STUDY FOR THE SERIES 66 EXAM

  Dear Series 66 Test Candidates: Here's a good example of the powers of the SEC to file complaints about securities violations in federal district courts, to root out fraud by securities professionals, brokers, investment advisers, and to bring charges of fake representations and unfair business dealings in the securities industry. FOR IMMEDIATE RELEASE 2023-74 Washington D.C., April 4, 2023 — The Securities and Exchange Commission today charged Charlie Javice, the founder of the now shuttered student loan assistance company previously known as Frank, with fraud in connection with the $175 million sale of the company to JPMorgan Chase Bank, N.A., (JPMC) in 2021. The SEC’s complaint alleges that Javice orchestrated a scheme to deceive JPMC into believing that Frank had access to valuable data on 4.25 million students who used Frank’s service when in reality the number was less than 300,000. The SEC’s complaint alleges that Javice made numerous misrepresentations about Frank’s purpo...

   Taking the Series 66 exam? If so, be prepared for questions covering the Sharpe Ratio and various other descriptive statistics that analyze the price action of stocks. How do I know this? NASAA publishes Test Specifications for the Series 66 exam, and Section I (A) (2) covers the Sharpe Ratio and other analytical ratios and concepts. Bob Eder discusses the Sharpe Ratio and stock statistical analysis in his  Study for the Series 66 Exam . Here is an example of Bob Eder's treatment of the Sharpe Ratio: EXAMPLE Jimmy compares shares of ABC Corp. with shares of XYZ Corp. The standard deviation of XYZ's historical returns is 5, but the standard deviation of ABC shares is 3. If both ABC and XYZ generate an annual return of 30 percent above risk-free return, ABC has a Sharpe Ratio of 10 (i.e., 30 percent divided by 3). XYZ stock has a Sharpe Ratio of 6 (i.e., 30 percent divided by 5). ABC's higher Sharpe Ratio indicates ABC's return is less risky than that of XYZ. Jimmy thu...

    Planning to take the Series 66 Exam? Then become familiar with FINRA Rule 3210 on Opening Outside Accounts. Why? Because NASAA Series 66 Test Specifications includes this topic in Section IV (H) (4), thus signaling that there can be questions on the test about this rule. Here is the text of Rule 3210: FINRA RULE 3210 Securities Accounts at Other Investment Advisers, Broker/Dealers or Financial Institutions a) No person associated with a member ("employer member") shall, without the prior written consent of the member, open or otherwise establish at a member other than the employer member ("executing member"), or at any other financial institution, any account in which securities transactions can be effected and in which the associated person has a beneficial interest. (b) Any associated person, prior to opening or otherwise establishing an account subject to this Rule, shall notify in writing the executing member, or other financial institution, of his or her as...

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                            ...