STUDY FOR THE SERIES 66 EXAM

Under the  SEC's Marketing Rule , 17 CFR 275.206(4)-1, an investment adviser may not make any statements or promises that in general are false or misleading, or which cannot be substantiated by the adviser. Here are some general prohibitions which the Marketing Rule prohibits:   statements that are false and misleading or untrue   statements that the adviser cannot substantiate as to the statements'   truthfulness  statements that may cause wrong implications or inferences in a material fashion  statements that fail to include material risks or drawbacks  misleading assertions or give investment advice that is unfair or unbalanced  charts or tables showing investment results that are misleading or unfair The SEC has recently cited two investment advisory firms that have made unfair and misleading claims about using A.I. in the firms' selection of investments and advisory services.   Here is what the SEC said: "According to the SEC’s order against Delphia, from 2019 to

Taking the Series 66 Exam? If yes, make sure that you are able to work problems regarding the Time Value of money, such as the net present value (NPV) and future value (FV). How do I know this? I know this because NASAA publishes Test Specifications for the Series 66 Exam , and Section I (A) (1) (1.1 - 1.3) specifically discusses concepts regarding  Time Value of Money . Bob Eder discusses discusses these concepts in his Study for the Series 66 Exam . Here is a sample problem involving NPV: James is considering purchasing a business office building. He thinks that he could sell the building for  $1 million at the end of five years. Assume interest rates will hold steady at six percent for this period and interest is paid on a yearly basis. What is the net present value (NPV) of the $1,000,000 sales proceeds? To solve for NPV of $1 million, here is the formula: NPV = Future Amount/(1.06)^5 NPV 1,000,000/1.338 NPV= $747,258 Here is the link to NASAA's Test Specifications   for the S

We all know that insider trading is against the law, but it's worthwhile reviewing an actual case of insider trading to see how the SEC treats it, and also how it likely involves criminal charges brought by the Department of Justice (DOJ). Oh, and by the way, the Series 66 Exam includes questions on Insider Trading. How do I know this? I know it because NASAA's  Test Specifications for the Series 66  include Section IV (H) (4) (4.4) on Insider Trading. Here is a recent SEC Press Release dated February 22, 2024, on an Insider Trading case : " Spouse purchased stock using non-public information about planned merger " FOR IMMEDIATE RELEASE 2024-24 "Washington D.C., Feb. 22, 2024 — The Securities and Exchange Commission today charged Tyler Loudon of Houston, Texas, with insider trading ahead of a February 2023 announcement that London-based oil and gas company BP p.l.c. agreed to acquire TravelCenters of America Inc., a full-service truck stop and travel center compa

From time to time, we use this blog to talk about the Record-Keeping Rule that requires both investment advisers and broker/dealers to create and maintain written records of all communications received from and directed to retail customers and clients. Record-Keeping is certainly reflected in NASAA's Test Specifications for the Series 66 Exam. See Section IV (G), especially Subsection 5 (5.1 through 5.3) which covers communications with customers through social media, e-mail, digital messaging, and all other website and internet platforms. (These communications are known as "off channel.") That this is an important topic on the Series 66 Exam is underscored by an SEC Press Release dated February 9, 2024 announcing that the SEC has discovered serious violations of the Record-Keeping Rule by 16 firms, and the names of the firms which the SEC has fined more than $81 million in total. Here's what the SEC stated about these 16 firms: "The SEC’s investigations uncovere

NASAA, the North American Securities Administrators Association, publishes Test Specifications for the Series 66 Exam, and in Section IV (H) (6) (6.2) includes Succession Planning. By Succession Planning we mean planning for the changing of the guard when senior or key executives of an advisory firm resign, retire or pass away.  What will happen to the advisory firm in the event of such happenings? Will the firm simply wither up and disappear? That would  be disastrous for the clients of such firm. They would be abandoned by their advisers, and forced to fend for themselves for management of their savings or the investment of their retirement nest egg. To prevent such damage to clients, each investment adviser or advisory firm should create in writing a detailed succession plan. Here's is  what Bob Eder, author of  Study for the Series 66 Exam , says about Succession Planning: Succession Planning                                                                          IV (H) (6) (6

NASAA publishes a Test Specifications for the Series 66 exam, and Section III (C) (1) (1.1) of these Series 66 Test Specifications includes Capital Asset Pricing Model (CAPM). Therefore, since CAPM is included, candidates for the Series 66 Exam need to know and study CAPM. A good self-test of whether you know what CAPM is about is to write a paragraph and see if you can explain it. Bob Eder in his  Study for the Series 66 Exam  discusses CAPM in Chapter 8 on Portfolio Management. Here is a sample of Bob Eder's treatment of CAPM: "The theory of Capital Asset Pricing Model attempts to establish the likely return of a portfolio, using the portfolio's beta, the expected return of the whole market, and the risk-free return of a T-bill. To arrive at a likely return, the CAPM subtracts the risk-free return, e.g., an average of the return on Treasury bills, say, for the last five years, from the expected return of the whole market. Then CAPM multiplies this net return by the beta