IACCP Examination Study Guide | 100
Questions | 100% Correct Answers
"Investment Adviser" person/firm compensated for engaging in business of
(directly or indirectly) advising others on securities or the advisability of investing
(or) who issues analysis/reports concerning securities Correct Answer: SEC vs
Capital Gains Research Bureau basis of Fiduciary Rule, specifically Best Interest
SEC Registration Required when 1) definition of "IA" is met (unless otherwise
excepted from definition or exempt/prohibited from registration); AND $100M in
AUM (optional for Mid-Sized Advisers AUM $100-115M Buffer Zone) - OR - 2)
when ADVISING a Registered Investment Company - OR - 3) AUM $25-100M
AND NOT registered/required to register with State OR NOT Subject to EXAMS
by State
Registration withdraw required for AUM under $90M Correct Answer: SEC
Registration Optional when 1) AUM $25-100M (except NY req. at $25M) - OR -
2) Advisers Registered in 15 or more States
(AUM $25M or less PROHIBITED from registering w/ SEC but held to various
state requirements)
EXCLUDED from Definition of "IA" are:
1) Domestic banks and bank holding companies; 2) Services SOLELY Incidental
by lawyers, accountants, engineers, teachers, (and) 3) BD advisory services w/out
special compensation; 4) Publishers of bona fide newspapers/mags w/Regular
Circulation; 5) Advising Direct Obligations of US (bonds); 6) NRSROs
(Nationally Recognized Statistical Rating Orgs; 7) Family Offices; and 8) Others
designated by SEC rulemaking (such as those otherwise prohibited or exempt)
Correct Answer: EXEMPTIONS from SEC Registration:
1) Intrastate Advisers: NOT advising, analyzing or reporting on NSE Listed
Securities* and ALL Clients reside in same state as principal office (*includes
securities w/ unlisted trading privileges); 2) Advisers to ONLY Insurance
Companies; 3) Private Fund Advisers w/ AUM less than $150M, and Advisers to
Foreign Private and Venture Capital Funds; 4) Church Plans, and certain 5)
Charitable organizations 6) Registered Commodity Trading 7) Small Business
Investment Companies
,Private Fund Adviser Exemption Criteria:
PRIVATE FUND: Advise SOLELY private funds (unlimited) so long as aggregate
assets of such NOT EXCEEDING $150M (per ADV annual calculation), including
Non-US Advisers when ALL US clients are Qualifying Private Funds
VENTURE CAPITAL: Any advising SOLELY venture capital funds
FOREIGN PRIVATE: No place of business in US, Less than 15 private fund
clients/investors in US, Less than $25M aggregate AUM attributed to
clients/private fund investors, AND doesn't hold out to US public as an IA Correct
Answer: Form PF (intended to Monitor Systematic Risk to US Financial System)
is required by advisers to Hedge & other Private Funds, and SEC-Registered
Advisers to 1 or More Private Funds having at least $150M AUM attributable to
such as of last fiscal year-end
Form PF filing EXEMPTION: Advisers NOT registered/required to register with
SEC
Dodd-Frank also resulted in changes to AUM by 1) raising registration threshold to
$100M, and creating Mid-Sized adviser category w/ AUM $25-100M (w/ $100-
115 Buffer Zone); and 2) "RAUM" Uniform Calculation of Gross Basis at Market
Value (or fair value if n/a) to include: (i) "Securities Portfolios" (any consisting of
at least 50%) and/or Private Funds to which adviser provides Regular/Continuous
Supervisory or Management services; (ii) Proprietary accounts (owned in
aggregate 25% or more), accts managed w/out compensation and those of foreign
clients; and (iii) uncalled capital commitments to private fund(s) Correct Answer:
Repeal of Private Adviser Exemption (per Dodd-Frank) brought into SEC's
regulatory view hedge, private equity, venture capital, and other private funds by
adding regulation to circumvent adviser's use of a loop-hole to avoid registration in
which each fund, and not it's underlying investors, is counted as a "client"
An IAR (supervised person of an Investment Advisor) is required to be licensed
when it has more than 5 and with more than 10% of which are natural person
clients.
