The Uniform Combined State Law Examination Exam Review 2019 + Test Bank

The go-to guide to acing the Series 66 Exam!

Passing the Uniform Combined State Law Examination (Series 66) qualifies an individual to represent both a broker-dealer and an investment adviser. It covers such topics as client investment strategies and ethical business practices. Taken as a corequisite with the Series 7 Exam, candidates must complete the Series 66 Exam in order to register as an agent with a state securities administrator.

Created by the experts at The Securities Institute of America, Inc., Wiley Series 66 Exam Review 2019 arms you with what you need to score high on this tough 100-question test. Designed to help you build and fine-tune your knowledge of all areas covered in the exam and to guarantee that you're prepared mentally and strategically to take the test, it provides:

• Dozens of examples
• Assorted practice questions for each subject area covered in the exam
• Priceless test-taking tips and strategies
• Helpful hints on how to study for the test, manage stress, and stay focused

Wiley Series 66 Exam Review 2019 is your ticket to passing this difficult test on the first try—with flying colors!

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ABOUT THE SERIES 66 EXAM xiii

ABOUT THIS BOOK xvii

ABOUT THE TEST BANK xix

ABOUT THE SECURITIES INSTITUTE OF AMERICA xxi

CHAPTER 1 DEFINITION OF TERMS 1

Security 1

Person 3

Broker Dealer 4

Agent 4

Issuer 5

Nonissuer 5

Investment Adviser 5

Pension Consultants 6

Investment Counsel 6

Form ADV 7

Investment Adviser Registration Database (IARD) 8

Investment Adviser Representative 9

Solicitor 9

Access Person 10

Institutional Investor 10

Accredited Investor 11

Qualified Purchaser 11

Private Investment Company 11

Offer/Offer to Sell/Offer to Buy 11

Sale/Sell 12

Guarantee/Guaranteed 12

Contumacy 12

Federally Covered Exemption 12

Escheatment 13

12B-1 Fees 13

Power of Attorney 14

Option Contracts 14

Call Options 15

Put Options 15

Futures and Forwards 15

Secondary Market Orders 15

Market Orders 16

Buy Limit Orders 16

Sell Limit Orders 16

Stop Orders/Stop Loss Orders 17

Buy Stop Orders 17

Sell Stop Orders 18

Pretest 19

CHAPTER 2 SECURITIES INDUSTRY RULES AND REGULATIONS 25

The Securities Act of 1933 25

The Securities Exchange Act of 1934 27

Public Utilities Holding Company Act of 1935 29

Financial Industry Regulatory Authority (FINRA) 29

The Trust Indenture Act of 1939 30

Investment Advisers Act of 1940 30

Investment Company Act of 1940 30

Retail Communications/Communications with the Public 31

FINRA Rule 2210 Communications with the Public 32

Blind Recruiting Ads 34

Generic Advertising 34

Tombstone Ads 35

Testimonials 35

Free Services 36

Misleading Communications 36

Securities Investor Protection Corporation Act of 1970 (SIPC) 37

The Securities Acts Amendments of 1975 38

The Insider Trading and Securities Fraud Enforcement Act of 1988 38

Firewall 39

The Telephone Consumer Protection Act of 1991 39

National Securities Market Improvement Act of 1996 40

The Uniform Securities Act 41

The Patriot Act 41

Regulation S-P 43

Identity Theft 44

FINRA Rules on Financial Exploitation of Seniors 44

Pretest 47

CHAPTER 3 ECONOMIC FUNDAMENTALS 51

Gross Domestic Product 51

Recession 53

Depression 53

Economic Indicators 53

Schools of Economic Thought 55

Economic Policy 56

Tools of the Federal Reserve Board 56

Interest Rates 56

Reserve Requirement 57

Changing the Discount Rate 58

Federal Open Market Committee 58

Money Supply 59

Disintermediation 60

Moral Suasion 60

Fiscal Policy 60

International Monetary Considerations 62

London Interbank Off ered Rate (LIBOR) 62

Yield Curve Analysis 62

Pretest 65

CHAPTER 4 CUSTOMER RECOMMENDATIONS, PROFESSIONAL CONDUCT, AND TAXATION 69

Professional Conduct by Investment Advisers 70

The Uniform Prudent Investors Act of 1994 70

Fair Dealings with Clients 71

Periodic Payment Plans 75

