Series 26

Study Question of the Month – June

This month’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 24, 26, 27, 28, 62, and 99. –ANSWER POSTED– Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available.

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

Question (Relevant to the Series 24, Series 26, Series 27, Series 28, Series 62, and Series 99):

Which of the following is true regarding lost and stolen security reporting requirements?

I. All reports of securities that have been lost for one business day should be reported to the Commission

II. All reports of lost securities in which there is a substantial belief that theft was involved should be reported to the Commission

III. All reports of lost or stolen securities should be reported promptly to the FBI

IV. All reports of lost securities in which there is a substantial belief that theft was involved should be reported to the FBI

Answers:

A. I and III

B. II and IV

C. I and IV

D. II and III

Correct Answer: B. II and IV

Rationale: All reports in which there is substantial belief that theft was involved should be reported to the Commission within one business day of such a discovery. In addition, when there is believed to be criminal activity involved, it should be reported to the Federal Bureau of Investigation. Securities that have been lost for two business days should be reported to the Commission when criminal activity is not suspected.

Congratulations Roseann L., this month’s Study Question of the Month winner!

All study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Month – May

This month’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, 7, 24, 26, 27, and 28. –ANSWER POSTED– Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available.

***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 24, Series 26, Series 27, and Series 28):

According to the Code of Arbitration, excluding claims alleging discrimination or sexual harassment, arbitration of disputes is mandatory for all of the following except:

Answers:

A. Disputes between two member firms

B. Disputes brought by member firms against customers, if required by contract

C. Disputes brought by member firms against customers for claims in excess of $25,000

D. Disputes brought by associated persons against customers, if the customer consents

Correct Answer: C. Disputes brought by member firms against customers for claims in excess of $25,000

Rationale: Arbitration of disputes involving customers is mandatory only if the customer consents to arbitration or if required by contract. Claims alleging discrimination or sexual harassment cannot be arbitrated, except by agreement of all disputing parties.

(No winner this month. There were no correct answers submitted. Try back next month!)

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Month – January

This month’s study question from the Solomon Online Exam Simulator question database is now available. Submit your answer for a chance to win a $10 Starbucks gift card! Relevant to the Series 7, 24, 26, 27, 51, 52, 53, 62, 79, 82, 99. –ANSWER POSTED– Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available.

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

Question (Relevant to the Series 7, Series 24, Series 26, Series 27, Series 51, Series 52, Series 53, Series 62, Series 79, Series 82, Series 99)

Jon and Jenny are married. They each have an individual account and they have a joint account owned by both of them. What is the combined maximum SIPC coverage for all their accounts?

Answers:

A. $500,000

B. $1,000,000

C. $1,500,000

D. $750,000

Correct Answer: C. $1,500,000

Rationale: SIPC covers a maximum of $500,000 per “separate customer” at a broker-dealer or clearing firm including up to $250,000 in cash.Total coverage can be higher for multiple accounts if the accounts are considered to be held by separate customers. There are five categories of separate customers defined by SIPC. These categories include 1) individual accounts, 2) joint accounts, 3) accounts held by executors, administrators, and guardians/custodians/conservators (such as UGMA accounts), 4) accounts held by corporations, partnerships, or unincorporated associations, and 5) trust accounts. Thus, two individual accounts held by two different people, and one joint account would be considered three separate customers by the SIPC, and therefore subject to a maximum of $1,500,000 of coverage.

Congratulations! This month’s winner is Abe B.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Exam Alert: FINRA Allows Arbitrators to Make Mid-case Referrals in Cases of Serious Threats

Effective October 27, 2014, FINRA has revised its arbitration rules regarding when arbitrators may refer matters to FINRA for disciplinary investigation. Continue reading

Exam Alert Effective October 27, 2014, FINRA has revised its arbitration rules regarding when arbitrators may refer matters to FINRA for disciplinary investigation. Arbitrators may now make such referrals during an arbitration if they become aware of an issue that they believe poses a serious threat that will harm investors unless immediate action is taken. Previously, arbitrators could not make referrals until the conclusion of a case.

Source: Regulatory Notice 14-42: SEC Approves Amendments to the Arbitration Codes to Expand Arbitrators’ Authority to Make Referrals During an Arbitration Proceeding

This alert applies to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 79, and Series 82.

