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. Effective May 30, 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.

Announcing the Release of the Solomon Exam Prep Android Mobile App!

With the release of the Solomon Exam Prep app, you have full mobile access to your Solomon study materials with the click of a button. Continue reading

Do you need to take a securities licensing exam?

Do you wish you had more time to study?

With the release of the Solomon Exam Prep Android app, you have full mobile access to your Solomon study materials at the click of a button.

  • Easier and quicker—Just click the Solomon Exam Prep icon on your phone to be taken directly to your account.
  • Access all your materials—The app provides full site functionality and access to your study guide, exam simulator, audiobook, and video lecture.
  • No typing on tiny keyboards—Don’t worry about typing in a web address! Our app will take you right where you need to be.

Move into the future of mobile securities exam prep with the Solomon Exam Prep app!

To download the app, please visit: goo.gl/IkNceh

Solomon Exam Prep has helped thousands of financial professionals pass their FINRA, NASAA, and MSRB licensing exams, including the 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 the Series 99.

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Study Question of the Month – January 2016

This month’s study question from the Solomon Online Exam Simulator question database is now available! Relevant to the Series 7, Series 24, Series 55, and Series 62. –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.***

Study Question

Question (Relevant to the Series 7, Series 24, Series 55, and Series 62): A market maker has a listed a quote of 32.20 – 32.80, 12 x 7 for ABCD stock on NASDAQ. The market maker accepts a buy limit order from a customer for 200 shares at 32.60. What quote will the market maker have to display to comply with a SEC rules?

Answers:

A. 32.60 – 32.80, 10 x 7

B. 32.20 – 32.80, 12 x 7

C. 32.60 – 32.80, 2 x 7

D. 32.20 – 32.80, 2 x 7

Correct Answer: C. 32.60 – 32.80, 2 x 7

Rationale: The SEC requires market makers to immediately (within 30 seconds) display customer limit orders that are better than their current best quote for NMS stocks. In this case, the buy limit order is better than the market maker’s current bid (32.60 > 32.20) so the market maker must immediately display the adjusted quote.

Congratulations to David A., this month’s Study Question of the Month winner!

New Securities Trader Qualification Exam (Series 57)

FINRA recently announced that it plans to file a proposed rule change with the SEC to replace the Equity Trader Limited Representative Exam (Series 55) with a new exam to be called the Securities Trader Qualification Exam (Series 57). Continue reading

Exam Alert FINRA recently announced that it plans to file a proposed rule change with the SEC to replace the Equity Trader Limited Representative Exam (Series 55) with a new exam to be called the Securities Trader Qualification Exam (Series 57). FINRA will file this proposed rule change in conjunction with the national securities exchanges proposed rule changes to similarly replace the Proprietary Trader Qualification Exam (Series 56) with the Securities Trader Qualification Exam (Series 57). In preparation for the Series 57—a merger of the Series 55 and Series 56—FINRA will conduct a detailed job-analysis survey to gather information from individuals currently Series 55 and Series 56 registered regarding their present roles and responsibilities to ensure that the Series 57 exam accurately covers their day-to-day job functions.

You can read the official announcement on FINRA’s website: http://www.finra.org/industry/information-notice-033115

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 6Series 7Series 24, Series 26, Series 55, Series 62Series 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 Revises OATS, ORF, and ADF/TRF Trade Reporting Rules

FINRA is revising the trade reporting rules for the Order Audit Trail System (OATS) and for FINRA facilities. The changes require… Continue reading

FINRA is revising the trade reporting rules for the Order Audit Trail System (OATS) and for FINRA facilities. The changes require:

  • reporting additional times for certain transactions
  • expressing trade times in milliseconds
  • linking reversal reports to the original trade
  • reporting trades on non-business days and trades that are over a year old to FINRA facilities
  • using a new “step-in” indicator (when a firm takes over a position from another firm)
  • keeping declined trades in the system so they may still be cancelled, corrected, or accepted

Effective April 7, 2014, FINRA has modified the rules for the Order Audit Trail System (OATS).

