Your FREE Series 65 Flashcards 2026 – 200+ Cards

The recurring fluctuation of economic activity through four phases — expansion, peak, contraction, and trough — measured from the start of one recession to the start of the next.

Expansion (upward) to peak to contraction (downward) to trough (low point before recovery).

A significant, broad decline in economic activity lasting more than a few months. The NBER dates U.S. recessions using several measures of activity, not real GDP alone.

The NBER (National Bureau of Economic Research), using a variety of measures of economic activity, not just real GDP.

The interest rate banks charge one another for overnight loans of reserves. The FOMC sets a target range for it; its level influences other short-term rates across the economy.

The Federal Reserve's main monetary tool — buying securities to add reserves and lower rates (easing), or selling securities to drain reserves and raise rates (tightening).

Open market operations — the purchase and sale of securities in the open market to influence the federal funds rate and money supply.

The rate the Federal Reserve charges depository institutions that borrow directly from its discount window. The primary-credit rate is set above the top of the federal funds target range.

Primary credit (sound institutions), secondary credit (rate higher than primary), and seasonal credit (smaller institutions with seasonal swings).

Zero percent across all deposit liability types, effective March 26, 2020. The Fed eliminated reserve requirements for all depository institutions.

Maximum employment and stable prices (controlled inflation). These are the two goals set by the Federal Reserve Act.

2 percent per year, as measured by the annual change in the price index for personal consumption expenditures (PCE).

The Federal Reserve body that sets the target for the federal funds rate. It holds eight regularly scheduled meetings each year.

Government use of spending and taxation (set by Congress and the President) to influence the economy — distinct from monetary policy, which the Federal Reserve controls.

A deficit occurs when the government spends more than it collects in revenue; a surplus occurs when it spends less than it collects.

Currency outside the Treasury, Fed Banks, and depository-institution vaults; demand deposits at commercial banks; and other liquid deposits.

M1 plus small-denomination time deposits (under $100,000) and balances in retail money market funds.

A general upward movement of prices. Inflation reduces purchasing power, which is a risk for investors receiving a fixed rate of interest.

The amount of goods and services that can be purchased by a given unit of currency, taking into account the effect of inflation.

The value of the final goods and services produced in the United States. Real (chained) GDP is adjusted to remove the effects of inflation so different periods can be compared.

Nominal (current-dollar) GDP uses market prices of the measured period; real (chained) GDP is adjusted to remove the effects of inflation over time.

A measure of the average change over time in prices paid by consumers for a representative basket of goods and services. It is the most widely used measure of inflation.

Population coverage only. CPI-U covers all urban consumers (over 90% of population); CPI-W covers urban wage earners and clerical workers (about 30%).

The Federal Reserve's preferred inflation gauge. Core PCE excludes consumer energy prices and many food prices.

A curve relating the par yield on a security to its time to maturity, based on closing market bid prices of the most recently auctioned Treasury securities.

A financial statement that shows what a company owns and what it owes at a fixed point in time.

A financial statement that shows how much money a company made and spent over a period.

One of the audited statements in the 10-K; it shows the cash flowing into and out of a company over a period.

The money left over if a company paid its current liabilities (debts due within one year) from its current assets.

Generally Accepted Accounting Principles — the standards U.S. companies are required to follow in presenting their financial statements.

A company's annual report. Its Financial Statements section contains the audited income statement, balance sheets, statement of cash flows, and statement of stockholders' equity.

Total Liabilities divided by Shareholders' Equity. A 2-to-1 ratio means two dollars of debt for every one dollar shareholders invest.

Stock price divided by earnings per share (EPS).

Cost of sales divided by average inventory for the period.

Current assets divided by current liabilities. Desirable ratios vary by industry.

Interest earned on both the principal and the accumulated interest, allowing money to grow faster over time than with simple interest.

The degree of uncertainty about the rate of return on an asset and the potential harm that could arise when financial returns are not what the investor expected.

Market-wide risk that diversification cannot remove — market, interest-rate, inflation (purchasing-power), currency, and political/regulatory risk.

Risk specific to one company, industry, or security — business, credit (default), and liquidity risk. It can be reduced by diversification.

