Series 26

Study Question of the Week: July 2, 2013 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.

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

A registered representative wishes to participate in a securities transaction outside of the jurisdiction of his firm. He does not receive compensation for the transaction. Which of the following is true?

Answers:

A. The registered representative needs to inform his firm prior to participating and adhere to any conditions that the firm puts on the rep in connection with the rep’s participation

B. The registered representative does not need to inform his firm because he is not receiving compensation

C. The registered representative needs to inform his firm and await permission before participating in the securities transaction

D. The registered representative cannot participate in any outside securities transactions because it is considered selling away and it is prohibited

Correct Answer: A.

Rationale: A “private securities transaction“ shall mean any securities transaction outside the regular course or scope of an associated person’s employment with a member. A registered representative who wishes to participate in private securities transactions needs to notify his firm and await permission if he will be receiving compensation. If he will not receive compensation, he must notify his firm. The firm shall provide the representative prompt written acknowledgement of the notice and at the firm’s discretion require the person to adhere to specified conditions in connection with the rep’s participation in the transaction.

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

Exam Alert: FINRA revises who can qualify as “public arbitrators”

Effective July 1, 2013, FINRA will revise its arbitration rules to impose additional limits on who may be considered a public arbitrator. Continue reading

Effective July 1, 2013, FINRA will revise its arbitration rules to impose additional limits on who may be considered a public arbitrator. The changes prohibit people associated with mutual funds or hedge funds from serving as public arbitrators. The changes also require individuals to wait for at least two years after ending certain affiliations before they are considered public arbitrators.

Source: FINRA Regulatory Notice 13-21: SEC Approves Amendments to Arbitration Codes to Revise the Definition of Public Arbitrator

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

Study Question of the Week: June 19, 2013 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, and Series 99. –ANSWER POSTED– Continue reading

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

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

Under FINRA Rule 2830, an associated person may accept which of the following gifts from a mutual fund distributor?

Answers:

A. Reimbursement for out-of-pocket expenses incurred by the associated person and his spouse in attending an educational conference

B. Occasional meals and NFL tickets tied to a stated annual sales quota

C. A crisp new $100 bill delivered once every year on Christmas eve

D. None of the choices listed

Correct Answer: D.

Rationale: Rule 2830 prohibits all of these gifts from a mutual fund distributor to an associated person; specifically, any cash compensation (unless described in a current prospectus of the investment company), meals and tickets tied to a sales target, and reimbursement for meeting expenses incurred by anyone other than the associated person.

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

Study Question of the Week: June 4, 2013 Edition

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

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

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

FINRA considers institutional communications to be written communications sent solely to institutional investors. FINRA considers an “institutional investor“ to be any of the following except:

Answers:

A. An individual with total assets of $55 million

B. An insurance company

C. A corporation with net assets of $20 million

D. A qualified plan that has 100 participants

Correct Answer: C

Rationale: Institutional communications are written communications sent to institutional investors. FINRA Rule 2210, Communication with the Public, defines “institutional investor“ as any of the following:

(A) a bank,savings and loan association, insurance company, or registered investment company;

(B) an investment adviser registered either with the Securities and Exchange Commission under Section 203 of the Investment Advisers Act of 1940 or with a state securities commission (or any agency or office performing like functions);

(C) any other entity (whether a natural person, corporation, partnership, trust, or otherwise) with total assets of at least $50 million;

(D) governmental entity or subdivision thereof;

(E) employee benefit plan, or multiple employee benefit plans offered to employees of the same employer, that meet the requirements of Section 403(b) or Section 457 of the Internal Revenue Code and in the aggregate have at least 100 participants, but does not include any participant of such plans;

(F) qualified plan, as defined in the Exchange Act, or multiple qualified plans offered to employees of the same employer,that in the aggregate have at least 100 participants, but does not include any participant of such plans;

(G) member or registered person of such a member; and

(H) person acting solely on behalf of any such institutional investor.

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

Exam Alert: SEC requires financial institutions to implement identity theft programs

On April 10, 2013, the SEC announced that it and the CFTC were implementing rules to require broker-dealers, mutual funds, investment advisers, and certain other entities to adopt programs to prevent identity theft. Continue reading

The programs should be designed to identify relevant red flags, and to detect and respond to such red flags. The programs must also be updated periodically. Staff should receive adequate training. Financial institutions must exercise appropriate and effective oversight of service provider arrangements.

The rules will become effective 30 days after publication in the Federal Register. The compliance date for the rules will be six months after their effective date.

Source: SEC Release 2013-57: SEC Adopts Rules to Help Protect Investors from Identity Theft

This alert applies to Series 24, Series 26, Series 65, Series 66, and Series 99.

Exam Alert: FINRA implements pricing limits to prevent extreme volatility in NMS stocks

Effective April 8, 2013, FINRA and other SROs will put into effect a plan to address extraordinary volatility in the stock market, such as what happened during the flash crash of 2010. The plan prevents trades in an NMS stock from being executed outside of a specified threshold of the average price of trades in the stock over the past five minutes. Continue reading

If the national best bid goes below the lower threshold or the national best offer goes above the higher threshold (but the other side of the market is within the threshold), the quotes for the stock enter a “straddle state.” When the quotes are in a straddle state, the primary exchange that lists the stock may pause trading in the stock.

