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

Regulation S-P requires financial institutions to provide privacy notices at account opening and annually to inform customers about data sharing practices.

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

Soft dollar arrangements involve using client brokerage commissions to pay for research or other services that benefit the adviser, which must be disclosed.

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

Fiduciary duty requires prompt disclosure and correction of material errors, as concealing errors violates the adviser's duty of loyalty and candor.

Question 4

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

Accepted Answer

A business continuity plan (BCP)

Answer

FINRA Rule 4370 requires member firms to maintain a written Business Continuity Plan (BCP) to ensure operations during emergencies.

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

Rule 206(4)-2 (the Custody Rule) requires RIAs with custody to undergo annual surprise examinations by an independent public accountant.

Financial Advisor Practice Test

Financial Advisor Practice Test

Financial Advisor Financial Advisor Ethics and Compliance 3