A full-service financial enterprise provides comprehensive investment consulting, charges asset-based advisory fees for continuous management, and also maintains an active trade execution desk that executes customer orders. Which of the following statements correctly evaluate the regulatory roles, execution capacities, and legal obligations governing this firm's activities under securities regulations? (Select all that apply.)
- Providing continuous portfolio management for an asset-based fee triggers registration as an Investment Adviser, subjecting the firm to a strict fiduciary standard under the Investment Advisers Act of 1940.Cevap
- When fulfilling a customer buy order by selling securities directly out of its own inventory, the firm acts in a principal capacity as a dealer and receives a mark-up.Cevap
- CWhen executing client transactions on an agency basis in exchange for a commission, the firm acts in a dealer capacity and takes ownership of the securities.
- DBecause the firm is a member of FINRA, this self-regulatory organization maintains independent statutory authority to criminally prosecute the firm for federal securities law violations.
Cevap
The correct statements are that providing continuous management for an asset-based fee classifies the firm as an Investment Adviser subject to a fiduciary standard, and that selling securities directly from its inventory means the firm acts in a principal (dealer) capacity compensated via mark-up.
The statements correctly identify that receiving asset-based fees for continuous advice triggers Investment Adviser status under the Investment Advisers Act of 1940 (establishing a fiduciary obligation), and that executing trades directly out of firm inventory places the firm in a principal (dealer) capacity compensated through a mark-up.
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Anahtar Kavram
Distinction between Broker-Dealer and Investment Adviser roles, capacities (Agency vs. Principal), compensation structures, and regulatory oversight boundaries.