Free Series 66 Practice Exam

Analytical Methods

Covers time-value-of-money math (IRR, NPV, future value), descriptive statistics (mean, median, standard deviation, alpha/beta/Sharpe ratio, correlation), financial ratio analysis (current, quick, debt-to-equity), and valuation multiples like price-to-earnings and price-to-book.

Cash and Cash Equivalents

Insured deposit products (demand deposits, CDs) and money market instruments such as commercial paper and Treasury bills.

Fixed Income Valuation

How bonds are priced and compared using duration, maturity, yield-to-call/maturity, coupon, conversion value, credit ratings, credit spreads, and discounted cash flow.

Types of Equity Securities

Common stock (domestic, foreign, ADRs) and preferred/convertible/floating-rate preferred stock.

Equity Valuation Factors

Technical analysis, fundamental analysis, dividend discount models, and discounted cash flow approaches to valuing stocks.

Characteristics of Equity Securities

Shareholder rights (voting, preemptive rights, liquidation preference), restricted/resale-restricted stock, dividends, and incentive vs. nonqualified employee stock options.

Equity Public Offerings

IPOs, secondary offerings, and SPAC/blind-pool/blank-check structures.

Types of Pooled Investments

Open- and closed-end mutual funds, private funds (hedge funds, private equity, venture capital), UITs, ETFs, and liquid vs. non-liquid REITs.

Characteristics of Pooled Investments

Share classes, liquidity, tax treatment, fee structures, NAV and premium/discount pricing, risk/benefit tradeoffs, and comparison factors like benchmarks and manager tenure.

Futures and Options

Basic definitions of futures and options contracts.

Alternative Investments

Risk and application of leveraged funds, inverse funds, structured products, and exchange-traded notes.

Insurance-Based Products

Fixed, variable, and indexed annuities, and whole/term/universal/variable life insurance definitions.

Other Assets

Commodities, precious metals, and the definition/characteristics/risks of digital assets.

Type of Client/Customer

Individuals and sole proprietors, business entities (partnerships, LLCs, C/S-corps), trusts/estates, and foundations/charities as client types.

Client/Customer Profile

Gathering and using financial goals, cash flow/balance sheet/tax situation, risk tolerance, non-financial factors (values, life stage, behavioral finance), and time horizon to build a client profile.

Capital Market Theory

Core investment theories — CAPM, Modern Portfolio Theory, and the Efficient Market Hypothesis.

Portfolio Management Strategies, Styles, and Techniques

Strategic vs. tactical asset allocation; active/passive/growth/value/income styles; and techniques like diversification, sector rotation, dollar-cost averaging, and leveraging.

Tax Considerations

Individual income tax basics (capital gains, tax basis, AMT), entity-level taxation, and estate/gift tax fundamentals including exemptions and portability.

Retirement Plans

Traditional/Roth IRAs, solo 401(k)s, qualified plans (401(k), 403(b), 457, SEP, SIMPLE), and nonqualified plans.

ERISA Issues

Fiduciary duties under ERISA, including qualified default investment alternatives and diversification requirements.

Special Types of Accounts

Education accounts (529s, Coverdell), UTMA/UGMA custodial accounts, and health savings accounts.

Ownership and Estate Planning Techniques

Account titling (JTWROS, tenants in common, tenancy by entirety), TOD/POD designations, beneficiary designations, wills/trusts basics, QDROs, and donor-advised funds.

Trading Securities

Order types and trading terminology, the roles of broker-dealers/custodians/market makers, trading costs, and best execution obligations.

Portfolio Performance Measures

Return calculations (risk-adjusted, time-weighted, dollar-weighted, IRR, after-tax), current yield, and use of relevant benchmarks.

Regulation of Investment Advisers

Definitions, notice-filing, registration and books-and-records requirements for state-registered and federal covered investment advisers, and supervision of IARs.

Regulation of Investment Adviser Representatives

Who qualifies as an IAR, registration/exclusion rules, and ongoing requirements like continuing education and reportable-event disclosures.

Regulation of Broker-Dealers

Broker-dealer definitions, registration/exclusion requirements, and supervisory obligations over agents.

Regulation of Agents of Broker-Dealers

Definition of an agent and the registration/maintenance requirements that apply to them.

Regulation of Securities and Issuers

Definitions of securities/issuers, state registration requirements, registration exemptions, and state antifraud/enforcement authority.

Remedies and Administrative Provisions

Powers of the state securities Administrator, administrative actions, and other penalties/liabilities.

Communication with Clients and Prospects

Required disclosures, bans on misrepresenting registration status or guaranteeing performance, client agreements, and rules governing advertising across social media, email, and websites.

Ethical Practices and Fiduciary Obligations

Compensation disclosure, custody and discretion rules, AML obligations, conflict-of-interest and prohibited-activity rules (insider trading, selling away, market manipulation, exploitation of vulnerable adults, etc.), cybersecurity/privacy duties, and business continuity planning.