Series 65 — Uniform Investment Adviser Law Examination Cheat Sheet

Last revised: September 16, 2026

Compact Series 65 Cheat sheet for NASAA adviser law, ethics, products, portfolio theory, tax, retirement, and calculation review.

Use the tables for a quick pre-exam check. Expand a topic’s notes for explanations, examples, and additional distinctions.

Scope and study context

Item	Reference
Official vendor/provider	NASAA
Official exam title	Series 65 — Uniform Investment Adviser Law Examination
Official exam code	Series 65
Page purpose	Independent quick-reference support for candidates preparing for the real exam

High-Yield Topic Map

Area	What the exam often asks you to do	Common trap
Investment adviser law	Identify IA, IAR, BD, agent, issuer, federal covered adviser	Confusing an exclusion from the definition with an exemption from registration
State vs federal registration	Decide who registers with the state, SEC, both by notice, or neither	Federal covered advisers are not state-registered, but states may require notice filings and enforce antifraud rules
Exempt securities and transactions	Separate security registration exemptions from person registration	Exempt securities are still subject to antifraud provisions
Ethical practices	Spot prohibited conduct by IAs, IARs, BDs, and agents	Disclosure does not cure every conflict; fiduciary duty still applies
Investment products	Match product features to client objectives and risks	Fixed insurance products are generally not securities; variable products are securities
Portfolio theory	Apply risk, return, diversification, beta, alpha, Sharpe ratio, CAPM	Beta measures systematic risk, not total risk
Tax and retirement	Choose tax-appropriate accounts and investments	Tax deferral is not the same as tax-free treatment

Core Regulatory Vocabulary

Person and Product Definitions

Term	Quick definition	Exam distinction
Security	Broad category including stock, bonds, notes, investment contracts, options, fractional interests, variable annuities, and variable life insurance	Substance matters more than label; an “investment contract” can make a nontraditional product a security
Investment contract	Investment of money in a common enterprise with expectation of profit primarily from others’ efforts	Often tested with real estate, limited partnerships, pooled ventures, and “managed” programs
Issuer	Person who issues or proposes to issue a security	Issuer representatives may or may not be agents depending on the security and transaction
Broker-dealer	Person engaged in the business of effecting securities transactions for accounts of others or for its own account	A BD earns transaction compensation; an IA is paid for advice
Agent	Individual representing a BD or issuer in effecting securities transactions	Individuals are agents; firms are BDs
Investment adviser	Person in the business of advising others about securities for compensation	Compensation can be direct or indirect; “financial planner” can be an IA if securities advice is part of the service
Investment adviser representative	Individual associated with an IA or federal covered adviser who gives advice, manages accounts, solicits advisory business, or supervises those functions	Clerical or ministerial employees are excluded
Federal covered adviser	Adviser registered with the SEC or excluded from the definition of IA under federal law	States do not register the firm as an IA but may regulate IARs with a place of business in the state
Client	Person receiving advisory services	For IA registration exemptions, count clients carefully; institutions and natural persons may be treated differently depending on the rule

Notes and examples

Investment Adviser Definition: Three-Part Test

A person is generally an investment adviser when all three are present:

Element	Meaning	Exam clue
Advice	Gives advice, reports, analysis, models, or recommendations about securities	Asset allocation including securities counts
Business	Holds out, regularly provides advice, or advice is part of services	“Occasional” can still count if marketed as a service
Compensation	Receives direct or indirect economic benefit	Fees, commissions, wrap fees, referral fees, or bundled planning fees can qualify

Common IA Exclusions

Excluded person	Why excluded	Trap
Bank or bank holding company	Statutory exclusion	Savings institutions may be treated differently depending on the statute tested
Lawyer, accountant, teacher, engineer	Advice is solely incidental to professional practice	Charging a separate advisory fee can destroy the exclusion
Broker-dealer	Advice is solely incidental to brokerage and no special advisory compensation is received	Wrap fees or separate planning fees can create IA status
Publisher	Bona fide publication of general, impersonal advice	Market-timing newsletters tailored to subscribers may not qualify
Federal covered adviser	Excluded from state IA registration	Still subject to state antifraud authority and possible notice filing
Person excluded by Administrator rule/order	Specific regulatory exclusion	Do not assume an exclusion unless the facts support it

State, Federal, and Person Registration Logic

Who Registers Where?

Party	State registration?	Federal/other treatment	Exam focus
State-covered IA	Yes, in states where required unless exempt	Not SEC-registered	State Administrator regulates registration, books, capital/bonding, and conduct
Federal covered adviser	No state IA registration	SEC-registered or federally excluded	State may require notice filing, fee, consent to service, and enforce antifraud
IAR of state-covered IA	Generally registers with relevant states	No SEC registration as an individual	Link the IAR to the IA’s business and the IAR’s place/client activity
IAR of federal covered adviser	State registration only if the IAR has a place of business in that state	Firm is federally covered	“Place of business” is the key exam phrase
Broker-dealer	State registration if doing BD business in the state unless excluded/exempt	Also subject to federal/SRO framework	No office plus institutional-only activity may avoid state BD registration
Agent	State registration if representing a BD or issuer in securities transactions unless excluded	No effective agent registration if the represented BD/issuer is not properly registered or exempt	Agents are individuals, not firms
Issuer	Does not register as a BD merely for issuing its own securities	Securities may need registration unless exempt/federal covered	Issuer employees may become agents depending on facts

Notes and examples

Investment Adviser SEC vs State Concepts

Adviser type	Typical treatment	High-yield point
Small adviser	Generally state-registered if required by state law	Do not default to SEC registration merely because securities advice is involved
Mid-sized adviser	Often state-registered if the state requires registration and examines advisers	State examination requirement can affect SEC eligibility
Large adviser	Generally SEC-registered	Federal covered adviser status preempts state IA registration
Adviser to registered investment company	SEC registration	Investment company adviser status is a federal-registration trigger
Multi-state adviser	May qualify for SEC registration if state registration burden is broad enough	Know the concept; confirm numeric thresholds in current study materials
Exempt reporting adviser	Not fully registered as an IA but may file reports	“Exempt from registration” does not mean “unregulated”

Common State IA Exemptions

Scenario	Common result	Trap
No place of business in the state and only institutional clients in the state	Often exempt from state IA registration	Institutions are treated more favorably than retail clients
No place of business in the state and limited retail clients during the prior 12 months	De minimis exemption may apply	If there is a place of business in the state, de minimis usually fails
Adviser solely to certain private funds or venture funds	May have exemption/reporting treatment	Do not assume exemption eliminates antifraud liability
Federal covered adviser	Exempt from state IA registration	State may still require notice filing and fees

Exempt Securities, Exempt Transactions, and Federal Covered Securities

Key Rule

Exempt from registration does not mean exempt from antifraud rules. Fraud rules apply to exempt securities, exempt transactions, registered securities, and federal covered securities.

Exempt Securities

Security	Why it matters	Exam trap
U.S. government securities	Exempt security	Government backing does not eliminate interest-rate risk
Municipal securities	Exempt security	Municipal interest may be federally tax-exempt, but price can fluctuate
Canadian government and municipal securities	Often treated as exempt under USA-style rules	Do not generalize to all foreign issuers
Bank securities	Exempt security category	Bank-issued securities differ from bank deposits
Insurance company securities	Often exempt if issued by authorized insurer	Fixed annuity is generally not a security; variable annuity is
Railroad/equipment trust and public utility securities	Traditional exempt categories	Know as registration exemptions, not antifraud exemptions
Nonprofit securities	Charitable, religious, educational, or similar nonprofit issuers	Fraud still prohibited
Short-term commercial paper	High-quality, short-maturity commercial paper may be exempt	A “note” is not automatically exempt
Federal covered securities	State registration preempted	State notice filing may still be allowed for some categories

Notes and examples

Federal Covered Securities

Category	Treatment	Exam point
Exchange-listed securities	State registration preempted	Includes certain senior or equal-ranking securities
Registered investment company securities	State registration preempted	States may require notice filing and fees
Certain private offerings, such as Rule 506 offerings	State registration preempted	Antifraud and notice filing authority remain
Securities sold to qualified purchasers	State registration preempted	Do not confuse with “accredited investor” unless facts specify

Exempt Transactions

Transaction	Common exemption concept	Trap
Isolated nonissuer transaction	Occasional secondary sale not by issuer	Repeated activity can lose “isolated” status
Unsolicited nonissuer transaction	Customer initiates order	Broker should document unsolicited status
Fiduciary transaction	Executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, conservator	Fiduciary status drives the exemption
Institutional transaction	Sale to bank, insurance company, investment company, pension plan, or other institution	Institutional sophistication supports exemption
Private placement	Limited noninstitutional purchasers, investment intent, no general public distribution	Private placement is not a free pass for commissions or resale
Preorganization subscription	Limited subscribers, no payment, no commission	Taking funds too early can destroy the exemption
Existing security holder transaction	Rights, warrants, stock dividends, or exchanges with existing holders	Compensation for solicitation can change the analysis
Underwriter transaction	Transactions between issuers and underwriters	The public distribution still needs its own exemption or registration path

Exempt Securities

If the security itself is exempt, resale transactions are often easier, but anti-fraud rules still apply.

