IACCP Actual Questions and Correct Answers
Q1
Which THREE types of clients can be charged performance-based fees under the Investment
Advisers Act of 1940? (Choose three.) Natural persons having $500,000 under management
with the adviser. Mutual funds having more than $1 million in managed assets. Clients with at
least $1.1 million under management with the adviser or a minimum net worth of $2.2 million.
Hedge funds established under Investment Company Act Section 3(c)(7)(exemption for private
funds).
Answer: 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).
Q2
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.) Rulemaking and
regulatory changes. Replacing a retiring portfolio manager. Changes in a firm's business
activities. Compliance issues within the firm.
Answer: a, c, d A. * Rulemaking and regulatory changes C. * Changes in a firm's
business activities. D. * Compliance issues within the firm.
Q3
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: $950
worth of X $1,000 worth of X $1,050 worth of X $1,100 worth of X
Answer: c C. * $1,050 worth of X
Q4
Which TWO types of supervised persons are also considered access persons?(Choose two.)
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. Third-party service provider
who provides exception reporting to the RIA. Passive directors and officers of the RIA. Persons
serving as directors of an affiliate of the adviser.
Answer: 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.
, Q5
Under the Compliance Program Rule, it is a best practice to create which TWO of the following
records? (Choose two.) Appointment of board members. Amendments to written policies and
procedures. Written policies and procedures. Written report of corrective actions taken per
annual review.
Answer: B, C B. * Amendments to written policies and procedures. C. * Written policies
and procedures.
Q6
If the SEC were to conduct an investigation, what would be the MOST likely outcome? The CCO
will be deemed to have failed reasonably to supervise The CCO shall be suspended from future
activity in a supervisory capacity. The CCO shall not be deemed to have failed to reasonably
supervise. The CCO shall be deemed to have failed to adequately assess the risk exposure for
the firm.
Answer: C. * The CCO shall not be deemed to have failed to reasonably supervise.
Q7
In Form ADV Part 1, who is NOT considered a "high net worth individual"? A qualified purchaser.
An individual with a net worth of $1 million A couple with a net worth of $2 million, excluding
their home. An individual with $1 million assets under management
Answer: B. * An individual with a net worth of $1 million.
Q8
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? A. Yes, because Sam is not a member of the Smith family. B. No, because Sam
owns less than 25% of Smith Family Advisers.
Answer: A. * Yes, because Sam is not a member of the Smith family.
Q1
Which THREE types of clients can be charged performance-based fees under the Investment
Advisers Act of 1940? (Choose three.) Natural persons having $500,000 under management
with the adviser. Mutual funds having more than $1 million in managed assets. Clients with at
least $1.1 million under management with the adviser or a minimum net worth of $2.2 million.
Hedge funds established under Investment Company Act Section 3(c)(7)(exemption for private
funds).
Answer: 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).
Q2
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.) Rulemaking and
regulatory changes. Replacing a retiring portfolio manager. Changes in a firm's business
activities. Compliance issues within the firm.
Answer: a, c, d A. * Rulemaking and regulatory changes C. * Changes in a firm's
business activities. D. * Compliance issues within the firm.
Q3
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: $950
worth of X $1,000 worth of X $1,050 worth of X $1,100 worth of X
Answer: c C. * $1,050 worth of X
Q4
Which TWO types of supervised persons are also considered access persons?(Choose two.)
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. Third-party service provider
who provides exception reporting to the RIA. Passive directors and officers of the RIA. Persons
serving as directors of an affiliate of the adviser.
Answer: 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.
, Q5
Under the Compliance Program Rule, it is a best practice to create which TWO of the following
records? (Choose two.) Appointment of board members. Amendments to written policies and
procedures. Written policies and procedures. Written report of corrective actions taken per
annual review.
Answer: B, C B. * Amendments to written policies and procedures. C. * Written policies
and procedures.
Q6
If the SEC were to conduct an investigation, what would be the MOST likely outcome? The CCO
will be deemed to have failed reasonably to supervise The CCO shall be suspended from future
activity in a supervisory capacity. The CCO shall not be deemed to have failed to reasonably
supervise. The CCO shall be deemed to have failed to adequately assess the risk exposure for
the firm.
Answer: C. * The CCO shall not be deemed to have failed to reasonably supervise.
Q7
In Form ADV Part 1, who is NOT considered a "high net worth individual"? A qualified purchaser.
An individual with a net worth of $1 million A couple with a net worth of $2 million, excluding
their home. An individual with $1 million assets under management
Answer: B. * An individual with a net worth of $1 million.
Q8
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? A. Yes, because Sam is not a member of the Smith family. B. No, because Sam
owns less than 25% of Smith Family Advisers.
Answer: A. * Yes, because Sam is not a member of the Smith family.
