IACCP LATEST 2026 EXAM QUESTIONS AND SOLUTIONS
RATED A+
✔✔Allows use of client commissions to purchase eligible brokerage and research
services - ✔✔Explain how the Safe Harbor Rule applies to Soft Dollars
✔✔Proprietary research, Third party research (investment adviser, broker, research
provider), Commission sharing arrangements (recapture programs) - ✔✔Types of Soft
Dollar Arrangements
✔✔Soft Dollar Test
1) SAFE HARBOR ELIGIBLE: Does product/service meet eligibility criteria of Safe
Harbor Rule?
2) LAWFUL & APPROPRIATE INVESTMENT DECISION-MAKING
RESPONSIBILITIES ASSISTANCE: Does it provide lawful and appropriate assistance
in performance of adviser's investment decision-making?
3) GOOD FAITH DETERMINATION: Can adviser make good faith determination that
commissions paid reasonable in relation to value of products/services provided by BD
(either in terms of particular transaction or advisers overall jop w/ respect to
discretionary accounts)? - ✔✔What is the Three-Step Test?
✔✔SEC interpretations, Safe Harbor applicable to Soft Dollars when:
Products/Services provide lawful and appropriate assistance to money manager in
performance of investment decision-making responsibilities;
Mixed-use:
Three-Step Test
Only when services obtained in relation to commissions paid to BD acting in agency
capacity, commissions on fixed-income securities effected on agency basis - ✔✔What
guidance has SEC released specific to Safe Harbor Rule and Soft Dollars?
✔✔Product/service obtained with client commissions has both eligible and non-eligible
uses
Requirements: 1) reasonable allocation of cost according to use; 2) maintain allocation
B&R; and 3) clearly disclose soft dollar practices and provide details info to clients upon
request - ✔✔Define Mixed-Use (soft dollars) and the applicable requirements
✔✔RESEARCH: Advice, Analysis, Reports, and Services provided by BD before
communication of transaction order.
(EXs: data services, market research products/services, securities portfolio analysis
software, seminars/conferences, discussions with research analysts, meetings with
corporate execs to obtain oral reports on co's performance, rating services)
BROKERAGE (newer 'Temporal' Standard): activities required to effect transaction
(beginning order transmittal to BD through conclusion of transaction clearance and
, settlement); also functions incidental thereto ('Incidental'); and functions required by
SEC or SRO rules.
(Exs Temporal: communications services related to execution, clearing, settlement of
securities; dedicated lines between BD and adviser's/third-party vendor's order
management system; order transmittal services; trading software; software providing
algorithmic trading strategies
EXs Incidental: clearanc - ✔✔Define "brokerage and research services"
✔✔CLIENT-REQUESTED: adviser instructed to direct all or portion of brokerage
transactions to specified BD
ADVISER-REQUIRED Adviser does not take discretion to determine broker or
commission on trade-by-trade basis and requires all clients direct use of specific BD for
all trades
Requirements include: 1) reasonably disclose to client disadvantages of arrangement
and any conflicts of interest; 2) written policies and procedures; 3) - ✔✔Define Directed
Brokerage and requirements
✔✔Inability to negotiate commissions, to obtain volume discount, and potential conflicts
of interest such as referral of clients from brokerage firm - ✔✔What are the
disadvantages or limitations of Directed Brokerage arrangement?
✔✔SOFT DOLLARS: arrangement for product/service from or through BD in exchange
for adviser directing trades to BD
DIRECTED BROKERAGE: client request or adviser requirement to direct all or some
portion of trades to a specific BD - ✔✔Directed Brokerage vs Soft Dollars
✔✔Advisers should place orders with intent of maximizing value or minimizing cost to
clients in light of relevant circumstances.
Factors may include: value of research provided, execution capability, brokerage
personnel responsiveness, explicit costs (brokerage commissions, fees), implicit costs
(bid/ask spreads, etc.), anonymity of parties, financial responsibility, willingness to
commit capital to facilitate trade - ✔✔Factors to consider when seeking best execution,
including price and non-price considerations
✔✔1) P&P: written policies procedures to reasonably prevent violations of federal
securities laws; 2) attempt to define optimal outcome for clients over time; 3) periodically
and systematically evaluate quality and cost of services from BD; 4) consider
quality/cost of services available from alternative brokers and providers - ✔✔Advisers
responsibility for selecting broker
✔✔Duty to seek best execution on behalf of client by considering a variety of factors so
that securities transactions are executed in such a manner that the client's total cost or
RATED A+
✔✔Allows use of client commissions to purchase eligible brokerage and research
services - ✔✔Explain how the Safe Harbor Rule applies to Soft Dollars
✔✔Proprietary research, Third party research (investment adviser, broker, research
provider), Commission sharing arrangements (recapture programs) - ✔✔Types of Soft
Dollar Arrangements
✔✔Soft Dollar Test
1) SAFE HARBOR ELIGIBLE: Does product/service meet eligibility criteria of Safe
Harbor Rule?