Exempt Security Category	Exam Memory Hook
Government and municipal securities	Issuer is governmental
Bank and savings institution securities	Financial institution issuer
Insurance company securities	Insurer issuer, not variable products automatically
Public utility or regulated entity securities	Often due to other regulatory oversight
Nonprofit securities	Religious, educational, charitable, or similar organizations
Commercial paper / short-term corporate paper	High-quality, short-term financing instruments under statutory conditions

Exempt Transactions

If only the transaction is exempt, the security itself is not necessarily exempt.

Exempt Transaction	Typical Exam Facts
Isolated nonissuer transaction	Occasional secondary sale by someone other than issuer
Unsolicited brokerage transaction	Customer initiated without solicitation
Institutional transaction	Sale to banks, insurance companies, investment companies, or other institutions
Private placement	Limited offering, no general public distribution, investment intent facts
Fiduciary transaction	Executor, administrator, trustee, sheriff, or similar fiduciary
Existing security holder transaction	Certain offers to existing holders
Preorganization subscription	Limited preliminary subscriptions before formation

Critical rule: exemption from registration is never an exemption from fraud liability.

Securities Registration Methods

Method	Used when	Effective idea	Exam distinction
Filing / notification	Seasoned issuers meeting statutory conditions	Simpler state filing	Not available to every issuer
Coordination	Securities also registered with the SEC	Coordinates state and federal effectiveness	Often used for public offerings
Qualification	Any security can be registered this way	Most detailed state review	Default method when others are unavailable
Federal covered	State registration preempted	Notice filing may apply	Not the same as “exempt security” in every context

Notes and examples

Three Main Registration Methods

Method	Best Fit	Key Review Point
Filing / notification	Seasoned issuers or federally reviewed offerings, depending on facts	Usually simplest method where issuer already meets conditions
Coordination	Securities also registered with the SEC	State registration coordinates with federal registration
Qualification	Any security may use it	Often most detailed; effective when ordered by Administrator

Trap: the exam may ask which method is available to “any security.” That is generally qualification.

Administrator Powers

The state Administrator can generally:

Require filings, fees, and consent to service of process.
Investigate possible violations.
Issue subpoenas and require testimony or documents.
Deny, suspend, revoke, or condition registrations for statutory reasons.
Issue stop orders for securities offerings.
Seek injunctions and refer matters for enforcement.

The Administrator generally cannot:

Make rules that contradict the statute.
Impose arbitrary requirements unrelated to investor protection.
Automatically punish without required process where a hearing or notice is required.
Change federal law or require full state registration of federal covered securities.

Registration Administration and Enforcement

Common Registration Mechanics

Item	Quick rule	Trap
Consent to service of process	Filed so legal papers can be served through the Administrator	Usually filed once and remains effective
Effective registration	Often effective at noon on the 30th day after filing unless accelerated or denied	“Filed” does not always mean “effective”
Expiration	Registrations commonly expire December 31 unless renewed	Annual renewal matters
Amendments	Material changes must be amended promptly	A stale Form ADV can be an exam issue
Withdrawal	Becomes effective after a statutory period unless proceedings are pending	Withdrawal does not erase prior liability
Successor registration	May preserve continuity when ownership or form changes	Watch for assignment or control changes

Notes and examples

Administrator Powers

Power	Administrator can do	Administrator cannot do
Rulemaking	Make, amend, and rescind rules/forms	Make rules retroactive unless permitted
Investigations	Investigate in or outside the state if jurisdiction exists	Require self-incrimination beyond legal limits
Subpoenas	Subpoena witnesses and records	Imprison a violator directly
Orders	Deny, suspend, revoke, cancel, or withdraw registrations when statutory standards are met	Act arbitrarily without public-interest basis and cause
Injunctions	Seek court injunctions	Award criminal punishment personally
Criminal matters	Refer for prosecution	Serve as prosecutor, judge, and jailer
Interpretive opinions	Issue no-action or interpretive guidance	Change the statute by opinion

Denial, Suspension, or Revocation: Two-Part Pattern

Most disciplinary registration questions require both:

Action is in the public interest.
A statutory cause exists.

Cause examples	Exam note
False or misleading application	Materiality matters
Willful violation of securities law	“Willful” generally means intentionally doing the act, not necessarily knowing the law
Injunction or relevant conviction	Securities, fraud, fiduciary, or financial misconduct is highly relevant
Insolvency	Especially relevant for custodial firms
Unethical or dishonest practices	Broad category for exam scenarios
Lack of qualification	Administrator may require exams, but cannot usually deny solely for lack of experience
Failure to supervise	Supervisors can be liable for ignoring red flags

Jurisdiction

Situation	State jurisdiction likely?
Offer originates in the state	Yes
Offer is directed into and received in the state	Yes
Acceptance is communicated from the state	Yes
Acceptance is received in the state	Yes
Bona fide out-of-state publication with limited in-state targeting	Often no
Broadcast or internet communication not specifically directed to the state	Analyze facts; do not assume

Adviser Contracts, Brochures, Custody, and Discretion

Advisory Contract Requirements

Contract issue	Rule to remember	Trap
Assignment	Advisory contract cannot be assigned without client consent	Assignment includes transfer of control, not routine minority share changes
Partnership changes	Partnership adviser must notify clients of changes in membership	Notice is not the same as consent unless assignment occurs
Compliance waiver	Client cannot waive compliance with securities law	“Client agreed” is not a defense to an illegal clause
Performance fee	Generally prohibited for ordinary retail advisory clients	Exceptions exist for qualified clients and certain sophisticated/institutional arrangements
Compensation disclosure	Fees and conflicts must be disclosed	Hidden referral compensation is a major red flag
Termination	Prepaid fees generally require refund of unearned portion	Nonrefundable advisory fees are suspect

Notes and examples

Brochure Delivery and ADV Concepts

Document/concept	What to know
Form ADV Part 1	Registration and business information filed with regulators
Form ADV Part 2A	Firm brochure: services, fees, conflicts, discipline, methods
Form ADV Part 2B	Brochure supplement for supervised persons giving advice
Delivery	Brochure must be delivered at or before advisory contract formation under common exam rules
Annual update	Material changes require updated disclosure
Balance sheet	Required in certain prepaid-fee or custody/financial-condition situations

Custody

Custody exists when adviser…	Example
Holds client funds or securities	Adviser maintains client stock certificates
Can withdraw client funds	Adviser deducts fees without proper controls or has broad withdrawal authority
Has legal ownership/access	Adviser is trustee, general partner, or has power of attorney
Receives client checks made payable to adviser	Custody issue unless returned promptly under applicable rules

Custody control	Exam point
Segregation	Do not commingle client and firm assets
Qualified custodian	Client assets should be held by appropriate custodian
Notice and statements	Clients must receive proper account information
Surprise examination	Often required unless an exception applies
Fee deduction	Not always custody if narrowly authorized and procedural safeguards are met

Discretion

Authority type	Is it discretion?	Exam point
Adviser chooses security	Yes	Written discretionary authority required
Adviser chooses amount	Yes	Written discretionary authority required
Adviser chooses buy/sell action	Yes	Written discretionary authority required
Client specifies security/action/amount; adviser chooses time or price only	Usually no full discretion	Time-and-price discretion is limited
Initial oral discretion	Temporarily permitted under common USA-style rules	Written authority must follow promptly; 10 business days is a commonly tested rule

Ethics and Fiduciary Duty

IA/IAR Fiduciary Principles

Duty	Practical meaning	Exam clue
Loyalty	Put client interests ahead of adviser interests	Conflicts must be disclosed and managed
Care	Provide suitable, informed, reasonable advice	Recommendation must fit objectives and constraints
Full disclosure	Disclose material facts and conflicts	Omission can be fraud
Best execution	Seek favorable execution considering total transaction quality	Lowest commission is not always best execution
Fair allocation	Allocate limited opportunities fairly	Cherry-picking winners to favored accounts is prohibited
Confidentiality	Protect client information	Disclosure requires authorization or legal basis
Ongoing suitability	Monitor if the advisory relationship includes monitoring	One-time planning differs from managed account

