STUDY FOR THE SERIES 66 EXAM

Taking the Series 66 exam soon? Make sure that you are familiar with the four common ways of valuing equity securities. NASAA's Series 66 Test Specifications lists these methods in Section II (B) (1-4), so you can reasonably expect to see questions on these methods on the actual Series 66 exam. Bob Eder covers Valuing Equity Securities in his  Study for the Series 66 Exam . Here is a sample of Bob Eder's treatment: Discounted Cash Flow (DCF)                                                                                      II (B) (4) Discounted Cash Flow considers all expe...

NASAA publishes a Series 66 Test Specifications and Content Outline that indicates areas that a Series 66 candidate can expect to see on the test. Section IV (H) (4) of the Content Outline lists six lines of conflicts of interest, and prohibited, unethical or criminal acts or behavior. Here is a real-life example of Unethical and/or Prohibited Activity from the Securities and Exchange Commission, SEC Release 2023-33: FOR IMMEDIATE RELEASE 2023-33 Washington D.C., Feb. 16, 2023 — The Securities and Exchange Commission today charged Milan Vinod Patel, of Cumming, Georgia, for spreading more than 100 false rumors about public companies to generate more than $1 million in illicit trading profits. The SEC previously charged  Barton Ross ,  Mark Melnick ,  Anthony Salandra , and  Charles Parrino  for their roles in this scheme. According to the SEC’s complaint, Patel received rumors that he knew to be false from Ross, Salandra, or Parrino about purported market-moving...

Over the years there have been some securities professionals whom the SEC has accused of illegally using inside information to make gains on trading stocks. Don't allow yourself to fall into this trap. It would ruin your career in the securities business, as well as subject you to fines, civil penalties, and even criminal convictions. NASAA specifies in its Test Specifications and Content Outline for the Series 66 exam that you should expect questions about  Trading on Inside Information . See NASAA's Series 66 Test Specifications, Section IV (H) (4). Bob Eder discusses  Trading on Inside Information  in detail in his  Study for the Series 66 Exam . Here is a sample of Bob Eder's treatment of using inside information: EXAMPLE Jason, a hedge fund manager, is managing several billions of client monies. He asks for and receives confidential information about XYZ Corp.’s forthcoming earnings from Bill, a friend, who happens to be on XYZ’s board. Bill tells Jason that XYZ...

SEC Rule 206(4)-5 bars investment adviser reps from taking compensation for advisory services for a period of two years following the making of a contribution to any political candidate who has the power to award or influence the awarding of government advisory business to the rep or investment adviser.  Rule  206(4)-5  does not prohibit the giving of investment advice but only the receiving of compensation for that advice and for a two-year  period. NASAA's Content Outline for the Series 66 covers Political Contributions in Section IV (H) (4). This means that the Series 66 candidate can expect to see questions on political contributions on the test. Bob Eder discusses political contributions in his Study for the Series 66 Exam on pages 269-271. Here is a sample of his treatment: "Political Contributions                            ...

The SEC has rules regarding the requirement that registered investment advisory reps maintain confidentiality about the financial positions of their customers. This is called Regulation S-P. NASAA'S Test Specifications and Content Outline for the Series 66 Exam includes required knowledge on Privacy Regulations in Section IV (H) (5). This means that a Series 66 candidate should expect to see questions on privacy requirements on the Series 66 Exam. Bob Eder has detailed information about Regulation S-P in his  Study for the Series 66 Exam . Here is a sample of Bob Eder's discussion on maintaining  privacy of financial information of  customers : "Changes in Privacy Policies                                             IV (H) (5) If a financial services company changes or amends its privacy policy, it must send out revised privacy notices, or te...

Taking the Series 66 exam? Be aware that  NASAA's Test Specifications for the Series 66 include questions on insurance-based products, such as equity indexed annuities. See NASAA's Test Specifications Section II (F) (1). Bob Eder devotes pages 75-81 in his Study for the Series 66 Exam to a discussion of annuities, including equity indexed annuities, including practice questions and examples. Here is a sample of Bob Eder's treatment of annuities: "Equity Indexed Annuities                                                                   II(F)(1) These products are also known as "fixed-indexed annuities." An equity-indexed annuity is a variation of a fixed annuity. An...

NASAA publishes Test Specifications for the Series 66 exam, and it includes in Section II (B) (1-4) Methods of Valuing Equity Securities. These include technical analysis, fundamental analysis, dividend discount, and discounted cash flow. NASAA indicates that the Series 66 exam contains three questions. If you are going to sit for the Series 66, make sure that you know how dividend discount and discounted cash flow work. Bob Eder discusses equity valuation methods on pages 52-53 of  his Series 66 study manual,  Study for the Series 66 Exam . Here is a sample of Bob Eder's treatment of the dividend discount model : EXAMPLE OF DIVIDEND DISCOUNT MODEL ABC Corp. stock paid an annual dividend of $3.30 last year. Today, ABC announces that it will boost its dividend by eight percent for the coming year. Joe tries to earn 12 percent on his money. To find the price based on the dividend discount model, divide this year's expected dividend of $3.56 ($3.30 multiplied by 1.08) by the d...