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Investment Compliance Test Flashcards

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

Read the first 6 Investment Compliance Test flashcards as text

  1. What is 'pay-to-play' in the context of investment adviser compliance?

    Answer: Making political contributions to influence the award of government investment advisory contracts

    Pay-to-play refers to the practice of investment advisers making political contributions to government officials in exchange for managing public pension fund assets, which the SEC prohibits under Rule 206(4)-5.

  2. What is the purpose of FINRA's suitability rule (Rule 2111)?

    Answer: To require that securities recommendations be suitable based on the customer's investment profile

    FINRA Rule 2111 requires broker-dealers to have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer based on their financial situation, needs, and objectives.

  3. Under the Investment Advisers Act of 1940, at what AUM threshold are advisers generally required to register with the SEC (rather than the state)?

    Answer: $110 million

    Investment advisers with $110 million or more in AUM are generally required to register with the SEC; those below $100M must register with their state, with a buffer zone between $100M–$110M.

  4. What is 'market manipulation' under SEC Rule 10b-5?

    Answer: Intentional actions to artificially affect securities prices or trading volumes to mislead investors

    Market manipulation involves intentional acts or practices to create artificial prices, trading activity, or misleading appearances of market activity to deceive investors.

  5. What is the GIPS (Global Investment Performance Standards) framework?

    Answer: A voluntary set of ethical standards for calculating and presenting investment performance to prospective clients

    GIPS are voluntary ethical standards established by the CFA Institute for calculating and presenting historical investment performance to ensure fair representation and full disclosure.

  6. Which regulation requires broker-dealers to deliver a 'Regulation Best Interest' disclosure (Form CRS) to retail investors?

    Answer: Regulation BI (Best Interest)

    Regulation Best Interest requires broker-dealers to deliver a concise Form CRS (Customer Relationship Summary) to retail investors describing the services offered, fees, conflicts, and the standard of conduct.