CFP Regulatory Frameworks & Compliance 2

Question 1

Under the Investment Advisers Act of 1940, which AUM threshold generally requires an investment adviser to register with the SEC rather than state regulators?

Accepted Answer

$100 million

Answer

Advisers managing $100 million or more in AUM are generally required to register with the SEC rather than state securities regulators.

Question 2

The Employee Retirement Income Security Act (ERISA) Section 404(c) protects plan fiduciaries from liability when which condition is met?

Accepted Answer

The plan offers at least three diversified investment options and participants exercise control

Answer

ERISA 404(c) shields fiduciaries when the plan offers at least three diversified options, provides sufficient information, and participants exercise independent control over their accounts.

Question 3

A CFP® professional who becomes aware that a client's tax return contains a material error is required to do which of the following under CFP Board's Code of Ethics?

Accepted Answer

Inform the client of the error and recommend they take corrective action

Answer

CFP Board's Standards require the professional to promptly notify the client of the error and recommend corrective action, while respecting client confidentiality.

Question 4

Which rule under the Securities Exchange Act of 1934 prohibits corporate insiders from profiting on short-swing transactions in their company's securities?

Accepted Answer

Section 16(b)

Answer

Section 16(b) requires insiders to disgorge profits from any purchase and sale (or sale and purchase) of their company's equity securities within a six-month period.

Question 5

Under Regulation Best Interest (Reg BI), a broker-dealer must act in the best interest of a retail customer at the time of a recommendation without primarily considering:

Accepted Answer

The financial interests of the broker-dealer or its associated persons

Answer

Reg BI requires broker-dealers to put retail customer interests first and prohibits placing the firm's or associated person's financial interests ahead of the customer's.

CFP - Certified Financial Planner Practice Test

CFP - Certified Financial Planner Practice Test

CFP Regulatory Frameworks & Compliance 2