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Series 63 · 5% of the exam

Regulation of Investment Advisers practice questions

10 free Regulation of Investment Advisers questions for the Uniform Securities Agent State Law Exam (Series 63) exam, each with the correct answer and an explanation for every option.

Start the questionsFree 10-question Series 63 quiz

What this domain covers

Who counts as an investment adviser under the Uniform Securities Act, who is excluded, and how state registration and notice filing work, including the split between state-registered and federal covered advisers.

Exam weight
5%
On a real exam
≈ 3 questions
In our bank
30 questions

Topics that come up most

  • Definition of investment adviser and the main exclusions
  • Federal covered advisers and state notice filing
  • The de minimis exemption from state registration
  • Registration process, renewal and Form ADV
  • Books, records, custody and financial requirements

How to study it

Make a table of who is excluded from the definition, who is exempt from registration and who must notice file; most questions ask which of those three applies to a given firm.

Sample Regulation of Investment Advisers questions

Try each one before opening the answer. Original questions written to the official exam objectives.

  1. Question 1

    Information in a state-registered adviser's Form ADV brochure becomes materially inaccurate. The adviser should:

    • ATell only the clients who ask about the change
    • BWait until the next annual amendment, whatever the change
    • CPromptly file an amendment
    • DRemove the brochure from its website until year-end
    Show answer and explanation

    Answer: C) Promptly file an amendment

    • AIncorrect. The filing must be amended.
    • BIncorrect. Material inaccuracies need prompt updates.
    • CCorrect. Material changes can't wait for the annual update.
    • DIncorrect. An amendment is required.

  2. Question 2

    An investment adviser's contract allows it to raise fees at any time without telling the client. This is:

    • AAcceptable for discretionary accounts only, since clients gave authority
    • BAcceptable since advisers set their own fees
    • CUnfair, since fee changes should be disclosed and agreed to
    • DRequired by the Administrator for all contracts
    Show answer and explanation

    Answer: C) Unfair, since fee changes should be disclosed and agreed to

    • AIncorrect. It's still unfair.
    • BIncorrect. Changes must be disclosed.
    • CCorrect. Contracts must disclose fees.
    • DIncorrect. It isn't required.

  3. Question 3

    An investment adviser wants to assign its advisory contract with a client to another adviser. The assignment is permitted only if the adviser obtains:

    • AThe client's consent to the assignment
    • BProof that the client received written notice at least 30 days before the assignment
    • CThe Administrator's approval of the assignment
    • DApproval from a majority of the adviser's partners or directors
    Show answer and explanation

    Answer: A) The client's consent to the assignment

    An advisory contract must state that the adviser may not assign it without the client's consent. Notice to the client, regulatory approval or internal firm approval cannot take the place of consent.

    • ACorrect. Advisory contracts must provide that the adviser may not assign them without the consent of the other party, the client.
    • BIncorrect. Notice is not consent. The client must actually agree to the assignment.
    • CIncorrect. The Administrator does not approve assignments of advisory contracts. The client's consent is required.
    • DIncorrect. The adviser's internal approval does not meet the requirement. The client, as the other party to the contract, must consent.

  4. Question 4

    An adviser with no place of business in a state need not register there if, over 12 months, its retail clients in that state number no more than:

    • A50
    • B15
    • C5
    • D100
    Show answer and explanation

    Answer: C) 5

    • AIncorrect. The limit is five.
    • BIncorrect. The limit is five.
    • CCorrect. Fewer than six clients falls under the national de minimis standard.
    • DIncorrect. The limit is five.

  5. Question 5

    A state-registered investment adviser may generally charge performance-based fees only to:

    • AAny client
    • BQualified clients
    • CClients under 30
    • DNew clients only
    Show answer and explanation

    Answer: B) Qualified clients

    • AIncorrect. Performance fees are restricted.
    • BCorrect. Performance fees are limited to clients meeting asset or net worth tests.
    • CIncorrect. Age isn't the test.
    • DIncorrect. Wealth is the test.

  6. Question 6

    A state-registered adviser collects fees of more than $500 per client six or more months in advance. Under NASAA rules, it must generally:

    • ARefund all prepaid fees within 30 days
    • BInclude an audited balance sheet in its disclosure brochure
    • CRegister with the SEC instead of the state, regardless of its size
    • DObtain written permission from the Administrator before each billing cycle
    Show answer and explanation

    Answer: B) Include an audited balance sheet in its disclosure brochure

    • AIncorrect. Disclosure is the requirement.
    • BCorrect. Prepaid fees raise financial risk for clients.
    • CIncorrect. Size determines registration.
    • DIncorrect. That isn't required.

