- An investment adviser representative associated with a federal covered investment adviser terminates that association and no longer has a place of business in this state. Under the Uniform Securities Act, which of the following is true regarding notice to the Administrator?
Answer: The IAR must promptly notify the Administrator of the termination; the federal covered adviser has no notice duty for the IAR's change in association.
Under Uniform Securities Act § 201(d), when an IAR's association with a federal covered adviser begins or ends, the IAR must promptly notify the Administrator; the federal covered adviser has no state registration through which to report the IAR's status. The statement that the adviser must notify is wrong because the adviser's notice filing does not cover its representatives' individual registrations. The statement that both must notify describes the dual-notice rule that § 201(b) sets for agents and their broker-dealers or issuers, not the rule for IARs of federal covered advisers. The statement that no notice is required is wrong because § 201(d) requires the IAR to notify the Administrator promptly when the association ends.
- An investment adviser representative registered in this state files a notice of withdrawal from registration on June 1. On June 15, the Administrator opens an investigation into the IAR's past recommendations. No formal proceeding has been commenced as of July 1. Under the Uniform Securities Act, which of the following is true?
Answer: The withdrawal takes effect on July 1, and the Administrator may begin a revocation or suspension proceeding within one year of that date.
Under Uniform Securities Act § 204, a withdrawal from registration takes effect 30 days after the Administrator receives the notice unless a proceeding is pending or is started within those 30 days. An investigation is not a formal proceeding, and the stem states that no proceeding had been commenced by July 1, so the withdrawal takes effect on July 1. The Administrator may still commence a revocation or suspension proceeding within one year after the withdrawal takes effect. The statement that the Administrator may not act after July 1 is wrong because the one-year window preserves that authority. The statement that the investigation blocks the withdrawal is wrong because an investigation is not a proceeding. The statement that the investigation accelerates the effective date is wrong; the 30-day period runs from the filing of the notice, not from the Administrator's action.
A federal covered investment adviser has its principal office in State Y and maintains a branch office in State X. An employee at the State X branch solicits advisory accounts, meets with clients, and provides investment advice. The adviser has 30 clients in State X: 25 institutional clients and 5 natural persons, each of whom is a qualified client. The employee has no clients outside State X.
Under federal law governing state registration of investment adviser representatives, is this employee required to register as an IAR in State X? Answer: No, because the employee's natural-person clients are all qualified clients and therefore are excluded from the de minimis count, leaving no counted natural-person clients.
Under SEC Rule 203A-3 and the Uniform Securities Act, a state may require registration of an IAR of a federal covered adviser only if the individual has a place of business in the state and meets the Rule 203A-3 definition: more than 5 natural-person clients and more than 10% natural-person clients, excluding qualified clients. This employee has a State X office, but all 5 natural-person clients are qualified clients, so the counted natural-person client total is zero; the 25 institutional clients are not natural persons. The answers saying the employee must register ignore the de minimis or count qualified clients. The answer that employees of a federal covered adviser are categorically exempt is wrong because an IAR with a place of business in a state may be required to register when the client-count test is met.
- A state-registered investment adviser's registration has just become effective. Under the Uniform Securities Act, which individual associated with the adviser is automatically registered as an investment adviser representative?
Answer: A director who chairs the adviser's investment committee and approves the model portfolios that the adviser's client advisors implement on behalf of clients.
Under Uniform Securities Act § 202(a), registering an investment adviser automatically registers its partners, officers, and directors who act as IARs. An IAR is an individual who gives advice, manages accounts, determines which advice is given, solicits advisory services, or supervises those who do. The director who approves the model portfolios determines which advice is given and is therefore automatically registered through the adviser's registration. The vice president holds an officer title but performs no IAR function, so no registration is needed. The telephone solicitor performs an IAR function but, as a non-officer employee, is not within the automatic-registration provision and must file individually. The partner-attorney provides legal advice to the adviser, not investment advice to clients, and performs no IAR function.
- A federal covered investment adviser's principal office is in another state, and the adviser maintains a small branch office in this state. Which of the following individuals associated with the adviser is required to register as an investment adviser representative in this state?
Answer: An individual who works in the branch office, solicits new accounts, and has eight natural-person clients in this state, none of whom are qualified clients, and no other clients.
Under SEC Rule 203A-3, a state may require an individual associated with a federal covered adviser to register as an investment adviser representative only if the individual has a place of business in the state and is a supervised person with more than five natural-person clients and more than 10% natural-person clients, not counting qualified clients. The individual who works in the branch office, solicits new accounts, and has eight non-qualified natural-person clients satisfies the place-of-business and client-count tests, and soliciting advisory services is an IAR function. The individual with four qualified clients and no other clients is not an IAR because qualified clients are excluded from the count. The individual who manages accounts from the out-of-state home office has no place of business in this state and, after excluding qualified clients, has only three natural-person clients. The individual who gives only impersonal website advice is outside the IAR definition, and all 15 of those clients are qualified clients.
- A state-registered investment adviser hires an individual who submits a complete application for registration as an investment adviser representative on April 1. No denial order is in effect and no proceeding is pending, and the Administrator takes no action. Under the Uniform Securities Act, when does the registration become effective?
