Chapter 5 Practice Questions
1. If a professional is registered as both an agent and an investment adviser representative, which of the following is true regarding agent commissions and investment advisory fees:
A. The professional may charge both to the same client at the same time.
B. The professional may charge both, but not to the same client at the same time.
C. The professional must charge whichever results in the lowest overall cost to a client.
D. The professional may not charge both and has to choose if he is going to operate as an investment adviser representative or agent.
2. A good measure of whether or not a fee is reasonable is:
A. Whether or not a client feels it is fair
B. What fees are charged to other clients for the same services
C. What portion of the fee a professional keeps
D. How long the client has been working with the professional
3. Which compensation-related conflicts must be disclosed to a client in writing?
I. When an agent receives bonuses from his firm based on his level of revenue
II. When an agent splits compensation with another licensed professional
III. When an agent splits compensation with an unlicensed professional
IV. When an agent receives compensation for making a trade for a client that is higher than the amount initially disclosed to the client
A. IV only
B. I and IV
C. I, II, and III
D. II, III, and IV
4. Soft-dollar arrangements can best be defined as:
A. Those in which the client’s fees or commission are based on volume
B. Those in which a broker-dealer provides products or services to a professional or firm without charging them
C. Those in which a client’s commissions are counted toward their investment advisory fee
D. Those in which securities professionals trade their services for services their clients can offer
5. Which of the following soft-dollar services can be accepted by a professional or his firm?
I. Research services
II. I