IACCP Examination Study Guide 2023 | 94
Questions And 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 - -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 - -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) - -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 - -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) - -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 - -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 - -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) - -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
- -Define client according to Advisers Act
Questions And 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 - -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 - -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) - -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 - -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) - -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 - -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 - -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) - -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
- -Define client according to Advisers Act
