IACCP PRACTICE EXAM QUESTIONS WITH ACCURATE
ANSWERS
Under the SEC Investment Adviser Codes of Ethics Rule, all are reportable
securities Accurate Answer - Exchange listed securities, Proprietary
mutual funds, and Foreign issuers
Adviser is answering a Request for Proposal from a prospective institutional
client. TheRequest for Proposal asks Adviser to provide performance data for
one account of acomparable size as the prospective institutional client and in
the same style beingconsidered by the prospective institutional client. Adviser
replies by providing anappropriate client's most recent performance report.
The client's report showsperformance gross of fees and only shows the
previous three years of performance.
Has Adviser violated the marketing rule of the Advisers Act? Accurate
Answer - Yes, because the Request for Proposal did not specifically
requestperformance gross of fees and did not request performance for
aspecific time period.
Which action would result in an investment adviser having custody under the
InvestmentAdvisers Act of 1940? Accurate Answer - Having sole check
writing authority over a client's non-managed account.
Doug is a trader for an investment advisory firm. Doug shares a residence
with his wife,son, daughter and retired mother. Doug and his wife do not have
any investmentaccounts.
Which TWO family members will have to give Doug quarterly transaction
reports tosubmit? Accurate Answer - Doug's mother because she holds
only open-end funds, high qualityshort-term corporate debt, blue chip stocks
and U.S. governmentpaper in her brokerage account. AND Doug's son who has
an employee-directed 401(k) plan whoseinvestment options include only
open-end funds, high quality short-term corporate debt, blue chip stocks and
U.S. government paper.
Which TWO factors are considered mandatory provisions to be included in
advisorycontracts, if an adviser, as a matter of best practice, chooses to enter
into written advisorycontracts with its clients? (Choose two.) Accurate
, Answer - Disclosure of changes in the general partners of the partnership.
AND "No Assignment" clause without client consent.
An investment adviser manages performance-based and asset-based fee
accounts.Trade allocation of IPO shares could result in which TWO potential
conflicts of interest? Accurate Answer - Higher fees AND Preferential
treatment of certain clients
According to the SEC Investment Adviser Codes of Ethics Rule, all are
requirements foraccess persons Accurate Answer - Periodically report
their securities holdings to the Chief ComplianceOfficer or other designated
person.
Obtain the investment adviser's approval before investing in certaintypes of
securities.
Report personal securities transactions on a quarterly basis.
How can an investment adviser address material conflicts of interest as they
relate toproxy voting? Accurate Answer - Delegate responsibility for
voting proxies to a proxy voting service.
If an investment adviser has proxy voting authority, which record is NOT
required to bemaintained? Accurate Answer - Evidence of annual offer
of proxy policies and procedures.
Which TWO examples fall within the definition of an "advertisement"?
(Choose two.) Accurate Answer - A notice, circular, letter or other
written communication addressed tomore than one person.
Any endorsement or testimonial for which an investment adviserprovides
compensation.
When trading for a client's account, Investment Adviser accidentally
instructed the brokerto buy 1000 shares of Y at $1.00 per share when Adviser
actually wanted to buy 1000shares of X at $1.00 per share. Adviser realizes its
mistake the next day, when Y is tradingfor $0.95 per share and X is trading for
$1.05 per share. Adviser must sell Y and buy forthe client: Accurate
Answer - $1,000 worth of X
A Chief Compliance Officer (CCO) who has supervisory responsibility has
adoptedprocedures "reasonably designed" to prevent and detect violations of
ANSWERS
Under the SEC Investment Adviser Codes of Ethics Rule, all are reportable
securities Accurate Answer - Exchange listed securities, Proprietary
mutual funds, and Foreign issuers
Adviser is answering a Request for Proposal from a prospective institutional
client. TheRequest for Proposal asks Adviser to provide performance data for
one account of acomparable size as the prospective institutional client and in
the same style beingconsidered by the prospective institutional client. Adviser
replies by providing anappropriate client's most recent performance report.
The client's report showsperformance gross of fees and only shows the
previous three years of performance.
Has Adviser violated the marketing rule of the Advisers Act? Accurate
Answer - Yes, because the Request for Proposal did not specifically
requestperformance gross of fees and did not request performance for
aspecific time period.
Which action would result in an investment adviser having custody under the
InvestmentAdvisers Act of 1940? Accurate Answer - Having sole check
writing authority over a client's non-managed account.
Doug is a trader for an investment advisory firm. Doug shares a residence
with his wife,son, daughter and retired mother. Doug and his wife do not have
any investmentaccounts.
Which TWO family members will have to give Doug quarterly transaction
reports tosubmit? Accurate Answer - Doug's mother because she holds
only open-end funds, high qualityshort-term corporate debt, blue chip stocks
and U.S. governmentpaper in her brokerage account. AND Doug's son who has
an employee-directed 401(k) plan whoseinvestment options include only
open-end funds, high quality short-term corporate debt, blue chip stocks and
U.S. government paper.
Which TWO factors are considered mandatory provisions to be included in
advisorycontracts, if an adviser, as a matter of best practice, chooses to enter
into written advisorycontracts with its clients? (Choose two.) Accurate
, Answer - Disclosure of changes in the general partners of the partnership.
AND "No Assignment" clause without client consent.
An investment adviser manages performance-based and asset-based fee
accounts.Trade allocation of IPO shares could result in which TWO potential
conflicts of interest? Accurate Answer - Higher fees AND Preferential
treatment of certain clients
According to the SEC Investment Adviser Codes of Ethics Rule, all are
requirements foraccess persons Accurate Answer - Periodically report
their securities holdings to the Chief ComplianceOfficer or other designated
person.
Obtain the investment adviser's approval before investing in certaintypes of
securities.
Report personal securities transactions on a quarterly basis.
How can an investment adviser address material conflicts of interest as they
relate toproxy voting? Accurate Answer - Delegate responsibility for
voting proxies to a proxy voting service.
If an investment adviser has proxy voting authority, which record is NOT
required to bemaintained? Accurate Answer - Evidence of annual offer
of proxy policies and procedures.
Which TWO examples fall within the definition of an "advertisement"?
(Choose two.) Accurate Answer - A notice, circular, letter or other
written communication addressed tomore than one person.
Any endorsement or testimonial for which an investment adviserprovides
compensation.
When trading for a client's account, Investment Adviser accidentally
instructed the brokerto buy 1000 shares of Y at $1.00 per share when Adviser
actually wanted to buy 1000shares of X at $1.00 per share. Adviser realizes its
mistake the next day, when Y is tradingfor $0.95 per share and X is trading for
$1.05 per share. Adviser must sell Y and buy forthe client: Accurate
Answer - $1,000 worth of X
A Chief Compliance Officer (CCO) who has supervisory responsibility has
adoptedprocedures "reasonably designed" to prevent and detect violations of
