ABOUT THE SERIES 66 EXAM XIII
ABOUT THIS BOOK XVII
ABOUT THE TEST BANK XIX
ABOUT THE SECURITIES INSTITUTE OF AMERICA XXI
CHAPTER 1
DEFINITION OF TERMS 1
Security 1
Person 3
Broker Dealer 4
Agent 4
Issuer 5
Nonissuer 5
Investment Adviser 6
Pension Consultants 6
Form ADV 7
Investment Adviser Representative 8
Solicitor 8
Institutional Investor 8
Accredited Investor 9
Qualified Purchaser 9
Private Investment Company 9
Offer/Offer to Sell/Offer to Buy 9
Sale/Sell 10
Guarantee/Guaranteed 10
Contumacy 10
Federally Covered Exemption 10
Option Contracts 11
Call Options 11
Put Options 11
Futures and Forwards 12
Secondary Market Orders 12
Market Orders 13
Buy Limit Orders 13
Sell Limit Orders 13
Stop Orders/Stop Loss Orders 14
Buy Stop Orders 14
Sell Stop Orders 14
Pretest 15
CHAPTER 2
SECURITIES INDUSTRY RULES AND REGULATIONS 21
The Securities Act of 1933 21
The Securities Exchange Act of 1934 23
Public Utilities Holding Company Act of 1935 25
Financial Industry Regulatory Authority (FINRA) 25
The Trust Indenture Act of 1939 26
Investment Advisers Act of 1940 26
Investment Company Act of 1940 26
Retail Communications/Communications with the Public 27
FINRA Rule 2210 Communications with the Public 28
Blind Recruiting Ads 30
Generic Advertising 30
Tombstone Ads 31
Testimonials 31
Free Services 32
Misleading Communications 32
Securities Investor Protection Corporation Act of 1970 (SIPC) 32
The Securities Acts Amendments of 1975 34
The Insider Trading and Securities Fraud Enforcement Act of 1988 34
Firewall 35
The Telephone Consumer Protection Act of 1991 35
National Securities Market Improvement Act of 1996 36
The Uniform Securities Act 36
Pretest 39
CHAPTER 3
ECONOMIC FUNDAMENTALS 43
Gross Domestic Product 43
Recession 45
Depression 45
Economic Indicators 45
Economic Policy 47
Tools of the Federal Reserve Board 47
Reserve Requirement 47
Changing the Discount Rate 48
Federal Open Market Committee 48
Money Supply 49
Disintermediation 49
Moral Suasion 50
Fiscal Policy 50
International Monetary Considerations 52
Pretest 53
CHAPTER 4
CUSTOMER RECOMMENDATIONS, PROFESSIONAL CONDUCT, AND TAXATION 57
Professional Conduct by Investment Advisers 58
The Uniform Prudent Investors Act of 1994 58
Fair Dealings with Clients 59
Periodic Payment Plans 63
Disclosure of Client Information 64
Borrowing and Lending Money 64
Developing the Client Profile 64
Investment Objectives 66
Risk vs. Reward 68
Alpha 71
Beta 71
Fundamental Analysis 77
Capitalization 80
Tax Structure 81
Investment Taxation 82
Calculating Gains and Losses 82
Cost Base of Multiple Purchases 83
Deducting Capital Losses 84
Wash Sales 84
Taxation of Interest Income 84
Inherited and Gifted Securities 85
Donating Securities to Charity 85
Trusts 85
Gift Taxes 86
Estate Taxes 86
Withholding Tax 87
Corporate Dividend Exclusion 87
Alternative Minimum Tax (AMT) 87
Taxes on Foreign Securities 88
Pretest 89
CHAPTER 5
VARIABLE ANNUITIES, RETIREMENT PLANS, AND LIFE INSURANCE 93
Annuities 93
Equity-Indexed Annuities 96
Annuity Purchase Options 97
Accumulation Units 97
Annuity Units 98
Annuity Payout Options 98
Factors Affecting the Size of the Annuity Payment 99
The Assumed Interest Rate (AIR) 100
Taxation 100
Sales Charges 101
Variable Annuity vs. Mutual Fund 101
Retirement Plans 101
Individual Plans 102
Individual Retirement Accounts (IRAS) 102
529 Plans 105
Local Government Investment Pools (LGIPs) 105
IRA Contributions 106
IRA Accounts 106
IRA Investments 106
It Is Unwise to Put a Municipal Bond in an IRA 107
Rollover vs. Transfer 107
Keogh Plans (HR-10) 108
Contributions 108
Tax-Sheltered Annuities/Tax-Deferred Account 109
Contributions 110
Tax Treatment of Distributions 111
Corporate Plans 111
Non-Qualified Corporate Retirement Plans 111
Payroll Deductions 111
Deferred Compensation Plans 112
Qualified Plans 112
Types of Plans 112
Rolling Over a Pension Plan 114
Employee Retirement Income Security Act of 1974 (ERISA) 114
ERISA 404C Safe Harbor 116
Life Insurance 117
Premiums and Death Benefits 118
Assumed Interest Rate 120
Variable Policy Features 120
Sales Charges 122
Life Settlements 122
Pretest 125
CHAPTER 6
REGISTRATION OF BROKER DEALERS, INVESTMENT ADVISERS, AND AGENTS 129
Registration of Broker Dealers 129
Financial Requirements 130
Agent Registration 130
Registering Agents 132
Changes in an Agent’s Employment 133
Mergers and Acquisitions of Firms 133
Renewing Registrations 133
Canadian Firms and Agents 133
Investment Adviser State Registration 134
The National Securities Market Improvement Act of 1996 (The Coordination Act) 134
Investment Adviser Representative 135
State Investment Adviser Registration 136
Capital Requirements 136
Exams 137
Advertising and Sales Literature 137
Brochure Delivery 138
The Role of the Investment Adviser 139
Additional Compensation for an Investment Adviser 139
Agency Cross Transactions 139
Disclosures by an Investment Adviser 140
Investment Adviser Contracts 141
Additional Roles of Investment Advisers 142
Private Investment Companies/Hedge Funds 142
Fulcrum Fees 142
Wrap Accounts 143
Soft Dollars 143
Pretest 145
CHAPTER 7
SECURITIES REGISTRATION, EXEMPT SECURITIES, AND EXEMPT TRANSACTIONS 151
Exempt Securities 151
Securities Registration 152
Exempt Securities/Federally Covered Exemption 155
Exempt Transactions 156
Pretest 161
CHAPTER 8
STATE SECURITIES ADMINISTRATORS AND THE UNIFORM SECURITIES ACT 167
Actions by the State Securities Administrator 167
Actions Against an Issuer of Securities 169
Rule Changes 169
Investigations 171
Civil and Criminal Penalties 171
Jurisdiction of the State Securities Administrator 172
Administrator’s Jurisdiction over Securities Transactions 172
Right of Rescission 174
Statute of Limitations 175
Pretest 177
ANSWER KEYS 183
GLOSSARY OF EXAM TERMS 193
INDEX 259