Effective September 15, 2014, FINRA will modify the rules for the OTC Reporting Facility (ORF).

Effective September 29, 2014, FINRA will require firms to report the time of trades in milliseconds when reporting to the Alternative Display Facility (ADF) or to Trade Reporting Facilities (TRFs).

FINRA will implement the other changes to ADF and TRF reporting rules in the first quarter of 2015.

Source: FINRA Regulatory Notice 14-21: SEC Approves Amendments to Equity Trade Reporting and OATS Rules

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

Personal Finances and Your Registration

Customers sometimes ask whether a poor credit rating or a personal bankruptcy could negatively impact their ability to get licensed to work in the securities industry. Here is some information about how your personal financial situation may affect your registration process … Continue reading

Customers sometimes ask whether a poor credit rating or a personal bankruptcy could negatively impact their ability to get licensed to work in the securities industry. Here  is some information about how your personal financial situation may affect your registration process.

First an important caveat: this is not legal advice and, as an education company, Solomon Exam Prep provides this information for educational purposes only. Please consult with a compliance professional to identify and address any issues regarding your situation or your state’s regulations. Always check with your compliance department regarding compliance issues.

1. Be sure to disclose relevant information on Form U4.

Form U4 is the registration form for broker-dealer agents and investment adviser representatives. It asks several questions about your history, including some on your finances. Such questions include whether you or a company you controlled have been subject to a bankruptcy within the past ten years. Answer these questions completely and honestly! Failing to disclose this information could jeopardize your ability to work in the securities industry–it could result in a statutory disqualification.

2. You may be denied registration based on insolvency.

If the state securities administrator discovers that you are insolvent (meaning that you can’t pay your debts), they may deny your registration if they feel that it is in the public’s interest.

3. You may be denied registration based on your financial history.

FINRA may deny your registration based your answers to the questions on Form U4. This means that FINRA could deny your registration if:
-you or a company you controlled have been subject to a bankruptcy within the past ten years
-a bonding company denied, paid out on, or revoked a bond for you
-you have unpaid legal judgments or liens

4. You may be denied registration for having a poor credit history.

Having a poor credit history could result in your registration being denied. Regulators may require applicants to submit balance sheets, and the information on such sheets will be factored into the overall decision of whether to approve or deny your application.

5. Your application for registration will not be automatically accepted if you have financial issues that are required to be reported on Form U4.

If you report financial problems on your application, it will not be automatically accepted. Instead, it will be transferred to a manual review process.

6. Once you are registered, you may lose your registration due to poor credit, bankruptcy, or insolvency.

Even if you are already registered, you are still required to report certain events by updating Form U4, and your registration is still subject to review when you do so.

7. You may be able to get registered even if you don’t have a spotless financial history.

Regulators are looking out for your customers and they want to collect all relevant information so they can stop problems before they start. They will only deny your registration if they feel it is in the public’s interest.

If a checkered financial history fit with other red flags, such as a criminal record or a history of regulatory violations, then a denial would be more likely. However, an isolated financial incident would be less likely to cause regulators to deny a registration. Regulators look at each case individually.

Note that regulations vary by state, and that in some states regulators will not look at your credit rating when evaluating your application. Certain regulators may also allow you to send your information before you apply, so you can see whether they would accept your application. For more information, contact your state securities administrator. Contact information may be found on the NASAA’s website.

Reminder: this is not legal advice and is provided for educational purposes only. Please consult with a compliance professional to identify and address any issues regarding your situation or your state’s regulations. Always check with your compliance department regarding compliance issues.

