CIC Investment Adviser Regulations 4

Question 1

Under the Investment Advisers Act, a 'solicitor' who refers clients to a registered investment adviser for compensation must:

Accepted Answer

Provide clients with a disclosure document describing the referral arrangement and compensation

Answer

Rule 206(4)-3 requires that cash-paid solicitors provide clients with a written disclosure of the referral arrangement, including the nature of compensation received.

Question 2

Which statement about the 'books and records' requirements under Rule 204-2 is CORRECT?

Accepted Answer

Records must be kept for a minimum of 5 years, with the first 2 years in an accessible location

Answer

Rule 204-2 requires investment advisers to maintain most records for at least 5 years from the end of the fiscal year in which they were created, with the first 2 years in an easily accessible place.

Question 3

An investment adviser charging performance fees to non-qualified clients would violate:

Accepted Answer

Section 205 of the Advisers Act regarding performance compensation

Answer

Section 205 generally prohibits performance-based fees unless the client is a 'qualified client' with at least $1.1 million in AUM with the adviser or $2.2 million net worth.

Question 4

The 'investment adviser' definition under the Advisers Act requires which THREE elements to be present?

Accepted Answer

Being in the business of advising, for compensation, and concerning securities

Answer

The three-prong test for 'investment adviser' under the Act is: (1) provides advice concerning securities, (2) is in the business of doing so, and (3) receives compensation.

Question 5

An investment adviser that has custody of client funds must arrange for an annual 'surprise examination' by an independent public accountant UNLESS:

Accepted Answer

A qualified custodian holds the assets and sends account statements directly to clients

Answer

Under Rule 206(4)-2, the surprise examination requirement is satisfied if client assets are held by a qualified custodian that sends quarterly account statements directly to clients.

(CIC) Certified Investment Counselor Practice Test

(CIC) Certified Investment Counselor Practice Test

CIC Investment Adviser Regulations 4