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
Sarah is an investment adviser representative employed by a federal covered investment adviser. She maintains an office in State B from which she solicits advisory clients who reside in State B. Regarding state-level registration, Sarah is:
Solution
A is correct. Although federal covered investment advisers themselves are not subject to state registration (only notice filing), their IAR employees remain subject to state registration. An IAR must register in any state in which the IAR has a place of business. Sarah maintains an office in State B, so she must register as an IAR there. The employer's federal covered status does not shield the individual representative from IAR registration.
Question 3
Hard
Harborview Advisors is registered only with State C and manages $98 million in AUM, with its sole place of business in State C. On its next annual updating amendment to Form ADV, Harborview reports $112 million in AUM. Six months later, due to a market decline, AUM falls to $92 million. Assuming Harborview wants to minimize regulatory switching, which path is correct?
Solution
C is correct. At $98 million, Harborview is a mid-sized adviser that must remain state-registered. Reporting $112 million on the annual amendment crosses the $110 million mandatory SEC threshold, so Harborview must register with the SEC within 90 days. The $90 million to $110 million band acts as a buffer zone: once SEC-registered, an adviser only needs to withdraw (switch back to state) when AUM reported on the annual updating amendment falls below $90 million. A mid-year drop to $92 million stays above the $90 million withdrawal floor and is not reported until the next annual amendment, so Harborview remains SEC-registered and avoids regulatory churn.