IACCP MASTER QBANK QUESTIONS WITH VERIFIED SOLUTIONS GRADED A+

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 ANS 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 ANS 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: 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 ANS 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 ANS 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 ANS C. Consent from at least two advisory clients "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 ANS 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 ANS 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 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 ANS 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 ANS 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. B. Soft dollar arrangements that fail to comply with the Section 28(e) safe harbor are not prohibited under the Investment Advisers Act of 1940. C. Riskless principal transactions may be used to generate soft dollar commissions. D. Soft dollars may not be used to correct trade errors in client accounts. - CORRECT ANS A. In a soft dollar arrangement, an adviser always receives research services produced by a third party whom the broker-dealer pays. After a trade has been completed, an adviser checking for trade errors should reconcile trade confirmations with which of the following? A. Trade recommendations memorialized in the minutes of a Brokerage Committee meeting. B. A trade order ticket completed after the order was completed. C. A client's investment policy guidelines. D. A trade order ticket completed