Series 66 Chapter 1

Question 1

Who enforces federal securities laws?

Answer 1

SEC, FINRA, Exchanges

Question 2

Securities Investor Protection Act of 1970

Answer 2

Established SIPC (provides protection for customers of bankrupt securities firms)

Question 3

Nation Securities Markets Improvement Act of 1996 (NSMIA)

Answer 3

When federal and state law are the same, Federal Law has primary jurisdiction.

Question 4

Any rule that includes a calendar year

Answer 4

Federal law

Question 5

Person

Answer 5

individual, joint account, partnership, corporation, gov, association, NOT minor

Question 6

NASAA

Answer 6

North American Securities Administrator Association

Question 7

Exempt Security

Answer 7

Does not need to be registered on the state level to be issued publicly

Question 8

Issuer transaction (Primary Market Transaction)

Answer 8

trade where issuer receives money from sale of securitites

Question 9

Non-Issuer Transaction (Secondary Market Transaction)

Answer 9

a trade where proceeds of sale are received by an investor instead of an issuer

Question 10

In-the-State

Answer 10

a person will be considered in the state if any offer or sale occurs in the state

Question 11

Issuer transaction - exempt or not?

Answer 11

non-exempt

Question 12

Non-Issuer Transaction - exempt or not?

Answer 12

exempt

Question 13

Deny- Suspend- Revoke- Cancel-

Answer 13

Deny- person or security wishing to register did no satisfy state law req. Suspend - reg. person violates state law and is suspended for lim. period of time Revoke- reg. person violates state law and is indefinitely banned from registration in that state Cancel - reg. person has died, deemed mentally incompetant, missing, or allowed reg. to expire. No violation has been committed.

Question 14

Broker-Dealer Exemption

Answer 14

must register in states where its locations are, but not other states (if a BD does not have a place of business in that state)

Question 15

Broker-Dealer Exception

Answer 15

does not have to register in any states as a BD. An issuer, an agent (if a BD still records trades) Banks, savings institutions, credit unions, insurance companies, and trusts

Question 16

Clients who may be charged performance based fees

Answer 16

Registered Investment Companies (mutual funds, etc), Qualified Clients -individual with 2 mm net worth -Individual with 1 mm under management -Qualifed purchaser of 3(c)(7) funds -employee of investment adviser for at least 12 months and has participated in investment activities Non US Residents 3(c)(7) funds

Question 17

3(c)(7) funds

Answer 17

typically hedge funds made up of qualified investors only -individuals must have 5mm in investments

Question 18

Non IA Exceptions (do not register in any state)

Answer 18

Broker-Dealer Financial Institutions Professionals giving advice that is part of job description Newspapers and magazines

Question 19

Non IA Exemptions (must register in own state)

Answer 19

Persons having no place of business in the state

Question 20

What is a recommendation to trade a security?

Answer 20

Offer

Question 21

What is a trade of a security?

Answer 21

Sale

Question 22

What is a gift with financial risk?

Answer 22

Offer and a Sale

Question 23

If there is no money to be risked now or later?

Answer 23

Neither offer nor sale

Question 25

Regulates trading of outstanding securities - rules to prevent manipulation

Answer 25

Securities Exchange Act of 1934

Question 26

Securities Act of 1933

Answer 26

Regulates the registration of new issues - includes the rule of "full and fair disclosure"

Question 27

Provides for regulation and registration of investment advisors with SEC

Answer 27

Investment Advisers Act of 1940

Question 28

Provides for the regulation and registration of investment companies with SEC

Answer 28

Investment Company Act of 1940

Question 29

Established SIPC (provides protection for customers of bankrupt securities firms)

Answer 29

Securities Investor Protection Act of 1970

Question 30

When federal and state law are the same, Federal Law has primary jurisdiction.

Answer 30

Nation Securities Markets Improvement Act of 1996 (NSMIA)

Question 31

a salesperson representing a broker-dealer or issuer in selling securities

Answer 31

Agent

Question 32

a person or firm trading for themselves and for the accounts of others

Answer 32

Broker-Dealer

Question 33

A person who charges fees for offering investment advice about securities.

Answer 33

Investment Adviser (IA)

Question 34

any employee of an investment adviser except for clerical employees

Answer 34

Investment Adviser Representative (IAR)

Question 35

a corp. or gov. who issues or plans to issue securities. According to state law, partnership may not be an issuer

Answer 35

Issuer

Question 36

trade where issuer receives money from sale of securitites

Answer 36

Issuer transaction (Primary Market Transaction)

Question 37

a trade where proceeds of sale are received by an investor instead of an issuer

Answer 37

Non-Issuer Transaction (Secondary Market Transaction)

Question 38

dividends, interest and/or principal are guaranteed by institution not issuer (insurance company, gov, etc) Capital gains may not be guaranteed

Answer 38

Guaranteed Security

Question 39

a person will be considered in the state if any offer or sale occurs in the state

Answer 39

In-the-State

Question 40

violation has been committed or is about to be committed. If so, administrator has right to investigate possible violation and force people to submit records or testimonies.

Answer 40

Proper Cause

Question 41

based on the performance of the account in relation to an index of similar types securities. If account outperforms, adviser receives more compensation, vis versa.

Answer 41

Fulcrum Fees

Question 42

A person with no place of business in the state may offer advice to an unlimited number of insitutional clients, but no more than 5 non-institutional clients within 12 months.

Answer 42

De minimis exemption

Question 43

Broker-Dealers, credit unions, savings and loan companies, insurance companies, investment advisers and pension funds with at least 1mm under management.

Answer 43

Institutional Clients

Question 44

individual, joint account, partnership, corporation, gov, association, NOT minor

Answer 44

Person

Question 45

an enforcer of rules and regulations of the securities industry within the state. Nominated by governor and approved by state legislature

Answer 45

State administrator (Commissioner)

Question 46

typically hedge funds made up of qualified investors only -individuals must have 5mm in investments

Answer 46

3(c)(7) funds