13,000 Questions

The professors at Solomon Exam Prep have been hard at work. This month, after hundreds of hours of research and writing, not to mention grueling all-night debates and rigorous statistical back-testing, Solomon Exam Prep added practice question number 13,000 to our securities exam prep database! Continue reading

The professors at Solomon Exam Prep have been hard at work. This month, after hundreds of hours of research and writing, not to mention grueling all-night debates and rigorous statistical back-testing, Solomon Exam Prep added practice question number 13,000 to our securities exam prep database!

In our company meeting, we discussed how to best celebrate reaching such a monumental yet obscure number. We considered consuming 13,000 calories of cake, but that just wasn’t cutting it. Lighting off 13,000 fireworks seems fun in theory, but we all agreed the execution would be far too dangerous. If you think about it, even a riveting game of office telephone would get old after the 13,000th round.

Instead, we decided to skip the fireworks and focus on what we do best, which is writing yet more highly relevant and high quality questions. While we’re proud of our achievement, 13,000 is only the beginning for Solomon Exam Prep. We’re already working hard on new questions for our database, and we don’t plan on stopping anytime soon—or ever, really. Does that make us crazy? Perhaps. But it’s a good kind of crazy because it makes Solomon Exam Prep the most effective and robust securities exam prep program. Having over 13,000 practice questions is just one of the reasons Solomon students pass their exams over 90% of the time. When you’re studying for the Series 7 or the Series 24 or the Series 65 or … bigger is better. Ask yourself: how many practice questions does your securities exam prep have? If it’s less than 13,000, do yourself a favor and try Solomon.

Cyber Week: 5 Days of Savings

Don’t miss out on Cyber Week! By popular demand, we have extended our Cyber Monday special through Friday, Dec 1. Continue reading

 Don’t miss out on Cyber Week! 

By popular demand, we have extended our Cyber Monday special through Friday, Dec 1.

*Valid on study packages only
**Coupon cannot be combined with another promotional offer

Fiduciary Standard Coming for Broker-Dealers

The Securities and Exchange Commission announced last week that next April it plans to introduce a fiduciary standard for broker-dealers. Since last month when the Department of Labor issued its fiduciary rule for tax-advantaged retirement accounts, the securities industry has been waiting to see if the SEC would join the Department of Labor in a push to raise the legal and ethical standards for broker-dealers and agents. Continue reading

Decorative Scales Of Justice In The LibraryThe Securities and Exchange Commission announced last week that next April it plans to introduce a fiduciary standard for broker-dealers. Since last month when the Department of Labor issued its fiduciary rule for tax-advantaged retirement accounts, the securities industry has been waiting to see if the SEC would join the Department of Labor in a push to raise the legal and ethical standards for broker-dealers and agents.

Currently, broker-dealers and agents are held to the less stringent suitability ethical standard while investment advisors and investment advisor representatives are held to the higher fiduciary standard. The higher standard requires disclosure of all conflicts of interest and ensures the client’s interests come first. While SEC Chair Mary Jo White has said she supports a uniform fiduciary rule, Republicans in Congress have strongly opposed the effort by the Labor Department to expand the fiduciary standard to retirement accounts.  However, many in the securities industry hope that the SEC’s efforts will harmonize with the Department of Labor’s efforts, making compliance more uniform and less complicated.

Currency Hedging in International Investing: Smart Investing or Just Smart Marketing?

Investing internationally has never been easier, especially if you don’t want to invest directly in a foreign market. Today, US investors have an enormous range of mutual fund, ETF and ADR options from which to choose. However, when making a foreign investment it’s important to know that, unless currency hedging is employed, returns depend not only on the performance of the investment but also on the currency exchange rate. Continue reading

Currency HedgingInvesting internationally has never been easier, especially if you don’t want to invest directly in a foreign market. Today, US investors have an enormous range of mutual fund, ETF and ADR options from which to choose. However, when making a foreign investment it’s important to know that, unless currency hedging is employed, returns depend not only on the performance of the investment but also on the currency exchange rate. To understand this, imagine you buy shares in a Brazilian company. Time passes and the share price has gone up 5%. But at the same time the value of the real, the Brazilian currency, has depreciated 10%. Since the Brazilian shares, and any returns, are denominated in real, and must be converted to dollars, the value of your Brazilian investment has declined. Instead of a gain, you have a loss. This foreign exchange (“FX”) risk is the risk that the currency of a foreign investment will decline in relation to the value of the US dollar (or, said another way, that the US dollar will appreciate relative to the value of the currency of the foreign investment).

