Market Circuit Breakers — A Post-Brexit Reminder

With post-Brexit vote market turmoil, it’s good to remember that the Securities Exchange Commission requires trading halts across US markets in the event that stocks fall more than specified percentages in one day. Continue reading

stop-634941_1280With post-Brexit vote market turmoil, it’s good to remember that the Securities Exchange Commission requires trading halts across US markets in the event that stocks fall more than specified percentages in one day. This information is also important to know if you are studying for securities licensing exam such as the Series 7, Series 24, Series 26, Series 62, Series 79, and the Series 65.

A market-wide trading halt can be triggered at three thresholds. These thresholds are triggered by steep declines in the S&P 500 Index. They are calculated based on the prior day’s closing price of the Index.

• Level 1 Halt—a 7% drop in the S&P 500 prior to 3:25 p.m. ET will result in a 15-minute cross-market trading halt. There will be no halt if the drop occurs at or after 3:25 p.m. ET.

• Level 2 Halt—a 13% drop in the S&P 500 prior to 3:25 p.m. ET will result in a 15-minute cross-market trading halt. There will be no halt if the drop occurs at or after 3:25 p.m. ET.

• Level 3 Halt—a 20% drop in the S&P 500 at any time during the day will result in a cross-market trading halt for the remainder of the day.

These halts apply to securities and options trading on all the exchanges as well as the OTC market. Levels 1 and 2 trading halts are permitted just once a day.

Solomon Exam Prep has helped thousands of financial professionals pass the Series 6, 7, 63, 65, 66, 24, 26, 27, 50, 51, 52, 53, 62, 79, 82 and 99 exams.

For more information call 503 601 0212 or visit http://www.solomonexamprep.com/

FINRA qualification exam restructure update

Panel discussion May 24, 2016 at the FINRA annual conference. John Kalohn, Joe McDonald and Roni Meikle from FINRA discussed coming restructure of qualification exams. Continue reading

Panel discussion May 24, 2016 at the FINRA annual conference. John Kalohn, Joe McDonald and Roni Meikle from FINRA discussed coming restructure of qualification exams.

Goals of exam restructure:

• Respond to industry and regulatory changes
• Reduce redundancy of content across exams
• Streamline exam process
• Minimize impact and change to the registration rules
• Ensure registered reps have a solid breadth of understanding of securities industry

Another goal appears to be a desire by FINRA and member firms to expand the number of people who can and will get licensed to work in the securities industry.

Exam restructure launch date has been postponed, at least a year, till January 2018 at the earliest.

Exams slated to be retired, will not be retired till 2018 restructure launch date. These include the Series 11 (Order Processing Assistant), Series 42 (Options Representative), Series 62 (Corporate Securities Representative) and Series 72 (Government Securities Representative) exams. The panel noted that only one person had taken the Series 72 in the past year.

Anyone holding registrations that are being retired (Series 11, Series 62, Series 72) will be able to continue to hold them until they leave industry for more than 2 years.

Series 17/37/38 Exams – FINRA will retire these exams and use the UK and Canadian certifications to exempt certificate holders from the Essentials Exam.

Exams that will remain as “Top-off” exams: Series 6, 7, 22, 57, 79, 82, 86/87 and 99. Top-off exams will be shorter than current exams.

Essentials Exam features:

Essentials exam currently envisioned to be 100 questions long.

Unlike the current system, you will not need to be associated with a member firm to take the Essentials Exam. In other words, you won’t need to have a job with a broker-dealer to take the Essentials Exam.

If you pass the Essentials Exam, it will be valid for 4 years from your passing date.

Just passing the Essentials Exam will not be enough to qualify you to be a registered person with FINRA. To become a registered person, you will have to have a job with a FINRA member firm, file a U4, get finger-printed, and pass a Top-off exam.

What if you are currently registered?

Current registrants will maintain registration(s) without the need for additional testing.

Most current registrants will be considered to have passed the Essentials Exam, and it will be valid for 4 years upon leaving the securities industry.

Registrants who return to the securities industry within 2 years will regain registration without needing to take the Essentials or Top-off exam.

Registrants who return to the securities industry between 2 and 4 years later will not need to take the Essentials Exam, only the Top-off exam for the registration position.

