RN Domain 4: Reduction of Risk Potential (Quiz 3) Welcome to your Series 66 Practice Quizzes. Note: We designed four (4) parts of practice quizzes for each Domain. Each part has 25 questions. Domain 4 (part 1): Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices​​​​​​​. (25 questions) Please click NEXT to start your Free Series 66 Practice Quizzes right away. Best of Luck! 1. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 An agent omits facts that a prudent investor requires to make informed decisions. Under the Uniform Securities Act, this action is A. A) fraudulent for exempt securities only B. B) fraudulent for nonexempt securities only C. C) not fraudulent if there was willful intent to omit the information D. D) fraudulent for both exempt and nonexempt securities None 2. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 The federal law dealing with privacy matters for financial institutions is A. A) Regulation FD B. B) HIPAA C. C) the ACA D. D) Regulation S-P None 3. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 Review of an SEC-registered investment adviser's policies and procedures designed to prevent violation of the federal securities laws must take place no less frequently than A. A) quarterly. B. B) monthly C. C) semiannually D. D) annually None 4. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 Under rule 206(4)-7 of the Investment Advisers Act of 1940, each investment adviser registered with the SEC is required to adopt and implement written policies and procedures designed to prevent violation of the federal securities laws. Ensuring that this is done is the role of ​ A. A) the chief executive officer (CEO) B. B) the chief compliance officer (CCO) C. C) the chief operating officer (COO) D. D) the chief financial officer (CFO) None 5. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 Jessica is an investment adviser representative for an SEC-registered investment adviser. She lives in State X and receives a letter from a former college friend requesting a contribution to the friend's political campaign for governor of State Y. As it happens, Jessica's firm provides advisory services to State Y's employee retirement fund and Jessica actively solicits business from other state agencies. Which of the following actions would be permitted to Jessica under the SEC's pay-to-play rule without causing any concerns to her firm? A. A) Donating a maximum of $350 to the campaign B. B) Donating a maximum of $250 to the campaign C. C) Sending a letter to the friend indicating that the rules would not permit her to contribute to the campaign D. D) Donating a maximum of $150 to the campaign None 6. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 During your training, you overhear your manager discussing the Chinese wall. This is probably referring to A. A) takeout for lunch B. B) internal provisions enacted to prevent material, nonpublic information from leaking from one department of the firm to another C. C) the increasingly high percentage of U.S. government bonds held by the Chinese D. D) a leading tourist attraction in China None 7. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 Which of the following statements regarding investment adviser compliance rules is TRUE? A. A) If the chief compliance officer (CCO) conducts appropriate annual compliance reviews, interim review is generally not necessary. B. B) Compliance procedures should be designed to prevent violations, as well as detect existing violations. C. C) The CCO must have at least 3 years’ experience in securities industry compliance. D. D) Compliance procedures should review the accuracy of disclosures made to clients and investors, although it is not necessary that they review disclosures made to regulators. None 8. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 The Investment Advisers Act of 1940 requires advisers to prepare and adhere to a code of ethics. Which of the following is charged with the responsibility of enforcing that code? A. A) Administrator of the state in which the IA has its principal office B. B) Chief compliance officer of the IA C. C) Each individual IAR D. D) The SEC None 9. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 All of the following statements regarding the role of the chief compliance officer of an investment adviser are correct EXCEPT A. A) the chief compliance officer should have a minimum of 5 years’ experience in securities compliance in matters involving public customers or accounts B. B) the chief compliance officer should be competent and knowledgeable regarding the applicable federal securities laws C. C) the identity of an investment adviser's chief compliance officer must be disclosed on the Form ADV D. D) the chief compliance officer should be empowered with full responsibility and authority to develop and enforce appropriate policies and procedures for the adviser None 10. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 For purposes of safeguarding customer information, which of the following would be considered a covered account? A. A) A margin account in the name of the Interglobal Hedge Fund B. B) An account in the name of the State of X employee pension fund C. C) An account in the name of the Wells Morgan Bank D. D) A margin account in the name of Mary Beth Simmons None 11. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 Richard Alan is a longtime customer of yours and usually calls in orders identifying himself as Dick. Today, you receive a call requesting that half of the available funds in his account be wired to an offshore bank. When you say that his voice sounds different, he replies that he has a sore throat and that is why he doesn't sound like himself. Then you recall, when you answered the phone, he said that this is Mr. Richard Alan calling. At first you thought he was having fun, but now you might suspect A. A) he is having financial difficulties he wishes to hide from you B. B) identity theft C. C) this is a different Richard Alan who is a client of the firm D. D) his illness is more serious than a sore throat None 12. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66,Series 65 The powers of the Administrator include the ability to determine A. A) minimum net worth requirements for investment advisers B. B) maximum net capital requirements for broker-dealers C. C) minimum net worth requirements for agents who exercise discretion D. D) surety bond requirements for investment advisers who do not exercise discretion or maintain custody None 13. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 The compliance rules of the Investment Advisers Act of 1940 require all of the following EXCEPT A. A) independent review of an advisory firm's compliance procedures B. B) written compliance policies and procedures C. C) appointment of a chief compliance officer (CCO) D. D) annual compliance review None 14. