Series 65 Regulation of Advisers & IARs Practice Questions
Regulation of Advisers & IARs makes up 5 of every 50 questions on a Tigertest Series 65 practice test. Here are 10 of the 20 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on NASAA's Series 65 test specifications. Original questions; 50 per test, weighted like the real 130-question exam. Not affiliated with NASAA or FINRA.
1. Under the SEC's three-part test, a person is an investment adviser if she gives advice about securities, is in the business of doing so, and:
- A.Manages over 25 accounts
- B.Receives compensation
- C.Holds client funds
- D.Has discretion
Answer: B. The test asks whether the person advises on securities, is in the business of advising, and is paid for it in any form. Custody and discretion are not part of the definition.
2. A CPA prepares tax returns and also charges clients a separate fee for advice on which mutual funds to buy. The CPA:
- A.Is an agent of the funds
- B.Needs no state filing at all
- C.Is excluded as an accountant
- D.Is an investment adviser
Answer: D. The professional exclusion covers only advice that is solely incidental to the practice. Charging a separate fee for securities advice makes the CPA an investment adviser.
3. Under the Uniform Securities Act, which of these is an investment adviser?
- A.A pension consultant paid for fund advice
- B.A newspaper's personal finance columnist
- C.A bank's trust department
- D.A teacher in a college finance class
Answer: A. Consultants paid to advise pension plans on securities choices are advisers. Banks, teachers whose advice is incidental, and publishers of general-circulation papers are excluded.
4. A broker-dealer agent recommends stocks to customers and is paid only commissions on the trades. The agent:
- A.Must register as an adviser
- B.Must charge an advisory fee
- C.Is not an adviser
- D.Must register as an IAR
Answer: C. A broker-dealer's advice that is incidental to its brokerage business, with no special compensation, is excluded. A separate advisory fee would change that.
5. A publisher sells a newsletter of general circulation with stock picks, plus a phone line giving personal advice for an extra fee. The phone service:
- A.Is exempt as a publication
- B.Needs only an SEC filing
- C.Makes the publisher an adviser
- D.Is covered by the press exclusion
Answer: C. The publisher exclusion covers impersonal, regularly published content of general circulation. Advice tailored to each caller's situation is investment advice.
6. An adviser manages a registered mutual fund with modest assets. It must register:
- A.With the SEC
- B.With FINRA
- C.Nowhere, as it is exempt
- D.With each state where it does business
Answer: A. Any adviser to a registered investment company is a federal covered adviser and registers with the SEC regardless of its assets under management.
7. An SEC-registered adviser has a place of business in a state. Under NSMIA, the state may require the firm itself to:
- A.Meet a state net worth test
- B.Register with the state
- C.Keep extra books and records
- D.Notice file and pay a fee
Answer: D. NSMIA bars states from registering federal covered advisers or adding books, records, net capital or bonding rules, but a state may require a notice filing (copies of Form ADV), a fee and consent to service of process.
8. A state-registered adviser has no office in another state, and its only clients there are two insurance companies. In that state it:
- A.Must register its IARs
- B.Need not register
- C.Must register now
- D.Must notice file
Answer: B. An adviser with no place of business in a state whose only clients there are institutions, such as insurers and banks, falls outside the state's registration requirement.
9. An adviser opens a branch office in a state but has only one client there so far. It:
- A.May wait for a sixth client
- B.Must register in that state
- C.Is exempt as de minimis
- D.Need only notify the SEC
Answer: B. The de minimis exemption requires having no place of business in the state. Once the adviser has an office there, it must register whatever its client count.
10. An adviser's employee writes the research that tells IARs which securities to recommend, but never speaks with clients. She is:
- A.An agent
- B.An investment adviser
- C.Excluded as back-office staff
- D.An IAR
Answer: D. The IAR definition covers anyone who determines which recommendation or advice should be given, not only those who meet clients.
Practice all 20 regulation of advisers & iars questions, and the rest of the 200-question bank, in the free Series 65 training sets. Questions you miss come back until you have mastered them.
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