Registrants who return to the securities industry more than 4 years later will need to take both the Essentials and the top-off exam.

Next steps:

Securities Essentials Exam is being finalized by FINRA and committee of industry representatives.

Top-off exam outlines to be released 9-12 months prior to launch date of exam restructure

Prepare CRD and other FINRA systems for new exam
structure

Create a system for persons not associated with a member to enroll and pay for the Essentials Exam

Make registration rule, fee and qualification exam filings with the SEC in 2016

FINRA says exam restructure will do the following for firms:

• Give firms an opportunity to employ new business models for onboarding staff.
• Allow firms to better gauge industry knowledge of interns and other potential employees.
• Allow non-registered staff (e.g., administrative) to take Essentials Exam.
• Create a larger pool of potential new registered persons

Impact on firms

Firms will have choices of how to onboard new reps:
• Request applicants take and pass Essentials Exam prior to making job application
• Have new hires take Essentials Exam-only initially and then take top-off qualification exam
• Have new hires take both Essentials Exam and top-off exam together

Other info related to exam restructure:

• Through CRD, firms will be able to confirm whether and when an individual passed the Essentials Exam.
• Top-off exams will retain traditional names: i.e., Series 7 exam will remain the Series 7 exam.
• Position designations in CRD will remain the same (i.e., GS will remain GS [Series 7]).
• Firms will be able to schedule the Essentials Exam for support personnel through CRD.
• Current registrants will not need to take the Essentials Exam to maintain current registrations.
• Principal exams and registrations will not be directly affected.

Principal Exams

Under the new representative-level program structure, several principal exams cover subject matter already covered on the Essentials and the Top-off exams.

Example – Series 24 Exam major topic areas include:

• Sales practice (Series 7)
• Investment banking (Series 79)
• Trading (Series 57)
• Research (Series 86/87)

As a result of this, FINRA will develop a principal exam structure that builds on the new representative-level exam structure to reduce redundancy in content and better focus on testing knowledge of and ability to apply supervisory level rules and concepts

Solomon’s Industry News: October 2015 Edition

Solomon Exam Prep is happy to release this month’s edition of “Solomon’s Industry News.” Continue reading

Solomon Exam Prep is happy to release this month’s edition of “Solomon’s Industry News.” Every month we will send out industry updates from the past month, so you can stay current and up-to-date on everything that is happening here at Solomon Exam Prep and in the industry.

Check out this month’s edition here: Solomon’s Industry News – October 2015.

To be added to our monthly mailing list, please click here.

FINRA Institutes Rule 2241, Replacing NASD Rule 2711 and NYSE Rule 472

On September 25, 2015, FINRA implemented a new rule regarding the relationship between investment banking personnel and research analysts. FINRA rule 2241 replaces NASD Rule 2711 and NYSE Rule 472. NASD Rule 2711 was created to prevent investment bankers from pressuring research analysts at the investment bank to write favorable research reports about securities that the investment bank was distributing or planning to distribute. Continue reading

Exam AlertOn September 25, 2015, FINRA implemented a new rule regarding the relationship between investment banking personnel and research analysts. FINRA rule 2241  replaces NASD Rule 2711 and NYSE Rule 472. NASD Rule 2711 was created to prevent investment bankers from pressuring research analysts at the investment bank to write favorable research reports about securities that the investment bank was distributing or planning to distribute.

The new rule is similar to the rules it replaces with a series of changes that will be implemented to further promote objective and reliable research.

The new rule requires member firms to establish, maintain and enforce written procedures regarding conflicts of interest between research analysts and other people within the firm (e.g., personnel from investment banking, trading and sales). The written policies and procedures should allow analysts to produce objective and reliable research that reflects their true opinions about the securities they are evaluating. The policies and procedures should prevent firms from using research to manipulate or condition the market.

Rule 2241 prevents investment banking personnel from reviewing research reports for factual accuracy before publication. This practice was allowed in the previous rule. Also, firms must specify in their policies and procedures if and when non-research personnel would be allowed to review a research report before publication. If such prepublication review by non-research personnel is permitted then a firm’s written policies and procedures must specify under what circumstances that would be necessary and appropriate. Under the new rule, a FINRA member firm’s written policies and procedures must prohibit pre-publication review of research reports by a subject company (i.e., an issuer) for purposes other than fact-checking.

