In your initial meeting with an investment
advisor representative (IAR), she fails to provide
you with the ADV Part II as per the brochure rule.
She then goes on to talk about the advisory firm, which
of the following statements made by her would be considered
as fraudulent?
a) Our firm’s investment style follows that of
efficient market theory
b) Once you sign a contract with
our firm, it can be terminated within 3 days without
penalty
c) Our firm requires that all of our advisors are
certified financial planners (CFP)
d) You should research our firm’s disciplinary
history through the SEC and NASD
Answer:
The correct answer is b):
The investment advisor representative (IAR) can tell
the prospective client all of the following statements
above, with the exception of termination within 3 days
without penalty. Per the Brochure Rule, since the IAR
failed to provide the prospective client with the written
disclosure statement (ADV Part II) at the initial meeting,
the client must be given 5 days to terminate the contract
without penalty.
