CIC CIC - Certified Investment Counselor Securities Law and Regulatory Compliance Questions and Answers 2

Question 1

Which SEC rule requires investment advisers to adopt written policies and procedures reasonably designed to prevent violations of the Advisers Act?

Accepted Answer

Rule 206(4)-7

Answer

SEC Rule 206(4)-7 requires registered investment advisers to adopt and implement written compliance policies and procedures and to review them annually.

Question 2

The SEC's Regulation Best Interest (Reg BI) applies primarily to:

Accepted Answer

Broker-dealers making recommendations to retail customers

Answer

Reg BI requires broker-dealers to act in the best interest of retail customers when making investment recommendations, establishing a standard higher than suitability.

Question 3

Under the Investment Advisers Act, an investment adviser is prohibited from charging a performance fee to a client unless the client is a:

Accepted Answer

Qualified client meeting net worth or AUM thresholds

Answer

Performance-based fees under the Advisers Act are only permitted with 'qualified clients' who meet minimum net worth or AUM thresholds set by SEC rules.

Question 4

The Investment Advisers Act's 'custody rule' (Rule 206(4)-2) requires advisers with custody of client assets to:

Accepted Answer

Maintain assets at a qualified custodian and in most cases undergo a surprise annual audit

Answer

Rule 206(4)-2 requires that client assets be held at qualified custodians and that advisers with custody undergo surprise examinations by an independent public accountant.

Question 5

An investment adviser who receives soft dollars (research and brokerage services) in exchange for client commissions must:

Accepted Answer

Disclose the arrangement to clients and ensure it falls within the Section 28(e) safe harbor

Answer

Section 28(e) of the Securities Exchange Act provides a safe harbor for soft dollar arrangements if the products or services received assist in investment decision-making and are properly disclosed.

(CIC) Certified Investment Counselor Practice Test

(CIC) Certified Investment Counselor Practice Test

CIC CIC - Certified Investment Counselor Securities Law and Regulatory Compliance Questions and Answers 2