Series 66 Uniform Combined State Law Examination
Combined with passing the Series 7 (General Securities Representative) exam (which is a prerequisite), it is required by most states before someone is qualified to work as a securities agent or an investment advisor representative. While agencies of the federal government, most notably the SEC, are the most prominent regulators of the securities markets and securities industry in the United States, it is often forgotten that the individual states have their own regulatory regimes and licensing requirements.
Passing the Series 66 exam is the equivalent of passing both the Series 63 and the Series 65. Additionally, while administered by FINRA, the Series 66 exam is developed by the North American Securities Administrator Association, also known as NASAA.
Uniformed Securities Act
This is a piece of model legislation, first introduced in 1956 and subsequently amended, that was designed to standardize and harmonize the states' securities laws. The idea was to introduce best practices nationwide, while also simplifying compliance for securities firms and securities professionals.
Definition of Investment Advisor Representative
According to the Uniform Securities Act, an investment advisor representative is someone employed by or associated with an investment advisory firm who does any of the following:
- Makes recommendations or gives investment advice
- Manages client accounts or portfolios
- Determines which recommendations or advice regarding securities should be given
- Provides investment advice or holds herself or himself out as providing investment advice
- Receives compensation to solicit, offer or negotiate for the sale of or for selling investment advice
- Supervises employees who perform any of the above tasks
On the other hand, an investment advisor is not someone who:
- Performs only clerical or ministerial acts
- Whose involvement in formulating or offering investment advice is incidental, and who does not receive special compensation for investment advisory services
Investment advisory firms registered with the SEC and people employed by or associated with the are exempt from separate state registration, licensing or qualification, except for investment advisor representatives whose actual places of business is within a given state.
Holders of several professional designations, most notably the CFA and the CFP, are considered to have proven mastery of the same material already, and thus are exempt in most states from taking the Series 66 exam. Other such designations include the Personal Financial Specialist (PFS), Chartered Financial Consultant (ChFC) and Chartered Investment Counselor (CIC) credentials.
Length of the Exam
The Series 66 exam consists of 110 multiple choice questions and 150 minutes are allotted for completing the test. Only 100 of the questions in the exam are actually counted towards the candidate'€™s final score. Each test includes 10 experimental questions being considered for use in future versions of the exam. They are distributed throughout the exam, and the test taker is unaware of which ones they are.
The Series 66 exam tests minimum competency, and a passing score is 75 correct answers or 75% of the 100 questions that count towards the final score. A candidate who fails the Series 66 exam must wait at least 30 days before taking it again. The same rule applies to someone who has failed a second time and who wishes to take it a third time. After a third failure, a candidate must wait at least 180 days before taking the exam again. This same rule applies to all subsequent failed attempts.
Passing the Series 66 exam is equivalent to passing both the Series 63 and Series 65. However, it also is designed for candidates who hold Series 7 certification. Accordingly, the Series 66 test omits questions related to securities products, securities analysis and investment strategy that are a significant part of the Series 65, but which are covered at greater length and detail in the Series 7 exam.
Getting Registered and Licensed
There are several caveats related to passing the Series 66 exam. First, the candidate is still responsible for knowing and adhering to the specific requirements of the securities laws and regulations of the states in which he will conduct business. Second, while passing the exam often is a key prerequisite to being licensed to do business in a particular state, it is not necessarily the only one, and never confers an automatic right to be licensed or registered in a given state. Nevertheless, the NASAA firmly believes that the Uniform Combined State Law Examination makes for better state securities regulation and better protection of the investing public by promoting uniformity in such regulation and in the qualification standards for financial professionals.