Series 66 Laws, Regulations, and Ethics Practice Questions
- Official outline
- NASAA Series 66 Exam Content Outline
- Questions on this page
- 4
- Updated
- Nov 3, 2026
- Share of the exam
- 45%
An investment adviser representative working at a local office for an SEC-registered advisory firm gives individualized advice to retail clients. Which registration question should be analyzed?
- A.The firm's SEC registration covers its personnel, because states lack authority to register individuals who work for SEC-registered firms.
- B.The representative must register in the state where the employer is incorporated, rather than where the representative works with clients.
- C.State registration does not apply to employees of SEC-registered firms, because federal law preempts state regulation of their individual advisers.
- D.State IAR registration may apply based on place of business and federal/state definitions and exemptions.
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Correct answer: D. State IAR registration may apply based on place of business and federal/state definitions and exemptions.
States may register IARs of federal covered advisers who have a place of business in the state, subject to definitions and exclusions. Firm and individual registration are separate matters.
- A. States can register individual IARs even when the firm is SEC-registered.
- B. IAR registration turns on place of business, not the employer's state of incorporation.
- C. Preemption covers the adviser firm; it does not bar state IAR registration.
- D. Place of business and the applicable definitions and exclusions drive IAR registration.
- Source: NASAA Model Rule USA 2002 102(16) (Investment Adviser Representative Definition), accessed October 2026
- Source: Investment Advisers Act Section 203A (15 U.S.C. 80b-3a, State and Federal Responsibilities), accessed October 2026
A customer, without any recommendation or solicitation from her broker-dealer, calls in and requests to purchase shares of a specific security that is not registered or otherwise exempt in the state. Under the Uniform Securities Act, this transaction is:
- A.Exempt only if the customer is an institutional investor
- B.Not exempt because the underlying security itself is not registered
- C.Not exempt because the broker-dealer processed the order
- D.Exempt as an unsolicited brokerage transaction
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Correct answer: D. Exempt as an unsolicited brokerage transaction
An unsolicited order. One initiated entirely by the customer without any recommendation or solicitation by the broker-dealer or its agent. Is an exempt transaction under the USA, regardless of whether the underlying security itself is registered. This exemption protects execution-only order flow from being blocked by the registration status of the security.
- A. Incorrect. The unsolicited exemption isn't limited to institutional investors; it applies to any customer-initiated, non-recommended order.
- B. Incorrect. The exemption applies precisely because the trade was unsolicited; the underlying security's registration status doesn't defeat this transaction-level exemption.
- C. Incorrect. Merely processing a customer-initiated order doesn't remove the exemption; what matters is that the broker-dealer didn't recommend or solicit the trade.
- D. Correct. An unsolicited transaction, where the customer initiates the purchase without any recommendation from the broker-dealer, is exempt from the Act's registration requirements even if the security itself isn't registered.
- Source: Exam outline: NASAA Series 66 Exam Content Outline, accessed October 2026
An investment adviser with $150 million in regulatory assets under management is generally required to register with which regulator?
- A.The SEC, as a federal covered adviser
- B.FINRA, as a broker-dealer
- C.Both the SEC and every state in which it has even a single client, with no exemption available
- D.Only the state(s) where it has a place of business
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Correct answer: A. The SEC, as a federal covered adviser
Investment advisers with regulatory assets under management at or above the federal covered adviser threshold (generally $100 million, with certain buffer provisions) must register with the SEC rather than with individual states and are known as federal covered advisers. Smaller advisers typically register at the state level instead.
- A. Correct. $150 million AUM places the adviser above the federal covered adviser threshold, requiring SEC registration.
- B. Incorrect. This is an investment adviser, not a broker-dealer; FINRA registration is not the applicable requirement.
- C. Incorrect. Federal covered status generally preempts full state registration; states may only require notice filing, not full dual registration in every client's state.
- D. Incorrect. At this AUM level the adviser is a federal covered adviser and registers with the SEC, not state-by-state.
- Source: SEC Rule 203A-1 (Eligibility for SEC Registration), accessed October 2026
- Source: Investment Advisers Act Section 203A (15 U.S.C. 80b-3a, State and Federal Responsibilities), accessed October 2026
A client approves a one-time purchase of $5,000 in a stock but the IAR later sells unrelated holdings without seeking authority. The adviser says the earlier trade shows general consent. What is the correct distinction?
- A.Authority for a specific transaction does not necessarily confer discretion over future securities or timing decisions.
- B.A client's signed advisory agreement gives the adviser authority to trade at its own discretion in any account the firm manages for that client.
- C.Approval of one stock purchase gives the adviser discretion over the rest of the account when the client has not objected to earlier activity.
- D.A trade confirmation sent after the sale puts the client on notice, so the client's failure to object ratifies the trade as authorized.
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Correct answer: A. Authority for a specific transaction does not necessarily confer discretion over future securities or timing decisions.
Discretion requires authority and documentation from the client. Approving one trade is transaction-specific consent and does not extend to later securities or timing choices.
- A. One-time approval of a specific trade does not grant ongoing discretion.
- B. Wrong: a signed advisory agreement establishes the advisory relationship and fees, but discretion exists only if the client expressly grants trading authority. Without that grant, the adviser must get approval before each trade.
- C. Wrong: discretion comes from the client's grant of authority, not from the client's silence or past approvals. A single approved purchase covers only that trade, and the adviser cannot treat it as a standing grant over unrelated holdings.
- D. Wrong: a confirmation reports a trade that has already occurred, and the client's silence does not retroactively authorize an unapproved sale. Authority must exist before the trade is placed.
- Source: NASAA Model Rule 102(a)(4)-1 (Unethical Business Practices of Investment Advisers, 1956 Act), accessed October 2026
- Source: NASAA Model Rule USA 2002 502(b) (Prohibited Conduct of Investment Advisers), accessed October 2026
Sources
- NASAA Model Rule USA 2002 102(16) (Investment Adviser Representative Definition), checked October 2026
- Investment Advisers Act Section 203A (15 U.S.C. 80b-3a, State and Federal Responsibilities), checked October 2026
- SEC Rule 203A-1 (Eligibility for SEC Registration), checked October 2026
- NASAA Model Rule 102(a)(4)-1 (Unethical Business Practices of Investment Advisers, 1956 Act), checked October 2026
- NASAA Model Rule USA 2002 502(b) (Prohibited Conduct of Investment Advisers), checked October 2026
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