Series 65 Unit 1 - Kaplin
Investment advisor act of 1940 - correct answer ✔✔Is the federal legislation that defines the term
investment advisor and requires persons that fall within the definition to register with the SEC or with
the states in which they do business. 2 primary purposes:
regulation of persons both natural and legal in the business of giving investment advice
-the establishment of standars of ethical business conduct for the industry
National Securities Markets Improvement Act of 1993 (NSMIA) - correct answer ✔✔Under this act
investment advisors who are registered wit the SEC under the Investment advisers act of 1940 *federal
covered advisors) do not register with the state securities administrators
Broker - correct answer ✔✔This means any persons engaged in the buesiness of effecting transactions in
securties for the account of others
Dealer - correct answer ✔✔any person regularly engaged in the business of buying and selling securities
as principal for his own account, but doesnt include a bank, insurance copnay, or investment company
Fiduciary - correct answer ✔✔a person legally appointed and authorized to hold assets in trust for
another person. They managed the assets for the benefit of the other person rahter than for his or her
own profits must exercise a standard of care imposed by law. exampls are an executor of an estate a
trustee and an investment advisor
Person assosciated with an investment advisor - correct answer ✔✔means any partner, officer, or
director of the investment advisor or directly or indirectly controllign or controlled by the investment
adivor including any employees of the investment advisor
Supervised Person - correct answer ✔✔means any partner, officer, director or employees of an
envestment adviser on behalf of the investment adviser and is subject to the supervision and control of
the ivnestment adviser. includes all employees even those who perfrom clerical functions and are not
required to become registered.
,Principal office and place of business - correct answer ✔✔the executive office of the investment adviser
from which the officers, partners, or managers of the investment adviser direct, control, and cooridnate
activities o the investment adviser
investment adviser - correct answer ✔✔is defined as any person who, for compensation, engages in the
business of advising others as to the value of securities or the advisability of investing in securities or, as
part of a regular business, issues analyses or reports converning scurities
SEC Release IA-1092 - correct answer ✔✔interprets the definition of investment adviser under the IAA
act of 1940 to include financial planners, pension consultants, and others who offer investment advice as
part of their financial practices.
Financial Planners - correct answer ✔✔persons who make recs regarding a person's financial resources
or perform analyses that concern securities are investmnet advisers if such cservices are performed as
part of a business and for compensation. SEC holds that there is no such thing as a comprehensive
financial plan that does not involve securites
pension consultants - correct answer ✔✔consultants who advise employee benefit plans on how to fund
their plans with securities are also considered investment advisers by the SEC.
Sports and entertaintment reps - correct answer ✔✔persons who provide financially related servces to
entertainers and athletes that include advice related to investments, tax planning, budgeting and money
management are also investment advisors. *A sports agen who secures a favorable contract for a
football player and receives a commission of 10% of the player's salary is not necessarily an investment
adviser. However - once they advise the player to invest his money in specific securities the agent is then
in the business of offering investment advice and would then be subject to the investment advisor act of
1940 or uniform securities act
Compensation - correct answer ✔✔A person who receives any economic benefit as a result of providing
investment advice is an investment adviser. Includes advisory fees, commissions, or other types of fees
relating to the service redered. Can be payed by a third party but always must be disclosed to the client.
Fees receied from a corporation for advice given to the corporations emlpyees or retirees are considred
compensation
, Intrastate Advisers - correct answer ✔✔Advisers whose clients are residents of the state in which the
adviser has its principal oiffice and place of business and who do not give advice dealing with securities
listed on any national exchange are exempt
Private fund adviser exemption - correct answer ✔✔an exeption for advisers solely to proivate funds
with less than $150million in assets under management in the US without regard to the number or type
of private funds
foreign private adviser exemption - correct answer ✔✔an exeption for certain non-UXS advisers with no
place of business in the US and minimal assets under management (less than $25m) attributable to US
clients and investors
venture capital fund exemption - correct answer ✔✔an exerpmtion for advisers solely to venture capital
funds
3(c)1 issuer - correct answer ✔✔is one whose outstanding securities are beneficially owned by not more
than 100 and which is not making and does not presently propose to make a public offering of its
securities.
3(c)7 issuer - correct answer ✔✔is one whose outstanding securities are owned exclusively by persons
who, at the time of acquisition of such securities are qualified pruchasers. at least $5mil in investments
for individuals and $25m in investments for business entitities and which is not making and does not at
the time propose to mkae a public offering of such securities,.
