption?
Failing to disclose a material fact that makes a statement misleading is considered this.
What is fraud?
This act regulates advisers who provide advice for compensation.
What is the Investment Advisers Act of 1940?
Banks, insurance companies, and pension plans fall into this client category.
What are institutional clients?
This investment strategy keeps portfolio assets balanced at assigned target weights over the long term.
What is strategic asset allocation?
Which individual registers ONLY at the state level?
A. Broker-dealer
B. Investment adviser
C. Investment adviser representative
D. Federal covered adviser
What is
C. Investment adviser representative?
This Administrator power allows denial, suspension, or revocation of registration.
What is an administrative action?
Which act governs registration of new securities offerings?
A. Securities Exchange Act of 1934
B. Investment Company Act of 1940
C. Securities Act of 1933
D. Investment Advisers Act of 1940
What is C. Securities Act of 1933?
This suitability factor measures a client’s ability to absorb losses.
What is risk tolerance?
A portfolio designed to track an index uses which strategy?
A. Tactical allocation
B. Active management
C. Sector rotation
D. Passive management
What is D. Passive management?
This employment event immediately makes an agent’s registration ineffective.
What is termination of association with a broker-dealer or issuer?
Which practice is NOT fraudulent?
A. Churning
B. Front-running
C. Guaranteed returns
D. Bona fide gift
What is D. Bona fide gift?
This act regulates secondary market trading and broker-dealers.
What is the Securities Exchange Act of 1934?
A client focused on stability of principal has which objective?
A. Growth
B. Income
C. Capital preservation
D. Speculation
What is C. Capital preservation?
This measure evaluates volatility relative to the market.
What is beta?
Which security is a federal covered security?
A. Intrastate municipal bond
B. Regulation D private placement
C. Nonprofit issuer bond
D. Insurance company stock
What is B. Regulation D private placement?
This authority allows the Administrator to examine books and records without a subpoena.
What is inspection authority?
Mutual funds are primarily regulated by which act?
A. Securities Act of 1933
B. Securities Exchange Act of 1934
C. Investment Company Act of 1940
D. Investment Advisers Act of 1940
What is C. Investment Company Act of 1940?
This profile evaluates income, liquidity, tax bracket, and net worth.
What is a financial profile?
Which of the following BEST describes strategic asset allocation?
A. A strategy using market timing and stock picking to outperform a benchmark
B. A strategy focused on short-term asset mix adjustments based on market conditions
C. A strategy where assets are balanced and generally kept at an assigned balance over the long term
D. A strategy where rebalancing only occurs after significant market declines
What is C. A strategy where assets are balanced and generally kept at an assigned balance over the long term?
Changes to ownership, control, or disciplinary history are considered this type of change.
What is a material change?
Advertising that highlights rewards while omitting risks is considered.
What is fraudulent advertising?
Which advisers must register with the SEC?
A. Advisers with $90M AUM
B. State-registered advisers
C. Advisers with $110M+ AUM
D. Investment adviser representatives
What is C. Advisers with $110M+ AUM?
This standard requires recommendations to align with client objectives and risk tolerance.
What is suitability?
Loss of purchasing power over time is known as which risk?
A. Market risk
B. Inflation risk
C. Credit risk
D. Liquidity risk
What is B. Inflation risk?
Which person is automatically registered with a broker-dealer?
A. Clerical employee
B. Partner acting as agent
C. Intern
D. Solicitor
What is B. Partner acting as agent?
The civil statute of limitations under the USA begins running at which point?
A. Date of transaction
B. Date of discovery
C. Date of registration
D. Date of complaint filing
What is B. Date of discovery?
This disclosure document outlines fees, services, and conflicts.
What is Form ADV?
Which client requires heightened disclosure obligations?
A. Institutional client
B. Accredited investor
C. Retail client
D. Qualified purchaser
What is C. Retail client?
XYZ stock trades at $120 per share and has earnings per share (EPS) of $8. What is the P/E ratio?
A. 8
B. 15
C. 20
D. 25
What is C. 15?
An IA employing an unregistered IAR is committing this violation.
What is unlawful employment of an investment adviser representative?
Which action may the Administrator NOT take?
A. Revoke registration
B. Conduct hearings
C. Issue cease-and-desist
D. Impose criminal penalties
What is D. Impose criminal penalties?
This act prohibits manipulative and deceptive trading practices.
What is the Securities Exchange Act of 1934?
This investment objective prioritizes current income with moderate risk.
What is income?
Overweighting one industry increases this type of risk.
What is concentration risk?
Which transaction is exempt under the Uniform Securities Act?
A. Public IPO
B. Secondary market transaction
C. New issue to retail client
D. Sale of non-covered security
What is B. Secondary market transaction?
This rule governs how long customer complaints must be retained.
What are record retention rules?
This SEC release clarifies fiduciary duty and disclosure obligations.
What is SEC Release IA-1092?
This analysis compares marginal tax rates to investment returns.
What is after-tax return analysis?
Which metric isolates manager skill from market movement?
A. Beta
B. Standard deviation
C. Alpha
D. Sharpe ratio
What is C. Alpha?
A broker-dealer must register in a state once it establishes this.
What is a place of business?
Which is an example of unethical conduct?
A. Reasonable commissions
B. Suitability review
C. Borrowing from a client without consent
D. Disclosure of conflicts
What is C. Borrowing from a client without consent?
This act regulates pooled investment vehicles such as mutual funds.
What is the Investment Company Act of 1940?
This factor determines how quickly assets can be converted to cash.
A. Volatility
B. Liquidity
C. Inflation
D. Credit quality
What is B. Liquidity?
This strategy combines long-term allocation with active components.
What is core-satellite strategy?
Which statement about registration is TRUE?
A. Registration implies approval
B. IARs register federally
C. Broker-dealers avoid state law
D. Registration does not imply endorsement
What is D. Registration does not imply endorsement?
This enforcement action orders future compliance without monetary penalties.
What is a cease-and-desist order?
Which act created the SEC?
A. Securities Act of 1933
B. Securities Exchange Act of 1934
C. Investment Advisers Act of 1940
D. Uniform Securities Act
What is B. Securities Exchange Act of 1934?
This standard applies when an adviser has discretionary authority.
What is fiduciary duty?
Adjusting allocations based on short-term expectations is called this.
What is tactical asset allocation?