The new rule says that firms must establish information barriers to ensure that research analysts are insulated from the review, pressure or oversight of other personnel, such as investment banking, sales, and trading. The rule also extends the prohibition on retaliation, preventing employees from retaliating against a research analyst for writing an unfavorable report.

Interestingly, the rule 2241 reduces the quiet periods for IPOs to 10 days for all underwriters and dealers involved in the IPO (it was formerly 40 days for managers and co-managers and 25 days for underwriters and dealers). The quiet period has been reduced to three days for managers or co-managers on follow-on offerings. During a quiet period, firms may not publish or distribute research reports about the issuer, and research analysts may not make public appearances about the issuer.

The new rule continues to prevent investment-banking personnel from supervising research analysts or exerting any influence over analysts’ compensation. In addition, research analysts may not participate in the solicitation of investment banking business. Moreover, research analysts may not communicate with a customer or prospective customer about an investment banking transaction in the presence of the firm’s management or investment banking department personnel. Similarly, investment-banking personnel are forbidden from directing a research analyst either to participate in soliciting investment-banking business or to communicate with a customer or prospective customer about an investment banking transaction.

Note: In 2012, the Jumpstart Our Business Startups (JOBS) Act loosened constraints on research analysts for emerging growth companies (EGCs), defined as businesses with less than $1 billion in revenue. Specifically, the JOBS Act prohibits regulators from imposing a quiet period on EGCs. This means that research analysts from an underwriting firm that participated in an emerging growth company’s IPO may make both public appearances and distribute research reports during the quiet period. If the company is an emerging growth company, a research analyst may attend a pitch meeting, but not participate in soliciting investment-banking business.

Source: Regulatory Notice 15-30

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

FINRA Admits Series 24 Exam Score Error

On September 30, 2015, FINRA announced that 208 Series 24 test takers were incorrectly assigned failing grades for that exam. The individuals affected by this issue all took the test between July 13 and September 24, 2015. Continue reading

On September 30, 2015, FINRA announced that 208 Series 24 test takers were incorrectly assigned failing grades for that exam.  The individuals affected by this issue all took the test between July 13 and September 24, 2015. A FINRA representative reports that this incident affected test takers who were close to the passing score of 70%.

The problem was caused by what FINRA called a “configuration error” in the new version of the Series 24 exam, which was introduced on July 13.  During a review of the system, FINRA staff noticed a higher than usual number of failures, which alerted them to the error.

FINRA is currently in the process of updating the exam records and contacting any firms that were affected by this incident.

The Series 24 is the qualifying exam for general securities principals, and it is the only exam series that experienced this issue.

Source: Statement Regarding Series 24 Exam

Solomon’s Industry News: September 2015 Edition

Solomon Exam Prep is happy to release this month’s edition of “Solomon’s Industry News.” Continue reading

Solomon Exam Prep is happy to release this month’s edition of “Solomon’s Industry News.” Every month we will send out industry updates from the past month, so you can stay current and up-to-date on everything that is happening here at Solomon Exam Prep and in the industry.

Check out this month’s edition here: Solomon’s Industry News – September 2015.

To be added to our monthly mailing list, please click here.

Exam Alert: FINRA Provides Guidance on Communications

On May 22, 2015, FINRA issued guidance concerning communications with the public. Here are some notable points from the guidance… Continue reading

Exam Alert

On May 22, 2015, FINRA issued guidance concerning communications with the public. Here are some notable points from the guidance.

  • Non-promotional communications (i.e. communications that do not promote or recommend a specific product or service) do not need to be filed with FINRA
  • Electronic forum posts are considered retail communication, but are specifically excluded from filing requirements
  • Template updates do not need to be filed with FINRA if all that changed was statistical information
  • Various non-material changes to previously filed communications do not require refiling the communication
  • A reprinted article does not need to be filed with FINRA
  • Promotional items that only have the name of a mutual fund are not considered “advertisements” under Rule 482
  • If a firm includes mutual fund performance in a retail communication or correspondence, they must also include the fund’s expense ratio
  • Firm must file retail communications regarding registered business development companies
  • A Series 26 registration does not permit a principal to approve retail communications concerning a business development company. The principal must have a Series 24, Series 9/10, or Series 39 registration instead.

