Supervised Person

An investment adviser's code of ethics must address:

1. A.Employee dress codeWorkplace appearance is an internal management matter with no bearing on client protection. The code of ethics targets conduct that can harm clients, chiefly the personal trading of people with access to advisory information.
2. B.Personal securities trading by access personsCorrect - access-person trading rules.
3. C.Client vacation plansThis confuses information the firm collects about clients with the conduct the firm must govern in its own people. A code of ethics regulates employees, most importantly by requiring access persons to report their personal securities transactions and holdings.
4. D.Office rentOccupancy costs are a business expense, not an ethical standard. The code exists to address situations where an employee could profit from knowledge of client activity, such as trading ahead of client orders.

Why: The code of ethics must govern the personal securities trading of the firm's access persons.

An investment adviser must:

1. A.Supervise only new hiresNew hires may warrant closer attention, which makes this feel sensible, but supervision is not a probationary phase that expires. Experienced people commit violations too, and the obligation covers all supervised persons for as long as they are with the firm.
2. B.Let employees act unsupervisedThis states the failure the rule is designed to prevent. Reasonable supervision means written procedures, designated supervisors, and actual monitoring, and its absence is itself a chargeable violation even where no employee misconduct is ever found.
3. C.Report only to the IRSTax filings are a separate obligation with no bearing on the supervisory duty. The adviser answers to its securities regulator for how it oversees the people giving advice, and the IRS has no role in that.
4. D.Reasonably supervise its IARs and employeesCorrect - supervision is required.

Why: An adviser must reasonably supervise its IARs and other employees.

The brochure supplement (Form ADV Part 2B) provides information about:

1. A.The custodian's financesThe custodian is a separate institution, and its balance sheet is not something the adviser reports on. Part 2B is about people, covering the education, business background, discipline, and outside activities of the individual advising this client.
2. B.The firm's office locations onlyOffice locations are firm-level facts that appear elsewhere in Form ADV. The supplement exists to tell a client about the particular supervised person handling their account, which office geography does nothing to convey.
3. C.The individual personnel who advise the clientCorrect - 2B covers the advising individuals.
4. D.The client's portfolioHoldings and performance reach the client through account statements and reports, not through a disclosure form. Part 2B runs the other direction, telling the client who the adviser's representative is and what qualifies them.

Why: Part 2B describes the specific supervised persons who provide advice to the client.

Wexley Asset Management employs a portfolio manager, a client-service associate who answers account questions and gathers suitability information, a receptionist who books meetings and photocopies statements, and a paralegal who assembles filings. The compliance officer is identifying which of them are supervised persons subject to the firm code of ethics and Advisers Act oversight.

1. A.All four are investment adviser representatives, because everyone employed by an adviser is by definition an IAREmployment alone does not make someone an IAR. The clerical and ministerial carve-out exists precisely to keep support staff out of the registration requirement.
2. B.Only the portfolio manager is covered, since only a person who makes investment decisions can be treated as advisory personnelToo narrow. Soliciting clients, gathering suitability information and communicating recommendations are all advisory functions, even without discretion over trades.
3. C.The portfolio manager and the client-service associate perform advisory functions, while the receptionist and paralegal perform clerical or ministerial roles that fall outside the IAR definitionCorrect. Function, not job title, drives the analysis, and purely clerical or ministerial work is carved out of the IAR definition.
4. D.None of them is a supervised person, because that term applies only to officers and directors of the firmThe definition expressly reaches employees, not just officers and directors, and also covers others who give advice on the firm behalf under its control.

Why: A supervised person includes any partner, officer, director or employee of the adviser, and any other person who provides investment advice on the adviser behalf and is subject to its supervision and control. That sweeps in the portfolio manager and the client-service associate. Individuals whose functions are purely clerical or ministerial are generally excluded from the parallel definition of investment adviser representative, which is why the receptionist and the paralegal are treated differently for registration purposes even though the firm still supervises their conduct.