IACCP Actual Questions and Correct Answers
Q1
"Investment Adviser" person/firm compensated for engaging in business of (directly or
indirectly) advising others on securities or the advisability of investing (or) who issues
analysis/reports concerning securities
Answer: SEC vs Capital Gains Research Bureau basis of Fiduciary Rule, specifically
Best Interest
Q2
SEC Registration Required when 1) definition of "IA" is met (unless otherwise excepted from
definition or exempt/prohibited from registration); AND $100M in AUM (optional for Mid-Sized
Advisers AUM $100-115M Buffer Zone) - OR - 2) when ADVISING a Registered Investment
Company - OR - 3) AUM $25-100M AND NOT registered/required to register with State OR NOT
Subject to EXAMS by State Registration withdraw required for AUM under $90M
Answer: SEC Registration Optional when 1) AUM $25-100M (except NY req. at $25M) -
OR - 2) Advisers Registered in 15 or more States (AUM $25M or less PROHIBITED from
registering w/ SEC but held to various state requirements)
Q3
EXCLUDED from Definition of "IA" are: 1) Domestic banks and bank holding companies; 2)
Services SOLELY Incidental by lawyers, accountants, engineers, teachers, (and) 3) BD advisory
services w/out special compensation; 4) Publishers of bona fide newspapers/mags w/Regular
Circulation; 5) Advising Direct Obligations of US (bonds); 6) NRSROs (Nationally Recognized
Statistical Rating Orgs; 7) Family Offices; and 8) Others designated by SEC rulemaking (such as
those otherwise prohibited or exempt)
Answer: EXEMPTIONS from SEC Registration: 1) Intrastate Advisers: NOT advising,
analyzing or reporting on NSE Listed Securities* and ALL Clients reside in same state
as principal office (*includes securities w/ unlisted trading privileges); 2) Advisers to
ONLY Insurance Companies; 3) Private Fund Advisers w/ AUM less than $150M, and
Advisers to Foreign Private and Venture Capital Funds; 4) Church Plans, and certain 5)
Charitable organizations 6) Registered Commodity Trading 7) Small Business
Investment Companies
,Q4
Private Fund Adviser Exemption Criteria: PRIVATE FUND: Advise SOLELY private funds
(unlimited) so long as aggregate assets of such NOT EXCEEDING $150M (per ADV annual
calculation), including Non-US Advisers when ALL US clients are Qualifying Private Funds
VENTURE CAPITAL: Any advising SOLELY venture capital funds FOREIGN PRIVATE: No place of
business in US, Less than 15 private fund clients/investors in US, Less than $25M aggregate
AUM attributed to clients/private fund investors, AND doesn't hold out to US public as an IA
Answer: Form PF (intended to Monitor Systematic Risk to US Financial System) is
required by advisers to Hedge & other Private Funds, and SEC-Registered Advisers to
1 or More Private Funds having at least $150M AUM attributable to such as of last
fiscal year-end Form PF filing EXEMPTION: Advisers NOT registered/required to
register with SEC
Q5
Dodd-Frank also resulted in changes to AUM by 1) raising registration threshold to $100M, and
creating Mid-Sized adviser category w/ AUM $25-100M (w/ $100-115 Buffer Zone); and 2)
"RAUM" Uniform Calculation of Gross Basis at Market Value (or fair value if n/a) to include: (i)
"Securities Portfolios" (any consisting of at least 50%) and/or Private Funds to which adviser
provides Regular/Continuous Supervisory or Management services; (ii) Proprietary accounts
(owned in aggregate 25% or more), accts managed w/out compensation and those of foreign
clients; and (iii) uncalled capital commitments to private fund(s)
Answer: Repeal of Private Adviser Exemption (per Dodd-Frank) brought into SEC's
regulatory view hedge, private equity, venture capital, and other private funds by
adding regulation to circumvent adviser's use of a loop-hole to avoid registration in
which each fund, and not it's underlying investors, is counted as a "client"
Q6
An IAR (supervised person of an Investment Advisor) is required to be licensed when it has
more than 5 and with more than 10% of which are natural person clients. EXCEPTIONS: 1)
Qualified Clients (person/company that immediately after entering into contract has at least $1
million AUM by IA or net worth of $2 million; 2) Irregular communication; 3) Impersonal Advisory
Services are NOT required for consideration when determining an IARs licensing requirement
Answer: When is IAR licensing required and what are the exceptions?