Exam Alert: FINRA Adds Additional FOCUS Report Supplement

Effective December 31, 2014, certain firms that are required to file FOCUS reports will be required to file an additional form called the Supplemental Inventory Schedule. Continue reading

Effective December 31, 2014, certain firms that are required to file FOCUS reports will be required to file an additional form called the Supplemental Inventory Schedule. On this form, firms report their gross long and short inventory positions in specified categories of securities and commodities. The requirement does not apply to firms that have (1) a minimum dollar net capital or liquid capital requirement of less than $100,000 or (2) inventory positions consisting only of money market mutual funds.

Source: FINRA Regulatory Notice 14-43: SEC Approves Supplemental Inventory Schedule

This alert applies to the Series 26 and Series 99.

Study Question of the Week: August 27, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, 7, 24, 26, 55, 62, 79, and 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 55, Series 62, Series 79, and Series 82):

What is the maximum civil penalty that can be imposed on a firm when an employee engages in insider trading?

Answers:

A. The greater of $1,000,000, or three times the amount of the profit gained or loss avoided as a result of the violation

B. The lesser of $1,000,000, or three times the amount of the profit gained or loss avoided as a result of the violation

C. Three times the amount of the profit gained or loss avoided as a result of the violation

D. $0

Correct Answer: A. The greater of $1,000,000, or three times the amount of the profit gained or loss avoided as a result of the violation

Rationale: The maximum civil penalty that can be imposed on a firm when an employee engages in insider trading is the greater of $1,000,000, or three times the amount of the profit gained or loss avoided as a result of the violation.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Exam Alert: FINRA Excludes Research Reports on Exchange-Listed Securities From Filing Requirement

Effective July 11, 2014, FINRA revised its rules on filing retail communications. The new rules do not require firms to file research reports on securities listed on national exchanges, except for certain research reports on investment companies. Continue reading

Effective July 11, 2014, FINRA revised its rules on filing retail communications. Generally, FINRA requires firms to file retail communications on registered securities within ten business days of first use. The new rules exclude from filing research reports on securities listed on national exchanges. However, firms must still file certain research reports on investment companies. Specifically, research reports on open-end investment companies, unit investment trusts, and face-amount certificate companies must still be filed if they will be distributed to prospective investors.

Additionally, FINRA clarified that free-writing prospectuses that are exempt from the SEC’s filing requirements do not need to be filed with FINRA.

Retail communications are written communications, including electronic communications, that will be distributed or made available to more than 25 retail investors within any 30-calendar-day period. “Retail Investor” is defined as any person other than an institutional investor, regardless of whether the person has an account with the firm.

A research report is a written communication that includes information, analysis, and/or recommendations on a security.

Open-end investment companies, also known as mutual funds, are companies that offer shares of a portfolio of securities in the form of a fund to the public. Every time shares in the fund are purchased, the shares are issued new by the mutual fund company. Additionally, when shareholders wish to sell their shares, they must sell them back to the mutual fund company. The mutual fund company will then “redeem” them and expire the shares.

A unit investment trust (UIT) is an investment company that buys and holds a fixed portfolio of securities that are put into a trust in “units” that are sold to investors (unit holders). UITs have a stated termination date that varies according to the type of investments in the portfolio. A UIT in bonds may have as much as a 30-year life; a UIT in stocks may mature in one year or less. Unit holders receive a share of the principal at termination, and any income earned is distributed to investors in periodic payments of dividends or interest.

A face-amount certificate company is an investment company that issues debt securities called face-amount certificates backed by assets such as real property or other securities. Issuers of face-amount certificates promise to pay a stated amount (face-amount) to the investor at a specified time in the future. In return, investors pay the issuer a fixed amount of money either as a lump sum payment or in periodic installments. The rate of return is calculated by comparing the amount paid into the investment and the face-amount received.

A free-writing prospectus (FWP) is any written offer to sell or a solicitation to buy the securities in an offering, distributed during the cooling-off period, after a registration statement has been filed. It is not required to have the detail or depth of information of the preliminary prospectus.

This alert applies to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 82, and Series 99.

Source: FINRA Regulatory Notice 14-30: SEC Approves Amendments to FINRA Rule 2210 to Exclude Research Reports on Exchange-Listed Securities From Filing Requirements and Clarify the Standards Applicable to Free Writing Prospectuses

Exam Alert: FINRA Revises Series 26 Exam

Effective June 16, 2014, FINRA will modify the outline for the Series 26 exam. The changes affect the structure of the outline, the distribution of the exam questions, and the content tested on the exam. The total number of scored and unscored questions and the score required to pass remain unchanged. Continue reading

Effective June 16, 2014, FINRA will modify the Series 26 exam. The changes affect the structure of the outline, the distribution of the exam questions, and the content tested on the exam. The total number of scored and unscored questions and the score required to pass remain unchanged.

