Series 63 – Uniform Securities Agent State Law Exam Investment Advisers and Investment Adviser Representatives 1 — Questions and Answers
Question 1: Under the USA, who qualifies as an 'investment adviser'?
- Any person who buys and sells securities for a fee
- Any person who, for compensation, engages in the business of advising others about securities (Correct answer)
- Any person licensed by FINRA to provide investment advice
- Any person who manages a mutual fund for a management fee
Correct answer: Any person who, for compensation, engages in the business of advising others about securities
Under the USA, an investment adviser is any person who, for compensation, engages in the business of advising others about investing in, purchasing, or selling securities.
Question 2: Under the USA, which of the following is excluded from the definition of 'investment adviser'?
- A financial planner who charges for portfolio recommendations
- A newspaper with a general circulation that publishes securities recommendations as part of its regular financial news (Correct answer)
- A pension consultant who advises plan sponsors on securities selection
- A registered representative who provides fee-based financial planning
Correct answer: A newspaper with a general circulation that publishes securities recommendations as part of its regular financial news
Publishers of bona fide newspapers or general circulation publications are excluded from the investment adviser definition, as are their editors acting in that capacity.
Question 3: Under the USA, which investment advisers must register with the SEC rather than the state?
- All investment advisers who advise pension funds
- Investment advisers with assets under management of $110 million or more, or those advising registered investment companies (Correct answer)
- Investment advisers with more than 100 clients in any state
- Investment advisers who operate in more than five states
Correct answer: Investment advisers with assets under management of $110 million or more, or those advising registered investment companies
Investment advisers with $110 million or more in AUM, or those who advise registered investment companies, are required to register with the SEC as federal covered advisers.
Question 4: Under the USA, what is an 'investment adviser representative' (IAR)?
- Any employee of an investment adviser firm regardless of their role
- An individual who on behalf of an investment adviser provides investment advice, manages accounts, or solicits advisory clients (Correct answer)
- Any person registered with FINRA who also provides advice
- An investment adviser who represents clients in regulatory proceedings
Correct answer: An individual who on behalf of an investment adviser provides investment advice, manages accounts, or solicits advisory clients
An IAR is an individual supervised by or associated with an investment adviser who performs advisory functions such as giving advice, managing accounts, or soliciting clients.
Question 5: Under the USA, the 'brochure rule' requires investment advisers to deliver what to clients?
- A complete copy of all trade confirmations
- A written disclosure document containing information about the adviser's services, fees, and background (Correct answer)
- A prospectus for every security recommended
- Monthly account statements detailing all investment activity
Correct answer: A written disclosure document containing information about the adviser's services, fees, and background
The brochure rule requires investment advisers to provide clients with a written disclosure brochure (Part 2 of Form ADV) containing material information about the firm.
Question 6: Under the USA, investment advisers with assets under management below what threshold must register with the state rather than the SEC?
- $25 million
- $50 million
- $100 million (Correct answer)
- $110 million
Correct answer: $100 million
Investment advisers with AUM below $100 million generally must register with the state; those between $100 million and $110 million may choose either; those above $110 million must register with the SEC.
Series 63 – Uniform Securities Agent State Law Exam Investment Advisers and Investment Adviser Representatives 1
Under the USA, who qualifies as an 'investment adviser'?