Q7
Varies by state but generally an SEC-registered IA must notice file in any state in which it has 5
or more clients (de minimus). Exceptions: LA, NE, NH & TX
Answer: State Notice Filing is generally required when
, Q8
Investment Advisers are generally required to register in the state where they have a principal
place of business and any states where they maintain de minimus (5 or more clients in that
state with the exception of LA, NE, NH & TX which have their own de minimus)
Answer: When is State Adviser Registration generally required?
Q9
The following are deemed a SINGLE CLIENT a natural person, and: (i) any minor child; (ii) any
relative, spouse, or relative of spouse having same residence; (iii) all accounts of which the
person is the only primary beneficiary; and (iv) all trusts of the person or of which the person is
the only primary beneficiary; A corporation, general partnership, limited partnership, LLC, trust,
or other legal org receiving advice based on investment objectives rather than individual
objectives of shareholders/partners/etc. INCLUDING two or more legal orgs having identical
owners
Answer: Define client according to Advisers Act
Q10
Render disinterested/impartial advice, exercise high degree of care to ensure adequate and
accurate recommendations/info is presented, and prior due diligence on holdings selected
Answer: Describe characteristics fulfilling suitability obligation
Q11
Advisor must: match portfolio decisions with client mandates, create and maintain client profile,
execute investment advisory agreement
Answer: Describe 3 requirements related to client investment objectives/restrictions
Q12
Goal is to provide certain investment advisory programs (such as wrap fees, model accounts
and others having similar objectives and investments traded simultaneously with all clients
being treated similarly) a non-exclusive safe harbor from the definition of an investment
company and from being deemed to be a mutual fund, therefore requiring registration as such.
Answer: What is the goal of the Safe Harbor Rule?
Q1
"Investment Adviser" person/firm compensated for engaging in business of (directly or
indirectly) advising others on securities or the advisability of investing (or) who issues
analysis/reports concerning securities
Answer: SEC vs Capital Gains Research Bureau basis of Fiduciary Rule, specifically
Best Interest
Q2
SEC Registration Required when 1) definition of "IA" is met (unless otherwise excepted from
definition or exempt/prohibited from registration); AND $100M in AUM (optional for Mid-Sized
Advisers AUM $100-115M Buffer Zone) - OR - 2) when ADVISING a Registered Investment
Company - OR - 3) AUM $25-100M AND NOT registered/required to register with State OR NOT
Subject to EXAMS by State Registration withdraw required for AUM under $90M
Answer: SEC Registration Optional when 1) AUM $25-100M (except NY req. at $25M) -
OR - 2) Advisers Registered in 15 or more States (AUM $25M or less PROHIBITED from
registering w/ SEC but held to various state requirements)
Q3
EXCLUDED from Definition of "IA" are: 1) Domestic banks and bank holding companies; 2)
Services SOLELY Incidental by lawyers, accountants, engineers, teachers, (and) 3) BD advisory
services w/out special compensation; 4) Publishers of bona fide newspapers/mags w/Regular
Circulation; 5) Advising Direct Obligations of US (bonds); 6) NRSROs (Nationally Recognized
Statistical Rating Orgs; 7) Family Offices; and 8) Others designated by SEC rulemaking (such as
those otherwise prohibited or exempt)
Answer: EXEMPTIONS from SEC Registration: 1) Intrastate Advisers: NOT advising,
analyzing or reporting on NSE Listed Securities* and ALL Clients reside in same state
as principal office (*includes securities w/ unlisted trading privileges); 2) Advisers to
ONLY Insurance Companies; 3) Private Fund Advisers w/ AUM less than $150M, and
Advisers to Foreign Private and Venture Capital Funds; 4) Church Plans, and certain 5)
Charitable organizations 6) Registered Commodity Trading 7) Small Business
Investment Companies
,Q4
Private Fund Adviser Exemption Criteria: PRIVATE FUND: Advise SOLELY private funds
(unlimited) so long as aggregate assets of such NOT EXCEEDING $150M (per ADV annual
