SERIES 66 FINAL 2025/2026 QUESTIONS AND
ANSWERS WITH VERIFIED
EXPLANATIONS || ALREADY GRADED A+ |
GUARANTEED PASS | LATEST VERSION!!!
An agent of a broker-dealer recommends a specific stock to a customer and says
that the stock will most likely increase in value within the next couple of months.
The customer invests in the stock and its market price increases substantially.
Which statement is TRUE?
A. The agent may accept a bonus based on a percentage of the increase in market
value with the specific authorization of the customer
B. The agent may accept a bonus based on a percentage of the increase in market
value with the specific authorization of the agent's broker-dealer
C. Both the customer and the broker-dealer must approve of any increased
commission given the agent based on a percentage of the increase in market value
D. The only acceptable commission is that which was originally received -
CORRECT ANSWER - The best answer is D. When an agent recommends the
purchase of a stock, he or she is only allowed to accept the normal commission
for the transaction. The agent cannot accept any larger commission based on
an increase in value of the recommended stock; nor can the agent rebate any
commission if the stock decreases in value.
The index that is composed of companies in developed countries outside of the
United States is the:
A. EAFE
B. ADRs
C. S&P 500
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,D. Russell 2,000 - CORRECT ANSWER - The best answer is A. The EAFE
Index stands for Europe, Australasia, and the Far East. It consists of
companies of developed countries in these areas - so these are all companies
outside of North America. Investing in an EAFE ETF would give the customer
international exposure. The S&P 500 and Russell 2000 consist of U.S.
companies. ADRs are American Depositary Receipts - the way in which
foreign companies list their shares in the U.S. They are not Index Exchange
Traded Funds.
Which statement is TRUE about a rollover from one State's 529 plan to another
State's 529 plan?
A. State to state rollovers are prohibited
B. A rollover is permitted only once every 6 months without tax penalty
C. A rollover is permitted only once every 12 months without tax penalty
D. A rollover is permitted only once every 24 months without tax penalty -
CORRECT ANSWER - The best answer is C. 529 rollovers are permitted every
12 months without any tax penalty. This is similar to the rule for IRA
rollovers.
The Sharpe Ratio is the ratio of:
A. portfolio return to standard deviation
B. risk-adjusted return to standard deviation
C. portfolio return to duration
D. risk-adjusted return to duration - CORRECT ANSWER - The best answer is B.
The Sharpe Ratio takes "excess return" earned by a portfolio (the excess of
portfolio return over the risk-free rate of return) and divides it by standard
deviation. It measures the incremental return achieved per incremental unit
of risk assumed. The higher the ratio, the better.
2|Page
,If the SEC sends a deficiency letter to the issuer regarding an issue in registration:
A. it disapproves of registering the issue
B. disclosure is not considered to be adequate
C. the underwriters have failed to establish the Public Offering Price
D. due diligence has not been performed by the underwriters - CORRECT
ANSWER - The best answer is B. An SEC "deficiency letter" indicates that
there is not adequate disclosure in the registration documents filed under the
Securities Act of 1933 to allow investors to make an informed decision. The
deficiency must be cured before the SEC will allow the registration to be
effective.
All of the following statements are true EXCEPT:
A. Investment advisers can be required to be registered in each State
B. Investment advisers can be required to be registered with the SEC
C. Investment adviser representatives can be required to be registered in each State
D. Investment adviser representatives can be required to be registered with the
SEC - CORRECT ANSWER - The best answer is D. Advisers that manage
$100,000,000 or more of assets; or that render advice to investment
companies; or that are not regulated at the State level; must register with the
SEC only. Note that the SEC registers the investment adviser only - it does not
register investment adviser representatives. The smaller advisers are only
required to be registered at the State level. However, the State can require
registration of investment adviser representatives for any investment adviser
firm.
A business would be formed as an LLC primarily because of the:
3|Page
, A. ease of formation
B. characteristic of limited liability
C. benefit of lower tax rates
D. characteristic of limited life - CORRECT ANSWER - The best answer is B. An
"LLC" is a limited liability company. The principal benefit to the owners is
that liability is limited in such a business form.
A customer is starting a new business and will not have much potential liability
because of the type of services that he offers. The customer wants to minimize the
legal expense of starting the business. The BEST business form would be a(n):
A. LLC
B. S Corporation
C. C Corporation
D. Sole Proprietorship - CORRECT ANSWER - The best answer is D. To form a
sole proprietorship, one simply goes into business. There are no legal filings
with the State. Of course, the sole proprietor does have unlimited liability, but
this is not an issue for this customer. Setting up a C or S Corporation or a
Limited Liability Company requires legal filings in the State (so there are
both legal and State filing fees). These 3 business forms offer limited liability,
but the customer is not seeking this protection.
A broker-dealer buys a large block of bonds into its inventory account at a
discounted price. After holding the bonds for a period of time, prices for the bonds
have risen. The broker-dealer then sells the bonds at the appreciated price to all of
its customers that hold discretionary accounts. Which statement is TRUE?