Sources:
Regulatory Notice 15-17: Guidance on Rules Governing Communications With the Public
FINRA Rule 2210 Questions and Answers

This alert applies to the Series 6, Series 7, Series 9/10, Series 24, Series 26, Series 39, Series 62, Series 82, and Series 99.

Exam Alert: FINRA Revises Public, Non-public Arbitrator Standards

Effective June 26, 2015, FINRA will alter its rules regarding who will be consider a public or non-public arbitrator. The change will make it so that any arbitrator who has worked in the financial industry for any period of time will be considered a non-public arbitrator. Also, arbitrators who represent investors or the financial industry as a significant part of their business will be considered non-public arbitrators, but may become public arbitrators after a cooling-off period. Continue reading

Exam AlertEffective June 26, 2015, FINRA will alter its rules regarding who will be considered a public or non-public arbitrator. The change will make it so that any arbitrator who has worked in the financial industry for any period of time will be considered a non-public arbitrator. Also, arbitrators who represent investors or the financial industry as a significant part of their business will be considered non-public arbitrators, but may become public arbitrators after a cooling-off period. The cooling-off period lasts five years if they were disqualified from being a public arbitrator based on their own actions. The cooling-off period lasts two years if they were disqualified from being a public arbitrator based on someone else’s actions.

Source: SEC Approves Amendments to Arbitration Codes to Revise the Definitions of Non-Public and Public Arbitrator

This alert applies to the Series 6, Series 7, Series 24, Series 26, Series 27, Series 28, Series 62, Series 79, and Series 82.

Proposed FINRA Exam Restructure

FINRA plans to reduce the number of representative-level examinations, currently numbering 16, in order to simplify the examination program and reduce the amount of redundancy across exams. Continue reading

On May 28, 2015 at the FINRA annual conference in Washington, DC, a panel of FINRA and industry representatives discussed proposed changes to restructure FINRA’s representative-level qualification program and fielded questions from attendees present at the meeting.

According to Joe McDonald, Senior Director, Testing and Continuing Education Department, FINRA plans to reduce the number of representative-level examinations, currently numbering 16, in order to simplify the examination program and reduce the amount of redundancy across exams.  FINRA proposes to do this by restructuring the current exam program into a format whereby all potential representative-level registrants would take a core general-knowledge exam and then additional specialized knowledge exam(s).  The general knowledge exam is being called the Securities Industry Essentials Examination (SIE) or “essentials exam,” and the specialized exams are being called “top-off” exams.  According to McDonald, the proposed changes will restructure the exam program without rewriting registration rules.

The SIE, or essentials exam, content would include knowledge fundamental to working in the securities industry, such as basic product knowledge, structure and functioning of the securities markets, regulatory agencies and their functions, basic economics, professional conduct, and regulated and prohibited practices. A significant change in this restructure proposal is that individuals taking the SIE would not need to be associated with or sponsored by a FINRA member firm. Also, since the content of the essentials exam would be stable and less likely to change than the content on the top-off exams, a passing result on the SIE would be valid for 4 years, instead of the current 2 years for FINRA exams. This should make employment in the securities industry more accessible, flexible, and appealing.

Passing the SIE alone would not qualify an individual for registration with FINRA. To be eligible for registration, an individual who has passed the SIE would also need to pass the appropriate top-off exam pertaining to one’s job function. If, following an individual’s registration with a firm, the job functions for which the individual is registered change and one needs to become registered in an additional or alternative representative-level position, one would not need to pass the SIE again. Rather, the registered individual would need to pass only the appropriate top-off exam.

Each top-off exam would correlate to a current representative exam and registration position (e.g., Series 7 and General Securities Representative) and would test content specific to that registration category or job function. In addition, several of the current registration categories would be retired, reducing the number of representative-level qualification exams from the current 16 to the following 9:

Revised Exam Structure

 

 

The essentials exam is expected to be 75-100 questions in length and the specialized top-off exams are expected to be shorter than the current representative exams.  For example, the Series 7 is expected to be 150 questions in length, rather than the current 250 questions.

As part of the restructuring, FINRA is proposing to retire the current registration categories of Options Representative, Corporate Securities Representative and Government Securities Representative as well as the associated exams, the Series 42, Series 62 and Series 72, respectively.

