Series 66 – Uniform Combined State Law Exam Securities & Investment Products 1 — Questions and Answers
Question 1: Under the Uniform Securities Act, which of the following is NOT included in the definition of 'security'?
- Stock
- Variable annuity
- Fixed annuity (Correct answer)
- Investment contract
Correct answer: Fixed annuity
Fixed annuities are insurance products and are excluded from the definition of 'security' under the USA.
Question 2: Which of the following best describes the Howey Test used to determine whether an instrument is a security?
- An investment of money in a common enterprise with profits expected solely from the efforts of others (Correct answer)
- Any transaction involving the exchange of money for a financial instrument
- Any investment expected to generate a guaranteed return
- A product registered with the SEC or state regulators
Correct answer: An investment of money in a common enterprise with profits expected solely from the efforts of others
The Howey Test defines an investment contract (and thus a security) as an investment of money in a common enterprise with profits expected from others' efforts.
Question 3: Which of the following securities is typically EXEMPT from state registration under the Uniform Securities Act?
- Common stock of a small private company
- A newly issued corporate bond from an unrated company
- Securities issued by a national bank (Correct answer)
- Limited partnership interests
Correct answer: Securities issued by a national bank
Securities issued by national banks are exempt from state registration under the USA because they are federally regulated.
Question 4: Under the Uniform Securities Act, which transaction is considered an 'exempt transaction'?
- A public offering to retail investors
- A sale by a broker-dealer to the general public
- An isolated non-issuer transaction (Correct answer)
- A rights offering to existing shareholders of a private company
Correct answer: An isolated non-issuer transaction
Isolated non-issuer transactions (such as a one-time private sale between individuals) qualify as exempt transactions under the USA.
Question 5: Which of the following investment products is considered a 'non-exempt' security that must be registered under the Uniform Securities Act?
- US Treasury bonds
- Municipal bonds
- Corporate stock of a newly formed company (Correct answer)
- Securities issued by a nonprofit charitable organization
Correct answer: Corporate stock of a newly formed company
Corporate stock of a newly formed company is a non-exempt security that must be registered with the state before being offered or sold.
Question 6: Under the Uniform Securities Act, which method of securities registration allows a company to register in multiple states simultaneously using a single federal registration?
- Registration by coordination (Correct answer)
- Registration by qualification
- Registration by filing
- Registration by notation
Correct answer: Registration by coordination
Registration by coordination allows state registration to become effective at the same time as the SEC registration, making multi-state offerings more efficient.
Series 66 – Uniform Combined State Law Exam Securities & Investment Products 1
Under the Uniform Securities Act, which of the following is NOT included in the definition of 'security'?