Disclosure of Client Information 76

Borrowing and Lending Money 76

Developing the Client Profile 76

Investment Objectives 79

Risk vs. Reward 81

Alpha 83

Beta 83

Predicting Portfolio Income 90

Fundamental Analysis 92

Capitalization 95

Tax Structure 97

Investment Taxation 97

Calculating Gains and Losses 97

Cost Base of Multiple Purchases 98

Deducting Capital Losses 99

Wash Sales 99

Taxation of Interest Income 100

Inherited and Gifted Securities 100

Donating Securities to Charity 100

Trusts 101

Gift Taxes 101

Estate Taxes 102

Withholding Tax 102

Corporate Dividend Exclusion 102

Alternative Minimum Tax (AMT) 103

Taxes on Foreign Securities 103

Pretest 105

CHAPTER 5 VARIABLE ANNUITIES, RETIREMENT PLANS, AND LIFE INSURANCE 109

Annuities 109

Equity-Indexed Annuities 112

Recommending Variable Annuities 113

Annuity Purchase Options 114

Accumulation Units 114

Annuity Units 115

Annuity Payout Options 115

Factors Affecting the Size of the Annuity Payment 116

The Assumed Interest Rate (AIR) 117

Taxation 117

Sales Charges 118

Variable Annuity vs. Mutual Fund 118

Retirement Plans 118

Individual Plans 119

Individual Retirement Accounts (IRAS) 119

529 Plans 122

Local Government Investment Pools (LGIPs) 123

IRA Contributions 124

IRA Accounts 124

IRA Investments 124

It Is Unwise to Put a Municipal Bond in an IRA 125

Rollover vs. Transfer 125

Keogh Plans (HR-10) 126

Contributions 126

Tax-Sheltered Annuities/Tax-Deferred Account 127

Contributions 128

Tax Treatment of Distributions 129

Corporate Plans 129

Non-Qualified Corporate Retirement Plans 129

Payroll Deductions 129

Deferred Compensation Plans 130

Qualified Plans 130

Types of Plans 130

Rolling Over a Pension Plan 132

Employee Retirement Income Security Act of 1974 (ERISA) 132

ERISA 404C Safe Harbor 134

The Department of Labor Fiduciary Rules 135

Life Insurance 135

Premiums and Death Benefits 137

Assumed Interest Rate 138

Variable Policy Features 139

Sales Charges 140

Life Settlements 141

Tax Implications of Life Insurance 141

Health Savings Accounts 142

ABLE Accounts 143

Pretest 145

CHAPTER 6 REGISTRATION OF BROKER DEALERS,INVESTMENT ADVISERS, AND AGENTS 149

Registration of Broker Dealers 149

Financial Requirements 150

Agent Registration 151

Hiring New Employees 153

Resignation of a Registered Representative 154

Registering Agents 155

Changes in an Agent’s Employment 156

Mergers and Acquisitions of Firms 156

Renewing Registrations 156

Canadian Firms and Agents 156

Investment Adviser State Registration 157

The National Securities Market Improvement Act of 1996 (The Coordination Act) 157

Investment Adviser Representative 158

State Investment Adviser Registration 159

Capital Requirements 159

Exams 160

Advertising and Sales Literature 161

Brochure Delivery 162

The Role of the Investment Adviser 163

Additional Compensation for an Investment Adviser 163

Agency Cross Transactions 163

Disclosures by an Investment Adviser 163

Investment Adviser Contracts 165

Additional Roles of Investment Advisers 166

Private Investment Companies/Hedge Funds 166

Fulcrum Fees 166

Wrap Accounts 167

Soft Dollars 167

Pretest 169

CHAPTER 7 SECURITIES REGISTRATION, EXEMPT SECURITIES, AND EXEMPT TRANSACTIONS 175

Exempt Securities 175

Securities Registration 176

Exempt Securities/Federally Covered Exemptions 179

Exempt Transactions 180

Pretest 187

CHAPTER 8 STATE SECURITIES ADMINISTRATOR: THE UNIFORM SECURITIES ACT 193

Actions by the State Securities Administrator 193

Actions Against an Issuer of Securities 195

Rule Changes 196

Investigations 198

Civil and Criminal Penalties 198

Jurisdiction of the State Securities Administrator 199

Administrator’s Jurisdiction over Securities Transactions 199

Radio, Television, and Newspaper Distribution 202

Right of Rescission 202

Statute of Limitations 203

Pretest 205

ANSWER KEYS 211

GLOSSARY OF EXAM TERMS 221

INDEX 287

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