Series 66 cheat sheet

• Analytical Methods: Time value of money is the backbone: value cash flows with future value, net present value (accept above zero), and internal rate of return (which equals a bond's yield to maturity, and beats net present value only when net present value says otherwise on mutually exclusive projects). Standard deviation is total risk, beta is systematic risk, alpha is manager skill, the Sharpe ratio is return per unit of total risk, and low correlation drives diversification that kills unsystematic but never systematic risk. Financial ratios (current, quick, debt-to-equity) size up the company and valuation ratios (price-to-earnings, price-to-book) ask whether the price is right, but every metric is meaningless in isolation, so always compare to peers and history.
• Cash and Cash Equivalents: Cash equivalents split into insured bank deposits and uninsured money market securities. Federal Deposit Insurance Corporation coverage of $250,000 per depositor, per bank, per ownership category applies to checking, savings, and certificates of deposit, but never to stocks, bonds, mutual funds, annuities, or money market funds. Commercial paper (1 to 270 days), Treasury bills (state and local tax exempt), banker's acceptances, and repurchase agreements are the money market securities to know. A money market fund is a security that can break the buck while a money market deposit account is an insured deposit, and the federal funds rate is market-determined, not Fed-set.
• Fixed Income Valuation: Bond prices move inversely to yields, and duration measures that sensitivity: a zero-coupon bond's duration equals its maturity while a coupon bond's is always less, and higher coupons or shorter maturities cut duration. Know the yield hierarchy cold, because it flips by pricing (coupon below current yield below yield to maturity below yield to call for discount bonds, and the reverse for premiums, all equal at par). Municipal interest is generally tax-exempt, Treasuries are state-exempt only, corporates are fully taxable, and credit spreads widen in stress. Convertibles turn on conversion ratio (par over conversion price) times stock price versus the bond's market price.
• Equity Securities: Common stock is direct ownership with one vote per share, variable dividends the board can cut or skip, and last place at liquidation, so it is the highest-risk claim with unlimited upside and downside capped at the amount invested. Preferred stock is the hybrid: a fixed dividend rate (still declared, not guaranteed), priority over common, usually no vote, and bond-like interest-rate sensitivity. Convertible preferred always trades at the higher of its investment value or conversion value. Preferred is equity, not debt, so its dividends are not deductible to the issuer, though corporate investors can claim the dividends-received deduction.
• Equity Valuation Methods: Technical analysis reads charts, price, and volume to answer when to trade, while fundamental analysis studies financial statements to answer what to buy by finding intrinsic value. The Dividend Discount Model prices a stock as the present value of future dividends using next year's dividend divided by required return minus growth, and it breaks when growth meets or exceeds the required return. Discounted Cash Flow generalizes this to any future cash flows, so it can value non-dividend growth companies. A calculated value above market price signals undervalued, and higher risk means a higher discount rate and a lower valuation.
• Equity Characteristics: Common shareholders vote (cumulative voting protects the minority), hold preemptive rights against dilution, and stand last in liquidation. Restricted and control stock cannot trade freely: the resale rule sets a 6-month holding period for reporting issuers and 12 months for non-reporting, and affiliates keep volume limits and a filing. Dividends run declaration, ex-dividend, record, and payment, with the price dropping by the dividend amount on the ex-date. Incentive stock options go only to employees with no regular tax at exercise but an alternative minimum tax preference, while non-qualified stock options go to anyone and tax the spread as ordinary income at exercise.
• Equity Public Offering: An Initial Public Offering is a company's first stock sale, a primary offering where the issuer gets the proceeds. Underwriting commitments turn on who bears the risk of unsold shares: firm commitment puts it on the underwriter, while best efforts, all-or-none, and mini-maxi leave it with the issuer. A secondary offering is existing shareholders selling their own shares, so the company gets nothing and it is not dilutive, unlike a dilutive primary follow-on. A Special Purpose Acquisition Company is a shell that raises money into trust, hunts a target for 18 to 24 months, then merges or liquidates, with the sponsor's roughly 20% promote as the hidden dilution. Keep asking who gets the money and who bears the risk.

