Stock Advisor Regulatory Compliance and Ethics

Question 1

Under the Investment Advisers Act of 1940, which of the following best describes a 'registered investment adviser'?

Accepted Answer

Any person who, for compensation, advises others on investing in securities as part of a regular business

Answer

Any person who receives compensation for providing securities trading services

Answer

Any broker-dealer registered with FINRA who manages client portfolios

Answer

Any individual who holds a Series 65 license and charges flat fees

Question 2

A stock advisor's fiduciary duty primarily requires the advisor to:

Accepted Answer

Act in the best interest of the client and disclose all material conflicts of interest

Answer

Maximize commissions earned on every client transaction

Answer

Follow the client's instructions regardless of their financial suitability

Answer

Prioritize the firm's proprietary products when making recommendations

Question 3

Which federal agency has primary regulatory authority over registered investment advisers with $100 million or more in assets under management?

Accepted Answer

SEC

Answer

FINRA

Answer

CFTC

Answer

OCC

Question 4

The 'suitability' standard requires a stock advisor to recommend investments that are:

Accepted Answer

Appropriate for a client based on their financial situation, risk tolerance, and investment objectives

Answer

The highest-returning options available in the current market

Answer

Approved by the SEC for retail investor use

Answer

Listed on a major exchange such as the NYSE or NASDAQ

Question 5

Insider trading is best defined as buying or selling securities based on:

Accepted Answer

Material, non-public information obtained through a position of trust or confidence

Answer

Publicly released quarterly earnings reports

Answer

Analyst ratings published in mainstream financial media

Answer

Historical price trends identified through technical analysis

Question 6

Form ADV is the registration document required by the SEC for investment advisers. Part 2A of Form ADV is commonly called the:

Accepted Answer

Brochure

Answer

Prospectus

Answer

Annual Report

Answer

Disclosure Statement

Question 7

Know Your Customer (KYC) regulations require stock advisors to gather which type of information from new clients?

Accepted Answer

Personal financial details, investment experience, risk tolerance, and investment objectives

Answer

Social media profiles and online investment forum activity

Answer

Employment history for the past 10 years and tax returns

Answer

References from at least three existing advisory clients