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Compliance Procedures for Investment Advisors

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Compliance Procedures for Investment Advisors

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Questions and Answers

What should be done if client orders are entered against the advice of the IA?

Consult the branch manager before deciding on the orders

Do not mark the orders as 'unsolicited' to avoid raising red flags

Mark the orders as 'unsolicited' and document the circumstances of the transaction (correct)

Ignore the advice and proceed with the orders

What is the foremost consideration in all business dealings for registrants?

The client's interest (correct)

The branch manager's interest

The compliance department's interest

Their own interest

Under what circumstances may firms refuse to accept orders?

When the orders are too complicated

When they are too busy

When the orders are unsuitable (correct)

When they are implementing new policies

What should be done if IAs are unable to dissuade clients from making apparently unsuitable trades?

Clear such orders with the branch manager or compliance department before putting them through Signup and view all the answers

What should registrants be able to do in addition to 'Know Your Client'?

Prove the suitability of their investment advice Signup and view all the answers

What could happen if a client complained about poorly performing securities?

The registrant might have to justify the orders Signup and view all the answers

What changes must compliance registrants document about their clients' situations?

Marital status changes Signup and view all the answers

What did Stanley Kowalski do after discussing the speculation with Doris Green?

He invested Doris Green's excess margin in shares of the company Signup and view all the answers

What must the firm do in relation to any business dealings outside of normal business?

Give written consent and have knowledge of the dealings Signup and view all the answers

Under what conditions should the IA place securities with clients?

If the firm agreed to participate in the distribution and perform due diligence Signup and view all the answers

What must be done with regards to recording trades and issuing statements to clients?

Record trades in a normal way and issue monthly statements to clients Signup and view all the answers

In the example provided, what was the relationship between IA Edgar Brown and his client Michelle Green?

They socialized to some extent and might be considered friends Signup and view all the answers