Chapter 5: Laws, Regulations & Ethics
This chapter covers the Laws, Regulations, and Guidelines (45%) section of the Series 66 exam: the single largest portion of the test.
What You'll Learn
| Unit | Topic | Key Concepts |
|---|---|---|
| 25 | Regulation of Securities and Issuers | Security definitions, registration methods, exemptions, accredited investors |
| 26 | Regulation of Investment Advisers | IA definition, three-prong test, registration, notice filing, post-registration |
| 27 | Regulation of IA Representatives | IAR definition, registration, post-registration requirements |
| 28 | Regulation of Broker-Dealers | BD definition, underwriters, market makers, registration |
| 29 | Regulation of BD Agents | Agent definition, exclusions, registration requirements |
| 30 | Remedies and Administrative Provisions | Administrator authority, administrative actions, penalties, liabilities |
| 31 | Communication with Clients | Disclosures, unlawful representations, performance guarantees, contracts, advertising |
| 32 | Ethical Practices and Fiduciary Obligations | Compensation, custody, conflicts of interest, cybersecurity, business continuity |
Why This Chapter Matters
At 45% of the exam, this is the most heavily weighted section by far. Nearly half of all questions test your knowledge of securities laws, registration requirements, and ethical obligations. You cannot pass the Series 66 without mastering this material.
The exam tests the Uniform Securities Act (USA), federal securities laws, registration requirements for all four person types (IAs, IARs, BDs, agents), the Administrator's enforcement powers, and the ethical and fiduciary standards that govern the industry.
Exam Strategy
Focus on:
- IA definition and three-prong test: The most frequently tested concept in the entire exam
- Registration differences: IA (SEC or state) vs. BD (SEC + FINRA + state) - know the "OR" vs. "AND" distinction
- Exemptions vs. exclusions: Different concepts with different consequences
- Administrator powers: What requires notice/opportunity for hearing vs. what doesn't
- Fiduciary duty: IAs owe a fiduciary duty; BDs follow Reg BI; know the difference
- Prohibited practices: Sharing in client accounts, guarantees, churning, front-running