calculation), including Non-US Advisers when ALL US clients are Qualifying Private Funds
VENTURE CAPITAL: Any advising SOLELY venture capital funds FOREIGN PRIVATE: No place of
business in US, Less than 15 private fund clients/investors in US, Less than $25M aggregate
AUM attributed to clients/private fund investors, AND doesn't hold out to US public as an IA
Answer: Form PF (intended to Monitor Systematic Risk to US Financial System) is
required by advisers to Hedge & other Private Funds, and SEC-Registered Advisers to
1 or More Private Funds having at least $150M AUM attributable to such as of last
fiscal year-end Form PF filing EXEMPTION: Advisers NOT registered/required to
register with SEC
Q5
Dodd-Frank also resulted in changes to AUM by 1) raising registration threshold to $100M, and
creating Mid-Sized adviser category w/ AUM $25-100M (w/ $100-115 Buffer Zone); and 2)
"RAUM" Uniform Calculation of Gross Basis at Market Value (or fair value if n/a) to include: (i)
"Securities Portfolios" (any consisting of at least 50%) and/or Private Funds to which adviser
provides Regular/Continuous Supervisory or Management services; (ii) Proprietary accounts
(owned in aggregate 25% or more), accts managed w/out compensation and those of foreign
clients; and (iii) uncalled capital commitments to private fund(s)
Answer: Repeal of Private Adviser Exemption (per Dodd-Frank) brought into SEC's
regulatory view hedge, private equity, venture capital, and other private funds by
adding regulation to circumvent adviser's use of a loop-hole to avoid registration in
which each fund, and not it's underlying investors, is counted as a "client"
Q6
An IAR (supervised person of an Investment Advisor) is required to be licensed when it has
more than 5 and with more than 10% of which are natural person clients. EXCEPTIONS: 1)
Qualified Clients (person/company that immediately after entering into contract has at least $1
million AUM by IA or net worth of $2 million; 2) Irregular communication; 3) Impersonal Advisory
Services are NOT required for consideration when determining an IARs licensing requirement
Answer: When is IAR licensing required and what are the exceptions?
Q7
Varies by state but generally an SEC-registered IA must notice file in any state in which it has 5
or more clients (de minimus). Exceptions: LA, NE, NH & TX
Answer: State Notice Filing is generally required when
, Q8
Investment Advisers are generally required to register in the state where they have a principal
place of business and any states where they maintain de minimus (5 or more clients in that
state with the exception of LA, NE, NH & TX which have their own de minimus)
Answer: When is State Adviser Registration generally required?
Q9
The following are deemed a SINGLE CLIENT a natural person, and: (i) any minor child; (ii) any
relative, spouse, or relative of spouse having same residence; (iii) all accounts of which the
person is the only primary beneficiary; and (iv) all trusts of the person or of which the person is
the only primary beneficiary; A corporation, general partnership, limited partnership, LLC, trust,
or other legal org receiving advice based on investment objectives rather than individual
objectives of shareholders/partners/etc. INCLUDING two or more legal orgs having identical
owners
Answer: Define client according to Advisers Act
Q10
Render disinterested/impartial advice, exercise high degree of care to ensure adequate and
accurate recommendations/info is presented, and prior due diligence on holdings selected
Answer: Describe characteristics fulfilling suitability obligation
Q11
Advisor must: match portfolio decisions with client mandates, create and maintain client profile,
execute investment advisory agreement
Answer: Describe 3 requirements related to client investment objectives/restrictions
Q12
Goal is to provide certain investment advisory programs (such as wrap fees, model accounts
and others having similar objectives and investments traded simultaneously with all clients
being treated similarly) a non-exclusive safe harbor from the definition of an investment
company and from being deemed to be a mutual fund, therefore requiring registration as such.
Answer: What is the goal of the Safe Harbor Rule?
