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IACCP MASTER QUESTIONS BANK
QUESTIONS AND ANSWERS 2025
The SMC Capital, Inc. No-Action Letter (September 5, 1995)
states that trade allocations may occur:
A. Only on a rotational basis
B. On a pro rata basis but other allocation methods can be
used without violating the Advisers Act
C. Only on a pro rata basis
D. Based on the trader's good faith discretion - correct answer-
B. On a pro rata basis but other allocation methods can be
used without violating the Advisers Act
Which of the following should NOT be a factor when evaluating
best execution?
A. Price
B. Transaction costs
C. Availability of affiliated brokerage services
D. Service and execution capability - correct answer- C.
Availability of affiliated brokerage services
Under the safe harbor provided by Section 28(e) of the
Securities and Exchange Act of 1934, a "mixed use"
product/service, purchased with soft dollars, most likely refers
to which of the following:
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A. A research newsletter used by analysts
B. A computer terminal used only to place client trades
C. Portfolio management software used to calculate client
returns
D. A junket to Pebble Beach for golf - correct answer- C.
Portfolio management software used to calculate client returns
An adviser's valuation procedures should, practically speaking,
be prepared with the LEAST attention to:
A. Large cap stocks
B. Illiquid investments
C. Foreign issues
D. Micro cap stocks - correct answer- A. Large cap stocks
Agency cross transactions do NOT require:
A. Annual disclosure to advisory clients of the number of
agency cross transactions
B. Annual disclosure of the total remuneration received by the
adviser through agency cross transactions
C. Consent from at least two advisory clients
D. Disclosures that written consent may be revoked at any time
- correct answer- C. Consent from at least two advisory clients
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"Bailey disclosure" refers to the concept of advising clients of
the effect of directing the adviser to use a particular broker(s).
Disclosure about the ramifications of brokerage direction should
include:
A. Potential conflicts of interest when a directed broker referred
the client to the adviser
B. Limits on the ability of the adviser to negotiate commissions
C. Restrictions on placing directed trades with other client
trades
D. All of the above - correct answer- D. All of the above
Which of the following statements is FALSE?
A. Trade errors must be resolved for the client's benefit.
B. Principal transactions require consent prior to settlement.
C. Commissions generated from ERISA plan transactions may
never be used to generate soft dollars.
D. An adviser's fiduciary duty includes allocating investment
opportunities fairly and equitably. - correct answer- C.
Commissions generated from ERISA plan transactions may
never be used to generate soft dollars.
A client directs an adviser to execute securities transactions
with ABC Broker. What are adviser's obligation(s) in trading for
this client?
A. To consider ABC Broker when conducting client's
transactions
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B. To execute all of client's transactions with ABC Broker
C. To execute some of client's transactions with ABC Broker
regardless of best execution
D. To execute all of client's transactions with ABC Broker,
consistent with the adviser's duty to achieve best execution -
correct answer- B. To execute all of client's transactions with
ABC Broker
Some of adviser's clients have directed that certain brokers be
used to trade for their accounts. When executing similar
transactions for non-directed and directed business, the adviser
should:
A. Ensure its order of transactions is consistent with its
disclosure
B. Promise to receive equal execution for non-directed and
directed business
C. Always execute directed transactions first
D. Consider which client's accounts need improved
performance - correct answer- A. ensure its order of
transactions is consistent with its disclosure
Which of the following statements is FALSE?
A. In a soft dollar arrangement, an adviser always receives
research services produced by a third party whom the broker-
dealer pays.
IACCP MASTER QUESTIONS BANK
QUESTIONS AND ANSWERS 2025
The SMC Capital, Inc. No-Action Letter (September 5, 1995)
states that trade allocations may occur:
A. Only on a rotational basis
B. On a pro rata basis but other allocation methods can be
used without violating the Advisers Act
C. Only on a pro rata basis
D. Based on the trader's good faith discretion - correct answer-
B. On a pro rata basis but other allocation methods can be
used without violating the Advisers Act
Which of the following should NOT be a factor when evaluating
best execution?
A. Price
B. Transaction costs
C. Availability of affiliated brokerage services
D. Service and execution capability - correct answer- C.
Availability of affiliated brokerage services
Under the safe harbor provided by Section 28(e) of the
Securities and Exchange Act of 1934, a "mixed use"
product/service, purchased with soft dollars, most likely refers
to which of the following:
,2 | Page
A. A research newsletter used by analysts
B. A computer terminal used only to place client trades
C. Portfolio management software used to calculate client
returns
D. A junket to Pebble Beach for golf - correct answer- C.
Portfolio management software used to calculate client returns
An adviser's valuation procedures should, practically speaking,
be prepared with the LEAST attention to:
A. Large cap stocks
B. Illiquid investments
C. Foreign issues
D. Micro cap stocks - correct answer- A. Large cap stocks
Agency cross transactions do NOT require:
A. Annual disclosure to advisory clients of the number of
agency cross transactions
B. Annual disclosure of the total remuneration received by the
adviser through agency cross transactions
C. Consent from at least two advisory clients
D. Disclosures that written consent may be revoked at any time
- correct answer- C. Consent from at least two advisory clients
,3 | Page
"Bailey disclosure" refers to the concept of advising clients of
the effect of directing the adviser to use a particular broker(s).
Disclosure about the ramifications of brokerage direction should
include:
A. Potential conflicts of interest when a directed broker referred
the client to the adviser
B. Limits on the ability of the adviser to negotiate commissions
C. Restrictions on placing directed trades with other client
trades
D. All of the above - correct answer- D. All of the above
Which of the following statements is FALSE?
A. Trade errors must be resolved for the client's benefit.
B. Principal transactions require consent prior to settlement.
C. Commissions generated from ERISA plan transactions may
never be used to generate soft dollars.
D. An adviser's fiduciary duty includes allocating investment
opportunities fairly and equitably. - correct answer- C.
Commissions generated from ERISA plan transactions may
never be used to generate soft dollars.
A client directs an adviser to execute securities transactions
with ABC Broker. What are adviser's obligation(s) in trading for
this client?
A. To consider ABC Broker when conducting client's
transactions
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B. To execute all of client's transactions with ABC Broker
C. To execute some of client's transactions with ABC Broker
regardless of best execution
D. To execute all of client's transactions with ABC Broker,
consistent with the adviser's duty to achieve best execution -
correct answer- B. To execute all of client's transactions with
ABC Broker
Some of adviser's clients have directed that certain brokers be
used to trade for their accounts. When executing similar
transactions for non-directed and directed business, the adviser
should:
A. Ensure its order of transactions is consistent with its
disclosure
B. Promise to receive equal execution for non-directed and
directed business
C. Always execute directed transactions first
D. Consider which client's accounts need improved
performance - correct answer- A. ensure its order of
transactions is consistent with its disclosure
Which of the following statements is FALSE?
A. In a soft dollar arrangement, an adviser always receives
research services produced by a third party whom the broker-
dealer pays.
