IACCP EVALUATION EXAMS 2025/2026 QUESTIONS WITH
ANSWERS RATED A+
✔✔1. Each account within the program received individualized treatment (managed
according to each client's specifics);
2. Client specific information is obtained by each upon account openings;
3. Annual contact confirming no changes;
4. Advisor to notify clients quarterly (a reminder) requesting contact if any changes
apply;
5. Advisor consultation reasonably accessible to clients;
6. Ability to impose reasonable restrictions, such as specific securities or sectors;
7. Quarterly statements to clients reporting all activity; and
8. Indication of securities ownership retained by each client - ✔✔What conditions must
be met for a program to qualify for the Safe Harbor Rule?
✔✔1. Clients will pay advisory fees and fund expenses at the mutual fund level in
addition to any account fees; and
2. MFs may be purchased directly without advisory services - ✔✔Disclosure
requirements for MFs managed within program qualifying for Safe Harbor
✔✔PRINCIPAL: Adviser (owned 25% or more) & Advisory Client
AGENCY: Advisory & Brokerage Clients
(1-sided Discretion w/ trade using broker to represent Brokerage client side. Broker gets
commission if any)
INTERNAL: Client Accounts w/out Broker use
(2-sided Discretion w/ trade crossed internally) - ✔✔Principal/Agency Cross
Transactions
✔✔PRINCIPAL: 1) Written Disclosure before trade completion, and 2) Client Consent
each transaction before execution or settlement
AGENCY: 1) Client Consent, 2) Trade summary at/before completion, 3) Annual notice
disclosing for prior period total # agency trades including total $ received by Adviser,
and 4) Notice consent may be revoked any time
*NOT permitted where adviser acts on behalf of buyer AND seller
INTERNAL: 1) Best interest both parties including fair price and best execution to both,
2) Practice described in ADV 2A, and 3) for Investment Companies, compliance with
Rules of Investment Company Act; or ERISA accounts, ONLY when both accounts are
Index or Model driven AND meet DOL Terms or Act Exemptions - ✔✔Requirements for
each type of cross transaction include
,✔✔Adviser finds buyer/seller before settlement date then buys/sells security through
advisor's own account - ✔✔Define riskless principal trade
✔✔BEFORE transaction advisor must provide WRITTEN disclosure to client that the
advisor is acting as principal of buying/selling account;
Following, either prior to transaction execution or settlement, client must provide advisor
with consent to EACH INDIVIDUAL TRANSACTION - ✔✔Describe the disclosure
process/requirements applicable to Principal Transactions
✔✔Expired on Dec 31, 2016, this rule allowed IAs dually registered as BDs to engage in
principal transactions - ✔✔Describe Temporary Rule for Principal Trades with Certain
Advisory Clients
✔✔Between client accounts:
Between advisory and brokerage accounts where advisor (having discretion on only
advisory account side) arranges trade through investment manager (IM) or BD to act as
broker for other account, in which case any applicable trade commission goes to IM/BD.
- ✔✔Define Agency Cross Trade
✔✔Written consent obtained from client, Written confirmations detailing trades is sent,
Annual (minimally) written disclosure identifying agency cross trades during preceding
period, and Notice that consent may be revoked at any time.
Not permissible where advisor recommended transaction to both buyer and seller -
✔✔In dealing with Agency Cross Transactions for Advisory Clients, what requirements
apply?
✔✔Fair and equitable distribution of transaction costs across accounts traded -
✔✔Fiduciary duty as it applies to aggregate trade orders
✔✔Regulatory guidance states advisers should have policies & procedures to address
processes to value client holdings and assess fees based on valuations. Mispricing may
violate antifraud provisions. - ✔✔What is the SEC's stance on pricing and valuation of
securities in advisory accounts?
✔✔Value assets at market price or, if not available, obtain fair and accurate valuation -
✔✔Securities pricing and valuation general principles
✔✔Obtain 3 to 5 quotes (actual transactions and/or indicative), and consider the quality
of the broker, nature and basis of quote, relationship with quoting broker, spread
between/among quotes received (not tossing highest/lowest) - ✔✔How could an advisor
obtain reasonably accurate securities valuation and what should be considered in doing
so?
