Series 66 in 30 days
Day 1 05/24/17
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5X Economic Factors and Business Information
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15X Investment Vehicle Characteristics
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30X Client Investment Recommendations and
Strategies
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50X Laws, Regulations, and Guidelines, including
Prohibition of Unethical Business Practices
Tips
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Be careful when reading the question. Don’t JUST
skim
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Use logic or common sense. Use cues. Is response
true or false? Eliminate incorrect answers
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Cross off wrong answers
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Do multiple choice questions
Key Words/Phrases
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ALL
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NONE
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EXEMPT
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EXCLUDED
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EXCEPT
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UNLESS
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TRUE
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FALSE
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ALWAYS
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NEVER
What is the 66 all
about?
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Rules and regulations for registration
requirements for persons and securities
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EXEMPT versus NONEXEMPT
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EXEMPT, NOT required to register with a
regulator
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NONEXEMPT, NOT EXEMPT from registration, MUST
register
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Register at federal OR state
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Uniform Securities Act (USA) state level
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Securities and Exchange Commission (SEC) federal
level
Security
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Common stock
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Bonds
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Option contracts
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Variable annuities
Persons
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NOT DECEASED
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NOT a MINOR
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NOT MENTALLY INCOMPETENT
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Individuals
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Corporations
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Partnerships
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Sole proprietorships
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Issuers
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State Administrators (office AND individual)
Issuer
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ANY person who issues or proposes to issue any
security
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U.S. state/local/foreign governments
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Corporations
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Partnerships
Broker-Dealer
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Any legal person effecting transactions FOR
others OR for OWN account
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Find buyer AND represents seller
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Find seller AND represents buyer
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Charge commission for service
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BUY for own inventory WITH markdown
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SELL FROM own inventory WITH markup
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Market maker, publishes quotes in NASDAQ
marketplace
Agent
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Represent a person in effecting securities
transactions
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Represent broker-dealer OR represent securities
issuer
Agent of a
Broker-Dealer
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Nonclerical individual who represents a
broker-dealer in effecting securities transactions
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Salespersons ARE agents AND MUST be registered
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Clerical or information ONLY are NOT agents
Case Study
Lenny and Janice are employed by High Bridge Securities.
Lenny works with a team of individuals who are responsible for forwarding
client calls and mailing campaigns on behalf of the agents with whom he works.
He also coordinates seminars and helps with mailing invitations.
Janice is responsible for executing equity transactions for
customers who open accounts after attending the seminars Lenny coordinates.
Would Lenny, Janice,
or both NEED to register as an agent
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Lenny is clerical NOT securities transactions,
NOT an agent, NO registration
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Janice IS representing a broker-dealer, IS
effecting securities transactions, MUST register as an agent
Agent of an Issuer
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NON clerical individual
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Represents an issuer in effecting securities
transactions of the issuer’s securities to the public
Case Study
Lucy and Jim work for Industrial Widgets Incorporated, a
newly formed company that is in the process of conducting an initial public
offering (IPO) of stock. Jim is a director who is currently soliciting
commitments from public investors for which he will earn compensation based on
the number of investors who agree to purchase the securities.
Once the shares are publicly traded, Lucy, the Director of
Human Resources, will administer a plan that permits employees of Industrial
Widgets to purchase registered common shares of the company as part of her
regular duties. Who would be required to register as an agent of the issuer?
Lucy and Jim are both directors; however, their
responsibilities vary.
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Jim IS an agent, EFFECTs securities transactions
with the public
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Jim IS compensated based on number of investors
who purchase shares
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Lucy is NOT an agent, handling distribution of
shares to employees
Investment Adviser
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A firm
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ADVICE about securities
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BUSINESS provides securities advice
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COMPENSATION for these services
Investment Adviser
Representative
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Partner
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Director
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Makes recommendations, determines advice
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Solicits, offers, or negotiates the sale of
investment advice and services
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Supervises employees who sell investment advice
Case Study
Harrison Investment Advisory Services employs several
individuals who sell the firm’s portfolio management services to institutional
and NON institutional clients. Last month, Marti led the team in sales of
Harrison’s Advisory Services.
Based on Marti’s activities, would she be defined as an
investment advisor?
What role does Harrison play?
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Marti solicits investment advice services,
investment adviser representative
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Harrison, investment advisor
State Securities
Laws and Regulations
The Uniform Securities
Act
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USA, model law
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Blueprint each state can use
Administrator
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Administers and enforces laws
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Educates investors
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Protect consumers who purchase securities or pay
for investment advice
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Securities Commissioner MAY carry out duties
North American
Securities Administrators Association (NASAA)
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Founded in 1919
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Oldest international organization devoted to
investor protection
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67 state, province, territories
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District of Columbia, the U.S. Virgin Islands,
Puerto Rico, Canada, and Mexico
Federal Securities
Acts
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The Securities Act of 1933 (regulation of new
issues)
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The Securities Exchange Act of 1934 (regulation
of secondary markets, also known as trading markets)
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The Investment Advisers Act of 1940 (federal
regulation of investment advisors)
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The Investment Company Act of 1940 (regulation
of mutual funds and other investment companies)
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SEC Release IA 1092
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The National Securities Markets Improvement Act
of 1996
Securities Act of
1933
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Reaction to the stock market crash in 1929
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States HAD governed regulation of securities
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Securities MUST be registered with the federal
government (SEC)
Securities Act of
1934
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Empower the SEC to enforce federal rules and
regulations
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Financial professionals MUST register
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Governs secondary trading markets
The Investment
Advisers Act of 1940
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Some of its rules are part of the USA
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Test takers MUST recognize state versus federal
laws
The National
Securities Markets Improvement Act of 1996 (NSMIA)
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Eliminates the need for dual registration (state
& federal)
EXEMPT
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Securities listed on the U.S. exchanges (NYSE,
NASDAQ, etc)
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Regulation D offerings (private placements)
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Municipal securities issued outside the state
Test Chapter 1 Laws,
Rules, and Guidelines
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According to the Uniform Securities Act, an
officer of an issuer selling securities to the public would be considered an:
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Agent of
the issuer
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*A brokerage firm executes an existing
customer’s buy order by locating a contraparty and charges the client a
commission for executing the trade. In what capacity is the firm acting?
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Broker
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Which of the following would NOT be considered
an agent?
a.
A financial services firm that provides mutual
fund asset allocation services to individual investors for a fee, IA
b.
Jack, who works for a financial services firm
and makes asset allocation decisions, IAR
c.
Carla, the CEO of a broker-dealer, who still
buys and sells securities for the accounts of a few family members and friends,
IAR
d. Cliff,
a sales assistant at a broker-dealer, who accepts client orders when his boss
is unavailable, Neither
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The main goal of blue-sky laws is to:
a.
Protect investors from fraudulent securities
transactions
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The Uniform Securities Act is the model law governing state securities
statutes
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Under the Uniform Securities Act, the person who
educates investors and enforces a state’s securities laws is called the Administrator
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Notice Filing may be required by which federal
covered security? Investment companies
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A state securities Administrator has decided
that a broker-dealer is in danger of becoming bankrupt. The Administrator
orders the broker-dealer to maintain a minimum net capital of 200% of federal
minimum. How would this action be viewed under NSMIA? State
Administrators are not allowed to impose requirements that are more stringent
than SEC regulations
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*The securities act responsible for empowering
the SEC as a federal regulatory agency is the: Securities Act of 1934
