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Series 66 Missed Practice With Complete Solutions 2024
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Series 66 Missed Practice With Complete Solutions 2024
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Series 66 Missed Practice With CompleteSolutions 2024
The term "issuer" applies to a:
A. person who proposes to sell a security
B. director of a company that is selling new shares to the public
C. trader executing trades off an exchange floor
D. market maker in a security traded over-the-counter Answer: A.
An "issuer" is defined as any person who issues, or proposes to issue, a security. Directors of companies
that are selling new issues are not issuers. However they can be defined as "agents" of the issuer.
Traders execute trades in the secondary market and have nothing to do with issuers. Market makers
also trade stocks for their own accounts in the secondary market and have nothing to do with issuers.
Which statement is TRUE regarding registration requirements under the Uniform Securities Act?
A. Minimum net capital can be required for agents, broker-dealers and investment advisers
B. Minimum net capital and a surety bond can be required for agents, broker-dealers and investment
advisers
C. Minimum net capital can be required for broker-dealers and investment advisers
D. Minimum net capital and an examination can be required for agents, broker-dealers and investment
advisers Answer: C.
Minimum net capital can be required for registration as a broker-dealer or investment adviser; it is not
required for registration as an agent of a broker-dealer or investment adviser. Surety bond coverage can
be required for registration of broker-dealers, their agents, and investment advisers. Note that there is
no surety bond requirement for investment adviser representative registration.
Under the Uniform Securities Act, an unregistered individual employed by a registered broker-dealer
may sell securities:
A. in exempt transactions only
,B. if the securities are exempt
C. if the public is not solicited
D. under no circumstances Answer: D.
Unregistered agents are not permitted to sell under the Act, whether or not the securities involved are
exempt. The only way for a person to avoid registration as an agent is to be excluded from the definition
of an agent. For example, individuals who represent issuers trading exempt securities or effecting
exempt transactions are not defined as agents. Individuals who represent broker-dealers effecting
securities trades (exempt or non-exempt) are defined as agents under the Act.
Registration by Qualification can be stopped by the Administrator if it is in the public interest and the:
A. applicant cannot show that the registration is not incomplete in any material respect
B. applicant can show that the registration is incomplete in any material respect
C. Administrator cannot show that the registration is not incomplete in any material respect
D. Administrator can show that the registration is incomplete in any material respect Answer: A.
In a Registration by Qualification or Filing, there is no concurrent SEC registration. The security is only
being registered in the State. In such a case, the Administrator can issue a stop order "if it is in the public
interest" and the applicant cannot prove that the offering would not be illegal in the State (the burden
of proof is on the applicant).
On the other hand, Registration by Coordination in a State permits the applicant to coordinate an SEC
registration with the registration requirement in each State. Essentially, the State accepts the SEC
registration statement as the State filing document. Registration becomes effective in the State when
the SEC registration is effective. In such a registration, the State Administrator can only issue a stop
order if "it is in the public interest" and the Administrator can prove that the offering would be illegal in
the State, is not complete, or required filing fees have not been paid (thus, the burden of proof is on the
Administrator).
All of the following are considered to be an "offer to sell" a security EXCEPT:
A. offering to make the gift of an assessable security
B. offering to give a security as consideration for the purchase of another security
C. the offer of rights to purchase an underlying security
,D. the giving of a stock dividend to holders of that security Answer: D.
Before an "offer to sell" a security is made in a state, the issue must either be registered in that state, or
must be sold under an available exemption. A stock dividend given by an issuer is excluded from the
definition of an "offer to sell" a security, since the holder really is receiving "nothing" - after the dividend
is received, he or she holds more shares, with each one being worth proportionately less.
Included in the definition of an "offer to sell" is:
- The gift of an assessable security (which obligates the recipient to make future payments)
- A security that is "given" in consideration for the purchase of another security, since by tying the "gift"
to the purchase of the other security, that person is really buying both, and both must be registered in
that State
- A rights or warrants offering on an underlying security, since the rights give the holder the right to buy
the underlying stock from the issuer at a pre-determined price.
Which of the following statements is TRUE regarding the compensation of an unlicensed solicitor for
referring a customer to an investment adviser?
A. A referral fee cannot be paid to an unlicensed solicitor
B. A referral fee may be paid to an unlicensed solicitor only if there is a prior written agreement detailing
work to be performed and compensation to be paid
C. A fixed fee may be paid to an unlicensed solicitor only if the investment adviser is a "federal covered
adviser"
D. The referral fee can be paid as long as the amount is fair and reasonable Answer: A.
Investment advisers do not earn commissions, and the prohibition on sharing commissions with
unlicensed persons is not applicable. Investment advisers are permitted to pay referral fees to
individuals who solicit business for the adviser, however the State defines the solicitor as an investment
adviser representative that must be registered (licensed) with the State. So a referral fee can only be
paid to a licensed solicitor; not to an unlicensed solicitor.
Under the Uniform Securities Act, if the Administrator prohibits an investment adviser from taking
custody of customer funds or securities, the investment adviser would be permitted to:
, A. buy securities for a customer using the investment adviser's monies, and then delay delivery of those
securities to the customer
B. buy securities for a customer who has given a limited power of attorney to the adviser using monies
deposited by that customer to an account established by the adviser specifically for that purpose
C. hold customer funds in accounts established and maintained by the adviser that have been
segregated and properly identified
D. accept a prepaid advisory fee of $500 from the client covering a period of up to 1 year Answer: B.
If the adviser is prohibited from taking custody of client funds or securities by the State Administrator,
the adviser can trade the customer account under a limited power of attorney - this is normal practice.
So Choice B is the correct answer. The adviser cannot buy securities for a customer and then delay
delivery of the securities to the client - this is an unethical practice. If an adviser is prohibited from
taking custody, it cannot hold customer funds and securities, making Choice C incorrect. There is nothing
precluding an adviser from taking a prepaid advisory fee, but if the adviser accepts $500 or more of
prepaid fees, 6 months or more in advance of rendering services, this is defined as "taking custody"
under NASAA rules.
A broker-dealer offers 4 summer passes to an amusement park to each of its agents who sell at least
$10,000 of bonds during the month of June. This action is:
I. allowed
II. not allowed
III. considered to be "soft dollar" compensation
IV. not considered to be "soft dollar" compensation
A. I and III
B. I and IV
C. II and III
D. II and IV Answer: B.
There is no prohibition on a broker-dealer compensating its agents with prizes for meeting a sales
contest requirement. The broker-dealer will have to report the compensation value as taxable income to
the IRS, but this is not part of the question. Soft dollar compensation is where a broker-dealer offers
"free" services to a mutual fund or investment adviser in return for "directed brokerage" (which is the
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