To protect against currency or exchange risk, a US investor can hedge using various FX products such as forward currency contracts, swaps and options. These products allow an investor to lock in an exchange rate and thereby minimize the effect of currency fluctuations. Recently, many ETF and mutual fund companies have begun to use FX products and strategies to reduce the effect of currency volatility in their international offerings. BlackRock’s iShares web site says that this allows investors to “take command of currency risk.” WisdomTree’s website says that by hedging currencies their ETFs allow investors to “participate more fully in the local equity returns of international markets.”  Vanguard urges “investors to consider fully hedging their portfolios’ fixed income allocation” and “investors should consider hedging at least a portion of the foreign-currency exposure within their equity allocation.”

Sounds good. But everything has a cause and effect, not to mention a cost. Is currency hedging really a good idea for investors with international investments?

A brief review of the information available online indicates the following:

• Currency hedging helps returns when the US dollar is rising. But when the dollar is falling, unhedged does better.

• Short-term changes in exchange rates are difficult, perhaps impossible, to predict. In the long run, currency swings even out.

• Studies seem to indicate that hedging reduces short-term volatility. This may be particularly beneficial for those investing in international bonds. In the long-term, however, it’s not clear that currency hedging reduces volatility, especially in equity investing.

• Hedging costs, which cuts into returns. Hedging costs more in times of economic uncertainty and stress, often exactly when hedging may be most desirable.

• Currency hedging makes it easier to track the local return of an international equity index.

• Long-term, unhedged international stock and bond portfolios perform better than hedged international stock and bond portfolios.

• Currency exposure means greater volatility and greater diversification.

• Hedged foreign investments have a higher correlation with US investments than un-hedged foreign investments.

On balance, if you are investing in foreign securities and you are concerned with short-term volatility, particularly if you are a fixed income investor, currency hedging may be for you. But if short-term volatility is not a concern, the lower returns, greater costs and reduced diversification of currency hedging may outweigh any benefit.

Studying for the FINRA Series 7 exam or the NASAA Series 65 exam?

You need to know that in times of home currency strength, the value of a foreign investment will be negatively impacted. When the dollar appreciates, US investors with overseas holdings will earn less. Conversely, if the home currency weakens, the Series 7 or Series 65 exam will expect you to know that the returns on international investments will be higher. That means that US investors with foreign holdings will see higher returns on their international assets when the US dollar depreciates.

A related question that may come up on your securities licensing exam, such as the Series 7 or Series 65, is what effect will a rising or falling US dollar have on the share price of a US company with international sales? Remember, a rising US dollar means overseas sales will be worth less since they will convert into fewer US dollars, while a falling US dollar means overseas sales will be worth more since they will convert into more US dollars.  However, if a company hedges its currency exposure, that may dampen the effect of currency fluctuations.

How might a US company with international sales hedge FX risk? A US company can do several things.  It can enter into a forward contract that locks in a specific exchange rate. This is highly effective as long as the transaction is likely to occur. It’s also low cost. A standardized and exchange-traded version of a forward is a futures contract.  An exporter can also use options to hedge currency risk.  An exporter could buy a put on a foreign currency in order to hedge FX risk.  Conversely, a US company that imports from overseas is exposed to the risk that the foreign currency will rise in value and if that happens it will cost more US dollars to pay foreign suppliers. To hedge such a risk, a US importer could buy a call on the foreign currency.

*For your Series 7 or Series 65 exam, remember the mnemonic: EPIC which stands for Exporters use Puts, Importers use Calls.

Of course, there are ways to mitigate foreign currency risk without using options or entering into forward contracts.  If you’re an exporter, you can ask your customer to pay in dollars. This transfers all exchange risk to the foreign buyer.  However, this will limit a company’s overseas sales.  Also, you can set up a foreign subsidiary and keep the foreign sales revenue overseas.


Sources and suggested links:

Currency Hedging: 5 Things You Need to Know
http://www.schwab.com/public/schwab/nn/articles/Currency-Hedging-5-Things-You-Need-to-Know

Currency Risk Does Not Belong in Your Bond Portfolio
https://www.betterment.com/resources/investment-strategy/why-international-bonds-but-not-currency-risk-belong-in-your-portfolio/

To hedge or not to hedge? Evaluating currency exposure in global equity portfolios
https://personal.vanguard.com/pdf/ISGCMC.pdf

To Hedge or Not to Hedge: Currency Hedging and International Investing
http://gersteinfisher.com/wp-content/uploads/2015/06/GF_Research_ToHedgeOrNot.pdf

Hedge of least regret: The benefits of managing international equity currency risk with a 50% hedging strategy
http://www.nylinvestments.com/polos/ME39a-071555414.pdf

Options Trading Before Merger and Acquisition Announcements Indicate Pervasive Insider Trading

Professors at McGill University and New York University released a study investigating unusual trading activity that occurs before mergers and acquisitions announcements. Equity options in approximately 25% of target firms had abnormal trading volumes on a level that was statistically significant. Continue reading

Professors at McGill University and New York University released a study investigating unusual trading activity that occurs before mergers and acquisitions (M&A) announcements. The study looked at trading activity in equity options for the 30 day period prior to M&A announcements. Equity options in approximately 25% of target firms had abnormal trading volumes on a level that was statistically significant, showing that insider trading likely occurred. Abnormal trading was especially common in call options and out-of-the-money options.

