Series 66 Practice Questions with Explanations

🧾 Series 66 Practice Questions with Explanations
📘 Sharpen Your Skills with These Sample Questions for the Series 66 Exam

The Series 66 exam qualifies individuals to act as both securities agents and investment adviser representatives. The test covers state securities law, investment vehicles, ethics, client recommendations, and more. Below are 8 practice questions across key Series 66 topics — each with a detailed explanation to help reinforce your understanding.

🎯 1. Investment Adviser Registration

Which of the following individuals must register as an investment adviser?

A) A lawyer who occasionally provides investment advice to clients
B) A publisher of a general financial newsletter
C) A person who provides personalized investment advice for a fee
D) A bank trust officer offering investment recommendations to trust beneficiaries

✅ Answer: C) A person who provides personalized investment advice for a fee

Explanation:
Under the Uniform Securities Act, a person who regularly provides investment advice and receives compensation must register as an investment adviser. Exceptions apply to lawyers, publishers of general (non-personalized) advice, and bank employees acting in their official capacity.

🎯 2. Fiduciary Duty

Which of the following best describes the fiduciary responsibility of an investment adviser?

A) Always placing the adviser’s interests before the client’s
B) Disclosing material conflicts of interest to the client
C) Avoiding recommendations of risky investments
D) Guaranteeing a minimum level of returns

✅ Answer: B) Disclosing material conflicts of interest to the client

Explanation:
A fiduciary must act in the client’s best interest, which includes disclosing conflicts of interest, fair dealing, and full transparency. Fiduciaries do not avoid risk entirely or guarantee returns.

🎯 3. Ethical Business Practices

An adviser representative recommends a mutual fund that pays the highest commission. The fund is not the best fit for the client. This is:

A) Acceptable because the fund is still suitable
B) Acceptable if the client signs a disclosure
C) A conflict of interest that must be disclosed
D) A breach of fiduciary duty

✅ Answer: D) A breach of fiduciary duty

Explanation:
Recommending a product for higher commission — rather than suitability — breaches the adviser’s fiduciary duty to act in the client’s best interest. It goes beyond a simple conflict and constitutes unethical conduct.

🎯 4. State vs. Federal Jurisdiction

An adviser with $30 million AUM and no office in a state has five non-institutional clients in that state. What must they do?

A) Register with the SEC only
B) Register with the state
C) Register with both the SEC and the state
D) No registration required

✅ Answer: B) Register with the state

Explanation:
Advisers with less than $100 million AUM generally register with the state, unless exempt. Advisers with more than 5 non-institutional clients in a state usually must register in that state.

🎯 5. Client Recommendations

Which of the following would be the most suitable investment for a retired client needing stable income?

A) Growth stocks
B) Treasury bonds
C) Small-cap mutual fund
D) High-yield junk bond

✅ Answer: B) Treasury bonds

Explanation:
A retired investor typically values income and capital preservation. Treasury bonds are safe, reliable, and appropriate. Growth stocks and junk bonds are too volatile or risky for conservative, income-focused clients.

🎯 6. Securities vs. Non-Securities

Which of the following is NOT a security under the Uniform Securities Act?

A) Stock
B) Fixed annuity
C) Option contract
D) Bond

✅ Answer: B) Fixed annuity

Explanation:
A fixed annuity is not a security because it does not involve an investment risk borne by the purchaser. Stocks, bonds, and options are securities under the Act.

🎯 7. Fraudulent Practices

An adviser tells clients that a particular bond is “guaranteed never to lose money,” even though market prices may fall. This is:

A) Ethical if the bond is investment-grade
B) Acceptable if disclosed in writing
C) A prohibited practice
D) An example of puffery

✅ Answer: C) A prohibited practice

Explanation:
Misrepresenting investment characteristics — such as claiming a bond is guaranteed never to lose money — is fraudulent and prohibited, regardless of intent.

🎯 8. Performance Fees

When can an investment adviser charge a performance-based fee?

A) Never
B) Only if the client agrees in writing
C) Only if the client has at least $1 million AUM or $2.1 million net worth
D) Only for institutional clients

✅ Answer: C) Only if the client has at least $1 million AUM or $2.1 million net worth

Explanation:
Under the Investment Advisers Act, performance-based fees are allowed for qualified clients — those with $1M AUM or $2.1M net worth — to prevent abuse of unsophisticated investors.

🚀 Next Step: Practice with Full-Length Exams

These questions reflect the tone and format of the Series 66 exam. To prepare further:

• Take full-length timed practice tests
• Focus on state laws, ethics, client suitability, and regulatory rules
• Understand definitions, exemptions, and registration requirements

🎓 Want more practice?
Access complete Series 66 study guides, simulated exams, and video lessons at
👉 https://finra-exam-mastery.com

Pass the Series 66 with confidence — you’re closer than you think!