Series 66 Study Questions

An agent is hired by a company for the upcoming issuance of securities to the public. The company has registered the issue in States A, B, and C. The agent is currently registered in State A only. Which of the following is true of this situation? [A]The agent would be best served to register in States A, B, and C, in order to offer the securities to the largest number of potential buyers. [B]The agent would be permitted to sell the securities in States A, B, and C under the registration of the issuer. [C]The agent would need to be dually registered with the issuer and with a broker-dealer firm. [D]The agent would need to register as an issuer in order to issue these securities.

A An agent must be registered in all states where they act within the scope of an agent. If an agent is working for an issuer on an upcoming new issue of securities, the agent would be best served to register in all states where the issuer intends to offer securities. This would provide the most opportunity to sell the new issue.Agents are not permitted to sell under the registration of the issuer. As well, dual registration or registration as an issuer would not be required for the agent

According to the Uniform Securities Act, which of the following is a federal covered security? [A]Pennsylvania state bonds offered outside of Pennsylvania [B]A fixed annuity [C]A futures contract [D]Securities issued by a non-profit organization

A EXPLANATION Under the definition of federal covered security municipal bonds (Pennsylvania) offered outside the state of issue are included whereas the other choices are NOT federal covered.

Broker-dealers under the Uniform Securities Act. I. May be classified as investment advisers if they provide investment advice for which they are paid a fee separate from any commissions they earn on securities transactions. II. May employ agents to represent them. III. Unlike investment advisers, generally need not be registered in each state in which they do business. [A]II only [B]I and II [C]I and III [D]I, II, and III

B According to the Uniform Securities Act, broker-dealers may provide investment advice for a fee separate from commissions they earn if registered as investment advisers. They may also employ agents to represent them. However, the statement that broker-dealers generally need not be registered in each state in which they do business is an incorrect statement, since broker-dealers are required to register in each state where they conduct business.

According to the Uniform Securities Act, which of the following is not excluded from the definition of broker-dealer? [A]an agent [B]an investment adviser [C]an issuer [D]a bank, savings institution, or trust company

B EXPLANATION The statutory exclusions from the definition of a broker-dealer in the USA do not include Investment Advisers. A firm can be registered as a broker-dealer and as an investment advisory firm. Agent's work for broker-dealers and issuers use broker-dealers to help them distribute new issues of securities.

Under the provisions of the Uniform Securities Act, an individual representing an issuer is not an agent if the issuer is I. a government. II. an insurance company. III. a bank. [A]I and II only [B]I and III only [C]II and III only [D]I, II, and III

B EXPLANATION Under the Uniform Securities Act's definition of an "agent", an individual is excluded from the definition if they represent an issuer in effecting transactions in U.S. Government securities and securities issued by U.S. banks. Insurance companies are not included in the exclusions.

Brett is an officer of a firm applying for IA registration. Which is true regarding Brett's registration? [A]It requires separate documentation and approval by the State. [B]Filing by the firm automatically constitutes registration of Brett since he is an officer of the firm. [C]Brett would have to be approved by the Administrator. [D]Brett would not be required to be registered at all.

B Under the USA registration of an Investment Advisory Firm automatically constitutes registration of any investment adviser representative who is also partner, officer, or director. The rule does not cover all equity owners of the firm. Those automatically registered may still have to take qualification examinations. Automatic registration is more a matter of avoiding duplication of paperwork.

The definition of an "agent" in the Uniform Securities Act includes persons who are in the business of: I. Advising clients about securities for compensation II.Selling securities listed on a major stock exchange III.Representing an insurance company during the issue of securities IV.Effecting commission-free securities transactions [A]I and II only [B]II and III only [C]II, III, and IV only [D]I, II, III, and IV

C EXPLANATION Agent is defined as any person who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.

