Green Light Exam 2 with Complete Solutions
A woman owns a very successful bike shop. She wants to expand her business and is planning to offer her securities to the public. She will help to market the shares but will not be involved in sales or receive direct compensation for her efforts. Accordin...
A woman owns a very successful bike shop. She wants to expand her business and is
planning to offer her securities to the public. She will help to market the shares but will
not be involved in sales or receive direct compensation for her efforts. According to the
Uniform Securities Act, the owner must register: - Answer-the securities
The question states that the owner is conducting a public offering of securities. All
securities offerings must be registered unless they qualify for an exemption. Since there
is nothing in the question to indicate that the offering qualifies for an exemption, the
securities must be registered. The owner is NOT involved in effecting securities
transactions, giving advice for compensation, nor soliciting business for an investment
adviser.
An investment adviser's contract with its clients may contain all of the following
provisions, EXCEPT: - Answer-an exculpatory provision
an exculpatory provision, relieves one party from liability or blame arising from the
actions of another party or the performance of the duties set forth in the contract. These
provisions are not allowed in an adviser's contract.
Which of the following persons would be considered an investment adviser
representative under the Uniform Securities Act?
a) a registered representative with BareBones Brokerage who occasionally offers
complimentary tax and financial planning advice to clients
b) an office manager of an advisory firm who manages sales associates
c) a lawyer who refers business to an advisory firm and receives a referral fee
d) all of the above - Answer-answer is c.
An investment adviser representative (IAR) includes but is not limited to any partner,
officer, director of an investment adviser, or a person occupying a similar status or
performing similar functions. In addition, when a person:
Recommends or otherwise renders advice regarding securities
Manages accounts or portfolios of clients
Determines which recommendation or advice regarding securities should be given
Solicits, offers or negotiates for the sale of or sells investment advisory services
Supervises employees who perform any of the previous functions
Though the office manager of an advisory firm supervises employees, the sales
associates do not perform any of the related duties therefore the office manager is not
required to be registered as an IAR.
, Michelle Gladstone has noticed that many of her elderly clients do not bother to read the
prospectus prior to making a purchase. They consider these documents much too
confusing and far too time-consuming to go through. They generally rely on Michelle's
advice when considering investment selections. Michelle is uncomfortable with her
clients' lack of due diligence and is attempting to come up with a better way to educate
them about the risks and rewards of investing in a particular fund. Under SEC rules,
Michelle may engage in which of the following activities? - Answer-she may provide her
clients with a summary prospectus from the fund's wholesaler
Michelle does not need to produce any document nor should she alter any document to
address her client's ability to understand the risks and rewards of the investments they
intend to purchase. However, based on her concern she may provide them with a
document which will condense the information found in the full disclosure document.
Providing her clients with a summary prospectus will provide various information
including the fund's expenses, risks and performance. This document will also refer to
the availability of the full statutory prospectus
A state Administrator is permitted to apply all of the following administrative actions,
EXCEPT:
a) order a broker-dealer to cease conducting business in the state
b) suspend the registration of a broker-dealer in the state
c) bar an agent from association with any other broker-dealer registered in the state
d) require a higher level of net capital than what is required by the Securities Exchange
Act of 1934 - Answer-answer is D.
A state Administrator may not impose more restrictive financial conditions on a broker-
dealer than the federal act that regulates net capital requirements.
Which of the following statements is NOT TRUE concerning agency cross trades? -
Answer-a client may provide verbal authorization for up to 10 days is NOT TRUE.
An agency cross transaction is one in which the adviser acts as broker for both sides of
the trade. Advisory clients must provide written consent before an adviser may affect
the first agency cross transaction. This is a blanket consent and covers future agency
cross transactions until the client revokes consent, which can be done at any time.
Which of the following situations would constitute an assignment of an investment
advisory contract requiring client approval?
The investment adviser is a partnership with three partners, one of whom dies
The investment adviser is a partnership with seven partners, three of whom retire, while
another dies
The investment adviser changes from a sole proprietorship to a LLC
A corporation acquires 60% of the assets of the broker-dealer parent of an investment
adviser - Answer-answer is II, III, and IV.
If the adviser is organized as a partnership, the death, resignation or retirement of a
**minority** of the partners does not constitute a change of control or management—
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