Unsystematic (specific/diversifiable) risk. Systematic (market) risk cannot be diversified away.

The risk tied to a company staying in business. If a company fails, common stockholders are last in line for the proceeds of its assets.

The risk that inflation reduces purchasing power — a particular concern for investors receiving a fixed rate of interest.

The risk that interest rate changes affect a bond's value. Rising rates make new bonds more attractive, forcing older bonds to sell at a discount.

The risk that investors won't find a market for their securities, potentially preventing them from buying or selling when they want.

The risk of an issuer defaulting on interest or principal payments. Lower-rated and high-yield (junk) bonds carry greater credit risk than higher-rated bonds.

Investing across multiple industries to dilute the risk caused by trends or events in any particular industry, reducing unsystematic risk.

A type of mutual fund that invests in liquid, short-term debt securities, cash, and cash equivalents.

Government money market funds, tax-exempt (municipal) money market funds, and prime money market funds.

99.5% or more of total assets in cash, government securities, and/or fully collateralized repurchase agreements.

80% or more of its assets in municipal securities.

When a stable-NAV fund's NAV per share deviates by more than half a cent (more than 1/2 of 1%) from $1.00, requiring repricing.

No. Money in a money market fund is not guaranteed by the FDIC like bank deposit accounts are.

A savings product that holds a fixed amount of money for a fixed period; in exchange the issuing bank or credit union pays interest.

A CD bought through a federally insured bank or credit union is insured up to $250,000.

A short-term corporate debt security that prime money market funds invest in.

A debt security. When you buy a bond, you lend to the issuer (government, municipality, or corporation), which promises to pay interest over the bond's life and repay principal at maturity.

The interest rate a bond pays; the periodic interest payments themselves are called coupon payments.

A bond that does not pay periodic interest; it is sold at a discount and pays its face value at maturity.

Direct U.S. government debt: T-bills, T-notes, and T-bonds, backed by the full faith and credit of the U.S. government. Interest is exempt from state and local tax but not federal tax.

One year or less. T-bills are sold at a discount to face value.

Greater than one year but not exceeding ten years. Notes pay interest semiannually.

Greater than ten years (commonly 20 or 30 years). Bonds pay interest semiannually.

Treasury securities whose principal is tied to the Consumer Price Index; maturity 5 years or greater, paying interest every six months on the inflation-adjusted principal.

Debt of a state or local government. Interest is generally exempt from federal income tax (and state tax for in-state residents). Types: general obligation and revenue.

A municipal bond backed by the full faith and credit of the issuer, which has the power to tax residents to pay bondholders.

A municipal bond not backed by taxing power but by revenues from a specific project or source, such as highway tolls or lease fees.

Generally exempt from federal income tax; for state and local exemption, the buyer generally must reside in the state where the bond was issued.

A security representing an ownership interest (equity) in a company. It entitles owners to vote at shareholder meetings and to receive dividends.

Stock whose holders usually lack voting rights but receive dividends before common stockholders and have priority over common stockholders in a liquidation.

A portion of a company's profit paid to shareholders. Dividend-paying public companies usually pay on a fixed schedule but may issue dividends at any time.

The date that governs entitlement to a declared dividend; a buyer must own the stock before the ex-dividend date to receive the dividend.

Open-end funds (mutual funds), closed-end funds, and unit investment trusts (UITs).

An SEC-registered open-end investment company that continuously offers new redeemable shares priced at NAV and pools investor money into a managed portfolio.

An investment company's total assets minus total liabilities. A mutual fund's per-share NAV is computed at least once every business day.

An exchange-traded investment product that must register as an open-end investment company or UIT; its shares trade intraday on an exchange at market prices.

An investment company that issues a fixed number of shares in an IPO, then trades on an exchange at a market price that can be above or below NAV.

No. Unlike open-end funds, closed-end funds are not required to buy back shares; investors sell them on the exchange at market price.

An investment company that holds a generally fixed portfolio in a one-time public offering, does not actively trade, issues redeemable units, and terminates on a specified date.

No. A UIT has no board of directors, corporate officers, or investment adviser rendering advice during the life of the trust.

