Series 65 Licensing Exam
Which of the following individuals does NOT come under the supervisory regimen of an investment
adviser?
- An individual in the mailroom who has fewer than 6 retail advisory clients
- A CFA® preparing the firm's research reports
- The CPA engaged to perform the annual audit
- A financial planner registered with the firm as an IAR, but maintaining a separate financial planning
practice as an independent contractor correct answers*The CPA engaged to perform the annual audit*
Explanation:
The annual audit must be performed by an independent accountant (think L.A.T.E.). Therefore, this CPA
would have no advisory responsibilities requiring supervision. Independent contractors registered as
IARs are supervised just as would be any other IAR. Research reports carry the name of both the firm
and the preparer and need adequate supervision. If the mailroom person has clients (the number isn't
relevant because there is obviously an office in the state), registration as an IAR is required.
(refer to U1LO6)
Although many advisers to private funds are exempt from registration, larger ones generally register with
the SEC. SEC-registered investment advisers with at least $150 million in private fund assets under
management use which form to report information about the private funds that they manage?
- Form 13F
- Form ADV Part 1A
- Form PF
- Form D correct answers*Form PF*
Logically enough, the letters, PF stand for private fund and that is the form used. The ADV Part 1A is used
by any investment adviser registering with the SEC (or the states); it is not unique to private funds. Form
,13F applies to any institutional investor with discretion over $100 million or more in certain equity
securities. Those are on a list published by the SEC and are called, "13F securities". Form D is used under
Rule 506 for private placements and has nothing to do with investment advisers.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, an investment adviser must
register with the SEC if it...
- has $35 million in client assets invested in cash or money market funds and $75 million of client assets
invested in long-term bonds under management
- its only place of business is outside of the United States, deals with fewer than 15 U.S.-based clients,
and has less than $25 million in AUM in the United States
- limited its clients to insurance companies only
- would be required to register in 15 or more states correct answers*has $35 million in client assets
invested in cash or money market funds and $75 million of client assets invested in long-term bonds
under management*
An adviser with $110 million or more in assets under management, regardless of the asset class, must
register with the SEC. Advisers whose only clients are insurance companies are exempt from registration
with the SEC. There is an exemption for foreign advisers who have fewer than 15 clients in the United
States, and their AUM in the United States is less than $25 million. When an investment adviser is
required to register in 15 or more states, it is eligible, but not required to register with the SEC.
Adoption correct answersa social media term meaning that a securities firm links to a third-party site
and indicates that it endorses the content on that site
(not involved in creating the content, just using someone else's)
Entanglement correct answersa social media term meaning that a securities firm has participated in the
development of content on a third-party site to which it publishes links
(involved in creating the content)
Static Content correct answersrefers to content that remains the same until changed by the person who
established the account on the site
,(examples: company websites, profiles, backgrounds, or walls)
Interactive Content correct answersrefers to content with input from both the creator AND the viewer
(examples: Facebook, Twitter, Instagram, and LinkedIn)
A man owns 15% of the stock of a company. His wife owns 5% of the stock of the same company. If the
wife wishes to sell the stock she owns, which of the following statements are TRUE?
I. Both the husband and the wife are control persons.
II. He is a control person, but she is not.
III. She must file a Form 144.
IV. She does not have to file a Form 144.
A. I and III
B. I and IV
C. II and III
D. II and IV correct answersA. I and III
His 15% ownership is control. Her 5% is not, but the fact that she is the spouse of a control person,
makes her one as well, causing this to be a sale of control stock. All sales of control stock (unless an
exemption applies) must be accompanied by a Rule 144 filing on Form 144.
Government National Mortgage Association (Ginnie Mae or GNMA) correct answersGinnie Maes are
known as modified pass-through certificates. They represent an interest in pools of FHA-insured
mortgages or Veterans-Administration-guaranteed mortgages. The term pass-through is used because,
as the homeowners make their monthly mortgage payments, those payments are collected in the pool
and proportionately passes through to the investor.
Because payments on home mortgages consist of interest and some principal and, because that money
goes into the pool for all the investors, as it is paid out monthly, some of each monthly payment to the
, investor represents principal, and the balance of each payment represents interest. The portion of each
monthly payment representing interest is subject to state, local, and federal income tax.
The minimum initial investment is $25,000.
Which of the following is TRUE of GNMA securities?
I. Interest is subject to federal income tax.
II. Interest is exempt from federal income tax.
III. They are backed by farm mortgages.
IV. They are backed by residential mortgages.
A) I and IV
B) I and III
C) II and III
D) II and IV correct answersA) I and IV
Form 13F correct answersMust be filled out by any institutional investment manager that exercises
investment discretion over an equity portfolio with a market value on the last trading day in any of the
preceding 12 months of $100 million or more in 13(f) securities. Must be filed with the SEC quarterly,
within 45 days of the end of each quarter.
Form 8-K correct answersThe report used by publicly traded companies to disclose any material event
not previously reported that is important to investors.
Examples of material events/changes include: change in management, change in the company's name,
mergers or acquisitions, bankruptcy filings, and major new product introductions or sale of a product
line.
Form 10-K correct answersA report containing a comprehensive overview of the company's business and
financial condition. It includes financial statements that have been audited by an independent
accountant.
