Series 65 Questions with correct answers
The Uniform Securities Act excludes certain persons from the definition
of an investment adviser if their performance of advisory services is
solely incidental to their professions. This exclusion would apply to all
of the following EXCEPT.
A. An Accountant
B. An Economist
C. An Electrical Engineer
D. A College Professor teaching a course on economics. Correct
Answer-Answer: B. As long as the activity is incidental to the
professional practice and no separate fee for the advice is charged, the
act specifically excludes L.A.T.E. and not economists.
Which of the following would be excluded from the definition of
investment adviser under the Uniform Securities Act?
A. The publisher of a weekly magazine, sold on newsstands that
contains at least 5 stock recommendations per issue.
B. A broker-dealer making a separate charge for investment advice
C. A civil damages attorney who advertises that she is available to assist
clients in suggesting appropriate investments for their successful claim
D. A finance teacher at a local community college who offers weekend
seminars on comprehensive financial planning at a very reasonable
price. Correct Answer-Answer: A. Publishers of general circulation
newspapers and magazines are excluded from the definition of
investment adviser, especially because the entire publication is devoted
,to impersonal investment advice. An important key is here is that it is
published regularly, not upon market events. A broker dealer loses its
exclusion the moment it offers advice for a separate charge, as does an
attorney who holds herself out as offering investment advice. Normally a
teacher is excluded, but not when charging for advice as would appear to
be the case here. On this examination, the term comprehensive (or total)
financial planning always includes securities advice.
Exemptions Correct Answer-When it comes to exemptions state and
federal laws have established rules whereby a person, although meeting
the definition of an investment adviser, is not required to register as
such. That person is considered to be exempt from registration. Because
the state and federal exemptions are not as similar as the exclusions, let's
take them separately starting with the exemptions available under the
Investment Advisers Act of 1940 (federal law).
Federal Law Exemptions Correct Answer-1. Intrastate Advisors
2. Advisers to Insurance Companies
Intrastate Advisers (Only Within One State) Correct Answer-Investment
advisers, whose clients are residents of the state in which the adviser has
its principal office and only place of business and who do not give
advice dealing with securities listed on any national exchange (NYSE)
are exempt. For example, an adviser would be exempted under this
provision if all of its clients were Georgia residents, its only place of
business were in Georgia and it did not give advice on securities listed
on any national exchange.
,Advisers to Insurance Companies Correct Answer-Advisers whose only
clients are insurance companies are exempt.
State Law Exemptions Correct Answer-The Uniform Securities Act
exempts from registration certain persons who, although they fall within
the definition of an investment adviser, do not have to register as such in
the state.
Investment advisers exempt from registration with the state
Administrator are those who have no place of business in the state but
are registered in another state (provided their only clients in the state
are)
1. Broker-dealers registered under the act;
2. Other investment advisers;
3. Institutional investors;
4. Existing clients who are not residents but are temporarily in the state;
5. Limited to 5 or fewer clients, other than those listed above, resident in
the state during the preceding 12 months (called the de minims
exemption); or
6. Any others the Administrator exempts by rule or order.
Definition: Institution Correct Answer-The term institution would
include banks, trust companies, saving and loan associations, insurance
companies, investment companies (e.g. mutual funds), employee benefit
plans with assets of not less than 1 million, and governmental agencies
or instrumentalities.
, Institutions are included in the term person.
The act generally affords less protection to these investors owing their
supposed greater investment sophistication.
Retail Client Correct Answer-A few questions use the term retail client
instead of non institutional client. Look for it and remember that retail
clients need FAR more protection than institutional ones.
If the question refers to an individual, that will always be a retail client
Snowbird Exemption Correct Answer-is a term used for IA's who have
no place of business in the state, but are licensed in another state and
only offer advice in the state only with persons in the state who are
existing customers not in the state but just there temporarily. It is called
this because of the fact that there are clients leaving winter climates for
warmer climates.
If the client should change legal residence to that state, the adviser has
30 days to register in that state or discontinue doing business with that
client (unless qualifying for the minims exemption).
Think of it like moving to a state and getting a new license. You have 30
days.