Notes and examples

Prohibited or Unethical Practices

Practice	Why wrong
Guaranteeing a profit or no loss	Securities involve risk unless backed by an actual guarantor and properly disclosed
Misrepresenting registration	Registration does not imply approval, merit, or recommendation by regulator
Borrowing from or lending to clients	Generally prohibited unless a recognized exception applies
Commingling funds	Violates custody and fiduciary principles
Unauthorized trading	Client authorization is required
Churning	Excessive trading to generate compensation
Front running	Trading ahead of client orders
Insider trading	Trading on material nonpublic information or tipping
Selling away	Private securities transactions outside firm supervision
Unsuitable recommendation	Recommendation does not match client facts
Excessive fees	Fee must be reasonable relative to services
False advertising	Misleading testimonials, rankings, performance, or credentials
Cherry-picked performance	Showing only winners or omitting material assumptions
Failure to disclose conflict	Compensation, affiliation, principal capacity, referral fee, or product incentive hidden

Principal and Agency Cross Transactions

Transaction	Requirement concept	Trap
Principal trade	Adviser sells to or buys from client for adviser’s own account	Requires written disclosure and client consent before completion
Agency cross	Adviser arranges transaction between advisory client and another party while receiving compensation	Requires proper disclosure, consent, confirmations, and ability to revoke
Brokerage referral	Adviser receives benefit for directing trades	Must disclose conflict and still seek best execution
Soft dollars	Client commissions pay for research/brokerage services	Must benefit clients; not for ordinary overhead

Suitability and Client Profile Reference

Core Client Data

Data point	Why it matters
Age and life stage	Risk capacity, income need, retirement horizon
Financial status	Net worth, income, emergency reserves
Tax status	Taxable vs tax-deferred vs tax-free placement
Investment objectives	Growth, income, preservation, speculation
Risk tolerance	Emotional willingness to accept volatility/loss
Risk capacity	Financial ability to absorb loss
Time horizon	Longer horizon usually supports more volatility
Liquidity needs	Avoid illiquid products for near-term cash needs
Experience and knowledge	Complexity must be appropriate
Legal constraints	Trust terms, ERISA/fiduciary standards, restrictions
Existing holdings	Concentration, correlation, tax basis
Special circumstances	Dependents, health, employment risk, estate goals

Notes and examples

Suitability Shortcuts

Client need	Often suitable	Often unsuitable
Emergency reserve	Bank deposits, Treasury bills, money market funds	Long-term bonds, annuities, limited partnerships
Current income	Bonds, bond funds, dividend stocks, preferred stock	Non-income growth stocks if income is essential
Capital preservation	High-quality short-term debt, insured deposits	Options speculation, small-cap concentration
Long-term growth	Diversified equity funds, ETFs, growth allocation	Excess cash if inflation risk is high
High tax bracket, taxable account	Municipal bonds, tax-efficient equity funds	High-turnover taxable funds
Inflation protection	Equities, TIPS, real assets	Long fixed-rate bonds only
Estate liquidity	Life insurance	Illiquid private placements
Tax deferral	Retirement plans, annuities where appropriate	Annuity inside tax-deferred account without added benefit
Speculation	Options or aggressive equities only if suitable	Speculative product for conservative client

Client Information You Need Before Recommending

Client Fact	Why It Matters
Age and life stage	Time horizon, income needs, retirement planning
Income and expenses	Ability to save, liquidity needs, risk capacity
Net worth	Concentration, diversification, ability to bear loss
Tax status	Taxable vs tax-deferred strategy, municipal suitability
Investment objectives	Growth, income, preservation, speculation
Risk tolerance	Psychological comfort with volatility
Risk capacity	Financial ability to absorb loss
Liquidity needs	Emergency funds, near-term spending
Time horizon	Product maturity, volatility tolerance
Existing holdings	Concentration risk and correlation
Legal constraints	Trusts, fiduciary accounts, employer restrictions
Unique circumstances	ESG preferences, restricted stock, family needs

Trap: a high net worth client is not automatically suitable for high-risk or illiquid investments.

Recommendation Decision Rules

If the Client Needs…	Favor	Avoid or Question
Emergency liquidity	Cash equivalents, money market funds, short-term instruments	Illiquid alternatives, long surrender periods
Current income	Bonds, dividend stocks, income funds, annuities if suitable	Zero-coupon bonds for current income
Capital preservation	High-quality short-term debt, insured deposits, conservative allocation	Long-duration bonds in rising-rate scenarios, speculative stocks
Long-term growth	Diversified equities, equity funds, balanced allocation	Overconcentration in cash
Tax-exempt income	Municipal bonds or muni funds if tax bracket supports it	Munis for low-tax-bracket accounts without analysis
Inflation protection	Equities, TIPS, real assets where suitable	Long fixed-rate investments only
Estate planning	Beneficiary designations, trusts, TOD accounts, insurance review	Product recommendation without legal/tax coordination
Speculation	Options or concentrated positions only if risk profile supports it	Presenting speculation as conservative investing

Investment Policy Statement Checklist

An IPS should usually address:

Return objective.
Risk tolerance and risk capacity.
Time horizon.
Liquidity needs.
Tax considerations.
Legal and regulatory constraints.
Unique circumstances.
Target asset allocation.
Rebalancing rules.
Monitoring and review responsibilities.

Investment Product Decision Matrix

Cash, Debt, and Money Markets

Product	Key features	Major risks	Exam distinction
Treasury bill	Short-term U.S. government obligation sold at discount	Reinvestment, inflation	No periodic coupon
Treasury note/bond	Intermediate/longer U.S. government debt	Interest-rate risk, inflation	State/local tax exemption on interest
STRIPS	Zero-coupon Treasury components	High duration, phantom income in taxable accounts	No current cash interest
Money market fund	Portfolio of short-term instruments	Not the same as bank deposit insurance	Stable objective, but still investment product
Negotiable CD	Bank-issued, often large denomination	Interest-rate and secondary-market risk	FDIC coverage depends on ownership/limits; market price can fluctuate
Commercial paper	Short-term corporate debt	Credit/liquidity risk	High-quality paper may be exempt security
Corporate bond	Corporate debt obligation	Credit, interest-rate, call risk	Higher yield usually means higher risk
Secured bond	Backed by collateral	Collateral value risk	Senior to unsecured debt
Debenture	Unsecured corporate bond	Credit risk	Backed by issuer’s general credit
Subordinated debenture	Lower priority unsecured debt	Greater credit risk	Higher yield required
Convertible bond	Bond convertible into common stock	Equity downside, call risk	Lower coupon due to conversion feature
Callable bond	Issuer can redeem early	Reinvestment risk	Call benefits issuer when rates fall
Put bond	Investor can sell back to issuer	Lower yield	Put benefits investor when rates rise
Municipal GO bond	Backed by taxing power	Political/tax-base risk	Safer than many revenue bonds if tax base strong
Municipal revenue bond	Backed by project revenues	Project/revenue risk	Feasibility studies matter
Private activity muni	Benefits private entity	AMT risk	Interest may trigger alternative minimum tax issues

Notes and examples

Equity and Pooled Products

Product	Key features	Major risks	Exam distinction
Common stock	Ownership, voting, residual claim	Market/business risk	Highest claim risk among corporate securities
Preferred stock	Fixed dividend preference	Interest-rate risk, limited upside	Equity security with bond-like income
Cumulative preferred	Missed dividends accumulate	Issuer credit risk	Dividends in arrears owed before common dividends
Participating preferred	Can receive extra dividends	Still limited upside	Rare but testable
ADR	U.S.-traded certificate for foreign shares	Currency/political risk	Simplifies U.S. trading of foreign equity
Mutual fund	Redeemable investment company	Market risk, expenses, tax distributions	Bought/sold at NAV plus any sales charge
ETF	Exchange-traded pooled portfolio	Market, tracking, liquidity risk	Intraday trading; may trade at premium/discount
Closed-end fund	Fixed shares traded on exchange	Premium/discount risk	Does not redeem at NAV
UIT	Fixed portfolio for defined life	Market risk, limited management	Unit holders redeem; portfolio generally unmanaged
Hedge fund/private fund	Pooled private investment	Liquidity, leverage, complexity	Suitable only for sophisticated/qualified investors
REIT	Real estate investment trust	Real estate, rate, sector risk	Equity REIT owns property; mortgage REIT owns loans
DPP/limited partnership	Pass-through business interest	Illiquidity, tax complexity	Limited partners risk loss of limited liability if they manage

Derivatives, Insurance, and Annuities

Product	Key features	Major risks	Exam distinction
Call option	Right to buy underlying asset	Premium loss	Bullish for buyer
Put option	Right to sell underlying asset	Premium loss	Bearish or protective for buyer
Covered call	Long stock plus short call	Opportunity risk	Income strategy, limited upside
Protective put	Long stock plus long put	Premium cost	Downside protection
Futures	Obligation to buy/sell later	Leverage, margin, price risk	Commodity futures as such are not securities, but related products can be
Fixed annuity	Insurer guarantees payments/interest	Inflation, insurer claims-paying risk	Generally not a security
Variable annuity	Separate account investment performance	Market risk, expenses	Security; requires securities registration/licensing
Immediate annuity	Payments begin soon after purchase	Liquidity loss	Income-focused
Deferred annuity	Accumulation before payout	Surrender charges, tax penalties	Tax-deferred growth
Term life	Death benefit for term	No cash value	Pure insurance
Whole life	Permanent insurance with cash value	Cost, low flexibility	Not primarily a securities product
Variable life	Cash value in separate account	Market risk	Security
Universal life	Flexible premium/death benefit	Lapse risk	Securities status depends on variable investment component