A contract giving the owner the right to buy or sell an underlying asset at a fixed price on or before a specified future date. Options are derivatives.

A call gives the right to buy the underlying at the strike price through expiration; a put gives the right to sell the underlying at the strike price through expiration.

The price at which the option buyer may buy the underlying stock (if a call) or sell it (if a put).

The price per share the buyer pays to purchase the option contract.

An option contract generally represents 100 shares of the underlying stock.

An agreement to buy or sell a specific quantity of a commodity or financial instrument at a specified price on a particular future date.

The CFTC (Commodity Futures Trading Commission).

A financial instrument whose performance is derived, at least in part, from the performance of an underlying asset, security, or index.

A contract between an investor and an insurance company, often used to provide a stream of periodic payments.

An insurance contract that serves as a tax-deferred investment account with subaccounts (typically mutual funds). The holder bears market risk, so it is a security registered with the SEC.

An annuity that credits interest linked in part to a market index, with caps limiting positive gains in exchange for downside protection.

An annuity whose value rises or falls based partly on a benchmark like the S&P 500; unlike a fixed-index annuity, you can lose money in a RILA.

Variable annuities and RILAs are securities that must register with the SEC; fixed and fixed-indexed annuities generally are not.

A private, unregistered investment fund that pools investor money and pursues more flexible strategies than registered funds, with the goal of positive returns.

An asset management fee of 1-2% of NAV plus a performance fee of 15-20% of the fund's profit.

A pooled investment vehicle whose adviser pools investor money to make investments, typically with a time horizon of 10 or more years.

A company that owns and typically operates income-producing real estate or related assets such as offices, malls, apartments, hotels, warehouses, and mortgages.

A REIT must distribute at least 90 percent of its taxable income to shareholders annually as dividends. Most pay out at least 100% and owe no corporate tax.

As ordinary income; they are not entitled to the reduced tax rates that apply to other types of corporate dividends.

A type of investment company (mutual fund, ETF, closed-end fund, or UIT) that invests primarily in bonds or other debt securities.

A fund holding a mix of stock, bond, and other funds, designed for investors with a particular retirement or goal date in mind.

A qualified tuition plan sponsored by states, agencies, or educational institutions under IRC Section 529. The two types are prepaid tuition plans and education savings plans.

A type of closed-end investment company that invests in small and developing or financially troubled companies, defined under the Investment Company Act.

A trust that can be changed or ended at any time during the grantor's life; because it is revocable, it is treated as a grantor-type trust for tax purposes.

A trust that by its terms cannot be modified, amended, or revoked; it may still be a grantor trust if grantor-trust powers are retained.

Form 1041, the U.S. Income Tax Return for Estates and Trusts. A trust must file for any year it has $600 of income or a nonresident alien beneficiary.

The grantor, on Form 1040. A grantor trust generally does not file Form 1041.

Reasonable grounds to believe the recommendation is suitable, based on the client's investment objectives, financial situation, and needs after reasonable inquiry.

The reasonable inquiry an adviser makes into a client's investment objectives, financial situation, and needs before recommending the purchase, sale, or exchange of any security.

Spreading money among different investments to reduce risk — 'don't put all your eggs in one basket' — at two levels: between asset categories and within each category.

Stocks, bonds, and cash. A portfolio should be diversified both between these categories and within each one.

Adjusting a portfolio back to its original target asset-allocation mix, typically by selling assets that have grown and buying those that have shrunk.

A measure of a security's or portfolio's volatility (systematic risk) relative to the market. A beta above 1.0 is more volatile than the market; below 1.0 is less volatile.

A fund that may invest a greater portion of assets in individual issuers, so a single investment's value change can cause greater share-price fluctuation than in a diversified fund.

Investing a fixed dollar amount at regular intervals regardless of price, buying more shares when prices are low and fewer when high — lowering average cost per share.

More than one year. Assets held one year or less produce short-term gains, taxed as ordinary income.

As ordinary income at graduated rates.

0%, 15%, or 20%, depending on the taxpayer's taxable income and filing status.

The lesser of $3,000 ($1,500 if married filing separately) per year; any excess carries forward to future years.

