Series 66

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At Moore Advisers in Venice Beach, California, Othello is a registered investment adviser representative. Othello's accountant, Iago, has expressed an interest in directing accounting clients to Othello for investment advisory services. Iago wants a referral fee for his efforts. Which of the following statements are TRUE regarding this arrangement?
There must be a written agreement between Othello and Iago.
Othello may not pay more than $250 for each client referral.
Iago must not have been convicted of any felonies or securities-related misdemeanors.
Iago must be fingerprinted and a copy filed with the state securities Administrator.
I and III only
II and III only
I, II, and III only
I, II, III, and IV

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A

In order for someone to act as a solicitor for an investment adviser, three conditions must be met: (1) the adviser must be licensed (which Othello is), (2) the agreement between the solicitor and the adviser must be in writing, and (3) the solicitor must not have been statutorily disqualified from association with an investment adviser either because he was convicted of a felony or securities-related misdemeanor during the last 10 years or by order of the SEC.

The solicitor must also disclose the nature of his relationship with the adviser to clients. The exact form that this disclosure must take depends on the nature of the arrangement between the solicitor and the adviser. Note also that the adviser must retain a copy of the agreement between it and the solicitor for its records.

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Terms in this set (54)

Two of your clients, Bruce and Gary, are forming their own company. They are planning to incorporate and want to know which corporate entity would be best from a tax perspective. Which of the following entities would have the MOST tax disadvantages?
A C Corporation
An S Corporation
A limited liability company (LLC)
A limited liability partnership (LLP)

A

A C Corporation would be the worst option from a tax prospective. The corporation would first need to pay corporate taxes on any profits it generated. Its shareholders (owners) would then be required to pay personal income taxes on anything that is distributed to them in the form of dividends. All of the other choices are flow-through entities for tax purposes.

According to modern portfolio theory (MPT), the expected return of an investment is the:
Income, such as bond interest, that has been guaranteed by the issuer
Income, including dividends and/or interest, that is more than 50% likely to be paid by the issuer in the next year
Possible returns on the investment weighted by the likelihood that return will occur
Standard deviation of gains and losses over the life of the investment

C

MPT defines the expected return of an investment as the possible returns on the investment weighted by the likelihood that return will occur.

Which of the following persons would require registration as an agent in State A?
A person representing a broker-dealer, effecting interstate securities transactions for a client who is temporarily vacationing in a State A
An employee of the Federal Reserve Board located in State A, who executes orders to buy and sell Treasury bills for the account of her employer
A person representing an issuer domiciled in State A, who effects securities transactions for an intrastate institutional account
A person representing a broker-dealer located in State A, who solicits securities transactions on an intrastate basis for clients' accounts

D

A person representing a broker-dealer in securities transactions is defined as an agent. An agent located in State A would be required to be registered in that state. Note the use of the term intrastate in this case does not involve an issue of securities, but securities solicitations occurring only within one state. As an exclusion from registration, agents who are not registered in a state may execute transactions for existing customers who are temporarily in a state (for up to 30 days). A person representing an issuer in a securities transaction is not defined as an agent provided she does not receive commissions for the transactions. The same holds true for an employee of the government effecting securities transactions on behalf of the government.

Securities that are registered through qualification may be sold only:
Upon effective SEC registration
Once declared effective by the Administrator
The day after being approved by the Administrator
Upon completion of the 20-day cooling-off period

B

Securities registered by qualification may be sold once the registration is declared effective by the Administrator. Note in choice (c), the use of the term approved is inappropriate. Securities deemed effective for sale by an Administrator may not be described as approved by the Administrator.