The study’s results suggest that insider trading is pervasive. The study states that the odds of observing such unusual trading activity by chance is extremely low – “about three in a trillion.”

The study indicates that the SEC only investigates a fraction of the instances of insider trading occurring in the markets. The SEC tends to focus on cases with large target companies and cases with foreign acquiring companies. The SEC brings litigation much more frequently when the deals are actually seen through to completion – “a withdrawn or rumored deal is about 22 times less likely to be investigated.”

Sources:

Informed Options Trading prior to M&A Announcements: Insider Trading?

“Study Asserts Startling Numbers of Insider Trading Rogues”

Amazing Pass Rates!

For over 10 years Solomon Exam Prep has been devoted to helping students to prepare effectively for various securities and insurance licensing exams. We pride ourselves on our customer service and easy-to-use products that make the studying process as painless as possible. Continue reading

For over 10 years, Solomon Exam Prep has been devoted to helping students effectively prepare for various securities and insurance licensing exams. We pride ourselves on our customer service and easy-to-use products that make the studying process as painless as possible.

Solomon Exam Prep has recently published a brand-new line of materials for the MSRB Series 51, Series 52 and Series 53 exams. We are pleased to report that our early Series 52 and Series 53 students have all passed their exams!

We keep track of our students through BrokerCheck and keep in contact with them via e-mail. “We are excited to announce a 93% pass rate across all of our exams,” said president Jeremy Solomon. We are constantly publishing more materials and updating our current materials, which is how we can maintain such a high pass rate. Our Series 7 boasts a 95.0% first time pass rate, Series 82— 97.4%, Series 55— 96.9%, and Series 63— 93.6% just to name a few.

Are you studying for your FINRA, NASAA, or MSRB exams? Order now and be a part of our amazing pass rate!

Join Solomon Exam Prep at NSCP in DC!

Solomon Exam Prep is excited to announce that we will be attending the NSCP National Meeting in Washington, DC October 22-24. Continue reading

Solomon Exam Prep is excited to announce that we will be attending the NSCP National Meeting in Washington, D.C. October 22-24.

We congratulate The National Society of Compliance Professionals on 25 years of industry guidance and education and we look forward to celebrating with all of you in DC!

Come by our booth to learn more about Solomon’s corporate study solutions for the Series 6, Series 7, Series 24, Series 26, Series 55, Series 62, Series 63, Series 65, Series 66, Series 79, Series 82, Series 99 and Life & Health licensing exams. We’ll also be showcasing some of our new study solutions coming in 2013!

FINRA Makes Changes to Series 7 Exam Outline

FINRA made changes to its Series 7 General Securities Representative Exam outline. These modifications are mostly minor and include replacing Continue reading

FINRA made changes to its Series 7 General Securities Representative Exam outline. These modifications are mostly minor and include replacing the term “specialist” with “specialist/designated market maker (DMM),” updated short sale requirements, adding the Electronic Municipal Markets Access and various FINRA/NASD/NASDAQ rule updates.

For more information, click here.

Series 79 Exam Prep Class in New York City

November 18 and 19 in New York City.

Taught by the experienced instructors at Solomon Exam Prep partner firm, FAST. Continue reading

November 18 and 19 in New York City.

Taught by the experienced instructors at Solomon Exam Prep partner firm, FAST.

The two-day intensive course covers the four major topic areas of the Series 79 exam: Collection, Analysis and Evaluation of Data; Underwriting/New Financing Transactions, Types of Offerings and Registration of Securities; Mergers and Acquisitions, Tender Offers and Financial Restructuring Transactions; General Securities Industry Regulations.

Contact Jeremy@SolomonExamPrep.Com for more information.

Solomon Exam Prep Publishes Free FINRA Series 79 Lite iPhone App

Do you need to take the FINRA Series 79 exam? Do you have limited time to study? If you answered “yes” to both of these questions, then you’ve come to the right place! Continue reading

Do you need to take the FINRA Series 79 exam? Do you have limited time to study? If you answered “yes” to both of these questions, then you’ve come to the right place!

Officially known as the “Investment Banking Limited Representative Exam” the Series 79 exam qualifies candidates to advise on and facilitate debt and equity offerings and mergers and acquisitions. The examination tests candidates’ knowledge of topics necessary for investment banking.

The Series 79 exam was developed and is administered by the Financial Industry Regulatory Authority (FINRA). The Solomon Exam Prep Series 79 iPhone app offers 20 practice questions from the same topic categories and in the same proportion as the actual Series 79 exam. Each question is followed by an immediate answer and explanation, as well as an opportunity to review the question. Users may pause at any time and resume at the same point later on