NASAA Series 66 agent and adviser scenarios

A framework for role questions

The Series 66 law section tests investment advisers, IARs, broker-dealers, agents, securities, issuers, and the conduct surrounding client relationships and transactions. A scenario may contain several of these roles at once. Do not answer from a job title alone. Identify the entity, individual, activity, compensation, jurisdiction, and exact question.

1. Entity: Which firm or person provides advice or effects securities transactions?
2. Individual: Which employee or associated person communicates, solicits, recommends, or executes?
3. Capacity: Is the person acting as an adviser representative, broker-dealer agent, issuer representative, or in more than one role?
4. Jurisdiction and status: Is the firm state registered or federally covered, and where does the individual have a relevant place of business?
5. Issue: Does the question ask about registration, exemption, disclosure, client fit, custody, discretion, or conduct?

A correct rule applied to the wrong person is still the wrong answer. Keep the firm and the individual on separate lines in your notes. Also distinguish eligibility to take the Series 66 from eligibility to use it for state registration: passing the exam does not make a person an approved IAR.

Scenario 1: the adviser firm and its representative

North Harbor Advisory charges clients an ongoing asset-based fee for portfolio advice. Jordan is an employee who recommends securities, discusses allocations, and solicits new advisory clients. The question asks who is the investment adviser and who may be an IAR.

Answer: The advisory business is the adviser, and Jordan's advisory functions point to IAR status under the applicable definition. The firm and Jordan have separate registration and filing obligations. A distractor that calls Jordan the only adviser ignores the entity's advisory business; a distractor that says the employee can never be an IAR ignores the person's client-facing advisory functions. The exact registration requirements depend on the applicable state and federal framework.

Study takeaway: When a question describes someone who recommends, manages, solicits, or negotiates advisory services, analyze the IAR definition. Do not conclude that every employee is automatically an IAR; match the individual’s functions and the governing definition.

Scenario 2: an individual can act in more than one capacity

Taylor works for an organization with both an investment adviser and a broker-dealer business. Taylor recommends a managed account under an advisory agreement in one meeting and later places a securities order as a broker-dealer representative. The client asks whether Taylor is subject to only one set of rules because the same person handled both conversations.

Answer: The capacity and service matter. The advisory recommendation invokes adviser and IAR obligations; the securities transaction can invoke broker-dealer and agent rules. A person may operate in multiple capacities, and the firm should make the relationship and compensation understandable. A distractor that treats the job title as controlling fails to distinguish the services. Another that assumes every advisory conversation is brokerage activity ignores the agreement and function.

Study takeaway: Mark the specific interaction described. A single customer relationship can involve separate advisory and brokerage services. Look for which agreement, compensation, disclosure, and transaction the prompt asks about.

Scenario 3: the firm's federal status and a representative

A federally covered adviser is registered with the SEC. One IAR works from an office in State A and advises clients there. The question asks whether the adviser's federal status automatically resolves every state registration issue for the IAR.

Answer: No. Adviser registration and IAR registration are distinct. States may have notice-filing authority for a federal covered adviser, and the representative's registration may depend on the individual's activity, place of business, and state law. A distractor that assumes the firm's status automatically covers every employee confuses the entity with its associated person. Another that treats a notice filing as full adviser registration confuses different regulatory acts.

Study takeaway: Separate SEC registration of the firm, state notice filing, and the individual representative's state registration. Do not infer an exemption for the IAR solely from the adviser's federal status.

Scenario 4: the broker-dealer agent and the issuer

A registered representative solicits a customer to buy securities through a broker-dealer. A separate employee of the issuer describes the same offering to prospective purchasers. A question asks which person is acting as a broker-dealer agent.

Answer: The registered representative acting for the broker-dealer is the likely agent in the described securities transaction. The issuer employee's status must be analyzed under the definition and any applicable issuer or transaction exclusions; do not decide from the word 'employee' alone. The facts do not provide enough detail to determine every possible issuer-agent exemption, so the defensible answer focuses on the broker-dealer representative whose role is explicitly given.

