IACCP COMPREHENSIVE EXAM 2026 QUESTIONS AND
SOLUTIONS RATED A+
✔✔What should be disclosed to clients should an adviser decide not to aggregate client
orders? - ✔✔That the adviser will not aggregate and the potential consequences of not
aggregating
✔✔What are the acceptable (fair process) allocation methods? - ✔✔Pro-rata
Rotation of orders to specific accounts
Random allocation
Alternative allocation
✔✔What disclosures could be made by advisors choosing to recommend/invest new
issues on behalf of clients? - ✔✔Potential effects of IPO or new issue allocations on
performance of client's account(s) or performance composites
✔✔What allocation method should be used for limited opportunity, such as IPOs and
why? - ✔✔Pro-rata to ensure fair allocation to all eligible accounts
✔✔Define side-by-side management (or trading) - ✔✔Trading a security and an option
on the same security on the same exchange
✔✔What are potential conflicts of interest to consider for different accounts involved in
side-by-side trading? - ✔✔Allocation of investment opportunities, timing of investment
actions, strategies of investments, any cross trades with other clients of the adviser,
principal transactions
✔✔Considerations in developing side-by-side trading policies and procedures -
✔✔Mitigate Conflicts of Interest:
Allocation of trades (different fee structures - fixed vs. performance-based fees);
Investing in funds/accounts by adviser/personnel (such as taking different positions in
same issuer in different types of accounts); Trade sequencing (sequential trading in
same security by different accounts); Different valuation; Short sales (prohibit hedge
funds from taking positions contrary to positions held by other clients); Prohibit advisers
from preferring hedge fund to other clients when assigning profitable trades/investments
Separation of Functions & Personnel:
Restrictions on information flow between those working on MFs vs. other advised
accounts; Prohibit discretion by same person for both types of clients; Physical
separation of workspace; Oversight responsibilities by Boards of Directors/Trustees of
MFs (enhanced reporting by adviser to board regarding conflicts of interest)
✔✔Disclosing side-by-side trading conflicts of interest - ✔✔Form ADV, Part 2A, Item 6:
Performance-Based Fees and Side-by-Side Management - how to manage conflicts
, Private Placement Memoranda for Private Funds
Client contracts for separately managed (institutional) accounts
✔✔Define Internal Cross Trading - ✔✔Investment manager with discretion on both
sides of transaction places trades crossed internally without using a broker
✔✔When is an Agency Cross Transaction not permissible? - ✔✔Where adviser
recommended transaction to both buyer and seller
✔✔When is an Internal Cross Trade not permitted? - ✔✔Not permissible for ERISA
accounts (unless terms are met or exemptions can be relied upon)
✔✔What conditions would need to be met for an investment adviser to be determined
as "not acting as broker" when effecting a particular cross transaction between advisory
clients? - ✔✔Receives no brokerage commission or other compensation (other than its
advisory fee), directly or indirectly, for effecting the transactions. Therefore such trades
would NOT be considered agency cross transactions.
✔✔In what case would an adviser NOT be required to obtain written consent from
clients before effecting trades between advisory clients? - ✔✔INTERNAL CROSS
TRADE: no compensation received (other than advisory fee) for effecting transaction
between advisory clients without using broker, and therefore applies as not acting as
broker in the trade and not considered agency cross transaction
✔✔When are Internal Cross Trades permitted and what conditions must be met for the
trade to classify as such? - ✔✔Neither adviser nor any affiliate can receive, directly or
indirectly, any compensation (other than advisory fees) for effecting the trade to be
considered Internal Cross Transaction.
Permitted provided: in the best interest of each client, price is fair to both parties,
adviser discloses practice on Form ADV 2A, and special provisions met under ERISA
and Investment Company Act Rule 17a-7 (if applicable)
✔✔New Issues are defined as - ✔✔Any IPO offering of an equity security
✔✔What are the basic elements of Form ADV ("Brochure") - ✔✔ADV Part 1: Firm
disclosure electronically filed via IARD and made available to the public but not required
for client delivery
ADV Part 2: Adviser's Disclosure, written "brochure" describing business practices and
educational and business background.
