Uniform Combined State Law Exam (FINRA Series 66)
The Series 66 exam - the Uniform Combined State Law Examination - is designed to test an individual's knowledge and ability to advise clients in the area of investing and how to solicit the purchase or sale of securities within a given state.
The Uniform Combined State Law Exam (a.k.a. the Series 66 exam) was created to qualify candidates as both securities agents and investment adviser representatives. It is considered a combination of the Series 63 and Series 65. 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, as well as the purchase and sale of securities and state laws pertaining to securities.
Despite commonly being called the "FINRA Series 66" it is more accurately a North American Securities Administrators Association (NASAA) exam administered by FINRA.
Question 1
A conservative investor from Idaho in the 24% federal tax bracket and 4% state tax bracket seeks an income producing investment and needs your help choosing between:
- 4.40% yielding general obligation bond from state of Idaho
- 6.60% yielding Treasury bond
- 8.60% yielding AAA-rated debenture
- 6.60% yielding AA-rated convertible bond
Which investment should you recommend?
A.
4.40% yielding general obligation bond
B.
6.60% yielding Treasury bond
C.
6.60% yielding AA-rated convertible bond
D.
8.60% yielding AAA-rated debenture
Question 2
An agent meets with a client to discuss the suitability of a common stock. While the security seems suitable, it's experienced significant volatility over the past month. The agent recommends a purchase given the growth in the company's earnings, but the client wants to perform more research before making any investment. A week later, the agent attempts to call the client after a report is disseminated publicly about a new product the company plans to release. The call goes to voicemail, and the agent leaves a message stating they will make a small purchase of the stock for the client due to the new product release. The following day, the stock rises 15% in value. The client returns the agent's call to thank them for making the purchase, although they wish they purchased more shares. What statement is true?
A.
Given the volatility of the stock, the agent's action was suitable
B.
The agent performed an unethical action
C.
The agent should have known their client better and purchased more shares
D.
This action was ethical if the client was accredited
Question 3
DDD Management Group is considering the introduction of fulcrum fees to their service list. All of the following clients would qualify for this type of compensation, EXCEPT:
A.
A client that recently declared bankruptcy, but wins a lottery and subsequently invests $1.13 million with the adviser
B.
A client that invests $1.24 million with the adviser while making a $50,000 salary
C.
A client making $650,000 in annual salary
D.
A client making $125,000 in annual salary and invests $1.50 million with the adviser
Question 4
Of the scenarios listed, which does not qualify as an exempt transaction according to the Uniform Securities Act?
A.
Offer of non-registered securities to 10 or fewer retail investors
B.
Transaction in an unregistered security between an issuer and an underwriter
C.
Unsolicited transaction for an unregistered security by a retail client
D.
Sale of a Treasury bond to a retail client
Question 5
A 45 year old investor is looking for some advice on how to invest a $5,000 bonus they received into their IRA. The investor has a 20 year time horizon, a moderate tolerance for risk, and an objective of growth. Additionally, they don't believe the extra costs associated with active management are worth it over long periods of time. What investment is the best recommendation?
A.
S&P 500 index fund
B.
Russell 2000 ETF
C.
Balanced fund
D.
Large cap growth fund
Question 6
An influencer is hired by a registered investment adviser to review their products and services. The opinion of the influencer is solely their own and their compensation is not contingent on a positive review. What statement is true?
A.
The firm has neither adopted or entangled itself with the influencer's content if the review is not written
B.
The firm has adopted the influencer's content
C.
The firm has neither adopted or entangled itself with the influencer's content because the review is unbiased
D.
The firm has entangled itself with the influencer's content
Question 7
An investor in the 37% tax bracket makes a $64,000 investment in a lifecycle fund on December 13, 2022. Over the next several months, the investor receives a total of $1,920 in qualified dividends, none of which is reinvested. On December 12, 2023, the investor redeems the fund for a total of $78,000. What is the investor's after-tax return?
A.
15.67%
B.
16.18%
C.
20.99%
D.
21.14%
Question 8
A customer submits an order to sell 300 shares of GS stock @ $209 stop $205 limit. Which of the following statements is TRUE?
A.
Triggers at $209 or lower; fills at $205 or higher
B.
Triggers at $209 or lower; fills at $205 or lower
C.
Triggers at $209 or higher; fills at $205 or lower
D.
Triggers at $209 or higher; fills at $205 or higher
Question 9
A consultant provides ongoing advice to businesses in relation to managing assets in pension funds. What statement is true regarding this role and relevant registration responsibilities?
A.
If providing advice on $100 million or more of assets, the consultant is eligible for SEC registration
B.
If providing advice on $110 million or more of assets, the consultant must register with the SEC
C.
If providing advice on $200 million or more of assets, the consultant is eligible for SEC registration
D.
The consultant is excluded from registration
Question 10
A client emails their assigned agent to request a trade to be placed. Which of the following requests would require discretionary authority on the client's account?
A.
"Buy 50 shares of DEF stock at the price you deem appropriate by the end of the day"
B.
"Buy 450 shares CCC common stock at the price you deem appropriate by the end of the week"
C.
"Buy 800 shares of NOP stock if it falls to $135, and make the order good until the end of the month"
D.
"Sell my TUV Bond Fund and reinvest the proceeds into GHI Stock Fund"
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FINRA's Series 66 exam summary
Economic Factors and Business Information
8%
8 questions
The methods used to analyze economic factors and businesses. Topics include time value of money concepts, descriptive statistics, and the interpretation and calculation of financial ratios and valuation factors.
Investment Vehicle Characteristics
17%
17 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/Customer Investment Recommendations and Strategies
30%
30 questions
Developing a client portfolio, portfolio theory, and suitability. Topics include types of clients; client profiling, capital market theory; portfolio management; tax considerations; retirement planning; special accounts; trading securities; and performance measurement.
Laws, Regulations, and Guidelines
45%
45 questions
The state and federal securities acts and laws, rules, and regulations regarding investment advice. Topics include state and federal securities acts; rules and regulations for investment advisers; ethical practices; and fiduciary obligations.
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