Dodd-Frank assets under management threshold - correct answer ✔✔under this, investment advisers
must determine the amount of private fund assets on a quarterly basis, based upon the fair value of such
assets. Investment advisers will have one calendar quarter after exceeding $150million threshold to
register with the SEC
foreign private investor under Dodd-Frank - correct answer ✔✔any investment adviser that has no place
of busines in the US, has in total, fewer than 15 clients and investors in teh US in private funds advised by
the adviser, has aggregate assets under management attributable to clients in the US and investors in the
US in private funds advised by the adviser of less than $25milliuon and does not hold itself out to the
public in the US as an investment adviser or act as an investment adviser to an investment company
regisrterd under Inv comnp act of 1940
Investment advisor act of 1940 - correct answer ✔✔Is the federal legislation that defines the term
investment advisor and requires persons that fall within the definition to register with the SEC or with
the states in which they do business. 2 primary purposes:
regulation of persons both natural and legal in the business of giving investment advice
-the establishment of standars of ethical business conduct for the industry
National Securities Markets Improvement Act of 1993 (NSMIA) - correct answer ✔✔Under this act
investment advisors who are registered wit the SEC under the Investment advisers act of 1940 *federal
covered advisors) do not register with the state securities administrators
Broker - correct answer ✔✔This means any persons engaged in the buesiness of effecting transactions in
securties for the account of others
Dealer - correct answer ✔✔any person regularly engaged in the business of buying and selling securities
as principal for his own account, but doesnt include a bank, insurance copnay, or investment company
Fiduciary - correct answer ✔✔a person legally appointed and authorized to hold assets in trust for
another person. They managed the assets for the benefit of the other person rahter than for his or her
own profits must exercise a standard of care imposed by law. exampls are an executor of an estate a
trustee and an investment advisor
Person assosciated with an investment advisor - correct answer ✔✔means any partner, officer, or
director of the investment advisor or directly or indirectly controllign or controlled by the investment
adivor including any employees of the investment advisor
Supervised Person - correct answer ✔✔means any partner, officer, director or employees of an
envestment adviser on behalf of the investment adviser and is subject to the supervision and control of
the ivnestment adviser. includes all employees even those who perfrom clerical functions and are not
required to become registered.
,Principal office and place of business - correct answer ✔✔the executive office of the investment adviser
from which the officers, partners, or managers of the investment adviser direct, control, and cooridnate
activities o the investment adviser
investment adviser - correct answer ✔✔is defined as any person who, for compensation, engages in the
business of advising others as to the value of securities or the advisability of investing in securities or, as
part of a regular business, issues analyses or reports converning scurities
SEC Release IA-1092 - correct answer ✔✔interprets the definition of investment adviser under the IAA
act of 1940 to include financial planners, pension consultants, and others who offer investment advice as
part of their financial practices.
Financial Planners - correct answer ✔✔persons who make recs regarding a person's financial resources
or perform analyses that concern securities are investmnet advisers if such cservices are performed as
part of a business and for compensation. SEC holds that there is no such thing as a comprehensive
financial plan that does not involve securites
pension consultants - correct answer ✔✔consultants who advise employee benefit plans on how to fund
their plans with securities are also considered investment advisers by the SEC.
Sports and entertaintment reps - correct answer ✔✔persons who provide financially related servces to
entertainers and athletes that include advice related to investments, tax planning, budgeting and money
management are also investment advisors. *A sports agen who secures a favorable contract for a
football player and receives a commission of 10% of the player's salary is not necessarily an investment
adviser. However - once they advise the player to invest his money in specific securities the agent is then
in the business of offering investment advice and would then be subject to the investment advisor act of
1940 or uniform securities act
Compensation - correct answer ✔✔A person who receives any economic benefit as a result of providing
investment advice is an investment adviser. Includes advisory fees, commissions, or other types of fees
relating to the service redered. Can be payed by a third party but always must be disclosed to the client.
Fees receied from a corporation for advice given to the corporations emlpyees or retirees are considred
compensation
, Intrastate Advisers - correct answer ✔✔Advisers whose clients are residents of the state in which the
adviser has its principal oiffice and place of business and who do not give advice dealing with securities
listed on any national exchange are exempt
Private fund adviser exemption - correct answer ✔✔an exeption for advisers solely to proivate funds
with less than $150million in assets under management in the US without regard to the number or type
of private funds
foreign private adviser exemption - correct answer ✔✔an exeption for certain non-UXS advisers with no
place of business in the US and minimal assets under management (less than $25m) attributable to US
clients and investors
venture capital fund exemption - correct answer ✔✔an exerpmtion for advisers solely to venture capital
funds
3(c)1 issuer - correct answer ✔✔is one whose outstanding securities are beneficially owned by not more
than 100 and which is not making and does not presently propose to make a public offering of its
securities.
3(c)7 issuer - correct answer ✔✔is one whose outstanding securities are owned exclusively by persons
who, at the time of acquisition of such securities are qualified pruchasers. at least $5mil in investments
for individuals and $25m in investments for business entitities and which is not making and does not at
the time propose to mkae a public offering of such securities,.
Dodd-Frank assets under management threshold - correct answer ✔✔under this, investment advisers
must determine the amount of private fund assets on a quarterly basis, based upon the fair value of such
assets. Investment advisers will have one calendar quarter after exceeding $150million threshold to
register with the SEC
foreign private investor under Dodd-Frank - correct answer ✔✔any investment adviser that has no place
of busines in the US, has in total, fewer than 15 clients and investors in teh US in private funds advised by
the adviser, has aggregate assets under management attributable to clients in the US and investors in the
US in private funds advised by the adviser of less than $25milliuon and does not hold itself out to the
public in the US as an investment adviser or act as an investment adviser to an investment company
regisrterd under Inv comnp act of 1940
