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Series 65 > USA - Business Practices > Flashcards

USA - Business Practices Flashcards

1
Q

Advisory contracts must be _____ and have ______

A

be in writing and have a defined term

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2
Q

Prepayment of fees is permitted. T/F

A

True

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3
Q

Refund for early terminations are permitted. T/F

A

True

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4
Q

If the firm is a partnership, any change in ownership must be _____

A

communicated promptly to customers

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5
Q

A change in a majority of partners requires _____

A

customer consent

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6
Q

A performance fee is allowed for _______

A

wealthy clients

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7
Q

Soft dollar arrangements are allowed as long as the “give backs” benefit the _____

A

adviser’s clients

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8
Q

An adviser can also collect _____ fees if they place client funds into a particular mutual fund

A

12b-1 fees

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9
Q

You cannot include hedge clauses in an advisory contract that are ______ or hold the adviser _____

A

unreasonable or hold the adviser harmless for misconduct

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10
Q

Each client must receive the adviser’s brochure and brochure supplement, also known as Form ADV part ____ and form ADV part _____

A

2A and 2B

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11
Q

The brochure and supplement must be delivered either _____ before signing, or if after, the customer has _____ to rescind the contract

A

48 hours before signing or has 5 days to rescind afterwards

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12
Q

If there is a material change to the brochure, it must be sent to the customer no later than _____ after fiscal year end

A

120 days

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13
Q

An adviser may not take custody of client assets if there is a specific ______ or, if no ____, then if they have not given ______

A

if there is a specific rule, or if no rule, if they have not given notice

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14
Q

In order to take custody, adviser must notify the state using form _____

A

ADV

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15
Q

Assets held by an adviser must be held by a ______ who must be _______ annually

A

custodian who must be audited annually

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16
Q

The IA must file audit results of the custodian within ______

A

120 days

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17
Q

Qualified custodians under the NASAA rules are:

A
  • FDIC insured deposit taking institutions
  • registered BDs
  • registered futures commissions merchants
  • foreign financial institutions
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18
Q

“Custody” also pertains to taking more than _____ in advance fees and accounts with full _____

A

more than $500 in advance fees and accounts with full POA

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19
Q

If funds received mistakenly are returned within _____, then not considered custody

A

3 days

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20
Q

Annual updates to ADV must be filed within _____ of fiscal year end; material changes filed within _____ of event

A

90 days of year end; 30 days of event (for Fed covered advisers, material change is required “promptly”)

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21
Q

Under NASAA rules, customer must sign margin agreement ______ after the first trade occurs

A

promptly

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22
Q

For discretionary accounts, written authority must be received no later than ______ after verbal authority is given (does not apply to BDs - Fed laws)

A

10 business days

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23
Q

For BDs, written authority for discretion must be received ______ to placing trades

A

prior

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24
Q

Payment for trades by a customer must be received no later than _____ after the trade date

A

5 days (S+2)

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25
Q

If account is frozen, customer can still trade but needs to _____

A

have the cash deposited up front

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26
Q

A loan amount to a customer with a margin account cannot exceed limits placed by ______

A

Reg T (for instance, since margin on a LEAP is 75%, then loan cannot exceed 25%)

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27
Q

If a customer wants securities transferred and shipped, must be ______

A

fully paid

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28
Q

Order tickets must be stamped with time of _____, _____, and ______

A

time of receipt, time of execution, and time of cancellation (if canceled)

29
Q

For IAs, orders must show name of person who recommended transaction, name of person who entered the ticket, the ______ of the order, name of account, name of the _____ who will execute the order, and whether or not it is ______

A

date of the order; name of the BD, and whether is discretionary or not

30
Q

Limit order display rule states that if a customer places an order with a better price than the market maker, the market maker must ______

A

display those customer quotes

31
Q

Order confirms do not need to indicate if the order was ______ or not

A

solicited or not

32
Q

On order confirms, _________ must be disclosed

A

payment for order flow

33
Q

NASAA does or does not allow a RR to borrow or lend money from a relative?

A

DOES NOT - not like FINRA

34
Q

Can IAs lend money to customers? Can BDs?