, ✔✔Clearly defined and understandable - ✔✔What is of the most importance for written
policies and procedures for securities valuation?
✔✔Consistency of disclosures is crucial and should include: 1) Transparency of
valuation process; 2) Risk disclosure (particularly if holdings include illiquid or difficult-
to-price); and 3) Firm's conflicts of interest and measures to mitigate those.
Types of investors and disclosure materials include:
Registered Investment Companies: Prospectus and Statement of Additional Information
(SAI)
Private Investment Funds: Private placement memorandum (PPM)
Advisory clients: Form ADV Part 2 (if adviser recommends or places accounts in
difficult-to-price investments - ✔✔What should a securities valuation disclosure include,
and in what materials would the various investor types receive such disclosure?
✔✔Consistent and clear written procedures for:
Process for securities pricing or, when not available, process for determining fair and
accurate valuation which could include established committee to perform valuation,
identify methodologies and factors, establish procedures and regularly review and test
or third party valuation service
Written valuation policies should identify all parties involved in valuation process,
appropriate, reasonable and consistent valuation methodologies (including sources of
prices for different types of investments, priority of sources, and how sources are used)
for the various types of liquid illiquid investments; Procedures for use and oversight of
pricing service or other 3rd parties; Procedures to manage potential conflicts of interest;
Documentation requirements; Procedures to prevent, detect and correct violations;
Regular review and updating of process
Disclosures - ✔✔What should a consistent securities valuation are some procedures
that should be consistent as related to securities valuation?
✔✔Client must not be disadvantaged and must be made whole. Adviser should bear
costs of errors and cannot use soft dollars (brokerage commissions) to do so. -
✔✔When correcting trade errors, what is required per Lerner No-Action letter?
✔✔1) Written procedures for correcting trade errors (which should name who to make
aware of potential errors)
2) Form ADV disclosure of what firm will not correct
3) Trade Error log
4) Document how losses are calculated
Other considerations: If possible, person who caused error should not be responsible
for resolving. Periodic reviews of trading practices to confirm procedures are being
followed. - ✔✔Trade Error related documentation
ANSWERS RATED A+
✔✔1. Each account within the program received individualized treatment (managed
according to each client's specifics);
2. Client specific information is obtained by each upon account openings;
3. Annual contact confirming no changes;
4. Advisor to notify clients quarterly (a reminder) requesting contact if any changes
apply;
5. Advisor consultation reasonably accessible to clients;
6. Ability to impose reasonable restrictions, such as specific securities or sectors;
7. Quarterly statements to clients reporting all activity; and
8. Indication of securities ownership retained by each client - ✔✔What conditions must
be met for a program to qualify for the Safe Harbor Rule?
✔✔1. Clients will pay advisory fees and fund expenses at the mutual fund level in
addition to any account fees; and
2. MFs may be purchased directly without advisory services - ✔✔Disclosure
requirements for MFs managed within program qualifying for Safe Harbor
✔✔PRINCIPAL: Adviser (owned 25% or more) & Advisory Client
AGENCY: Advisory & Brokerage Clients
(1-sided Discretion w/ trade using broker to represent Brokerage client side. Broker gets
commission if any)
INTERNAL: Client Accounts w/out Broker use
(2-sided Discretion w/ trade crossed internally) - ✔✔Principal/Agency Cross
Transactions
✔✔PRINCIPAL: 1) Written Disclosure before trade completion, and 2) Client Consent
each transaction before execution or settlement
AGENCY: 1) Client Consent, 2) Trade summary at/before completion, 3) Annual notice
disclosing for prior period total # agency trades including total $ received by Adviser,
and 4) Notice consent may be revoked any time
*NOT permitted where adviser acts on behalf of buyer AND seller
INTERNAL: 1) Best interest both parties including fair price and best execution to both,
2) Practice described in ADV 2A, and 3) for Investment Companies, compliance with
Rules of Investment Company Act; or ERISA accounts, ONLY when both accounts are
Index or Model driven AND meet DOL Terms or Act Exemptions - ✔✔Requirements for
each type of cross transaction include
,✔✔Adviser finds buyer/seller before settlement date then buys/sells security through
advisor's own account - ✔✔Define riskless principal trade
✔✔BEFORE transaction advisor must provide WRITTEN disclosure to client that the
advisor is acting as principal of buying/selling account;
Following, either prior to transaction execution or settlement, client must provide advisor
with consent to EACH INDIVIDUAL TRANSACTION - ✔✔Describe the disclosure
process/requirements applicable to Principal Transactions
✔✔Expired on Dec 31, 2016, this rule allowed IAs dually registered as BDs to engage in
principal transactions - ✔✔Describe Temporary Rule for Principal Trades with Certain
Advisory Clients
✔✔Between client accounts:
Between advisory and brokerage accounts where advisor (having discretion on only
advisory account side) arranges trade through investment manager (IM) or BD to act as
broker for other account, in which case any applicable trade commission goes to IM/BD.
