IACCP Actual Questions and Correct Answers
Q1
SEC vs Capital Gains Research Bureau basis of Fiduciary Rule, specifically Best Interest
Answer: "Investment Adviser" person/firm compensated for engaging in business of
(directly or indirectly) advising others on securities or the advisability of investing (or)
who issues analysis/reports concerning securities
Q2
SEC Registration Optional when 1) AUM $25-100M (except NY req. at $25M) - OR 2) Advisers
Registered in 15 or more States (AUM $25M or less PROHIBITED from registering w/ SEC but
held to various state requirements)
Answer: SEC Registration Required when 1) definition of "IA" is met (unless otherwise
excepted from definition or exempt/prohibited from registration); AND $100M in AUM
(optional for Mid-Sized Advisers AUM $100-115M Buffer Zone) - OR - 2) when ADVISING
a Registered Investment Company - OR - 3) AUM $25-100M AND NOT
registered/required to register with State OR NOT Subject to EXAMS by State
Registration withdraw required for AUM under $90M
Q3
EXEMPTIONS from SEC Registration: 1) Intrastate Advisers: NOT advising, analyzing or reporting
on NSE Listed Securities* and ALL Clients reside in same state as principal office (*includes
securities w/ unlisted trading privileges); 2) Advisers to ONLY Insurance Companies; 3) Private
Fund Advisers w/ AUM less than $150M, and Advisers to Foreign Private and Venture Capital
Funds; 4) Church Plans, and certain 5) Charitable organizations 6) Registered Commodity
Trading 7) Small Business Investment Companies
Answer: EXCLUDED from Definition of "IA" are: 1) Domestic banks and bank holding
companies; 2) Services SOLELY Incidental by lawyers, accountants, engineers,
teachers, (and) 3) BD advisory services w/out special compensation; 4) Publishers of
bona fide newspapers/mags w/Regular Circulation; 5) Advising Direct Obligations of US
(bonds); 6) NRSROs (Nationally Recognized Statistical Rating Orgs; 7) Family Offices;
and 8) Others designated by SEC rulemaking (such as those otherwise prohibited or
exempt)
,Q4
Form PF (intended to Monitor Systematic Risk to US Financial System) is required by advisers to
Hedge & other Private Funds, and SEC-Registered Advisers to 1 or More Private Funds having at
least $150M AUM attributable to such as of last fiscal year-end Form PF filing EXEMPTION:
Advisers NOT registered/required to register with SEC
Answer: Private Fund Adviser Exemption Criteria: PRIVATE FUND: Advise SOLELY
private funds (unlimited) so long as aggregate assets of such NOT EXCEEDING $150M
(per ADV annual calculation), including Non-US Advisers when ALL US clients are
Qualifying Private Funds VENTURE CAPITAL: Any advising SOLELY venture capital
funds FOREIGN PRIVATE: No place of business in US, Less than 15 private fund
clients/investors in US, Less than $25M aggregate AUM attributed to clients/private
fund investors, AND doesn't hold out to US public as an IA
Q5
Repeal of Private Adviser Exemption (per Dodd-Frank) brought into SEC's regulatory view
hedge, private equity, venture capital, and other private funds by adding regulation to
circumvent adviser's use of a loop-hole to avoid registration in which each fund, and not it's
underlying investors, is counted as a "client"
Answer: Dodd-Frank also resulted in changes to AUM by 1) raising registration
threshold to $100M, and creating Mid-Sized adviser category w/ AUM $25-100M (w/
$100-115 Buffer Zone); and 2) "RAUM" Uniform Calculation of Gross Basis at Market
Value (or fair value if n/a) to include: (i) "Securities Portfolios" (any consisting of at
least 50%) and/or Private Funds to which adviser provides Regular/Continuous
Supervisory or Management services; (ii) Proprietary accounts (owned in aggregate
25% or more), accts managed w/out compensation and those of foreign clients; and
(iii) uncalled capital commitments to private fund(s)
Q6
When is IAR licensing required and what are the exceptions?
