FRAUDULENT AND PROHIBITED

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Author:
Anonymous
ID:
158783
Filename:
FRAUDULENT AND PROHIBITED
Updated:
2012-06-14 17:08:07
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FRAUDULENT PROHIBITED
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Description:
FRAUDULENT AND PROHIBITED PRACTICES WHEN PROVIDING INVESTMENT ADVICE
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  1. WHAT ACTIONS BY AN ADVISER OR BROKER/DEALER ARE UNLAWFUL UNDER THE INVESTMENT ADVISERS ACT OF 1940 AND THE USA?
    IT IS UNLAWFUL FOR ANY PERSON WHO RECEIVES DIRECT OR INDIRECT COMPENSATION FOR INVESTMENT ADVICE TO USE ANY DEVICE, SCHEME, OR ARTIFICE TO DEFRAUD THE OTHE PERSON.
  2. WHAT ARE EXAMPLES OF PROHIBITED PRACTICES WHEN PROVIDING INVESTMENT ADVICE?
    • - DISCLOSING THE IDENTITY OR INVESTMENTS OF A CLIENT WITHOUT CLIENT'S CONSENT, UNLESS REQUIRED BY LAW.  IF A JOINT ACCOUNT, PERMISSION FROM ONE OWNER SUFFICES FOR BOTH.
    • - USING THIRD-PARTY RESEARCH AS OWN.
    • -  USE OF TESTIMONIALS IN ADVERTISING (ADVERTISING DEFINED AS COMMUNICATING TO MORE THAN ONE PERSON).
    • - CALCULATING FEES DIFFERENTLY THAN ORIGINALLY DISCLOSED.
    • - FAILING TO COMPLY WITH CLIENTS WISHES REGARDING BROKERAGE ARRANGEMENTS.
    • - CAUSING CLIENTS TO INVEST IN SECURITIES INCONSISTENT WITH THEIR LEVEL OF RISK.
    • - NOT DISCLOSING BROKERAGE SERVICES ARRANGEMENTS.
    • - TRADING IN SECURITIES FOR PERSONAL ACCOUNTS, OR FAMILY MEMBER ACCOUNTS OR AFFILIATES, SHORTHLY BEFORE TRADING THE SAME SECURITIES FOR CLIENTS.
    • - DIRECTING CLIENTS TO INVEST IN SECURITIES WHICH THE ADVISER HAS AN UNDISCLOSED INTEREST.
    • - CREATING AN ADVISORY CONTRACT THAT GOES AGAINST THE USA OR IAA 1940.
    • - UNFAIRLY CRITICIZING THE WORK OF CLIENT'S OTHER PROFESSIONAL ADVISERS.
    • - RECOMMENDING THE SAME SECURITY WITHOUT REGARD TO INDIVIDUAL SUITABILITY.
    • - FOR STATE COVERED ADVISERS, RELAYING IN ORAL DISCRETIONARY AUTHORITY BEYOND THE ORIGINAL 10 BUSINESS DAYS AFTER THE DATE OF ORIGINAL TRANSACTION.
  3. WHAT ARE OTHER PROHIBITED PRACTICES UNDER THE IAA 1940? 
    • TO PROVIDE ADVICE IN THE ABSENCE OF:
    • - WRITTEN POLICIES AND PROCEDURES DESIGNED TO PREVENT VIOLATION UNDER THE ACT;
    • - REVIEW, NOT LESS FREQUENTLY THAN ANNUALLY, THE ADEQUACY OF THE POLICIES AND PROCEDURES.
    • - THE APPOINTMENT OF A CHIEF COMPLIANCE OFFICER. SEE APPENDIX B

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