Question of the Week

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


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.

Professionals FAQs
  1. Where can I look for a financial planner?

    References from trusted friends or family members can help you find a financial planner; however, keep in mind that your friends' financial situations and goals may differ from yours and, therefore, their planners won't necessarily be the best fit for you.The Certified Financial Planner (CFP) Board of Standards certifies financial planners and maintains an online list of certified financial planners on its CFP Board of Standards website.
  2. If I am looking to get an Investment Banking job. What education do employers prefer? MBA or CFA?

    If you are looking specifically for an investment banking position, an MBA may be marginally preferable over the CFA. The caveat here is that the MBA would most probably need to be from a Top-20 B-School.The Chartered Financial Analyst (CFA) is well worth considering if you (a) are aiming for an entry-level position in investment banking, and/or (b) cannot afford to shell out six figures for an MBA or have to settle for a lesser-known B-school.That's because in the investment banking field, most entry-level positions are at the analyst level.
  3. Can I still pass the CFA Level I if I do poorly in the ethics section?

    You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't count on it. The CFA Institute has long emphasized that ethics is a particular area of focus for it. The seriousness with which the CFA Institute views ethics is evident from the fact that for exam candidates with borderline total scores, performance on the ethics section can mean the difference between passing and failing the exam.
  4. Under the USA, registration as an IAR includes all of the following EXCEPT:

    Under the USA, registration as an IAR includes all of the following EXCEPT: A. Minimum net capitalB. Passing a qualification examC. Filing a consent to service of processD. Posting a surety bond The correct answer is "A", since only an IA would need to prove minimum net capital requirements.