November Study Question of the Month

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Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Congratulations to Elizabeth S., this month’s Study Question of the Month winner!

Question

Relevant to the SIESeries 7, Series 24, Series 79, and Series 82.

 

 

 

 

 

Which of the following would not necessarily be restricted shares when you purchase them?:

A. Shares sold by the CEO of the issuing company

B. Shares sold by the CEO’s wife of the issuing company

C. Shares sold by the assistant to the CEO of the issuing company

D. Shares sold by a major shareholder (more than 10% ownership) of the issuing company

Answer: C.

Securities that are held by control persons are called control securities. A control person, or affiliated person, is an individual in a position to exert direct influence on the actions of an issuer. For example, officers, directors, policy-making executives, major shareholders (generally own 10% or more of outstanding shares), and other people who are in a position to directly or indirectly control the management of the company are considered control persons. This includes spouses, family members who live with them, and other entities such as trusts or corporations affiliated with control persons, as defined in Rule 144. When control securities are sold, they become restricted securities even if they were not restricted securities previously.

October Study Question of the Month

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Congratulations to Megan K., this month’s Study Question of the Month winner!

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 6, Series 7, Series 66, and Series 65.

 

 

 

 

 

The cost basis for inherited securities is:

A. The same as the deceased person’s cost basis

B. The same as the price of the securities on the date that the original owner dies

C. The same as the price of the securities on the date that the new owner takes possession

D. The lower of the deceased person’s cost basis and the price of the securities when the new owner takes possession

Answer: B.

In the event that the holder of securities dies and passes those securities to one of his heirs, the new owner gets to claim the price of those securities on the deceased person’s date of death as the securities’ new tax basis.

July Study Question of the Month

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Congratulations to Terry F., this month’s Study Question of the Month winner!

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Question
Relevant to the Series 6Series 7Series 65Series 66

 

 

 

 

 

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


A. I and II
B. III and IV
C. II and III
D. None of the choices listed

Answer: D. 

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.

June Study Question of the Month

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Congratulations to Veronika J., this month’s Study Question of the Month winner!

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Question (Relevant to the Series 6Series 7, Series 65, Series 66)

In her junior year in college, Kim’s grandmother dies and leaves Kim several thousand dollars. Kim wants to put some of the money she received from her grandmother into a retirement account. Given Kim’s young age and status as a full-time college student, what would be her best option?

A. Traditional IRA
B. Roth IRA
C. SIMPLE IRA
D. None of the choices listed

Answer: D. You can only contribute earned income to an IRA or tax-deferred retirement plan and so unless Kim has earned income, she cannot contribute to a tax-deferred retirement plan. A SIMPLE IRA, which stands for Savings Incentive Match Plan for Employees, is an employer-sponsored retirement plan and not available to individuals.

May Study Question of the Month

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Congratulations to Diane K., this month’s Study Question of the Month winner! 

See the answer below!

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Question (Relevant to the Series 7, Series 52, Series 65, Series 66, Series 79)

When the yield curve inverts, that is, when short-term interest rates are higher than long-term interest rates, all of the following are true EXCEPT: 

A. It indicates low or no inflation expectations.

B. It indicates higher demand for long-term bonds and lower demand for short-term bonds.

C. It indicates an economic recession.

D. It indicates an economic expansion.

Answer: D. A yield curve plots the yields of similar bonds based on the term of the bond (maturity) and the yield of the bonds, with term on the x-axis and yield on the y-axis.  A normal yield curve is upward sloping, indicating that the longer the term of the bond, the higher yield (interest rate).  This is because in normal economic conditions, the longer the term of the investment, the greater the risk that interest rates or the economy will change. Thus investors require greater compensation for uncertainties and risks associated with committing their money for longer time periods. This is called the risk premium.  When the yield curve is inverted, however, it slopes downward instead of upward. This means that there is higher demand for long-term bonds compared to short-term bonds because investors believe that interest rates will fall in the future.  Also, it means that investors are not concerned about inflation. These conditions are associated with a future economic recession.

April Study Question of the Month

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Congratulations to Margaret C., this month’s Study Question of the Month winner! 

See the answer below!

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Question (Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, Series 82)

To qualify as a long-term capital gain or loss, stock must be held for more than one year. At purchase, the holding period clock begins:

A. On the trade date
B. One day after the trade date
C. On the settlement date
D. One day after the settlement date

Answer: B. According to the IRS, the holding period clock begins the day after the shares were purchased.

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.