IACCP CORE EXAM 2026 TEST QUESTIONS AND SOLUTIONS
RATED A+
✔✔When engaging in internal cross transactions (or "cross trading"), where an adviser
causes the purchase and sale of securities between two or more client accounts and
neither the adviser nor any affiliate receives compensation for effecting the transaction,
the adviser should do all of the following EXCEPT:
A. Make full disclosure in Form ADV Part 2.
B. Ensure that best execution is achieved.
C. Obtain the prior written consent of all clients involved in the cross trade.
D. Confirm that no client is disfavored by the cross trade. - ✔✔C. Obtain the prior
written consent of all clients involved in the cross trade
✔✔Dewey Cheatem & Howe Advisers ("DCH") is investment adviser to two hedge
funds formed as 3(c)(1) feeder funds. The General Partner of DCH and each of the two
funds is XYZ Advisors LP, which owns 100% of DCH and has a 30% ownership interest
in each of the two funds. Moreover, an ERISA pension plan has a 5% interest in each of
the feeder funds. If DCH wishes to rebalance the allocations of the two funds via an
internal cross transaction between the two funds, which of the following is true pursuant
to the Gardner Russo No-Action letter?
A. DCH has engaged in an agency cross transaction.
B. DCH has engaged in a principal transaction.
C. DCH has engaged in a prohibited transaction under ERISA.
D. DCH has breached its fiduciary duty to the funds. - ✔✔B. DCH has engaged in a
principal transaction.
✔✔Which THREE persons or firms may be excluded from having to register under the
Investment Advisers Act of 1940? (Choose three.)
A. Accountants whose advisory services pertain solely to incidental financial planning.
B. Persons or firms whose advice and reports are related solely to U.S. government
securities.
C. Publishers of generally circulated, bona fide newspapers or financial journals.
D. Domestic banks and bank holding companies. - ✔✔B. Persons or firms whose
advice and reports are related solely to U.S. government securities.
C. Publishers of generally circulated, bona fide newspapers or financial journals.
D. Domestic banks and bank holding companies.
✔✔Which activity is NOT mandated for investment advisers that store required records
electronically?
A. Providing the SEC with prompt access, retrieval, and reproduction.
B. Maintaining copies of all electronically stored records using WORM format.
C. Arranging and indexing records to provide easy access and retrieval.
,D. Developing procedures to preserve and maintain records. - ✔✔B. Maintaining copies
of all electronically stored records using WORM format.
✔✔The Investment Advisers Act of 1940 defines the scope of the anti-fraud provisions
as extending to:
A. SEC-registered advisers and foreign advisers with a place of business in the U.S.,
whether registered or exempt.
B. SEC-registered advisers and foreign advisers doing business in the U.S., whether
registered or exempt.
C. SEC-registered investment advisers.
D. All investment advisers, whether registered or exempt. - ✔✔D. All investment
advisers, whether registered or exempt.
✔✔The fiduciary duty imposed on advisers under the Investment Advisers Act of 1940
can BEST be described as:
A. providing equal disclosure to all clients.
B. imposing an ERISA fiduciary standard.
C. putting the client's interests ahead of the adviser's.
D. acting in a custodial capacity. - ✔✔C. putting the client's interests ahead of the
adviser's.
✔✔Which TWO qualify as a "security" under the Investment Advisers Act of 1940?
(Choose two.)
A. Commodity futures
B. Limited partnership interests
C. Fixed annuities
D. Variable annuities - ✔✔B. Limited partnership interests
D. Variable annuities
✔✔In performing due diligence on a potential solicitor, the investment adviser must
ensure that the solicitor:
A. is not subject to any statutory disqualification.
B. is not acting as a solicitor for an unregistered adviser.
C. has passed the Series 65 exam.
D. is registered in appropriate states. - ✔✔A. is not subject to any statutory
disqualification.
✔✔An SEC-registered investment adviser is NOT required to disclose "material"
disciplinary information in its Form ADV Part 1 after:
A. 5 years
,B. 10 years
C. 12 years
D. 15 years - ✔✔B. 10 years
✔✔Which event would be deemed an assignment of an investment advisory contract?
A. An adviser hires a new CEO to replace its current retiring CEO.
B. An adviser is purchased by an unaffiliated adviser.
C. Any public offering of an adviser's stock.
D. An adviser organized as a corporation changes its structure to a partnership. - ✔✔B.
An adviser is purchased by an unaffiliated adviser
✔✔The Investment Advisers Act of 1940 requires that written investment advisory
agreements must address:
A. proxy voting.
B. assignment of the contract.
C. brokerage arrangements.
D. fees. - ✔✔B. assignment of the contract.
✔✔If an investment adviser becomes ineligible for SEC registration, which document
must be filed to terminate its registration?
A. Form DRP
B. Form ADV-W
C. Form ADV Part 2A
D. Form U5 - ✔✔B. Form ADV-W
✔✔During an examination of XYZ Investment Advisers, the SEC discovers that two of
Adviser's portfolio managers have been engaged in frontrunning client accounts.
