Series 63 – Uniform Securities Agent State Law Exam Investment Advisers and Investment Adviser Representatives 3

Question 1

Under the USA, when must an investment adviser deliver the disclosure brochure to a prospective client?

Accepted Answer

At least 48 hours before entering into the advisory contract, or at the time of entering the contract if the client has the right to cancel within five business days

Answer

The brochure must be delivered at least 48 hours before contract execution, or at signing if the client retains a five-business-day right to cancel without penalty.

Question 2

Under the USA, 'discretionary authority' for investment advisers means what?

Accepted Answer

The authority to make investment decisions—including which securities to buy or sell and in what amounts—on behalf of a client without prior client approval for each transaction

Answer

Discretionary authority allows an investment adviser to make buy and sell decisions in a client's account without contacting the client for approval before each transaction.

Question 3

Under the USA, what is the 'solicitor's rule' in the context of investment adviser regulations?

Accepted Answer

A requirement that cash compensation paid to persons who solicit clients for investment advisers must be disclosed to the clients being solicited

Answer

The solicitor's rule requires that when an investment adviser pays cash compensation to a third party for client referrals, this arrangement must be disclosed to the referred clients.

Question 4

Under the USA, 'cherry picking' in investment advisory fraud refers to which practice?

Accepted Answer

Allocating profitable trades to the adviser's own account or favored clients after the trade direction is known

Answer

Cherry picking involves an adviser waiting to see if trades are profitable before allocating them to favored accounts or their own account, rather than allocating trades fairly at the time of execution.

Question 5

Under the USA, which of the following is true about investment adviser registration by an IAR who works for a state-registered adviser?

Accepted Answer

IARs must register in each state in which they have a place of business and in states where they have more than five clients

Answer

IARs of state-registered investment advisers must register in each state where they maintain a place of business and in states where they serve more than five clients.

Series 63 – Uniform Securities Agent State Law Exam Practice Test

Series 63 – Uniform Securities Agent State Law Exam Practice Test

Series 63 – Uniform Securities Agent State Law Exam Investment Advisers and Investment Adviser Representatives 3