EXCEPTIONS: 1) Qualified Clients (person/company that immediately after
entering into contract has at least $1 million AUM by IA or net worth of $2
million; 2) Irregular communication; 3) Impersonal Advisory Services are NOT
required for consideration when determining an IARs licensing requirement
Correct Answer: When is IAR licensing required and what are the exceptions?
, Varies by state but generally an SEC-registered IA must notice file in any state in
which it has 5 or more clients (de minimus). Exceptions: LA, NE, NH & TX
Correct Answer: State Notice Filing is generally required when
Investment Advisers are generally required to register in the state where they have
a principal place of business and any states where they maintain de minimus (5 or
more clients in that state with the exception of LA, NE, NH & TX which have their
own de minimus) Correct Answer: When is State Adviser Registration generally
required?
The following are deemed a SINGLE CLIENT
1) a natural person, and: (i) any minor child; (ii) any relative, spouse, or relative of
spouse having same residence; (iii) all accounts of which the person is the only
primary beneficiary; and (iv) all trusts of the person or of which the person is the
only primary beneficiary;
2) A corporation, general partnership, limited partnership, LLC, trust, or other
legal org receiving advice based on investment objectives rather than individual
objectives of shareholders/partners/etc. INCLUDING two or more legal orgs
having identical owners Correct Answer: Define client according to Advisers Act
recommendations in light of a clients experience, situation and objectives Correct
Answer: Define suitability
Render disinterested/impartial advice, exercise high degree of care to ensure
adequate and accurate recommendations/info is presented, and prior due diligence
on holdings selected Correct Answer: Describe characteristics fulfilling suitability
obligation
Advisor must: match portfolio decisions with client mandates, create and maintain
client profile, execute investment advisory agreement Correct Answer: Describe 3
requirements related to client investment objectives/restrictions
Goal is to provide certain investment advisory programs (such as wrap fees, model
accounts and others having similar objectives and investments traded
simultaneously with all clients being treated similarly) a non-exclusive safe harbor
from the definition of an investment company and from being deemed to be a
mutual fund, therefore requiring registration as such. Correct Answer: What is the
goal of the Safe Harbor Rule?
Questions | 100% Correct Answers
"Investment Adviser" person/firm compensated for engaging in business of
(directly or indirectly) advising others on securities or the advisability of investing
(or) who issues analysis/reports concerning securities Correct Answer: SEC vs
Capital Gains Research Bureau basis of Fiduciary Rule, specifically Best Interest
SEC Registration Required when 1) definition of "IA" is met (unless otherwise
excepted from definition or exempt/prohibited from registration); AND $100M in
AUM (optional for Mid-Sized Advisers AUM $100-115M Buffer Zone) - OR - 2)
when ADVISING a Registered Investment Company - OR - 3) AUM $25-100M
AND NOT registered/required to register with State OR NOT Subject to EXAMS
by State
Registration withdraw required for AUM under $90M Correct Answer: SEC
Registration Optional when 1) AUM $25-100M (except NY req. at $25M) - OR -
2) Advisers Registered in 15 or more States
(AUM $25M or less PROHIBITED from registering w/ SEC but held to various
state requirements)
EXCLUDED from Definition of "IA" are:
1) Domestic banks and bank holding companies; 2) Services SOLELY Incidental
by lawyers, accountants, engineers, teachers, (and) 3) BD advisory services w/out
special compensation; 4) Publishers of bona fide newspapers/mags w/Regular
Circulation; 5) Advising Direct Obligations of US (bonds); 6) NRSROs
(Nationally Recognized Statistical Rating Orgs; 7) Family Offices; and 8) Others
designated by SEC rulemaking (such as those otherwise prohibited or exempt)
Correct Answer: EXEMPTIONS from SEC Registration:
1) Intrastate Advisers: NOT advising, analyzing or reporting on NSE Listed
Securities* and ALL Clients reside in same state as principal office (*includes
securities w/ unlisted trading privileges); 2) Advisers to ONLY Insurance
Companies; 3) Private Fund Advisers w/ AUM less than $150M, and Advisers to
Foreign Private and Venture Capital Funds; 4) Church Plans, and certain 5)
Charitable organizations 6) Registered Commodity Trading 7) Small Business
