Series 79

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.

Study Question of the Week: August 20, 2014 Edition

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.

Study ? of the Week

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:

Invest at least 75% of its assets into real estate or cash
Distribute at least 90% of its taxable income to shareholders annually in the form of dividends
Be a corporation, trust, or association that would be taxable as a domestic corporation except for its status as a REIT.
Be managed by a board of directors and have ‘unit’ shares that are fully transferable
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
Derive at least 75% of its gross income from its real estate sources
Derive at least 95% of its gross income from those real estate sources mentioned above and dividends and interest from other sources
Have no more than 25% of its assets in securities of taxable REIT subsidiaries

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.

Study Question of the Week: July 9, 2014 Edition

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.

Study ? of the Week

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.

Exam Alert: FINRA Provides Information to the Public on Dark Pool Transactions and 144A Transactions

On June 2, 2014, FINRA began providing information to the investing public about the transactions that occur on alternative trading systems (ATSs), including “dark pools.” On June 30, 2014, FINRA began providing information to the investing public about 144A transactions in corporate debt. Continue reading

On June 2, 2014, FINRA began providing information to the investing public about the transactions that occur on alternative trading systems (ATSs), including “dark pools.” Investors can see the total shares traded each week at each ATS. The information is available for free to non-professionals at FINRA’s website. Professionals must purchase a subscription to access the data.

On June 30, 2014, FINRA began providing information to the investing public about 144A transactions in corporate debt. 144A transactions are resales of corporate debt securities to large institutions called qualified institutional buyers (QIBs). Nearly 20 percent of the trading volume in corporate debt securities were 144A transactions in the first quarter of 2014. 144A issues are often foreign IPOs.

Information on 144A transactions will be disseminated through the Trade Reporting and Compliance Engine (TRACE) and through FINRA’s Market Data Center. The standards for dissemination will be the same as for non-144A transactions: a dissemination cap of $5 million for investment-grade corporate debt transactions, and a dissemination cap of $1 million for high-yield corporate debt transactions. 144A transactions are also subject to the same 15 minute reporting requirement as non-144A corporate debt transactions.

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

Sources:
FINRA Makes Dark Pool Data Available Free to the Investing Public
FINRA Brings 144A Corporate Debt Transactions Into the Light
FINRA Shines More Light on Some Private Bond Trades

Study Question of the Week: June 12, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 52, Series 62, Series 65, 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.

Study ? of the Week

Question (Relevant to the Series 7, Series 52, Series 62, Series 65, Series 79, and Series 82):

All of the following is true of the Securities Act of 1933 except?

Answers:

A. One of its purpose is to prohibit fraud and deceit in the marketing of securities

B. It requires that all securities are registered with the federal government prior to offering them for sale

C. The Act requires that a company’s financial statements are certified by independent accountants

D. It regulates how securities are issued and first sold to the public

Correct Answer: B. It requires that all securities are registered with the federal government prior to offering them for sale

Rationale: The Securities Exchange Act of 1933 has two main purposes: (1) to require that companies publicly disclose all relevant financial information about their securities prior to offering them for sale, and (2) to prohibit fraud and deceit in the marketing of securities. The Act requires that most securities be registered with the
federal government prior to their sale, but there are securities that are exempt from registration. The Act regulates how securities are issued and first sold to the public.

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

Study Question of the Week: June 4, 2014 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 62, 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.

Study ? of the Week

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

Under Rule 144, which of the following persons would be subject to holding period limits on a re-sale?

Answers:

A. A C.E.O who holds 10,000 shares of the publicly traded company he runs

B. A C.E.O who purchased 10,000 shares of restricted securities two years ago of the company that he runs

C. A person who is not an affiliate purchased 10,000 shares in a private placement 1 year ago

D. A person who is not an affiliate purchased 10,000 shares of a company’s stock 2 months ago from an affiliate of the company

Correct Answer: D. A person who is not an affiliate purchased 10,000 shares of a company’s stock 2 months ago from an affiliate of the company

Rationale: If a person purchases shares from an affiliate, the shares are considered restricted, even if they were not restricted in the affiliates’ hands and therefore subject to holding period limits. Holding period limits are 6 months for reporting companies and 1 year for non-reportng companies.

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

Study Question of the Week: May 28, 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 7, Series 24, Series 62, Series 79, and Series 82):

Which of the following is not exempt from the registration requirements of the Securities Act of 1933?

Answers:

A. State bonds

B. Insurance company variable annuities

C. Municipal bonds

D. Common carrier (e.g., railroad) securities

Correct Answer: B. Insurance company variable annuities

Rationale: State and municipal bonds are backed by the full faith of the respective governments. Common carrier securities are reviewed by the ICC. If variable annuities were not registered, no authority would have jurisdiction over them.

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

Study Question of the Week: May 14, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 51, Series 52, Series 53, 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 7, Series 51, Series 52, Series 53, Series 62, Series 79, Series 82, and Series 99):

Why would a bond issuer decide to issue an advance refunding bond?

Answers:

A. Because interest rates have risen

B. To lock into the current lower interest rates

C. Because the CPI has gone up

D. To try to increase the yield on their bond issue

Correct Answer: B. To lock into the current lower interest rates

Rationale: A bond refunding is the replacement of existing bonds with new “refunding“ bonds. The issuer of refunding bonds seeks to lower its interest payments by paying off its previously issued (refunded) bonds with newly issued bonds that pay a lower interest rate. An advance refunding bond refers to one in which more than 90 days must elapse before the refunded bond can be retired. An issuer typically uses advance refunding when interest rates have dropped significantly, but the next call date is not in the near future. An advance refunding bond allows the issuer to lock in the lower interest rates now without risking that they rise before the call date arrives.

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

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 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 55, Series 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.