STC SERIES 66 FINAL #1 AND 2
COMPLETE QUESTIONS AND ANSWERS
WITH VERIFIED SOLUTIONS LATEST
UPDATE 2025/2026
A client purchases an equity-indexed annuity contract that guarantees a 4% return
or 80% of the performance of the S&P 500, whichever is greater. The index
declines over the course of the next year. What return will your client receive? -
CORRECT ANSWER - 4%
An equity-indexed annuity guarantees the contract owner a minimum interest rate
or the performance of a stock index such as the S&P 500 Index. If the return on
this index is less than the guaranteed rate, the owner receives the guaranteed rate.
If the index return is greater than the guarantee, the owner receives the greater
return. (62437)
The investment policy statement of a qualified retirement plan states that no more
than 50% of the plan's assets may be invested in stocks. The investment manager
places 65% of the plan's assets in stocks in order to take advantage of a bull market
and increase the value of the plan's assets. Has the investment manager violated the
fiduciary responsibility provisions of ERISA? - CORRECT ANSWER - Yes, since
the investment manager did not follow the stipulations of the investment policy
statement
This is an actual court case. The plan's trustees sued the investment manager who
was held liable even though the plan's assets increased. (62146)
All of the following choices are required to be included in a trade blotter,
EXCEPT: - CORRECT ANSWER - The amount of interest or dividends the
investor will receive
Broker-dealers and investment advisers are required to keep certain books and
records. One of them is a blotter, which is a daily record of all purchases and sales
1|Page
,of securities. The trade blotters contain information concerning the transaction
such as the account in which the trade was executed, the trade date, the unit value
and total value of the transaction, the name and amount of securities, and whom
the securities were bought from or sold to. Blotters are also required when a firm
receives or delivers securities as well as receives or disburses cash.
Under the Uniform Securities Act, the statute of limitations for criminal violations
of the Act is: - CORRECT ANSWER - Five years
The statute of limitations for criminal violations under the Act is five years.
(62943)
A small, single-office investment advisory firm has $4 million in assets under
management. The firm is located in Texas. According to the Uniform Securities
Act, which of the following persons associated with the firm will NOT fall under
the definition of an investment adviser representative? - CORRECT ANSWER -
An in-house accountant who tabulates investment results for client accounts
IA representatives are persons who are associated with an IA and make
recommendations, manage accounts, solicit or negotiate the sale of IA services, or
supervise any persons who engage in these activities. Persons who perform clerical
functions (e.g., accountants) are not considered IA representatives. There is no
requirement for a person to be an employee or to be solely dedicated to sales to
meet the definition of IA representative.
Under the Securities Exchange Act, a customer confirmation is NOT required to
disclose: - CORRECT ANSWER - The time of the trade execution
The Securities Exchange Act requires broker-dealers to make specific disclosures
on customer confirmations. Some of the required information includes the capacity
in which the broker-dealer is acting (i.e., agency or principal), the amount of
commission received by the broker-dealer for executing an agency trade, and the
settlement date of the trade. The time of the trade execution is not required to be
disclosed on a customer confirmation; however, it may be provided if the customer
makes a specific request.
2|Page
,Under the Uniform Securities Act, an Administrator may deny registration to an
agent because of findings that indicate the agent had been convicted of a felony
within the past: - CORRECT ANSWER - 10 years
The Administrator may deny an agent's registration if she finds the individual has
been convicted of a felony within the past 10 years. (62109)
NASAA's Model Rule on Unethical Business Practices of Investment Advisers,
Investment Adviser Representatives, and Federal Covered Advisers states that any
fee arrangement based on capital gains or portfolio appreciation may only be used
if which of the following disclosures is made in writing? - CORRECT ANSWER -
That the arrangement may cause the adviser to recommend strategies that
encourage a client to take greater-than-normal risks
As opposed to other fee arrangements, performance-based fees are more likely to
encourage an adviser to take greater risks with a client's money in order to generate
more fees. While performance-based fees are generally prohibited under the
Uniform Securities Act, some state Administrators make exceptions. (67684)
Susan is a high-ranking official in the Comptroller's Office of Zanzibar Securities.
