IAR Laws, Regulations & Guidelines 2

Question 1

Under the Investment Advisers Act of 1940, which of the following transactions is exempt from the definition of 'investment advice'?

Accepted Answer

Publishing a bona fide financial publication of general and regular circulation

Answer

Publishers of bona fide financial publications of general and regular circulation are excluded from the definition of investment adviser under the 1940 Act.

Question 2

A state-registered investment adviser must register in a new state when it has how many clients in that state within a 12-month period?

Accepted Answer

5 clients

Answer

Most states require an investment adviser to register when it has 5 or more clients residing in that state within a 12-month period.

Question 3

Which regulatory body has primary oversight responsibility for investment advisers managing more than $110 million in assets under management?

Accepted Answer

SEC

Answer

Investment advisers with $110 million or more in AUM must register with the SEC rather than state authorities.

Question 4

Under the Uniform Securities Act, which of the following is NOT considered a security?

Accepted Answer

Commodity futures contract

Answer

Commodity futures contracts are regulated by the CFTC under the Commodity Exchange Act, not as securities under the Uniform Securities Act.

Question 5

An IAR who receives a commission from a broker-dealer for recommending a client purchase a specific mutual fund has engaged in what type of conflict of interest?

Accepted Answer

A violation of fiduciary duty if not disclosed to the client

Answer

An IAR receiving undisclosed third-party compensation breaches the fiduciary duty owed to clients, as it represents an undisclosed material conflict of interest.

IAR Practice Test

IAR Practice Test

IAR Laws, Regulations & Guidelines 2