Supplements: Individual brochures of supervised persons providing advisory services to
clients (either by formulating and providing advice directly to clients OR making
discretionary decisions for client assets even if no direct contact with client)
SOLUTIONS RATED A+
✔✔What should be disclosed to clients should an adviser decide not to aggregate client
orders? - ✔✔That the adviser will not aggregate and the potential consequences of not
aggregating
✔✔What are the acceptable (fair process) allocation methods? - ✔✔Pro-rata
Rotation of orders to specific accounts
Random allocation
Alternative allocation
✔✔What disclosures could be made by advisors choosing to recommend/invest new
issues on behalf of clients? - ✔✔Potential effects of IPO or new issue allocations on
performance of client's account(s) or performance composites
✔✔What allocation method should be used for limited opportunity, such as IPOs and
why? - ✔✔Pro-rata to ensure fair allocation to all eligible accounts
✔✔Define side-by-side management (or trading) - ✔✔Trading a security and an option
on the same security on the same exchange
✔✔What are potential conflicts of interest to consider for different accounts involved in
side-by-side trading? - ✔✔Allocation of investment opportunities, timing of investment
actions, strategies of investments, any cross trades with other clients of the adviser,
principal transactions
✔✔Considerations in developing side-by-side trading policies and procedures -
✔✔Mitigate Conflicts of Interest:
Allocation of trades (different fee structures - fixed vs. performance-based fees);
Investing in funds/accounts by adviser/personnel (such as taking different positions in
same issuer in different types of accounts); Trade sequencing (sequential trading in
same security by different accounts); Different valuation; Short sales (prohibit hedge
funds from taking positions contrary to positions held by other clients); Prohibit advisers
from preferring hedge fund to other clients when assigning profitable trades/investments
Separation of Functions & Personnel:
Restrictions on information flow between those working on MFs vs. other advised
accounts; Prohibit discretion by same person for both types of clients; Physical
separation of workspace; Oversight responsibilities by Boards of Directors/Trustees of
MFs (enhanced reporting by adviser to board regarding conflicts of interest)
✔✔Disclosing side-by-side trading conflicts of interest - ✔✔Form ADV, Part 2A, Item 6:
Performance-Based Fees and Side-by-Side Management - how to manage conflicts
, Private Placement Memoranda for Private Funds
Client contracts for separately managed (institutional) accounts
✔✔Define Internal Cross Trading - ✔✔Investment manager with discretion on both
sides of transaction places trades crossed internally without using a broker
✔✔When is an Agency Cross Transaction not permissible? - ✔✔Where adviser
recommended transaction to both buyer and seller
✔✔When is an Internal Cross Trade not permitted? - ✔✔Not permissible for ERISA
accounts (unless terms are met or exemptions can be relied upon)
✔✔What conditions would need to be met for an investment adviser to be determined
as "not acting as broker" when effecting a particular cross transaction between advisory
clients? - ✔✔Receives no brokerage commission or other compensation (other than its
advisory fee), directly or indirectly, for effecting the transactions. Therefore such trades
would NOT be considered agency cross transactions.
✔✔In what case would an adviser NOT be required to obtain written consent from
clients before effecting trades between advisory clients? - ✔✔INTERNAL CROSS
TRADE: no compensation received (other than advisory fee) for effecting transaction
between advisory clients without using broker, and therefore applies as not acting as
broker in the trade and not considered agency cross transaction
✔✔When are Internal Cross Trades permitted and what conditions must be met for the
trade to classify as such? - ✔✔Neither adviser nor any affiliate can receive, directly or
indirectly, any compensation (other than advisory fees) for effecting the trade to be
considered Internal Cross Transaction.
Permitted provided: in the best interest of each client, price is fair to both parties,
adviser discloses practice on Form ADV 2A, and special provisions met under ERISA
and Investment Company Act Rule 17a-7 (if applicable)
✔✔New Issues are defined as - ✔✔Any IPO offering of an equity security
✔✔What are the basic elements of Form ADV ("Brochure") - ✔✔ADV Part 1: Firm
disclosure electronically filed via IARD and made available to the public but not required
for client delivery
ADV Part 2: Adviser's Disclosure, written "brochure" describing business practices and
educational and business background.
Supplements: Individual brochures of supervised persons providing advisory services to
clients (either by formulating and providing advice directly to clients OR making
discretionary decisions for client assets even if no direct contact with client)