A. This action on the part of the broker-dealer is unethical because the broker-
dealer made a large profit on the transaction
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ANSWERS WITH VERIFIED
EXPLANATIONS || ALREADY GRADED A+ |
GUARANTEED PASS | LATEST VERSION!!!
An agent of a broker-dealer recommends a specific stock to a customer and says
that the stock will most likely increase in value within the next couple of months.
The customer invests in the stock and its market price increases substantially.
Which statement is TRUE?
A. The agent may accept a bonus based on a percentage of the increase in market
value with the specific authorization of the customer
B. The agent may accept a bonus based on a percentage of the increase in market
value with the specific authorization of the agent's broker-dealer
C. Both the customer and the broker-dealer must approve of any increased
commission given the agent based on a percentage of the increase in market value
D. The only acceptable commission is that which was originally received -
CORRECT ANSWER - The best answer is D. When an agent recommends the
purchase of a stock, he or she is only allowed to accept the normal commission
for the transaction. The agent cannot accept any larger commission based on
an increase in value of the recommended stock; nor can the agent rebate any
commission if the stock decreases in value.
The index that is composed of companies in developed countries outside of the
United States is the:
A. EAFE
B. ADRs
C. S&P 500
1|Page
,D. Russell 2,000 - CORRECT ANSWER - The best answer is A. The EAFE
Index stands for Europe, Australasia, and the Far East. It consists of
companies of developed countries in these areas - so these are all companies
outside of North America. Investing in an EAFE ETF would give the customer
international exposure. The S&P 500 and Russell 2000 consist of U.S.
companies. ADRs are American Depositary Receipts - the way in which
foreign companies list their shares in the U.S. They are not Index Exchange
Traded Funds.
Which statement is TRUE about a rollover from one State's 529 plan to another
State's 529 plan?
A. State to state rollovers are prohibited
B. A rollover is permitted only once every 6 months without tax penalty
C. A rollover is permitted only once every 12 months without tax penalty
D. A rollover is permitted only once every 24 months without tax penalty -
CORRECT ANSWER - The best answer is C. 529 rollovers are permitted every
12 months without any tax penalty. This is similar to the rule for IRA
rollovers.
The Sharpe Ratio is the ratio of:
A. portfolio return to standard deviation
B. risk-adjusted return to standard deviation
C. portfolio return to duration
D. risk-adjusted return to duration - CORRECT ANSWER - The best answer is B.
The Sharpe Ratio takes "excess return" earned by a portfolio (the excess of
portfolio return over the risk-free rate of return) and divides it by standard
deviation. It measures the incremental return achieved per incremental unit
of risk assumed. The higher the ratio, the better.
2|Page
,If the SEC sends a deficiency letter to the issuer regarding an issue in registration:
A. it disapproves of registering the issue
B. disclosure is not considered to be adequate
C. the underwriters have failed to establish the Public Offering Price
D. due diligence has not been performed by the underwriters - CORRECT
ANSWER - The best answer is B. An SEC "deficiency letter" indicates that
there is not adequate disclosure in the registration documents filed under the
Securities Act of 1933 to allow investors to make an informed decision. The
deficiency must be cured before the SEC will allow the registration to be
effective.
All of the following statements are true EXCEPT:
A. Investment advisers can be required to be registered in each State
B. Investment advisers can be required to be registered with the SEC
C. Investment adviser representatives can be required to be registered in each State
D. Investment adviser representatives can be required to be registered with the
SEC - CORRECT ANSWER - The best answer is D. Advisers that manage
$100,000,000 or more of assets; or that render advice to investment
companies; or that are not regulated at the State level; must register with the
SEC only. Note that the SEC registers the investment adviser only - it does not
register investment adviser representatives. The smaller advisers are only
required to be registered at the State level. However, the State can require
registration of investment adviser representatives for any investment adviser
firm.
A business would be formed as an LLC primarily because of the:
3|Page
, A. ease of formation
B. characteristic of limited liability
C. benefit of lower tax rates
D. characteristic of limited life - CORRECT ANSWER - The best answer is B. An
"LLC" is a limited liability company. The principal benefit to the owners is
that liability is limited in such a business form.
A customer is starting a new business and will not have much potential liability
because of the type of services that he offers. The customer wants to minimize the
legal expense of starting the business. The BEST business form would be a(n):
A. LLC
B. S Corporation
C. C Corporation
D. Sole Proprietorship - CORRECT ANSWER - The best answer is D. To form a
sole proprietorship, one simply goes into business. There are no legal filings
with the State. Of course, the sole proprietor does have unlimited liability, but
this is not an issue for this customer. Setting up a C or S Corporation or a
Limited Liability Company requires legal filings in the State (so there are
both legal and State filing fees). These 3 business forms offer limited liability,
but the customer is not seeking this protection.
A broker-dealer buys a large block of bonds into its inventory account at a
discounted price. After holding the bonds for a period of time, prices for the bonds
have risen. The broker-dealer then sells the bonds at the appreciated price to all of
its customers that hold discretionary accounts. Which statement is TRUE?
A. This action on the part of the broker-dealer is unethical because the broker-
dealer made a large profit on the transaction
4|Page
