Series 65

Study Question of the Week: January 3, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 62, Series 65, Series 66, Series 79, 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 62, Series 65, Series 66, Series 79, and Series 82):
Two corporate bonds have different durations, but are equivalent in other ways. Bond A has a duration of 6. Bond B has a duration of 4. Interest rates go down by 50 basis points. Which of the following is true?

Answers:

A: The price of Bond A will increase more than the price of Bond B

B: The price of Bond A will decrease more than the price of Bond B

C: The price of both bonds will increase by a similar amount

D: The price of both bonds will decrease by a similar amount

Correct Answer: A

Rationale: Duration is a measure of the sensitivity of a bond’s price to changes in interest rates. A price of a bond with a higher duration will be influenced more by a change in interest rates than a bond with a lower duration. Bond A has a higher duration so it will be influenced by a change in interest rates more than Bond B. When interest rates go down, the prices of existing bonds go up. Thus, a decline in interest rates will cause the price of both bonds to increase, but because Bond A has a higher duration than Bond B, its price will go up more than Bond B.

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

Exam Alert: FINRA requires orders with alternative triggers to be clearly distinguished from stop orders

Effective January 21, 2013, FINRA will revise its rules relating to stop orders in equity securities. The new rule provides that any market or limit order that triggers off of an alternative condition (any condition other than a transaction occurring at a specified price) must be clearly distinguished from a “stop order” or “stop limit order.” Continue reading

Effective January 21, 2013, FINRA will revise its rules relating to stop orders in equity securities. The new rule provides that any market or limit order that triggers off of an alternative condition (i.e., any condition other than a transaction occurring at a specified price) must be clearly distinguished from a “stop order” or “stop limit order.” For example, an order that triggers when a quote occurs at the stop price may be referred to as a “stop quotation order” or “stop quote order.”

If a firm provides orders that trigger off of alternatives conditions, the firm must disclose the nature of these orders in paper or electronic format to its customers prior to the customer placing such an order. For example, this disclosure could occur when a customer first opens an account with the firm. A firm that routes an order triggered by alternative conditions to another broker-dealer or to an exchange must take “reasonable steps” to ensure that the order is handled or executed in the correct manner.

Source: FINRA Regulatory Notice 12-50: SEC Approves Amendments Relating to Stop Orders

This alert applies to the Series 7, Series 65, Series 66, and Series 24.

Study Question of the Week: December 26, 2012 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 55, Series 62, Series 65, and Series 66. –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 55, Series 62, Series 65, and Series 66):

ABCD is an actively traded security with an inside market of 19.25 – 19.95. A market maker receives an order to sell 100 shares and buys the security from the customer at a net price of ______________. Choose the net price that makes the most sense given what you know about markups, markdowns, and net prices.

Answers:

A: 18.75
B: 19.25
C: 19.95
D: 20.45

Correct Answer: A

Rationale: On a sell order in an active competitive market, the net price will contain a markdown from the best bid. In this case the only price that is lower than the best bid is the $18.75. The markdown amount is calculated by taking $19.25 – $18.75 = $.50. The markdown is $.50/$19.25 = 2.60%.

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

Study Question of the Week: December 20, 2012 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 62, Series 65, 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 6, Series 7, Series 62, Series 65, and Series 82):

A Oregon hazelnut farm exports all of their hazelnuts to China and a Chinese trampoline manufacturer exports all of their trampolines to the U.S. Which of the following is true?

Answers:

A: Both the hazelnut farm and the Chinese trampoline manufacturer prefer a strong dollar

B: Both the hazelnut farm and the Chinese trampoline manufacturer prefer a weak dollar

C: The hazelnut farm prefers a strong dollar and the Chinese trampoline manufacturer prefers a weak dollar

D: The hazelnut farm prefers a weak dollar and the Chinese trampoline manufacturer prefers a strong dollar

Correct Answer: D

Rationale: To get this kind of question correct, think about where the goods are being sold. Groups that sell goods in the U.S. prefer a strong dollar. Foreign exporters and U.S. importers both sell goods in the U.S. so they prefer a strong dollar. In contrast, groups that sell goods in a foreign country prefer a weak dollar. Foreign importers and U.S. exporters sell goods in a foreign country so they prefer a weak dollar. The hazelnut farm is selling their goods outside of the U.S. so they prefer a weak dollar. The Chinese trampoline manufacturer is selling their goods in the U.S. so they prefer a strong dollar.

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

Study Question of the Week: November 8, 2012 Edition

This week’s exam study question from the Solomon Online Exam Simulator question database is now available. This week’s exam question is relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 65, Series 66, and Series 82. –ANSWER POSTED– 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 below.

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 65, Series 66, and Series 82):

A couple has just had a baby and they want to start saving for college. What option does NOT offer the opportunity for their investment to grow free of federal taxes?

Answers:

A: Education Savings Account

B: UGMA/UTMA Account

C: 529 College Savings Plan

D: 529 Prepaid Tuition Plan

ANSWER & RATIONALE

Correct Answer: B

Rationale: Unlike the other options, UGMA/UTMA (Uniform Gifts to Minors Act/Uniform Transfers to Minors Act) accounts are subject to federal income and capital gains taxes.

