Introduction

Welcome to Ethical Practices and Fiduciary Obligations, a heavily tested topic on the Series 66 exam.

Exam Weight: Part of 45 questions (approximately 14 questions)

What You'll Learn

In this unit, you'll cover:

• Compensation: Fee types, performance-based fees, pay-to-play rules, soft dollar arrangements, and disclosure requirements
• Client Funds and Securities: Custody rules, discretionary authority, prudent investor standards, suitability obligations, and anti-money laundering requirements
• Conflicts of Interest and Fiduciary Duties: Insider trading, churning, code of ethics requirements, vulnerable adult protections, and prohibited business practices
• Cybersecurity and Privacy: Regulation S-P, safeguards rule, data breach requirements, and client information protections
• Business Continuity Plans: NASAA requirements for continuity and succession planning

Why This Matters

This unit ties together everything you've learned about investment adviser and broker-dealer regulation. While earlier units defined who must register and how, this unit focuses on the ethical standards and fiduciary duties that govern day-to-day conduct. The exam tests your ability to spot conflicts of interest, identify prohibited practices, and apply the right ethical standard to real-world scenarios. Expect roughly 14 questions from this section alone.

Let's start with how advisers and agents are compensated, and the conflicts that different compensation models create.