Contract Review & Negotiation Flashcards
7 cards from real Series 66 – Uniform Combined 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 7 Contract Review & Negotiation flashcards as text
An advisory contract authorizes the adviser to deduct fees directly from the client's account. How does the adviser's authority generally affect its custody status?
Answer: It is considered to have custody and must use a qualified custodian
Authority to deduct fees constitutes custody, requiring a qualified custodian.
When must an adviser deliver its Form ADV Part 2A brochure to a new client?
Answer: Before or at the time of entering the advisory contract
The brochure must be delivered before or at the time the advisory contract is signed.
A contract gives the adviser authority to decide which securities to buy and in what amounts without client consent. What type of authority is this?
Answer: Discretionary authority
Determining securities or amounts without prior client approval is discretionary authority.
A contract directs the client to use only one specified broker for all transactions. What must the adviser disclose?
Answer: That the arrangement may prevent obtaining best execution
Directed brokerage may cost clients best execution, which must be disclosed.
An adviser that has authority to vote client proxies must do what under the federal proxy voting rule?
Answer: Adopt written policies and procedures and disclose how clients can obtain voting information
Advisers with proxy authority must adopt policies and disclose them to clients.
When must a financial firm provide its initial privacy notice under Regulation S-P?
Answer: At the time the customer relationship is established
Initial privacy notices are due when the customer relationship begins.
A contract states the client agrees the adviser is 'not liable for any act or omission.' How should an agent view this clause?
Answer: It is a hedge clause that may be misleading and should be avoided
Broad liability waivers can mislead clients into thinking they lack legal remedies.
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