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 It is not uncommon to find financial planners who use their home as the base of their operations. When a financial planner who works from home is also registered as an agent of a broker-dealer, she must A. A) not remain open during hours when the broker-dealer is closed B. B) not use personal computers to store client information C. C) have cybersecurity policies and procedures in place to protect customer data D. D) ensure that her office is separate from her living quarters None 15. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 Under the Securities Exchange Act of 1934, which of the following statements regarding reports required to be filed with the SEC is TRUE? A. A) Institutional investment managers who exercise discretion over accounts valued at $100 million or more need not file reports if all their clients are insurance companies. B. B) Institutional investment managers who exercise discretion over accounts valued at $100 million or more of 13(f) securities must file reports quarterly. C. C) Persons who become the beneficial owner of more than 2% of a security registered under the Securities Exchange Act of 1934 must file a report within 5 days. D. D) Persons who become the beneficial owner of more than 5% of a security registered under the Securities Exchange Act of 1934 must file a report within 2 days. None 16. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 If having discretion over $100 million or more in 13(f) securities, which of the following would be exempt from filing a Form 13F? A. A) A trustee B. B) An investment adviser that manages mutual fund assets C. C) A natural person who exercises investment discretion over the account of any other natural person or entity D. D) A natural person who exercises investment discretion over her own account None 17. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 In an effort to make things easier for her clients, an agent redacts certain material information from sales literature relating to a sophisticated investment product her firm is offering. The agent A. A) is offering better service to her clients by making the decision-making process easier B. B) is properly including information necessary for an investor to make an informed investment decision C. C) has violated the Uniform Securities Act by adding information to sales literature D. D) is acting in a fraudulent manner by failing to include material information None 18. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 Protection of the investing public is one of the major objectives of the SEC. Much of the protection comes from the disclosure requirements enveloping the industry. Among the disclosure forms used is Form 13F. To come under the SEC's requirement to file a Form 13F, an institutional manager must have discretion over A. A) more than 10% of the outstanding voting securities of a reporting company B. B) a portfolio of at least $100 million C. C) a portfolio of at least $50 million D. D) a portfolio of at least $100 million of 13(f) securities None 19. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 Your advisory customer calls to check on her account value at 9:00 am, but you were unavailable at the time. It is now 2:00 pm and you are able to call her back. If between 9:00 am and 2:00 pm her account value dropped from $711,500 to $710,000, what should you tell her? A. A) Your account value cannot be determined until the market closes. B. B) Your account has a value of $711,500. C. C) Your account is valued at $710,000 at this time. D. D) Your account was down to $699,700 earlier today but is up to $711,500. None 20. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 Registration with the SEC as an investment adviser would be required for a person who A. A) limits the advice offered strictly to securities issued or guaranteed by the U.S. government B. B) acts as the investment adviser to an investment company registered under the Investment Advisers Act of 1940 C. C) acts as the investment adviser to an investment company registered under the Investment Company Act of 1940 D. D) limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) None 21. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 The practice of stealing an individual's personal information for criminal activity is generally referred to as A. A) an unethical business practice B. B) felonious assault C. C) identity theft D. D) credit monitoring None 22. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 If an agent misrepresents the price of a customer's stock by $10 per share to encourage the client to sell, this activity is A. A) a misrepresentation and a fraudulent act B. B) allowed if the customer ultimately makes a profit in the account C. C) allowed if the agent views the difference as a service charge D. D) a misrepresentation but not a fraudulent act None 23. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 NASAA's Statement of Policy on Unethical or Dishonest Business Practices of Broker-Dealers and Agents prohibits excessive activity in the account of a client for the purpose of generating commissions. This activity, frequently called churning, would likely be excused A. A) when the account has outperformed the S&P 500 Index B. B) if the investor is considered an accredited investor under SEC Rule 501 C. C) when the agent has been granted discretionary authority D. D) under no circumstances None 24. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 Which of the following would be considered when determining whether excessive trading has occurred in a client's account? A. A) The number of years the account has been opened B. B) The size of the companies issuing the securities C. C) The nature of the client's financial objectives D. D) The performance of the account in comparison to other client's accounts None 25. Series 66, Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices,Series 66 The SEC has enumerated specific items that must be included in Investment Adviser written compliance manuals EXCEPT A. A) the advisory firm must review policies and procedures at least on an annual basis B. B) the advisory firm should indicate the educational requirements necessary for employment C. C) the advisory firm should implement procedures for allocating investment opportunities such as best executions among clients D. D) the advisory firm must monitor the consistency of portfolios with guidelines established by clients, disclosures, and regulatory requirements None 1 out of 25 Time is Up! Time's up