If both sides of the market go either at or above the higher threshold or at or below the lower threshold, the quotes inn the stock enter a “limit state.” If the quotes remain in a limit state for 15 seconds, then the primary listing exchange for the stock must pause trading in the stock for five minutes.

The thresholds are as follows:

Average price over the past 5 minutes	Threshold
More than $3.00	5%
$0.75 up to and including $3.00	20%
Less than $0.75	Lesser of $0.15 or 75%

These thresholds are doubled within 15 minutes of market open and 25 minutes of market close. Also, a leveraged ETP (exchange-traded product) multiplies the threshold by the leverage ratio of the product.

The plan will be implemented in two stages. The first stage will go into effect April 8, 2013, and will have the plan apply to certain selected NMS stocks. The second stage will go into effect six months later, and will expand the plan to cover all NMS stocks.

FINRA has added a new rule and adopted amendments to other rules to ensure compliance with the plan.

Source: FINRA Regulatory Notice 13-12: FINRA Adopts Amendments Relating to Regulation NMS Plan to Address Extraordinary Market Volatility

This alert applies to the Series 7, Series 24, Series 26, Series 55, and Series 62.

Exam Alert: SEC clarifies standards for filing social media communications by investment companies

On March 15, 2013, the SEC issued guidance for investment companies regarding their communications over social media. Noting that investment companies have been filing certain communications unnecessarily, the SEC describes which types of communications should or should not be filed, providing examples of each. Continue reading

Communications that should be filed include:

-Discussion of the specific elements of the performance of a fund

-Promotion of the performance of a fund

-Communication initiated by the issuer that talks about the merits of the fund

Communications that do not need to be filed include:

-Mention of an investment company that does not address the investment merits of the fund

-Talking about performance with no mention of any specific element of a fund’s return

-Factual introductory statements that include a link to the fund’s prospectus

-Factual responses to queries that do not address the investment merits of a fund

To see examples of what needs to be filed and what does not, check out the SEC guidance.

For further analysis of the SEC release, along with a general discussion of the intersection of regulation and social media, check out the blog post by Augie Ray at http://www.experiencetheblog.com/2013/03/regulators-to-financial-service-stop.html. Mr. Ray, an ex-Forrester analyst (source), asserts that regulators are encouraging firms to make more active use of social media, and that this guidance is part of that trend.

Source: SEC Release 2013-40: SEC Issues Guidance Update on Social Media Filings by Investment Companies

This alert applies primarily to the Series 6, Series 7, and Series 26. It may also be relevant to the Series 24, Series 62, Series 82, Series 99.

Exam Alert: FINRA provides reporting exceptions to avoid duplicative filings, permits online filing

FINRA will let members:
-avoid needing to independently report information that is already contained on Form U4
-avoid needing to independently report actions that FINRA takes against firms and agents
-file required copies of criminal complaints, civil complaints, and arbitration claims online Continue reading

Effective March 4, 2013, FINRA will let members avoid needing to independently report information that is already contained on Form U4. FINRA will also implement an exception for reporting regulatory actions that FINRA takes against firms and associated persons (since FINRA will already have the details of the action on file).

Effective July 1, 2013, FINRA will let firms file required copies of criminal complaints, civil complaints, and arbitration claims online.

Source: FINRA Regulatory Notice 13-08: FINRA Amends Rule 4530 to Eliminate Duplicative Reporting and Provide the Option to File Required Documents Online Using a New Form

This alert applies to the Series 7, Series 24, Series 26, Series 62, Series 79, Series 82, and Series 99.

Study Question of the Week: February 19, 2013 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.

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

Richard had just returned to the States from his third tour of duty in Afghanistan. After relaxing with family and friends for a couple of months, he re-registers with his old employer where he had worked as a broker. In the meantime his license:

Answers:

A. Expired after his second year-long tour of duty

B. Expired ninety days after completing his second tour of duty

C. Remains current

D. Expires in 30 days unless Richard successfully completes his continuing education program

Correct Answer: C

Rationale: FINRA provides licensing relief to registered representatives who are called into or volunteer for active military service. Richard’s license will expire ninety days after completion of active service, unless he re-registers with a member firm before that time. Since he took only two months off before re-registering, Richard’s license is still current and will remain so.

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

Exam Alert: FINRA revises inspection rule

Effective February 25, 2013, FINRA will modify its rule that covers its ability to request information and inspect books and records. Continue reading

Effective February 25, 2013, FINRA will modify its rule that covers its ability to request information and inspect books and records. The rule will:

-specify that FINRA may inspect and copy information that is in a person’s “possession, custody, or control” if the person is subject to FINRA’s jurisdiction

-identify that books and records are subject the rule if they relate to a broker-dealer’s business or to a person’s association with a member

-describe how FINRA will contact unregistered associated persons at either a business or home address

-permit FINRA to provide an inspection request to a person’s attorney, assuming the person is being represented by the attorney in responding to the request

Source: Regulatory Notice 13-06: SEC Approves Amendments to Rule 8210

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