Test your industry knowledge by answering Quest CE’s exam question of the week! Exam questions are drawn directly from Quest CE’s exam portal, and feature a wide range of topics including suitability, ethics, regulation and anti-money laundering. Be sure to submit your answer in the comments section and check back Thursday for the correct answer.
Course Topic: Due Diligence for Investment Advisers
Question: Due diligence, as it applies to the investment industry, is first mentioned in what piece of legislation?
a.) The Securities Act of 1933
b.) The Securities Exchange Act of 1934
c.) The Investment Advisers Act of 1940
d.) The Stock Exchange Act of 1943
The correct answer is A.
The term “due diligence” first came into common use as a result of the United States’ Securities Act of 1933. This Act included a defense at Sec. 11, referred to as the “Due Diligence” defense, which could be used by broker-dealers when accused of inadequate disclosure to investors of material information with respect to the purchase of securities.
Source: Wikipedia
Bryan, you are correct! The Investment Advisers Act of 1940 is the law that requires adviser firms to develop and implement written compliance programs.