Common vs Preferred Stock

Feature	Common Stock	Preferred Stock
Ownership	Yes	Yes, but more income-like
Voting rights	Usually yes	Usually limited
Dividends	Variable, not guaranteed	Fixed or stated dividend preference
Liquidation priority	Last	Ahead of common, behind debt
Growth potential	Higher	Usually lower
Interest-rate sensitivity	Lower than bonds, varies	Often higher due to fixed dividend

Mutual Funds, Closed-End Funds, ETFs, and UITs

Product	Key Features	Common Trap
Open-end mutual fund	Redeemable at NAV; forward pricing; prospectus	Bought/sold from fund, not intraday exchange trading
Closed-end fund	Fixed shares; exchange traded; can trade at premium/discount	Market price may differ from NAV
ETF	Exchange traded; intraday pricing; tax efficiency potential	Can still have tracking error and market risk
UIT	Fixed portfolio, unmanaged or lightly managed, termination date	Not the same as an actively managed mutual fund
Money market fund	Seeks stability and liquidity	Not identical to an insured bank deposit unless specifically stated

Cost Item	Meaning
Front-end load	Sales charge paid at purchase
Back-end load / CDSC	Sales charge paid on redemption, often declines over time
12b-1 fee	Distribution/marketing fee included in expenses
Expense ratio	Ongoing fund operating costs
Breakpoint	Reduced sales charge at higher investment levels
Rights of accumulation	Prior purchases count toward breakpoint
Letter of intent	Investor commits to reach breakpoint level over stated period

Trap: a lower front-end load is not always cheaper if ongoing expenses are higher and the holding period is long.

Bond and Interest-Rate Reference

Relationship	Rule
Interest rates up	Existing bond prices down
Interest rates down	Existing bond prices up
Longer maturity	More interest-rate sensitivity
Lower coupon	More interest-rate sensitivity
Higher coupon	Less price sensitivity than otherwise similar lower-coupon bond
Premium bond	Coupon rate greater than current yield greater than yield to maturity
Discount bond	Yield to maturity greater than current yield greater than coupon rate
Callable premium bond	Yield to call can be lower than yield to maturity
Zero-coupon bond	Large duration risk and no periodic income
Bond ladder	Reduces reinvestment and maturity concentration risk
Barbell strategy	Short and long maturities; less middle exposure
Bullet strategy	Maturities concentrated around target date

Risk Reference

Risk	Meaning	Most exposed
Systematic risk	Market-wide risk not diversified away	Equities, broad market portfolios
Unsystematic risk	Company/industry-specific risk	Concentrated portfolios
Interest-rate risk	Bond price declines as rates rise	Long-term bonds, preferred stock
Reinvestment risk	Income reinvested at lower rates	Callable bonds, short maturities
Credit/default risk	Issuer cannot pay	Low-rated debt
Inflation/purchasing power risk	Return fails to keep up with inflation	Cash, fixed income
Liquidity risk	Cannot sell quickly at fair price	DPPs, private placements, thinly traded issues
Call risk	Issuer redeems when rates fall	Callable bonds
Prepayment risk	Principal returned earlier than expected	Mortgage-backed securities
Extension risk	Principal returned later than expected	Mortgage-backed securities when rates rise
Currency risk	Exchange-rate movement affects return	Foreign investments
Political/regulatory risk	Law or political events impair value	Foreign securities, regulated sectors
Business risk	Issuer operations underperform	Common stock, corporate bonds
Longevity risk	Client outlives assets	Retirees relying on portfolio withdrawals
Sequence-of-returns risk	Poor early retirement returns damage sustainability	Retirees taking withdrawals

Portfolio Theory and Calculation Sheet

Core Formulas

\[ \text{Total return} = \frac{\text{income} + \text{ending value} - \text{beginning value}} {\text{beginning value}} \]\[ \text{Tax-equivalent yield} = \frac{\text{tax-free yield}}{1 - \text{marginal tax rate}} \]\[ \text{After-tax yield} = \text{taxable yield} \times (1 - \text{marginal tax rate}) \]\[ 1 + r_{\text{real}} = \frac{1 + r_{\text{nominal}}}{1 + \text{inflation rate}} \]\[ \text{Required return under CAPM} = R_f + \beta(R_m - R_f) \]\[ \text{Sharpe ratio} = \frac{\text{portfolio return} - \text{risk-free rate}} {\text{portfolio standard deviation}} \]

Formula Table

Measure	Plain formula	Use
Holding-period return	Income plus price change, divided by beginning value	Total performance over period
Current yield	Annual income divided by current market price	Bond or income stock cash yield
Approximate YTM	Annual interest plus annualized discount/premium, divided by average of par and price	Bond yield estimate
Tax-equivalent yield	Tax-free yield divided by 1 minus tax rate	Compare municipal to taxable bond
After-tax yield	Taxable yield times 1 minus tax rate	Compare taxable investments
Real return	Approximate: nominal return minus inflation	Purchasing-power analysis
Expected return	Sum of each possible return times its probability	Probability-weighted forecast
Alpha	Actual return minus CAPM required return	Risk-adjusted outperformance
Beta	Security covariance with market divided by market variance	Systematic risk
Standard deviation	Dispersion of returns around mean	Total volatility
Correlation	Degree two assets move together	Diversification benefit
Sharpe ratio	Excess return divided by standard deviation	Risk-adjusted return using total risk
Treynor ratio	Excess return divided by beta	Risk-adjusted return using systematic risk
Dividend payout ratio	Dividends per share divided by EPS	Portion of earnings paid out
EPS	Earnings available to common divided by common shares	Profit per common share
P/E ratio	Market price per share divided by EPS	Valuation multiple
Book value per share	Common equity divided by common shares	Accounting value per share
Current ratio	Current assets divided by current liabilities	Liquidity
Quick ratio	Cash plus marketable securities plus receivables, divided by current liabilities	Stricter liquidity
Debt-to-equity	Total debt divided by total equity	Leverage
NAV per fund share	Assets minus liabilities, divided by shares	Mutual fund pricing

Portfolio Concepts

Concept	Meaning	Exam use
Diversification	Combining assets to reduce unsystematic risk	Does not eliminate market risk
Efficient frontier	Portfolios with highest expected return for each risk level	Rational portfolio selection
Capital market line	Efficient portfolios combining market portfolio and risk-free asset	Uses total risk
Security market line	CAPM relationship between beta and required return	Uses systematic risk
Beta greater than 1	More volatile than market	Aggressive
Beta less than 1	Less volatile than market	Defensive
Beta near 0	Little market correlation	Cash-like or market-neutral
Negative correlation	Assets tend to move opposite	Strong diversification potential
Rebalancing	Restores target allocation	Forces sell-high/buy-low discipline but may create tax costs
Dollar-cost averaging	Invest fixed dollars periodically	Does not guarantee profit or prevent loss
Strategic allocation	Long-term target mix	Policy-driven
Tactical allocation	Short-term deviation from target	Market view-driven

Quick Yield Example

A municipal bond yields 3.0 percent. The client’s marginal tax rate is 24 percent.

Tax-equivalent yield = 3.0 percent divided by 0.76 = 3.95 percent.

A taxable bond must yield more than 3.95 percent before tax to beat the 3.0 percent tax-free municipal yield for that client, ignoring state taxes and risk differences.

