Free NASAA Series 63 (Uniform Securities Agent State Law Examination) Regulation of Investment Advisers Practice Questions
Regulation of investment advisers on the NASAA Series 63 exam covers state registration requirements, exemptions, notice filing, investment adviser contracts, recordkeeping, and net worth and bonding requirements under the Uniform Securities Act.
Sample Questions
Question 1
Easy
Under the Uniform Securities Act, which of the following entities is EXCLUDED from the definition of an investment adviser?
Solution
Choice A is correct because the Uniform Securities Act explicitly excludes lawyers, accountants, engineers, and teachers from the definition of investment adviser when their advice about securities is solely incidental to their professional practice and they receive no special compensation for that advice.
Question 2
Medium
A federal covered investment adviser has clients in a state where it maintains no office. Under the National Securities Markets Improvement Act and the Uniform Securities Act, that state may require all of the following EXCEPT
Solution
D is correct. NSMIA preempts the states from imposing substantive registration on federal covered advisers, so a state cannot require such an adviser to register as an investment adviser before doing business. A state in which the federal covered adviser has clients may still require a notice filing consisting of the documents the adviser files with the SEC (such as Form ADV), payment of the state's filing fees, and a consent to service of process. These notice-filing requirements are what remain to the states after federal preemption.
Question 3
Hard
Brookfield Capital Advisors has $115 million in regulatory assets under management, with its principal office in State A and advisory clients residing in States B and C. Under federal and state law, all of the following are correct EXCEPT
Solution
C is correct. Because Brookfield has $115 million in regulatory assets under management, above the $110 million threshold, it is required to register with the SEC as a federal covered adviser. NSMIA preempts state substantive regulation of federal covered advisers, including recordkeeping, net capital, and financial requirements, so a state may NOT impose its own recordkeeping rules on the firm. States where the adviser has clients may still require notice filings and fees, and states may register the adviser's representatives who maintain a place of business within the state.