2) LAWFUL & APPROPRIATE INVESTMENT DECISION-MAKING
RESPONSIBILITIES ASSISTANCE: Does it provide lawful and appropriate assistance
in performance of adviser's investment decision-making?
3) GOOD FAITH DETERMINATION: Can adviser make good faith determination that
commissions paid reasonable in relation to value of products/services provided by BD
(either in terms of particular transaction or advisers overall jop w/ respect to
discretionary accounts)? - ✔✔What is the Three-Step Test?
✔✔SEC interpretations, Safe Harbor applicable to Soft Dollars when:
Products/Services provide lawful and appropriate assistance to money manager in
performance of investment decision-making responsibilities;
Mixed-use:
Three-Step Test
Only when services obtained in relation to commissions paid to BD acting in agency
capacity, commissions on fixed-income securities effected on agency basis - ✔✔What
guidance has SEC released specific to Safe Harbor Rule and Soft Dollars?
✔✔Product/service obtained with client commissions has both eligible and non-eligible
uses
Requirements: 1) reasonable allocation of cost according to use; 2) maintain allocation
B&R; and 3) clearly disclose soft dollar practices and provide details info to clients upon
request - ✔✔Define Mixed-Use (soft dollars) and the applicable requirements
✔✔RESEARCH: Advice, Analysis, Reports, and Services provided by BD before
communication of transaction order.
(EXs: data services, market research products/services, securities portfolio analysis
software, seminars/conferences, discussions with research analysts, meetings with
corporate execs to obtain oral reports on co's performance, rating services)
BROKERAGE (newer 'Temporal' Standard): activities required to effect transaction
(beginning order transmittal to BD through conclusion of transaction clearance and
, settlement); also functions incidental thereto ('Incidental'); and functions required by
SEC or SRO rules.
(Exs Temporal: communications services related to execution, clearing, settlement of
securities; dedicated lines between BD and adviser's/third-party vendor's order
management system; order transmittal services; trading software; software providing
algorithmic trading strategies
EXs Incidental: clearanc - ✔✔Define "brokerage and research services"
✔✔CLIENT-REQUESTED: adviser instructed to direct all or portion of brokerage
transactions to specified BD
ADVISER-REQUIRED Adviser does not take discretion to determine broker or
commission on trade-by-trade basis and requires all clients direct use of specific BD for
all trades
Requirements include: 1) reasonably disclose to client disadvantages of arrangement
and any conflicts of interest; 2) written policies and procedures; 3) - ✔✔Define Directed
Brokerage and requirements
✔✔Inability to negotiate commissions, to obtain volume discount, and potential conflicts
of interest such as referral of clients from brokerage firm - ✔✔What are the
disadvantages or limitations of Directed Brokerage arrangement?
✔✔SOFT DOLLARS: arrangement for product/service from or through BD in exchange
for adviser directing trades to BD
DIRECTED BROKERAGE: client request or adviser requirement to direct all or some
portion of trades to a specific BD - ✔✔Directed Brokerage vs Soft Dollars
✔✔Advisers should place orders with intent of maximizing value or minimizing cost to
clients in light of relevant circumstances.
Factors may include: value of research provided, execution capability, brokerage
personnel responsiveness, explicit costs (brokerage commissions, fees), implicit costs
(bid/ask spreads, etc.), anonymity of parties, financial responsibility, willingness to
commit capital to facilitate trade - ✔✔Factors to consider when seeking best execution,
including price and non-price considerations
✔✔1) P&P: written policies procedures to reasonably prevent violations of federal
securities laws; 2) attempt to define optimal outcome for clients over time; 3) periodically
and systematically evaluate quality and cost of services from BD; 4) consider
quality/cost of services available from alternative brokers and providers - ✔✔Advisers
responsibility for selecting broker
✔✔Duty to seek best execution on behalf of client by considering a variety of factors so
that securities transactions are executed in such a manner that the client's total cost or
