Uniform Investment Advisor Law Exam (FINRA Series 65)
The Series 65 exam - the Uniform Investment Advisor Law Examination - is designed to test an individual's knowledge and ability to advise clients in the area of investing and to discuss general financial concepts. The exam seeks to qualify candidates as investment adviser representatives. The exam covers topics, both regulatory and strategic, that have been determined to be necessary to understand in order to provide investment advice to clients.
The Uniform Investment Advisor Law Exam (aka the Series 65 exam) was created to qualify candidates as investment adviser representatives. The exam covers topics, both regulatory and strategic, that have been determined to be necessary to understand in order to provide investment advice to clients.
Despite commonly being called the "FINRA Series 65" it is more accurately a North American Securities Administrators Association (NASAA) exam administered by FINRA.
Question 1
A federal covered adviser would be prohibited from which of the following actions in advertisements, EXCEPT:
A.
Presenting return scenarios without discussing the risks involved
B.
Disclosing returns of a predecessor firm that offered similar products and services
C.
Creating hypothetical return projections related to aggressive investing for clients that are risk averse
D.
Highlighting performance of a small number of account with high returns
Question 2
Registration as a broker-dealer in a state would be required in which of the following circumstances?
A.
A broker-dealer with no office in a state that offers services to 3 retail investors in that state
B.
A broker-dealer with no office in a state that offers its services only to pension plans in that state
C.
A broker-dealer with no office in a state that only engages large organizations in that state
D.
A broker-dealer with no office in a state that only offers moderate-to-risky investments to investment advisers in that state
Question 3
An investor is considering an investment in a long term bond and is asking for your expertise regarding benefits and risks. Which of the following statements is true?
A.
A portfolio invested 100% in bonds is generally considered aggressive
B.
Payment of interest and principal must be approved by the Board of Directors
C.
Capital appreciation is the primary benefit
D.
A significant non-systematic risk is default risk
Question 4
Which of the following securities is LEAST suitable for an investor specifying a high yield income investment objective?
A.
Callable preferred stock
B.
Straight preferred stock
C.
Speculative grade corporate bond
D.
Convertible preferred stock
Question 5
An investor builds a long term plan for investing their retirement assets, which involves a heavy emphasis on stocks. In the coming months, the investor believes there will be a short term bear market for stocks and a bull market for bonds. They subsequently make some adjustments to their portfolio in order to take advantage of the opportunity, and plan to adjust back to the long term plan within a year. What asset allocation style does this best describe?
A.
Tactical asset allocation
B.
Strategic asset allocation
C.
Passive asset allocation
D.
Active asset allocation
Question 6
An investor pulls the following S&P 500 data from the market:
| Date | Price increases | Price decreases |
|---|---|---|
| Monday | 444 stocks | 56 stocks |
| Tuesday | 403 stocks | 97 stocks |
| Wednesday | 373 stocks | 127 stocks |
What can be assumed about the market given the data provided?
A.
Bear market
B.
Volatile market
C.
Oversold market
D.
Overbought market
Question 7
A 44 year old client reaches out to you to discuss the opportunity to purchase an immediate annuity with an initial premium of $500,000 once they reach retirement. Instead of contributing to a deferred annuity now, they believe they can invest a large sum of money today and attain a higher return through their brokerage account. In particular, the client believes they can achieve an average annual return of 6% from now until they turn age 68 (when they plan on investing these funds into the immediate annuity). Assuming no future contributions will be made, what amount of money must they set aside to invest today to attain their goal?
A.
$125,000
B.
$181,818
C.
$222,222
D.
$250,000
Question 8
The belief that no information, including non-public inside information, can be utilized to determine future market movements is closely aligned with which of the following forms of efficient markets hypothesis (EMH)?
A.
Weak form
B.
Semi-strong form
C.
Strong form
D.
Semi-weak form
Question 9
A registered agent receives an email from their client about purchasing life insurance in the near future. They want to pay fixed premiums, have coverage for life, and are concerned about loss of purchasing power with the funds they keep if they decide to forfeit the insurance. What form of life insurance should you recommend?
A.
Term life insurance
B.
Universal life insurance
C.
Whole life insurance
D.
Variable life insurance
Question 10
An investment adviser determined some of the advice it had previously given to a client to purchase a risky security was unethical. To avoid legal liability, the firm should offer to:
A.
Offer to buy back the recommended security at its current market value
B.
Send a report to the state administrator detailing the advice provided
C.
Repay the cost of the advice plus any damages experienced and a state-defined interest rate
D.
Do nothing as repayment of the advice would be considered a performance guarantee
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FINRA's Series 65 exam summary
Economic Factors and Business Information
15%
20 questions
Handling economic cycles, financial reporting, analytical methods, and types of risk. Topics include monetary and fiscal policy, economic indicators, financial reports and accounting fundamentals, quantitative methods, and basic risk concepts.
Investment Vehicle Characteristics
25%
32 questions
The characteristics of different types of investment vehicles. Topics include cash and equivalents, fixed income securities and valuations, equities and equity valuation, pooled investments, derivative securities, and insurance-based products.
Client Investment Recommendations and Strategies
30%
39 questions
Developing a client portfolio, portfolio theory, and suitability. Topics include business entities and trusts; client profiles; capital market theory; portfolio management strategies, styles and techniques; tax considerations; retirement and estate planning; special accounts; trading securities; exchanges and markets; and performance measurement.
Laws, Regulations, and Guidelines
30%
39 questions
The laws, rules, and regulations regarding investment advice. Topics include state and federal securities acts; rules and regulations for IARs and Broker-Dealers; regulation of securities and issuers; communication with clients and prospects; ethical practices; and fiduciary obligations.
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