IACCP (MASTER TERMS)QUESTIONS WITH ACCURATE
ANSWERS
Investment supervisory services Accurate Answer - Giving of
continuous advice as to the investment of funds on the basis of the individual
needs of each client
National securities exchange Accurate Answer - an exchange
registered under section 6 of the Securities Exchange Act of 1934
Person Accurate Answer - Natural person or company
Not Securities Accurate Answer - Commodity Futures, Fixed Annuities
Securities Act of 1933 Securities Exchange Act of 1934 Trust Indenture Act of
1939 Accurate Answer - Acts respectively, heretofore or hereafter
amended
What is a Business Development Company? Accurate Answer - A
company must be registered in compliance with Section 54 of the Investment
Company Act of 1940 to qualify as a BDC. A major difference between a BDC
and a venture capital fund is that BDCs allow smaller, non-accredited
investors to invest in startup companies.
A BDC is a type of closed-end fund that makes investments in developing
companies and firms that are financially distressed.
What is an underwriter? Accurate Answer - Works closely with the
issuing body to determine the offering price of the securities, buys them from
the issuer, and sells them to investors via the underwriter's distribution
network. Underwriters generally receive underwriting fees from their issuing
clients, but they also can earn profits when selling the underwritten shares to
investors.
What is a Foreign Private Advisor? Accurate Answer - No US, fewer
than 15 clients in US in private funds, aggregate assets under management US
clients in private funds of less than $25 million. Does not hold self out in the
US public as an Investment Adviser; nor acts as An Investment Adviser to any
investment company registered under the Investment Company Act of 1940
,What is a Commodity Pool Operator (CPO)? Accurate Answer - A CPO
is an individual or organization which operates a commodity pool and solicits
funds for that commodity pool.
What is a Commodity Pool? Accurate Answer - An enterprise in which
funds contributed by a number of persons are combined for the purpose of
trading futures contracts, options on futures, retail off-exchange forex
contracts or swaps, or to invest in another commodity pool.
Assignment Accurate Answer - Any direct or indirect transfer or
hypothecation of an investment advisory contract by the assignor
Who is not an Investment Advisor? Accurate Answer - A Bank, Lawyer,
accountant, engineer, teach whose performance of such services is solely
incidental to the practice of his profession, Broker-dealer (commission
only)published of any bona fide newspaper, magazine, business publication,
rating systems (Moodys, etc.)
What does it mean when someone has "Control"? Accurate Answer -
Power to exercise a controlling influence over the management or policies of a
compny
What is a Commodity Trading Advisor (CTA) Accurate Answer - A US
financial regulatory term for an individual or organization who is retained by
a fund or individual client to provide advice and services related to trading in
futures contracts, commodity options and/or swaps. They are responsible for
the trading within managed futures accounts.
What is a Swap Accurate Answer - A derivative contract through which
two parties exchange financial instruments. These instruments can be almost
anything, but most swaps involve cash flows based on a notional principal
amount that both parties agree to. Usually, the principal does not change
hands. Each cash flow comprises one leg of the swap. One cash flow is
generally fixed, while the other is variable, that is, based on a a benchmark
interest rate, floating currency exchange rate or index price.
The most common kind of swap is an interest rate swap. Swaps do not trade
on exchanges, and retail investors do not generally engage in swaps. Rather,
,swaps are over-the-counter contracts between businesses or financial
institutions.
What is a Swap Dealer? Accurate Answer - An individual who acts as
the counterparty in a swap agreement for a fee called a spread. Swap dealers
are the market makers for the swap market. The spread represents the
difference between the wholesale price for trades and the retail price. Because
swap arrangements aren't actively traded, swap dealers allow brokers to
standardize swap contracts to some extent.
What is Swap Execution Facility? Accurate Answer - A platform for
financial swap trading that provides pre-trade information (i.e. bid and offer
prices) and a mechanism for executing swap transactions among eligible
participants.
Penalties Accurate Answer - 1st Tier - Max Penalty for each act
$5,000/natural person or $50,000 for any other person
2nd Tier $50,000 for each act or omission natural person or $250,000 for any
other person (Fraud, deceit, manipulation or deliberate or reckless disregard)
3rd Tier $100,000 each act natural person or $500,000 for any other person
(Fraud, deceit, manipulation or deliberate or reckless disregard, and if
substantial losses or created a significant risk of substantial losses to other
persons)
Violations could result in Accurate Answer - Accounting and
disgorgement
Cease and Desist Proceedings
Hearing
Temporary Order
Investment Advisor Accurate Answer - An investment advisor is
defined by the Investment Advisors Act of 1940, as any person or group that
makes investment recommendations or conducts securities analysis in return
for a fee, whether through direct management of client assets or via written
publications.
Who are Advisory Affiliates? Accurate Answer - (1) all of your officers,
partners, or directors (or any person performing similar functions);
(2) all persons directly or indirectly controlling or controlled by you; and
, (3) all of your current employees (other than employees performing only
clerical, administrative, ...
