Regulatory Compliance Flashcards
7 cards from real CIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulatory Compliance flashcards as text
Under the Custody Rule (Rule 206(4)-2), an adviser to a pooled investment vehicle can satisfy certain requirements by distributing audited financial statements to investors within how many days of fiscal year end (for a non-fund-of-funds)?
Answer: 120 days
The audit approach requires audited financials prepared under GAAP to be distributed within 120 days of fiscal year end (180 days for funds of funds).
When an adviser with custody does not rely on the audit approach, the Custody Rule generally requires what type of independent verification?
Answer: An annual surprise examination by an independent public accountant
Advisers with custody must generally undergo an annual surprise examination by an independent public accountant to verify client assets.
Under the SEC Marketing Rule (Rule 206(4)-1), an advertisement that presents gross performance must also do what?
Answer: Present net performance with equal prominence and for the same time period
The Marketing Rule prohibits showing gross performance unless net performance is presented with at least equal prominence, calculated over the same period and methodology.
Which statement about testimonials and endorsements under the SEC Marketing Rule is accurate?
Answer: They are permitted subject to disclosure, oversight, and disqualification conditions
The Marketing Rule replaced the prior ban and permits testimonials and endorsements if disclosure, oversight, and disqualification requirements are met.
Under the Marketing Rule, hypothetical performance may be included in an advertisement only if the adviser does which of the following?
Answer: Adopts policies to ensure it is relevant to the intended audience's financial situation and objectives
Hypothetical performance requires policies ensuring relevance to the intended audience plus disclosure of criteria, assumptions, and risks.
A registered investment adviser that charges a performance-based fee generally may do so only with which type of client under Rule 205-3?
Answer: Qualified clients
Rule 205-3 permits performance fees only for 'qualified clients' who meet specified assets-under-management or net worth thresholds.
An SEC-registered investment adviser must file its annual updating amendment to Form ADV within how many days after its fiscal year end?
Answer: 90 days
Advisers must file an annual updating amendment to Form ADV within 90 days after the end of their fiscal year.