• Pooled Investments: Open-end mutual funds price once daily at Net Asset Value with forward pricing and always trade at Net Asset Value, while closed-end funds issue fixed shares and trade on an exchange at a premium or discount. Private funds (hedge, private equity, venture capital) are limited to accredited investors and qualified purchasers, run "2 and 20" fees, and stay illiquid through lock-ups. Unit Investment Trusts hold a fixed portfolio to a termination date and redeem at Net Asset Value without active management, while Exchange-Traded Funds trade intraday near Net Asset Value and earn tax efficiency from in-kind redemptions. Real Estate Investment Trusts must distribute at least 90% of taxable income as ordinary-income dividends.
• Pooled Investment Characteristics: Share classes trade upfront cost for ongoing cost: Class A carries a front-end load with breakpoints, Class B a declining contingent deferred sales charge that converts to Class A, and Class C a level load that traditionally does not convert, making it the priciest long-term hold. Taxes flow through under the 90% distribution rule, capital gains follow the fund's holding period (not yours), and Exchange-Traded Funds stay tax-efficient through in-kind redemptions. Watch the fee lines: distribution-and-service fees cap at 1.00%, the expense ratio excludes sales loads, and breakpoints (plus the Letter of Intent and Rights of Accumulation) apply only to Class A.
• Derivative Securities: A derivative gets its value from an underlying asset. The option buyer pays a premium (the max loss) for a right, while the writer takes on the obligation, with a call betting the price rises and a put betting it falls. Futures obligate both parties, are standardized and exchange-traded, settle daily by mark-to-market, and lean on a clearinghouse that nearly erases counterparty risk. Forwards are the customized over-the-counter version, so they carry higher counterparty risk and low liquidity. Across all of them, leverage cuts both ways, time decay hurts buyers and helps sellers, and derivatives suit sophisticated hedgers far more than risk-averse investors.
• Alternative Investments: An Exchange-Traded Note is a bank's unsecured IOU that tracks an index with no tracking error but full issuer credit risk, unlike an Exchange-Traded Fund that actually holds segregated assets. Leveraged funds (2x, 3x) and inverse funds reset their exposure every trading day, so compounding decays their value in choppy markets and they suit only short-term trading, never buy-and-hold. Structured products bundle a bond with derivatives into tailored payoffs, but they add issuer credit risk, thin liquidity, capped upside, and hidden costs baked into an above-fair-value issue price. Name the credit risk, explain the daily-reset compounding trap, and see through "principal protection."
• Insurance-Based Products: Every insurance-based product turns on one question: who bears the investment risk? Fixed annuities, indexed annuities, term, whole, and universal life leave the risk with the insurer, so they are insurance products regulated by state insurance departments, not securities. The moment the word "variable" appears (variable annuities, variable life, variable universal life), the owner bears the risk, which makes it a security registered with the SEC, sold with a prospectus, and sold only by someone holding both securities and insurance licenses. Lock in the variable-annuity details (mortality and expense charges, last-in-first-out ordinary-income taxation, the 10% penalty before age 59 1/2) and the payout ladder (life only pays most, joint and survivor pays least).
• Other Assets: Other Assets is one question: is it a security, and who regulates it? Physical commodities, futures, and physical precious metals sit under the Commodity Futures Trading Commission and are not securities, while a commodity Exchange-Traded Fund or a mining stock is a security under the SEC. Digital assets turn on the Howey Test (investment of money, common enterprise, expectation of profits, efforts of others, all four required), so Bitcoin generally fails while most initial coin offering tokens pass. Remember that crypto has no Securities Investor Protection Corporation or Federal Deposit Insurance Corporation protection, lost private keys mean lost assets, and regulatory risk is its most distinctive danger.

