Uniform Investment Adviser Law Exam (Series 65) Study Guide

130 scored questions; you must correctly answer at least 92 of the 130 to pass.

180 minutes to complete; the fee is $187.

130 scored questions.

180 minutes (3 hours).

You must answer at least 92 of the 130 scored questions correctly (about 70.8%).

$187.

Individuals seeking to act as investment adviser representatives (IARs) who are not otherwise exempt (e.g., via other credentials or exam combinations).

A legal obligation to act in the client's best interest, placing the client's interests above the adviser's own, with duties of loyalty and care.

An investment adviser provides advice about securities for compensation and owes a fiduciary duty; a broker-dealer executes securities transactions for customers and is generally held to a suitability (not fiduciary) standard, though this line is tested carefully on state exams.

Excessive trading in a client's account by an adviser or agent primarily to generate commissions or fees, rather than to benefit the client — a prohibited/unethical business practice.

The state official (or agency) responsible for administering and enforcing state securities law — including registration of securities, broker-dealers, agents, and investment advisers, and investigating violations.

Notification (filing), coordination (with a federal SEC registration), and qualification (registering directly with the state when no federal filing exists).

Guaranteeing a client against loss, sharing in profits/losses in a client account without proper agreement, or making unsuitable recommendations — all violate fiduciary and ethical standards.

You have roughly 1.4 minutes per question on average, so budgeting time and flagging difficult questions to revisit is a practical strategy.

Fiduciary duty applies to all investment advisers registered or required to register under the Act. It encompasses a duty of care (competence, diligence, proper analysis) and a duty of loyalty (avoiding conflicts of interest, full disclosure of material facts, avoiding misrepresentations).

An adviser charges fees for providing advice and must prioritize the client's interests (fiduciary). A broker-dealer executes transactions and typically earns commissions; while subject to suitability rules, advisers have a higher fiduciary duty of loyalty and care.

An adviser managing $110 million or more in assets must register with the SEC. Advisers with less than $110 million typically register at the state level. Some exceptions apply to advisers with only institutional clients or those advising only other investment companies.

Performance-based fees are charges that increase or decrease based on investment results. These are generally prohibited except for clients meeting net worth thresholds or hedge fund/private equity clients meeting specific criteria, and must be disclosed fully with written advisory agreements.

Soft dollars allow advisers to pay for research and brokerage services using client commissions rather than direct fees. These must: provide research or brokerage services (not general office overhead), be documented, serve the adviser's clients generally, and be disclosed in the advisory contract.

An adviser must fully disclose material conflicts to all affected clients and obtain informed written consent. The adviser may execute conflicting transactions only if clients consent after complete disclosure, and must not favor one client's interests over another's absent client agreement.

Part 2A must include advisory services and fees, information about adviser personnel, disciplinary history, compensation conflicts of interest, material business relationships, client account safeguarding practices, and the adviser's regulatory status and custodial arrangements.

A hedge fund is a privately offered investment vehicle using sophisticated strategies (leverage, short sales, derivatives). Hedge fund advisers face different registration and compensation rules than traditional advisers—they can charge performance fees to qualified clients and have certain exemptions from registration requirements.

Advisers must provide written disclosure of all compensation sources, fee structures (percentage of assets, hourly, fixed, or performance-based), total costs clients will bear, and any conflicts arising from compensation methods. This must be in the advisory contract or brochure.

Client securities must be held by a qualified custodian (bank, broker-dealer, or trust company), not by the adviser. Exceptions: advisers may hold limited assets if authorized and audited annually; cash can be held in adviser accounts if clearly identified and regularly reconciled; certain advisers may use alternatives under specific rules.

Advisers must disclose on Form ADV Part 1 any criminal convictions, SEC/regulatory orders, and civil judgments within the past 10 years. Material disciplinary events must appear in the brochure; advisers cannot mislead by omission and must update filings within 30 days of reportable events.

An adviser may execute agency cross transactions (buying from one client, selling to another) only if: (1) clients are informed, (2) the adviser obtains written permission, (3) the adviser discloses the conflict and potential risks, and (4) the adviser acts in good faith and charges no more than a reasonable commission.

If an adviser compensates a third party (solicitor) to refer clients, the adviser must: provide written disclosure to the client before engagement, document the referral arrangement, ensure the solicitor is properly supervised, and maintain records of all solicitation arrangements and compensation.

Adviser anti-fraud rules prohibit specific conduct: misrepresenting credentials or experience, promising specific returns, charging undisclosed fees, and breaching fiduciary duties. The standard is scienter (intent or recklessness); negligence alone may not suffice, but fiduciaries face heightened duty-of-care standards.

Investment advice is individualized recommendations about securities, account management, or trading. Research that is not advice includes general market commentary, general economic analysis, or recommendations with no customization to a specific client's situation. Only advice triggers fiduciary duties.

Advisers must maintain books and records including: client communications, account statements, contract evidence, advisory agreements, fee records, compliance documents, and audit trails. Records must be preserved for at least 5 years (first 2 years in accessible form) and subject to examination.

If an adviser buys from or sells to a client account, it is acting as principal. This must be disclosed, the client must consent in writing, and the adviser may not charge advisory fees on that transaction. The adviser bears the burden of proving the price was fair and reasonable.

Individual clients (retail) receive full fiduciary protection and must consent to conflicts. Institutional clients may waive certain protections if they are sophisticated; however, advisers owe fiduciaries care and cannot engage in fraud. All clients receive duty of loyalty and anti-fraud protection.

Advisers must disclose when they rely on research from broker-dealers, third parties, or insiders, especially if those sources have conflicts of interest. If using soft dollars to obtain research, the adviser must disclose this arrangement and explain how it benefits clients and why such costs are reasonable.

Some advisers (small state-registered, certain in-state advisers, or those managing very few accounts) may be exempt from registration, but exemption does not eliminate fiduciary duties, anti-fraud rules, or the need for written advisory agreements. Exempt advisers remain subject to state law and federal anti-fraud provisions.