Practice Test Geeks(AIP) Accredited Investment Professional Certification Practice Test
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Risk Assessment & Regulatory Compliance Flashcards

7 cards from real AIP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Risk Assessment & Regulatory Compliance flashcards as text

  1. An investment adviser has a personal interest in recommending a particular mutual fund to clients. Under the Investment Advisers Act of 1940, the adviser's fiduciary duty requires which action?

    Answer: Fully disclose the conflict of interest to clients

    Under the fiduciary standard, advisers must fully disclose all material conflicts of interest so that clients can make informed decisions.

  2. Stress testing a portfolio involves which of the following analytical approaches?

    Answer: Applying extreme but plausible hypothetical scenarios to assess potential losses

    Stress testing evaluates portfolio performance under severe but plausible adverse conditions, such as a market crash or credit crisis, to identify vulnerabilities.

  3. Under the USA PATRIOT Act, financial institutions must establish a Customer Identification Program (CIP). At minimum, which piece of information must be collected for individual customers?

    Answer: Social Security number, date of birth, name, and address

    CIP requirements for individuals mandate collection of name, date of birth, address, and identification number (typically Social Security number) at a minimum.

  4. Which of the following best describes 'liquidity risk' for an investment fund?

    Answer: The risk that the fund cannot meet redemption requests without selling assets at distressed prices

    Liquidity risk is the risk that a fund cannot satisfy redemption demands promptly without incurring significant transaction costs or selling at below-market prices.

  5. FINRA's suitability rule (Rule 2111) includes three components of suitability analysis. Which of the following is one of those components?

    Answer: Reasonable-basis suitability

    FINRA Rule 2111 identifies three suitability components: reasonable-basis (the strategy is suitable for at least some investors), customer-specific (suitable for this particular customer), and quantitative (frequency of trades is suitable).

  6. An investment firm's compliance officer discovers that a portfolio manager has been front-running client trades. This conduct most directly violates which regulatory principle?

    Answer: The duty of loyalty under fiduciary law and SEC anti-fraud rules

    Front-running — trading ahead of client orders for personal gain — violates the manager's fiduciary duty of loyalty and constitutes securities fraud under SEC anti-fraud provisions.

  7. Under Regulation D of the Securities Act of 1933, which of the following investors qualifies as an 'accredited investor' based on net worth?

    Answer: An individual with a net worth over $1 million excluding the value of the primary residence

    An accredited investor based on net worth is an individual with a net worth (or joint net worth with a spouse) exceeding $1 million, excluding the value of the primary residence.