Chapter 8 Practice Questions

1. 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:
2. A. The professional may charge both to the same client at the same time
3. B. The professional may charge both, but not to the same client at the same time
4. C. The professional must charge whichever results in the lowest overall cost to a client
5. D. The professional may not charge both, but has to choose if he or she is going to operate as an investment adviser representative or agent.
6. 2. A good measure of whether or not a fee is reasonable is:
7. A. Whether or not a client feels it is fair
8. B. What fees are charged to other similar clients
9. C. What portion of the fee a professional keeps
10. D. How long the client has been with the professional
11. 3. Which compensation-related conflicts must be disclosed to a client in writing?
12. I. Receiving bonuses from their firm based on their level of revenue
13. II. Splitting compensation with another licensed professional
14. III. Splitting compensation with an unlicensed professional
15. IV. Receiving compensation related to an account that is in addition to what was initially disclosed to a client
16. A. IV only
17. B. I and IV
18. C. I, II, and III
19. D. II, III, and IV
20. 4. Clients can be charged fees for postage, wire transfers, and other miscellaneous fees:
21. A. Under no circumstances
22. B. Only in advisory accounts
23. C. Only if the fees are reasonable
24. D. Only if a flat fee is charged to all clients, regardless of whether or not they actually use those services
25. 5. Soft-dollar arrangements can best be defined as:
26. A. Those in which the client’s fees or commission are based on volume
27. B. Those in which a broker-dealer provides products or services to a professional or firm with