Series 66 Random Terms

Under a decision of the U.S. Supreme Court, for a publisher to qualify for the exclusion, the publication must satisfy the following three elements

"(1) the publication must offer only impersonal advice, i.e., advice not tailored to the individual needs of a specific client, group of clients, or portfolio; (2) the publication must be 'bona fide,' containing disinterested commentary and analysis rather than promotional material disseminated by someone touting particular securities, advertised lists of stocks 'sure to go up,' or information distributed as an incident to personalized investment services; and (3) the publication must be of general and regular circulation rather than issued from time to time in response to episodic market activity or events affecting the securities industry."

Uniform Securities Act does not specify an amount for broker-dealers. However, the NSMIA states that the Administrator may not require a broker-dealer to be bonded in an amount above that set by the SEC.

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If the adviser uses third-party reports as a basis for its own recommendation or as support for its own recommendation to its client, it does not have to disclose this information.

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NASAA developed an interpretive order concerning broker-dealers, investment advisers, agents, and investment adviser representatives using the internet for general dissemination of information on products and services. The primary focus of this order was to set the parameters under which securities professionals could communicate on the internet or use their websites in states in which they were not registered. Meeting all of the requirements stated in the answer is necessary.

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The USA specifically excludes agents/issuers and banks (international or domestic) from the definition of a broker-dealer.

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The contribution limit has to be aggregated when participating in both A) a 401(k) and a 403(b) B) a 401(k) and a 457 C) a 457 and a Roth IRA D) a 403(b) and a 457

A) a 401K and 403B

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Advising only banks does not qualify one for the exemption.

The Uniform Securities Act provides an exemption from registration as an investment adviser for which of the following persons who have no place of business in the state? Advisers who deal exclusively with broker-dealers Advisers who deal exclusively with insurance companies Advisers who deal exclusively with registered investment companies Advisers who have no more than five clients in that state in a 12-month period

All of the above

Plentitude Abundant Returns (PAR) is a broker-dealer registered in a dozen states. The principal office is located in State X. To be in compliance with the Uniform Securities Act, PAR must satisfy the recordkeeping requirements of A) State X. B) the SEC. C) the state with the most stringent requirements. D) the state with the least stringent requirements.

B) The USA holds that federal law supersedes that of the states. The Securities Exchange Act of 1934 holds that no state can impose financial or recordkeeping requirements that exceed those of the SEC. Remember, unlike IAs who register with either the SEC or the states, broker-dealers, unless stated to the contrary, register with both. Once a BD is registered in more than one state, it must register with the SEC.

Under state law, all of the following investment advisers are exempt from registration except A) advisers solely to venture capital funds. B) foreign private advisers with no place of business in the United States and less than $25 million in assets under management. C) advisers whose only clients are insurance companies. D) advisers solely to private funds with less than $150 million in assets under management in the United States.

C) Advisers whose only clients are insurance companies

Becky Biggins has an executive position with a large corporation that covers her under its defined benefit pension plan. This year, Becky's salary will top $435,000. Becky has no dependents and wishes to maximize funds that she can accumulate for her retirement. Becky could not contribute to a traditional IRA contribute to a traditional IRA but would not be able to deduct her contributions contribute to her Roth IRA not contribute to her Roth IRA

Contribute to a tradition IRA but will not be able to deduct her contributions AND not contribute a roth IRA

Which of the following statements about plan fiduciaries under ERISA are true? Plan fiduciaries sometimes have conflicting obligations to plan participants and other parties in interest. Plan fiduciaries must ordinarily diversify plan investments. Plan fiduciaries are personally liable for fines if they violate their fiduciary duties.

II and III

Which of the following statements is true? An agent may never be simultaneously employed by more than one broker-dealer. An agent must submit separate registrations for each broker-dealer with which she is registered. Certain states prohibit agents from dual or multiple registration. An agent who sells securities in several states must be registered with different broker-dealers in each state.

II and III

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If you go to work for a federal registered investment adviser, it becomes your duty to notify the state securities Administrator that you are working there, as well as when you terminate.

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In almost every case, an IA acting as a principal (out of inventory) or agent in a trade with an advisory client must obtain client consent and provide written disclosure of the IA's capacity in the trade no later the completion of the trade.

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In order for an investment adviser to enter into an advisory contract with an investment company, the adviser must be SEC registered

Can IA recommend cross transactions to both the buyer and seller?

Investment advisers cannot recommend cross transactions to both buyer and seller, even if written consent is given.

de minimis exemption

Investment advisers who have no place of business within the state are not defined under the act as investment advisers if they have no more than five clients within the state in a 12-month period

What is the primary responsibility of an advisor ?

It is a primary responsibility of the adviser to make reasonable inquiry as to the client's financial situation, investment objectives, and needs, before making recommendations.

If two agents of a broker-dealer agree to work together as partners to solicit business and they agree to split commissions, this practice is A) permitted. B) in violation of the Uniform Securities Act's prohibition against sharing in the profits of an account. C) permitted, but only with the prior written consent of the affected clients. D) permitted only if the broker-dealer's compliance department audits the partnership's financial performance.

Permitted

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The investment adviser representatives of a federal registered adviser are required to register in each state in which they have a place of business

It is a NASAA Model Rule that broker-dealers operating on the premises of a financial institution make three primary disclosures:

The investments being sold are not FDIC insured; The investments may lose value; and The investments are not obligations of the financial institution.

