Series 66 Practice Test

An investment adviser that wishes to act as a broker for both parties to a transaction must:

1. Disclose the capacity in which it is acting prior to the completion of the transaction and 2. Obtain the client's written consent. Since both parties to the trade are clients, the disclosure and consent requirements apply to both

NASAA says that a website advertisement must include these 2 statements:

1. agent will only conduct business in the state if registered or exempt 2. follow ups will be handles only by agents who are registered or exempt

What is disclosed on a bond confirmation?

1. coupon rate 2. YTM 3. bond's PP - rating not required unless it is unrated

When would an administrator waive a surety bond for an IA?

1. no custody 2. net worth of 35k

Who are affiliates of an IA? (3)

1. officers, partners, directors 2. nonclerical employees 3. any person directly or indirectly who owns, controls, or holds, 5% or more of the outstanding securities

A state regulated IA falls below the minimum financial requirements. What are the next 2 steps and what day do they occur?

1. provide a notice to the state administrator the next day 2. file a statement of financial condition on the day after providing the notice

What must be included in the access person's report when it comes to his security holdings? What is not included?

1. the type of securities 2. the date the report is submitted on 3. the name of BD that maintains the account the prices paid

A spouse inherits her deceased husband's IRA. What are her 3 options? What is 1 thing she can't do?

1. transfer IRA to her own name and make contributions (if eligible) 2. treat it as an inherited IRA, which retains it's character 3. Use the the 5 year rule for distributions if the husband was under the age of 70.5

Schedule 13D must be filed within _ days of acquiring the stock, and be filed with...(3)

10 SEC, issuer, appropriate exchange

According to the IA act of 40, when you become an access person, you must submit your personal security holdings no later than... access person = officers, directors, parnters, and supervisors who have access to non public information

10 days after becoming an access person, then at lest every 12 months after

An IA, under both acts, needs to record a transaction in a client's account within... What security is exempt from this?

10 days of the end of each quarter direct obligations of the US gov't

Form _ is required for any investor that acquires more than _% of the common stock of a reporting company and is filed with the SEC.

13D 5%

If the administrator revokes a firm's registration, the firm may request a hearing with the administrator within _ days of revocation and/or apply for judicial review of the administrator's actions within _ days.

15 60

The IA act of '40 requires an access person to submit a transaction report no later than _ days after the end of each _. How does this differ from the USA?

30 days calendar quarter USA is 10 days

The statute of limitations for a criminal act under the USA is _ years.

5

REITs are required to generate at least _% of their income from investing in real property. Also, REITs are required to distribute at least _% of their income to its shareholders each year.

75% 90%

Exempt reporting advisers are required to file Form _ with the SEC and must _ with the Administrator

ADV1a notice file

An IA who executed transactions through an affiliated BD must disclose this relationship through form _.

ADVII

T/F: Any security that is exempt from federal regulations is also exempt under the USA.

F but i thought federally covered securities were exempt? look this up

A cash withdrawal from a life insurance policy is done via *LIFO/FIFO*

FIFO

_ and _ are valued each day, at the close of market, based on their net asset value.

Open-end management companies (mutual funds) unit investment trusts (UITs)

Future value of money formula:

Pn = P0(1+r)^n

"What is the rate of annual compounding interest?"

Rule of 72 S1: Total years */* Amount of times investment doubled = how many years it takes for investment to double once S2: 72 / years it takes for investment to double once

A structured product usually consist of...

a debt instrument and a derivative

Indexing may result in....

a portfolio that does not accurelty track the index this is called error tracking

Alpha =

actual return - expected return

Opening an account for a non US citizen requires obtaining the person's *current employer/current address* What about telephone number?

address no

A "certificate of interest" is considered a security and is regulated by the _.

administrator

For an IAR, social media advertising is considered _ and must be maintained for _ years.

advertisement 5

A _represents the difference in the yields of various bonds as compared to Treasury securities of similar maturities.

credit spread

_ is a liquidity ratio that measures both short term and long term debt.

debt coverage ratio

The CAPM defines risk as...

deviation of returns uses beta and alpha

Which weighted return allows investors to measure how much money they have earned on their investment?

dollar

The administrator may require an IA to file a document stating the _ along with it's initial ADV.

firm's current financial condition

DCA results in the avg cost per share less than the avg price per when the price of stock has _ and a fixed dollar amount is invested regularly. this is what you want

fluctuated

To issue common stock in a private placement under reg D, the state administrator would most likely require...(3)

form d consent to service of process notice iling

What is the difference between fraud and unethical practices?

fraud - always include some sort of false statement, misrepresentation, or *deceitful* conduct deceit - willfull reckless misrepresentation or concealment of material fact with the intent to mislead unethical - bad behavior but isn't illegal??