Neither Compliance nor Senior Management had any knowledge of the scheme. If
Adviser can show to the SEC's satisfaction that it had developed and enforced
procedures reasonably designed to prevent frontrunning, Adviser will be able to claim
that, despite the violation, Adviser has met its duty to:
A. assist the SEC.
B. maintain required books and records.
C. eliminate internal control deficiencies.
D. supervise. - ✔✔D. supervise.
✔✔SEC-registered advisers that have proxy voting authority for clients must do which
TWO of the following? (Choose two.)
A. Adopt procedures to ensure proxies are voted in the best interest of clients.
, B. Disclose to clients information about the firm's proxy policies and procedures on
Form ADV Part 2.
C. Create a proxy voting committee to address conflict situations.
D. Provide information to clients on how their proxies were voted. - ✔✔A. Adopt
procedures to ensure proxies are voted in the best interest of clients.
D. Provide information to clients on how their proxies were voted.
✔✔In which THREE circumstances is an adviser deemed to have custody under the
SEC Custody Rule? (Choose three.)
A. The investment adviser is mistakenly sent a check payable to the client and returns it
to the sender within five business days of receipt.
B. The investment adviser deducts advisory fees from the client's account with the
client's prior written consent.
C. The investment adviser takes possession of a check drawn by the client that is
payable to a third party.
D. The investment adviser acts as one of three or more trustees in regards to an
advisory client's account. - ✔✔A. The investment adviser is mistakenly sent a check
payable to the client and returns it to the sender within five business days of receipt.
B. The investment adviser deducts advisory fees from the client's account with the
client's prior written consent.
D. The investment adviser acts as one of three or more trustees in regards to an
advisory client's account.
✔✔An investment advisory firm is closing its business.
What should the firm do with its corporate and organizational documents after
termination of the firm entity?
A. Retain the documents in an easily accessible place of which the SEC has been
notified for five years.
B. Retain the documents in an easily accessible place of which the SEC has been
notified for three years.
C. Dispose of the documents in a prudent manner, ensuring the personal identifying
information is destroyed.
D. Retain the documents for five years, two of which must be in an easily accessible
place. - ✔✔B. Retain the documents in an easily accessible place of which the SEC has
been notified for three years.
✔✔Under the SEC Custody Rule, an adviser is NOT subject to a surprise annual
examination by a qualified accounting firm if the:
A. adviser directly debits advisory fees from clients' custodial accounts.
B. adviser is granted general power of attorney by advisory clients.
C. adviser or certain of adviser's employees serve as trustees to advisory clients.
RATED A+
✔✔When engaging in internal cross transactions (or "cross trading"), where an adviser
causes the purchase and sale of securities between two or more client accounts and
neither the adviser nor any affiliate receives compensation for effecting the transaction,
the adviser should do all of the following EXCEPT:
A. Make full disclosure in Form ADV Part 2.
B. Ensure that best execution is achieved.
C. Obtain the prior written consent of all clients involved in the cross trade.
D. Confirm that no client is disfavored by the cross trade. - ✔✔C. Obtain the prior
written consent of all clients involved in the cross trade
✔✔Dewey Cheatem & Howe Advisers ("DCH") is investment adviser to two hedge
funds formed as 3(c)(1) feeder funds. The General Partner of DCH and each of the two
funds is XYZ Advisors LP, which owns 100% of DCH and has a 30% ownership interest
in each of the two funds. Moreover, an ERISA pension plan has a 5% interest in each of
the feeder funds. If DCH wishes to rebalance the allocations of the two funds via an
internal cross transaction between the two funds, which of the following is true pursuant
to the Gardner Russo No-Action letter?
A. DCH has engaged in an agency cross transaction.
B. DCH has engaged in a principal transaction.
C. DCH has engaged in a prohibited transaction under ERISA.
D. DCH has breached its fiduciary duty to the funds. - ✔✔B. DCH has engaged in a
principal transaction.
✔✔Which THREE persons or firms may be excluded from having to register under the
Investment Advisers Act of 1940? (Choose three.)
A. Accountants whose advisory services pertain solely to incidental financial planning.
B. Persons or firms whose advice and reports are related solely to U.S. government
securities.
C. Publishers of generally circulated, bona fide newspapers or financial journals.
D. Domestic banks and bank holding companies. - ✔✔B. Persons or firms whose
advice and reports are related solely to U.S. government securities.
C. Publishers of generally circulated, bona fide newspapers or financial journals.
D. Domestic banks and bank holding companies.
✔✔Which activity is NOT mandated for investment advisers that store required records
electronically?
A. Providing the SEC with prompt access, retrieval, and reproduction.
B. Maintaining copies of all electronically stored records using WORM format.
C. Arranging and indexing records to provide easy access and retrieval.
,D. Developing procedures to preserve and maintain records. - ✔✔B. Maintaining copies
of all electronically stored records using WORM format.
✔✔The Investment Advisers Act of 1940 defines the scope of the anti-fraud provisions
as extending to:
A. SEC-registered advisers and foreign advisers with a place of business in the U.S.,
whether registered or exempt.
