Tag: securities exams

How to Pass the FINRA Series 7 Exam

What can you do with a Series 7 license? What is the exam like and how should you prepare for it? Solomon answers your top Series 7 questions. Continue reading

What does the Series 7 exam permit me to do?

The Series 7, also known as the General Securities Representative Qualification Exam, was developed by the Financial Industry Regulatory Authority (FINRA) to assess the skills and competency of entry-level registered representatives as general securities representatives. Passing the Series 7 exam qualifies you to solicit, purchase, and/or sell all securities products, including corporate securities, municipal fund securities, options, direct participation programs, investment company products, and variable contracts. As a result of this broad scope, the Series 7 exam is one of the longest and most challenging securities industry exams. The good news, however, is that you will be permitted to perform an impressive range of activities with a Series 7 license. The following are covered activities and products: 

    • Public offerings and/or private placements of corporate securities (stocks and bonds)
    • Rights
    • Warrants
    • Mutual funds
    • Money market funds
    • Unit investment trusts (UITs)
    • Exchange-traded funds (ETFs)
    • Real estate investment trusts (REITs)
    • Options on mortgage-backed securities
    • Government securities
    • Repos and certificates of accrual on government securities
    • Direct participation programs (DPPs)
    • Venture capital
    • Sale of municipal securities
    • Hedge funds
Do I need to take any other securities licensing exams?

In order to be registered as a general securities representative, you must pass two exams: the Series 7 and the FINRA Securities Industry Essentials (SIE) exam. While the Series 7 requires you to be hired and sponsored by a FINRA-member firm, the SIE does not. Therefore, even though you can technically take them in either order, it makes sense to take the introductory-level SIE exam before taking the Series 7 exam.

About the Exam

The Series 7 exam consists of 125 scored and 10 un-scored multiple-choice questions covering the four sections of the FINRA Series 7 content outline. The 10 additional un-scored questions are ones that the exam committee is trying out. These are unidentified and are distributed randomly throughout the exam.

Note: Scores are rounded down to the next lowest whole number (e.g. 71.9% would be a final score of 71% – not a passing score for the Series 7 exam).

Topics Covered on the Exam

The questions on the Series 7 exam cover the main job functions of a general securities representative, as determined by FINRA:

FINRA updates its exam questions regularly to reflect the most current rules and regulations. Solomon recommends that you print out the current version of the FINRA Series 7 Content Outline and use it in conjunction with the Solomon Series 7 Study Guide. The Content Outline is subject to change without notice, so make sure you have the most recent version.

Question Types on the Exam

The Series 7 exam consists of multiple-choice questions, each with four options. You will see these question structures:

Closed Stem Format:

This item type asks a question and gives four possible answers from which to choose.

When interest rates go up, what will happen to the price of typical preferred stock?

    1. It will go up.
    2. It will go down.
    3. It will stay the same.
    4. It is unrelated to interest rates, so it is impossible to tell.
Incomplete Sentence Format:

This kind of question has an incomplete sentence followed by four options that present possible conclusions.

The owner of a house with a market value of $450,000 and an assessed value of $300,000, and with an ad valorem tax of 4 mills would pay a property tax of:

    1. $1,800
    2. $1,200
    3. $12,000
    4. $18,000
“EXCEPT” Format:

This type requires you to recognize the one choice that is an exception among the four answer choices presented.

VRDOs may have their rates automatically reset at any of the following frequencies except:

    1. Daily
    2. Weekly
    3. Monthly
    4. Yearly
Complex Multiple-Choice (“Roman Numeral”) Format:

For this question type, you see a question followed by two or more statements identified by Roman numerals. The four answer choices represent combinations of these statements. You must select the combination that best answers the question.

A Build America Bond may:

    1. Provide a 35% subsidy on the interest as a tax deduction
    2. Reimburse the issuer for 35% of the interest paid to investors
    3. Provide a 35% subsidy on the interest as a tax credit
    4. Provide a 35% subsidy on the interest as an additional interest payment
    1. I or II
    2. I or IV
    3. II and III
    4. III and IV

This format is also used in items that ask you to rank or order a set of items from highest to lowest (or vice versa), or to place a series of events in the proper sequence.

The flow of funds requirement for a municipality with a net revenue pledge usually prioritizes the following funds in which order, going from highest priority to lowest priority?

    1. Debt service fund
    2. Debt service reserve fund
    3. Operations and maintenance fund
    1. I, II, III
    2. III, I, II
    3. II, I, III
    4. III, II, I

Answers: B, B, D, C, B

For an even better idea of the possible question types you might encounter on the Series 7 exam, try Solomon Exam Prep’s free Series 7 Sample Quiz.

