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Define a “client” according to The Adviser’s Act ANSWER-1) a natural person, and: (i) any minor child; (ii) any relative, spouse, or
... [Show More] relative of spouse having same residence; (iii) all accounts of which the person is the only primary beneficiary; and (iv) all trusts of the person or of which the person is the only primary beneficiary;
2) A corporation, general partnership, limited partnership, LLC, trust, or other legal org receiving advice based on investment objectives rather than individual objectives of shareholders/partners/etc. INCLUDING two or more legal orgs having identical owners
Define “Suitability” ANSWER-Recommendations in light of a clients experience, situation and objectives
Describe the characteristics of fulfilling suitability obligation ANSWER-Render disinterested/impartial advice, exercise high degree of care to ensure adequate and accurate recommendations/info is presented, and prior due diligence on holdings selected
Describe 3 requirements related to client investment objectives/restrictions ANSWER-Advisor must:
1) match portfolio decisions with client mandates,
2) create and maintain client profile,
3) execute investment advisory agreement
What is the goal of the Safe Harbor Rule? ANSWER-To provide certain investment advisory programs (such as wrap fees, model accounts and others having similar objectives and investments traded simultaneously with all clients being treated similarly) a non-exclusive safe harbor from the definition of an investment company and from being deemed to be a mutual fund, therefore requiring registration as such.
What conditions must be met for a program to qualify for the Safe Harbor Rule? ANSWER-1. Each account within the program received individualized treatment (managed according to each client’s specifics);
2. Client specific information is obtained by each upon account openings;
3. Annual contact confirming no changes;
4. Advisor to notify clients quarterly (a reminder) requesting contact if any changes apply;
5. Advisor consultation reasonably accessible to clients;
6. Ability to impose reasonable restrictions, such as specific securities or sectors;
7. Quarterly statements to clients reporting all activity; and
8. Indication of securities ownership retained by each client
Disclosure requirements for Mutual Funds managed within program qualifying for Safe Harbor ANSWER-1. Clients will pay advisory fees and fund expenses at the mutual fund level in addition to any account fees; and
2. MFs may be purchased directly without advisory services [Show Less]