The purchase price of a security plus costs of purchase such as commissions and transfer/recording fees.

A loss is disallowed if substantially identical securities are acquired within 30 days before or after a sale at a loss; the disallowed loss is added to the basis of the replacement security.

$7,500, or $8,600 for those age 50 or older (a $1,100 catch-up).

$1,100, bringing the total 2026 IRA limit for those age 50 or older to $8,600.

$24,500. The standard catch-up for those age 50 or older is $8,000, for a total of $32,500.

$11,250 (for 401(k)/403(b)/governmental 457/TSP plans), replacing the standard $8,000 catch-up for those who turn 60-63 that year.

A tax-advantaged personal savings plan where contributions may be tax deductible; earnings grow tax-deferred and distributions are taxed as ordinary income.

An individual retirement account funded with after-tax dollars. Contributions are never deductible, but qualified distributions — held 5 years and taken after age 59 1/2 — are entirely tax-free.

The minimum amount a traditional IRA or retirement-plan owner must begin withdrawing annually starting at age 73. Roth IRAs have no RMD during the owner's lifetime.

Age 73. The first RMD may be delayed until April 1 of the following year; later RMDs are due by December 31 each year.

An employer-sponsored retirement savings plan offering investment options, typically mutual funds. In traditional 401(k)s, employees invest pre-tax salary; contributions and earnings are untaxed until withdrawal.

The Employee Retirement Income Security Act, governing private retirement plans. A fiduciary must act solely for participants, diversify investments, and follow the plan; breaches carry personal liability.

Fiduciaries must run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses.

To diversify plan investments to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so.

The duty to act prudently, requiring expertise in areas such as investments — a central fiduciary responsibility.

A broker-dealer's duty to seek the most favorable terms reasonably available for customer orders, enforced through the antifraud provisions of the federal securities laws.

An order to buy or sell at the best available price; it generally executes immediately, but the price is not guaranteed.

An order to buy or sell at a specific price or better.

An order in which the stop price triggers conversion to a market order; the execution price can deviate significantly in fast markets.

An order that combines stop and limit features: once the stop price triggers, it becomes a limit order rather than a market order.

T+1 (one business day after the trade date), effective May 28, 2024, for most securities transactions.

50%. An investor may borrow up to 50% of the purchase price of margin securities; firms may require more.

The Federal Reserve rule setting the initial margin requirement for buying margin securities at 50% — the customer deposits 50% and the broker-dealer may lend the rest.

A gain results if a security is sold above its adjusted basis; a loss results if sold below it.

The framework that an investor can build an 'efficient' portfolio offering the most return for a level of risk by combining assets whose returns are not perfectly correlated.

Setting and maintaining target percentages for asset classes based on a client's long-term objectives and risk tolerance, rebalancing back to those targets over time.

Active management seeks to outperform a benchmark through security selection and timing; passive management seeks to match an index at low cost.

Investment approaches emphasizing, respectively, companies expected to grow earnings faster than average, securities trading below intrinsic value, and securities producing steady income.

Individuals (natural persons), sole proprietorships, business entities, trusts, and estates.

Capital losses exceeding the annual $3,000 ($1,500 MFS) ordinary-income deduction limit, carried forward to offset gains and income in future years.

Dividing a portfolio among asset categories such as stocks, bonds, and cash based on the client's goals, time horizon, and risk tolerance.

A more active strategy that temporarily shifts a portfolio's asset-class weights away from long-term targets to take advantage of market conditions.

A strategy of shifting portfolio holdings among industry sectors expected to outperform at different points in the economic cycle.

Between asset categories (stocks, bonds, cash) and within each asset category.

It applies to taxpayers with the lowest taxable income; higher income moves gains into the 15% and then 20% brackets, by filing status.

They carry forward to future tax years to offset future capital gains and (subject to the annual limit) ordinary income.

No. Roth IRA contributions are made with after-tax dollars and are never deductible, but qualified distributions are tax-free.

The account must be held at least 5 years AND the distribution taken on or after age 59 1/2 (or for death, disability, or a first home).

No. Roth IRAs have no required minimum distributions during the owner's lifetime.