Taking the Series 7 Exam

The Series 7 exam can be taken at a Prometric test center or remotely online using Prometric’s ProProctor system. If taking the exam at a test center, you will be given a dry erase pen and whiteboard or a pen and scratch paper, and a basic electronic calculator. You cannot bring notes, paper, or your own calculator. Phones and watches are not permitted either. Due to COVID-19, you are required to wear a mask the whole time you are at the test center. Solomon recommends taking timed practice exams in the Series 7 Exam Simulator while wearing a mask to get used to this added discomfort.

If you’re thinking about taking the test from the comfort of your own home or office with ProProctor, it’s important to be aware of the strict procedures you must follow. See this user guide for complete details. And for a first-hand account of the remote testing experience, read this Solomon blog post.

Test-Taking Tips

Whether you take the exam in person or online, it helps to keep some test-taking strategies in mind. You have an average of slightly more than a minute and a half per question, so don’t spend too long on one question—this may cause you to run out of time and not get to other questions you know. If you don’t know the answer to a question, guess at the answer and “flag” it. You will not be penalized for guessing.

After you have finished all the questions, you can come back to any flagged questions. Not only does this strategy allow you to efficiently answer the ones you know, but it can also help because you might learn something later in the exam that may help you answer an earlier question. Just remember to save enough time to return to the questions you didn’t answer. However, it is not a good idea to simply skip all of the difficult questions with the intention of answering them later. You should make a serious effort to answer each question before moving on to the next one, as your thoughts are often clearer early on in the exam-taking process than they will be later.

How to Study for the Series 7 Exam

Follow Solomon Exam Prep’s proven study system:
    • Read and understand. Read the Solomon Study Guide, carefully. The Series 7 is a knowledge test, not an IQ test. Many students read the Study Guide two or three times before taking the exam. To increase your ability to focus while reading, or as an alternative to reading, listen to the Solomon Series 7 Audiobook, which is a word-for-word reading of the Study Guide.
    • Answer practice questions in the Solomon Exam Simulator. When you’re done with a chapter in the Study Guide, take 4–6 chapter quizzes in the Solomon Series 7 Online Exam Simulator. Use these quizzes to give yourself practice and to find out what you need to study more. Make sure you read and understand the question rationales. When you’re finished reading the entire Study Guide, review your handwritten notes once more. Then, and only then, start taking full practice exams in the Exam Simulator. Aim to pass at least six full practice exams and try to get your Solomon Pass Probability™ score to at least an 80%; when you reach that point, you are probably ready to sit for the Series 7 exam.
Use these effective study strategies:
    • Take handwritten notes. As you read the Study Guide, take handwritten notes and review your notes every day for 10 to 15 minutes. Studies show that the act of taking handwritten notes in your own words and then reviewing them strengthens learning and memory.
    • Make flashcards. Making your own flashcards is another powerful and proven method to reinforce memory and strengthen learning. Solomon also offers digital flashcards for the Series 7 exam.
    • Research. Research anything you do not understand. Curiosity = learning. Students who take responsibility for their own learning by researching anything they do not understand get a deeper understanding of the subject matter and are much more likely to pass.
    • Become the teacher. Studies show that explaining what you are learning greatly increases your understanding of the material. Ask someone in your life to listen and ask questions. If you don’t have anyone, explain it to yourself. Studies show that helps almost as much as explaining to an actual person (see Solomon’s previous blog post to learn more about this strategy!).
Take advantage of Solomon’s supplemental tools and resources:
    • Use all the resources. The Series 7 Resources folder in your Solomon student account has helpful study tools, including several documents that summarize important exam concepts. There are also detailed study schedules that you can print out – or use the online study schedule and check off tasks as you complete them.
    • Watch the Video Lecture. This provides a helpful review of the key concepts in each chapter after reading the Solomon Study Guide. Take notes to help yourself stay focused.
  • Good practices while studying:
    • Take regular breaks. Studies show that if you are studying for an exam, taking regular walks in a park or natural setting significantly improves scores. Walks in urban areas or among people did not improve test scores.
    • Get enough sleep during the period when you are studying. Sleep consolidates learning into memory, studies show. Be good to yourself while you are studying for the Series 7: exercise, eat well, and avoid activities that will hurt your ability to get a good night’s sleep.

You can pass the FINRA Series 7 Exam! It just takes focus and determination. Solomon Exam Prep is here to support you on your path to becoming a general securities representative.

To explore all Solomon Exam Prep’s Series 7 study materials, including product samples, visit the Solomon website here.

For more helpful securities exam-related content, study tips, industry updates, and promotional offers, join the Solomon email list. Just click the button below:

Join the List

How to Pass the FINRA Series 79 Exam

What can you do with a Series 79 license? What is the exam like and how should you prepare for it? Solomon answers your top Series 79 questions. Continue reading

What does the Series 79 exam permit me to do?