  7. Question 7

    Under NASAA rules, a state-registered investment adviser must generally keep its books and records for:

    • AOnly until each client relationship ends
    • BOne year, after which they may be destroyed with notice to clients
    • CThree years, all stored at the Administrator's office
    • DFive years, with the first two years in an appropriate office
    Show answer and explanation

    Answer: D) Five years, with the first two years in an appropriate office

    • AIncorrect. They're kept for a set period.
    • BIncorrect. That's too short.
    • CIncorrect. They're kept by the adviser.
    • DCorrect. Records must be easily accessible.

  8. Question 8

    Under NASAA's model rule on unethical business practices of investment advisers, an advisory contract must be in writing and must disclose certain items. Which of the following is one of the required disclosures?

    • AThe projected annual rate of return the adviser expects the account to earn
    • BWhether the contract gives the adviser discretionary power over the account
    • CThe names of other clients using the same strategy, offered as references
    • DThat the adviser may assign the contract to another firm by giving written notice
    Show answer and explanation

    Answer: B) Whether the contract gives the adviser discretionary power over the account

    NASAA's model rule requires a written advisory contract to disclose the services, term, fee and fee formula, prepaid fee refunds, whether the adviser has discretion, and that it can't be assigned without client consent. It does not require a projected return or client references.

    • AIncorrect. The model rule does not require a projected return, and a promised or projected return could mislead the client.
    • BCorrect. The contract must state whether it grants the adviser discretionary power. Other required items are the services, the term, the fee and its formula, the prepaid fee refunded on termination or non-performance, and that the contract can't be assigned without the client's consent.
    • CIncorrect. Client identities are confidential and are not a required disclosure in the contract.
    • DIncorrect. The contract must say it cannot be assigned by the adviser without the client's consent. Written notice alone is not enough.

  9. Question 9

    An investment adviser recommends securities in which the firm has a financial interest. The adviser must generally:

    • AStop advising clients about any securities it owns
    • BHide the conflict, since it's part of the firm's business
    • CDisclose the conflict to clients
    • DGet approval from the SEC before each recommendation
    Show answer and explanation

    Answer: C) Disclose the conflict to clients

    • AIncorrect. Disclosure is the requirement.
    • BIncorrect. It must be disclosed.
    • CCorrect. Clients need to know about conflicts.
    • DIncorrect. That isn't required.

  10. Question 10

    A small investment adviser registered only with its state physically holds several clients' stock certificates and has access to their cash in a firm-controlled account. Under NASAA's model minimum financial requirements rule, what minimum net worth must the adviser generally maintain at all times?

    • A$10,000
    • B$35,000
    • CA positive net worth
    • D$100,000
    Show answer and explanation

    Answer: B) $35,000

    Under NASAA's model rule, a state-registered adviser with custody must keep a $35,000 minimum net worth. An adviser with discretion but no custody needs $10,000, and one that only takes prepaid fees needs a positive net worth.

    • AIncorrect. $10,000 is the model-rule minimum for an adviser that has discretionary authority but does not have custody. This adviser has custody, so the higher figure applies.
    • BCorrect. NASAA's model rule requires an adviser with custody of client funds or securities to maintain a minimum net worth of $35,000 at all times, subject to limited exceptions such as custody arising solely from direct fee deduction when safeguards are met.
    • CIncorrect. A positive net worth is the standard for an adviser without custody or discretion that accepts prepayment of more than $500 per client six or more months in advance, not for an adviser with custody.
    • DIncorrect. The model rule does not set a $100,000 net worth minimum for state-registered advisers with custody; the figure is $35,000.

Regulation of Investment Advisers: FAQs

How much of the Series 63 exam is Regulation of Investment Advisers?

Regulation of Investment Advisers is 5% of the Series 63 exam by the official exam guide's weighting, which on a 65-question form works out to roughly 3 questions. The real exam's exact split varies by form.

What does the Regulation of Investment Advisers domain cover?

Who counts as an investment adviser under the Uniform Securities Act, who is excluded, and how state registration and notice filing work, including the split between state-registered and federal covered advisers.

How should I study Regulation of Investment Advisers for Series 63?

Make a table of who is excluded from the definition, who is exempt from registration and who must notice file; most questions ask which of those three applies to a given firm.

Where can I practise more Regulation of Investment Advisers questions?

This page has 10 free Regulation of Investment Advisers questions with answers. The ExamWize Series 63 question bank has 30 questions in this domain. Every practice exam result breaks your score down by domain, and Review Mode re-drills the questions you missed.

Other Series 63 topics

Also: 15 free questions across all topics, the Series 63 cheat sheet and the study guide.

Get Regulation of Investment Advisers exam-ready

The full Series 63 bank has 30 Regulation of Investment Advisers questions. Timed practice exams match the real exam's length and domain weights, every result shows your score per domain, and Review Mode re-drills the questions you missed.

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Not affiliated with NASAA; questions are original, written from the official exam outline, and never copied from the real exam.