Download FINRA Series 66 Exam 2025 and more Exams Nursing in PDF only on Docsity!
FINRA Series 66
Requirements for taking custody - correct answers ✔✔If the adviser takes custody of client funds and securities, it must segregate the client funds from investment adviser monies; send quarterly account statements to customers; and be audited annually. Example of taking custody - correct answers ✔✔If a State-registered adviser accepts prepaid advisory fees of $500 or more, 6 months or more in advance of rendering services, NASAA considers this to be taking custody. Security exclusions - correct answers ✔✔1. Insurance products (term life policies whole life policies endowment policies fixed annuities) (however variable annuities are a security) 2 .Commodities or Futures contracts (however, commodity options are a security)
- Retirement plansIndividual retirement accounts Keogh plans 401 K plans
- Mortgages (however, mortgage bonds and mortgage backed pass-through certificates are a security) Investment advisers who do not have to register in the state are... - correct answers ✔✔those that give advice to institutions, 5 or fewer customers, or federal covered advisors Registration by notification - correct answers ✔✔use SEC registration for state registration; must be on file for 5 days before being effective Registration by coordination - correct answers ✔✔A process that allows a security to be sold in a state. It is available to an issuer that files for the security's registration under the Securities Act of 1933 and files duplicates of the registration documents with the state administrator. The
state registration becomes effective at the same time the federal registration statement becomes effective. Registration by qualification - correct answers ✔✔A process that allows a security to be sold in a state. It is available to an issuer who files for the security's registration with the state Administrator, meets minimum net worth, disclosure, and other requirements, and files appropriate registration fees. The state registration becomes effective when the Administrator so orders. Broker Dealers follow FINRA rules and must keep communication records on file for.. - correct answers ✔✔3 years Investment Advisers follow the Investment Advisers Act of 1940 and must keep communication records on file for.. - correct answers ✔✔5 years; 2 years being accessible Federal Securities Act: Investment Advisers are NOT exempt from registering if they advise - correct answers ✔✔investment companies Performance fees can be charged to - correct answers ✔✔A qualified customer is one that has at least $1,000,000 under management with the adviser or that has a net worth of $2,100,000. Registration for Federal Covered Advisers expires.. - correct answers ✔✔December 31st Record retention for broker-dealer - correct answers ✔✔3 years Customer account records-6 years Record retention for investment advisor - correct answers ✔✔5 years If firm closes, additional 3 years
Investment advisors don't allow - correct answers ✔✔testimonials UTMA accounts are prohibited from being used for - correct answers ✔✔food, shelter, clothing Prospectus delivery is only required for - correct answers ✔✔new issues Changes to the terms of advisory contracts must be - correct answers ✔✔filed with the Administrator on Form ADV within 30 days A person who advises customers on the selection of a broker dealer - correct answers ✔✔is deemed an Investment Advisor An agent that withdraws from a broker dealer becomes effective within - correct answers ✔✔ 30 days Form ADV Part 1 - correct answers ✔✔Contains basic registration information: Name of firm Address Phone Number Officers Shareholders States registered Form ADV Part 2A - correct answers ✔✔"Brochure" Policies
Fees Education Type of investments Type of clients Method of analysis Conflicts of interests Form ADV Part 2B - correct answers ✔✔"Brochure Supplement" Educational and work background of key executives Hedge funds are most often structured as - correct answers ✔✔limited partnerships ERISA protect - correct answers ✔✔employee retirement funds from employer mismanagement LLC's and S Corporations - correct answers ✔✔the entity itself is not taxable and tax liability is passed through directly to the owners Inside market - correct answers ✔✔highest bid and lowest ask How many SEC commissioners are there? - correct answers ✔✔ 5 Member firms are responsible for - correct answers ✔✔1. Registering with the SEC
- Maintaining minimum net capital requirements
- Sending the financial statements to customers twice a year
- Being audited once a year
Broker dealer representative - correct answers ✔✔is not defined under the Uniform Securities Act Under the Uniform Securities Act, which persons are EXCLUDED from the definition of an investment adviser? A person who gives advice about: - correct answers ✔✔U.S. Govt and Agency bonds NOT Municipal bonds Which of the following individuals will be denied federal registration as an investment adviser? - correct answers ✔✔Anyone imprisoned for over a year Time weighted average return is the measure used for - correct answers ✔✔mutual fund performance charts Dollar weighted average return accounts for - correct answers ✔✔all cash flows (deposits) into the fund and all cash redemptions from the fund made by that investor An application to register securities may be filed by the: - correct answers ✔✔Issuer and broker dealer What is a Schedule C? - correct answers ✔✔Profit or loss from a business What is a Schedule E? - correct answers ✔✔Passive income or loss Characteristics of high duration - correct answers ✔✔Low coupon, long maturity
