NASAA Series 66 (Uniform Combined State Law Examination) Glossary
26 essential terms and definitions for NASAA Series 66 (Uniform Combined State Law Examination). Each definition is written for exam preparation, covering the concepts as they are tested on the 2026 syllabus.
A
- Administrator
- The Administrator is the state securities regulator with jurisdiction over agents, broker-dealers, investment advisers, IARs, and securities offerings within the state. Authority includes registration, examination, and enforcement powers.
- Agent (Series 66)
- An agent is an individual representing a broker-dealer or issuer in effecting securities transactions. Agents must register in each state where they do business unless an exemption applies.
B
- Blue Sky Laws
- Blue sky laws are state-level securities laws governing offers and sales of securities. The Uniform Securities Act is the model that most state Blue Sky regimes draw from in substance.
C
- Cease and Desist Order
- A cease and desist order is an administrative order directing a person to stop a specified activity. Administrators issue these for actual or threatened violations of state securities law.
- Custody Rule (Rule 206(4)-2)
- The Custody Rule requires advisers with custody of client assets to use a qualified custodian, deliver quarterly account statements, and (with limited exceptions) undergo an annual surprise verification by an independent public accountant.
D
- Discretionary authority is the client's written authorization permitting the adviser to make investment decisions without obtaining consent for each transaction. It must be documented and is supervised under specific Administrator and FINRA rules.
F
- Federal Covered Adviser
- A federal covered adviser is required to register with the SEC, generally because AUM exceeds the federal threshold ($110 million). Federally covered advisers cannot register at the state level but may be subject to state notice filings and antifraud rules.
- Federal Covered Security
- A federal covered security is one whose state registration is preempted by federal regulation. The category includes exchange-listed securities, investment company securities, and securities sold under Rule 506 of Regulation D.
- Fiduciary Duty
- Investment advisers owe a fiduciary duty to clients, which encompasses duty of care and duty of loyalty. It requires acting in clients' best interests, disclosing material conflicts, and seeking best execution.
- Form ADV
- Form ADV is the registration form filed by investment advisers with the SEC or state Administrator. Part 1 collects administrative information; Part 2 is the client-facing brochure with detailed business descriptions, fees, and conflicts.
- Form U4
- Form U4 is the Uniform Application for Securities Industry Registration filed by individuals seeking to register as agents or IARs. It captures employment history, disclosure events, and qualification examinations and must be amended for material changes.
- Form U5
- Form U5 is the Uniform Termination Notice filed when an individual's registration with a firm ends. It must be filed within 30 days and includes any required disclosure of the reason for termination.
I
- Investment Adviser (Series 66)
- An investment adviser is a person who, for compensation, engages in the business of advising others on securities. State registration applies unless the adviser is federally covered.
- Investment Adviser Representative (IAR)
- An IAR is an individual employed by an investment adviser who makes recommendations or solicits new advisory business. IARs register at the state level even when their employing adviser is federally registered.
N
- NASAA Model Rules
- The North American Securities Administrators Association promulgates model rules that guide state regulators. Many states adopt the model rules substantively, producing meaningful uniformity across state regimes.
- Net Worth Standard (Qualified Client)
- Under Rule 205-3, performance-based fees are limited to qualified clients: individuals with over $1.1 million net worth excluding primary residence, or with at least $2.2 million in AUM with the adviser. Thresholds are inflation-adjusted.
O
- Order Ticket
- An order ticket is the contemporaneous record of a securities order, including time, price, security, quantity, side, and account. Order tickets must be kept for the prescribed retention period and are central to trade-reconstruction and best-execution review.
P
- Power of Attorney
- A power of attorney is a legal document granting one person authority to act on behalf of another. Trading authority on an account typically requires either limited POA (trading only) or full POA (broader account control) in writing.
- Principal Trade
- A principal trade is one in which the adviser or its affiliate acts as the counterparty to the client. Section 206(3) of the Advisers Act requires written disclosure and the client's consent on a trade-by-trade basis.
R
- Registration Exemption
- A registration exemption relieves a security, transaction, or person from state registration requirements. Antifraud provisions still apply, regardless of whether registration is required.
- Risk Tolerance
- Risk tolerance is the subjective measure of how much loss a client is willing to bear without changing investment behavior. It is a required input for suitability determinations and for the design of an appropriate investment policy.
S
- Section 13(d) Filing
- Section 13(d) of the Exchange Act requires beneficial owners of more than 5% of a registered class of equity to file Schedule 13D (active investors) or Schedule 13G (passive or institutional) with the SEC within prescribed deadlines.
- State Registration Threshold
- Investment advisers with AUM below the federal threshold generally register with each state where they maintain a place of business or have more than five clients. The de minimis rules vary slightly by state.
- Suitability
- Suitability is the requirement that recommendations align with the customer's financial profile, objectives, and risk tolerance. Broker-dealers operate under FINRA Rule 2111 (and Reg BI for retail recommendations); advisers operate under the fiduciary standard.
T
- Time Horizon
- Time horizon is the expected period over which a client expects to be invested before drawing down assets. It is a key input for asset allocation, suitability, and risk-tolerance assessment.
W
- Wrap Account
- A wrap account bundles execution, advice, and custody for a single all-inclusive fee instead of paying separately for each service. Wrap accounts are subject to specific disclosure requirements including a wrap-fee program brochure (ADV Part 2A Appendix 1).