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All Series 66 Formulas
Economic Factors and Business Information
3 items
Debt-to-equity ratio
, higher ratio = more leveraged (greater financial risk)
Rule of 72
; inverse: . r = annual return (%). Estimates time for an investment to double at a fixed compound rate.
Current ratio and quick ratio
; . CA = current assets, CL = current liabilities, Inv = inventory. Quick (acid-test) excludes inventory.
Investment Vehicle Characteristics
3 items
Tax-equivalent yield (municipal bond)
, where Tax-free yield = municipal bond yield, t = investor's marginal tax rate (decimal)
Current yield (bond)
, Annual Coupon = yearly interest payment ($), Current Market Price = bond's current price (not par)
Mutual fund NAV and public offering price
; . Assets/Liabilities = fund totals, Shares = shares outstanding, SC = sales charge % (decimal).
Client/Customer Investment Recommendations and Strategies
7 items
Real (inflation-adjusted) return
, R = nominal return, i = inflation rate. Exact:
After-tax return
, = after-tax return, = pre-tax return, t = investor's marginal tax rate (as a decimal)
Total return and holding period return
, = beginning value, = ending value, Inc = income (dividends/interest) received during the period.
Sharpe ratio
, = portfolio return, = risk-free rate, = standard deviation of portfolio. Measures total-risk-adjusted return.
CAPM expected return
, = risk-free rate, = beta (systematic risk), = expected market return, = market risk premium
Treynor ratio
, = portfolio return, = risk-free rate, = portfolio beta. Uses systematic risk (beta); Sharpe uses total risk (std dev).
Alpha
, = actual portfolio return, = risk-free rate, = beta, = market return. Positive means outperformance vs CAPM expected return.
Series 66 Limits and Thresholds
Economic Factors and Business Information
8 items
A P/E of 25 means investors pay $25 per $1 of current earnings.
The market portfolio has a beta of 1.0 by definition, so a stock with beta 1.5 tends to move 1.5% for every 1% market move.
With a 3% risk-free rate and an 11% market return, Fund B (9% return, σ 10%, β 0.7) posts a Sharpe of 0.60, a Treynor of 8.57, and a Jensen's alpha of +0.4%.
A bond yielding 5% in a 6% inflation environment delivers a negative real return of roughly -1%.
With a 3% risk-free rate and an 11% market return, Fund A (11% return, σ 18%, β 1.4) posts a Sharpe of 0.44, a Treynor of 5.71, and a Jensen's alpha of -3.2%.
A fund returning +50% then -50% has an arithmetic mean of 0% but a geometric mean of -13.4% per year, leaving the account down 25%.
A Sharpe ratio of 1.0 is solid, 2.0 is excellent, and below zero means the portfolio underperformed the risk-free asset.
Using CAPM with a 4% risk-free rate, 10% market return, and beta 1.2, the required return equals 11.2%.
Investment Vehicle Characteristics
16 items
FDIC insures deposits to $250,000 per depositor per bank per ownership category; SIPC covers brokerage to $500,000 total with a $250,000 cash sublimit.
A SPAC must merge with a private target typically within 18 to 24 months or IPO investors get their cash back from the trust account.
Negotiable CDs trade in the secondary market and are issued in minimum denominations of $100,000, targeting institutional buyers.
Zero-coupon bonds have Macaulay duration equal to maturity, so a 20-year zero has duration of 20 years, longer than a 20-year 6% coupon bond with the same yield.
Treasury bills are sold at a discount or at par, with regular maturities of 4, 6, 8, 13, 17, 26, and 52 weeks.
Commercial paper has a maximum maturity of 270 days to qualify for the Securities Act Section 3(a)(3) registration exemption.
Conversion price equals par value (usually $1,000) divided by the conversion ratio, while bond parity value equals stock price times conversion ratio.
The investment-grade threshold is BBB- (S&P) / Baa3 (Moody's); anything below is high-yield, also called junk or speculative-grade.
Nonqualified annuity withdrawals before age 59½ generally trigger a 10% additional federal tax on taxable gains, which are taxed as ordinary income, unless an exception applies.
A hedge fund's "2 and 20" arrangement charges a 2% management fee plus a 20% performance fee; any hurdle or high-water mark depends on the contract.
Long-term gains on physical-gold ETFs structured as grantor trusts face a maximum 28% collectibles rate, while gains on mining-stock ETF shares generally face 0%/15%/20% LTCG rates.
Futures use very low initial margin of about 5-15% of contract value, creating extreme leverage where a small adverse move can wipe out the deposit.
Class A breakpoints may begin at $25,000, depending on the fund's prospectus, and a letter of intent typically valid for 13 months lets clients reach a breakpoint over time.
Section 3(c)(1) private funds generally cap beneficial owners at 100; qualifying venture capital funds may have 250. Section 3(c)(7) generally requires qualified purchasers; individuals need at least $5M in investments.
FINRA caps 12b-1 fees at 0.75% marketing plus 0.25% service, for a 1.00% maximum, and over 0.25% disqualifies no-load status.
REITs must generally distribute ≥90% of REIT taxable income excluding net capital gain. Most REIT dividends face ordinary income tax; distributions may include capital gains, return of capital, or qualified dividends.
