A Big Deal for Small Issuers: SEC Amends Rule 147

In order to open Rule 147 up to more issuers, the SEC has adopted changes to the rule that go into effect starting April 20, 2017. Continue reading

In order to open Rule 147 up to more issuers, the SEC has adopted changes to the rule that go into effect starting April 20, 2017. These changes will be of interest to anyone studying for the Series 7, Series 24, Series 62, Series 63, Series 65, Series 66, Series 79, or the Series 82.

Rule 147 exempts issuers from registering a securities offering with the SEC if the issuer conducts almost all its business in one state.

The changes to Rule 147 give businesses fewer requirements to meet in order to take advantage of the exemption. According to the revised rule, a business must have its “principal place of doing business” in the state and must satisfy at least one of the following four requirements. Previously, issuers were required to meet each of the first three requirements in order to be eligible for Rule 147.

  • 80% of revenues come from within the state where it does business
  • 80% of business assets come from within the state where it does business
  • 80% of the proceeds are used in-state
  • A majority of people employed by the issuer lives in the state

Additionally, the amended rule requires the issuer to have a reasonable belief that each purchaser of the security is a resident of the state, and purchasers must verify their residence in writing.

Investors may resell the securities to out-of-state residents after six months from the time of purchase. Previously, investors were required to wait at least nine months before reselling.

Additionally, the SEC created new Rule 147A, which is virtually identical to Rule 147. However, 147A allows issuers to make an offer to out-of-state residents as long as sales are only made to in-state residents. This allows a business to advertise an offer on social media or an unrestricted website.

The Rule 147 amendments affect the Series 7, Series 24, Series 62, Series 63, Series 65, Series 66, Series 79, and Series 82 exams.

April Study Question of the Month

***Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.*** Continue reading

***Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.***

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, Series 82)

To qualify as a long-term capital gain or loss, stock must be held for more than one year. At purchase, the holding period clock begins:

A. On the trade date
B. One day after the trade date
C. On the settlement date
D. One day after the settlement date

An Essential Change: FINRA’s SIE Exam

Beginning March 2018, according to a FINRA proposal, anyone seeking to enter the securities industry must take FINRA’s Securities Industry Essentials (SIE) exam, which will test applicants’ general knowledge of the securities industry. Continue reading

Beginning March 2018, according to a FINRA proposal, anyone seeking to enter the securities industry must take FINRA’s Securities Industry Essentials (SIE) exam, which will test applicants’ general knowledge of the securities industry. Applicants will also be required to pass a specialized knowledge exam that is tailored to the applicant’s desired job, if that job is at the representative level. For instance, the specialized Series 79 will allow an applicant to work as an investment banker. These specialized knowledge exams are also known as top-off tests.

Unlike with current securities licensing exams, test-takers will not be required to be sponsored by a firm in order to sign up for the Securities Industry Essentials exam. This will mean that even if you don’t have a job at a FINRA member firm, you will be able to take the SIE exam. However, before signing up for a specialized exam, the applicant will need to be sponsored by a FINRA member firm. This new system will allow people with little or no experience in the securities industry to demonstrate their knowledge before applying for securities jobs, and then to pursue a specialized exam after being hired.

Once an individual has passed the SIE exam, his scores will remain valid for four years. If an individual does not register with a firm within four years of passing the SIE exam, that individual will be required to retake the exam. The same will be true of an individual who leaves the industry and returns. If he returns within four years, he will not have to retake the SIE exam. However, according to the FINRA proposal, this will only be true of the SIE exam, not any of the specialized exams. Specialized exam results will expire two years after an individual leaves the industry.

The SIE exam is part of a larger set of changes that FINRA has proposed that will affect all of the FINRA securities licensing exams. For instance, under the current system, if you are registered with a firm and you transfer to a financial services affiliate (that is, an affiliate that is not regulated by FINRA) and you stay with the affiliate for two years or more, then you must retake all of your securities licensing exams before returning to the FINRA-regulated firm. FINRA’s proposed changes will allow an individual to return to a firm within seven years without having to retake his exams.

Once an individual has taken the SIE exam and a specialized exam, if his job changes and he needs to take another specialized exam, he will not need to repeat the SIE exam. This is yet another way in which the new proposal will avoid individuals being tested on the same concepts repeatedly.

