Series 66 Compliance Practice Questions

📝 Series 66 Compliance Practice Questions

Mastering compliance is critical to passing the Series 66 exam and succeeding as a financial professional. Below are sample practice questions focused on ethics, regulatory rules, and fiduciary duties—core topics tested on the exam.

🔒 Question 1

An investment adviser representative (IAR) receives nonpublic information that a client’s company is about to announce disappointing earnings. The IAR advises another client to sell stock in that company. This is an example of:

A. Churning
B. Front-running
C. Insider trading
D. Suitability violation

Correct Answer: ✅ C. Insider trading
Explanation: Using material nonpublic information for trading decisions is considered insider trading and is a serious violation.

📋 Question 2

Which of the following must an investment adviser disclose under the Uniform Securities Act?

A. The adviser’s investment performance over the past year
B. The method used to allocate block trades
C. The names of all other clients with similar portfolios
D. The identity of custodians for each client’s securities

Correct Answer: ✅ B. The method used to allocate block trades
Explanation: Fair and transparent trade allocation practices must be disclosed to clients.

📑 Question 3

A client grants written authorization for an IAR to place discretionary trades. Which of the following is TRUE?

A. A separate power of attorney must be filed with the Administrator
B. The adviser must still obtain verbal consent before each trade
C. The adviser may place trades without further consent
D. The client must renew the authorization quarterly

Correct Answer: ✅ C. The adviser may place trades without further consent
Explanation: Written discretionary authority allows trading without individual trade approvals.

📉 Question 4

An IAR executes multiple trades in a client’s account, generating commissions without a change in strategy or objective. This is known as:

A. Scalping
B. Churning
C. Pump and dump
D. Switching

Correct Answer: ✅ B. Churning
Explanation: Churning is excessive trading that benefits the adviser at the client’s expense and breaches fiduciary duty.

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