SEC Registration and Regulatory Compliance Flashcards
6 cards from real Investment Advisor practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 SEC Registration and Regulatory Compliance flashcards as text
Which SEC rule governs the custody of client assets by investment advisers?
Answer: Rule 206(4)-2
Rule 206(4)-2 (the Custody Rule) governs how registered investment advisers must handle and safeguard client funds and securities.
An investment adviser that has custody of client assets must undergo what type of annual examination?
Answer: A surprise examination by an independent public accountant
Under the SEC Custody Rule, advisers with custody of client assets must arrange for an annual surprise examination by an independent public accountant to verify client assets.
Performance-based fees are generally permissible for investment advisers only when charged to:
Answer: Qualified clients meeting specific net worth or AUM thresholds
Under SEC Rule 205-3, performance-based fees are permitted only for 'qualified clients' who meet minimum net worth ($2.2 million) or AUM ($1.1 million) thresholds.
Which regulatory body oversees the registration of investment adviser representatives at the state level?
Answer: State securities regulators (NASAA members)
State securities regulators, operating under the framework of NASAA, oversee the registration and regulation of investment adviser representatives at the state level.
Under the National Securities Markets Improvement Act (NSMIA), mid-sized advisers with AUM between $25 million and $100 million:
Answer: Generally register only with their state
NSMIA generally requires mid-sized advisers with AUM between $25 million and $100 million to register with state regulators rather than the SEC.
An investment adviser must promptly amend their Form ADV when which of the following occurs?
Answer: A material change in the information previously disclosed occurs
Advisers must promptly update Form ADV when material changes occur, ensuring clients and regulators have accurate current information about the adviser's business.