IACCP EXAMINATION 2 QUESTIONS WITH
DETAILED VERIFIED ANSWERS
Which THREE types of clients can be charged performance-based fees under the
Investment Advisers Act of 1940? (Choose three.)
A. Natural persons having $500,000 under management with the adviser.
B. Mutual funds having more than $1 million in managed assets.
C. Clients with at least $1.1 million under management with the adviser or a minimum net
worth of $2.2 million.
D. Hedge funds established under Investment Company Act Section 3(c)(7)(exemption for
private funds).
B, C, D
B. * Mutual funds having more than $1 million in managed assets.
C. * Clients with at least $1.1 million under management with the adviser or a minimum net
worth of $2.2 million.
D. * Hedge funds established under Investment Company Act Section 3(c)(7)(exemption for
private funds).
Which THREE activities should TYPICALLY require a review and possible changes to a
firm's written policies and procedures according to the SEC?(Choose three.)
A. Rulemaking and regulatory changes.
B. Replacing a retiring portfolio manager.
C. Changes in a firm's business activities.
D. Compliance issues within the firm.
a, c, d
A. * Rulemaking and regulatory changes
C. * Changes in a firm's business activities.
D. * Compliance issues within the firm.
,When trading for a client's account, Investment Adviser accidentally instructed the broker
to buy 1000 shares of Y at $1.00 per share when Adviser actually wanted to buy 1000
shares of X at $1.00 per share. Adviser realizes its mistake the next day, when Y is trading
for $0.95 per share and X is trading for $1.05 per share.
Adviser must sell Y and buy for the client:
A. $950 worth of X
B. $1,000 worth of X
C. $1,050 worth of X
D. $1,100 worth of X
c
C. * $1,050 worth of X
Which TWO types of supervised persons are also considered access persons?(Choose two.)
A. Back office personnel who input client new account information into the firm's client
management programs and enter trades, but do not talk to clients.
B. Third-party service provider who provides exception reporting to the RIA.
C. Passive directors and officers of the RIA.
D. Persons serving as directors of an affiliate of the adviser.
A, C
A. * Back office personnel who input client new account information into the firm's client
management programs and enter trades, but do not talk to clients.
C. * Passive directors and officers of the RIA.
Under the Compliance Program Rule, it is a best practice to create which TWO of the
following records? (Choose two.)
A. Appointment of board members.
B. Amendments to written policies and procedures.
, C. Written policies and procedures.
D. Written report of corrective actions taken per annual review.
B, C
B. * Amendments to written policies and procedures.
C. * Written policies and procedures.
If the SEC were to conduct an investigation, what would be the MOST likely outcome?
A. The CCO will be deemed to have failed reasonably to supervise
B. The CCO shall be suspended from future activity in a supervisory capacity.
C. The CCO shall not be deemed to have failed to reasonably supervise.
D. The CCO shall be deemed to have failed to adequately assess the risk exposure for the
firm.
C. * The CCO shall not be deemed to have failed to reasonably supervise.
In Form ADV Part 1, who is NOT considered a "high net worth individual"?
A. A qualified purchaser.
B. An individual with a net worth of $1 million
C. A couple with a net worth of $2 million, excluding their home.
D. An individual with $1 million assets under management
B. * An individual with a net worth of $1 million.
Sam Jones is the Chief Investment Officer and Chief Executive Officer of Smith Family
Advisers, LLC. Smith Family Advisers, LLC currently manages $250 million in securities.
All of the clients of Smith Family Advisers, LLC are members of the Smith family, and
prior to last year, the firm was entirely owned by members of the Smith family. Last year,
in recognition of Sam's long service and sound advice, the managing members of Smith
Family Advisers, LLC gave Sam a 5% interest in Smith Family Advisers, LLC.
Is Smith Family Advisers, LLC required to register with the SEC?
DETAILED VERIFIED ANSWERS
Which THREE types of clients can be charged performance-based fees under the
Investment Advisers Act of 1940? (Choose three.)
A. Natural persons having $500,000 under management with the adviser.
B. Mutual funds having more than $1 million in managed assets.
C. Clients with at least $1.1 million under management with the adviser or a minimum net
worth of $2.2 million.
D. Hedge funds established under Investment Company Act Section 3(c)(7)(exemption for
private funds).
B, C, D
B. * Mutual funds having more than $1 million in managed assets.
C. * Clients with at least $1.1 million under management with the adviser or a minimum net
worth of $2.2 million.
D. * Hedge funds established under Investment Company Act Section 3(c)(7)(exemption for
private funds).
Which THREE activities should TYPICALLY require a review and possible changes to a
firm's written policies and procedures according to the SEC?(Choose three.)
A. Rulemaking and regulatory changes.
B. Replacing a retiring portfolio manager.
C. Changes in a firm's business activities.
D. Compliance issues within the firm.
a, c, d
A. * Rulemaking and regulatory changes
C. * Changes in a firm's business activities.
D. * Compliance issues within the firm.
,When trading for a client's account, Investment Adviser accidentally instructed the broker
to buy 1000 shares of Y at $1.00 per share when Adviser actually wanted to buy 1000
shares of X at $1.00 per share. Adviser realizes its mistake the next day, when Y is trading
for $0.95 per share and X is trading for $1.05 per share.
Adviser must sell Y and buy for the client:
A. $950 worth of X
B. $1,000 worth of X
C. $1,050 worth of X
D. $1,100 worth of X
c
C. * $1,050 worth of X
Which TWO types of supervised persons are also considered access persons?(Choose two.)
A. Back office personnel who input client new account information into the firm's client
management programs and enter trades, but do not talk to clients.
B. Third-party service provider who provides exception reporting to the RIA.
C. Passive directors and officers of the RIA.
D. Persons serving as directors of an affiliate of the adviser.
A, C
A. * Back office personnel who input client new account information into the firm's client
management programs and enter trades, but do not talk to clients.
C. * Passive directors and officers of the RIA.
Under the Compliance Program Rule, it is a best practice to create which TWO of the
following records? (Choose two.)
A. Appointment of board members.
B. Amendments to written policies and procedures.
, C. Written policies and procedures.
D. Written report of corrective actions taken per annual review.
B, C
B. * Amendments to written policies and procedures.
C. * Written policies and procedures.
If the SEC were to conduct an investigation, what would be the MOST likely outcome?
A. The CCO will be deemed to have failed reasonably to supervise
B. The CCO shall be suspended from future activity in a supervisory capacity.
C. The CCO shall not be deemed to have failed to reasonably supervise.
D. The CCO shall be deemed to have failed to adequately assess the risk exposure for the
firm.
C. * The CCO shall not be deemed to have failed to reasonably supervise.
In Form ADV Part 1, who is NOT considered a "high net worth individual"?
A. A qualified purchaser.
B. An individual with a net worth of $1 million
C. A couple with a net worth of $2 million, excluding their home.
D. An individual with $1 million assets under management
B. * An individual with a net worth of $1 million.
Sam Jones is the Chief Investment Officer and Chief Executive Officer of Smith Family
Advisers, LLC. Smith Family Advisers, LLC currently manages $250 million in securities.
All of the clients of Smith Family Advisers, LLC are members of the Smith family, and
prior to last year, the firm was entirely owned by members of the Smith family. Last year,
in recognition of Sam's long service and sound advice, the managing members of Smith
Family Advisers, LLC gave Sam a 5% interest in Smith Family Advisers, LLC.
Is Smith Family Advisers, LLC required to register with the SEC?