Answer: At noon on May 1, and the registration expires on December 31 of that year unless it is renewed for the following calendar year.
Under Uniform Securities Act § 202(a), an IAR's registration takes effect at noon on the 30th day after filing if no denial order is in effect and no proceeding is pending, and under § 201(e) every registration expires December 31 unless renewed. An application filed April 1 becomes effective at noon on May 1. The 15-day effective date is wrong; 15 days is the period for scheduling a hearing after a summary suspension, not the registration waiting period. The one-year-from-effective-date statement describes the duration of a securities registration, not a person registration. The statement that the registration remains effective until the association ends and is then automatically withdrawn is wrong because a person's registration expires on December 31 unless renewed, and withdrawal under § 204(e) is a filed request, not an automatic event.
A federal covered investment adviser has notice-filed with State N. David, an employee of the adviser, works from the adviser's office in State N, solicits advisory clients, and provides investment advice to them. David has eight clients, each a natural person who met the SEC's qualified-client standard when the client's advisory contract was signed, and he has no other clients.
Under the Uniform Securities Act and SEC rules, which statement is correct about David's status in State N? Answer: David is not required to register in State N because qualified clients are excluded from the IAR client count, leaving David with no counted natural-person clients.
SEC Rule 203A-3 and the Uniform Securities Act § 401 definition of an IAR govern this item. A state may require registration of a supervised person of a federal covered adviser only if the person has a place of business in the state and, under Rule 203A-3, qualifies as an IAR, meaning the person has more than five natural-person clients and more than 10% natural-person clients, in each case not counting qualified clients. David has eight clients, every one a qualified client, so his counted natural-person clients are zero and he fails both prongs. He is therefore not an IAR, and State N may not require him to register even though he has an office in the state, solicits business, and gives advice. The statement that his office and IAR functions require registration disregards the Rule 203A-3 client-count tests. The statement that he must register because he has more than five natural-person clients counts the qualified clients that the rule excludes. The statement that only the SEC may require registration of individuals associated with a federal covered adviser is wrong: the SEC does not register IARs, and states do register IARs of federal covered advisers who have a place of business in the state.
A federal covered investment adviser maintains offices in State X. One employee at the State X office prepares internal research reports and model portfolios that the firm's client-facing IARs use. The employee never solicits or meets with clients, does not otherwise communicate with clients, and does not manage client accounts.
Under federal law defining an investment adviser representative for purposes of state registration, which statement is correct? Answer: The employee is not an IAR because the employee's duties do not include regular contact with clients.
Under SEC Rule 203A-3, an IAR of a federal covered adviser for state-registration purposes is a supervised person who regularly solicits clients, meets with clients, or otherwise communicates with clients; a person without that regular client contact is not an IAR. This employee's duties are internal and do not include regular client contact, so the employee is not an IAR for state-registration purposes. The statement that preparing research reports and model portfolios is enough to make the employee an IAR ignores the client-contact requirement; the office-location statement treats a place of business as sufficient by itself; and the categorical-statutory-exclusion statement is wrong because no such statutory exclusion exists.
A state-registered investment adviser employs Priya as a research analyst at the adviser's office in this state. Priya constructs the model portfolios that the adviser's client-facing employees use as the basis for every recommendation they make to clients. Priya never meets with, solicits, or corresponds with clients, and her job description classifies her position as internal research only.
Under the Uniform Securities Act, which statement is correct about Priya? Answer: Priya is an IAR and must register because she determines which advice is given to clients even though she has no client contact.
Uniform Securities Act § 401 defines an IAR to include an individual associated with a state-registered adviser who gives advice, manages accounts, determines which advice is given, solicits advisory business, or supervises persons who perform those functions. Because the model portfolios Priya constructs are the basis for every recommendation the adviser's client-facing employees make, she determines which advice is given, and the Act does not condition that function on client contact. She is therefore an IAR and must register. The statement that she is not an IAR because she has no client contact and gives only impersonal advice wrongly imports the SEC Rule 203A-3 carve-out for supervised persons of federal covered advisers who do not regularly solicit, meet, or communicate with clients; that rule does not apply to employees of a state-registered adviser. The statement that the adviser's registration automatically registers all non-clerical employees is wrong because automatic registration under the Act covers partners, officers, and directors who act as agents or IARs, not every non-clerical employee. The statement that the five-client de minimis exemption applies is wrong because that exemption is available only to a person with no place of business in the state, and Priya works in the adviser's office in this state; having no clients of her own is not sufficient.
An IAR employed by a state-registered investment adviser whose only office is in State A has no office or other place of business in State B. During the preceding 12 months, the IAR traveled to State B several times and provided advice to 5 natural-person clients and 12 institutional clients in State B.
Under the Uniform Securities Act, which statement is correct? Answer: The IAR is not required to register in State B because institutional clients are excluded from the 5-client limit and the IAR has no place of business in State B.