Tax Reference

Item	Tax treatment concept	Exam trap
Ordinary income	Wages, interest, nonqualified dividends, short-term gains	Taxed less favorably than long-term capital gains
Short-term capital gain	Gain on asset held one year or less	Generally taxed as ordinary income
Long-term capital gain	Gain on asset held more than one year	Preferential rates may apply
Qualified dividend	Dividend meeting statutory requirements	Not all dividends qualify
Municipal interest	Generally federally tax-exempt	Private activity bonds may affect AMT; out-of-state interest may face state tax
U.S. Treasury interest	Federally taxable	Exempt from state and local income tax
Corporate bond interest	Taxable as ordinary income	Higher nominal yield may not mean higher after-tax yield
Capital loss	Offsets capital gains, then limited ordinary income offset	Unused losses can carry forward
Wash sale	Loss disallowed when substantially identical security bought around sale window	Adds disallowed loss to basis of replacement shares
Return of capital	Reduces basis	Taxable as capital gain after basis reaches zero
Stock split	Total basis unchanged; per-share basis adjusted	No immediate taxable event
Reinvested dividends	Increase basis because dividend is taxable when paid	Avoid double taxation on sale
Inherited property	Often receives stepped-up basis	Gifted property uses different basis logic
Tax-deferred account	Tax delayed until distribution	Not tax-free
Roth-style account	Qualified distributions may be tax-free	Contributions are after-tax
Traditional retirement account	Deductible or pre-tax funding may apply	Distributions generally ordinary income
Annuity withdrawal	Earnings generally come out first before annuitization	Surrender charges and tax penalties may apply
Annuitized payment	Part principal return, part earnings under exclusion ratio	Once basis is recovered, payments taxable

Notes and examples

Taxable, Tax-Deferred, and Tax-Exempt

Category	Meaning	Examples
Taxable	Income/gains taxed currently unless offset	Brokerage account interest, dividends, realized gains
Tax-deferred	Tax postponed until distribution or event	Traditional retirement accounts, nonqualified annuities
Tax-exempt	Certain income exempt from specified taxes	Municipal bond interest, depending on issuer and investor residence

Trap: “tax-exempt” often means exempt from federal income tax, not automatically exempt from state, local, AMT, or other tax effects.

Cost Basis and Gains

Term	Meaning
Cost basis	Amount invested plus certain adjustments
Capital gain	Sale price above basis
Capital loss	Sale price below basis
Realized gain/loss	Occurs when sold or exchanged
Unrealized gain/loss	Paper gain/loss before sale
Holding period	Determines short-term vs long-term treatment
Return of capital	Generally reduces basis before creating taxable gain

Wash Sale Concept

A wash sale rule may disallow a tax loss if an investor sells a security at a loss and purchases a substantially identical security within the applicable before/after window. The disallowed loss is generally added to the basis of the replacement position.

Trap: buying replacement shares before the sale can still trigger the rule.

Retirement Account Decision Points

Account Type	High-Level Tax Treatment
Traditional IRA / traditional employer plan	Potential pre-tax contribution; taxable distributions
Roth account	After-tax contribution; qualified distributions may be tax-free
Taxable brokerage account	Current tax on dividends, interest, and realized gains
529 plan	Education-focused tax advantages under qualifying rules
Nonqualified annuity	Tax-deferred growth; ordinary income treatment on earnings when withdrawn

Suitability trap: do not recommend a product only for tax deferral if the client already receives tax deferral in the account and does not need the product’s other features.

Retirement, Education, and Estate Planning

Tool/account	Primary purpose	Tax/ownership concept	Suitability note
Traditional IRA	Individual retirement savings	Possible deductible contribution; taxable distributions	Useful when current deduction is valuable
Roth IRA	After-tax retirement savings	Qualified tax-free distributions	Useful when future tax rate may be higher
Employer plan	Workplace retirement accumulation	Salary deferral and possible employer match	Match is usually a high-priority benefit
Rollover	Move retirement assets	Must preserve tax-qualified status	Mishandled rollovers can create tax
529 plan	Education savings	Tax-free qualified education withdrawals	Donor may retain control; investment options limited
Coverdell ESA	Education savings	Qualified education tax benefits	Contribution limits and income limits are testable in current materials
UTMA/UGMA	Custodial account for minor	Irrevocable gift to minor	Counts as minor’s asset; custodian controls until termination age
Trust	Fiduciary management of assets	Revocable vs irrevocable treatment differs	Investment policy must follow trust terms
JTWROS	Joint ownership with survivorship	Survivor receives property at death	Avoids probate for that asset
Tenants in common	Joint ownership without survivorship	Decedent’s share passes through estate	Unequal ownership allowed
Life insurance	Death benefit and estate liquidity	Death benefit often income-tax-free to beneficiary	Product choice should start with insurance need
Variable annuity	Tax-deferred investment with insurance features	Ordinary-income taxation on earnings	High expenses; unsuitable if tax deferral already available without benefit

Economic and Market Indicators

Indicator	Meaning	Market implication
GDP	Total economic output	Growth supports earnings; overheating can invite tightening
CPI	Consumer inflation measure	Higher inflation hurts fixed income and purchasing power
PPI	Producer price measure	Can foreshadow consumer inflation
Unemployment rate	Labor-market condition	Lagging indicator
Yield curve	Yields across maturities	Inversion can signal slowdown expectations
Leading indicators	Predictive economic data	Used for cycle forecasting
Coincident indicators	Move with economy	Confirm current conditions
Lagging indicators	Confirm after the fact	Less useful for forecasting
Expansion	Rising output/employment	Cyclical stocks may perform well
Peak	Growth tops out	Inflation/rate pressure may build
Contraction	Declining output	Defensive assets may be favored
Trough	Downturn bottoms	Early-cycle opportunities may emerge

Notes and examples

Monetary and Fiscal Policy

Policy action	Who does it	Typical effect
Lower short-term rates	Central bank	Stimulates borrowing and spending
Raise short-term rates	Central bank	Slows inflation and borrowing
Open market purchases	Central bank	Adds reserves/liquidity
Open market sales	Central bank	Drains reserves/liquidity
Increase government spending	Legislature/executive fiscal policy	Stimulative
Decrease taxes	Fiscal policy	Stimulative
Decrease spending or raise taxes	Fiscal policy	Restrictive

Account Authority and Fiduciary Roles

Account/role	Key point	Exam trap
Individual account	One owner controls	Death freezes account until estate authority
Joint tenants with rights of survivorship	Survivor owns account	Not controlled by will for that asset
Tenants in common	Each owner has fractional interest	No automatic survivorship
Transfer on death	Beneficiary receives after death	Beneficiary has no lifetime control
Custodial account	Custodian manages for minor	Gift is irrevocable
Discretionary account	Adviser can decide action, asset, or amount	Written authority required
Margin account	Borrowing against securities	Requires margin agreement; increases risk
Fiduciary account	Trustee/executor/guardian manages for beneficiary	Must follow fiduciary duty and governing document
Corporate account	Entity authorization required	Need resolutions/authorized traders
Partnership account	Authority from partnership agreement	General partner typically manages
Trust account	Trustee authority controls	Trust document governs investments

Business Entity Cheat Sheet

Entity	Liability	Tax concept	Exam use
Sole proprietorship	Owner personally liable	Pass-through	Simple but unlimited liability
General partnership	General partners personally liable	Pass-through	Each general partner can bind partnership
Limited partnership	General partner liable; limited partners limited if passive	Pass-through	DPP structure often uses LP
LLC	Limited liability for members	Often pass-through	Flexible structure
C corporation	Shareholder liability limited	Entity-level tax plus shareholder tax on dividends	Double taxation concept
S corporation	Shareholder liability limited	Pass-through if requirements met	Restrictions on shareholders/classes
Trust	Trustee manages for beneficiaries	Depends on trust type	Fiduciary investment standards
Nonprofit	Mission-driven entity	Special tax status possible	Securities may be exempt but antifraud applies

Common Exam Traps Checklist

Law and Registration

Registration never means regulator approval or recommendation.
Antifraud rules apply even when a security or transaction is exempt.
An IA exclusion means the person is not an IA; an IA exemption means the person is an IA but need not register.
Federal covered advisers are not state-registered as IAs, but state notice filing and antifraud authority can remain.
IARs of federal covered advisers are state-registered only where they have a place of business.
Broker-dealer exclusion is not the same as investment adviser exclusion.
Issuer employees are not automatically agents, but can become agents depending on compensation, security type, and transaction.
Private placement exemption focuses on purchaser count/type, investment intent, solicitation, and compensation.
Administrator can investigate and seek injunctions but does not personally impose prison sentences.
Public interest plus statutory cause is the pattern for denial, suspension, or revocation.

Notes and examples

Ethics

A fiduciary cannot rely on disclosure alone if the recommendation remains improper.
Time-and-price discretion is not the same as full discretionary authority.
Principal trades require special disclosure and consent before completion.
Soft dollars are not automatically illegal, but conflicts and client benefit matter.
Testimonials, rankings, and performance ads must not be misleading.
Referral fees and solicitor arrangements require disclosure and proper agreements.
Churning can occur when trading is excessive relative to client objectives.
Borrowing from clients, lending to clients, and sharing profits/losses are heavily restricted.
Insider trading includes tipping others, not just personal trading.
Client consent cannot waive securities-law compliance.

Products and Suitability

Variable annuities and variable life insurance are securities; fixed annuities are generally not.
Mutual funds redeem at NAV; closed-end funds trade in the secondary market at premium or discount.
ETFs trade intraday but still have market and tracking risk.
Callable bonds benefit issuers; put bonds benefit investors.
Long maturities and low coupons increase duration risk.
Municipal bonds are not automatically suitable just because interest is tax-exempt.
High yield usually means high risk.
Illiquid products are poor matches for emergency reserves.
Tax deferral is less valuable inside an already tax-deferred account unless other benefits justify the product.
Diversification reduces unsystematic risk, not systematic market risk.

