CRPC Chapter 9 Test Questions with Correct Answers
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Course
CRPC
Institution
CRPC
CRPC Chapter 9 Test Questions with Correct Answers
Prudent Investor Rule - Answer-Updated in the Uniform Prudent Investor Act of 1994
Any investment as part of total portfolio
Risk vs return
No categorical restrictions on types of investments
Diversify investments
Delegation of trust ...
CRPC Chapter 9 Test Questions
with Correct Answers
Prudent Investor Rule - Answer-Updated in the Uniform Prudent Investor Act of 1994
Any investment as part of total portfolio
Risk vs return
No categorical restrictions on types of investments
Diversify investments
Delegation of trust Inv and management functions
Detailed records - Answer-Recommendation and decision
All data from client- need to have to make sure looking out for best interest of client
Fiduciary as defined by CFP board - Answer-Principle based approach
One must act in utmost good faith, in a manner he/she reasonably believes to be in the
best interest of the client
7 principles of conduct - Answer-Integrity
Objectivity
Competence
Fairness replace with duty of loyalty?
Confidentiality
Professionalism
Diligence
Client understand and intent
Degree multiple FP topics areas are covered, material elements
Comprehensive of data gathering
Depth of recommendations - Answer-CFP BOARD held to fiduciary standard
Ethical behavior - Answer-Gather data, KYC, diligent
Establish financial goals
Analyze information
Make recommendations
Monitor performance
Best practices - Answer-Best interest of client
Provide full adequate disclosures in writing
Written contract
Rule based fiduciary standard - Answer-Many rules and regulations
Inc complexity, create opp for loopholes
, Leads to enforcement issues
Principal based fiduciary standard - Answer-Aspirational in nature
Current approach with RIAs and CFP professionals
Trust in the system in Financial Services - Answer-Subprime mortgage crisis -
systematic breakdown in accountability and ethics -Financial crisis inquiry commission
Edelman Trust Barometer - Answer-Various industries level of trust in industries
FI bottom of rankings
Stock market done well
Trust in financial industry remains low despite the recovery since 2008-2009 Great
Recession.
Pershing study and comments from the CFA institute - Answer-Clients concerned about
fiduciary standard than FAs are
Highlight trust issues and concerns
CFA Institute a crisis of culture annual report warning after 2008 meltdown - Answer-
Breakdown in financial industry will have consequences
Occupy Wall Street
Focus on fees and fiduciary standards
Wave 1 - results of crash and Great Depression Securities Act of 1933 - Answer-The
first major federal law regulating the securities industry. It requires firms issuing new
stock in a public offering to file a registration statement with the SEC.
Cover initial public offerings
If SEC finds misleading or inaccurate info it will delay the offering until registration
statement is corrected.
All new issues must be accompanied by a prospectus.
Securities exchange act of 1934 - Answer-Established the securities and exchange
commission and aimed to regulate securities transactions on both organizedabd OTC
MARKETS
Broker dealers to register with SEC
File quarterly financial statements with SEC
Investment advisors act of 1940 - Answer-Requires the registration of investment
advisors who charge fees for investment advice
ADV2B form
Prohibitions re: advertising practices
Inv advisors with $100 million AUM register with the SEC
Investment company act of 1940 - Answer-provides a definition of "investment
company"
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