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Financial Advisor Ethics and Compliance Flashcards

6 cards from real Financial Advisor practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Financial Advisor Ethics and Compliance flashcards as text

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

    Answer: At account opening and annually thereafter

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

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

    Answer: Using client commission dollars to pay for research and brokerage services

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

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

    Answer: Disclose and correct the error promptly

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

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

    Answer: A business continuity plan (BCP)

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

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

    Answer: An independent public accountant

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

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

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

    Selling away refers to a registered representative conducting securities transactions outside the scope of their employing broker-dealer without approval, which is prohibited.