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Financial Services · Series 66

FINRA Series 66 – Uniform Combined State Law Exam Practice Test

Series 66 practice covers state securities regulation alongside investment concepts used in client recommendations. The available questions sample subjects such as registration procedures, complaint handling, conflicts of interest, order instructions, investment risk, bond features, and tax treatment of investment gains.

Exam overview

Exam providerFinancial Industry Regulatory Authority
Exam codeSeries 66
CategoryFinancial Services

About the FINRA Series 66 – Uniform Combined State Law Exam

The material connects legal responsibilities with practical investment analysis. Questions ask you to recognize how state administrators may act and what procedural protections can apply, and how firms should respond to written customer complaints or disclose material conflicts. Other items test financial reasoning: how discount rates affect present value, how adjusted cost basis informs gain characterization, and how callable bonds or mortgage-backed securities respond to interest-rate changes. You may also need to distinguish a limit order from other order instructions and understand what par value does—and does not—indicate about common stock. These concepts support work involving client communications, transaction handling, evaluation of investment risks, and application of securities rules to specific facts.

Sample Practice Questions

Review a selection from this exam's published US Practice Tests practice bank.

Question 1

A registered representative receives a customer’s signed, dated complaint alleging unauthorized trading. What is the most appropriate general response by the firm?

  1. ADiscard it if the customer later places another order.
  2. BPromptly follow the firm’s procedures for documenting, escalating, and responding to the complaint.
  3. CAsk the representative involved to decide whether the complaint is valid and take no further action if denied.
  4. DWait for a regulator to request the complaint before recording it.
Show answerCorrect answer: B

Written customer complaints should be handled under the firm’s supervisory and recordkeeping procedures, including appropriate documentation and escalation. A firm should not ignore a complaint simply because the representative disputes it.

Question 2

Under the time value of money, what happens to the present value of a fixed future payment when the discount rate increases, assuming the payment date stays the same?

  1. AThe present value decreases
  2. BThe present value increases
  3. CThe present value remains unchanged
  4. DThe present value becomes equal to the future payment
Show answerCorrect answer: A

A higher discount rate reduces the present value of a fixed future amount because more is deducted for the time and required return until receipt. The effect is greater for payments farther in the future.

Question 3

An investor sells a security for more than its adjusted cost basis. Before considering special rules, what is the general tax characterization of the gain?

  1. AA capital gain
  2. BA tax-free return of principal in every case
  3. COrdinary wage income
  4. DA deductible investment expense
Show answerCorrect answer: A

A sale for more than adjusted basis generally produces a capital gain. Whether it is short-term or long-term, and its tax rate, depend on holding period and applicable tax rules; special circumstances can alter treatment.

Question 4

A fund’s prospectus states that it may invest in securities of issuers located outside the United States. Which risk is especially relevant to that investment policy?

  1. AForeign political or currency developments may affect investment values
  2. BThe fund is guaranteed to outperform domestic investments
  3. CForeign investments cannot lose value when U.S. markets decline
  4. DThe fund is exempt from all investment-related expenses
Show answerCorrect answer: A

International investments can be affected by political, economic, regulatory, and currency changes in other countries. These risks can add to, rather than eliminate, investment risk.

Question 5

An investor buys a callable corporate bond. If interest rates fall, which feature may become especially relevant to the investor?

  1. AThe issuer may redeem the bond early under its call terms, limiting the investor’s opportunity to retain the higher coupon.
  2. BThe investor may require the issuer to increase the coupon rate.
  3. CThe bond’s principal becomes payable immediately by law.
  4. DThe bond automatically converts into common stock.
Show answerCorrect answer: A

A call provision generally gives the issuer the right to redeem a bond before maturity under specified terms. Issuers may be more likely to call higher-coupon debt when they can refinance at lower rates, creating reinvestment risk for bondholders.

Question 6

A company’s common stock has a par value of $1 per share. Which statement about par value is generally accurate?

  1. AIt is a guaranteed minimum resale price for the stock.
  2. BIt is a nominal value assigned to shares and does not determine their market price.
  3. CIt is the amount of the annual dividend required by law.
  4. DIt is the amount shareholders must receive if the company is liquidated.
Show answerCorrect answer: B

Par value is a nominal amount assigned to a share, often relevant to corporate accounting or legal capital concepts. It does not guarantee a market value, dividend, or liquidation payment.

Question 7

A state securities administrator issues a formal order suspending a firm’s registration. The firm disagrees. Which general procedural protection is ordinarily associated with such an action?

  1. AThe firm must be given an opportunity for a hearing under applicable law and procedure.
  2. BThe firm may disregard the order until a federal court approves it.
  3. CThe order is automatically void unless every customer consents.
  4. DThe administrator must first obtain a unanimous vote of the firm’s directors.
Show answerCorrect answer: A

State securities laws generally provide procedural protections, including an opportunity for a hearing, when registration is suspended or revoked. Exact procedures and timing depend on the applicable law and circumstances.

How to use this practice test

Access is free. A session presents up to 20 random questions from the 50-question Series 66 practice bank, covering its sampled legal and investment concepts. After the session, results are shown so you can identify which question types or subject areas need closer review.

Preparation tips

  • For state-law questions, distinguish registration actions from formal administrative orders and identify the procedural protections described in the facts.
  • Practice separating customer instructions by price condition: a maximum purchase price or minimum sale price indicates a limit-order constraint.
  • Work through present-value examples with different discount rates, and connect rate movements to callable-bond and mortgage-backed-security risks.
  • For tax questions, start with proceeds minus adjusted cost basis before considering any special treatment or exceptions.
  • When analyzing adviser conflicts or customer complaints, identify the relevant disclosure, documentation, and firm-response issue in the scenario.
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