The administrator may require a FCA to _ if any state that they transact business with six or more retail clients.

give notice or notice file

Registration of an agent is only as good for as long as... So what happens if you leave your current employer for another BD employer?

he is associated with the BD original employer still has to file form U5, but then registration will be restored when hired by new BD

Value stocks tend to have: _ EPS _ P/E ratios _ price to book value _ dividend yield

high low low high

Does having discretionary authority over an account mean you have custody?

i thought so, but apparently not, so look this up CB5 #65

When would a BD have to post a surety bond?

if the BD has custody or discretionary authority

A registered representative who wants to sell securities outside of her normal course of employment must first notify her firm *orally/in writing/either* about the proposed transactions and must receive her firm's written permission

in writing

When developing a plan for a client, what is important - current int rates or approximate inflation rate?

inflation rate

Sales literature that relates to exempt securities, exempt transactions, and federal covered securities (e.g., an exchange-listed security) *is/is not* subject to the filing requirements of the USA.

is not

What 3 things (and only 3 things) are needed to make a lump sum projection?

life expectancy inflation investment return

Which type of investment is most subject to regulatory risk?

limited partnerships

_ is the general risk of investing in a given market or economy. The day to day potential for losses from fluctuations in security prices.

market risk

The Investment company act of 40 does not regulate _ or _.

minimum rates of return or the performance just the companies, banks, and distributors

Non qualified annuity payments are *LIFO/FIFO/Mixed* this might not be right??

mixed

_ focuses on diversifying across various asset classes without significantly increasing risk.

modern portfolio theory

Are closed ended companies' shares redeemable?

no

Can forward contracts be offset?

no futures can but they still may be required to take delivery

Is a tender offer considered an offer of securities?

no, it is an offer to buy

If you change your fees as an IA do you have to give your updated brochure to current clients?

no, just new ones; current clients will get the updated one annually

Are funds of hedge funds liquid? So can they be redeemed at the end of the trading day?

no, they are illiquid like a hedge fund no

A person employed by an issuer is required to register under the USA when he is making a sale of a _ security to a _ investor.

non exempt retail

Variable life policies have a *guaranteed/non-guaranteed* surrender value.

non guaranteed

EMH: Which form believes in technical analysis? Which believe in fundamental analysis? "Past market prices are reflected" Which one believes insider information will help? "All public information is reflected in the price" Which on believes prices reflect both public and private information and no one can beat the market?

none weak semi strong

Which type of management companies allow for the purchase of fractional shares?

open ended closed ended may only issue full shares

What is a good way to hedge against systematic risks?

options

Dividends are taxed as _ at the investor's tax rate (even if reinvested to acquire more shares), usually at no more than a tax rate of 20%.

ordinary income.....the investors OI rate determines the tax rate of the dividend if qualified...i think

MPT describes expected return as...

possible returns on the investment weighted by the likelihood of that return

Whos is an accredited investor? (2)

someone with annual income of 200k or a net worth of 1mm a senior officer of the issuer

Are employees of issuers considered agents?

sometimes; like selling stock to the public

Whole life insurance may be called _ life.

straight

_ is the process of buying and selling securities within a portfolio to restore its original asset allocation. It may be done either periodically (annually, quarterly, or monthly) or whenever market forces or different rates of return cause a significant change in the original asset allocation.

systematic rebalancing

What is assumed in a time weighted return?

that the amount invested was a fixed dollar amount

When completing form BD, a social security number is not required when...

the BD is a corporation it is required if the applicant is an individual

What is 1 important thing that must be included on an order ticket for an IA?

the IA who recommended the transaction

MPT describes risk as... What is used to measure risk?

the degree to which investment returns deviate from what was expected standard deviation or variance

What is the only part of a futures contract that is not standardized?

the price - that is negotiated between buyer and seller

What disclosures must be made when selling your BD's stock to your clients?

the relationship must be disclosed orally prior to transaction and in writing before the settlement date

Under the USA, _ is not required to be on a customer confirmation, but _ is.

the time is not the date is

If an adviser develops investment tools (e.g., charts and spreadsheets), it must make adequate disclosure regarding...

the tool's limitations and that it may not be appropriate for all clients

Performance based fees are generally prohibited, but if an administrator allows it, there must be a disclosure that says...

this arrangement may cause the advisor to recumbent strategies that encourage a client to take greater than normal risk

Which weighted return allows investors to compare the performance of two IAs?

time

Does a third party solicitor have to register as an IAR?

under act of 40 = no USA = maybe

Under the USA, who is an institutional investor?

who ever the administrator deems

Can closed ended funds issue other things besides common stock?

yes

Is investing in difference countries considered sector rotation? What rotating between LT and ST bonds?

yes no

May a BD use testimonials?

yes, as long as they disclose whether more than a nominal fee was paid for them

Is an IA allowed to sell a security it owns to a client?

yes, but the firm must provide disclosure to client and obtain consent

Can you rollover a 529 plan?

yes, every 12 months, to another states plan

If you are an IAR and also an agent at a BD, what must be done if you receive a commission and collect an advisory fee?

you must disclose total compensation to the client

Unemployment benefits *are/are not* exempt from the definition of earned income.

are

Shares of an REIT *are/are not* allowed in an IRA. What about oil futures?

are no... all futures or just oil?

Industrial stocks *are/are not* cyclical, meaning...

are they rise and fall with the economy

Under the Investment Company Act of 1940, shareholders *are/are not* entitled to current information about the composition of the fund's portfolio.

are not

Who is NOT considered a fiduciary according to ERISA?

attorneys, accountants, and actuaries

What is the difference between 506c and 506b offerings?

b - no advertisement and the issuer may sell to an unlimited amount of accredited investors but only 35 non accredited investors c- you can advertise and solicit but only accredited investors can purchase

_ is used for determining the amount of insurance a client needs to purchase today in order to fund her future financial goals.

capital needs analysis

_ style options will be exercised automatically if the value of the underlying security hits or exceeds a specified capped price.

capped