Which State-registered adviser is considered to have taken custody of client funds? An adviser: - correct answers ✔✔that accepts $600 prepaid fees 6 months in advance Hedge funds are - correct answers ✔✔managed and not registered Mid size federal covered advisor - correct answers ✔✔$25M+ in 15 states or more Surety bond is usually worth - correct answers ✔✔$10, Surety bond registers a - correct answers ✔✔Broker dealer, agent, or investment advisor What is a Form U-6? - correct answers ✔✔filed for legal trouble However, the solicitor is offering an adviser's services in the State, and the State requires registration of that solicitor - whether the solicitor is representing a Federal Covered Adviser or a State-registered adviser. - correct answers ✔✔Only the Investment Advisor must register with the SEC Registration with the Administrator is not effective until - correct answers ✔✔30 days unless Administrator approves earlier U.S. Government bonds; bank issues; and commercial paper maturing within 9 months rated in one of the 3 highest categories; are exempt securities. - correct answers ✔✔True Rule of 72 - correct answers ✔✔72/x How long it takes to double initial investment
- Security Broker Dealer- Discretionary Power of Attorney - correct answers ✔✔At or prior to entering in the first trade Investment Advisor- Power of Attorney - correct answers ✔✔Verbal discretion is allowed for 10 business days before receiving a written POA Regulation A - correct answers ✔✔capped at $50M 13D - correct answers ✔✔5% or greater holding in issuer's stock 10 days to file 13G - correct answers ✔✔5% or more in a stock but wants to remain a passive investor 45 days within year end to file 13F - correct answers ✔✔investment managers with over $100M AUM file within 45 days of quarter ending Margin on securities - correct answers ✔✔set by Federal Reserve Regulation T - correct answers ✔✔Regulates extension of credit to customers by broker/dealers. Regulation U - correct answers ✔✔The federal regulation governing the amount of credit that may be advanced by a bank to its customers for the purchase of securities
What percentage of affiliated people can sit on the board at an open management firm? - correct answers ✔✔60% max Uniform Securities Act What is the net worth requirement for an Investment Advisor? - correct answers ✔✔set by principal state Uniform Securities Act Most common exempt transactions: - correct answers ✔✔1. Isolated nonissue transactions
- Unsolicited orders
- Transaction with institutions
- Transactions between the issuer and underwriter
- Transactions by fiduciaries
- Private placements (10 or fewer in 12 months) Investment Advisor Representative leaves an Investment Advisor - correct answers ✔✔State- Investment Advisor tells Administrator Federal- Investment Advisor Representative tells Administrator Broker dealer is permitted to charge for - correct answers ✔✔1. Appraisals
- Account transfers
- Collection of dividends or interest
- Safekeeping of client assets Rescission - correct answers ✔✔return a customer's money, plus interest, and pay legal fees Client has 30 days to accept or reject the offer
State Law Form ADV - correct answers ✔✔1. Parts 2A and 2B delivered at least 48 priors to the customer signing; 5 days to cancel
- Withdrawal is effective within 30 days
- Custody is $500 in 6 months Broker Dealers are allowed to - correct answers ✔✔take custody of customer funds Investment Advisors cannot - correct answers ✔✔take custody of customer funds Uniform Securities Act A solicitor for an investment advisory firm who is paid a fee - correct answers ✔✔must register as an IAR IAs with custody must send statements how often? - correct answers ✔✔Quarterly Form ADV-E - correct answers ✔✔-ONLY applies to IA's who have custody of client accounts -requires an annual surprise examination by an independent public accountant -the form contains info about the adviser and about the exam conducted Dividend Discount Model (DDM) - correct answers ✔✔a formula for the intrinsic value of a firm equal to the present value of all expected future dividends Dividend Growth Model - correct answers ✔✔a model that determines the current price of a stock as its dividend next period divided by the discount rate less the dividend growth rate
Ex. $8/(1-.05)=$8. REITs must distribute - correct answers ✔✔90% of their income If a passively managed fund either underperforms or overperforms the benchmark index, this is called the: - correct answers ✔✔tracking error First choice for preservation of capital is - correct answers ✔✔insured bank CDs Which of the following can an agent choose in a customer transaction without a written power of attorney? - correct answers ✔✔Price and time Investment companies that must register with the SEC are those with at least 100 shareholders and at least $100,000 of net assets. - correct answers ✔✔True What is portfolio immunization? - correct answers ✔✔It is the strategy of managing a portfolio to make it worth a specific amount at a stated date in the future. Income in a revocable trust is taxed at the: - correct answers ✔✔grantor's tax rate Coverdell ESAs funds be used by - correct answers ✔✔age 30 Under the Investment Advisers Act of 1940, which of the following persons is exempt from registration with the SEC? - correct answers ✔✔An investment adviser whose only clients are insurance companies Tactical asset allocation is a method of: - correct answers ✔✔market timing
