Q:
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
A:
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.

RELATED FAQS

  1. 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 ...
  2. Which of the following qualifies as an Investment Advisor Representative ...

    The correct answer is b. An Investment Advisor Representative (IAR) is defined as any partner, officer, or other individual ...
  3. Your firm is a registered investment advisor that specializes in investment management ...

    The correct answer is b: As a professional, you must be able to recognize when clients make requests for services that are ...
RELATED TERMS
  1. Investment Advisory Representative - IAR

    Personnel that work for investment advisory companies whose main ...
  2. Brochure Rule

    Under the Investment Advisor's Act of 1940, the Brochure Rule ...
  3. ADV Form

    A required submission to the Securities and Exchange Commission ...
  4. Investment Advisor

    As defined by the Investment Advisors Act of 1940, any person ...
  5. Fee-Based Investment

    An investment account in which the advisor's compensation is ...
  6. Federal Covered Advisor

    An investment advisor in the United States that manages more ...
Hot Definitions
  1. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  2. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  3. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  4. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
  5. Merchandising

    Merchandising is any act of promoting goods or services for retail sale, including marketing strategies, display design and ...
  6. Small Cap

    Refers to stocks with a relatively small market capitalization. The definition of small cap can vary among brokerages, but ...
Trading Center