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Which of the following statements describes a person who provides investment advice on a regular basis but does not charge fees, yet would be considered an adviser under Release IA-1092? A)A wealth... y college professor who gives free lectures on sound investment practices and makes specific securities recommendations based on a quantitative model he has developed. B)The Secretary of the U.S. Treasury who, as part of his official duties, comments on conditions in the financial markets and their future investment implications. C)A financial planner who sold his business and spends his time consulting with pension plans on whether to retain or hire new investment managers based on their performance. He does not charge fees; however, those managers retained as a result of his recommendations routinely provide him with noncash benefits such as vacations, computers, and office space. D)A retired chief investment officer of a well-known investment management company who, without compensation, writes a column in a general circulation newspaper commenting on the value of investing in equity securities; many readers find his advice useful and become clients of his former investment management company. Correct Answer: C)A financial planner who sold his business and spends his time consulting with pension plans on whether to retain or hire new investment managers based on their performance. He does not charge fees; however, those managers retained as a result of his recommendations routinely provide him with noncash benefits such as vacations, computers, and office space. If an individual is in the business of providing advice and receives any economic benefit, such benefit is considered compensation under Release IA-1092. Since the financial planner is in the business of giving advice to pension plans, actually provides that advice, and is compensated for it, he meets all three elements in the definition of an adviser. The noncash benefit, as in this case, need not come directly from the beneficiary of the services to be considered compensation. The college professor, the chief investment officer, and the Secretary of the Treasury do not receive separate compensation, nor are they in the business of providing investment advice. The Uniform Securities Act provides an exemption from registration as an investment adviser for which of the following persons who have no place of business in the state? Advisers who deal exclusively with broker-dealers. Advisers who deal exclusively with insurance companies. Advisers who deal exclusively with investment companies. Advisers who have no more than 5 clients in that state in a 12-month period. A)I only. B)I, II and III. C)I and III. D)I, II, III and IV. Correct Answer: D)I, II, III and IV. Investment advisers who have no place of business in the state are exempt from registration provided their clients are broker-dealers, other advisers, insurance companies, institutions, or government agencies. Also exempt are those advisers who have 5 or fewer clients in a 12-month period. All of these exemptions are lost when the adviser has a place of business in the state. Stanford Securities, Inc., is a registered broker-dealer in 22 states. Stanford has just created a wholly owned subsidiary, Stanford Advisers, Inc., and expects to have at least $100 million in assets under management within the next 45 days. Stanford Advisers, Inc.: A)will not have to register in any state. B)must register in each state in which they intend to offer advisory services. C)must register in each state in which they maintain an office. D)will only have to register in the state in which Stanford Advisers, Inc., maintains their principal office. Correct Answer: A)will not have to register in any state. Unlike broker-dealers, where there is no such concept as federal covered, a new investment adviser that reasonably expects to reach the $100 million minimum threshold within 120 days of the initial filing of the Form ADV invariably registers with the SEC as a federal covered investment adviser and, therefore, does not register in any state. Jim Thompson has recently joined an investment advisory firm as a financial professional in the principal business of rendering investment advice for a fee through offering investment supervisory services. Under the Investment Advisers Act of 1940, Jim is considered which of the following? A)Investment expert. B)Investment counsel. C)RIA. D)Prudent expert. Correct Answer: B)Investment counsel. The term "investment counsel" may only be used if an adviser is in the principal business of acting as an investment adviser and a substantial amount of business comes from providing investment supervisory services. The term "investment expert" is misleading terminology and the designation RIA is not allowed. It is unlawful for an investment adviser: To share in the profits of an account in relation to the amount of time devoted to the account. To unilaterally transfer an account to another firm if the assets fall below a minimum level. To take custody of a client's securities and funds, in the absence of a rule on custody by the state Administrator. To fail to disclose the departure of a general partner of an investment advisory partnership who only had a minority interest in the firm. A)I, II and III. B)I and IV. C)I and II. D)I, II and IV. Correct Answer: D)I, II and IV. An investment adviser cannot share in the profits of an account based on time devoted and may not assign an account without the written permission of the client. An investment adviser organized as a partnership must disclose to clients when any partner, minority interest or not, departs from the firm. When, if ever, would a broker-dealer be required to register as an investment adviser? [Show More]

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