ARE PRACTICE MANAGEMENT
EXAM 2026 ARCHITECTURE TEST
PAPER QUESTIONS ANSWERS
GRADED A+
◉ One would not normally place convertible bonds in the portfolio of an
investor
A) who is bullish on the future for a specific issuer's common stock
B) seeking to maximize current income
C) seeking capital gains
D) seeking a position senior to that of common stock. Answer: B
A conversion feature is a benefit to the bondholder. It allows the
bondholder a choice to either continue holding the debt represented by
the bond or to convert the bond into shares of common stock of the
underlying issuer. Everything that is done in the securities industry has
to be a win-win situation. The win for the bondholder in this instance is
the ability to take advantage of the capital appreciation potential the
common stock may offer, and the win for the issuer is that by offering
something extra to the bond purchaser, the bond purchaser is willing to
accept a lower interest rate on the bond (as compared to a
nonconvertible bond), and therefore, giving the issuer a lower cost of
capital.
◉ Which of the following items does NOT fall within the Section 28(e)
safe harbor?
,A) Software used to simplify the investment adviser's preparation of its
tax returns
B) Proprietary research reports analyzing the performance of a specific
industry
C) Software used to analyze client's portfolios
D) Research reports prepared by a third party other than the broker-
dealer. Answer: A
Research reports, whether prepared by the firm or by a third party, fall
within the safe harbor provisions of Section 28(e). Software used to
analyze securities is also permissible since that benefits the client. Tax
preparation software benefits the adviser, but not the client.
◉ A significant difference between opening an account for a trust and an
account for an estate is
A) the standard of prudent investing applies to trusts, but not to
executors
B) banks can be named as trustees for a trust, but not as an executor
C) only the estate has beneficiaries
D) the trust account will generally be active for a much longer period of
time. Answer: D
Trusts can be set up to run for many years; the executor's job is over
once the estate has been settled.
,◉ Richard, Tim, Sam, and Fred have a regular golf foursome every
weekend. During one of their outings, they decide it is time they did
something constructive with their money by opening an account with a
brokerage firm. If the account is opened tenants in common, suitability
information would be required on
A)
each of the individuals, and if married, their spouses
B)
only that individual with the authorization to trade the account
C)
each of the four individuals
D)
whichever person has been designated by the group as its spokesman.
Answer: C
On any joint account, it is required to obtain suitability information on
all of the account owners.
◉ Prudent Asset Construction Enterprises (PACE) has offices in states
X, Y, and Z. On their last annual updating amendment, they reported
AUM of $218 million. In which of the following instances would PACE
be receiving a substantial prepayment of fees?
A)
, $1,600, paid at the first of each quarter
B)
$1,600, paid one year in advance
C)
$600, paid six or more months in advance
D)
$10,000, paid monthly. Answer: B
First of all, this is an SEC registered IA, so we have to go by the federal
numbers. Those are more than $1,200, six or more months in advance.
The $600 would have been substantial if PACE was state-registered.
Although the other two choices are above $1,200, they are not prepaid
for at least six months.
◉ All of the following would decrease the U.S. balance of payments
deficit EXCEPT
A)
a decrease in purchases of U.S. securities by foreign investors
B)
a decrease in imports of foreign goods into the U.S.
C)
an increase in exports of domestic goods from the U.S.
D)
EXAM 2026 ARCHITECTURE TEST
PAPER QUESTIONS ANSWERS
GRADED A+
◉ One would not normally place convertible bonds in the portfolio of an
investor
A) who is bullish on the future for a specific issuer's common stock
B) seeking to maximize current income
C) seeking capital gains
D) seeking a position senior to that of common stock. Answer: B
A conversion feature is a benefit to the bondholder. It allows the
bondholder a choice to either continue holding the debt represented by
the bond or to convert the bond into shares of common stock of the
underlying issuer. Everything that is done in the securities industry has
to be a win-win situation. The win for the bondholder in this instance is
the ability to take advantage of the capital appreciation potential the
common stock may offer, and the win for the issuer is that by offering
something extra to the bond purchaser, the bond purchaser is willing to
accept a lower interest rate on the bond (as compared to a
nonconvertible bond), and therefore, giving the issuer a lower cost of
capital.
◉ Which of the following items does NOT fall within the Section 28(e)
safe harbor?
,A) Software used to simplify the investment adviser's preparation of its
tax returns
B) Proprietary research reports analyzing the performance of a specific
industry
C) Software used to analyze client's portfolios
D) Research reports prepared by a third party other than the broker-
dealer. Answer: A
Research reports, whether prepared by the firm or by a third party, fall
within the safe harbor provisions of Section 28(e). Software used to
analyze securities is also permissible since that benefits the client. Tax
preparation software benefits the adviser, but not the client.
◉ A significant difference between opening an account for a trust and an
account for an estate is
A) the standard of prudent investing applies to trusts, but not to
executors
B) banks can be named as trustees for a trust, but not as an executor
C) only the estate has beneficiaries
D) the trust account will generally be active for a much longer period of
time. Answer: D
Trusts can be set up to run for many years; the executor's job is over
once the estate has been settled.
,◉ Richard, Tim, Sam, and Fred have a regular golf foursome every
weekend. During one of their outings, they decide it is time they did
something constructive with their money by opening an account with a
brokerage firm. If the account is opened tenants in common, suitability
information would be required on
A)
each of the individuals, and if married, their spouses
B)
only that individual with the authorization to trade the account
C)
each of the four individuals
D)
whichever person has been designated by the group as its spokesman.
Answer: C
On any joint account, it is required to obtain suitability information on
all of the account owners.
◉ Prudent Asset Construction Enterprises (PACE) has offices in states
X, Y, and Z. On their last annual updating amendment, they reported
AUM of $218 million. In which of the following instances would PACE
be receiving a substantial prepayment of fees?
A)
, $1,600, paid at the first of each quarter
B)
$1,600, paid one year in advance
C)
$600, paid six or more months in advance
D)
$10,000, paid monthly. Answer: B
First of all, this is an SEC registered IA, so we have to go by the federal
numbers. Those are more than $1,200, six or more months in advance.
The $600 would have been substantial if PACE was state-registered.
Although the other two choices are above $1,200, they are not prepaid
for at least six months.
◉ All of the following would decrease the U.S. balance of payments
deficit EXCEPT
A)
a decrease in purchases of U.S. securities by foreign investors
B)
a decrease in imports of foreign goods into the U.S.
C)
an increase in exports of domestic goods from the U.S.
D)