Fiduciary Duty: The Series 65 Center of Gravity

Investment advisers owe fiduciary duties to clients. On exam questions, fiduciary duty usually means:

Duty	What It Requires
Duty of care	Reasonable basis, client-specific advice, best execution where applicable, ongoing review if agreed
Duty of loyalty	Put client interests ahead of adviser interests, disclose conflicts, obtain required consent
Full and fair disclosure	Explain material facts a reasonable client would consider important
Conflict management	Avoid, mitigate, or disclose conflicts; do not hide compensation incentives
Fair dealing	No misleading statements, cherry-picking, favoritism, or manipulative practices

Trap: “The client signed a waiver” is usually not enough if the clause attempts to waive legal rights, excuse fraud, or mislead the client about the adviser’s obligations.

Advisory Contracts: High-Yield Clauses

Contract Issue	Exam Rule to Remember
Assignment	Advisory contracts generally cannot be assigned without client consent
Partnership changes	Clients must be notified of material changes in partnership membership
Performance fees	Generally restricted; allowed only under specific exceptions
Hedge clauses	Problematic if they imply the client waives rights or the adviser avoids legal responsibility
Fees	Must be reasonable, disclosed, and not misleading
Services	The client should understand what the adviser will and will not do
Discretion	Must be clearly authorized; time/price discretion is treated differently from full discretion

Custody

Custody means the adviser has access to or possession of client funds or securities, or authority that allows withdrawal of client assets.

Examples that may create custody:

Holding client securities or checks.
Acting as trustee or having similar legal authority over client assets.
Having authority to deduct advisory fees from client accounts.
Having login credentials or authority allowing asset movement.

Custody usually requires heightened safeguards, notice, records, and client account statements.

Trap: fee deduction authority can create custody-like issues even if the adviser never physically holds securities.

Discretion

Discretion means the adviser can decide one or more of the following without first obtaining client approval for each trade:

Which security to buy or sell.
Whether to buy or sell.
How much to buy or sell.

Not usually treated as full discretion:

Choosing only the time of execution.
Choosing only the price of execution.

Trap: “Just rebalance when appropriate” may be discretionary authority if the adviser decides what and how much to trade.

Principal and Agency Cross Transactions

Transaction Type	Meaning	Exam Concern
Principal transaction	Adviser sells from or buys for its own account against the client	Conflict of interest; disclosure and consent issues
Agency cross transaction	Adviser or affiliate represents both sides of a transaction	Conflict, fairness, and disclosure requirements

Decision rule: when the adviser benefits on the other side of the trade, assume disclosure and client consent are central.

Borrowing, Lending, and Commingling

High-risk conduct:

Borrowing money from a client unless a recognized exception applies.
Lending money to a client outside permitted circumstances.
Commingling client assets with firm assets.
Using client securities for adviser benefit.
Guaranteeing a client against loss.
Sharing in gains and losses without meeting strict conditions.

Trap: “The client agreed” does not automatically make the practice permissible.

Advertising and Communications

Problematic advertising includes:

False or misleading claims.
Guarantees of profit or guarantees against loss.
Cherry-picked performance.
Misleading testimonials, endorsements, or ratings.
Unsupported claims of expertise.
Omission of material risks or fees.
Use of hypothetical or back-tested performance without required context and controls.
Implying government approval because a person is registered.

Exam shortcut: registration means permission to do business, not endorsement of skill, honesty, or performance.

Last-Week Review Plan

Time available	Best use
2 hours	Drill definitions, IA/IAR/BD/agent distinctions, exempt securities vs exempt transactions
4 hours	Add ethics scenarios, Administrator powers, registration mechanics, and product suitability
1 day	Complete mixed practice, review every missed explanation, then memorize formulas and bond relationships
2 to 3 days	Rotate law, ethics, products, tax, and portfolio math; use timed sets to build endurance

Practical next step: take a timed mixed Series 65 practice set, tag every miss by category, then rework the weakest law/ethics and calculation topics until you can explain the rule without looking it up.

What This Cheat Sheet Is For

This independent Cheat Sheet is for candidates preparing for NASAA’s Series 65 — Uniform Investment Adviser Law Examination \(\text{Series 65}\). Use it after your first full content pass and before topic drills, mock exams, and detailed explanations.

The exam rewards candidates who can:

Classify people correctly: investment adviser, investment adviser representative, broker-dealer, agent, issuer, client, customer.
Separate state registration, federal covered status, exempt securities, and exempt transactions.
Apply adviser fiduciary duties, ethics rules, disclosure obligations, and prohibited practices.
Match investment recommendations to a client’s risk tolerance, time horizon, liquidity needs, tax status, and objectives.
Understand core products, portfolio theory, economics, retirement planning, and tax consequences.

Quick review strategy: read this page once for structure, then use original practice questions and topic drills to test whether you can apply the rules under exam-style wording.

High-Yield Series 65 Map

Area	What to Know Cold	Common Candidate Mistake
State securities law	Administrator authority, registration, exemptions, anti-fraud rules	Thinking “exempt” means exempt from anti-fraud
Investment advisers	Definition, exclusions, federal covered advisers, IAR rules	Confusing adviser compensation with brokerage commissions
Ethics and fiduciary duty	Disclosure, conflicts, custody, discretion, advertising, contracts	Assuming disclosure always cures an improper practice
Client recommendations	Suitability, objectives, constraints, IPS, diversification	Recommending a product before identifying client facts
Products	Stocks, bonds, funds, ETFs, annuities, options, alternatives	Focusing on return while ignoring liquidity, taxes, and risk
Portfolio concepts	Risk/return, beta, duration, diversification, CAPM, performance ratios	Treating all risk as diversifiable
Economics	Rates, inflation, GDP, business cycles, monetary/fiscal policy	Reversing the effect of interest-rate changes on bond prices
Tax and retirement	Basis, gains/losses, retirement accounts, estate basics	Calling something “tax-free” without checking federal/state context

Notes and examples

Legal and Registration Traps

Exempt security is not the same as exempt transaction.
Exempt from registration is not exempt from anti-fraud.
Federal covered does not mean unregulated by states for all purposes.
Notice filing is not the same as full state registration.
Registration is not an endorsement by the Administrator, SEC, NASAA, or any regulator.
An individual may need registration even if the firm’s status seems clear.
Unsolicited must actually be unsolicited; a recommendation or promotion can destroy the fact pattern.
Issuer exemption facts differ from broker-dealer and agent facts.
Investment advice can exist even when a person uses titles like consultant, planner, coach, or analyst.

Ethics Traps

Disclosure must be full, fair, and timely.
A client signature does not automatically cure an unethical practice.
Conflicts must not be hidden in vague language.
Performance advertising must not be cherry-picked or misleading.
Borrowing from clients is a red-flag fact pattern.
Custody and discretion create heightened obligations.
Referral compensation must not be undisclosed.
“Guaranteed return” is almost always wrong unless the guarantee is legally valid and clearly tied to a guaranteed product or issuer obligation.

Recommendation Traps

More return usually means more risk.
Safety of principal and high income rarely coexist without tradeoffs.
Municipal bonds are not automatically suitable for every client.
Long-term bonds are not automatically conservative.
Illiquid products are unsuitable for clients with near-term cash needs.
Tax deferral alone may not justify high fees.
Concentrated employer stock creates single-company risk.
Past performance does not prove future results.
A sophisticated client can still receive an unsuitable recommendation.

Core Legal Vocabulary

The “Who Is Regulated?” Decision Table

Term	Core Idea	Exam Trigger Words
Investment adviser	In the business of giving advice about securities for compensation	Fees for portfolio advice, asset allocation involving securities, advisory newsletters tailored to clients
Investment adviser representative	Individual associated with an adviser who gives advice, manages accounts, solicits advisory clients, or supervises those activities	“Employee of advisory firm,” “solicits clients,” “manages client portfolios”
Broker-dealer	Business that effects securities transactions for others or for its own account	Executes trades, brokerage commissions, market making
Agent	Individual representing a broker-dealer or certain issuers in securities transactions	Registered rep, salesperson, individual taking orders
Issuer	Entity that issues or proposes to issue a security	Corporation issuing stock, municipality issuing bonds, fund issuing shares
Administrator	State securities regulator under the Uniform Securities Act framework	Registration, subpoenas, stop orders, consent to service, investigations

Notes and examples

The Investment Adviser Definition: ABC Test

An investment adviser generally satisfies all three:

Letter	Requirement	Practical Meaning
A — Advice	Gives advice, reports, or analysis about securities	Recommending securities, portfolios, asset allocation involving securities
B — Business	Holds out as providing advice or provides advice as a regular business activity	Not merely isolated personal comments
C — Compensation	Receives economic benefit	Fees, wrap fees, advisory subscriptions, referral compensation, bundled compensation

Trap: compensation does not have to be a separate line item called an “advisory fee.” Any economic benefit can satisfy the compensation element.

