Series 65 Exam ACTUAL UPDATED
Exam Questions and CORRECT Answers
An investment adviser with no place of business in the state is exempt from registration with the
state when making recommendations to all of the following EXCEPT
A)
AAA Manufacturing Co., with respect to the quality of investment bankers available for an
underwriting of AAA securities
B)
when the recommendations are made exclusively to individual residents of the state who are
accredited investors regarding new issues of exempt securities not registered in that state
C)
Amalgamated Bank
D)
St. Amelia's college endowment fund - CORRECT ANSWER - B.
An investment adviser with no place of business in the state is not exempt from registration with
the state when making recommendations to individual accredited investors who are residents of
that state, even when the securities being recommended are exempt from registration. The
Uniform Securities Act exempts investment advisers with no place of business in the state who
deal with certain institutional customers such as banks, insurance companies, investment
management companies, and employee benefit plans with assets in excess of $1 million. College
endowments and other nonprofit organizations also carry exempt status, but not wealthy
individuals. An adviser advising an issuer on the quality of potential underwriters does not fall
within the definition of investment adviser under the Uniform Securities Act and is therefore
exempt from registration.
A state-registered investment adviser suddenly incurs a liability that materially affects its net
worth, causing it to drop below the required minimum. Which of the following statements is
TRUE?
A)
The investment adviser is not required to file an amendment to its registration with the
Administrator.
B)
,The investment adviser must notify the Administrator by the close of business on the following
business day.
C)
The investment adviser must notify the Administrator promptly.
D)
The investment adviser must increase its surety bond to make up the deficiency. - CORRECT
ANSWER - B.
Although most notifications involving emergency type situations require prompt notification,
when an investment adviser's net worth is below the requirement, the NASAA Model Rule is a
bit different. Unless otherwise exempted, as a condition of the right to transact business in the
state, every investment adviser registered with the state shall, by the close of business on the next
business day, notify the Administrator if such investment adviser's net worth is less than the
minimum required. After transmitting such notice, each investment adviser shall file by the close
of business on the next business day after that, a report with the Administrator of its financial
condition.
The term "federal covered investment adviser" would apply to a person who
A)
is registered as such under the Investment Advisers Act of 1940
B)
limits the advice offered strictly to securities issued or guaranteed by the U.S. government or 1 of
its political subdivisions
C)
is registered as such under the Investment Company Act of 1940
D)
limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) -
CORRECT ANSWER - A.
Only federal covered investment advisers register under the Investment Advisers Act of 1940.
Even if the person only gives advice on exchange-listed securities (which are federal covered
securities), that does not make the person federal covered. After all, if the AUM is under $100
million, registration is only possible with the state(s), unless meeting an exception. Although the
term "federal covered adviser" does apply to those who limit their advice to securities issued or
guaranteed by the U.S. government, it would not apply if advice is given on political
subdivisions (states, cities, etc.).
,Under SEC Release 1A-1092, which of the following has (have) met the test of providing advice
or analysis concerning securities?
I) A stockbroker calls a client and recommends the purchase of a certain stock.
II) A lawyer recommends against purchasing shares of a mutual fund in favor of another
investment.
III) A publisher of an investment newsletter provides general information and recommendations
concerning specific securities.
A)
I only
B)
I and II
C)
I and III
D)
I, II, and III - CORRECT ANSWER - D.
Any person who gives advice (positive or negative, specific or general) or issues reports or
analyses concerning specific securities meets the criterion of providing advice. This does not
mean that these examples qualify for the definition of investment adviser. They only qualify for
the first criterion. For example, a lawyer may be exempt from the definition if she provides
advice incidental to the profession and does not receive compensation, but may still meet the first
criterion. Likewise, if the stockbroker's only compensation is commissions from securities
transactions, the exclusion is in effect.
Under the Investment Advisers Act of 1940, which of the following are excluded from the
definition of an investment adviser?
A)
Banks and trust companies
B)
Accountants who advise on securities (only) for a fee
C)
Insurance companies
, D)
Attorneys who advise on securities (only) for a fee - CORRECT ANSWER - A.
The act excludes the following from the definition: banks or trust companies; publishers of bona
fide publications of general circulation (newspapers and magazines); persons advising about
certain securities (U.S. government or agency issues); broker-dealers not receiving special
compensation for giving advice; and persons whose advice is incidental to their profession, such
as lawyers, accountants, engineers, and teachers
The purpose of the Investment Advisers Act of 1940 is to provide
A)
regulation for investment companies and their operations
B)
standards among the various states for the regulation of investment advisers
C)
minimum standards of performance for those registered as investment advisers
D)
standards at the federal level for the regulation of investment advisers - CORRECT
ANSWER - D.
The purpose of the Investment Advisers Act of 1940 is to provide federal standards for the
regulation of investment advisers. Providing standards among the various states for the
regulation of investment advisers is the purpose of the Uniform Securities Act. Providing
regulation for investment companies and their operations is the purpose of the Investment
Company Act of 1940.
An investment adviser (IA) has its primary office in State A. They have branches in states B and
C, and they advertise in states D, E, and F. What net capital requirements must they meet?
