Financial Advisor Financial Advisor Ethics and Compliance 3

Question 1

Under SEC Regulation S-P, financial advisors must provide customers with a privacy notice:

Accepted Answer

At account opening and annually thereafter

Answer

Only when the customer requests one

Answer

Every five years

Answer

Only when sharing data with third parties

Question 2

Which of the following best describes a 'soft dollar' arrangement in financial advisory practice?

Accepted Answer

Using client commission dollars to pay for research and brokerage services

Answer

Paying clients in non-cash incentives

Answer

Offering fee waivers for long-term clients

Answer

Discounting fees for institutional clients

Question 3

What action must a financial advisor take if they discover a material error in a client's account?

Accepted Answer

Disclose and correct the error promptly

Answer

Wait until year-end to correct it

Answer

Offset it with future gains without disclosure

Answer

Document it internally without telling the client

Question 4

Under FINRA Rule 4370, broker-dealers and advisers are required to maintain:

Accepted Answer

A business continuity plan (BCP)

Answer

A list of all client social security numbers

Answer

Quarterly audit reports

Answer

A minimum of 10 registered representatives

Question 5

A registered investment adviser who has custody of client assets must arrange for an annual surprise examination by:

Accepted Answer

An independent public accountant

Answer

The SEC directly

Answer

FINRA examiners

Answer

The state securities administrator

Question 6

Which of the following actions constitutes 'selling away' under FINRA rules?

Accepted Answer

Selling securities outside of the firm's approved product list without firm approval

Answer

Recommending municipal bonds over corporate bonds

Answer

Moving client assets to a different custodian

Answer

Selling securities at a discount