Series 66

The Series 66 exam, officially known as the Uniform Combined State Law Examination, is a crucial credential for investment professionals operating in the United States. Administered by the North American Securities Administrators Association (NASAA) and designed in conjunction with the Financial Industry Regulatory Authority (FINRA), the Series 66 license combines elements of the Series 63 and Series 65 exams. Primarily aimed at individuals who wish to become both securities agents and investment adviser representatives, this examination tests proficiency in state security regulations and ethical business practices.

Purpose and Scope

The Series 66 exam is intended to qualify candidates as investment adviser representatives (IARs) and securities agents. The test aims to ensure these professionals understand their responsibilities, can make well-informed investment decisions, and adhere to stringent regulatory requirements.

The Series 66 exam covers a wide range of topics, including:

• Economic factors and business information
• Investment vehicle characteristics
• Client/customer investment recommendations and strategies
• Laws, regulations, and guidelines, including prohibit unethical business practices.

Exam Format and Requirements

To sit for the Series 66 exam, candidates must also pass the Series 7 exam. The Series 7 license, known as the General Securities Representative Exam, qualifies a candidate to buy and sell securities for a client. The Series 66, therefore, builds on the fundamental knowledge tested in the Series 7 exam and focuses more on state-specific regulations and investment advice.

Key Components

• Length: The Series 66 exam consists of 100 multiple-choice questions.
• Time: Candidates are given 150 minutes to complete the exam.
• Passing Score: A passing score is 73 out of 100, or 73%.

Registration and Scheduling

Before taking the Series 66 exam, candidates typically need to get sponsorship from a FINRA-member firm. Registration is done through the FINRA website.

Key Steps:

1. Sponsorship: Seek sponsorship from a FINRA-member firm.
2. U4 Form: Complete the Uniform Application for Securities Industry Registration or Transfer (Form U4).
3. Fee Payment: Pay the exam fee, which as of this writing, is $165.
4. Scheduling: Schedule the exam through FINRA’s CRD system or directly with a testing center.

Preparation and Study Materials

Due to the complexity and comprehensive nature of the Series 66 exam, extensive preparation is crucial. Many candidates use a combination of self-study guides, practice exams, and in-class training courses.

Recommended resources include:

• Kaplan Financial Education: Offers various study packages, practice tests, and instructional videos.
• STCUSA: Provides online and in-person classes, as well as extensive practice questions.
• Securities Institute of America: Known for its comprehensive study materials and test simulation software.

Test Day: What to Expect

On test day, candidates should arrive at the exam center at least 30 minutes early. A valid, government-issued ID is required for entry. Personal belongings, including cell phones and study materials, are typically not allowed in the examination room.

Content Breakdown

Economic Factors and Business Information

• Market Structure: Understanding different types of financial markets and their impact on investment decisions.
• Economic Indicators: Gross Domestic Product (GDP), unemployment rates, inflation, and their relevance.
• Corporate Finance: Knowledge of financial statements, ratios, and corporate governance.

Investment Vehicle Characteristics

• Equities: Stocks, ETFs, ADRs, common vs. preferred shares.
• Fixed Income: Bonds, yields, rating agencies, interest rate risk.
• Derivatives: Options, futures, swaps, hedge strategies.
• Alternative Investments: Real estate, commodities, private equity.

Client/Customer Investment Recommendations and Strategies

• Portfolio Management: Asset allocation, diversification, modern portfolio theory.
• Risk Management: Types of risk, risk tolerance assessment, hedging techniques.
• Suitability: Aligning investment choices with client objectives and financial situations.
• Retirement Planning: Understanding different retirement accounts, social security, pension plans.

Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices

• Uniform Securities Act: State regulation principles, antifraud provisions, registration requirements.
• Investment Advisers Act of 1940: Governing rules for investment advisers.
• Ethical Practices: Conflicts of interest, fiduciary duty, insider trading laws.
• Client Communication: Transparency, reporting standards, record-keeping.

Career Impact

Holding the Series 66 license allows financial professionals to act as both broker-dealers and investment advisers, providing a broader range of services to clients. This dual functionality enhances career prospects and potential earnings.

Employment Roles

• Investment Adviser Representative: Provides bespoke financial advice and portfolio management services.
• Securities Agent: Executes buy and sell orders for securities on behalf of clients.
• Financial Planner: Offers comprehensive financial planning, including retirement and estate planning.
• Compliance Officer: Ensures adherence to laws and regulations within financial institutions.

Continuing Education and Advancement

Certified professionals must engage in continuous education to stay updated with regulatory changes and maintain their licenses. Often, this includes:

• Annual Compliance Meetings: Within their firm or through industry seminars.
• Advanced Certifications: Pursuing further credentials such as Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), or other relevant designations.

Conclusion

The Series 66 exam is a crucial stepping stone for financial professionals in the United States who want to expand their roles and responsibilities. Given its comprehensive nature, it requires thorough preparation and a deep understanding of both state and federal investment regulations. Successful candidates are well-equipped to offer a full range of investment services, making this license a valuable asset in the highly competitive financial industry.