Question 1

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

The definition of securities is given under the Securities Act of 1933. The Investment Advisers Act of 1933 regulates investment advisers, the Investment Company Act of 1933 regulates investment companies, and the Securities and Exchange Act of 1933 established the Securities and Exchange Commission to regulate securities markets.

Question 2

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

Elements typically found in an IPS include specific financial goals and a risk tolerance assessment. Broker-dealer licenses and investment adviser licenses are not typically included in an IPS.

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

D

Question 4

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.

Accepted Answer

The answer of Which of the following may be considered...

Question 5

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 rewarding due to their life experiences and the potential for a more stable investment base. However, as a fiduciary, the adviser must be vigilant to protect them from elder fraud, financial abuse, and exploitation, given their vulnerability.

Question 6

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 is typically involved in the sale of securities and receives a commission for their services. Option A and B suggest that the representative manages assets, which may be a separate function performed by a financial advisor or portfolio manager. Option D suggests that the representative receives a fee, which is not typically the case in the broker-dealer industry where commissions are more commonly used.

Question 7

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 regulated under the Securities Exchange Act of 1934, which governs registration, reporting, and other compliance requirements for firms engaged in the business of buying and selling securities for themselves and others. The Investment Advisers Act of 1940, on the other hand, regulates firms providing investment advice for compensation, while the Investment Company Act of 1940 regulates the organization and operation of investment companies. The Securities Act of 1933 primarily regulates the issuance and sale of securities to the public.

Question 8

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

According to the Code of Ethics for CPAs, a CPA providing personal financial planning services should disclose the compensation method and any conflicts of interest that may arise. Therefore, the CPA should disclose the difference in compensation models regardless of whether it is increased or decreased compensation, and regardless of whether they are acting as an RIA or not.

Deck 10: Investment Basics