Advisor Exam Series Practice

California Registered Investment Advisor Exam (Series 65/66) Practice Test Questions And Correct Answers (Verified Answers) Plus Rationales 2025 Q&A | Instant Download Pdf

• Which of the following best describes a fiduciary duty of an

investment advisor?

• Making recommendations based on market trends
• Acting in the best interest of the client at all times
• Only executing client orders as instructed
• Maximizing firm profits

Fiduciaries are legally and ethically obligated to put the client's interests above their own at all times.

• Under the Uniform Securities Act, which of the following is NOT

considered a security?

• Stock
• Investment contract
• Promissory note
• Whole life insurance policy 1 / 3

Whole life insurance policies are insurance products, not securities, and thus are excluded from the definition of a security.

3. A broker-dealer must register under the Uniform Securities Act unless:

• They work for a federally covered adviser
• They have no place of business in the state and deal only with

institutional clients

• They only offer mutual funds
• They operate exclusively via the internet

Broker-dealers with no physical presence in a state and who only deal with institutional clients or other broker-dealers are exempt from registration in that state.

• Which of the following statements about IA (Investment Advisor)

recordkeeping is true?

• Records must be maintained for 3 years
• All records must be kept on paper
• Records must be kept for 5 years, with the first 2 years readily accessible
• Only the SEC regulates recordkeeping rules

The SEC mandates that investment advisers retain records for 5 years, with the first 2 years in an easily accessible location.

5. A "sale" under the Uniform Securities Act includes:

• A pledge of securities
• A stock dividend
• A gift of assessable stock
• A security given by will

A gift of assessable stock is considered a sale due to the potential liability of the recipient. 2 / 3

• A client wants to use margin to purchase securities. The investment

advisor must:

• Refer the client to a futures specialist
• Open the account in a trust
• Explain the risks and ensure the strategy is suitable
• Decline the transaction immediately

Investment advisors must ensure margin trading aligns with the client’s financial goals and risk tolerance.

• Which is NOT considered a federal covered security?
• A stock listed on the OTCQB market
• A stock listed on the NYSE
• An investment company security
• A security sold to qualified purchasers

OTCQB securities are not federally covered; they are subject to state registration.

8. A client suffers losses in a discretionary account. The advisor:

• Is automatically liable
• Is not liable if the recommendation was suitable and in good faith
• Must reimburse the losses
• Must notify FINRA immediately

Losses do not imply wrongdoing if the advisor acted within their fiduciary duty and made suitable recommendations.

• Under the Investment Advisers Act of 1940, an investment adviser is

defined as someone who:

• Manages mutual funds
• Provides advice about securities for compensation
• / 3