Category: FINRA

Study Question of the Week: September 19, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale! Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale!

Happy studying!

Question (Relevant to Series 7, Series 79, Series 24, Series 62, Series 99, and Series 82):

Before allowing a customer to buy shares in an IPO, the member firm must receive a representation that the account is not restricted by the account owner. How can this form be obtained initially?
I. Negative consent letter
II. Positive affirmation letter

Answers:

A: I

B: II

C: Either I or II

D: Neither I nor II

Securities Licensing Examination Waivers

FINRA is permitted to waive the examinations in “exceptional cases and where good cause is shown.” Continue reading

FINRA is permitted to waive the examinations in “exceptional cases and where good cause is shown.”  Related experience, education, regulatory experience, registration filing errors and related exams may be grounds for waiver requests. Age and/or physical infirmity are factors FINRA may consider but Rule 1070(d) says that age and/or illness alone are not sufficient ground.  English as a second language is not considered grounds for a waiver, but ESL candidates can request additional time (30-60) minutes to take an exam.  Principal examinations, such as the Series 24 General Securities Principal Exam and the Series 26 Investment Company Products/Variable Contracts Limited Principal Exam, are “rarely waived.”  Also, if you’re talking NASAA exams (Series 63, 65, 66) you have to go to the state to request a waiver, not FINRA.  Finally, examination waiver requests must be submitted by the firm, not the applicant, electronically via Firm Gateway and they “are conditional on the applicant successfully completing a Regulatory Element training session pursuant to FINRA Continuing Education Rule 1250.”

Relevant to: Series 7, Series 6, Series 24, Series 26, Series 55, Series 79, Series 99, Series 82.

Exam Alert: FINRA adopts, modifies private placement rules

Effective December 3, 2012, FINRA will adopt a new rule regarding private placements. The rule requires that firms that sell securities in a private placement must file any offering documents used within 15 days of the date of the first sale, or indicate that the firm did not use any offering documents. Continue reading

Effective December 3, 2012, FINRA will adopt a new rule regarding private placements.  The rule requires that firms that sell securities in a private placement must file any offering documents used within 15 days of the date of the first sale, or indicate that the firm did not use any offering documents.  The documents must be filed electronically through the FINRA Firm Gateway.

FINRA will also modify a rule regarding private placements.  This change, also effective December 3, 2012, requires firms to submit filings regarding member firm private offerings through the Firm Gateway.

Source: FINRA Regulatory Notice 12-40

This alert applies to the Series 79, Series 62, Series 24, Series 7, and Series 82.

Exam Alert: FINRA amends short-interest reporting rule

Effective November 30, 2012, FINRA has amended its short-interest reporting rule. The change eliminates three exceptions to the rule for stabilizing activity, domestic arbitrage, and international arbitrage, and codifies/clarifies other provisions. Continue reading

Effective November 30, 2012, FINRA has amended its short-interest reporting rule.  The rule requires that member firms maintain records of short positions in non-restricted equity securities in customer and firm accounts and report the information to FINRA.

The change eliminates three exceptions to the rule for stabilizing activity, domestic arbitrage, and international arbitrage.  Exceptions still remain for certain other situations.

The change also codifies that short positions must be reported for each account on a gross basis (as opposed to a net basis).  The change clarifies that firms are only required to report short sales that have settled or that have reached their settlement date.

Source: FINRA Regulatory Notice 12-38

This alert applies to the Series 24.

ANSWER–Study Question of the Week: September 5, 2012 Edition

As a follow up to yesterday’s question, here is your question PLUS answer and rationale: Continue reading

As a follow up to yesterday’s question, here is your question PLUS answer and rationale:

Question (Relevant to Series 7, Series 62, and Series 24):

Sam bought 1,000 shares of XYZ Corporation three months ago and the stock has appreciated significantly over that time. Sam decides to go short against the box. What does this mean?

Answers:

A: Sam has decided to short 1,000 shares of XYZ.

B: Sam has decided to write 10 call options of XYZ stock.

C: Sam has decided to write 10 put options of XYZ stock.

D: Sam has decided to sell his shares of XYZ and then buy the shares back after a 30-day window.

Correct Answer: A

Rationale:

When an investor goes short “against the box” it simply means that the investor has shorted shares that they already own with no intention of delivering their own shares by the settlement date. This practice is called “against the box” because the owned shares are held safely in a box, while borrowed shares are sold. Shorting against the box used to be a common tax deferral strategy. By selling borrowed shares, the investor could defer a capital gain to a more favorable later time. Current tax law no longer permits shorting against the box to be used as a tax deferral strategy – when an investor shorts shares they already own it is treated as if they have sold the shares and the gain is recognized immediately.

*Questions featured in the weekly study question series are sampled from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: September 5, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section! Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.  Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale!

Happy studying!