Study takeaway: The statutory definition and exclusions matter. A person can be an agent of a broker-dealer or an issuer, but an issuer representative may fit an exclusion depending on the security and transaction. Identify the relationship and transaction before applying an exception.

Scenario 5: a registration exemption does not erase all duties

A small advisory firm says it does not have to register as an adviser under a particular exemption. A client asks whether that means the firm can make any recommendation without disclosing conflicts or observing antifraud requirements.

Answer: No. An exemption from registration is not a general exemption from antifraud or ethical obligations. The candidate should identify exactly which registration requirement the exemption addresses and keep client-protection duties separate. A distractor that treats 'exempt' as a complete license to avoid securities law uses the term too broadly.

Study takeaway: Ask 'exempt from what?' An exempt person, exempt security, exempt transaction, and adviser registration exemption are not interchangeable. A registration exception generally does not answer a separate antifraud or client-conflict question.

Scenario 6: disclosure and a referral payment

A representative receives a referral payment from a private fund and recommends it to a client who needs most of the assets in 18 months. The fund has limited redemptions and charges higher fees than a liquid alternative. The question asks whether a disclosure of the payment makes the recommendation proper.

Answer: Disclosure alone does not establish that the recommendation fits. The representative should assess the client's short horizon, liquidity need, fund risks, costs, and reasonable alternatives, then address the compensation conflict under applicable duties. A distractor that says the client signed a disclosure and therefore accepts any risk treats consent as a cure for every problem. Another that focuses only on the expected return ignores liquidity and concentration.

Study takeaway: Separate the conflict question from the client-fit question. A good response may need to address both. The same fact pattern can test a rule about compensation, a duty to disclose, and a recommendation based on client needs.

Scenario 7: specific client authority

A client sends a written instruction to buy 100 shares of ABC. The adviser buys 100 shares of XYZ instead because the adviser believes XYZ is better. No discretionary agreement is in place. The client later receives a trade confirmation.

Answer: The adviser exceeded the specific instruction by selecting a different security. The client authorized one named trade, not broad discretion or a substitution. A later confirmation records the trade but does not necessarily supply prior authority. A distractor that treats a general account relationship as discretionary ignores the stated absence of discretionary authority.

Study takeaway: Determine the scope and timing of authority. A client's instruction to execute a specific order is not a grant of ongoing discretion. The adviser's belief that another trade is better does not create permission.

Scenario 8: an exam pass and a registration

Riley passes Series 66 but has not passed Series 7. Riley wants to register as an IAR through the combined exam route. The question asks whether passing Series 66 completes the qualification.

Answer: No. A valid Series 7 pass is required for Series 66-based IAR registration. The candidate may take Series 66 and Series 7 in either order, but must complete both and the applicable registration process. The SIE is also part of the FINRA representative qualification route. A distractor that equates passing Series 66 with being licensed omits the co-requisite and state approval.

Study takeaway: Keep exam eligibility, exam passage, co-requisites, firm filings, and state approval as separate checkpoints. Series 66 has no prerequisite to sit, but the registration route has additional requirements.

How to review scenario questions

For each practice problem, write a one-line answer to the actual task before looking at the options. Then list the fact that changes the result. For scenario 3, it is the representative's state place of business; for scenario 6, it is both the short horizon and the referral payment. This keeps the reasoning tied to the issue instead of an attractive but unrelated definition.

After correcting an answer, change one fact and solve the case again. Add a second office, remove the fee, change the client from a natural person to a trust, or grant written trading discretion. State precisely which rule may change and which duties remain. This counterfactual practice helps prevent overgeneralizing an exemption or role definition.

Finally, mix scenarios with product and portfolio questions. A legal rule can be embedded in an investment recommendation or communication. The candidate should recognize the legal issue without being told the chapter and then answer the question the prompt asks.

Sources

NASAA Series 66 Exam Study Guide and Test Specifications; NASAA Series 66 Exam Content Outline; NASAA Exam FAQs.