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
Under the Investment Advisers Act of 1940, who is generally required to register with the SEC?
Answer: Investment advisers with $110 million or more in assets under management
Generally, investment advisers with $110 million or more in AUM must register with the SEC; those below that threshold register with state regulators.
What constitutes 'churning' in an investment account?
Answer: Excessive trading in a client's account to generate commissions for the adviser, regardless of the client's interest
Churning is the unethical and often illegal practice of excessively trading a client's account primarily to generate commissions rather than to benefit the client.
What is insider trading?
Answer: Trading securities based on material, non-public information in violation of a duty
Insider trading involves buying or selling securities based on material non-public information in breach of a fiduciary or other duty of trust, which is illegal under SEC rules.
Which document must investment advisers provide to clients under the Investment Advisers Act?
Answer: Form ADV Part 2 (the brochure)
Form ADV Part 2 is the adviser's disclosure brochure that must be delivered to clients and prospective clients, containing information about the adviser's services, fees, and conflicts of interest.
What is a 'conflict of interest' in the context of investment advisory relationships?
Answer: A situation where the adviser's personal or financial interests could improperly influence advice given to the client
A conflict of interest arises when an adviser's own financial interests or other loyalties could improperly influence the advice provided, which must be disclosed to clients.
What is the Uniform Securities Act designed to do?
Answer: Provide a model framework for state securities regulation, including registration of securities, advisers, and broker-dealers
The Uniform Securities Act is a model law created to help states develop consistent securities regulations covering registration of securities, investment advisers, and broker-dealers.