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

ANSWER – Study Question of the Week: October 23, 2012 Edition

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale. Relevant to Series 6, Series 7, Series 65, Series 66, Series 24, Series 26 and Series 99. Continue reading

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

Question (Relevant to Series 6, Series 7, Series 65, Series 66, Series 24, Series 26 and Series 99):

Which of the following is true of UGMA/UTMA accounts?

I. Only family members may contribute to a UGMA/UTMA
II. Annual contribution limit of $13,000 per year, per child
III. Assets may only be used for education expenses
IV. Earnings reported under adult custodian’s tax identification

Answers:

A: I, II

B: III, IV

C: II, III

D: None of the choices listed

Correct Answer: D

Rationale: Anyone may contribute to a Uniform Gifts to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) account and there are no contribution limits. Assets in UGMA/UTMA accounts may be used for any purpose and earnings are reported on the minor’s social security account, not the custodian’s.

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

Study Question of the Week: October 23, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available (Relevant to Series 6, 7, 65, 66, 24, 26 and 99). 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 6, Series 7, Series 65, Series 66, Series 24, Series 26 and Series 99):

Which of the following is true of UGMA/UTMA accounts?

Answers:

A: I, II

B: III, IV

C: II, III

D: None of the choices listed

Exam Alert: NASAA identifies compliance violations, best practices

A NASAA report outlines the most common broker-dealer violations and offers best practices in ten areas to help broker-dealers avoid mistakes. Continue reading

A NASAA report outlines the most common broker-dealer violations and offers best practices in ten areas to help broker-dealers avoid mistakes.

The most common areas of violations involved books and records, supervision, and sales practices. Less common were violations related to licensing and registration, and the most uncommon type of violations were those related to operations. The top five violation types were as follows: “failure to follow written supervisory policies and procedures, suitability, correspondence/e-mail, maintenance of customer account information, and internal audits.”

NASAA identified best practices in ten areas – summaries of those practices follow.

-Suitability: Know your customer, know your products.

-Staffing and Expertise: Make sure there is enough staff with appropriate training/experience for the size of the firm and the scope of business activities. Also, have and enforce written supervisory procedures.

-Exception Reports: Introducing brokers must get exception reports from clearing brokers and deal with any red flags that come up.

-Branch Office Audits: Have a good, well-documented audit program with unannounced visits.

-Selling Away: Monitor agents selling away. If an agent applies to sell away and gets denied, make sure they don’t do so anyway.

-Outside Business Activity: Outside business requests must be approved before the activity occurs and must be reported on the agent’s U4.

-Advertisements: Ads must be fair and approved by the broker-dealer and/or FINRA. Seminars must be approved by the broker-dealer.

-Correspondence: Keep copies of outside communications on record.

-Customer Complaints: Investigate and respond appropriately to any complaint. Update the U4 of involved agents if necessary.

-Working with Seniors: Develop practices for working with elderly customers.

Source: Coordinated Examinations Identify Top BD Compliance Violations

This alert applies to the Series 24, Series 26, Series 7, Series 65, and Series 66.

Exam Alert: SEC identifies concerns, good practices regarding nonpublic information

On September 27, 2012, the SEC identified situations ripe for abuse of inside information at broker-dealers so that industry professionals will know what to avoid. The SEC also provided examples of good policies put in place at some broker-dealers that minimize the risk of insider trading violations. Continue reading

Potentially problematic situations include the following:

-Lots of informal, undocumented interaction between departments with MNPI (material nonpublic information) and sales/trading departments that could abuse that information

-Having senior executives that supervise multiple departments and could spread MNPI from one department to another without oversight, due to being “above” the information barriers

-Lack of review of situations where MNPI is provided from one department to another for business purposes

-Lack of review of trading in customer and affiliate accounts

-Lack of review of situations where MNPI is received from an outside source

Effective practices included:

-Having a system that distinguishes MNPI based on source or type of information (possibly even having individualized reports specific to certain pieces of information)

-Expanded review of potential misuse of MNPI, including looking at trading in swaps, loans, components of pooled securities (such as UITs and ETFs), warrants, and bond options

-Monitoring access to electronic sources of MNPI to see which employees access the information

-Monitoring access levels granted via key cards and computer networks to ensure that only authorized personnel have access to restricted areas

Source: SEC Issues Report on Brokerage Firms’ Handling of Confidential Information (SEC Release 2012-200)

This alert applies to the Series 24, Series 26, Series 6, Series 7, Series 55, Series 62, Series 79, Series 82, Series 99, Series 63, Series 65, Series 66, and Series 56.

Study Question of the Week: October 10, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available (Relevant to the Series 7, Series 65, Series 66, Series 24 and Series 62). Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale. Continue reading

Question (Relevant to the Series 7, Series 65, Series 66, Series 24 and Series 62):

Todd finally hit the nail on the head when he sold short shares of Widget Corporation. He doesn’t see widgets coming around anytime soon, but would like to protect his profits in case the stock goes against him. What type of order would Todd most likely enter?

Answers:

A: Buy stop

B: Sell Stop

C: Market

D: FOK

Answer found here.