Deck 24: Examining Financial Regulation and Ethics

Question 1

Which of the following is a principle of the CFP code of ethics?

A)Integrity.
B)Profitability.
C)Subjectivity.
D)Transparency.
E)All of the above are principles.

Answer 1

A

Question 2

Are individuals involved in statistical ratings services such as Standard & Poor's,Moody's exempt from the Advisors Act?

A)Yes.
B)No.
C)Yes,if they do not provide advice about U.S.government securities.
D)Yes,if they do not provide advice about foreign government securities.
E)None of the above.

Answer 2

A

Question 3

Which of the following is included in part I of form ADV that is completed when registering with the SEC?

A)Methods of compensation.
B)Types of services offered.
C)Backgrounds of key employees.
D)Method of analysis used.
E)None of the above.

Answer 3

C

Question 4

Which of the following was established to protect the investment public against fraudulent and deceitful practices on the part of investment people who provide them with advice?

A)The Investment Advisor Act of 1940.
B)The Investment Advisor Act of 1972.
C)The Financial Planner Act of 1940.
D)The Financial Planner Act of 1972.
E)None of the above.

Question 5

According to the CFP code of ethics,which of the following is information that should be disclosed in writing prior to the financial planning engagement?

A)Conflicts of interest and sources of compensation.
B)Indications that clients can get additional information about compensation.
C)The basic philosophy,theory,and principles that are used.
D)All of the above.
E)None of the above.

Question 6

Another commonly used term for reporting is:

A)Discovery.
B)Disclosure.
C)Revelation.
D)Exploration.
E)None of the above.

Question 7

Making an adequate investigation of the merits of an investment or other recommendation is:

A)Due diligence.
B)Reporting.
C)Discovery.
D)Competency.
E)None of the above.

Question 8

What are the two principal NASD exams?

A)Series 5 and Series 6.
B)Series 6 and Series 7.
C)Series 7 and Series 8.
D)Series 12 and Series 65.
E)None of the above.

Question 9

Which of the following is not a factor that is intended to ensure that a financial planner and other financial service individuals will provide appropriate advice?

A)Competency.
B)Description.
C)Due care.
D)Compliance.
E)Documentation.

Question 10

What is the goal of financial regulation?

A)To bring about an efficient marketplace with fairness for all participants.
B)To facilitate the understanding that markets are not efficient.
C)To criminalize certain business practices that are perceived as legitimate.
D)All of the above.
E)None of the above.

Question 11

To be considered an advisor according to the Investment Advisor Act,which of the following criteria must be satisfied?

A)The person gives advice or analysis in regard to securities.
B)The person is in the business of presenting investment advice.
C)The person must be compensated for the services rendered.
D)All of the above
E)None of the above.

Question 12

Holders of which of the following are not exempt from taking a Series 65 exam?

A)CPA.
B)CFA.
C)CFP.
D)PFS.
E)All of the above are exempt.

Question 13

Which of the following categories of people are not exempt from the Advisors Act?

A)A bank or bank holding company that is not an investment company.
B)Accountants,lawyers,engineers,and teachers whose rendering of advisory services is incidental to their profession.
C)Brokers or dealers whose advice is not incidental to their business and receive special compensation for this service.
D)All of the above are exempt.
E)None of the above are exempt.

Question 14

In 2004,the SEC promulgated Rule 204A-1,which requires firms to keep copies of their own code of ethics,which include:

A)Protection of material that is not public information.
B)Reporting securities transaction and establishing policies to be reviewed by a compliance officer established by each firm.
C)Preapproval for securities transactions by the firm's employees is required.
D)Advisors should describe the code of ethics to clients.
E)All of the above.

Question 15

Which of the following is not an assumption associated with efficient markets?

A)People immediately understand information in the investments area.
B)People have the ability to act on information in the investments area.
C)All investors act logically and are highly knowledgeable.
D)Our free market system ensures that they receive the information they need to make appropriate decisions.
E)All of the above are assumptions.

Question 16

Getting a client to switch insurance policies without a strong reason for doing so is known as:

A)Slanting.
B)Twisting.
C)Compliance.
D)Falsification.
E)None of the above.

Question 17

Which of the following is not a rule associated with the principle of integrity,as detailed in the CFP code of ethics?

A)No false or misleading communication in advertising,promotion,or authority to represent a CFP board or any other group's point of view.
B)Reasonable and prudent judgment will be exercised in providing professional services.
C)When performing professional tasks,no dishonest,fraudulent,deceitful,or other false or misleading conduct to clients or any other parties.
D)All of the above are rules associated with the principle of integrity.
E)None of the above is a rule associated with the principle of integrity.

Question 18

Which of the following is not an assumption that regulators make?

A)People often make incorrect choices.
B)People can be exposed to unscrupulous advice that is motivated by self-interest.
C)Unscrupulous behaviors will not occur when there is heavy regulation.
D)All of the above are assumptions that regulators make.
E)None of the above is an assumption that regulators make.

Question 19

Investment advisors charged performance fees are:

A)Not allowed except for clients who have a net worth of $2,500,000 or $500,000.00 under the management of the RIA.
B)Not allowed except for clients who have a net worth of $2,000,000 or $1,000,000.00 under the management of the RIA.
C)Not allowed except for clients who have a net worth of $1,500,000 or $500,000.00 under the management of the RIA.
D)Not allowed except for clients who have a net worth of $2,500,000 or $750,000.00 under the management of the RIA.
E)None of the above.

Question 20

Which provisions must still be followed by an individual is exempt from the advisors act?

A)None.
B)Anti-fraud provisions.
C)Disclosure provisions.
D)Discovery provisions.
E)None of the above.

Question 21

Please provide details regarding the SECs investment advisor requirements in relation to both record keeping and anti-fraud provisions.

Question 22

Please list ten categories of people that are exempt from the Advisors Act.