Investment Advisers and Investment Adviser Representatives Flashcards
6 cards from real Series 63 – Uniform Securities Agent State Law Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Investment Advisers and Investment Adviser Representatives flashcards as text
Under the USA, when must an investment adviser deliver the disclosure brochure to a prospective client?
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
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.
Under the USA, 'discretionary authority' for investment advisers means what?
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
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.
Under the USA, what is the 'solicitor's rule' in the context of investment adviser regulations?
Answer: A requirement that cash compensation paid to persons who solicit clients for investment advisers must be disclosed to the clients being solicited
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.
Under the USA, 'cherry picking' in investment advisory fraud refers to which practice?
Answer: Allocating profitable trades to the adviser's own account or favored clients after the trade direction is known
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.
Under the USA, which of the following is true about investment adviser registration by an IAR who works for a state-registered adviser?
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
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.
Under the USA, investment advisers who have custody of client funds or securities are subject to which additional requirement?
Answer: They are subject to higher net worth requirements and more frequent audits
Investment advisers with custody of client assets face stricter financial requirements including higher minimum net worth and are subject to surprise audits.
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