An investment adviser representative's business card containing which of the following designations would be in violation of the NASAA policy on advertising? A) CLU® B) IAR C) MBA D) CFP®

The term investment adviser representative may appear, but not the abbreviation IAR.

A health savings account (HSA) requires that the employee enroll

a health insurance plan with a high deductible.

There are three primary expenses involved with brokerage accounts that are not included in the fee disclosure template

commissions; markups and markdowns; and advisory fees for those firms that are also registered as investment advisers.

Once the broker-dealer decides to offer wrap fee programs,=

it is no longer excluded from the definition of an investment adviser and would be required to register on either the state or federal level. The agent would now have to register as an IAR of the firm and, as such, would carry the additional fiduciary responsibility incurred in the advisory business.

Nonqualified corporate retirement plans differ from qualified retirement plans because nonqualified plan contributions are not exempt from current income tax nonqualified plan earnings accumulate on a tax-deferred basis the corporation need not comply with nondiscrimination rules that apply to qualified plans the corporation must comply with ERISA requirements dealing with communications to plan participants

nonqualified plan contributions are not exempt from current income tax the corporation need not comply with nondiscrimination rules that apply to qualified plans

The investment advisory contract must include

the amount of prepaid fees to be returned if the contract is terminated, the fact that assignment of the contract cannot occur without client consent, and the fact that the agreement does or does not contain discretionary authority.

For a fund to impose 12b-1 charages:

the distribution plan must be in writing and approved by a majority of the outstanding shares, as well as a majority of the board of directors, including a majority of directors classified as outside directors.

Under the USA, it is the sooner of two years after discovery or three years after the action.

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Under current regulations, the maximum contribution to a Coverdell Education Savings Account is

2,000 annually

The SEC is required by the Investment Advisers Act of 1940 to either grant an adviser registration or begin proceedings to determine whether the registration should be denied within

45 days of application

Most loans from a 401(k) plan are required to be repaid within

5 years

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Failure to state all known facts about an investment is not a violation of the Uniform Securities Act; omitting material facts, however, would be a violation of the act.

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For state-registered investment advisers, requirements set by the Administrator are subject to the limitations of the requirements set by the Administrator of the adviser's home state.

When an Administrator issues a final order, which of these is true regarding an agent subject to the order? The agent may obtain a review of the order in an appropriate court of law. The agent may request that additional evidence be presented to the court. The agent may request a hearing 90 days after the final order. The agent may not appeal a court's decision.

I and II

An investment policy statement would likely include expected returns of the recommended strategy and the expected range of these returns recommended allocations among differing asset classes strategies used for selecting specific stocks in the equity portion of the portfolio disclosure of the fees that the adviser will earn for implementing the recommended strategy

I,II,III

It would not be considered an unethical business practice under NASAA's policies for an investment adviser to charge which of these? Fees as well as commissions Fees based on an hourly rate Fees based on a percentage of the change in value of funds from quarter to quarter Fees based on a percentage of the aggregate value of funds under management

I,II,IV

Which of the following are characteristics of commercial paper? It represents a loan by the holder to the issuer. It is a certificate of ownership in the corporation. It is commonly issued to raise working capital for a corporation. It is junior in preference to convertible preferred stock.

I,III

Which of the following are exempt from state registration? A common stock traded on the OTC Link whose bonds are listed on the NYSE An isolated nonissuer transaction A transaction by an administrator of an estate A transaction with no commissions, directed by the offeror to no more than 50 persons in the state who buy the security for investment purposes only

II and III

Under the National Securities Markets Improvement Act of 1996, which of the following describe federal covered securities? A security registered under the Uniform Securities Act A security registered under the Investment Company Act of 1940 A security of a company traded on the Nasdaq Stock Market A security issued by the U.S. government

II, III. IV

There are three primary expenses involved with brokerage accounts that are not included in the fee disclosure template.

commissions; markups and markdowns; and advisory fees for those firms that are also registered as investment advisers.

Under IRS rules, if part of your retirement plan assets includes company stock, taking that as a distribution (not rolling it over into an IRA) subjects the cost basis to

ordinary income tax and any unrealized appreciation is taxed as long-term capital gain when sold.

It would not be considered a prohibited or unethical business practice for a federal covered investment adviser to A) pay a nominal fee, based on account size, to certain professionals as a way of thanking them for client referrals. B) pay a nominal fixed fee to unrelated third parties as a way of thanking them for endorsements. C) charge a performance-based fee to an individual who meets the SEC's accredited investor standard detailed in Rule 501 of Regulation D. D) use an endorsement from a

pay a nominal fixed fee to unrelated third parties as a way of thanking them for endorsements.

What is a irrevocable life insurance trust ?

policy is purchased on the life of the client, but owned by the trust. When properly structured, this means that the death benefit is not included in the estate and passes tax free to the beneficiaries. Those funds can then be used to pay the estate taxes and the real estate assets pass to the beneficiaries

The SEC's pay-to-play rule

prohibits investment advisers from receiving compensation for advisory services to a government entity for two years after the advisory firm or any covered employee makes a political contribution to a public official or candidate who is or would be in a position to influence the award of investment advisory business by public retirement funds

National Securities Markets Improvement Act of 1996 (NSMIA

prohibits state securities regulators from establishing requirements in addition to those required by the Securities Exchange Act of 1934.