Question (Relevant to Series 7, Series 62, and Series 24):

Sam bought 1,000 shares of XYZ Corporation three months ago and the stock has appreciated significantly over that time. Sam decides to go short against the box. What does this mean?

Answers:

A: Sam has decided to short 1,000 shares of XYZ.

B: Sam has decided to write 10 call options of XYZ stock.

C: Sam has decided to write 10 put options of XYZ stock.

D: Sam has decided to sell his shares of XYZ and then buy the shares back after a 30-day window.

ANSWER–Study Question of the Week: August 29, 2012 Edition

As a follow up to yesterday’s question, here is your question PLUS answer and rationale: Continue reading

As a follow up to yesterday’s question, here is your question PLUS answer and rationale:

Question (Relevant to Series 24, Series 55, Series 62, Series 7)

To calculate a markdown as a percentage, which of the following are used?

Answers

A: The lowest bid

B: The highest bid

C: The highest offer

D: The lowest offer

Correct Answer: B

Rationale: A markdown is calculated when a customer sells shares. The customer would sell their shares to the market maker who is willing to buy at the highest bid. The markdown is calculated by dividing the amount kept by the market maker by the highest bid.

Exam Alert: FINRA to modify minimum quote sizes for OTC stocks

Effective November 5, 2012, FINRA will implement a pilot program modifying the standards for minimum quotation sizes for OTC equity securities. Continue reading

Effective November 5, 2012, FINRA will implement a pilot program modifying the standards for minimum quotation sizes for OTC equity securities.  During this program, the minimum quote sizes will be as follows:

Price (Bid or Offer) Minimum Quote Size (# of shares)
$0.0001 to $0.0999 10,000
$0.10 to $0.1999 5,000
$0.20 to $0.5099 2,500
$0.51 to $0.9999 1,000
$1.00 to $174.99 100
$175.00+ 1

The rule will also be extended to apply to all quotes and orders displayed in an inter-dealer quotation system, including quotes displayed by alternative trading systems and quotes reflecting customer orders.  The program will last until October 31, 2013, unless rescinded, extended, or made permanent.

Source: FINRA Regulatory Notice 12-37

This alert applies to the Series 55, Series 62, Series 24, and Series 7.

Exam Alert: Test takers with limited English proficiency must submit a form to FINRA to receive extra time

Effective September 1, 2012, FINRA will implement a new policy for providing additional time to people with limited English proficiency on qualification exams and on Regulatory Element Continuing Education sessions. The new policy requires that people requesting additional time must submit an LEP Request Form to FINRA and receive confirmation from FINRA that the form has been processed before scheduling the exam or Continuing Education session. Continue reading

Effective September 1, 2012, FINRA will implement a new policy for providing additional time to people with limited English proficiency on qualification exams and on Regulatory Element Continuing Education sessions.  The new policy requires that people requesting additional time must submit an LEP Request Form to FINRA and receive confirmation from FINRA that the form has been processed before scheduling the exam or Continuing Education session.

This new policy replaces the current policy covering people who speak English as a second language.  Test center personnel will no longer be authorized to provide additional time to people who speak English as a second language or to people with limited English proficiency.

A person is considered to have “limited English proficiency” if they “(1) do not speak English as their primary language; and (2) have limited ability to read, speak, write and understand the English language.”

Further details on the new policy may be found on FINRA’s website.

Sources:

FINRA Information Notice 8/1/2012

Candidates with Limited English Proficiency (FINRA website)

This alert applies to all FINRA-administered exams.  This includes (among others) the Series 24, Series 26, Series 6, Series 7, Series 55, Series 62, Series 79, Series 82, Series 99, Series 56, Series 63, Series 65, and Series 66.

Exam Alert: Operations Professionals must pass the Series 99 by October 17

Anyone who was identified by their firm as an Operations Professional as of October 17, 2011, must pass the Series 99 (or other appropriate qualification exam) by October 17, 2012. Those who need to pass the exam should note the 30-day waiting period for retaking the exam. The waiting period increases to 180 days if an individual fails the exam three or more times in succession. Continue reading

Anyone who was identified by their firm as an Operations Professional as of October 17, 2011, must pass the Series 99 (or other appropriate qualification exam) by October 17, 2012.  Those who need to pass the exam should note the 30-day waiting period for retaking the exam.  The waiting period increases to 180 days if an individual fails the exam three or more times in succession.

If an individual fails to pass the Series 99 (or other qualification exam) by October 17, then the individual must stop functioning as an Operations Professional until he or she passes the exam.  FINRA has stated that it will not grant exceptions or waivers to the waiting period rule.

 

Sources:

“Operations Professional Qualification Exam” (FINRA website)

“Qualifications FAQ-Operations Professional” (FINRA website)

NASD Rule 1070, Qualification Examinations and Waiver of Requirements

 

This alert applies to the Series 99.