The structure of the new outline places topics into three “functions” (job responsibilities of an investment company and variable contracts products principal). These functions are then broken down into specific tasks as subsections. This is in contrast to the old outline, which has five broad sections and had subsections based on topics and/or rules.

The question distribution for the exam will change alongside the outline format. There is less of a focus on hiring and qualification and training of representatives. There is an increased focus on supervision, sales practices, and business processing and recordkeeping rules. According to FINRA, “the questions on the revised Series 26 examination place greater emphasis on key tasks such as supervision of registered persons, sales practices and compliance.” FINRA states that this adjustment “better reflects the key tasks performed by an Investment Company and Variable Contracts Products Principal.”

New content that may be tested on the revised exam includes the USA PATRIOT Act and associated anti-money laundering rules, the Fair and Accurate Credit Transaction Act of 2003 (FACT Act) and associated anti-identity theft rules, the Office of Foreign Assets Control (OFAC) Specially Designated National List (SDN), and Federal Deposit Insurance Corporation (FDIC) disclosures. Several new FINRA and SEC rules are on a wide range of topics may also be tested. These topics include disclosures during registration, deferred variable annuities, networking arrangements, proxies, business continuity plans, and holding customer mail, among others.

While some content that was listed on the old outline is not explicitly included on the new outline, test takers should still learn the material. For example, while the new outline does not specifically mention 529 plans or retirement plans, test takers will still be expected to know the rules regarding those products so that they may properly supervise individuals that sell such products.

Source: FINRA Regulatory Notice 14-18: FINRA Revises the Investment Company and Variable Contracts Products Principal (Series 26) Examination Program

This alert applies to the Series 26.

Study Question of the Week: April 30, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 79, Series 82, and Series 99. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 79, Series 82, and Series 99):

XYZ stock is trading at $10/share. ABC Co. makes a partial tender offer for XYZ stock at $11/share. John Johnson holds 1000 shares of XYZ stock. After ABC Co. announces the tender offer, John writes 10 calls of XYZ stock at $10.50/share. John then tenders as many shares of XYZ stock as he is legally permitted to. How many shares of XYZ does John tender?

Answers:

A. 0

B. 500

C. 1000

D. 2000

Correct Answer: A. 0

Rationale: John sold 10 calls after the tender offer was announced at a strike price lower than the tender offer price. As a result, the call is considered a short position for the purposes of calculating how many shares he can tender. John can tender up to his net long position in the stock, which is his long position (1000 shares) minus his short position (10 calls * 100 shares each = 1000 shares). 1000 – 1000 = 0, so John can tender 0 shares.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: April 16, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 79, Series 82, and Series 99):

For the question below, assume that each of the answers is solely for the benefit of the recipient and are classified as gifts, not business entertainment.

Which of the following gifts would be a violation under Rule 3220:

Answers:

A. A $20 giftcard given to a salaried employee

B. A holiday fruit basket valued at $80 paid for, or provided by, a third party vendor

C. A vase valued at $120, given as a wedding present and paid for by the employee

D. A dinner cruise valued at $120, if written consent was provided by the recipient’s employer

Correct Answer: D. A dinner cruise valued at $120, if written consent was provided by the recipient’s employer

Rationale: FINRA Rule 3220 is a broad rule with few exceptions. In the above examples, a $20 gift card given to a salaried employee would not violate the rule because it is not over the $100 limit. Regardless of the entity that pays for it, an $80 fruit basket would not violate the rule because it is not over $100. A dinner cruise valued at $120, even if written consent was provided by the recipient’s employer, is a violation because a flat $100 standard is applied, whether or not the recipient’s firm deems it appropriate. Note that in prior years, employees of NYSE firms were able to make such gifts under this scenario.

Even though it exceeds the $100 standard, a vase valued at $120, given as wedding present and paid for the by the employee is not a violation because it falls outside of the Rule 3220 restrictions. If a gift is given in commemoration of a life event (wedding, birth, etc.) and it is paid for by the individual employee, it is classified as a personal gift that is not “related to the business“ of the recipient’s employer. It is important to recognize that if the giver is ultimately reimbursed by their firm for the price of the present, the gift would be reclassified as a business-related gratuity and would then be in violation of the Rule’s $100 limitation.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.