The go-to guide to acing the Series 66 Exam!
Passing the Uniform Combined State Law Examination (Series 66) qualifies an individual to represent both a broker-dealer and an investment adviser. It covers such topics as client investment strategies and ethical business practices. Taken as a corequisite with the Series 7 Exam, candidates must complete the Series 66 Exam in order to register as an agent with a state securities administrator.
Created by the experts at The Securities Institute of America, Inc., Wiley Series 66 Exam Review 2020 arms you with what you need to score high on this tough 100-question test. Designed to help you build and fine-tune your knowledge of all areas covered in the exam and to guarantee that you're prepared mentally and strategically to take the test, it provides:
- Dozens of examples
- Assorted practice questions for each subject area covered in the exam
- Priceless test-taking tips and strategies
- Helpful hints on how to study for the test, manage stress, and stay focused
Table of Contents
About the Series 66 Exam xiii
About this Book xvii
About the Test Bank xix
About the Securities Institute of America xxi
Chapter 1 Definition of Terms 1
Security 1
Person 3
Broker Dealer 4
Agent 4
Issuer 5
Nonissuer 5
Investment Adviser 5
Pension Consultants 6
Investment Counsel 6
Form ADV 7
Investment Adviser Registration Database (IARD) 8
Investment Adviser Representative 9
Solicitor 9
Access Person 10
Institutional Investor 10
Accredited Investor 11
Qualified Purchaser 11
Private Investment Company 11
Offer/Offer to Sell/Offer to Buy 11
Sale/Sell 12
Guarantee/Guaranteed 12
Contumacy 12
Federally Covered Exemption 12
Escheatment 13
12B-1 Fees 13
Power of Attorney 14
Option Contracts 14
Call Options 15
Put Options 15
Futures and Forwards 15
Secondary Market Orders 15
Market Orders 16
Buy Limit Orders 16
Sell Limit Orders 16
Stop Orders/Stop Loss Orders 17
Buy Stop Orders 17
Sell Stop Orders 18
Pretest 19
Chapter 2 Securities Industry Rules and Regulations 25
The Securities Act of 1933 25
The Securities Exchange Act of 1934 27
Public Utilities Holding Company Act of 1935 29
Financial Industry Regulatory Authority (FINRA) 29
The Trust Indenture Act of 1939 30
Investment Advisers Act of 1940 30
Investment Company Act of 1940 30
Retail Communications/Communications with the Public 31
FINRA Rule 2210 Communications with the Public 32
Blind Recruiting Ads 34
Generic Advertising 34
Tombstone Ads 35
Testimonials 35
Free Services 36
Misleading Communications 36
Securities Investor Protection Corporation Act of 1970 (SIPC) 37
The Securities Acts Amendments of 1975 38
The Insider Trading and Securities Fraud Enforcement Act of 1988 38
Firewall 39
The Telephone Consumer Protection Act of 1991 39
National Securities Market Improvement Act of 1996 40
The Uniform Securities Act 41
The Patriot Act 41
Regulation S-P 43
Identity Theft 44
FINRA Rules on Financial Exploitation of Seniors 44
Pretest 49
Chapter 3 Economic Fundamentals 53
Gross Domestic Product 53
Recession 55
Depression 55
Economic Indicators 55
Schools of Economic Thought 57
Economic Policy 58
Tools of the Federal Reserve Board 58
Interest Rates 58
Reserve Requirement 59
Changing the Discount Rate 60
Federal Open Market Committee 60
Money Supply 61
Disintermediation 62
Moral Suasion 62
Fiscal Policy 62
International Monetary Considerations 64
London Interbank Offered Rate (LIBOR) 64
Yield Curve Analysis 64
Pretest 67
Chapter 4 Customer Recommendations, Professional Conduct, and Taxation 71
Professional Conduct by Investment Advisers 72
The Uniform Prudent Investors Act of 1994 72
Fair Dealings with Clients 73
Periodic Payment Plans 77
Disclosure of Client Information 78
Borrowing and Lending Money 78
Developing the Client Profile 78