Answer: An IAR (supervised person of an Investment Advisor) is required to be
licensed when it has more than 5 and with more than 10% of which are natural person
clients. EXCEPTIONS: 1) Qualified Clients (person/company that immediately after
entering into contract has at least $1 million AUM by IA or net worth of $2 million; 2)
Irregular communication; 3) Impersonal Advisory Services are NOT required for
consideration when determining an IARs licensing requirement
Q7
State Notice Filing is generally required when
Answer: Varies by state but generally an SEC-registered IA must notice file in any
state in which it has 5 or more clients (de minimus). Exceptions: LA, NE, NH & TX
, Q8
When is State Adviser Registration generally required?
Answer: Investment Advisers are generally required to register in the state where
they have a principal place of business and any states where they maintain de
minimus (5 or more clients in that state with the exception of LA, NE, NH & TX which
have their own de minimus)
Q9
Define client according to Advisers Act
Answer: The following are deemed a SINGLE CLIENT 1) a natural person, and: (i) any
minor child; (ii) any relative, spouse, or relative of spouse having same residence; (iii)
all accounts of which the person is the only primary beneficiary; and (iv) all trusts of
the person or of which the person is the only primary beneficiary; 2) A corporation,
general partnership, limited partnership, LLC, trust, or other legal org receiving advice
based on investment objectives rather than individual objectives of
shareholders/partners/etc. INCLUDING two or more legal orgs having identical owners
Q10
Define suitability
Answer: recommendations in light of a clients experience, situation and objectives
Q11
Describe characteristics fulfilling suitability obligation
Answer: Render disinterested/impartial advice, exercise high degree of care to ensure
adequate and accurate recommendations/info is presented, and prior due diligence on
holdings selected
Q12
Describe 3 requirements related to client investment objectives/restrictions
Answer: Advisor must: match portfolio decisions with client mandates, create and
maintain client profile, execute investment advisory agreement
Q1
SEC vs Capital Gains Research Bureau basis of Fiduciary Rule, specifically Best Interest
Answer: "Investment Adviser" person/firm compensated for engaging in business of
(directly or indirectly) advising others on securities or the advisability of investing (or)
who issues analysis/reports concerning securities
Q2
SEC Registration Optional when 1) AUM $25-100M (except NY req. at $25M) - OR 2) Advisers
Registered in 15 or more States (AUM $25M or less PROHIBITED from registering w/ SEC but
held to various state requirements)
Answer: SEC Registration Required when 1) definition of "IA" is met (unless otherwise
excepted from definition or exempt/prohibited from registration); AND $100M in AUM
(optional for Mid-Sized Advisers AUM $100-115M Buffer Zone) - OR - 2) when ADVISING
a Registered Investment Company - OR - 3) AUM $25-100M AND NOT
registered/required to register with State OR NOT Subject to EXAMS by State
Registration withdraw required for AUM under $90M
Q3
EXEMPTIONS from SEC Registration: 1) Intrastate Advisers: NOT advising, analyzing or reporting
on NSE Listed Securities* and ALL Clients reside in same state as principal office (*includes
securities w/ unlisted trading privileges); 2) Advisers to ONLY Insurance Companies; 3) Private
Fund Advisers w/ AUM less than $150M, and Advisers to Foreign Private and Venture Capital
Funds; 4) Church Plans, and certain 5) Charitable organizations 6) Registered Commodity
Trading 7) Small Business Investment Companies
Answer: EXCLUDED from Definition of "IA" are: 1) Domestic banks and bank holding
companies; 2) Services SOLELY Incidental by lawyers, accountants, engineers,
teachers, (and) 3) BD advisory services w/out special compensation; 4) Publishers of
bona fide newspapers/mags w/Regular Circulation; 5) Advising Direct Obligations of US
(bonds); 6) NRSROs (Nationally Recognized Statistical Rating Orgs; 7) Family Offices;