• Client Types: Start with the two great dividers: liability (limited vs. unlimited) and taxation (pass-through vs. double). A sole proprietorship carries unlimited liability with pass-through taxation, general and limited partnerships, and S-corporations stay pass-through, an LLC defaults to pass-through but may elect corporate taxation, and only the C-corporation is automatically double-taxed. Trusts hinge on revocable (grantor keeps control, assets stay in the estate) versus irrevocable (control surrendered, assets generally leave the estate, may gain creditor protection), while estates are temporary preservation accounts. Both private foundations and public charities generally follow UPMIFA's prudent-management standard, but private foundations also face additional federal rules, including the 5% minimum annual distribution requirement.
• Client Profile Development: A client profile fuses financial facts (objectives, cash flow versus net worth, tax picture) with nonfinancial factors (values, biases, experience, life events), and every recommendation must weigh all of them or risk being unsuitable. Risk tolerance splits into subjective willingness and objective ability, and when they conflict the lower, more risk-averse one governs, just as time horizon lifts ability but never willingness. Match each goal to its own time-horizon bucket rather than the client's overall situation. Gather it all through the Know Your Customer rule, then document the rationale and update it as the client's life changes.
• Tax Considerations: Individuals pay preferential 0%, 15%, or 20% on long-term gains (held more than a year and a day) and qualified dividends, while short-term gains hit ordinary rates, and net capital losses shave $3,000 of ordinary income a year with an indefinite carryforward. The wash-sale rule disallows a loss when a substantially identical security is bought within 30 days on either side. Gifts carry over the donor's basis but inherited capital property generally steps up to fair market value at death (inherited traditional IRAs are an exception and stay taxable), so appreciated assets are held until death rather than gifted. C-corporations face double taxation, S-corporations and partnerships pass income through, and wealth transfer runs on one large unified exemption with a top estate rate of 40% (copy the exact 2026 figures from the unit).
• Retirement Plans: Individual Retirement Accounts split into Traditional (deductible in, ordinary income out, Required Minimum Distributions at 73 or 75) and Roth (after-tax in, tax-free out, no lifetime Required Minimum Distributions), and only deductibility (not the right to contribute) phases out while Roth conversions ignore income limits. The Solo 401(k) lets the self-employed stack an employee deferral onto employer profit-sharing and allows loans where Individual Retirement Accounts never do. Qualified employer plans hand the employer a deduction plus creditor protection but forbid cherry-picking employees, while nonqualified plans buy the freedom to favor executives at the cost of an unsecured promise (copy the exact 2026 contribution limits from the unit).
• ERISA Issues: The Employee Retirement Income Security Act covers private-sector retirement plans and defines a fiduciary by function, holding anyone with discretion over plan assets to a prudent-expert standard across four duties: loyalty, prudence, diversification, and plan compliance. Prudence is judged by process, not outcomes, and the Investment Policy Statement documents that process even though it is not required. The participant-directed-plan safe harbor shields fiduciaries from participant-choice losses only when the plan offers at least three diversified options, quarterly transfers, and sufficient information, but it never excuses failing to select and monitor those options. Prohibited-transaction rules bar dealings with parties in interest.
• Special Account Types: Education plans win on tax-free growth: 529 plans have no income or age limits with the owner keeping control, while Coverdell education savings accounts add income limits, a lower cap, an age deadline, and broader investments. Custodial accounts (Uniform Gifts to Minors Act for financial assets, Uniform Transfers to Minors Act for any property) are irrevocable gifts where the minor takes full control at majority. Health Savings Accounts carry the unique triple tax advantage but require a high-deductible health plan and levy a penalty before 65, whereas Flexible Spending Accounts only shield contributions and are employer-owned use-it-or-lose-it accounts (copy the exact dollar caps from the unit).
• Ownership and Estate Planning: Titling drives everything: joint tenancy with right of survivorship, Payable on Death and Transfer on Death accounts, and beneficiary designations bypass probate but stay in the taxable estate, and those designations always override the will. Tenancy by the entirety adds creditor protection, and community property earns the double step-up in basis. A revocable living trust avoids probate but does not cut estate tax, while an irrevocable trust removes assets from the estate and shields them from creditors; a testamentary trust still hits probate. A Qualified Domestic Relations Order splits employer plans penalty-free in divorce, and a Donor Advised Fund trades an irrevocable gift for an immediate deduction while appreciated securities dodge capital gains.