Common Investment Adviser Exclusions

A person may avoid the investment adviser definition if the advice is outside the statutory definition or falls into an exclusion.

Exclusion Category	Exam Shortcut
Banks, savings institutions, trust companies	Often excluded from adviser definition under the tested framework
Broker-dealers	Excluded only when advice is solely incidental to brokerage business and no special advisory compensation is received
Lawyers, accountants, teachers, engineers	Excluded when advice is incidental to the professional practice
Publishers	Excluded when publication is bona fide, general, regular, and not tailored to individual clients
Federal covered advisers	Not state-registered as advisers, but may have notice filings and IAR-related state obligations
Other statutory exclusions	Apply only if the facts fit exactly

Trap: “I am not charging a fee” is not always enough. The question may hide compensation through commissions, referral payments, bundled fees, or other benefits.

State Registration and Federal Covered Concepts

Registration Categories to Keep Separate

Registration Question	Applies To	Key Point
Must the security be registered?	Stock, bond, fund interest, investment contract	May be registered, exempt, federal covered, or transaction-exempt
Must the firm/person be registered?	IA, IAR, broker-dealer, agent	Person registration is separate from security registration
Is the transaction exempt?	Specific sale or offer	Exempts that transaction, not necessarily the security or person
Does anti-fraud still apply?	Everyone	Yes. Anti-fraud rules remain in force

Notes and examples

Federal Covered Securities

Federal covered securities are primarily regulated at the federal level for registration purposes. States generally cannot require full state registration, but they may still require items such as notice filings, fees, consent to service of process, and anti-fraud compliance.

Common examples include:

Securities listed on major national exchanges.
Securities issued by registered investment companies.
Certain securities sold under federal exemptions.
Securities senior to or equal in rank to listed securities, depending on the tested fact pattern.

Trap: federal covered status limits state registration authority over the security; it does not eliminate state anti-fraud authority.

Federal Covered Advisers vs State-Registered Advisers

Adviser Type	General Review Point
Federal covered adviser	Registered with the SEC or excluded from state registration because of federal status; states may require notice filings and fees
State-registered adviser	Registers with one or more states and is subject to state adviser rules
IAR of a federal covered adviser	States may still regulate/register IARs with a place of business in the state under tested rules
IAR of a state adviser	Usually registered in states where required based on office and client activity facts

Decision rule: do not assume the advisory firm’s registration status automatically answers the IAR’s registration question. The exam often separates the two.

Securities: What Is and Is Not a Security

Common Securities

Usually a Security	Notes
Common stock and preferred stock	Equity securities
Corporate bonds and debentures	Debt securities
Municipal bonds	Securities; may be exempt from registration
Investment company shares	Mutual funds, closed-end funds, ETFs
Variable annuities and variable life products	Securities because investment risk is borne by the owner
Options	Securities and derivatives
Limited partnership interests	Often securities due to passive investor reliance on managers
REIT interests	Securities
Investment contracts	Broad catch-all category

Notes and examples

Common Nonsecurity Items

Usually Not a Security	Notes
Fixed annuities	Insurance product with insurer-backed fixed return
Whole life insurance	Traditional insurance, not a security
Term life insurance	Pure insurance protection
Traditional bank deposits	CDs and deposits may be banking products, though some instruments require careful facts
Collectibles and commodities themselves	A commodity alone is not necessarily a security, but pooled or managed programs may be

Trap: a product can look like insurance but still be a security if returns vary with a securities portfolio and the investor bears investment risk.

Portfolio Theory and Risk Review

Types of Risk

Risk	Meaning	Diversifiable?
Business risk	Company-specific operating risk	Usually yes
Financial risk	Leverage/debt burden risk	Usually yes
Market risk	Broad market movement	No
Interest-rate risk	Bond prices fall when rates rise	No for rate exposure
Reinvestment risk	Income reinvested at lower rates	Partly
Inflation risk	Purchasing power declines	No/partly
Liquidity risk	Cannot sell quickly at fair price	Partly
Default / credit risk	Issuer fails to pay	Partly
Call risk	Bond called when rates fall	Partly
Currency risk	Exchange-rate changes	Partly
Political/regulatory risk	Government or legal changes	Partly
Event risk	Unexpected company or market event	Partly

Notes and examples

Core principle: diversification reduces unsystematic risk, not systematic market risk.

Key Portfolio Measures

Measure	What It Tells You	Higher Means
Standard deviation	Total volatility	More variability
Beta	Sensitivity to market movements	More market risk if above 1
Alpha	Return above/below expected return for risk	Manager outperformance if positive
R-squared	How much movement is explained by benchmark	Benchmark fit is stronger
Sharpe ratio	Excess return per unit of total risk	Better risk-adjusted performance
Treynor ratio	Excess return per unit of beta risk	Better market-risk-adjusted performance
Jensen’s alpha	Performance vs CAPM-predicted return	Skill or unexplained excess return
Duration	Bond price sensitivity to rate changes	More interest-rate sensitivity

CAPM

\[ E(R_i)=R_f+\beta_i\big(E(R_m)-R_f\big) \]

Where:

\(E(R_i)\) = expected return of the investment.
\(R_f\) = risk-free rate.
\(\beta_i\) = beta of the investment.
\(E(R_m)-R_f\) = market risk premium.

Trap: beta measures market risk, not total risk. A poorly diversified portfolio can have low beta but still carry substantial company-specific risk.

Efficient Frontier and Diversification

Concept	Exam Meaning
Efficient frontier	Portfolios offering highest expected return for a given risk level
Correlation	Degree to which assets move together
Negative correlation	Best diversification benefit
Low positive correlation	Still helpful
Perfect positive correlation	Little or no diversification benefit
Asset allocation	Major driver of portfolio risk and return
Rebalancing	Restores target allocation; may force buy-low/sell-high discipline

Trap: adding more securities does not help much if they are highly correlated.

Bond Review

Bond Price and Rate Relationship

If Interest Rates…	Existing Bond Prices…	Why
Rise	Fall	Existing coupons are less attractive
Fall	Rise	Existing coupons are more attractive

Notes and examples

Duration Rules

Duration is higher when:

Maturity is longer.
Coupon is lower.
Yield is lower.
The bond is a zero-coupon bond.

Duration is lower when:

Maturity is shorter.
Coupon is higher.
Cash flows are received sooner.

Trap: long-term bonds can lose significant value when rates rise even if the issuer is high quality.

Bond Risks by Product

Bond Type	Main Risks
U.S. Treasury	Interest-rate and inflation risk; minimal credit risk
Corporate bond	Credit, interest-rate, liquidity, call risk
Municipal GO bond	Tax base and issuer credit
Municipal revenue bond	Project or revenue source risk
High-yield bond	Default risk and liquidity risk
Zero-coupon bond	High duration; imputed interest tax issues in taxable accounts
Callable bond	Reinvestment risk when called after rates fall
Mortgage-backed security	Prepayment and extension risk

Bond Yield Terms

Yield	Meaning
Nominal yield	Coupon rate on par value
Current yield	Annual interest divided by current market price
Yield to maturity	Return if held to maturity, assuming payments made
Yield to call	Return if called on call date
Tax-equivalent yield	Taxable yield needed to equal a tax-exempt yield

\[ \text{Tax-equivalent yield}=\frac{\text{tax-exempt yield}}{1-\text{marginal tax rate}} \]

Trap: when a bond is callable, yield to call may be more relevant than yield to maturity, especially if the bond is trading at a premium.

Derivatives, Annuities, and Alternative Products

Options Basics

Position	Right or Obligation	Market View
Long call	Right to buy	Bullish
Short call	Obligation to sell	Neutral to bearish; risky if uncovered
Long put	Right to sell	Bearish or protective
Short put	Obligation to buy	Neutral to bullish; downside risk

Notes and examples

Common strategies:

Covered call: owns stock and sells call; generates income but caps upside.
Protective put: owns stock and buys put; hedges downside.
Long straddle: buys call and put; expects volatility.
Naked option writing: high risk; often unsuitable for conservative clients.

Annuities

Product	Security?	Key Features
Fixed annuity	Generally no	Insurer guarantees fixed rate or payout
Variable annuity	Yes	Separate account; investment risk borne by owner
Indexed annuity	Depends on structure and rules tested	Return tied to index formula with limits
Immediate annuity	Income begins soon after purchase	Income planning
Deferred annuity	Accumulation before payout	Tax deferral and future income

Suitability concerns:

Surrender charges.
Liquidity needs.
Fees and riders.
Tax-deferred status.
Existing retirement account tax deferral.
Age, time horizon, and income need.
Exchange or replacement benefits versus costs.

