Module 4: Laws, Regulations, and Guidelines (45% Exam Weight)

Series 66 — Module 4: Laws, Regulations, and Guidelines

Master the Series 66 — Module 4: Laws, Regulations, and Guidelines function of the Series 66 (Combined Uniform State Law) exam with official regulatory rules, quantitative formulas, and targeted practice drills.

Start Series 66 Focused Drill →

Authoritative Series 66 Study Notes

Key Concepts & Regulatory Highlights

The largest Series 66 module (45% of exam), combining state Blue Sky laws (Uniform Securities Act) and federal/NASAA investment adviser regulations, including dual-capacity disclosures, principal/agency cross trades (Section 206(3)), the NASAA 10-business-day oral discretion rule for IARs, 5-year state IA recordkeeping, third-party solicitor rules, and civil/criminal remedies.

📐 Essential Calculation Formulas

Oral Discretion Window (IAR vs. Broker-Dealer Agent)

IAR = Up to 10 Business Days | BD Agent = 0 Days (Written Prior)

Time and price discretion for a specific order on a single trading day is NOT considered discretionary authority.

State IA vs. Broker-Dealer Record Retention

State IA = 5 Years (2 in Office) | Broker-Dealer = 3 Years

If an IA ceases business, it must arrange to preserve records for the remainder of the 5-year period.

📜 Core Regulatory Rules & Requirements

✓Series 66 Dual Prerequisite Rule: Passing the Series 66 qualifies a candidate as both a state Agent and an IAR ONLY when paired with an active Series 7 (General Securities Representative) registration.

✓NASAA 10-Business-Day Oral Discretion Rule: An IAR may exercise discretionary trading authority based on a client's oral instruction for up to 10 business days after the initial discretionary trade before written authorization is required. By contrast, a Broker-Dealer Agent must have written discretionary authorization BEFORE executing the very first discretionary trade.

✓Principal & Agency Cross Transactions (Section 206(3)): Before the completion (settlement) of any principal transaction (or agency cross transaction), the adviser must disclose in writing that it is acting as principal/broker and obtain the client's consent. In an agency cross trade, the adviser may only recommend the trade to ONE side (not both sides).

✓State IA 5-Year Recordkeeping & Home State Rule: State-registered investment advisers must preserve books and records for 5 years (first 2 years in the principal office) and need only satisfy the net worth, bonding, and recordkeeping rules of their home state.

✓Third-Party Cash Solicitors: Under NASAA rules, a solicitor referring clients to an IA for cash compensation must deliver both the adviser's Form ADV Part 2A brochure and a separate written Solicitor Disclosure Document disclosing the referral fee arrangement.

💡 High-Yield Exam Watchouts

•Never confuse Agent vs. IAR rules on sharing in accounts, borrowing/lending, or oral discretion: IARs can NEVER share in a client account and can NEVER borrow from a client (except an affiliated bank/lending institution), but CAN use oral discretion for 10 business days.
•A blanket waiver of compliance with the Uniform Securities Act or the Investment Advisers Act of 1940 in any client contract is ALWAYS null and void.

Why Study Series 66 — Module 4: Laws, Regulations, and Guidelines?

The Series 66 — Module 4: Laws, Regulations, and Guidelines portion of the Combined Uniform State Law (Series 66) 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 66 blueprint and statutory complexity you'll encounter at Prometric.

Oro Pro Pass

Oro Pro Pass — Unlock All 8 FINRA Series, Mock Exams 2–4 & Ad-Free Study

Upgrade to remove all advertisements and unlock full-length disjoint simulations for Series 6, 7, 63, 65, 66, 79, and 24.

View Pro Pass Plans →

Ready for the full simulation experience?

Try a Comprehensive Series 66 Practice Exam →