Series 66 – Uniform Combined State Law Exam Fiduciary Duties & Suitability Standards 3

Question 1

Which of the following scenarios represents an unsuitable investment recommendation under the Uniform Securities Act?

Accepted Answer

Recommending speculative options strategies to a risk-averse retiree on fixed income

Answer

Recommending speculative options to a risk-averse retiree ignores the client's risk tolerance and financial situation, making the recommendation unsuitable.

Question 2

The duty of care under the fiduciary standard requires an investment adviser to:

Accepted Answer

Act with the competence and diligence of a qualified professional in the client's best interest

Answer

The duty of care requires investment advisers to act with the skill, competence, and diligence of a qualified professional while always keeping the client's best interest in mind.

Question 3

What is 'best execution' in the context of fiduciary duty for investment advisers?

Accepted Answer

Seeking the most favorable terms reasonably available for client transactions

Answer

Best execution requires advisers to seek the most favorable overall terms for client transactions, considering price, speed, likelihood of execution, and other relevant factors — not just commission costs.

Question 4

Under the Uniform Securities Act, an investment adviser's fiduciary duty to a client continues:

Accepted Answer

Throughout the entire duration of the advisory relationship

Answer

The fiduciary duty is ongoing and applies throughout the entire advisory relationship, requiring continuous monitoring and acting in the client's best interest.

Question 5

An investment adviser who charges performance-based fees must ensure the fee arrangement is:

Accepted Answer

Agreed to only with qualified clients and fully disclosed in advance

Answer

Performance-based fees may only be charged to qualified clients (those meeting minimum asset or income thresholds) and must be fully disclosed in advance under the Uniform Securities Act.

Series 66 – Uniform Combined State Law Exam Practice Test

Series 66 – Uniform Combined State Law Exam Practice Test

Series 66 – Uniform Combined State Law Exam Fiduciary Duties & Suitability Standards 3