Series 66 – Uniform Combined State Law Exam Investment Adviser Registration & Licensing 2 — Questions and Answers
Question 1: Which of the following best describes an 'investment adviser' under the Uniform Securities Act?
- Any person who provides advice about municipal bonds for a fee
- A person who, for compensation, engages in the business of advising others on securities (Correct answer)
- Any broker-dealer who recommends securities
- A person who publishes a general financial newsletter
Correct answer: A person who, for compensation, engages in the business of advising others on securities
Under the USA, an investment adviser is a person who, for compensation, is in the business of advising others about securities.
Question 2: A state-registered investment adviser must keep records for a minimum of how many years under the Uniform Securities Act?
- 2 years
- 3 years
- 5 years (Correct answer)
- 7 years
Correct answer: 5 years
State-registered investment advisers are generally required to maintain records for a minimum of 5 years.
Question 3: Which of the following individuals is EXCLUDED from the definition of 'investment adviser' under the Uniform Securities Act?
- A financial planner who charges fees for advice
- A bank giving advice as part of its regular banking activities (Correct answer)
- A portfolio manager managing separate accounts
- A person advising pension funds for a fee
Correct answer: A bank giving advice as part of its regular banking activities
Banks are specifically excluded from the definition of investment adviser under the Uniform Securities Act.
Question 4: When must an investment adviser disclose its Part 2 brochure (Form ADV Part 2) to a client?
- Within 30 days after entering into a contract
- At least 48 hours before entering into an advisory contract, or at contract signing with a 5-day withdrawal right (Correct answer)
- Only upon client request
- Annually at the start of each calendar year
Correct answer: At least 48 hours before entering into an advisory contract, or at contract signing with a 5-day withdrawal right
The brochure must be delivered at least 48 hours before contract execution, or at signing if the client has a 5-day right to cancel.
Question 5: Under the Uniform Securities Act, which of the following is a prohibited practice for investment advisers?
- Charging performance-based fees to qualified clients
- Taking custody of client funds with proper notice
- Assigning the advisory contract without client consent (Correct answer)
- Recommending securities not listed on a national exchange
Correct answer: Assigning the advisory contract without client consent
Assigning an investment advisory contract to another adviser without client consent is prohibited under the USA.
Question 6: Which of the following is TRUE regarding investment adviser surety bonds under the Uniform Securities Act?
- All investment advisers must post a surety bond regardless of size
- Advisers who take custody or have discretion may be required to post a surety bond (Correct answer)
- Surety bonds replace net capital requirements
- Only federal-covered advisers must post surety bonds
Correct answer: Advisers who take custody or have discretion may be required to post a surety bond
States may require investment advisers with custody or discretionary authority over client assets to post a surety bond.
Series 66 – Uniform Combined State Law Exam Investment Adviser Registration & Licensing 2
Which of the following best describes an 'investment adviser' under the Uniform Securities Act?