TAKING THE SERIES 66 EXAM? THEN KNOW STRUCTURED PRODUCTS, THEIR ADVANTAGES AND DISADVANTAGES

If you plan on sitting for the Series 66 Exam, be aware that the Series 66 asks questions on characteristics and risks of Alternate Investments, including Structured Products. How do I know this? I know this because NASAA's Test Specifications for the Series 66 includes Section II (E) (1-5) which spells out the Alternate Investments including Structured Products that are likely to appear on your test.

Bob Eder in his Study for the Series 66 Exam devotes Chapter 6 to a discussion of Alternate Investments including Structured Products. Here is a sample of what Bob Eder says in his book:

Structured Products                                                                           II (E) (4)

How do structured products come into being? Two investment bankers meet in Johnny's Bar after the market closes. They dream up new products for their firms to sell and make more underwriting profits and generate more commissions. They realize that their ingenuity, if successful, could result in large bonuses at the end of the year. Note that we have not defined structured products, just described how they originate. Consider some relatively uncomplicated examples. Joe and Larry see that many of their customers don't have the time or inclination to utilize put and/or call options. They guess that if their firm, ABC Investment Bank, offered an ETF that purchased blue-chip stock and then wrote covered calls against those shares, ABC's ETF would appeal to customers. Here we have an example of a structured product. Another example is collateralized mortgage obligations (CMO's). These debt securities promise to repay an investor's principal, and usually pay interest. However, they are far more complex than a call-writing strategy. The issuer might pay interest differently to various tranches or classes of the CMO. Interest repayment might occur immediately while principal repayment might occur sometime in the distant future.

Here is the link to NASAA's Test Specifications for the Series 66 Exam. See the references to Alternate Investments including Structured Products in NASAA's Series 66 Test Specifications, Section II(E)(1-5).

Study for the Series 66 Exam is available from Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's Series 66 book on Amazon.

For questions about Bob Eder's Series 66 manual, Study for the Series 66 Exam, or questions in general about the Series 66 Exam, or about Alternate Investments including Structured Products, feel free to email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. See Bob Eder's Author Page on Amazon.com.