and 8) Others designated by SEC rulemaking (such as those otherwise prohibited or
exempt)
,Q4
Form PF (intended to Monitor Systematic Risk to US Financial System) is required by advisers to
Hedge & other Private Funds, and SEC-Registered Advisers to 1 or More Private Funds having at
least $150M AUM attributable to such as of last fiscal year-end Form PF filing EXEMPTION:
Advisers NOT registered/required to register with SEC
Answer: Private Fund Adviser Exemption Criteria: PRIVATE FUND: Advise SOLELY
private funds (unlimited) so long as aggregate assets of such NOT EXCEEDING $150M
(per ADV annual calculation), including Non-US Advisers when ALL US clients are
Qualifying Private Funds VENTURE CAPITAL: Any advising SOLELY venture capital
funds FOREIGN PRIVATE: No place of business in US, Less than 15 private fund
clients/investors in US, Less than $25M aggregate AUM attributed to clients/private
fund investors, AND doesn't hold out to US public as an IA
Q5
Repeal of Private Adviser Exemption (per Dodd-Frank) brought into SEC's regulatory view
hedge, private equity, venture capital, and other private funds by adding regulation to
circumvent adviser's use of a loop-hole to avoid registration in which each fund, and not it's
underlying investors, is counted as a "client"
Answer: Dodd-Frank also resulted in changes to AUM by 1) raising registration
threshold to $100M, and creating Mid-Sized adviser category w/ AUM $25-100M (w/
$100-115 Buffer Zone); and 2) "RAUM" Uniform Calculation of Gross Basis at Market
Value (or fair value if n/a) to include: (i) "Securities Portfolios" (any consisting of at
least 50%) and/or Private Funds to which adviser provides Regular/Continuous
Supervisory or Management services; (ii) Proprietary accounts (owned in aggregate
25% or more), accts managed w/out compensation and those of foreign clients; and
(iii) uncalled capital commitments to private fund(s)
Q6
When is IAR licensing required and what are the exceptions?
Answer: An IAR (supervised person of an Investment Advisor) is required to be
licensed when it has more than 5 and with more than 10% of which are natural person
clients. EXCEPTIONS: 1) Qualified Clients (person/company that immediately after
entering into contract has at least $1 million AUM by IA or net worth of $2 million; 2)
Irregular communication; 3) Impersonal Advisory Services are NOT required for
consideration when determining an IARs licensing requirement
Q7
State Notice Filing is generally required when
Answer: Varies by state but generally an SEC-registered IA must notice file in any
state in which it has 5 or more clients (de minimus). Exceptions: LA, NE, NH & TX
, Q8
When is State Adviser Registration generally required?
Answer: Investment Advisers are generally required to register in the state where
they have a principal place of business and any states where they maintain de
minimus (5 or more clients in that state with the exception of LA, NE, NH & TX which
have their own de minimus)
Q9
Define client according to Advisers Act
Answer: The following are deemed a SINGLE CLIENT 1) a natural person, and: (i) any
minor child; (ii) any relative, spouse, or relative of spouse having same residence; (iii)
all accounts of which the person is the only primary beneficiary; and (iv) all trusts of
the person or of which the person is the only primary beneficiary; 2) A corporation,
general partnership, limited partnership, LLC, trust, or other legal org receiving advice
based on investment objectives rather than individual objectives of
shareholders/partners/etc. INCLUDING two or more legal orgs having identical owners
Q10
Define suitability
Answer: recommendations in light of a clients experience, situation and objectives
Q11
Describe characteristics fulfilling suitability obligation
Answer: Render disinterested/impartial advice, exercise high degree of care to ensure
adequate and accurate recommendations/info is presented, and prior due diligence on
holdings selected
Q12
Describe 3 requirements related to client investment objectives/restrictions
Answer: Advisor must: match portfolio decisions with client mandates, create and
maintain client profile, execute investment advisory agreement
