STC SERIES 66 CHAPTER 5 TEST
COMPLETE QUESTIONS AND ANSWERS
WITH VERIFIED SOLUTIONS LATEST
UPDATE 2025/2026
If an investment adviser has an arrangement with a third-party solicitor, what must
the adviser maintain? - CORRECT ANSWER - The solicitor's disclosure
document
Solicitors are often third parties (e.g., accountants or attorneys) that refer
customers to investment advisers (IAs). In order to solicit for an IA, a solicitor
must provide a solicitor disclosure document that was written in coordination
with the IA. Although the solicitor's disclosure document must disclose any
compensation, there's no separate solicitor fee disclosure document. Since
solicitors don't always need to be registered, there's no requirement to
provide Forms ADV or U4.
Under NASAA's Statement of Policy on Unethical Business Practices, which of
the following statements is TRUE regarding investment advisory fees charged to
customers - CORRECT ANSWER - Advisers may not charge fees that are
unreasonably high in relation to fees charged by other advisers for similar services
Although it is difficult to compare the advisory services provided to clients of
different advisers, a general standard of reasonable fees is used to compare
fees charged by various advisers. Fees that are obviously out of line with those
charged for similar services are considered unethical.
Which TWO of the following clients may enter into an advisory contract that
includes a performance-based fee?
A joint account with a net worth of $1,000,000
A partner of the investment adviser with annual income of more than $200,000
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, An IRA account with $2,000,000 under management
An individual account with $750,000 net worth - CORRECT ANSWER - II and III
Under the Investment Advisers Act of 1940, performance fees are generally
prohibited. Exceptions include contracts for clients who have at least
$1,000,000 under management with the adviser or who have a net worth in
excess of $2,000,000. Performance-based fees may also be charged to a client
who is an executive, a partner, or a knowledgeable employee of the adviser.
The amount of funds under management is not a factor for these clients. The
type of account (individual, joint, or IRA) is also not a factor.
An adviser who manages $140 million in assets is recommending the sale of
Nasdaq-listed securities to a client. Which of the following statements is TRUE? -
CORRECT ANSWER - The adviser is a federal covered adviser and exempt from
state registration, and the securities are federal covered securities and exempt from
state registration
Advisers who manage $110 million or more in assets must register with the
SEC, not the state Administrator. Those registered with the SEC are federal
covered advisers and exempt from state registration, though subject to Notice
Filing. Securities listed on an exchange or Nasdaq, are federal covered
securities and are exempt from state registration.
Which of the following may be included in an advertisement created by an
investment adviser (IA)? - CORRECT ANSWER - A no-strings-attached offer to
furnish a list of all the recommendations made by the IA in the last two years
Investment adviser advertisements may not make reference to past
recommendations unless they offer to furnish all of the recommendations
made over at least the last year. Also, specific investment advice and the use of
testimonials are generally not permitted in IA advertising.
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
2|Page
COMPLETE QUESTIONS AND ANSWERS
WITH VERIFIED SOLUTIONS LATEST
UPDATE 2025/2026
If an investment adviser has an arrangement with a third-party solicitor, what must
the adviser maintain? - CORRECT ANSWER - The solicitor's disclosure
document
Solicitors are often third parties (e.g., accountants or attorneys) that refer
customers to investment advisers (IAs). In order to solicit for an IA, a solicitor
must provide a solicitor disclosure document that was written in coordination
with the IA. Although the solicitor's disclosure document must disclose any
compensation, there's no separate solicitor fee disclosure document. Since
solicitors don't always need to be registered, there's no requirement to
provide Forms ADV or U4.
Under NASAA's Statement of Policy on Unethical Business Practices, which of
the following statements is TRUE regarding investment advisory fees charged to
customers - CORRECT ANSWER - Advisers may not charge fees that are
unreasonably high in relation to fees charged by other advisers for similar services
Although it is difficult to compare the advisory services provided to clients of
different advisers, a general standard of reasonable fees is used to compare
fees charged by various advisers. Fees that are obviously out of line with those
charged for similar services are considered unethical.
Which TWO of the following clients may enter into an advisory contract that
includes a performance-based fee?
A joint account with a net worth of $1,000,000
A partner of the investment adviser with annual income of more than $200,000
1|Page
, An IRA account with $2,000,000 under management
An individual account with $750,000 net worth - CORRECT ANSWER - II and III
Under the Investment Advisers Act of 1940, performance fees are generally
prohibited. Exceptions include contracts for clients who have at least
$1,000,000 under management with the adviser or who have a net worth in
excess of $2,000,000. Performance-based fees may also be charged to a client
who is an executive, a partner, or a knowledgeable employee of the adviser.
The amount of funds under management is not a factor for these clients. The
type of account (individual, joint, or IRA) is also not a factor.
An adviser who manages $140 million in assets is recommending the sale of
Nasdaq-listed securities to a client. Which of the following statements is TRUE? -
CORRECT ANSWER - The adviser is a federal covered adviser and exempt from
state registration, and the securities are federal covered securities and exempt from
state registration
Advisers who manage $110 million or more in assets must register with the
SEC, not the state Administrator. Those registered with the SEC are federal
covered advisers and exempt from state registration, though subject to Notice
Filing. Securities listed on an exchange or Nasdaq, are federal covered
securities and are exempt from state registration.
Which of the following may be included in an advertisement created by an
investment adviser (IA)? - CORRECT ANSWER - A no-strings-attached offer to
furnish a list of all the recommendations made by the IA in the last two years
Investment adviser advertisements may not make reference to past
recommendations unless they offer to furnish all of the recommendations
made over at least the last year. Also, specific investment advice and the use of
testimonials are generally not permitted in IA advertising.
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
2|Page