FINRA is considering retiring the U.K. Securities Representative registration (Series 17) and the Canadian Securities Representative registrations (Series 37 & 38). Additionally, due to technological changes, FINRA is considering retiring the Order Processing Assistant registration (Series 11).

Under the proposal, representative-level registrants who are registered, or had been registered within the past 2 years, prior to the effective date of the proposal would be eligible to maintain those registrations without being subject to any additional requirements.  This means that most currently-registered individuals would be considered to have taken the SIE and it would be valid for 4 years after they leave the securities industry. Further, such individuals, with the exception of an Order Processing Assistant Representative, would be considered to have passed the SIE in FINRA’s CRD system; thus, if they wish to register in any additional representative category after the effective date of the proposal, they could do so by taking only the appropriate top-off exam. However, with respect to an individual who is not registered on the effective date of the proposal but was registered within the past two years prior to the effective date of the proposal, FINRA will administratively terminate the individual’s SIE status in the CRD system if such individual does not register with FINRA within 4 years from the date of the individual’s last registration.

FINRA says it will begin implementing changes in late 2016, starting with the SIE exam and 3 specialized exams that make up the majority of all registrations: the Investment Company and Variable Contracts Products Representative (Series 6), the General Securities Representative (Series 7), and the Investment Banking Representative (Series 79) registration categories.  FINRA says the remaining top-off exams will be implemented in the first half of 2017.

Panelists at the FINRA meeting said that they are beginning to look at the principal-level qualification exam program to identify an opportunity for similar restructuring.


Questions and answers from the 2015 FINRA Annual Conference audience included:

Q. Will it be possible to take the essentials and top-off exams on the same day?

A. Yes.

Q. What about failing and retaking?

A. If you fail the first time, FINRA says it will keep the same 30/30/180 day requirement.

Q. Will the exam question style change? 

A. No, FINRA says the current question and answer style will remain the same: a multiple-choice question with four answer choices.

Q. Will the essentials content be on the top-off exams?

A. No.

Q. Will there be a CE requirement for the essentials exam?

A. No.

Q. How will you keep the essentials exam questions secure?

A. New security measures to prevent questions from being stolen are being developed.  Also, FINRA says it has exam question pool rotation will be increased, meaning the exam questions will cycle faster than they have historically.

Q. What about the FINRA exam waiver program, will it be affected?

A. Yes, it will affect the program, but FINRA is not sure exactly how.

Q. Will the restructure affect state registration?

A. FINRA has been in touch with NASAA about the proposed exam changes and since FINRA, with the exception of retiring some registration categories, is not modifying registration rules, state registrations should not be affected much if at all.


You can find more information about the proposed restructure at: http://www.finra.org/sites/default/files/notice_doc_file_ref/Notice_Regulatory_15-20.pdf

The FINRA Notice seeks comment on the proposal from the industry and other interested persons.  You can email comments to pubcom@finra.org. The comment period ends July 27.

Before becoming effective, the proposed rule change must be authorized for filing with the Securities and Exchange Commission (SEC) by the FINRA Board of Governors, and then must be filed with the SEC.

New Securities Trader Qualification Exam (Series 57)

FINRA recently announced that it plans to file a proposed rule change with the SEC to replace the Equity Trader Limited Representative Exam (Series 55) with a new exam to be called the Securities Trader Qualification Exam (Series 57). Continue reading

Exam Alert FINRA recently announced that it plans to file a proposed rule change with the SEC to replace the Equity Trader Limited Representative Exam (Series 55) with a new exam to be called the Securities Trader Qualification Exam (Series 57). FINRA will file this proposed rule change in conjunction with the national securities exchanges proposed rule changes to similarly replace the Proprietary Trader Qualification Exam (Series 56) with the Securities Trader Qualification Exam (Series 57). In preparation for the Series 57—a merger of the Series 55 and Series 56—FINRA will conduct a detailed job-analysis survey to gather information from individuals currently Series 55 and Series 56 registered regarding their present roles and responsibilities to ensure that the Series 57 exam accurately covers their day-to-day job functions.

You can read the official announcement on FINRA’s website: http://www.finra.org/industry/information-notice-033115