 

Sources:

Form U4

Form U4 Instructions

“Why Bad Credit Is Bad For Financial Careers”

Study Question of the Week: April 23, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 24, Series 55, Series 62, and Series 79. –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 24, Series 55Series 62, and Series 79): 

The price of a 10b-18 repurchase transaction:

Answers:

A. Must not exceed the highest independent bid or the last independent transaction price, whichever is higher

B. Must not exceed the highest independent bid or the last independent transaction price, whichever is lower

C. Must not exceed the lowest independent offer or the last independent transaction price, whichever is higher

D. Must not exceed the lowest independent offer or the last independent transaction price, whichever is lower

Correct Answer: A. Must not exceed the highest independent bid or the last independent transaction price, whichever is higher

Rationale: Rule 10b-18 provides a safe harbor for issuer repurchase transactions. It allows the issuer to repurchase its own stock without being liable for manipulation based solely on the manner, timing, price, and volume of the repurchase transactions. In order to qualify, the transaction must be at a price equal to or less than the highest independent bid and the last independent transaction price, whichever is higher. The transaction must comply with broker usage restrictions, timing restrictions, and volume limitations as well.

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

Exam Alert: FINRA Establishes Exemption from Spinning Rule for Certain Funds of Funds

Effective February 3, 2014, FINRA has put in place a modification to its issue allocation rules. The change provides an exemption from the “anti-spinning” provision of FINRA Rule 5131. Continue reading

Effective February 3, 2014, FINRA has put in place a modification to its issue allocation rules. The change provides an exemption from the “anti-spinning” provision of FINRA Rule 5131.

Spinning refers to the practice of a firm allocating shares of a new issue to an investor’s account in exchange for that investor directing their company’s investment banking business to the firm. Spinning is generally prohibited.

The new exemption allows for a firm to allocate shares of a private fund (such as a fund of funds) to an account (such as a hedge fund) if both the account and the fund meets certain conditions. These conditions include that the fund:
-is managed by an investment adviser;
-has assets greater than $50 million;
-owns less than 25 percent of the account;
-is not a fund in which a single investor has a beneficial interest of 25 percent or more; and
-was not formed for the specific purpose of investing in the account.
The account must not look through to the beneficial owners of unaffiliated private funds invested in the account, except for beneficial owners that are control persons of the investment adviser managing the fund.

In addition, the adviser managing the account must be unaffiliated with the investment adviser managing the fund.

Source: FINRA Regulatory Notice 13-43: SEC Approves a Limited Exception From FINRA Rule 5131(b) to Permit Firms to Rely Upon a Written Representation From Certain Unaffiliated Private Funds

Further reading: Mondaq.com: FINRA Amends Its Rule 5131 To Ease “New Issues” Compliance Related To Certain Funds-Of-Funds

This alert applies to the Series 7 and Series 55.

Exam Alert: FINRA Revises ADF Market Participant Registration Rules

Effective February 3, 2014, FINRA has implemented changes to the requirements for registering as an Alternative Display Facility (ADF) market participant. An applying firm must now agree to submit an ADF Deposit Amount, execute a Participant Agreement with FINRA, and execute a Certification Record. Continue reading

Effective February 3, 2014, FINRA has implemented changes to the requirements for registering as an Alternative Display Facility (ADF) market participant. An applying firm must now agree to submit an ADF Deposit Amount of $250,000 into escrow (raised to $500,000 under certain conditions). The firm may lose some of the deposit if they fail to submit at least 75% of its quoting or trading volume to the ADF. The firm must also provide monthly projections of the volume of data it expects to submit to the ADF.

The rule provides for ways to earn back the deposit. The rule also specifies what happens to the deposit if the firm is sold, stops doing business, or fails to become or remain an ADF market participant.

A firm seeking registration as an ADF market participant must also execute a Participant Agreement with FINRA and execute a Certification Record. The Certification Record has the firm attest that it can comply with certain requirements of Regulation NMS.

Source: FINRA Regulatory Notice 14-04: SEC Approves Amendments to FINRA Rules 6271 and 6272 Regarding the Requirements For Firms Seeking Registration as FINRA Alternative Display Facility (ADF) Market Participants

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