Trap: a variable annuity inside a tax-deferred retirement account may be redundant unless insurance features justify the cost.

Alternative Investments

Product	Main Appeal	Main Risk
REIT	Real estate exposure, income potential	Real estate, rate, liquidity, leverage risk
DPP / limited partnership	Pass-through tax features, specialized exposure	Illiquidity, business risk, suitability
Hedge fund / private fund	Flexible strategies	Illiquidity, opacity, high fees, eligibility limits
Commodities	Inflation or diversification potential	Volatility and complexity
Structured product	Customized payoff	Credit risk, complexity, liquidity risk

Decision rule: alternatives require stronger suitability support, especially for liquidity, complexity, valuation, and concentration.

Economics Cheat Sheet

Monetary and Fiscal Policy

Policy Action	Usually Intended Effect
Lower interest rates	Stimulate borrowing, spending, investment
Higher interest rates	Slow borrowing and inflation pressure
Open market purchases	Add reserves; downward rate pressure
Open market sales	Drain reserves; upward rate pressure
Tax cuts or higher government spending	Fiscal stimulus
Tax increases or lower government spending	Fiscal restraint

Notes and examples

Business Cycle

Phase	Typical Conditions	Investment Implications
Expansion	Rising output, employment, profits	Equities often benefit
Peak	Capacity pressure, inflation concerns	Policy may tighten
Contraction	Falling output, weaker profits	Defensive assets may be favored
Trough	Weak but stabilizing conditions	Early-cycle assets may recover

Inflation and Rates

Indicator	What It Measures
CPI	Consumer price changes
PPI	Producer/input price changes
GDP	Total economic output
Real GDP	Inflation-adjusted output
Unemployment rate	Labor market slack
Yield curve	Relationship between short and long rates

Common traps:

Inflation erodes purchasing power.
Rising rates generally hurt existing bond prices.
An inverted yield curve may suggest economic slowdown expectations.
A strong domestic currency can help importers and hurt exporters.
Nominal return minus inflation approximates real return.

Retirement, Estate, and Account Ownership Basics

Account Ownership

Form	Key Point
Individual account	Owned by one person
Joint tenants with rights of survivorship	Survivor generally receives ownership at death
Tenants in common	Deceased owner’s share passes through estate or designated path
Transfer on death	Beneficiary receives assets outside probate process where recognized
Trust account	Trustee manages for beneficiaries under trust terms
Custodial account	Adult manages assets for minor under applicable law
Corporate/partnership account	Requires entity authority and documentation

Notes and examples

Estate Planning Concepts

Term	Meaning
Will	Directs property distribution through probate
Trust	Legal arrangement separating legal title and beneficial interest
Revocable trust	Grantor can generally change or revoke
Irrevocable trust	Grantor gives up control under trust terms
Trustee	Fiduciary managing trust assets
Beneficiary	Person/entity benefiting from account or trust
Probate	Court-supervised estate administration
Step-up in basis	Basis may adjust at death under tax rules

Trap: advisers should recognize estate planning issues but avoid giving legal advice unless properly qualified.

Performance and Calculation Review

Return Measures

Measure	Plain-English Formula
Holding period return	Income plus price change divided by beginning value
Current yield	Annual income divided by current price
After-tax yield	Taxable yield multiplied by 1 minus tax rate
Real return approximation	Nominal return minus inflation
Total return	Income plus realized/unrealized price change

Balance Sheet and Cash Flow

Concept	Formula / Meaning
Net worth	Assets minus liabilities
Cash flow	Income minus expenses
Current ratio	Current assets divided by current liabilities
Debt-to-equity	Debt divided by equity/net worth
Emergency fund	Liquid reserve for unexpected expenses

Client-analysis trap: risk tolerance is emotional; risk capacity is financial. Both matter.

Fast Drill Plan After This Review

Use this table to connect quick review to independent companion practice.

If You Miss Questions On…	Drill These Topics
IA vs IAR vs broker-dealer vs agent	Definition questions; exclusion questions; compensation facts
Exempt securities and transactions	Mixed fact patterns; anti-fraud questions
Adviser ethics	Custody, discretion, contracts, advertising, conflicts
Suitability	Client profile cases; IPS questions; product matching
Portfolio theory	Beta, standard deviation, CAPM, Sharpe/Treynor, diversification
Bonds	Duration, yield, call risk, muni tax questions
Funds and annuities	Share classes, expenses, variable products, surrender charges
Tax	Basis, gains/losses, tax-equivalent yield, retirement account treatment
Economics	Fed policy, yield curve, inflation, business cycle questions

Final Exam-Week Review Checklist

Before moving into full mock exams, confirm you can answer these without notes:

What makes someone an investment adviser?
What makes someone an investment adviser representative?
When is a broker-dealer excluded from the adviser definition?
What is the difference between state registration, notice filing, and federal covered status?
What is the difference between an exempt security and an exempt transaction?
Why does anti-fraud still apply even when registration is not required?
What clauses are problematic in advisory contracts?
What facts create custody or discretion?
When is a principal transaction a conflict?
What client facts must be gathered before making a recommendation?
How do rising rates affect bond prices?
Which bonds have the highest duration risk?
When are municipal bonds tax-appropriate?
How do beta and standard deviation differ?
What does diversification reduce?
What costs matter when comparing mutual fund share classes?
Why can variable annuities be unsuitable despite tax deferral?
What is the basic tax-equivalent yield calculation?
How do monetary policy actions affect rates and markets?
What answer choices imply guarantees, omissions, or undisclosed conflicts?

Put the review into practice

Finance Prep

Start Series 65 \u2014 Uniform Investment Adviser Law Examination on Web

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Original Finance Prep practice, independent from NASAA: not official NASAA questions, copied live-exam content, or exam dumps.

Current alignment Aligned to the relevant syllabus, exam elements, competency areas, and topic weights where they are available.

Practice modes Use topic drills, timed mocks, scenario questions, and focused review before deeper mixed practice.

Teaching explanations Explanations show the client, product, compliance, or calculation rule that makes the best answer defensible.

Stable bank Questions are prebuilt and reviewed before publication, so practice is stable and inspectable, not improvised during a quiz.

Study Plan

Series 65 — Uniform Investment Adviser Law Examination Cheat Sheet

High-Yield Topic Map

Core Regulatory Vocabulary

Person and Product Definitions

Investment Adviser Definition: Three-Part Test

Common IA Exclusions

State, Federal, and Person Registration Logic

Who Registers Where?

Investment Adviser SEC vs State Concepts

Common State IA Exemptions

Exempt Securities, Exempt Transactions, and Federal Covered Securities

Key Rule

Exempt Securities

Federal Covered Securities

Exempt Transactions

Exempt Securities

Exempt Transactions

Securities Registration Methods

Three Main Registration Methods

Administrator Powers

Registration Administration and Enforcement

Common Registration Mechanics

Administrator Powers

Denial, Suspension, or Revocation: Two-Part Pattern

Jurisdiction

Adviser Contracts, Brochures, Custody, and Discretion

Advisory Contract Requirements

Brochure Delivery and ADV Concepts

Custody

Discretion

Ethics and Fiduciary Duty

IA/IAR Fiduciary Principles

Prohibited or Unethical Practices

Principal and Agency Cross Transactions

Suitability and Client Profile Reference

Core Client Data

Suitability Shortcuts

Client Information You Need Before Recommending

Recommendation Decision Rules

Investment Policy Statement Checklist

Investment Product Decision Matrix

Cash, Debt, and Money Markets

Equity and Pooled Products

Derivatives, Insurance, and Annuities

Common vs Preferred Stock

Mutual Funds, Closed-End Funds, ETFs, and UITs

Fund Share Class and Cost Traps

Bond and Interest-Rate Reference

Risk Reference

Portfolio Theory and Calculation Sheet

Core Formulas

Formula Table

Portfolio Concepts

Quick Yield Example

Tax Reference

Taxable, Tax-Deferred, and Tax-Exempt

Cost Basis and Gains

Wash Sale Concept

Retirement Account Decision Points

Retirement, Education, and Estate Planning

Economic and Market Indicators

Monetary and Fiscal Policy

Account Authority and Fiduciary Roles

Business Entity Cheat Sheet

Common Exam Traps Checklist

Law and Registration

Ethics

Products and Suitability

Fiduciary Duty: The Series 65 Center of Gravity

Advisory Contracts: High-Yield Clauses

Custody

Discretion

Principal and Agency Cross Transactions

Borrowing, Lending, and Commingling

Advertising and Communications

Last-Week Review Plan

What This Cheat Sheet Is For

High-Yield Series 65 Map

Legal and Registration Traps

Ethics Traps