Investment Objectives 81
Risk vs. Reward 83
Alpha 85
Beta 85
Predicting Portfolio Income 92
Fundamental Analysis 94
Capitalization 97
Tax Structure 99
Investment Taxation 99
Calculating Gains and Losses 99
Cost Base of Multiple Purchases 100
Deducting Capital Losses 101
Wash Sales 101
Taxation of Interest Income 102
Inherited and Gifted Securities 102
Donating Securities to Charity 102
Trusts 103
Totten Trust 103
Gift Taxes 103
Estate Taxes 104
Withholding Tax 105
Corporate Dividend Exclusion 105
Alternative Minimum Tax (AMT) 105
Taxes on Foreign Securities 105
Pretest 107
Chapter 5 Variable Annuities, Retirement Plans, and Life Insurance 111
Annuities 111
Equity-Indexed Annuities 114
Recommending Variable Annuities 115
Annuity Purchase Options 116
Accumulation Units 116
Annuity Units 117
Annuity Payout Options 117
Factors Affecting the Size of the Annuity Payment 118
The Assumed Interest Rate (AIR) 119
Taxation 119
Sales Charges 120
Variable Annuity vs. Mutual Fund 120
Retirement Plans 120
Individual Plans 121
Individual Retirement Accounts (IRAs) 121
529 Plans 124
Local Government Investment Pools (LGIPs) 125
IRA Contributions 126
IRA Accounts 126
IRA Investments 126
It is Unwise to Put a Municipal Bond in an IRA 127
Rollover vs. Transfer 127
Keogh Plans (HR-10) 128
Contributions 128
Tax-Sheltered Annuities/Tax-Deferred Account 129
Contributions 130
Tax Treatment of Distributions 131
Corporate Plans 131
Non-Qualified Corporate Retirement Plans 131
Payroll Deductions 131
Deferred Compensation Plans 132
Qualified Plans 132
Types of Plans 132
Rolling Over a Pension Plan 134
Employee Retirement Income Security Act of 1974 (ERISA) 134
ERISA 404C Safe Harbor 136
The Department of Labor Fiduciary Rules 137
Life Insurance 137
Premiums and Death Benefits 139
Assumed Interest Rate 140
Variable Policy Features 141
Sales Charges 142
Life Settlements 143
Tax Implications of Life Insurance 143
Health Savings Accounts 144
ABLE Accounts 145
Pretest 147
Chapter 6 Registration of Broker Dealers, Investment Advisers, and Agents 151
Registration of Broker Dealers 151
Financial Requirements 152
Agent Registration 153
Hiring New Employees 155
Resignation of a Registered Representative 156
Registering Agents 157
Changes in an Agent’s Employment 158
Mergers and Acquisitions of Firms 158
Renewing Registrations 158
Canadian Firms and Agents 158
Investment Adviser State Registration 159
The National Securities Market Improvement Act of 1996 (The Coordination Act) 159
Investment Adviser Representative 160
State Investment Adviser Registration 161
Capital Requirements 161
Exams 162
Advertising and Sales Literature 163
Brochure Delivery 164
The Role of the Investment Adviser 165
Additional Compensation for an Investment Adviser 165
Agency Cross Transactions 165
Disclosures by an Investment Adviser 165
Investment Adviser Contracts 167
Additional Roles of Investment Advisers 168
Private Investment Companies/Hedge Funds 168
Fulcrum Fees 168
Wrap Accounts 169
Soft Dollars 169
Pretest 171
Chapter 7 Securities Registration, Exempt Securities, and Exempt Transactions 177
Exempt Securities 177
Securities Registration 178
Exempt Securities/Federally Covered Exemptions 181
Exempt Transactions 182
Pretest 189
Chapter 8 State Securities Administrator: The Uniform Securities Act 195
Actions by the State Securities Administrator 195
Actions Against an Issuer of Securities 197
Rule Changes 198
Investigations 200
Civil and Criminal Penalties 200
Jurisdiction of the State Securities Administrator 201
Administrator’s Jurisdiction over Securities Transactions 201
Radio, Television, and Newspaper Distribution 204
Right of Rescission 204
Statute of Limitations 205
Pretest 207
Answer Keys 213
Glossary of Exam Terms 223
Index 289
