Financial Advisor Financial Advisor Ethics and Compliance 2

Question 1

A financial advisor learns that a corporate client is about to announce a major acquisition. Trading on this information before the announcement is an example of:

Accepted Answer

Insider trading

Answer

Trading securities based on material non-public information is insider trading, which is illegal under SEC Rule 10b-5.

Question 2

What is the 'two-year look-back' rule relevant to under ERISA plan advisory compliance?

Accepted Answer

A restriction on pay-to-play contributions before managing government funds

Answer

Pay-to-play rules impose a two-year look-back period during which certain political contributions can disqualify an adviser from compensation for managing government accounts.

Question 3

Which of the following is an example of a prohibited practice under anti-money laundering (AML) rules for financial advisors?

Accepted Answer

Structuring transactions to avoid CTR reporting thresholds

Answer

Structuring transactions to stay below the $10,000 Currency Transaction Report threshold ('structuring') is illegal under the Bank Secrecy Act.

Question 4

Under the Investment Advisers Act, which of the following advisers is generally required to register with the SEC?

Accepted Answer

An adviser managing $110 million or more in assets

Answer

Advisers managing $110 million or more in regulatory assets under management are generally required to register with the SEC.

Question 5

What is the purpose of a financial advisor's written compliance policies and procedures under SEC Rule 206(4)-7?

Accepted Answer

To prevent, detect, and correct violations of the Advisers Act

Answer

SEC Rule 206(4)-7 requires registered investment advisers to adopt written compliance policies designed to prevent and detect Advisers Act violations.

Financial Advisor Practice Test

Financial Advisor Practice Test

Financial Advisor Financial Advisor Ethics and Compliance 2