Client/Customer Investment Recommendations and Strategies
16 items
Asset allocation explains roughly 90% of portfolio return variation across time, while security selection and market timing explain the rest.
ERISA §404(c) provides a fiduciary safe harbor when participants direct their own investments and the plan offers diverse options.
Diversification reduces risk whenever correlation is below +1.0, and perfect negative correlation of -1.0 could theoretically eliminate risk entirely.
At a 32% federal bracket, a 4.5% municipal bond delivers a tax-equivalent yield of 6.62%, computed as 4.5% ÷ (1 − 0.32).
An account earning 10% then 3.125% around a mid-year deposit posts a time-weighted return of 13.44%, but its dollar-weighted IRR cannot be determined without the cash-flow amounts and timing.
JTWROS passes 100% to the survivor, TIC passes each share through the estate, and TBE is spouse-only and adds creditor protection.
ERISA holds fiduciaries to the prudent expert standard, and QDIAs that protect the fiduciary when a participant fails to elect are typically target-date funds.
Active funds typically charge higher fees than passive index funds; the percentage beating a benchmark over 15 years depends on the fund category and measurement period.
Most long-term capital gains/qualified dividends: 0%, 15%, or 20%. Long-term: held >one year. Qualified common-stock dividends: stock usually held >60 days in the 121-day period. Short-term gains: ordinary tax ≤37%.
The Net Investment Income Tax is 3.8% of the lesser of net investment income or MAGI above $200,000 single or $250,000 married filing jointly.
The 2026 IRA contribution limit is $7,500 ($8,600 age 50+) and the 401(k) elective deferral limit is $24,500.
The 2026 annual gift tax exclusion is $19,000 per recipient, and the lifetime unified estate-and-gift exemption sits around $15 million per person.
QDIA: qualifying capital-preservation fund for 120 days after first elective contribution; then generally long-term target-date/balanced fund or managed account. Qualifying stable-value assets invested pre-12/24/07: grandfathered.
2026 new RMD-age owners: traditional IRAs/401(k)s generally start at age 73; age 75 for births in 1960+. Eligible still-working 401(k) owners may defer. Roth IRAs/designated Roth 401(k)s require none during owner's life.
Reg T initial margin on ordinary marginable stock: 50%; FINRA long maintenance: generally 25%. Short stock at 5/share or 30% of market value; below $5: greater of $2.50/share or 100% of market value.
2026 HSA contribution limits are $4,400 self-only and $8,750 family, with a $1,000 catch-up at age 55+.
Laws, Regulations, and Guidelines
16 items
The Form ADV annual updating amendment is due within 90 days of fiscal year end; specified Part 1 and 2 changes require amendment promptly, while an SEC adviser's materially inaccurate Form CRS (Part 3) is amended within 30 days.
A federal covered adviser must notice file in a state where it has a place of business or more than 5 non-institutional clients in the prior 12 months.
U4 2y written inv. sales-practice complaint: ≥$5,000 claimed; unstated unless firm in good faith finds less. Qual. settlements 5/18/09+: ≥$15,000. No minimum: award/judgment vs named resp.; forgery/theft/misappropriation/conversion.
The federal private fund adviser exemption applies to U.S.-based advisers advising solely qualifying private funds with under $150 million in private fund regulatory AUM.
When an agent or IAR leaves a firm, the former employer files Form U5 within 30 days of termination.
Advisers Act Rule 204-2 generally requires keeping records accessible for 5 years from the end of the fiscal year of the last entry, with the first 2 years in an appropriate office of the adviser.
Ordinary AUM rules: state IAs switch to SEC at $110M+ regulatory AUM; SEC IAs withdraw below $90M unless another SEC basis applies. Initial SEC registration is allowed at $100M.
NASAA's IAR CE rule requires 12 credits per year split into 6 Products and Practice plus 6 Ethics and Professional Responsibility.
Reg S-P: notify affected ASAP, generally ≤30 days after known actual/reasonably likely customer-data breach; unless reasonable investigation excludes past/reasonably likely sensitive-info use causing substantial harm/inconvenience.
Unlawful insider trading can lead to civil penalties of up to three times the profit gained or loss avoided, with individual criminal penalties under federal law up to $5 million and 20 years in prison.
The USA civil rescission window runs the earlier of 2 years from discovery or 3 years from sale, whichever is earlier.
USA private placements generally allow offers to at most 10 non-institutional offerees in-state per 12 months; reasonably believe buyers invest, with no pay for soliciting non-institutional buyers.
For new contractual relationships from June 29, 2026, the qualified-client dollar tests for performance fees are net worth over $2.7 million (excluding the primary residence) or at least $1.4 million under the adviser's management.
Marketing Rule testimonials and endorsements need reasonable adviser oversight regardless of pay. A written agreement is generally required if pay exceeds $1,000 over the prior 12 months, subject to other exceptions.
BD: CTR for cash total >$10,000 in one business day, due 15 days; SAR for qualifying suspicious totals ≥$5,000, due 30 days after initial detection or 60 if suspect unknown. IA AML/SAR delayed to 1/1/2028.
Under the Uniform Securities Act, the criminal maximum is a $5,000 fine and 3 years in prison, with a statute of limitations of 5 years from the violation.
