RIA Business Practices & Disclosure

Question 1

Fee-only investment advisers are compensated:

Accepted Answer

Only by clients through advisory fees, with no third-party compensation

Answer

Fee-only advisers receive compensation exclusively from clients (flat fees, hourly fees, or AUM percentages) with no commissions or third-party payments.

Question 2

An investment adviser's Form ADV Part 2A must be delivered to clients:

Accepted Answer

Annually and to prospective clients before or at contract signing

Answer

Advisers must deliver an updated Form ADV Part 2A annually and to new clients before or when entering the advisory agreement.

Question 3

The term 'wrap fee program' refers to:

Accepted Answer

A bundled fee covering advisory, brokerage, and administrative services for a single periodic charge

Answer

Wrap fee programs bundle advisory, brokerage execution, and custodial services into a single comprehensive fee, typically charged as a percentage of AUM.

Question 4

When advertising investment performance, advisers must:

Accepted Answer

Comply with SEC rules prohibiting misleading advertising, including cherry-picking results

Answer

SEC advertising rules prohibit misleading performance presentations and require fair, complete, and not misleading performance advertising.

Question 5

An investment adviser using a solicitor to refer clients must ensure the solicitor:

Accepted Answer

Delivers a written disclosure of the solicitation arrangement to referred clients

Answer

Cash solicitation arrangements require the solicitor to deliver a written disclosure describing the arrangement and compensation to referred clients.

(RIA) Registered Investment Advisor Practice Test

(RIA) Registered Investment Advisor Practice Test

RIA Business Practices & Disclosure