Chapter 5 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 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. Soft-dollar arrangements can best be defined as:
21. A. Those in which the client’s fees or commission are based on volume
22. B. Those in which a broker-dealer provides products or services to a professional or firm without charging them
23. C. Those in which a client’s commissions are counted toward their investment advisory fee
24. D. Those in which securities professionals trade their services for services their clients can offer
25. 5. Which of the following soft-dollar services can be ethically accepted by a professional or his