The Uniform Securities Act excludes certain persons from the definition
of an investment adviser if their performance of advisory services is
solely incidental to their professions. This exclusion would apply to all
of the following EXCEPT.
A. An Accountant
B. An Economist
C. An Electrical Engineer
D. A College Professor teaching a course on economics. Correct
Answer-Answer: B. As long as the activity is incidental to the
professional practice and no separate fee for the advice is charged, the
act specifically excludes L.A.T.E. and not economists.
Which of the following would be excluded from the definition of
investment adviser under the Uniform Securities Act?
A. The publisher of a weekly magazine, sold on newsstands that
contains at least 5 stock recommendations per issue.
B. A broker-dealer making a separate charge for investment advice
C. A civil damages attorney who advertises that she is available to assist
clients in suggesting appropriate investments for their successful claim
D. A finance teacher at a local community college who offers weekend
seminars on comprehensive financial planning at a very reasonable
price. Correct Answer-Answer: A. Publishers of general circulation
newspapers and magazines are excluded from the definition of
investment adviser, especially because the entire publication is devoted
,to impersonal investment advice. An important key is here is that it is
published regularly, not upon market events. A broker dealer loses its
exclusion the moment it offers advice for a separate charge, as does an
attorney who holds herself out as offering investment advice. Normally a
teacher is excluded, but not when charging for advice as would appear to
be the case here. On this examination, the term comprehensive (or total)
financial planning always includes securities advice.
Exemptions Correct Answer-When it comes to exemptions state and
federal laws have established rules whereby a person, although meeting
the definition of an investment adviser, is not required to register as
such. That person is considered to be exempt from registration. Because
the state and federal exemptions are not as similar as the exclusions, let's
take them separately starting with the exemptions available under the
Investment Advisers Act of 1940 (federal law).
Federal Law Exemptions Correct Answer-1. Intrastate Advisors
2. Advisers to Insurance Companies
Intrastate Advisers (Only Within One State) Correct Answer-Investment
advisers, whose clients are residents of the state in which the adviser has
its principal office and only place of business and who do not give
advice dealing with securities listed on any national exchange (NYSE)
are exempt. For example, an adviser would be exempted under this
provision if all of its clients were Georgia residents, its only place of
business were in Georgia and it did not give advice on securities listed
on any national exchange.
,Advisers to Insurance Companies Correct Answer-Advisers whose only
clients are insurance companies are exempt.
State Law Exemptions Correct Answer-The Uniform Securities Act
exempts from registration certain persons who, although they fall within
the definition of an investment adviser, do not have to register as such in
the state.
Investment advisers exempt from registration with the state
Administrator are those who have no place of business in the state but
are registered in another state (provided their only clients in the state
are)
1. Broker-dealers registered under the act;
2. Other investment advisers;
3. Institutional investors;
4. Existing clients who are not residents but are temporarily in the state;
5. Limited to 5 or fewer clients, other than those listed above, resident in
the state during the preceding 12 months (called the de minims
exemption); or
6. Any others the Administrator exempts by rule or order.
Definition: Institution Correct Answer-The term institution would
include banks, trust companies, saving and loan associations, insurance
companies, investment companies (e.g. mutual funds), employee benefit
plans with assets of not less than 1 million, and governmental agencies
or instrumentalities.
, Institutions are included in the term person.
The act generally affords less protection to these investors owing their
supposed greater investment sophistication.
Retail Client Correct Answer-A few questions use the term retail client
instead of non institutional client. Look for it and remember that retail
clients need FAR more protection than institutional ones.
If the question refers to an individual, that will always be a retail client
Snowbird Exemption Correct Answer-is a term used for IA's who have
no place of business in the state, but are licensed in another state and
only offer advice in the state only with persons in the state who are
existing customers not in the state but just there temporarily. It is called
this because of the fact that there are clients leaving winter climates for
warmer climates.
If the client should change legal residence to that state, the adviser has
30 days to register in that state or discontinue doing business with that
client (unless qualifying for the minims exemption).
Think of it like moving to a state and getting a new license. You have 30
days.