• Capital Market Theory: Which risk measure does each model use? The Capital Asset Pricing Model prices individual assets on systematic risk (beta), where the Security Market Line flags anything above it as undervalued and below it as overvalued. Modern Portfolio Theory shifts to the whole portfolio, measuring total risk by standard deviation and building the efficient frontier by combining low-correlation assets so diversification strips out unsystematic risk while systematic risk stays. The Efficient Market Hypothesis asks whether you can beat the market: weak form kills technical analysis, semi-strong kills technical and fundamental, and strong form kills even insider edges.
• Portfolio Management Strategies: Strategic asset allocation sets long-term target weights from the client's goals, risk tolerance, and time horizon, then rebalances back to them, while tactical allocation deliberately deviates to time the market before returning. Active management chases a benchmark while passive replicates it, growth pays a premium for future earnings while value buys a discount, and income prioritizes cash flow while capital appreciation prioritizes growth. Diversification kills unsystematic but never systematic risk, sector rotation rides the economic cycle, and dollar-cost averaging locks in a lower average cost than average price. Options round it out with the protective put (insurance), covered call (income, capped upside), and collar (both sides capped).
• Portfolio Performance Measures: Current yield is annual income over current price and moves inversely to price, while total return adds price change plus income over beginning value. When the exam asks about the manager use time-weighted return (cash flows removed, required by the Global Investment Performance Standards); when it asks about the investor's own experience use dollar-weighted return, which is the internal rate of return. Judge risk with Sharpe (total risk, standard deviation) for a whole portfolio and Treynor (systematic risk, beta) for one of many, and read positive alpha as beating the Capital Asset Pricing Model prediction. Always benchmark against a matching style, cap size, and geography.
• Trading Securities: A quote pairs the bid (highest buyer price) with the ask (lowest seller price), and the spread between them is an implicit round-trip cost that widens as liquidity thins. Orders trade off execution against price: market guarantees execution, limit guarantees price, a stop becomes a market order when triggered, and a stop-limit becomes a limit order. A broker-dealer wears one hat per trade, agent (commission) or principal (markup or markdown) but never both. Lock in the Federal Reserve's 50% initial margin, the 25% maintenance floor, the 5% markup guideline, and the rule that best execution applies to principal and agency trades alike.

• Securities and Issuer Regulation: A security is read broadly, and an investment contract is caught only when all four Howey prongs (money, common enterprise, expected profits, efforts of others) are met, so a variable annuity counts while a fixed annuity does not. Securities register federally on a disclosure standard (never SEC approval) and by state through coordination, qualification, or filing, unless an exempt-security or exempt-transaction path applies, and transaction exemptions do not carry to resales. Federal covered securities escape state registration; investment-company and Reg D covered securities may owe a state notice filing and fee, but exchange-listed federal covered securities owe none (antifraud only). Accredited status turns on the income or net-worth thresholds (excluding the home), and states keep unwaivable antifraud authority over every security, so exempt from registration never means exempt from antifraud.
• Investment Adviser Regulation: An Investment Adviser is anyone who, for compensation, is in the business of advising on securities, unless they fall into an exclusion like professionals giving solely incidental advice or a bank itself (never its subsidiary). Assets Under Management draw the registration line: the largest advisers go to the SEC as federal covered advisers, the mid-size band registers with the state, and federal covered advisers merely notice file, though states keep antifraud power everywhere. State registration takes effect on the 30th day and SEC on the 45th, the client brochure carries a delivery timing rule, and records run for years. Private fund advisers and venture capital advisers file as Exempt Reporting Advisers rather than register fully.
• Investment Adviser Representative Regulation: An Investment Adviser Representative is always an individual (never a firm) who recommends securities, manages accounts, decides which advice is given, solicits advisory services, or supervises those who do; clerical staff who do none of these are not representatives. The exam-favorite trap: a representative of a federal covered adviser still registers at the state level even though the adviser itself registers with the SEC. Representatives file the uniform application, consent to service of process, and update material changes promptly, and states that adopt the model rule require annual continuing education. A qualifying designation can waive the exam but never the registration.
• Broker-Dealer Regulation: A broker effects trades for others and earns a commission, a dealer trades from its own account and earns a markup or markdown, and most firms do both, so the label just describes the capacity on a given trade; agents, issuers, and banks are excluded. Underwriters bring new securities to the public under firm commitment, best efforts, or all-or-none, while market makers hold a continuous two-sided market. Broker-dealers register both federally and in every state where they do business, keep books and records on set schedules, and supervise their agents through designated principals, written procedures, pre-use advertising approval, and branch inspections on a tiered cycle (OSJs annually, other branches at least every three years).
• Agent Regulation: Under the Uniform Securities Act, an agent is an individual who represents a broker-dealer or issuer in effecting securities transactions, so "attempting" alone counts and the person is always a natural person, never a firm. The exclusions from the agent definition (exempt securities, exempt transactions, no-commission employee stock plans) help only individuals representing issuers, never anyone representing a broker-dealer. Agents never register independently: they file the uniform application, consent irrevocably to service of process, and stay registered only while associated with a broker-dealer, so leaving parks the registration. On termination, both the agent and the broker-dealer must promptly notify the Administrator.
• Remedies and Administrative Provisions: The state securities administrator runs the administrative track: making rules and orders, investigating, subpoenaing, and denying, suspending, or revoking registrations, but it can never fine, jail, or award damages. Due process means notice and a hearing first, except for a summary order while a proceeding is pending (in the public interest, matter set down for hearing within 15 days after the administrator receives a written request). The injured investor recovers purchase price plus interest minus income received under a statute of limitations of 2 years from discovery or 3 years from sale (whichever comes first), and a written rescission offer with a 30-day window can head off the suit. Criminal cases (a $5,000 fine and 3 years imprisonment) belong to the prosecutor.
• Client Communication: Full and fair disclosure of every material fact happens before or at the time of the relationship (never after), and an omission is as fraudulent as a lie. Registration is a filing, never an endorsement, approval, or finding of competence, so stating your status is fine but implying a regulator vouched for you is a violation. You can never guarantee against loss or share in client losses, though qualified clients may be charged a performance fee on gains, and advisory contracts must be written with no assignment absent the client's consent. Advertising is fair, balanced, and not misleading, testimonials are now allowed with heavy disclosure, and marketing records live for years.
• Ethical Practices and Fiduciary Obligations: Every compensation model carries its own conflict, so fee-based aligns interests, commissions tempt over-trading, performance fees need a qualified client (a symmetrical fulcrum fee is required only for registered investment companies), and soft dollars buy only eligible research. Custody (fee deduction, trustee, or login access counts) triggers a qualified custodian, quarterly statements, and an annual surprise exam, while discretion needs written authority and the prudent-investor standard. Guard against loans, insider trading, selling away, manipulation, and churning, and protect eligible adults with mandatory reports plus a permissive hold. The privacy rule wants initial and annual notices with an opt-out, and the continuity rule wants a written, annually reviewed plan with succession built in.

