Question

ten-year treasury obligations, exempt from the definition of an investment adviser as per the IIA of 1940? Why or why not? 2. True or False. - The purpose of the "brochure rule" is to assure the client that advisory contracts formulated by advisers do not exceed the initial consultation fee of $200.

Answer 1

According to provisions of Rule 204-3 under the Advisers Act, SEC-registered investment adviser needs to deliver to each client or prospective client a Form ADV Part 2A (brochure) and Part 2B (brochure supplement) describing the adviser's business practices, conflicts of interest describing the adviser's business practices, conflicts of interest and background of the investment adviser and its advisory personnel. An adviser must deliver the brochure to a client before or at the time the adviser enters into an investment advisory contract with a client.

Rule 206(4)-4 under the Advisers Act requires every SEC-registered investment adviser that has custody or discretionary authority over client funds or securities, or that requires prepayment six months or more in advance of more than $500 of advisory fees, to disclose promptly to clients and prospective clients (collectively, "clients") any financial conditions of the adviser that are reasonably likely to impair the ability of the adviser to meet contractual commitments to clients.

Therefore, it would be inappropriate to say that the prupose of brochure rule is to ensure the client that advisory contracts formulated by advisers do not exceed the initial consultation fees of $200.

The statement is FALSE