Series 65 – Uniform Investment Adviser Law Exam Laws, Regulations, and Ethics 2

Question 1

What is 'front-running' as it applies to investment advisers?

Accepted Answer

Trading securities for the adviser's own account ahead of executing client orders to take advantage of anticipated price movements

Answer

Front-running is the unethical practice of an adviser trading for their own account based on advance knowledge of pending client orders that will likely move the security's price.

Question 2

Under the Uniform Securities Act, which of the following is considered a 'security'?

Accepted Answer

A common stock

Answer

Common stock is explicitly included in the definition of a security under the Uniform Securities Act; fixed annuities, collectibles, and certain commodities contracts are generally excluded.

Question 3

What is the 'anti-fraud' provision that applies to all investment advisers under the Investment Advisers Act?

Accepted Answer

Section 206

Answer

Section 206 of the Investment Advisers Act prohibits investment advisers from engaging in fraudulent, deceptive, or manipulative practices with clients, regardless of registration status.

Question 4

What is the statute of limitations for civil liability under the Uniform Securities Act for an investor who was sold a security using fraudulent means?

Accepted Answer

1 year from discovery, 3 years from the transaction

Answer

Under the Uniform Securities Act, civil actions must be brought within 2 years of discovery of the fraudulent act or 3 years from the date of the transaction, whichever comes first.

Question 5

Which of the following is an example of an unethical practice by an investment adviser?

Accepted Answer

Sharing in client profits and losses without written consent

Answer

Sharing in client profits and losses without written client consent and proper regulatory permission is an unethical and generally prohibited practice.

Series 65 – Uniform Investment Adviser Law Exam Practice Test

Series 65 – Uniform Investment Adviser Law Exam Practice Test

Series 65 – Uniform Investment Adviser Law Exam Laws, Regulations, and Ethics 2