Investment Companies
,Private Fund Adviser Exemption Criteria:
PRIVATE FUND: Advise SOLELY private funds (unlimited) so long as aggregate
assets of such NOT EXCEEDING $150M (per ADV annual calculation), including
Non-US Advisers when ALL US clients are Qualifying Private Funds
VENTURE CAPITAL: Any advising SOLELY venture capital funds
FOREIGN PRIVATE: No place of business in US, Less than 15 private fund
clients/investors in US, Less than $25M aggregate AUM attributed to
clients/private fund investors, AND doesn't hold out to US public as an IA Correct
Answer: Form PF (intended to Monitor Systematic Risk to US Financial System)
is required by advisers to Hedge & other Private Funds, and SEC-Registered
Advisers to 1 or More Private Funds having at least $150M AUM attributable to
such as of last fiscal year-end
Form PF filing EXEMPTION: Advisers NOT registered/required to register with
SEC
Dodd-Frank also resulted in changes to AUM by 1) raising registration threshold to
$100M, and creating Mid-Sized adviser category w/ AUM $25-100M (w/ $100-
115 Buffer Zone); and 2) "RAUM" Uniform Calculation of Gross Basis at Market
Value (or fair value if n/a) to include: (i) "Securities Portfolios" (any consisting of
at least 50%) and/or Private Funds to which adviser provides Regular/Continuous
Supervisory or Management services; (ii) Proprietary accounts (owned in
aggregate 25% or more), accts managed w/out compensation and those of foreign
clients; and (iii) uncalled capital commitments to private fund(s) Correct Answer:
Repeal of Private Adviser Exemption (per Dodd-Frank) brought into SEC's
regulatory view hedge, private equity, venture capital, and other private funds by
adding regulation to circumvent adviser's use of a loop-hole to avoid registration in
which each fund, and not it's underlying investors, is counted as a "client"
An IAR (supervised person of an Investment Advisor) is required to be licensed
when it has more than 5 and with more than 10% of which are natural person
clients.
EXCEPTIONS: 1) Qualified Clients (person/company that immediately after
entering into contract has at least $1 million AUM by IA or net worth of $2
million; 2) Irregular communication; 3) Impersonal Advisory Services are NOT
required for consideration when determining an IARs licensing requirement
Correct Answer: When is IAR licensing required and what are the exceptions?
, Varies by state but generally an SEC-registered IA must notice file in any state in
which it has 5 or more clients (de minimus). Exceptions: LA, NE, NH & TX
Correct Answer: State Notice Filing is generally required when
Investment Advisers are generally required to register in the state where they have
a principal place of business and any states where they maintain de minimus (5 or
more clients in that state with the exception of LA, NE, NH & TX which have their
own de minimus) Correct Answer: When is State Adviser Registration generally
required?
The following are deemed a SINGLE CLIENT
1) a natural person, and: (i) any minor child; (ii) any relative, spouse, or relative of
spouse having same residence; (iii) all accounts of which the person is the only
primary beneficiary; and (iv) all trusts of the person or of which the person is the
only primary beneficiary;
2) A corporation, general partnership, limited partnership, LLC, trust, or other
legal org receiving advice based on investment objectives rather than individual
objectives of shareholders/partners/etc. INCLUDING two or more legal orgs
having identical owners Correct Answer: Define client according to Advisers Act
recommendations in light of a clients experience, situation and objectives Correct
Answer: Define suitability
Render disinterested/impartial advice, exercise high degree of care to ensure
adequate and accurate recommendations/info is presented, and prior due diligence
on holdings selected Correct Answer: Describe characteristics fulfilling suitability
obligation
Advisor must: match portfolio decisions with client mandates, create and maintain
client profile, execute investment advisory agreement Correct Answer: Describe 3
requirements related to client investment objectives/restrictions
Goal is to provide certain investment advisory programs (such as wrap fees, model
accounts and others having similar objectives and investments traded
simultaneously with all clients being treated similarly) a non-exclusive safe harbor
from the definition of an investment company and from being deemed to be a
mutual fund, therefore requiring registration as such. Correct Answer: What is the
goal of the Safe Harbor Rule?
