SERIES 65 UNIFORM INVESTMENT ADVISER LAW EXAM | PRACTICE QUESTIONS WITH VERIFIED ANSWERS AND
RATIONALES
Series 65 – Uniform Investment Adviser Law Exam Practice Questions
1. Under the Investment Advisers Act of 1940, who generally must register with the SEC rather than the states?
1. Advisers with less than $25 million AUM
2. Advisers managing $100 million or more in assets under management (federal covered advisers)
3. Advisers with fewer than 5 clients
4. All advisers regardless of size
Answer: 2. Advisers managing $100 million or more in assets under management (federal covered
advisers)
Rationale: Advisers managing $100 million or more in assets under management are generally required to
register with the SEC as 'federal covered advisers,' while smaller advisers register at the state level.
2. What is the legal standard of care an investment adviser owes to clients?
1. Suitability standard only
2. Fiduciary duty — acting in the client's best interest
3. Best execution only for trades
4. No formal duty is required
Answer: 2. Fiduciary duty — acting in the client's best interest
Rationale: Investment advisers are held to a fiduciary standard, requiring them to act in the client's best
interest, disclose conflicts of interest, and place client interests above their own.
3. Which of the following would NOT be considered an 'investment adviser' under the Uniform Securities Act?
1. A person who, for compensation, provides advice about securities as their business
2. A broker-dealer whose investment advice is solely incidental to their brokerage business and who receives no
special compensation for it
3. A financial planner charging fees for portfolio recommendations
4. A person publishing individualized investment newsletters for a fee
Answer: 2. A broker-dealer whose investment advice is solely incidental to their brokerage business and
who receives no special compensation for it
Rationale: Broker-dealers are excluded from the definition of investment adviser when their advice is
incidental to brokerage services and they receive no special compensation specifically for the advice.
4. What must an investment adviser representative do before conducting business in a new state?
1. Nothing, as long as they are registered federally
2. Register or notice file in that state, subject to de minimis exemptions
3. Wait one year before registering
4. Obtain a separate SEC license for each state
Answer: 2. Register or notice file in that state, subject to de minimis exemptions
Rationale: Investment adviser representatives generally must register in each state where they do business,
subject to certain de minimis exemptions for advisers with very few clients in a state.
5. A 'churning' violation occurs when an adviser or broker does what?
1. Recommends suitable long-term investments
2. Engages in excessive trading in a client account primarily to generate commissions or fees
3. Diversifies a client's portfolio appropriately
4. Rebalances a portfolio annually per the client's agreement
Answer: 2. Engages in excessive trading in a client account primarily to generate commissions or fees
Rationale: Churning is excessive trading in a client's account, disproportionate to the client's investment
objectives, done primarily to generate compensation for the adviser or broker.
RATIONALES
Series 65 – Uniform Investment Adviser Law Exam Practice Questions
1. Under the Investment Advisers Act of 1940, who generally must register with the SEC rather than the states?
1. Advisers with less than $25 million AUM
2. Advisers managing $100 million or more in assets under management (federal covered advisers)
3. Advisers with fewer than 5 clients
4. All advisers regardless of size
Answer: 2. Advisers managing $100 million or more in assets under management (federal covered
advisers)
Rationale: Advisers managing $100 million or more in assets under management are generally required to
register with the SEC as 'federal covered advisers,' while smaller advisers register at the state level.
2. What is the legal standard of care an investment adviser owes to clients?
1. Suitability standard only
2. Fiduciary duty — acting in the client's best interest
3. Best execution only for trades
4. No formal duty is required
Answer: 2. Fiduciary duty — acting in the client's best interest
Rationale: Investment advisers are held to a fiduciary standard, requiring them to act in the client's best
interest, disclose conflicts of interest, and place client interests above their own.
3. Which of the following would NOT be considered an 'investment adviser' under the Uniform Securities Act?
1. A person who, for compensation, provides advice about securities as their business
2. A broker-dealer whose investment advice is solely incidental to their brokerage business and who receives no
special compensation for it
3. A financial planner charging fees for portfolio recommendations
4. A person publishing individualized investment newsletters for a fee
Answer: 2. A broker-dealer whose investment advice is solely incidental to their brokerage business and
who receives no special compensation for it
Rationale: Broker-dealers are excluded from the definition of investment adviser when their advice is
incidental to brokerage services and they receive no special compensation specifically for the advice.
4. What must an investment adviser representative do before conducting business in a new state?
1. Nothing, as long as they are registered federally
2. Register or notice file in that state, subject to de minimis exemptions
3. Wait one year before registering
4. Obtain a separate SEC license for each state
Answer: 2. Register or notice file in that state, subject to de minimis exemptions
Rationale: Investment adviser representatives generally must register in each state where they do business,
subject to certain de minimis exemptions for advisers with very few clients in a state.
5. A 'churning' violation occurs when an adviser or broker does what?
1. Recommends suitable long-term investments
2. Engages in excessive trading in a client account primarily to generate commissions or fees
3. Diversifies a client's portfolio appropriately
4. Rebalances a portfolio annually per the client's agreement
Answer: 2. Engages in excessive trading in a client account primarily to generate commissions or fees
Rationale: Churning is excessive trading in a client's account, disproportionate to the client's investment
objectives, done primarily to generate compensation for the adviser or broker.