Her title is Executive Vice President. Under the Uniform Securities Act, Susan is: -
CORRECT ANSWER - Not considered an agent since she is not involved in sales
or trading
Only personnel engaged in securities transactions are agents. Officers can be
considered agents, but it depends on their particular job function. (79474)
Which of the following securities is NOT considered exempt under the Uniform
Securities Act? - CORRECT ANSWER - Securities issued by an automobile
company
Under the Uniform Securities Act, any security issued by Canada or a Canadian
Province, or savings and loan association, or any railroad company is considered
an exempt security. There is an exemption under the Act for common carriers but
an automobile company does not qualify for this exemption. (
3|Page
, Value investors would be interested in companies that have - CORRECT
ANSWER - Low price earnings ratios
Value investing is a method of identifying securities that are undervalued based on
company fundamentals. Value stocks tend to have low stock prices in relationship
to their earnings, a higher dividend yield than their industry peers, and, typically,
trade at a price closer to or at a discount to the book value than their competitors.
Value investors believe that the most undervalued companies should rebound and
outperform the market. This, of course, assumes that the company is financially
sound. (63012)
As an investment adviser, you are required to record and keep a record of every
transaction in a security for a client's account within: - CORRECT ANSWER - 10
days of the end of each quarter, excluding direct obligations of the U.S.
government
Under both the Investment Advisers Act and the Uniform Securities Act,
investment advisers are required to keep a record of every securities transaction
within 10 days of the end of the quarter in which the transaction took place.
Transactions in direct obligations of the U.S. government are excluded from this
requirement.
What is the benefit of discounting the cash flows of a fixed-income security? -
CORRECT ANSWER - It compares the price of a bond against the sum of the
present values of the bond's future payouts
A discounted cash flow evaluates each coupon payment and the repayment of a
bond's principal at a present value, based on a rate of return. This makes it possible
to evaluate a bond's value against the investor's desired rate of return. The sum of
each of the discounted cash flows, plus the present value of the bond's principal,
determines the total value of the bond. By comparing this value to the current price
of the bond, the adviser will be able to determine if the bond is an attractive
investment for a client.
4|Page
COMPLETE QUESTIONS AND ANSWERS
WITH VERIFIED SOLUTIONS LATEST
UPDATE 2025/2026
A client purchases an equity-indexed annuity contract that guarantees a 4% return
or 80% of the performance of the S&P 500, whichever is greater. The index
declines over the course of the next year. What return will your client receive? -
CORRECT ANSWER - 4%
An equity-indexed annuity guarantees the contract owner a minimum interest rate
or the performance of a stock index such as the S&P 500 Index. If the return on
this index is less than the guaranteed rate, the owner receives the guaranteed rate.
If the index return is greater than the guarantee, the owner receives the greater
return. (62437)
The investment policy statement of a qualified retirement plan states that no more
than 50% of the plan's assets may be invested in stocks. The investment manager
places 65% of the plan's assets in stocks in order to take advantage of a bull market
and increase the value of the plan's assets. Has the investment manager violated the
fiduciary responsibility provisions of ERISA? - CORRECT ANSWER - Yes, since
the investment manager did not follow the stipulations of the investment policy
statement
This is an actual court case. The plan's trustees sued the investment manager who
was held liable even though the plan's assets increased. (62146)
All of the following choices are required to be included in a trade blotter,
EXCEPT: - CORRECT ANSWER - The amount of interest or dividends the
investor will receive
Broker-dealers and investment advisers are required to keep certain books and
records. One of them is a blotter, which is a daily record of all purchases and sales
1|Page
,of securities. The trade blotters contain information concerning the transaction
such as the account in which the trade was executed, the trade date, the unit value
and total value of the transaction, the name and amount of securities, and whom
the securities were bought from or sold to. Blotters are also required when a firm
receives or delivers securities as well as receives or disburses cash.
Under the Uniform Securities Act, the statute of limitations for criminal violations
of the Act is: - CORRECT ANSWER - Five years
The statute of limitations for criminal violations under the Act is five years.