According to the Uniform Securities Act, for an offering of a pre-organization certificates to be exempt which of the following conditions must be met? I. Commissions or other compensation may be received in connection with the offering. II. Advertisements are permitted. III. The offering cannot be made to more than 10 investors. [A]I only [B]II only [C]II and III [D]I, II, III

C EXPLANATION Conditions which should be met to make a preorganization subscription exempt are as follows: subscribers cannot exceed 10, no commissions may be paid, and payments may only be made after the security is registered. Additionally, advertising is acceptable.

An Investment Adviser Representative charges her clients a management fee for her advice. All of her clients have their account with a broker-dealer where she, the IAR, is also registered as an agent. When her clients trade based on her advice, she is paid a commission from the broker-dealer. Which of the following is true with regard to this situation with the IAR and her clients? [A]She is acting unethically by charging her clients both an advisory fee and receiving commissions for transactions executed by her clients. [B]She is not acting unethically by charging her clients an advisory fee but cannot also be compensated with the broker-dealer commission. [C]She is acting ethically as long a she has made full disclosure to her clients of all compensation she is receiving for acting as an IAR and an agent of the broker-dealer while handling client accounts. [D]She is acting ethically as long as her compensation is within the 5% Mark-up

C EXPLANATION IARs are required to disclose ALL compensation received from all sources.

According to the Uniform Securities Act, how would a firm that engages in performing securities transactions for others or for its own accounts be classified? [A]A Banking Institution [B]An Investment Adviser (IA) [C]A Broker-Dealer [D]The Agent of a Broker-Dealer

C EXPLANATION Investment Advisers (IA) are just that, advisers. Broker-dealers are the ones who perform or effect transactions for the accounts of others or the account of the broker-dealer.

Under the Uniform Securities Act, a person who, for compensation, engages in the business of advising others, either directly or through publications, as to the value of any securities or as to the advisability of investing in any type of securities is defined as: [A]An agent [B]A publisher [C]An Investment Adviser [D]A broker-dealer

C EXPLANATION Under the USA, a person who, for compensation, engages in the business of advising others either directly or through publications as to the value of any securities or as to the advisability of investing in any type of securities, including Government securities, is defined as an Investment Adviser. Remember that the 1940 Act has an exclusion for advisers who only work with US Government Securities, but the USA does NOT have the same exclusion.

Each of the following describes a scenario where securities could be sold in a state under the Uniform Securities Act EXCEPT? [A]The security is registered under the Act. [B]The security is exempt from registration under the Act. [C]The security is registered in another State. [D]The security is a Federal Covered Security.

C EXPLANATION Under the Uniform Securities Act it is unlawful for any person to offer or sell any security in a State unless the security is registered under the Act, the security or transaction is exempt from registration or the security is a Federal Covered Security. Registration with another State would not cover the registration needs of every State.

An agent is not registered and is employed by and represents a broker-dealer which is registered. Who has violated the Act? [A]agent [B]broker-dealer [C]both [D]neither

C Even though the broker-dealer is registered, they are required to make sure all agents that represent them are also registered.

An investor buys a debenture that is accompanied by a warrant. According to the definitions of the Uniform Securities Act, the warrant constitutes which of the following? [A]The accompanying warrant would constitute a bona fide gift. [B]The accompanying warrant would constitute assessable stock. [C]The accompanying warrant would constitute an offer. [D]The accompanying warrant would constitute a stock dividend.

C If the "gift" of a security is contingent upon the purchase of another security, this is NOT a bona fide gift. It would be considered an "offer or sale" for purposes of the Uniform Securities Act definitions.

Which of the following best fits the Uniform Securities Act definition of a federal covered adviser? [A]A federal covered adviser only gives recommendations relating to securities that are federally covered. [B]A federal covered adviser has clients in at least two states. [C]A federal covered adviser only gives recommendations relating to U.S. Government Securities. [D]A federal covered adviser is one registered as such under the Investment Advisers Act of 1940.

D EXPLANATION The Uniform Securities Act states that a Federal Covered Adviser is an investment adviser who comes within the definition of an IA under the federal Investment Advisers Act of 1940.

