Module 4: Laws, Regulations, and Guidelines (35% Exam Weight)

Series 65 — Module 4: Laws, Regulations, and Guidelines

Master the Series 65 — Module 4: Laws, Regulations, and Guidelines function of the Series 65 (Uniform Investment Adviser Law) exam with official regulatory rules, quantitative formulas, and targeted practice drills.

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Authoritative Series 65 Study Notes

Key Concepts & Regulatory Highlights

Covers the Investment Advisers Act of 1940 and NASAA Model Rules, including Form ADV Part 1 & Part 2A/2B delivery rules (48-hour / 5-business-day rule), Section 206 fiduciary duties, performance-based fee restrictions (Qualified Clients), Custody Rule safeguards (Rule 206(4)-2), Section 28(e) soft-dollar safe harbor, and advisory contract non-assignment rules.

📐 Essential Calculation Formulas

Qualified Client Thresholds (Rule 205-3 Performance Fees)

>= $1.1M AUM with Adviser OR > $2.2M Net Worth (Excl. Primary Home)

Required before an investment adviser may charge a capital-appreciation / performance-based fee.

NASAA Brochure Delivery Timing (Form ADV Part 2)

48 Hours Prior to Signing OR At Signing + 5 Business Days Free Look

Annual updating amendment must be filed within 90 days of fiscal year-end and delivered within 120 days.

📜 Core Regulatory Rules & Requirements

✓NASAA Brochure Rule (Form ADV Part 2A): Must be delivered at least 48 hours prior to entering into an advisory contract, OR at the time of contract execution if the client is given 5 business days to terminate without penalty (SEC federal rule requires delivery at or before contract execution).

✓Performance-Based Fees (Rule 205-3): Generally prohibited unless the client is a 'Qualified Client' with at least $1.1 million in AUM with the adviser OR a net worth exceeding $2.2 million (excluding primary residence).

✓Custody Rule Safeguards (SEC Rule 206(4)-2 & NASAA): Requires holding client assets in segregated accounts at a Qualified Custodian, written notice to clients, quarterly account statements sent directly by the custodian, and an annual surprise audit by an independent CPA.

✓Section 28(e) Soft-Dollar Safe Harbor: Permits advisers to use client brokerage commission dollars to acquire research and brokerage services that aid investment decision-making, but NEVER for office rent, furniture, computer hardware, travel, or marketing.

✓Advisory Contract Non-Assignment (Section 205): Advisory contracts cannot be assigned without client consent. A transfer of a controlling block (>50%) of the adviser's voting stock constitutes an assignment requiring client consent.

💡 High-Yield Exam Watchouts

•If a state-registered adviser accepts more than $500 in prepaid fees 6 or more months in advance (or >$1,200 for an SEC adviser), it is deemed to have a balance sheet requirement and must include an audited balance sheet with Form ADV Part 2A!
•An adviser executing a principal trade (from its own inventory) or agency cross trade must provide written disclosure and obtain client consent BEFORE the settlement of each specific transaction.

Why Study Series 65 — Module 4: Laws, Regulations, and Guidelines?

The Series 65 — Module 4: Laws, Regulations, and Guidelines portion of the Uniform Investment Adviser Law (Series 65) exam is critical for passing on your first attempt. Understanding these concepts builds both test-day precision and practical regulatory fluency.

Our practice questions and formulas are engineered to mirror the official Series 65 blueprint and statutory complexity you'll encounter at Prometric.

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