FINRA has divided the content that the SIE exam covers into four sections:

  • Knowledge of Capital Markets

» Types of markets and offerings

» Broker-dealers and depositories

» Regulated and prohibited practices

  • Understanding Products and Their Risks

» Securities products

» Associated investment risks

  • Understanding Trading, Customer Accounts and Prohibited Activities

» Accounts

» Orders

» Settlement

» Prohibited Activities

  • Overview of the Regulatory Framework

» Self-regulatory organizations (SROs)

» Registration requirements

» Specified conduct rules

According to the FINRA proposal, the SIE exam will consist of 75 questions, with an additional 10 questions that will not be scored. That means you can expect to see 85 questions on the actual exam. The 10 unscored questions help FINRA to test out new questions before they are permanently added to the exam database.

Because the SIE exam will cover much of the material that is covered in the existing exams, the specialized exams will be considerably shorter than the existing exams. Here is FINRA’s proposed number of questions for each exam:

Currently Required Test Proposed Tests
Series 6—100 questions SIE (75 questions) + Specialized Series 6 (50 questions)
Series 7—250 questions SIE (75 questions) + Specialized Series 7 (125 questions)
Series 79—175 questions SIE (75 questions) + Specialized Series 79 (75 questions)
Series 82—100 questions SIE (75 questions) + Specialized Series 82 (50 questions)
Series 99—100 questions SIE (75 questions) + Specialized Series 99 (50 questions)

 

For more information about the Essentials or any other exam, visit www.solomonexamprep.com or give us a call at 503-601-0212!

It’s Settled: SEC Shortens Regular-Way to T+2

If you’ve ever traded securities or studied for a securities licensing exam, then you’ve probably come across T+3. No, it’s not an herbal supplement or an embarrassing medical procedure. Continue reading

If you’ve ever traded securities or studied for a securities licensing exam, then you’ve probably come across T+3. No, it’s not an herbal supplement or an embarrassing medical procedure. T+3 refers to the regular-way settlement period for most securities transactions. This means that securities must be paid for and delivered by three business days from the trade date. T+3 also means you don’t become the owner of record of a security until three business days after you purchase it.

Well, add T+3 to the list of things that have gone out of style. Beginning September 5, 2017, the SEC will shorten the regular-way settlement period to two business days. And so will begin the age of T+2, which is intended to “increase efficiency and reduce risk for market participants,” according to SEC Acting Chairman Michael Pinowar.

This shorter settlement period for the trading of secondary market securities has been discussed by the SEC for years. The change is expected to lower margin requirements for clearing agency members, reduce liquidity stress when markets are volatile, and harmonize settlement with European markets, which moved to T+2 in 2014.

This settlement period will not apply to every securities transaction, though. T+2, like T+3 before it, will apply to:

  • Stocks
  • Bonds
  • Municipal securities
  • Exchange-traded funds
  • Mutual funds traded through a brokerage firm
  • Unit investment trusts
  • Limited partnerships that trade on an exchange

The securities industry moves fast. Don’t get left behind! Visit www.solomonexamprep.com or call us at 503-601-0212 for more information about the latest securities exam preparation and education.

Solomon has helped thousands pass their Series 6, Series 7, Series 24, Series 26, Series 27, Series 28, Series 50, Series 51, Series 52, Series 53, Series 62, Series 63, Series 65, Series 66, Series 79, Series 82, and Series 99.

FINRA, MSRB, and NASAA Question Types

To ensure that you are fully prepared for your licensing exam, Solomon Exam Prep recommends taking some time to familiarize yourself with the question types that FINRA, MSRB, and NASAA use on their tests. Continue reading

To ensure that you are fully prepared for your licensing exam, Solomon Exam Prep recommends taking some time to familiarize yourself with the question types that FINRA, MSRB, and NASAA use on their tests.

FINRA, MSRB, and NASAA use five question formats. They include:

Closed-stem
Open-stem
Most/least/best
Except or not
Complex multiple choice

 

Closed-Stem. “Stem” is another word for the question itself. “Closed-stem” means that the question is a complete sentence and ends with a question mark.

Example
According to the Securities Act of 1933, which of the following is a non-exempt security?

