Series 63 practice questioneasySurprise examination requirements
Which of the following would MOST likely trigger a surprise examination requirement for an investment adviser under state rules?
- AThe adviser directs client trades but does not hold client funds
- BThe adviser has custody of client securities in a pooled account✓ Correct answer
- CThe adviser receives discretionary authority limited to rebalancing portfolios
- DThe adviser only collects prepaid fees, but less than six months in advance
Explanation
Why B — The adviser has custody of client securities in a pooled account
Having custody of client securities—even in a pooled account—typically triggers the requirement for a surprise examination by an independent public accountant. Discretion and trade direction alone do not. (USA §411(b), NASAA Model Rule IA Custody).
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