Investment Advisor SEC Registration and Regulatory Compliance 3

Question 1

Which SEC rule governs the custody of client assets by investment advisers?

Accepted Answer

Rule 206(4)-2

Answer

Rule 204-2

Answer

Rule 203(b)-3

Answer

Rule 205-3

Question 2

An investment adviser that has custody of client assets must undergo what type of annual examination?

Accepted Answer

A surprise examination by an independent public accountant

Answer

An IRS audit

Answer

An internal audit only

Answer

A FINRA examination

Question 3

Performance-based fees are generally permissible for investment advisers only when charged to:

Accepted Answer

Qualified clients meeting specific net worth or AUM thresholds

Answer

Any retail investor

Answer

Clients with taxable accounts only

Answer

Non-US investors only

Question 4

Which regulatory body oversees the registration of investment adviser representatives at the state level?

Accepted Answer

State securities regulators (NASAA members)

Answer

The SEC

Answer

FINRA

Answer

The CFTC

Question 5

Under the National Securities Markets Improvement Act (NSMIA), mid-sized advisers with AUM between $25 million and $100 million:

Accepted Answer

Generally register only with their state

Answer

Must register with both the SEC and their state

Answer

Are exempt from all registration

Answer

Must register with FINRA

Question 6

An investment adviser must promptly amend their Form ADV when which of the following occurs?

Accepted Answer

A material change in the information previously disclosed occurs

Answer

A new employee joins the firm

Answer

Office rent increases

Answer

A client changes their risk tolerance