Laws, Regulations, and Ethics Flashcards
6 cards from real Series 65 – Uniform Investment Adviser Law Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Laws, Regulations, and Ethics flashcards as text
What is required under the 'pay-to-play' rule (SEC Rule 206(4)-5) for investment advisers?
Answer: Advisers are prohibited from making political contributions to government officials who have influence over public pension fund investment decisions
Rule 206(4)-5 prohibits investment advisers from making political contributions to government officials with influence over public pension fund investment decisions, addressing pay-to-play corruption.
When must an investment adviser update its Form ADV?
Answer: Annually, and promptly when material information changes
Form ADV must be updated annually and amended promptly whenever material changes occur, ensuring clients and regulators have current information about the advisory firm.
Under the Investment Advisers Act, what is required before an investment adviser can charge a performance-based fee?
Answer: The client must be a 'qualified client' with at least $1.1 million under management or a net worth exceeding $2.2 million
Under Rule 205-3, performance-based fees may only be charged to 'qualified clients,' generally those with at least $1.1 million under management with the adviser or a net worth over $2.2 million.
What does 'material information' mean in the context of securities regulation?
Answer: Information that a reasonable investor would consider important in making an investment decision
Material information is any fact that a reasonable investor would consider important when making an investment decision, and it must be disclosed or not traded upon if non-public.
What is the primary purpose of FINRA?
Answer: To serve as a self-regulatory organization overseeing broker-dealers and their registered representatives
FINRA (Financial Industry Regulatory Authority) is a self-regulatory organization that oversees broker-dealers and their registered representatives, establishing conduct rules and enforcing compliance.
What is the 'business continuity plan' requirement for investment advisers?
Answer: A written plan describing how the adviser will continue operations during and after a significant business disruption
Regulators require investment advisers to maintain written business continuity plans that address how the firm will operate in the event of significant disruptions such as natural disasters or system failures.