1. Under the Uniform Securities Act, the statute of limitations for criminal
violations of the Act is:
A) 5 years
B) 1 year
C) 3 years
D) There is no time limit for criminal violations: A) 5 years
The statute of limitations for criminal violations under the Act is five years.
Series 66 Final Exam Test Questions
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1. Under the Uniform Securities Act, the statute of limitations for criminal
violations of the Act is:
A) 5 years
B) 1 year
C) 3 years
D) There is no time limit for criminal violations: A) 5 years
The statute of limitations for criminal violations under the Act is five years.
2. Pick TWO statements that are TRUE regarding time-weighted and dol-
lar-weighted rates of return.
I. Time-weighted returns allow investors to measure how much money they
have earned on their investments.
II. Dollar-weighted returns allow investors to compare the performance of two
investment advisers.
III. Time-weighted returns allow investors to compare the performance of two
investment advisers.
IV. Dollar-weighted returns allow investors to measure how much money they
have earned on their investments.
A) II and III
B) III and IV
C) II and IV
D) I and II: C) III and IV
Dollar-weighted returns measure the performance of an investor's actual investment
over a defined period. Time-weighted returns assume that a fixed-dollar amount
was invested and then measure how that amount would have performed over a
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defined period. Time-weighted averages are often used to compare the performance
of mutual fund managers
3. What are structured products?
A) An investment trust that manages a portfolio of real estate investments.
B) Securities which are created by financial institutions that customize returns
and risks to fit the needs of specific investors.
C) Contracts that derive their value from the return on an underlying security.
D) A contract in which two parties agree to exchange cash flows based
on different financial instruments.: B) Securities which are created by financial
institutions that customize returns and risks to fit the needs of specific investors.
Structured products are securities which are created by financial institutions (e.g.,
broker-dealers) and are often customized to fit the specific needs of customers.
Although structured products are legally created as debt instruments, their rates
of return are often linked to equities and derivatives. One of the most popular
types of structured products is the exchange-traded note (ETN). Derivatives (e.g.,
options) are contracts that derive their value from an underlying security. REITs are
investment trusts that manage portfolios of real estate investments. Swap contracts
are agreements to exchange cash flows based on financial instruments.
4. The securities holdings report that an access person of an adviser is
required to file with her firm's chief compliance officer does NOT include:
A) The prices paid to acquire the securities
B) The type of securities held in her personal account
C) The date that the person submits the report
D) The name of the broker-dealer that maintains the person's account: A) The
prices paid to acquire the securities
The securities holdings report that an access person files with her firm's CCO
include the types of securities held in her personal account, the date that the report
is submitted, and the name of the broker-dealer that maintains her personal account.
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However, the price that is paid to acquire securities is actually included in a different
report (the transaction report).
5. Which of the following statements is TRUE about indexing?
A) It is an active management strategy.
B) It is a strategy in which an IA attempts to outperform a specific index.
C) It measures the performance of an IA versus an index.
D) It may result in a portfolio that does not accurately track the index.: D) It may
result in a portfolio that does not accurately track the index.
Indexing is a passive, not an active, management strategy. When using this passive
strategy, an IA attempts to build a portfolio that will mirror or match the performance
of a specific index. However, it is quite possible that the portfolio's actual return may
not match the performance of the index. If this is the case, it is referred to as a
tracking error
6. XYZ Financial, Inc. is a registered investment adviser that is affiliated with
ABC Company, a broker-dealer. The investment adviser representatives who
manage client portfolios for XYZ Financial prefer to use ABC Company to
execute securities transactions. Which of the following statements is TRUE?
A) This practice is allowed, but is not required to be disclosed if the investment
adviser acts in the client's best interest.
B) RIAs may execute transactions through affiliated broker-dealers provided
they disclose the practice to clients and ensure that the clients receive the
best execution possible.
C) RIAs may execute transactions through affiliated broker-dealers provided
they disclose this practice to clients and do not receive additional compensa-
tion from the broker-dealer.
D) Using an affiliated broker-dealer is not allowed.: B) RIAs may execute trans-
actions through affiliated broker-dealers provided they disclose the practice to clients
and ensure that the clients receive the best execution possible.
Although an investment adviser is permitted to execute securities transactions
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through an affiliated broker-dealer, this practice represents a conflict of interest
which must be clearly disclosed to clients. Written disclosure of the conflict is
typically made on Form ADV Part 2.
7. The manager of the XYZ Fund is permitted to move assets between the stock
and bond markets, depending on economic conditions. Last year the manager
had 70% of the fund's assets invested in stocks while only 30% in bonds. This
year she has reversed the ratio. XYZ fund is most likely a(n):
A) Balanced Fund
B) Hedge Fund
C) Equity Income Fund
D) Asset Allocation Fund: D) Asset Allocation Fund
An asset allocation fund permits the manager to change investment strategies and
vehicles, based on changing market/economic conditions
8. Which factor will cause variable annuity payments (contributions) to change
from one client to another?
A) Gender
B) Profession
C) Age
D) Health: B) Profession
Payments into an annuity (i.e., the premiums) are most impacted by an person's
profession. High-earning individuals can contribute more than lower earners. During
the annuitization phase, the payout from an annuity is driven by the age and gender
of the annuity owner
9. Jack has a substantial amount of cash value built up in his variable life
insurance policy. He would like to use some of it for a home renovation project.
Which TWO of the following choices would be used to explain to Jack his
options for accessing his cash value?
I. If he withdraws some of his cash value, it will be treated as taxable earnings
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