Under Uniform Securities Act § 201, a nonresident IAR with no place of business in the state is exempt from registration if the IAR has no more than five non-institutional clients in the state during the preceding 12 months, or only institutional clients. The 5 natural-person clients are at the limit, and the 12 institutional clients are excluded from that count, so the exemption applies. The answer counting institutional clients toward the 5-client limit misstates the exemption; the answer requiring every client to be institutional adds a condition the rule does not contain; the answer allowing unlimited clients whenever the employing adviser is registered elsewhere ignores the client-count limit.
A federal covered investment adviser with its principal office in State A maintains a branch office in State B. An IAR works in the State B branch and has 40 clients, all natural persons, none of whom is a qualified client. All 40 clients are residents of State B. The adviser has made a notice filing in State B.
Under the Uniform Securities Act and federal law, which statement is correct? Answer: The IAR must register in State B because the IAR has a place of business there and meets the federal natural-person client test.
Under SEC Rule 203A-3 and the Uniform Securities Act, a state may require registration of an IAR of a federal covered adviser only if the IAR has a place of business in the state and satisfies the IAR definition: more than 5 natural-person clients and more than 10% natural-person clients, excluding qualified clients. This IAR has a State B office and 40 non-qualified natural-person clients, so the IAR must register in State B. The adviser's notice filing covers only the adviser, not the IAR, and is not a state registration of either; federal covered advisers are not exempt from state IAR registration for their employees; and requiring the adviser to register as a state investment adviser is not a precondition to requiring the IAR to register.
On December 10, a state-registered investment adviser filed a complete initial application with the Administrator to register Kelsey, a newly hired employee, as an IAR. Kelsey will recommend securities to the adviser's clients, and she is not an officer, partner, or director of the adviser. The Administrator has taken no action, and no proceeding is pending.
Under the Uniform Securities Act, which statement is correct about Kelsey's registration? Answer: Kelsey's registration becomes effective at noon on the 30th day after the filing and expires on December 31 of the calendar year in which it becomes effective unless renewed.
Uniform Securities Act § 202(a) governs when an IAR registration takes effect, and § 201(e) its expiry on December 31. A complete application takes effect at noon of the 30th day after filing when no denial order is in effect and no proceeding is pending; the Administrator may set an earlier date but did not. Kelsey's December application therefore becomes effective at noon on January 9. Every registration expires on December 31 unless renewed, regardless of when during the calendar year it became effective, so Kelsey's initial registration runs only from January 9 to December 31 of that year. The statement that she is automatically registered because the adviser is registered is wrong: under § 202(a), automatic registration is limited to partners, officers, and directors of the adviser who act as IARs, and Kelsey is an employee. The statement that the registration lasts one year from its effective date confuses the one-year period for securities registrations with the December 31 expiration for person registrations. The statement that the registration is immediately effective on filing misreads the no-pending-proceeding condition, which merely permits the 30th-day effectiveness to occur.
- Under the Uniform Securities Act and applicable state rules, which of the following statements regarding continuing education for investment adviser representatives is true?
Answer: An Administrator has the authority to require an IAR of a state-registered adviser to complete continuing education as a condition of registration renewal.
Under the NASAA Investment Adviser Representative Continuing Education Model Rule, as adopted by a state, an Administrator has the authority to require an IAR of a state-registered adviser to complete continuing education as a condition of registration renewal; the requirement is ongoing and separate from the initial qualification examination. The statement that the SEC requires IARs of federal covered advisers to complete continuing education is wrong: the Investment Advisers Act of 1940 imposes no CE requirement on IARs, and the Form ADV annual updating amendment is a firm-level filing. The statement that completing CE discharges the adviser's supervision obligation is wrong because supervision is a separate, ongoing duty. The statement that in-house compliance training satisfies the CE requirement in every state is wrong because the CE must meet the requirements the Administrator sets by rule.
- An investment adviser representative of a state-registered investment adviser maintains an office in this state. During the preceding 12 months, the IAR has provided investment advice only to two individuals, a bank trust department, a business retirement plan with $900,000 in assets, and a municipal pension plan with $4,000,000 in assets. Under the Uniform Securities Act, which of the following is true regarding the IAR's registration?
Answer: The IAR must register because the IAR maintains an office in this state, and the de minimis exemption requires that the IAR have no place of business in the state.
Under Uniform Securities Act § 201(c), an IAR is exempt from registration only if the IAR has no place of business in this state and either (a) gives advice solely to institutional clients or (b) has no more than five non-institutional clients during the preceding 12 months. Institutional clients include banks, trust companies, employee benefit plans with at least $1,000,000 in assets, and governmental agencies. Here, the IAR has an office in the state, so the de minimis exemption is unavailable. Although the IAR has only three non-institutional clients (the two individuals and the $900,000 business retirement plan, which does not meet the $1,000,000 asset threshold), the place-of-business requirement disqualifies the exemption. The bank trust department and municipal pension plan are institutional clients. Therefore, the IAR must register. The statement that the three non-institutional clients fit the de minimis limit ignores the place-of-business requirement. The statement that every client is institutional is false because the two individuals and the $900,000 plan are not institutional clients. The statement that the de minimis exemption applies only to investment advisers is wrong; § 201(c) applies it to IARs as well.