Under the Uniform Securities Act registration and licensing requirements, which of the following statements is true? I. Conditions for Surety Bonds of Broker-Dealers are determined by the Administrator and are subject to the limitations of the Securities Act of 1934. II. Conditions for Surety Bonds of Agents are set by the Administrator and are subject to the limitations of the Securities Act of 1934. III. In lieu of a surety bond, a Broker-Dealer may deposit cash or securities as prescribed by the Administrator. IV. In lieu of a surety bond an Agent may deposit cash or securities as prescribed by the Administrator. [A]I & III [B]II & III [C]I, II, III [D]I, II, III, IV

D All choices offered are correct with regard to the Uniform Securities Act requirements for Bonding for Broker-Dealers and Agents of Broker-Dealers. Administrators have discretion within the limitations of the SEC.

Under the Uniform Securities Act, when there are changes of material fact to a registration filing, these changes must be reported promptly by the individual or firm for which of the following? I. Agents of broker-dealers II. Broker-dealers III. Investment Adviser Representatives IV. Investment Advisory Firms [A]I & IV only [B]II & III only [C]I, II & IV only [D]I, II, III, IV

D Any all material changes must be reported to the Administrator promptly for all choices offered. Agents and IARs are responsible for reporting as individuals. Broker-dealers and IAs are responsible for reporting as a firm.

The term agent, according to the Uniform Securities Act, would include all of the following people EXCEPT [A]one who effects transactions of registered securities with clients who are members of the public. [B]one who works for a broker-dealer involved in selling securities that have been listed on a securities exchange. [C]one who represents a broker-dealer and performs securities transactions where no transaction-based fees are charged or paid. [D]one who represents an issuing body in effecting transactions that are exempt

D EXPLANATION A person representing an issuer in effecting transactions that are exempt or exempt transactions, is not considered an "agent." All of the other people listed would be considered agents because they either work for a broker-dealer effecting transactions, or because they conduct commissions-based transactions for the public.

Which of the following would NOT be considered a "Sale" under the Uniform Securities Act? I. A grandfather gives his grandson 100 shares of common stock for his 21st birthday. II. A customer opens a margin account and pledges stock in the account to buy on margin in the account. III. A company in bankruptcy is re-organizing and shares of stock are exchanged for another security in this process. IV. A broker-dealer loans stock to a customer. [A]I and II only [B]II and IV only [C]I, II, and III [D]I, II, III, and IV

D EXPLANATION Each of the items described would not be considered a "sale" for purposes of the Uniform Securities Act. The grandfather giving the gift of stock is a bona fide gift. Pledging securities as collateral in a margin account is not considered a sale. Securities exchanged for other securities by a company in bankruptcy would only be considered an exchange, not a sale. A broker-dealer lending stock to a customer would not be a sale, however if this customer then went on to sell the stock short, a sale would have occurred at that point in time.

An individual represents the Canadian government and its provinces when the government and provinces are issuing securities and effecting transactions related to the issue of these securities. When it comes to the regulations and definitions of the Uniform Securities Act, which of the following is TRUE? [A]The actions of the individual would be those of a broker-dealer, and the individual would be required to register as such. [B]The actions of the individual would be those of an agent, and the individual would be required to register as such. [C]The actions of the individual would be those of a broker-dealer, but the individual would qualify for an exclusion due to the issuer/securities. [D]The actions of the individual would be those of an agent, but the individual would qualify for an exclusion due to the issuer/securities

D EXPLANATION Individuals who represent issuers in the distribution of securities and effect transactions in such securities typically fall under the definition of an "agent" for purposes of the Uniform Securities Act. In certain cases, these individuals qualify for an exclusion or exemption from the definition of "agent" and would not have to register. Representing the Canadian Government or a Canadian Province would allow the individual to qualify for an exclusion. Exclusions are limited, however, to those representing US Government and Municipal Securities, Canadian Government/Province Securities, Bank Securities, Promissory Notes at 9 months, and certain Investment Contracts related to employee stock plans. Remember that insurance securities and federal savings and loan associations do NOT allow the individual to qualify for the exclusion from the definition of agent.