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A Kavanah Course — Free · 4 modules · Intermediate
Twelve lessons on the state law exam that most states require before you may transact business with their residents.
A complete preparation course for the Series 63, NASAA's state law exam for broker-dealer agents. It covers the Uniform Securities Act as amended by NASAA, the registration of broker-dealers, agents, advisers and securities, and — carrying 45 percent of the exam between them — the communication and ethical conduct standards that decide whether a career lasts. Every claim is traced to the statute, the statement of policy or the rule behind it, including the NASAA materials the exam's own study guide names as testable.
An Introduction
Why a state exam exists, what it tests, and how to use this course.
Passing the Series 7 makes you qualified. It does not make you permitted. Most states additionally require an agent to pass the Uniform Securities Agent State Law Examination — the Series 63 — before transacting business with their residents, and that requirement comes from a body of law almost entirely separate from the one the Series 7 tests.
Twelve lessons across four modules, built against NASAA's published test specifications and its exam study guide. Each lesson cites the primary sources behind its claims: the Uniform Securities Act of 1956 as amended by NASAA, NASAA's statements of policy and model rules, and the SEC and FINRA rules the study guide names as testable.
That last point is worth stating plainly, because it is a common misconception: the Series 63 is not purely a state law exam. NASAA's own guide lists Regulation Best Interest, Regulation S-P, Regulation T, SEC Rules 17a-3 and 17a-4, and eleven FINRA rules among the testable subjects. It is an exam about the rules governing an agent's conduct, drawn from wherever those rules live.
One detail that catches candidates out and is fixed here: the statute tested is the Uniform Securities Act of 1956 as amended by NASAA, not the Uniform Securities Act of 2002. A study source built around the 2002 Act is testing the wrong law.
This course is not affiliated with, endorsed by or produced in cooperation with NASAA, FINRA or the SEC, and it contains no exam questions. NASAA expressly prohibits the unauthorized use or reproduction of its examination content.
NASAA publishes the weighting, and it is the opposite of most candidates' instinct. Ethical Practices and Obligations carries 15 of the 60 scored questions — 25 percent — and Communication with Customers and Prospects carries 12, or 20 percent. Together that is 45 percent of the exam on conduct.
Registration of all four categories of regulated person — broker-dealers, agents, investment advisers and their representatives — carries 21 questions between them. Remedies and administrative provisions carry 7, and securities and issuers 5.
So this course gives conduct four lessons, registration four, foundations two and enforcement two. Candidates who memorize registration procedure and treat ethics as common sense have it backwards: the conduct questions turn on specific prohibitions with specific boundaries, and those boundaries are the exam.
Read in order. The definitions in lesson 1.2 decide almost every question that follows, because the Act is a definitional statute: whether a rule applies turns on whether a defined term fits.
The whole course is about two hours of reading, and the exam is short — 65 questions in 75 minutes, of which 60 are scored and 43 must be correct. Three weeks at a few hours a week is realistic for someone who has recently sat the SIE or a top-off exam, and lesson 4.2 sets out that plan with a Kavanah-in-practice block for running it.
One piece of reading outside this course is worth doing directly: NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents. It is five pages, it is cited throughout Module 3, and it is effectively a list of exam answers.
State securities regulation exists because the federal regime arrived twenty years after the states had already started, and because a regulator close to the customer sees things a federal one does not. Most of what this exam tests is conduct — the specific boundaries around compensation, custody, discretion and disclosure. That is the part of the licensing path you will use every working day.
Module 1
Why state law exists, and the definitions that decide everything
2 lessons · ~21 min
The relationship between state and federal regulation, NASAA and the Uniform Securities Act, the exam's structure and weighting, and the definitions of security, person, sale, offer and the four regulated categories.
Module 2
Broker-dealers, agents, advisers and securities
4 lessons · ~41 min
Who must register in a state and who need not, the application and effectiveness mechanics, the grounds and procedure for denial and revocation, and the registration methods and exemptions for securities.
Lesson 2.1 · 10 min
Registration of Broker-Dealers
Who must register, how, and what keeps the registration alive
Start lesson
Lesson 2.2 · 10 min
Registration of Agents
The category you register in, and the rules that follow you between firms
Start lesson
Lesson 2.3 · 10 min
Investment Advisers and Their Representatives
The boundary an agent must not cross without noticing
Start lesson
Lesson 2.4 · 11 min
Registration of Securities, and the Exemptions
Three methods, two kinds of exemption, and the authority that survives both
Start lesson
Module 3
Forty-five percent of the exam, in four lessons
4 lessons · ~44 min
What may be said to customers and prospects, the agreements they sign, the rules on compensation, custody and discretion, and the conflicts and criminal conduct the statements of policy enumerate.
Lesson 3.1 · 11 min
Communication with Customers and Prospects
What may be said, what may never be said, and where it applies
Start lesson
Lesson 3.2 · 10 min
Customer Agreements and Accounts
New account, margin and options — what each agreement authorizes, and when
Start lesson
Lesson 3.3 · 11 min
Compensation, Custody and Discretion
Fees, markups, holding customer property, and acting without asking
Start lesson
Lesson 3.4 · 12 min
Conflicts, Criminal Activity and Other Prohibited Practices
Excessive trading, sharing, selling away, insider trading, and protecting vulnerable adults
Start lesson
Module 4
What the Administrator may do, and what follows a violation
2 lessons · ~21 min
Jurisdiction, rulemaking, investigations and subpoenas, cease and desist orders and injunctions, the procedural protections, the civil and criminal liabilities, and a three-week study plan.