$17,000 (enhanced limit $18,100), with a standard age-50+ catch-up of $4,000.

The client's investment objectives, financial situation, and needs — gathered through reasonable inquiry before any recommendation.

The collected facts about a client — objectives, financial situation, risk tolerance, time horizon, and needs — used to make suitable recommendations.

The length of time a client expects to hold an investment before needing the funds; it shapes appropriate asset allocation and risk level.

A client's willingness and ability to endure declines in portfolio value; a key input to suitable asset allocation.

One business day after the trade date (T+1), effective May 28, 2024.

Up to 50% of the purchase price; the customer must deposit the other 50%. Firms may require more.

A decedent's property; the fiduciary files Form 1041 to report the estate's income, deductions, gains, losses, and any income tax liability.

Generally after 3 years of service, for employer contributions invested in employer securities.

The body of theory (including diversification, asset allocation, and beta) describing how investors should be rewarded for bearing systematic risk.

The security or portfolio is more volatile (more sensitive to market moves) than the overall market.

The security or portfolio is less volatile (less sensitive to market moves) than the overall market.

One year or less. Short-term gains are taxed as ordinary income at graduated rates.

The disallowed loss. It increases the basis of the substantially identical securities acquired within the 30-day window.

A strategy seeking to match a market index's return at low cost rather than outperform it through active selection.

Any person who, for compensation, is in the business of advising others about the value of securities or the advisability of buying or selling them. The Uniform Securities Act's definition includes financial planners.

Compensation, plus engaging in the business, plus giving advice about securities. All three must be present.

A Lawyer, Accountant, Teacher, or Engineer whose investment advice is solely incidental to their profession (and who does not hold out as an adviser) is excluded.

Banks and trust companies; LATE professionals (advice solely incidental); broker-dealers with no special compensation; bona fide publishers; federal covered advisers; and IARs.

An adviser registered with (or eligible to register with) the SEC — generally one with $110M+ in AUM. States cannot require it to register but can still pursue fraud.

An individual who works for an investment adviser and gives advice, manages accounts, solicits clients, or supervises those who do. IARs register where they have a place of business or enough clients.

Clerical or ministerial personnel, and persons excluded by Administrator rule.

A firm in the business of effecting securities transactions for customers (broker) or for its own account (dealer). It registers with the SEC and the states.

An individual who represents a broker-dealer (or issuer) in effecting securities transactions. Under the USA, clerical and ministerial staff are not 'agents.'

$100 million. An adviser may register with the SEC once it reaches $100M in AUM.

$110 million. Registration becomes mandatory once AUM reaches $110M (absent an exemption).

When AUM drops below $90 million. Until then it is not required to file Form ADV-W.

By the state. SEC registration is prohibited for small advisers under $25 million in AUM (absent an exception).

By the state, unless not subject to home-state examination or the home state does not require registration (e.g., NY and Wyoming advisers register with the SEC).

An IA with no place of business in a state and no more than 5 clients resident there in any 12 consecutive months is exempt from that state's registration.

Advisers to registered investment companies, pension consultants, multi-state advisers (15+ states), internet advisers, and certain others.

No. Federal anti-fraud provisions continue to apply even when an adviser is state-registered.

An investment adviser's duty of care and duty of loyalty — to act in the client's best interest at all times, seek best execution, and either avoid conflicts of interest or fully disclose them for informed consent.

The duty of care and the duty of loyalty, under the Investment Advisers Act of 1940.

Advice in the client's best interest based on the client's objectives, seeking best execution where the adviser selects the broker-dealer, and ongoing advice and monitoring.

Full and fair disclosure of all material facts including conflicts of interest, and either eliminating a conflict or disclosing it so the client can give informed consent.

No. The federal fiduciary duty cannot be waived, though it follows the scope of the agreed advisory relationship.

No. Disclosure with informed consent can satisfy the duty of loyalty, but cannot by itself satisfy the duty of care.

Holding, or having any authority to obtain possession of, client funds or securities. Custody triggers extra safeguards — qualified custodian, account statements, and often a surprise annual examination.

