Books and records requirements and custody-of-client-funds rules for investment advisers tested on the Series 65 and 66 exams.
30 cards · basic cards · AI-written, checked twice. Edit anything.
- What must an adviser do if it has custody of client funds or securities?
- Hold them with a qualified third-party custodian or maintain detailed custodial records.
- What is the primary purpose of an investment adviser's books and records?
- To demonstrate compliance with applicable securities laws and SEC regulations.
- Which individuals may perform advisory services on behalf of an adviser?
- Only registered investment adviser representatives (IARs).
- How often must clients receive account statements when an adviser has custody?
- At least quarterly, from the custodian or verified by an independent accountant.
- What is prohibited when advertising investment performance?
- Showing past returns without presenting complete performance history, risk factors, and fees.
- Which fees must be disclosed in writing before an advisory relationship begins?
- All fees, including management fees, performance fees, and any other charges.
- What record must exist for each discretionary account?
- Written authorization from the client granting discretionary trading authority.
- When transferring client assets to a new custodian, what must be documented?
- Written notice to the client before the transfer; confirmation after transfer is complete.
- What must be disclosed before offering a wrap-fee account?
- All fees included, services provided, and any conflicts of interest related to the arrangement.
- How must client funds be safeguarded if held by an adviser?
- In a separate account with a qualified custodian; never commingled with adviser assets.
- What must an adviser's chief compliance officer review annually?
- Policies and procedures to ensure compliance with all applicable securities rules.
- What independent verification is required when an adviser has custody?
- Either an annual surprise audit or annual certification by an independent accountant.
- What information must Form ADV Part 2A contain?
- Services offered, investment strategies, fees, conflicts of interest, and disciplinary history.
- What does custody mean under SEC Rule 206(4)-2?
- Having direct or indirect access to client funds or securities, or authority to withdraw them.
- Can an adviser use a non-qualified custodian for client funds?
- No; client funds must be held by a qualified custodian as defined by the SEC.
FlashKeepers