Series 65 – Uniform Investment Adviser Law Exam Laws, Regulations, and Ethics 3

Question 1

What is required under the 'pay-to-play' rule (SEC Rule 206(4)-5) for investment advisers?

Accepted Answer

Advisers are prohibited from making political contributions to government officials who have influence over public pension fund investment decisions

Answer

Rule 206(4)-5 prohibits investment advisers from making political contributions to government officials with influence over public pension fund investment decisions, addressing pay-to-play corruption.

Question 2

When must an investment adviser update its Form ADV?

Accepted Answer

Annually, and promptly when material information changes

Answer

Form ADV must be updated annually and amended promptly whenever material changes occur, ensuring clients and regulators have current information about the advisory firm.

Question 3

Under the Investment Advisers Act, what is required before an investment adviser can charge a performance-based fee?

Accepted Answer

The client must be a 'qualified client' with at least $1.1 million under management or a net worth exceeding $2.2 million

Answer

Under Rule 205-3, performance-based fees may only be charged to 'qualified clients,' generally those with at least $1.1 million under management with the adviser or a net worth over $2.2 million.

Question 4

What does 'material information' mean in the context of securities regulation?

Accepted Answer

Information that a reasonable investor would consider important in making an investment decision

Answer

Material information is any fact that a reasonable investor would consider important when making an investment decision, and it must be disclosed or not traded upon if non-public.

Question 5

What is the primary purpose of FINRA?

Accepted Answer

To serve as a self-regulatory organization overseeing broker-dealers and their registered representatives

Answer

FINRA (Financial Industry Regulatory Authority) is a self-regulatory organization that oversees broker-dealers and their registered representatives, establishing conduct rules and enforcing compliance.

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 3