A

IAs CANNOT, BDs CAN

35
Q

IAs and IARs are or are not allowed to open joint accounts with customers?

A

ARE NOT

36
Q

An agent ______ charge a higher commission based on performance of recommendations

A

CANNOT

37
Q

Disclosure of commission is required on the trade _____

A

confirm

38
Q

“Unusual” fees for trades must be disclosed ______

A

prior to execution

39
Q

BDs can charge for clerical fees but not for the actual ______

A

recommendation - then they would become IAs

40
Q

Fee discounts cannot be made _____

A

to only select clients

41
Q

A mutual fund is not considered “no-load” if it has a 12b-1 fee in excess of _____

A

0.25%

42
Q

If a customer dies, the account must be _____, all open orders canceled, the date of death must be noted, and must wait for the proper paperwork

A

the account must be frozen from all removals of assets

43
Q

If inside information is received by an agent, must be reported to the ______

A

exchange where the security trades

44
Q

A new issues of non-exempt securities cannot be sold without a ______

A

propsectus

45
Q

Must disclose if a research report distributed to customers is ______

A

from a third party

46
Q

IPO allocations can be made to IAs, but they have to buy it for _____

A

all their clients

47
Q

For an IPO, BD cannot issue a research report for _____ following the effective date; for add-on offering it is _____

A

10 days for IPO, 3 days for add-on

48
Q

IA advertising cannot contain a _______ (BDs can), cannot state that research is given for ____ unless true without condition, and can include recommendation as long as ALL recommendations over the past _____ are included

A

cannot contain a testimonial; and must include ALL recommendations over the last 1 year

49
Q

Internet communication for BDs and IAs is NOT considered “transacting business” if it is not _______, contains a legend that lets people know they can only conduct business ______, any individual follow up communication meets all registration requirements, the communication has a “firewall” to meet compliance standards

A

cannot be specific (must be general) and lets people know they can only do business in their own state or places of registration

50
Q

Agents cannot share commissions with _____ or _____

A

unlicensed individuals or licensed individuals at another firm

51
Q

IAs can pay referrals fees to solicitors but those solicitors must be ______

A

registered as IARs

52
Q

An IA can send trades to an affiliated BD as long as it is disclosed and customer has provided _______

A

written consent

53
Q

If 2 or more beneficiaries, the differing interest of the beneficiaries must be considered when investing the assets by the trustee. T/F

A

True

54
Q

Written consent from the customer must be obtained by settlement date for conflicts of interest where the IA has a _____ from the position of the client or is selling their own assets to the client

A

has an opposite position from the one being assumed by the client

55
Q

Privacy notices must be sent initially and then _____

A

annually

56
Q

Initial privacy notice must also include a ______ provision

A

opt-out

57
Q

A foreign customer must present their _____ and a US _____

A

passport and a US tax ID

58
Q

CTR reports must be aggregated over _____ and reported within _____

A

aggregated over 2 weeks and reported within 15 days

59
Q

Cyber security procedures must be tested _____

A

annually

60
Q

Money transfers must be confirmed with the client, but cannot be done over _____

A

email

61
Q

To offer a promissory note, both the ______ and the _____ must be registered

A

sales person and the promissory note

62
Q

Only promissory notes that have maturities of _____ or less, are _______ grade, and are sold in min increments of ______ are exempt from state registration

A

9 months or less, investment grade, and sold in min amounts of $50,000

63
Q

Not making required disclosures to customers who buy securities in a ______ is prohibited

A

bank location

64
Q

For securities bought at a bank location, the RR must disclose (orally and written) that the account is _____ FDIC insured, the securities are _____ deposits, and they _____ lose value

A

NOT FDIC insured, NOT deposits, and MAY lose value

65
Q

The fee for managing _____ may be higher than for ____

A

equities may be higher than for fixed income

66
Q

Discretion is allowed to be exercised upon verbal confirmation as long as written confirmation is received within _______

A

10 business days

67
Q

Is there a record of subscription orders that must be kept by a BD?

A

NO - happens directly between the issuer and the shareholder

68
Q

Can an IA lend money to its officers or employees?

A

YES

Series 65 (10 decks)

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