What AUM requires SEC Registration? Accurate Answer - Over $100
Million
What is an "Investment Advisor? Accurate Answer - 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
When is SEC Registration Required? Accurate Answer - 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
Who is EXCLUDED from Definition of "IA"? Accurate Answer - 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)
ANSWERS
Investment supervisory services Accurate Answer - Giving of
continuous advice as to the investment of funds on the basis of the individual
needs of each client
National securities exchange Accurate Answer - an exchange
registered under section 6 of the Securities Exchange Act of 1934
Person Accurate Answer - Natural person or company
Not Securities Accurate Answer - Commodity Futures, Fixed Annuities
Securities Act of 1933 Securities Exchange Act of 1934 Trust Indenture Act of
1939 Accurate Answer - Acts respectively, heretofore or hereafter
amended
What is a Business Development Company? Accurate Answer - A
company must be registered in compliance with Section 54 of the Investment
Company Act of 1940 to qualify as a BDC. A major difference between a BDC
and a venture capital fund is that BDCs allow smaller, non-accredited
investors to invest in startup companies.
A BDC is a type of closed-end fund that makes investments in developing
companies and firms that are financially distressed.
What is an underwriter? Accurate Answer - Works closely with the
issuing body to determine the offering price of the securities, buys them from
the issuer, and sells them to investors via the underwriter's distribution
network. Underwriters generally receive underwriting fees from their issuing
clients, but they also can earn profits when selling the underwritten shares to
investors.
What is a Foreign Private Advisor? Accurate Answer - No US, fewer
than 15 clients in US in private funds, aggregate assets under management US
clients in private funds of less than $25 million. Does not hold self out in the
US public as an Investment Adviser; nor acts as An Investment Adviser to any
investment company registered under the Investment Company Act of 1940
,What is a Commodity Pool Operator (CPO)? Accurate Answer - A CPO
is an individual or organization which operates a commodity pool and solicits
funds for that commodity pool.
What is a Commodity Pool? Accurate Answer - An enterprise in which
funds contributed by a number of persons are combined for the purpose of
trading futures contracts, options on futures, retail off-exchange forex
contracts or swaps, or to invest in another commodity pool.
Assignment Accurate Answer - Any direct or indirect transfer or
hypothecation of an investment advisory contract by the assignor
Who is not an Investment Advisor? Accurate Answer - A Bank, Lawyer,
accountant, engineer, teach whose performance of such services is solely
incidental to the practice of his profession, Broker-dealer (commission
only)published of any bona fide newspaper, magazine, business publication,
rating systems (Moodys, etc.)
What does it mean when someone has "Control"? Accurate Answer -
Power to exercise a controlling influence over the management or policies of a
compny
What is a Commodity Trading Advisor (CTA) Accurate Answer - A US
financial regulatory term for an individual or organization who is retained by
a fund or individual client to provide advice and services related to trading in
futures contracts, commodity options and/or swaps. They are responsible for
the trading within managed futures accounts.
What is a Swap Accurate Answer - A derivative contract through which
two parties exchange financial instruments. These instruments can be almost
anything, but most swaps involve cash flows based on a notional principal
amount that both parties agree to. Usually, the principal does not change
hands. Each cash flow comprises one leg of the swap. One cash flow is
generally fixed, while the other is variable, that is, based on a a benchmark
interest rate, floating currency exchange rate or index price.
The most common kind of swap is an interest rate swap. Swaps do not trade
on exchanges, and retail investors do not generally engage in swaps. Rather,
,swaps are over-the-counter contracts between businesses or financial
institutions.
What is a Swap Dealer? Accurate Answer - An individual who acts as
the counterparty in a swap agreement for a fee called a spread. Swap dealers
are the market makers for the swap market. The spread represents the
difference between the wholesale price for trades and the retail price. Because
swap arrangements aren't actively traded, swap dealers allow brokers to
standardize swap contracts to some extent.
What is Swap Execution Facility? Accurate Answer - A platform for
financial swap trading that provides pre-trade information (i.e. bid and offer
prices) and a mechanism for executing swap transactions among eligible
participants.
Penalties Accurate Answer - 1st Tier - Max Penalty for each act
$5,000/natural person or $50,000 for any other person
2nd Tier $50,000 for each act or omission natural person or $250,000 for any
other person (Fraud, deceit, manipulation or deliberate or reckless disregard)
3rd Tier $100,000 each act natural person or $500,000 for any other person
(Fraud, deceit, manipulation or deliberate or reckless disregard, and if
substantial losses or created a significant risk of substantial losses to other
persons)
Violations could result in Accurate Answer - Accounting and
disgorgement
Cease and Desist Proceedings
Hearing
Temporary Order
Investment Advisor Accurate Answer - An investment advisor is
defined by the Investment Advisors Act of 1940, as any person or group that
makes investment recommendations or conducts securities analysis in return
for a fee, whether through direct management of client assets or via written
publications.
Who are Advisory Affiliates? Accurate Answer - (1) all of your officers,
partners, or directors (or any person performing similar functions);
(2) all persons directly or indirectly controlling or controlled by you; and
, (3) all of your current employees (other than employees performing only
clerical, administrative, ...
What AUM requires SEC Registration? Accurate Answer - Over $100
Million
What is an "Investment Advisor? Accurate Answer - 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
When is SEC Registration Required? Accurate Answer - 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
Who is EXCLUDED from Definition of "IA"? Accurate Answer - 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)
