This month’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, 7, 62, 65, 66, and 82. –ANSWER POSTED– Continue reading
This month’s study question from the Solomon Online Exam Simulator question database is now available.
Question (Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66 and Series 82):
The decimal equivalent of a basis point is:
Answers:
A. 0.01
B. 0.001
C. 0.0001
D. 0.00125
Correct Answer: C. 0.0001
Rationale: A basis point is one-hundredth of one percent, or .0001.
Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.
Effective April 27, 2015, FINRA will revise the definition of “asset-backed security” under its rules. Asset-backed securities will be required to be reported no later than 45 minutes from the time of execution, with minor exceptions. Continue reading
Effective April 27, 2015, FINRA will revise the definition of “asset-backed security” under its rules. The new definition will exclude mortgage-backed securities, certain SBA-backed securities, and collateralized debt, loan, and bond obligations. Dissemination of trades in asset-backed securities will be limited to this more narrow group of securities, but will include additional types of transactions. These transactions include Rule 144A transactions, list or fixed offering price transactions, and takedown transactions.
Asset-backed securities will be required to be reported no later than 45 minutes from the time of execution, with minor exceptions for transactions executed shortly before the TRACE system closes and when the TRACE system is closed.
This applies to the Series 7, Series 24, and Series 62.
This month’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, 7, 62, 65, and 66. –ANSWER POSTED– Continue reading
This month’s study question from the Solomon Online Exam Simulator question database is now available.
Question (Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 66):
Your client owns stock mutual funds in an account with automatic reinvestment of dividends and capital gains. What happens to the value of his account on ex-dividend dates?
Answers:
A. The value of the account shrinks by the amount of the distribution
B. The value of the account grows by the amount of the distribution, and it is a taxable event for him
C. The value of the account remains unchanged, and it is a taxable event for him
D. The value of the account remains unchanged, and it is not a taxable event for him
Correct Answer: C. The value of the account remains unchanged, and it is a taxable event for him
Rationale: Upon distribution and reinvestment of dividends or capital gains, the client ends up with more shares, and each share is worth slightly less. The value of the account is unchanged. The mutual fund company reports these distributions annually to the IRS, and they are treated as taxable income.
Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.
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.
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.
This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, 24, 62, 65, 79, 82, and 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 7, Series 24, Series 62, Series 65, Series 79, Series 82, and Series 99):
To qualify as a REIT, a company must do all of the following EXCEPT:
Answers:
A. Invest at least 75% of its assets into real estate or cash
B. Distribute at least 90% of its taxable income to shareholders annually in the form of dividends
C. Have a minimum of 100 shareholders after its first year of operation, and no more than 50% of its shares may be held by five or fewer individuals during the last half of any taxable year
D. Derive at least 90% of its gross income from its real estate sources
Correct Answer: D. Derive at least 90% of its gross income from its real estate sources
Rationale: A Real Estate Investment Trust is a company that owns and operates income-producing real estate, such as office buildings, apartments, malls, hotels and resorts. They differ from other real estate companies in that they are required to operate the properties they develop after they have built them, rather than selling them off. Most REITs specialize in a single type of real estate.
To qualify as a REIT, it must:
By annually distributing at least 90% of taxable income to shareholders, REIT income is not taxed at the entity level. This is huge benefit to the REIT. However, because this income has never been taxed, dividend distributions to shareholders are not considered “qualified dividends,“ instead REIT dividends are generally taxed as ordinary income at the investor’s top marginal rate.
Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.
This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, 51, 52, 53, 62, 82, and 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 7, Series 51, Series 52, Series 53, Series 62, Series 82, and Series 99):
When money is regularly put into an escrow account in order to redeem the bonds before maturity this is called:
Answers:
A. A sinking fund redemption
B. Advance refunding
C. Defeasement
D. A make whole provision
Correct Answer: A. A sinking fund redemption
Rationale: A sinking fund redemption requires the issuer to set money aside regularly in a reserve account for the redemption of the bonds before maturity.
Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.
This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, 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 62, Series 65, Series 66, and Series 99):
A client wants to open a custodial IRA account for his minor daughter who has earned a couple thousand dollars babysitting. Which of the following would be the best choice?
Answers:
A. Traditional IRA
B. Roth IRA
C. SIMPLE IRA
D. SEP IRA
Correct Answer: B. Roth IRA
Rationale: SEP and Simple IRAs are for small businesses. A traditional IRA would work but since the client’s daughter doesn’t have enough income to take advantage of the tax deduction benefit from a traditional IRA, the Roth IRA is the best choice since it will permit her to eventually withdraw tax-free.
Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.
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.
This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, 7, 62, 65, 66, and 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 6, Series 7, Series 62, Series 65, Series 66, and Series 82):
Ross receives 50 shares of ABC Co. as a gift, then later inherits an additional 50 shares of ABC Co. The shares were all originally purchased at $10/share. When Ross receives the shares as a gift, they are worth $20/share. When Ross inherits the shares, they are worth $30/share. When Ross eventually all sells the shares, they are worth $50/share. What is Ross’s total cost basis when he sells the shares?
Answers:
A. $1,000
B. $2,000
C. $2,500
D. $5,000
Correct Answer: B. $2,000
Rationale: Inherited shares received a stepped up cost basis based on their market value at the time of the prior owner’s death. Shares received as a gift maintain their original cost basis. So the cost basis of the inherited shares is $1,500 ($30/share * 50 shares) while the cost basis of the gifted shares is $500 ($10/share * 50 shares). Adding them together gives a total cost basis of $2,000.
Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.
This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, 51, 52, 53, 62, 79, 82, and 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 7, Series 51, Series 52, Series 53, Series 62, Series 79, Series 82, and Series 99):
When new bonds are issued with the purpose of using the proceeds to pay off older bonds, it is called?
Answers:
A. Refunding
B. Defeasement
C. A sinking fund redemption
D. A bond SWAP
Correct Answer: A. Refunding
Rationale: A bond refunding is the replacement of existing bonds with new “refunding“ bonds. The issuer of refunding bonds often seeks to lower its interest payments by paying off its previously issued (refunded) bonds with newly issued bonds that pay interest at a lower rate. Another reason to refund existing bonds may be to release the issuer from legal covenants or restrictions in the original indenture.
Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.
