IACCP Examination | 100% Correct |
Verified | 2024 Version
"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
recommendations in light of a clients experience, situation and objectives - ✔✔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 - ✔✔Describe
characteristics fulfilling suitability obligation
Advisor must: match portfolio decisions with client mandates, create and maintain client profile, execute
investment advisory agreement - ✔✔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. - ✔✔What is the goal of the Safe Harbor Rule?
1. Each account within the program received individualized treatment (managed according to each
client's specifics);
2. Client specific information is obtained by each upon account openings;
3. Annual contact confirming no changes;
4. Advisor to notify clients quarterly (a reminder) requesting contact if any changes apply;
5. Advisor consultation reasonably accessible to clients;
6. Ability to impose reasonable restrictions, such as specific securities or sectors;
7. Quarterly statements to clients reporting all activity; and
8. Indication of securities ownership retained by each client - ✔✔What conditions must be met for a
program to qualify for the Safe Harbor Rule?
Verified | 2024 Version
"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
recommendations in light of a clients experience, situation and objectives - ✔✔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 - ✔✔Describe
characteristics fulfilling suitability obligation
Advisor must: match portfolio decisions with client mandates, create and maintain client profile, execute
investment advisory agreement - ✔✔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. - ✔✔What is the goal of the Safe Harbor Rule?
1. Each account within the program received individualized treatment (managed according to each
client's specifics);
2. Client specific information is obtained by each upon account openings;
3. Annual contact confirming no changes;
4. Advisor to notify clients quarterly (a reminder) requesting contact if any changes apply;
5. Advisor consultation reasonably accessible to clients;
6. Ability to impose reasonable restrictions, such as specific securities or sectors;
7. Quarterly statements to clients reporting all activity; and
8. Indication of securities ownership retained by each client - ✔✔What conditions must be met for a
program to qualify for the Safe Harbor Rule?