- ✔✔Define Agency Cross Trade
✔✔Written consent obtained from client, Written confirmations detailing trades is sent,
Annual (minimally) written disclosure identifying agency cross trades during preceding
period, and Notice that consent may be revoked at any time.
Not permissible where advisor recommended transaction to both buyer and seller -
✔✔In dealing with Agency Cross Transactions for Advisory Clients, what requirements
apply?
✔✔Fair and equitable distribution of transaction costs across accounts traded -
✔✔Fiduciary duty as it applies to aggregate trade orders
✔✔Regulatory guidance states advisers should have policies & procedures to address
processes to value client holdings and assess fees based on valuations. Mispricing may
violate antifraud provisions. - ✔✔What is the SEC's stance on pricing and valuation of
securities in advisory accounts?
✔✔Value assets at market price or, if not available, obtain fair and accurate valuation -
✔✔Securities pricing and valuation general principles
✔✔Obtain 3 to 5 quotes (actual transactions and/or indicative), and consider the quality
of the broker, nature and basis of quote, relationship with quoting broker, spread
between/among quotes received (not tossing highest/lowest) - ✔✔How could an advisor
obtain reasonably accurate securities valuation and what should be considered in doing
so?
, ✔✔Clearly defined and understandable - ✔✔What is of the most importance for written
policies and procedures for securities valuation?
✔✔Consistency of disclosures is crucial and should include: 1) Transparency of
valuation process; 2) Risk disclosure (particularly if holdings include illiquid or difficult-
to-price); and 3) Firm's conflicts of interest and measures to mitigate those.
Types of investors and disclosure materials include:
Registered Investment Companies: Prospectus and Statement of Additional Information
(SAI)
Private Investment Funds: Private placement memorandum (PPM)
Advisory clients: Form ADV Part 2 (if adviser recommends or places accounts in
difficult-to-price investments - ✔✔What should a securities valuation disclosure include,
and in what materials would the various investor types receive such disclosure?
✔✔Consistent and clear written procedures for:
Process for securities pricing or, when not available, process for determining fair and
accurate valuation which could include established committee to perform valuation,
identify methodologies and factors, establish procedures and regularly review and test
or third party valuation service
Written valuation policies should identify all parties involved in valuation process,
appropriate, reasonable and consistent valuation methodologies (including sources of
prices for different types of investments, priority of sources, and how sources are used)
for the various types of liquid illiquid investments; Procedures for use and oversight of
pricing service or other 3rd parties; Procedures to manage potential conflicts of interest;
Documentation requirements; Procedures to prevent, detect and correct violations;
Regular review and updating of process
Disclosures - ✔✔What should a consistent securities valuation are some procedures
that should be consistent as related to securities valuation?
✔✔Client must not be disadvantaged and must be made whole. Adviser should bear
costs of errors and cannot use soft dollars (brokerage commissions) to do so. -
✔✔When correcting trade errors, what is required per Lerner No-Action letter?
✔✔1) Written procedures for correcting trade errors (which should name who to make
aware of potential errors)
2) Form ADV disclosure of what firm will not correct
3) Trade Error log
4) Document how losses are calculated
Other considerations: If possible, person who caused error should not be responsible
for resolving. Periodic reviews of trading practices to confirm procedures are being
followed. - ✔✔Trade Error related documentation
