Question 1

Which of the following may be considered compensation for investment planning?
I)Commissions
II)Cruises
III)Fees
IV)Tickets to a sporting event

A)I,III.
B)II,IV.
C)I,II,IV.
D)I,II,III,IV.

D

Accepted Answer

Compensation for investment planning can take various forms, including commissions, fees, and non-monetary benefits like cruises and tickets to events.

Question 2

Broker-dealers (BDs)are regulated under:&#10;A)The Investment Advisers Act of 1934.&#10;B)The Investment Company Act of 1934.&#10;C)The Securities Act of 1934.&#10;D)The Securities Exchange Act of 1934.

Accepted Answer

Broker-dealers are mainly regulated under the Securities Exchange Act of 1934, which governs the overall securities industry and comprises a wide range of regulations directed toward broker-dealers. The other three acts mentioned in the question (Investment Advisers Act of 1934, Investment Company Act of 1934, and Securities Act of 1934) typically apply to other parts of the securities industry, such as investment advisors, investment companies, and public offerings of securities.

Question 3

Unique constraints of an Investment Policy Statement include all of the following except:&#10;A)Concentrated stock positions.&#10;B)Health issues.&#10;C)Marital status.&#10;D)Risk assessment.

Accepted Answer

Risk assessment is not a unique constraint; it is part of the broader investment policy considerations. Unique constraints are specific to the individual, such as concentrated stock positions, health issues, and marital status.

Question 4

Securities are defined under the:&#10;A)The Investment Advisers Act of 1933.&#10;B)The Investment Company Act of 1933.&#10;C)The Securities Act of 1933.&#10;D)The Securities and Exchange Act of 1933.

Accepted Answer

Securities are defined under the Securities Act of 1933. This act regulates the sale of securities and requires companies issuing securities to provide full disclosure of all material information to potential investors. The Investment Advisers Act of 1940 regulates investment advisers, while the Investment Company Act of 1940 regulates investment companies. The Securities and Exchange Act of 1934 regulates the secondary market, including exchanges and brokers.

Question 5

If a CPA who is providing personal financial planning services and alternative compensation models are available,the CPA should:&#10;A)Disclose the difference.&#10;B)Disclose the differences only if compensation is increased.&#10;C)Disclose the differences only if acting as an RIA and compensation is increased.&#10;D)Disclose the differences only if acting as an RIA and compensation is decreased.

Accepted Answer

A CPA providing personal financial planning services should disclose the difference in compensation models available, regardless of whether it is increased or decreased. This is because it is important for clients to be aware of the potential conflicts of interest that may arise depending on how the planner is compensated. Full disclosure allows clients to make an informed decision about whether to engage the services of the CPA.

Question 6

Working with older clients in the investment planning process is _____,and if acting as a fiduciary,the adviser needs to be _____ for potential elder fraud,financial abuse,and exploitation.&#10;A)Difficult / defended.&#10;B)Difficult / vigilant.&#10;C)Rewarding / defended.&#10;D)Rewarding / vigilant.

Accepted Answer

Working with older clients can be a rewarding experience, but it also requires the adviser to be vigilant for potential elder fraud, financial abuse, and exploitation. This includes being aware of signs of cognitive decline or vulnerability, and implementing safeguards to protect the client's assets. As a fiduciary, the adviser has a legal obligation to act in the best interests of the client, which includes protecting them from financial harm.

Question 7

A registered representative of a broker-dealer:&#10;A)Manages assets and receives a commission.&#10;B)Manages assets and receives a fee.&#10;C)Sells securities and receives a commission.&#10;D)Sells securities and receives a fee.

Accepted Answer

A registered representative of a broker-dealer sells securities and receives a commission. They may also receive other forms of compensation, such as bonuses or non-cash awards, based on their performance or meeting certain targets. However, they do not directly manage assets or receive fees for doing so.

Question 8

Elements found in an IPS include:&#10;I)Broker-dealer licenses.&#10;II)Investment adviser licenses.&#10;III)Specific financial goals.&#10;IV)Risk tolerance assessment.&#10;A)I,II.&#10;B)II,III.&#10;C)III,IV.&#10;D)II.IV.

Accepted Answer

III. Specific financial goals and IV. Risk tolerance assessment are elements typically found in an Investment Policy Statement (IPS). The IPS is designed to outline a client's investment goals and strategies, and includes information on risk tolerance, asset allocation, and investment criteria, but not professional licenses.

Deck 10: Investment Basics