In which of the following scenarios is an investment adviser representative required to disclose the fact that someone other than the representative performed the research on which his advice to the client is based?
I. The investment adviser representative recommends the same asset allocation for his client that a buddy of his did after his buddy had done some research for a client with similar characteristics.
II. The investment adviser representative provides a recommendation for his client based on research provided by a broker-dealer that provides the investment adviser with its analysts' recommendations in return for trades that the investment adviser executes using the services of the broker-dealer, as well as a couple of other research sources he finds on the internet.
III. The investment adviser representative submitted his client's information to a data base that provided a recommendation for the asset allocation of the client's investment monies that the adviser deemed was sound and, therefore, recommended it to his client.

• A. II only
• B. I only
• C. III only
• D. I and III only

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For how long after the effective date is a security's registration valid?

• A. three months
• B. two years
• C. one year
• D. six months

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Which of the following scenarios does not meet the definition of "custody" under NASAA Model Rules?

• A. An investment adviser receives a check from a client that is written to a mutual fund and forwards the check to the mutual fund within three business days of receipt.
• B. An investment adviser is mistakenly sent a client's securities, but returns them to the sender within three business days of receipt.
• C. An investment adviser keeps a client's securities in its safety deposit box.
• D. An investment adviser has general power of attorney for a client and is authorized to withdraw client funds or securities that are on deposit with a registered broker-dealer upon the investment adviser's request.

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Which of the following entities must sign a "consent to service of process," thereby allowing the Administrator to receive legal documents that are meant to be served to the entity in place of that entity?
I. agents
II. investment advisers
III. investment adviser representatives
IV. broker-dealers

• A. I and IV only
• B. II and IV only
• C. II and III only
• D. I, II, III, and IV

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Iggy recently started his own company. He soon discovered it required more cash to keep it going than he had anticipated. He ran an ad in the local paper for investors and got a response. He found a template for a promissory note on the internet, filled in the requisite information specific to the agreement he and the investor had worked out, and printed it out. On it, he promised to make monthly interest payments of 2% on the loan and to repay the principal amount at the end of 18 months. A few months after the arrangement, Iggy read an article in a small business publication that indicated that promissory notes had to be registered with the state unless they were sold in an exempt transaction, such as one enacted with a financial institution, prior to being offered for sale. The article indicated that a seller who had sold an unregistered note in error could remedy the situation by sending the buyer a formal offer to buy the security back, with interest. Iggy turned to the computer once again, found a form that could be used for a formal offer of rescission, filled it out, and sent it to the investor. Having done this,

• A. Iggy must follow up with a second notice sent via registered mail if he has not heard from the investor within 30 days.
• B. Iggy must wait 6 months for a response from the investor. If no response is received by the end of 6 months, Iggy is off the hook.
• C. Iggy will not be assessed any penalties by the Administrator of the state, but the investor can still sue for damages in civil court.
• D. Iggy cannot be sued for civil damages if the investor fails to respond to the offer within 30 days.

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