Notify the Administrator, use a qualified custodian, notify the client of custodian details, send quarterly account statements, and undergo an annual surprise CPA examination.

At least quarterly (every 3 months), showing the funds and securities in custody.

$35,000 under the NASAA Minimum Financial Requirements model rule.

$10,000 under the NASAA Minimum Financial Requirements model rule.

5 years from the end of the fiscal year in which last made, with the first 2 years kept in the principal office.

The NASAA model state securities law on which most state 'blue sky' laws are based. It defines advisers, broker-dealers, agents, and securities, and sets registration and antifraud rules.

The federal law governing investment advisers, including SEC registration and the antifraud/fiduciary provisions of Section 206. State law (the USA) mirrors many of its definitions.

The Advisers Act provision making it unlawful for any adviser — registered or not — to engage in fraudulent, deceptive, or manipulative conduct. It imposes an affirmative duty of full and fair disclosure.

Makes it unlawful, in connection with the offer, sale, or purchase of a security, to defraud, make an untrue statement of material fact, omit a material fact, or engage in deceit.

No. The antifraud provisions apply to all securities and transactions — including exempt securities, exempt transactions, and federal covered advisers.

An investor eligible to buy private (Reg D) offerings: net worth over $1M excluding the primary residence, or income over $200K individual / $300K joint in each of the last two years.

Individual or joint net worth exceeding $1,000,000, excluding the value of the person's primary residence.

Income over $200,000 individually (or $300,000 joint) in each of the two most recent years, with a reasonable expectation of the same in the current year.

The investment adviser registration form. Part 1 is regulatory data; Part 2A is the plain-English client brochure (fees, conflicts, discipline) and Part 2B is the supplement about the advising individuals.

The 'brochure' — a narrative, plain-English disclosure of 18 items including advisory business, fees, conflicts of interest, disciplinary history, and custody.

The 'brochure supplement' — disclosing the individuals who provide advice and have direct client contact, including their background, discipline, and supervision.

The IARD (Investment Adviser Registration Depository). Broker-dealers and agents register through CRD.

Advisers Act Rule 204-3: deliver the Form ADV Part 2 brochure at least 48 hours before the contract, or at signing if the client may cancel without penalty within five business days; deliver annually thereafter.

At least 48 hours before entering the contract, OR at the time of signing if the client may terminate without penalty within five business days.

Within 120 days of the end of the adviser's fiscal year — either the updated brochure or a summary of material changes with an offer to provide the full brochure, free of charge.

Inducing transactions in a client's account that are excessive in size or frequency given the client's resources and objectives — a prohibited practice.

Effecting transactions for a client without authority — a prohibited and unethical business practice.

Prior written discretionary authority. Oral authority is permitted only for the first 10 business days after the initial discretionary transaction, pending written authorization.

No, unless the client is a broker-dealer, an affiliate, or a financial institution in the business of lending.

No. Guaranteeing a client against loss is a prohibited and unethical business practice.

No. Charging an unreasonable advisory fee is an enumerated unethical business practice.

In writing, before advice is rendered, when the conflict could reasonably be expected to impair unbiased and objective advice.

No, not without the client's consent, unless disclosure is required by law.

At noon on the 30th day after filing, absent a stop order (the Administrator may defer for amendments).

December 31 of each year; they must be renewed annually with the required fee.

The IAR's registration is no longer effective. An IAR's registration depends on the employing adviser's registration.

A safe harbor allowing a manager with investment discretion to pay higher commissions in exchange for research and brokerage services, if reasonable in relation to their value.

Research and brokerage services only. Other goods or services (e.g., office overhead) fall outside the safe harbor.

$100 per year per recipient on gifts and gratuities related to municipal securities business, with a 'normal business dealings' exception.

A person who advises municipal entities on municipal financial products or securities; owes a fiduciary duty to municipal entity clients and must register with the SEC.

A natural person or a company (such as a corporation, partnership, association, trust, or organized group of persons).

A broad category including notes, stocks, bonds, debentures, investment contracts, options, and in general any instrument commonly known as a 'security.'

12 hours annually — 6 hours of Products and Practice plus 6 hours of Ethics and Professional Responsibility.