(62943)
A small, single-office investment advisory firm has $4 million in assets under
management. The firm is located in Texas. According to the Uniform Securities
Act, which of the following persons associated with the firm will NOT fall under
the definition of an investment adviser representative? - CORRECT ANSWER -
An in-house accountant who tabulates investment results for client accounts
IA representatives are persons who are associated with an IA and make
recommendations, manage accounts, solicit or negotiate the sale of IA services, or
supervise any persons who engage in these activities. Persons who perform clerical
functions (e.g., accountants) are not considered IA representatives. There is no
requirement for a person to be an employee or to be solely dedicated to sales to
meet the definition of IA representative.
Under the Securities Exchange Act, a customer confirmation is NOT required to
disclose: - CORRECT ANSWER - The time of the trade execution
The Securities Exchange Act requires broker-dealers to make specific disclosures
on customer confirmations. Some of the required information includes the capacity
in which the broker-dealer is acting (i.e., agency or principal), the amount of
commission received by the broker-dealer for executing an agency trade, and the
settlement date of the trade. The time of the trade execution is not required to be
disclosed on a customer confirmation; however, it may be provided if the customer
makes a specific request.
2|Page
,Under the Uniform Securities Act, an Administrator may deny registration to an
agent because of findings that indicate the agent had been convicted of a felony
within the past: - CORRECT ANSWER - 10 years
The Administrator may deny an agent's registration if she finds the individual has
been convicted of a felony within the past 10 years. (62109)
NASAA's Model Rule on Unethical Business Practices of Investment Advisers,
Investment Adviser Representatives, and Federal Covered Advisers states that any
fee arrangement based on capital gains or portfolio appreciation may only be used
if which of the following disclosures is made in writing? - CORRECT ANSWER -
That the arrangement may cause the adviser to recommend strategies that
encourage a client to take greater-than-normal risks
As opposed to other fee arrangements, performance-based fees are more likely to
encourage an adviser to take greater risks with a client's money in order to generate
more fees. While performance-based fees are generally prohibited under the
Uniform Securities Act, some state Administrators make exceptions. (67684)
Susan is a high-ranking official in the Comptroller's Office of Zanzibar Securities.
Her title is Executive Vice President. Under the Uniform Securities Act, Susan is: -
CORRECT ANSWER - Not considered an agent since she is not involved in sales
or trading
Only personnel engaged in securities transactions are agents. Officers can be
considered agents, but it depends on their particular job function. (79474)
Which of the following securities is NOT considered exempt under the Uniform
Securities Act? - CORRECT ANSWER - Securities issued by an automobile
company
Under the Uniform Securities Act, any security issued by Canada or a Canadian
Province, or savings and loan association, or any railroad company is considered
an exempt security. There is an exemption under the Act for common carriers but
an automobile company does not qualify for this exemption. (
3|Page
, Value investors would be interested in companies that have - CORRECT
ANSWER - Low price earnings ratios
Value investing is a method of identifying securities that are undervalued based on
company fundamentals. Value stocks tend to have low stock prices in relationship
to their earnings, a higher dividend yield than their industry peers, and, typically,
trade at a price closer to or at a discount to the book value than their competitors.
Value investors believe that the most undervalued companies should rebound and
outperform the market. This, of course, assumes that the company is financially
sound. (63012)
As an investment adviser, you are required to record and keep a record of every
transaction in a security for a client's account within: - CORRECT ANSWER - 10
days of the end of each quarter, excluding direct obligations of the U.S.
government
Under both the Investment Advisers Act and the Uniform Securities Act,
investment advisers are required to keep a record of every securities transaction
within 10 days of the end of the quarter in which the transaction took place.
Transactions in direct obligations of the U.S. government are excluded from this
requirement.
What is the benefit of discounting the cash flows of a fixed-income security? -
CORRECT ANSWER - It compares the price of a bond against the sum of the
present values of the bond's future payouts
A discounted cash flow evaluates each coupon payment and the repayment of a
bond's principal at a present value, based on a rate of return. This makes it possible
to evaluate a bond's value against the investor's desired rate of return. The sum of
each of the discounted cash flows, plus the present value of the bond's principal,
determines the total value of the bond. By comparing this value to the current price
of the bond, the adviser will be able to determine if the bond is an attractive
investment for a client.
4|Page