B. SEC-registered advisers and foreign advisers doing business in the U.S., whether
registered or exempt.
C. SEC-registered investment advisers.
D. All investment advisers, whether registered or exempt. - ✔✔D. All investment
advisers, whether registered or exempt.
✔✔The fiduciary duty imposed on advisers under the Investment Advisers Act of 1940
can BEST be described as:
A. providing equal disclosure to all clients.
B. imposing an ERISA fiduciary standard.
C. putting the client's interests ahead of the adviser's.
D. acting in a custodial capacity. - ✔✔C. putting the client's interests ahead of the
adviser's.
✔✔Which TWO qualify as a "security" under the Investment Advisers Act of 1940?
(Choose two.)
A. Commodity futures
B. Limited partnership interests
C. Fixed annuities
D. Variable annuities - ✔✔B. Limited partnership interests
D. Variable annuities
✔✔In performing due diligence on a potential solicitor, the investment adviser must
ensure that the solicitor:
A. is not subject to any statutory disqualification.
B. is not acting as a solicitor for an unregistered adviser.
C. has passed the Series 65 exam.
D. is registered in appropriate states. - ✔✔A. is not subject to any statutory
disqualification.
✔✔An SEC-registered investment adviser is NOT required to disclose "material"
disciplinary information in its Form ADV Part 1 after:
A. 5 years
,B. 10 years
C. 12 years
D. 15 years - ✔✔B. 10 years
✔✔Which event would be deemed an assignment of an investment advisory contract?
A. An adviser hires a new CEO to replace its current retiring CEO.
B. An adviser is purchased by an unaffiliated adviser.
C. Any public offering of an adviser's stock.
D. An adviser organized as a corporation changes its structure to a partnership. - ✔✔B.
An adviser is purchased by an unaffiliated adviser
✔✔The Investment Advisers Act of 1940 requires that written investment advisory
agreements must address:
A. proxy voting.
B. assignment of the contract.
C. brokerage arrangements.
D. fees. - ✔✔B. assignment of the contract.
✔✔If an investment adviser becomes ineligible for SEC registration, which document
must be filed to terminate its registration?
A. Form DRP
B. Form ADV-W
C. Form ADV Part 2A
D. Form U5 - ✔✔B. Form ADV-W
✔✔During an examination of XYZ Investment Advisers, the SEC discovers that two of
Adviser's portfolio managers have been engaged in frontrunning client accounts.
Neither Compliance nor Senior Management had any knowledge of the scheme. If
Adviser can show to the SEC's satisfaction that it had developed and enforced
procedures reasonably designed to prevent frontrunning, Adviser will be able to claim
that, despite the violation, Adviser has met its duty to:
A. assist the SEC.
B. maintain required books and records.
C. eliminate internal control deficiencies.
D. supervise. - ✔✔D. supervise.
✔✔SEC-registered advisers that have proxy voting authority for clients must do which
TWO of the following? (Choose two.)
A. Adopt procedures to ensure proxies are voted in the best interest of clients.
, B. Disclose to clients information about the firm's proxy policies and procedures on
Form ADV Part 2.
C. Create a proxy voting committee to address conflict situations.
D. Provide information to clients on how their proxies were voted. - ✔✔A. Adopt
procedures to ensure proxies are voted in the best interest of clients.
D. Provide information to clients on how their proxies were voted.
✔✔In which THREE circumstances is an adviser deemed to have custody under the
SEC Custody Rule? (Choose three.)
A. The investment adviser is mistakenly sent a check payable to the client and returns it
to the sender within five business days of receipt.
B. The investment adviser deducts advisory fees from the client's account with the
client's prior written consent.
C. The investment adviser takes possession of a check drawn by the client that is
payable to a third party.
D. The investment adviser acts as one of three or more trustees in regards to an
advisory client's account. - ✔✔A. The investment adviser is mistakenly sent a check
payable to the client and returns it to the sender within five business days of receipt.
B. The investment adviser deducts advisory fees from the client's account with the
client's prior written consent.
D. The investment adviser acts as one of three or more trustees in regards to an
advisory client's account.
✔✔An investment advisory firm is closing its business.
What should the firm do with its corporate and organizational documents after
termination of the firm entity?
A. Retain the documents in an easily accessible place of which the SEC has been
notified for five years.
B. Retain the documents in an easily accessible place of which the SEC has been
notified for three years.
C. Dispose of the documents in a prudent manner, ensuring the personal identifying
information is destroyed.
D. Retain the documents for five years, two of which must be in an easily accessible
place. - ✔✔B. Retain the documents in an easily accessible place of which the SEC has
been notified for three years.
✔✔Under the SEC Custody Rule, an adviser is NOT subject to a surprise annual
examination by a qualified accounting firm if the:
A. adviser directly debits advisory fees from clients' custodial accounts.
B. adviser is granted general power of attorney by advisory clients.
C. adviser or certain of adviser's employees serve as trustees to advisory clients.