A)
The state where the largest number of its clients reside
B)
All the states combined
C)
Exam Questions and CORRECT Answers
An investment adviser with no place of business in the state is exempt from registration with the
state when making recommendations to all of the following EXCEPT
A)
AAA Manufacturing Co., with respect to the quality of investment bankers available for an
underwriting of AAA securities
B)
when the recommendations are made exclusively to individual residents of the state who are
accredited investors regarding new issues of exempt securities not registered in that state
C)
Amalgamated Bank
D)
St. Amelia's college endowment fund - CORRECT ANSWER - B.
An investment adviser with no place of business in the state is not exempt from registration with
the state when making recommendations to individual accredited investors who are residents of
that state, even when the securities being recommended are exempt from registration. The
Uniform Securities Act exempts investment advisers with no place of business in the state who
deal with certain institutional customers such as banks, insurance companies, investment
management companies, and employee benefit plans with assets in excess of $1 million. College
endowments and other nonprofit organizations also carry exempt status, but not wealthy
individuals. An adviser advising an issuer on the quality of potential underwriters does not fall
within the definition of investment adviser under the Uniform Securities Act and is therefore
exempt from registration.
A state-registered investment adviser suddenly incurs a liability that materially affects its net
worth, causing it to drop below the required minimum. Which of the following statements is
TRUE?
A)
The investment adviser is not required to file an amendment to its registration with the
Administrator.
B)
,The investment adviser must notify the Administrator by the close of business on the following
business day.
C)
The investment adviser must notify the Administrator promptly.
D)
The investment adviser must increase its surety bond to make up the deficiency. - CORRECT
ANSWER - B.
Although most notifications involving emergency type situations require prompt notification,
when an investment adviser's net worth is below the requirement, the NASAA Model Rule is a
bit different. Unless otherwise exempted, as a condition of the right to transact business in the
state, every investment adviser registered with the state shall, by the close of business on the next
business day, notify the Administrator if such investment adviser's net worth is less than the
minimum required. After transmitting such notice, each investment adviser shall file by the close
of business on the next business day after that, a report with the Administrator of its financial
condition.
The term "federal covered investment adviser" would apply to a person who
A)
is registered as such under the Investment Advisers Act of 1940
B)
limits the advice offered strictly to securities issued or guaranteed by the U.S. government or 1 of
its political subdivisions
C)
is registered as such under the Investment Company Act of 1940
D)
limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) -
CORRECT ANSWER - A.
Only federal covered investment advisers register under the Investment Advisers Act of 1940.
Even if the person only gives advice on exchange-listed securities (which are federal covered
securities), that does not make the person federal covered. After all, if the AUM is under $100
million, registration is only possible with the state(s), unless meeting an exception. Although the
term "federal covered adviser" does apply to those who limit their advice to securities issued or
guaranteed by the U.S. government, it would not apply if advice is given on political
subdivisions (states, cities, etc.).
,Under SEC Release 1A-1092, which of the following has (have) met the test of providing advice
or analysis concerning securities?
I) A stockbroker calls a client and recommends the purchase of a certain stock.
II) A lawyer recommends against purchasing shares of a mutual fund in favor of another
investment.
III) A publisher of an investment newsletter provides general information and recommendations
concerning specific securities.
A)
I only
B)
I and II
C)
I and III
D)
I, II, and III - CORRECT ANSWER - D.
Any person who gives advice (positive or negative, specific or general) or issues reports or
analyses concerning specific securities meets the criterion of providing advice. This does not
mean that these examples qualify for the definition of investment adviser. They only qualify for
the first criterion. For example, a lawyer may be exempt from the definition if she provides
advice incidental to the profession and does not receive compensation, but may still meet the first
criterion. Likewise, if the stockbroker's only compensation is commissions from securities
transactions, the exclusion is in effect.
Under the Investment Advisers Act of 1940, which of the following are excluded from the
definition of an investment adviser?
A)
Banks and trust companies
B)
Accountants who advise on securities (only) for a fee
C)
Insurance companies
, D)
Attorneys who advise on securities (only) for a fee - CORRECT ANSWER - A.
The act excludes the following from the definition: banks or trust companies; publishers of bona
fide publications of general circulation (newspapers and magazines); persons advising about
certain securities (U.S. government or agency issues); broker-dealers not receiving special
compensation for giving advice; and persons whose advice is incidental to their profession, such
as lawyers, accountants, engineers, and teachers
The purpose of the Investment Advisers Act of 1940 is to provide
A)
regulation for investment companies and their operations
B)
standards among the various states for the regulation of investment advisers
C)
minimum standards of performance for those registered as investment advisers
D)
standards at the federal level for the regulation of investment advisers - CORRECT
ANSWER - D.
The purpose of the Investment Advisers Act of 1940 is to provide federal standards for the
regulation of investment advisers. Providing standards among the various states for the
regulation of investment advisers is the purpose of the Uniform Securities Act. Providing
regulation for investment companies and their operations is the purpose of the Investment
Company Act of 1940.
An investment adviser (IA) has its primary office in State A. They have branches in states B and
C, and they advertise in states D, E, and F. What net capital requirements must they meet?
A)
The state where the largest number of its clients reside
B)
All the states combined
C)