Know these cold (the exam's favorites are the balance-sheet equations and standard-deviation concepts)

• The accounting identity: Assets equal Liabilities plus Owners' Equity. Nearly every balance-sheet question rests on it.
• Working capital: current assets minus current liabilities. The cushion of short-term resources.
• Current ratio: current assets divided by current liabilities. Above 1 means short-term bills are covered.
• Quick (acid-test) ratio: (current assets minus inventory) divided by current liabilities. The stricter liquidity test.
• Debt-to-equity: total debt divided by total equity. Higher means more leverage and more financial risk.
• Earnings per share and price-to-earnings: earnings per share is net income (less preferred dividends) over shares; price-to-earnings is market price divided by earnings per share.
• Book value per share: equity minus preferred, divided by common shares. Mostly a concept, but know what it represents.
• Dividend payout and retention: payout is dividends divided by net income; retention is one minus payout. Watch the trap that dividends are quoted annually.
• Current yield: annual income divided by current market price. Moves inversely to price.
• Present and future value: future value compounds (present value times (1 plus rate) raised to the periods); present value discounts back. Expect concepts, not a brutal calculation.
• Tax-equivalent yield: the tax-free municipal yield divided by (1 minus the tax bracket). Turns a muni into its taxable equivalent for comparison.
• Averages: the simple mean is sum divided by count. Know it before the fancier statistics.

Lower-yield, mostly recognize-and-reason (a question or two at most)

• Rule of 72: 72 divided by the rate approximates the years to double.
• Sharpe ratio: excess return (return minus the risk-free rate) divided by standard deviation. Return per unit of total risk.
• Alpha: actual return minus the return the capital asset pricing model predicted. Positive alpha beats the benchmark.
• Net present value and internal rate of return: accept a positive net present value; the internal rate of return equals a bond's yield to maturity. Concepts far more than computation.
• Treasury Inflation-Protected Securities: principal adjusts with inflation, and the fixed coupon rate is paid on that adjusted principal.

What they will not make you grind

• Yield to maturity as a full calculation (understand the concept and the yield hierarchy instead).
• Complex options or margin math. Know the roles and the caps, not heavy multi-leg computation.