Stock Advisor Regulatory Compliance and Ethics 1

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

The Investment Advisers Act of 1940 defines an investment adviser as any person who, for compensation, engages in the business of advising others on securities investments.

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

A fiduciary duty requires advisors to put their clients' interests first and to fully disclose any conflicts of interest that could affect their advice.

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

The SEC (Securities and Exchange Commission) oversees investment advisers managing $100 million or more in AUM; those below that threshold are typically regulated by state securities regulators.

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

Suitability requires that investment recommendations align with the client's specific financial profile, including income, risk tolerance, time horizon, and investment goals.

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

Insider trading involves trading securities using material, non-public information, which gives an unfair advantage over other market participants and is illegal under SEC Rule 10b-5.

Stock Advisor Practice Test

Stock Advisor Practice Test

Stock Advisor Regulatory Compliance and Ethics 1