Question 1

Big Bo is an investment adviser representative who has a lot of the members of a well-known professional football team as clients. In advertising his services, Big Bo can one has invested with him.

Options :

A : list the names of the players he’s advising as long as he lists the names of all his other clients, too.

B : list the names of the players he’s advising as long as he doesn’t provide any other specifics, such as the amount each one has invested with him.

C : list the names of the players he’s advising as long as he has their written permission to do so.

D : use testimonials from any of the players who willingly provide them without compensation.

Answer: C

Question 2

Sam Shyster had his day in court-and lost. His license to do business as an investment adviser in the state has been revoked. What legitimate options does Sam have available to him now?

Options :

A : Sam can move to another state and apply for registration as an investment adviser there.

B : Sam has 45 days in which to file an appeal with the attorney general.

C : Sam can register with the SEC as an investment adviser, which will exempt him from state registration requirements.

D : Sam has 60 days to file an appeal of the decision in a court of law.

Answer: D

Question 3

Ken Con is an agent with Blue Sky Broker-Dealers. He gets up early each morning so that he can study any late-breaking news that may affect the markets and figure out ways to incorporate this news into conversations with select clients in order to pressure them to restructure their portfolios by selling holdings they have in one particular industry to invest the money in another particular industry. Ken has been very successful with this strategy and executes more trades for his clients than any other agent with the firm, but is he in danger of losing his license?

Options :

A : Yes. Ken is engaging in churning, a prohibited practice and can have his license revoked or suspended.

B : It depends. If his clients have lost money, Ken may lose his license; but if a review indicates that his clients’ accounts earn profits, then his license is safe.

C : Yes. Ken is guilty of the prohibited practice of “tailgating.”

D : No. Ken is just a successful sales person who is working harder than the other agents in the firm.

Answer: A

Question 4

Investment Adviser Foo Lish, LLC has begun serving as a custodian of its clients’ assets. Foo Lish, LLC must now I. file a new U-5 form with the Administrator. II. meet higher net capital requirements than before. III. file an updated Form ADV with the Administrator. IV. pay a CPA to do an annual unannounced audit of the firm.

Options :

A : I, II, III, and IV

B : II, III, and IV only

C : II and III only

D : I and II only

Answer: B

Question 5

Which of the following may an investment adviser not use in an attempt to solicit new clients?

Options :

A : testimonials of satisfied clients

B : a complete list of the stocks they have recommended in the past year, even if a statement is included that states that past performance is no guarantee of future performance

C : a free initial consultation, with no obligation on the part of the potential client

D : a free financial planning kit, with no obligation on the part of the potential client

Answer: A

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