Regulation of Investment Adviser Representatives practice questions

Answer: B) 12 credits each year, including ethics and products and practice

• AIncorrect. That isn't the rule.
• BCorrect. Credits are tracked through FINRA's system.
• CIncorrect. That isn't the rule.
• DIncorrect. CE is required.

Answer: B) An IAR

• AIncorrect. Solicitation isn't clerical.
• BCorrect. Soliciting advisory clients makes one an IAR.
• CIncorrect. Solicitors are IARs.
• DIncorrect. Dealers trade securities.

Answer: D) Must register as an IAR

• AIncorrect. Individuals register too.
• BIncorrect. Salary doesn't matter.
• CIncorrect. They're an IAR.
• DCorrect. Pay structure doesn't change IAR status.

Answer: D) Misleading, since it suggests a degree or credential

• AIncorrect. It's misleading regardless.
• BIncorrect. It's misleading for an individual.
• CIncorrect. It isn't required.
• DCorrect. "Registered" isn't a qualification.

Answer: D) A clerical employee

• AIncorrect. Supervisors are IARs.
• BIncorrect. Managers are IARs.
• CIncorrect. Solicitors are IARs.
• DCorrect. Purely clerical staff are excluded.

Answer: A) The client is a bank that is in the business of lending money

NASAA treats borrowing money or securities from a client as an unethical practice unless the client is a broker-dealer, an affiliate of the adviser, or a financial institution in the business of lending funds. Disclosure, consent, or favorable loan terms don't create an exception.

• ACorrect. Borrowing from a client is permitted only if the client is a broker-dealer, an affiliate of the adviser, or a financial institution in the business of lending funds. A bank making a loan in its normal course of business fits that exception.
• BIncorrect. A personal friendship and a signed agreement are not exceptions. The client still isn't a lender, broker-dealer, or affiliate, so the loan is prohibited.
• CIncorrect. Loan terms such as the interest rate or a short repayment period don't remove the conflict of interest. The prohibition depends on who the client is, not on the terms.
• DIncorrect. Disclosure and consent don't cure this practice. NASAA takes the position that the conflict in borrowing from clients can't simply be mitigated, so the loan is still prohibited unless the client falls within an exception.

Answer: A) Disclose the commissions and the conflict they create

• ACorrect. Clients can then weigh the advice.
• BIncorrect. They must be disclosed.
• CIncorrect. Disclosure is the requirement.
• DIncorrect. That isn't required.

Answer: B) Needn't register

• AIncorrect. Place of business is the test.
• BCorrect. States register these IARs only where they have a place of business.
• CIncorrect. Clients are allowed.
• DIncorrect. Place of business is the test.

Answer: A) 30 days after the end of the calendar quarter in which the trade occurred

Under Rule 204A-1, access persons file quarterly transaction reports no later than 30 days after each calendar quarter ends. Holdings reports are due within 10 days of becoming an access person (with information no more than 45 days old) and at least annually after that.

• ACorrect. Access persons must submit quarterly transaction reports no later than 30 days after the end of each calendar quarter, covering all reportable transactions during that quarter.
• BIncorrect. The 10-day deadline applies to the initial holdings report, which is due within 10 days after a person becomes an access person. It doesn't apply to individual trades.
• CIncorrect. The 45-day figure is how current the information in a holdings report must be. Quarterly transaction reports are due within 30 days after quarter-end.
• DIncorrect. The annual report covers holdings. Transactions must be reported quarterly, so waiting for the annual report would miss the deadline.

Answer: D) The CRD/IARD system, using Form U4

• AIncorrect. That's a brochure supplement.
• BIncorrect. States use electronic systems.
• CIncorrect. That isn't how it's filed.
• DCorrect. Electronic filing is standard.