Chapter 6 Practice Question Answers

1. 1. Answer: C. The Securities Exchange Act of 1934 was designed to regulate broker-dealers, individuals selling securities on behalf of broker-dealers, and the exchanges the trades take place on. Issuers of securities are primarily regulated under the Securities Act of 1933. Investment companies are primarily regulated under the Investment Company Act of 1940. Investment advisers are primarily regulated under the Investment Advisers Act of 1940.
2. 2. Answer: A. Broker-dealers are regulated under the Securities Exchange Act of 1934 and are exempt under the Investment Advisers Act as long as they do not charge a fee for giving investment advice that is incidental to the provision of their commission- or markup-based services. Publishers, lawyers, teachers, and engineers are all exempt if their advice is incidental to their primary job description.
3. 3. Answer: D. Buying and selling securities—in other words, serving as a securities broker-dealer—does not require investment adviser