IACCP MASTER QUESTIONS BANK |
QUESTIONS WITH 100% CORRECT
ANSWERS – LATEST UPDATE
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:
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
"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
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.
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
Answer: 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 Prior To The Execution Of The Order Correct
Answer: D. A Trade Order Ticket Completed Prior To The Execution Of The Order.
The Duty Of An Investment Adviser To Seek Best Execution For Client Securities
Transactions Is Derived From Which Of The Following?
A. Investment Advisers Act Of 1940 Interpretative Releases
B. Common Law Fiduciary Principles
C. Securities And Exchange Act Of 1934
D. The Investment Company Act Of 1940 Correct Answer: B. Common Law Fiduciary
Principles
Prior To Entering An Aggregated Trade Order, An Adviser Should Do Which Of The
Following Pursuant To The Smc No-Action Letter?
A. Prepare A Written Allocation Statement.
B. Obtain The Written Consent Of Each Client Participating In The Aggregated Order
Prior To Entering Each Aggregated Order.
C. Obtain A Blanket Consent From Each Client Participating In Aggregated Orders At
The Inception Of The Advisory Relationship.
D. Ensure That An Affiliated Broker Is Not Used For Execution Of The Aggregated
Order. Correct Answer: A. Prepare A Written Allocation Statement.
QUESTIONS WITH 100% CORRECT
ANSWERS – LATEST UPDATE
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:
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
"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
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.
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
Answer: 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 Prior To The Execution Of The Order Correct
Answer: D. A Trade Order Ticket Completed Prior To The Execution Of The Order.
The Duty Of An Investment Adviser To Seek Best Execution For Client Securities
Transactions Is Derived From Which Of The Following?
A. Investment Advisers Act Of 1940 Interpretative Releases
B. Common Law Fiduciary Principles
C. Securities And Exchange Act Of 1934
D. The Investment Company Act Of 1940 Correct Answer: B. Common Law Fiduciary
Principles
Prior To Entering An Aggregated Trade Order, An Adviser Should Do Which Of The
Following Pursuant To The Smc No-Action Letter?
A. Prepare A Written Allocation Statement.
B. Obtain The Written Consent Of Each Client Participating In The Aggregated Order
Prior To Entering Each Aggregated Order.
C. Obtain A Blanket Consent From Each Client Participating In Aggregated Orders At
The Inception Of The Advisory Relationship.
D. Ensure That An Affiliated Broker Is Not Used For Execution Of The Aggregated
Order. Correct Answer: A. Prepare A Written Allocation Statement.
