FINRA Series 63 – Uniform Securities Agent State Law — Question 3

Which of the following are accurate statements regarding the minimum financial requirements for investment advisers according to the NASAA Model Rules?
I. Any investment adviser who has discretionary authority over a client's assets, but who does not have actual custody of client funds or securities, is required to maintain a minimum net worth of $10,000 at all times.
II. An investment adviser who requires that a fee of more than $500 from his clients be paid six months or more in advance must maintain a positive net worth at all times.
III. Only an investment adviser who has actual custody of client assets is subject to a minimum net worth requirement, which the NASAA Model Rules specifies is
$10,000.

Answer options

• A. I only
• B. I and II only
• C. II and III only
• D. III only

Correct answer: B

Explanation

Statement I is correct as advisers with discretionary authority but no custody must maintain a minimum net worth of $10,000. Statement II is also correct since advisers collecting fees over $500 in advance must have a positive net worth. Statement III is incorrect because it falsely suggests that only advisers with actual custody are subject to the net worth requirement.