  1. An option to purchase a certificate of deposit at some time in the future
  2. A contract to purchase 10,000 bushels of corn for $5 a bushel three months from now
  3. A non-renewable banker’s acceptance note that matures in six months
  4. A municipal bond issued by the City of Los Angeles

 

Open-Stem. An open-stem question is an incomplete sentence that asks you to fill in the blank or what’s missing.

Example
The “tax-equivalent yield” tells an investor:

  1. How much lower a yield he can accept from a corporate bond
  2. The impact of his federal tax bracket on a municipal bond he purchases
  3. The risk-adjusted difference in par value of a corporate bond versus an insured municipal bond
  4. What the yield on a corporate bond would be to be equivalent to the yield of a municipal bond

 

Most/Least/Best. This type of question asks you to choose the answer that is either more suitable or less suitable than the other answer choices.

Example
Which of the following BEST describes a customer complaint?

  1. A customer calls upset about the stock market’s recent decline.
  2. A customer sends an email complaining about the impact of the government’s stimulus package on the stock market.
  3. A customer sends an email complaining about a representative’s purchase of General Motors in the client’s brokerage account.
  4. A customer calls and complains about the music played while on hold.

 

Except or Not. This type of question may be open-stem or closed-stem. It asks you to identify which answer choice is not correct with regard to the concept being covered.

Example
Owners of common stock enjoy all of the following rights and privileges except:

  1. Priority in bankruptcy
  2. Ownership stake
  3. Voting rights
  4. Growth potential

 

Complex Multiple Choice. These questions contain four Roman numeral options and may be open-stem or closed-stem. They can function in one of two ways: sequence or choose two.

Sequence

The question might ask you to put the four Roman numeral options into a correct sequence.

Example
Order the following from lowest to highest:

  1. Broker call rate
  2. Federal funds rate
  3. Prime rate
  4. Discount rate
  1. II, IV, III, I
  2. III, II, I, IV
  3. IV, III, I, II
  4. II, IV, I, III

Choose two.

The question might ask you to choose the two best answers out of the four Roman numeral options.

Example
“Phantom tax exposure” is a characteristic of:

  1. T-bonds
  2. Treasury STRIPS
  3. Zero-coupon bonds
  4. Municipal revenue bonds
  1. I and III
  2. I and IV
  3. II and III
  4. II and IV

 

Being familiar with these question types will allow you to go into the test with confidence, prepared to demonstrate your command of the subject matter. For more information, visit www.solomonexamprep.com or call 503-601-0212.

Solomon Exam Prep Partners with the Insurance School of Texas

Solomon Exam Prep is delighted to announce that it has partnered with the Insurance School of Texas to offer Solomon securities licensing exam products and services to students of the Insurance School of Texas. Continue reading

Solomon Exam Prep is delighted to announce that it has partnered with the Insurance School of Texas to offer Solomon securities licensing exam products and services to students of the Insurance School of Texas.

According to David Lervig, president, the Insurance School of Texas has been proudly serving Texas prelicensing needs since 2007, offering Life Only, Life & Health, Personal Lines, and Property & Casualty licensing in 1- and 2-day live classes with an exceptional pass rate. The Insurance School of Texas has two classroom locations in Houston, one in Beaumont, and one in Abilene, Texas. The Insurance School of Texas has 3 full-time instructors with almost 100 combined years of insurance experience dedicated to helping Texans pass their state licensing exams quickly and with ease.

March’s Study Question of the Month

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card. Continue reading

Congratulations to Dawn C., this month’s Study Question of the Month winner! 

See the answer below!

***Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.***

Question (Relevant to the Series 7, Series 65, Series 66)

studyQuestion

 

 

 

 

 

According to the Capital Asset Pricing Model, if the risk-free rate of return is 2%, the market rate of return is 6%, and the investment’s beta is 1.5, what is the required rate of return of an investment?

A. 6.5%
B. 7%
C. 8%
D. 18%

Answer: A. To calculate the required rate of return, according to the CAPM, subtract the risk-free rate from the market rate to get the market premium, then multiply the market premium by the beta and add that product to the risk-free rate to get the required rate of return of the investment.

As follows:

.06 – .02 = .04

.04 x 1.5 = .06
.06 + .02 = .08 or 8%