CIC - Certified Investment Counselor Securities Law and Regulatory Compliance Questions and Answers Flashcards

An investment adviser's 'code of ethics' required under SEC rules must address all of the following EXCEPT:

Answer: Minimum client account size requirements

A code of ethics under Rule 204A-1 must cover conduct standards, personal trading, and reporting requirements, but minimum account size is a business practice not required in the ethics code.

The SEC's Marketing Rule (Rule 206(4)-1) replaced the former testimonials prohibition and now permits testimonials and endorsements in adviser advertising provided that:

Answer: Required disclosures are made and disqualified persons are not used

The 2020 Marketing Rule permits testimonials and endorsements with appropriate disclosures about compensation, conflicts, and whether the promoter is a client.

Under SEC rules, which document must an investment adviser file at least annually to update information about the firm's business, ownership, and disciplinary history?

Answer: Form ADV

Registered investment advisers must file and keep current their Form ADV, which discloses business practices, conflicts, and disciplinary history to regulators and clients.

The Uniform Securities Act at the state level primarily governs investment advisers who:

Answer: Manage less than $100 million in AUM and have not registered with the SEC

Smaller advisers below the SEC's AUM registration threshold must register with state securities regulators under the Uniform Securities Act or state equivalent laws.

An investment adviser discovers a material compliance error in a client's account. According to best regulatory practices, the adviser should FIRST:

Answer: Correct the error, document it, and disclose it to the affected client promptly

Best practices and fiduciary duty require prompt identification, correction, and disclosure of material errors to affected clients, along with thorough documentation.

Which provision of the Dodd-Frank Act significantly expanded the SEC's authority over investment advisers?

Answer: Elimination of the 'private adviser' exemption, requiring most large advisers to register with the SEC

Dodd-Frank eliminated the 15-client 'private adviser' exemption, forcing thousands of previously exempt hedge fund and private equity advisers to register with the SEC.