The Series 79, also known as the Limited Representative Investment Banking Exam, was developed by the Financial Industry Regulatory Authority (FINRA) to assess the skills and competency of entry-level investment bankers. If you work for a FINRA member firm as an investment banker, you must pass the Series 79 exam and register as an Investment Banking Representative. Although the Series 79 is designed for junior-level bankers, it proves to be one of the most difficult exams offered by FINRA, particularly for test-takers who do not have education and work experience in accounting and finance. In addition, the Series 79 exam requires a broad knowledge of the rules, regulations and industry practices that govern US capital markets and investment banking.

Passing the Series 79 exam qualifies you to advise on and/or facilitate the following:  

    • Debt and equity offerings (private placement or public offering)
    • Mergers and acquisitions
    • Tender offers
    • Financial restructurings
    • Asset sales
    • Divestitures or other corporate reorganizations
    • Business combination transactions
Do I need to take any other securities licensing exams?

According to FINRA, the Series 79 does NOT cover sales or marketing of debt or equity securities to investors or potential investors. In order to make investor presentations, an investment banker with the Series 79 registration would also need to be “registered as a General Securities Representative (Series 7), Corporate Securities Representative (Series 62), or Private Securities Offerings Representative (Series 82) depending on the type of offering being made.”

You are also required to take the FINRA Securities Industry Essentials (SIE) exam, unless you have passed certain other licensing exams (such as the Series 7 or Series 82) before October 1st, 2018.

Additionally, in order to comply with state securities regulations, most individuals with the Series 79 registration pass the NASAA Series 63 exam as well. Check with your firm’s compliance officer to determine if this registration applies to you.

About the Exam

The Series 79 exam consists of 75 scored and 10 un-scored multiple-choice questions covering the three main sections of the FINRA Series 79 content outline. The exam itself is not divided into three sections, so questions from each section appear randomly throughout the exam. The 10 additional un-scored questions are ones that the exam committee is trying out. These are unidentified and are distributed randomly throughout the exam.

Note: Scores are rounded down to the next lowest whole number (e.g. 72.9% would be a final score of 72% – not a passing score for the Series 79 exam).

Topics Covered on the Exam

The questions on the Series 79 exam cover the major job functions of entry-level investment bankers, as determined by FINRA:

FINRA updates its exam questions regularly to reflect the most current rules and regulations. Solomon recommends that you print out the current version of the FINRA Series 79 Content Outline and use it in conjunction with the Solomon Series 79 Study Guide. The Content Outline is subject to change without notice, so make sure you have the most recent version.

FINRA and SEC Rule Numbers: What Should You Remember?

The Solomon Exam Prep Series 79 Study Guide introduces you to several different rules instituted by both FINRA and the SEC. While learning about these rules is important, the exam will not ask for specific FINRA rules, so you do not need to memorize those rule numbers. Instead, you should learn and understand the content of those rules. FINRA rules are generally distinguished by having four numbers (i.e., Rule 1250 or Rule 2241).

On the other hand, it is essential that you remember the content, and sometimes the names, of the SEC rules and regulations covered in the Solomon Series 79 Study Guide. In general, SEC rule numbers consist of either (1) three numbers (e.g., Rule 144) or (2) two numbers and a letter, followed by another number or a dash (e.g., Rule 10b-9, or Rule 15c1-3). Also, remember the names of regulations with letters associated with them, such as Regulation A.

Math and Accounting on the Series 79 Exam

Questions on the Series 79 exam do require you to use arithmetic, ratios, and basic algebra. Also, because the Series 79 exam requires you to understand and be able to analyze financial statements, a basic understanding of financial accounting is very helpful.

Question Types on the Exam

The Series 79 exam consists of multiple-choice questions, each with four options. You will see these question structures:

Closed Stem Format:

This item type asks a question and gives four possible answers from which to choose.

Which type of SEC filing would you look at to determine the holdings of a large investment manager?

    1. Form 13F
    2. Schedule 14A
    3. Form 4
    4. Form 8-K
Incomplete Sentence Format:

This kind of question has an incomplete sentence followed by four options that present possible conclusions.

If a company were to liquidate all its assets and pay off all its liabilities, the amount that would be left is:

    1. Shareholders’ equity
    2. Retained earnings
    3. Paid-in capital
    4. Long-term debt
“EXCEPT” Format:

This type requires you to recognize the one choice that is an exception among the four answer choices presented.

All of the following are characteristics of a hedge fund, except:

    1. They often do not need to register with the SEC.
    2. They are a highly liquid form of investment.
    3. They are generally lightly regulated when compared to other types of investments.
    4. Their members or investors are institutions or wealthy individual investors.
Complex Multiple-Choice (“Roman Numeral”) Format:

For this question type, you see a question followed by two or more statements identified by Roman numerals. The four answer choices represent combinations of these statements. You must select the combination that best answers the question.

You are analyzing a public company and your analysis requires you to compile LTM (last 12 months) financial data for the company. Which of the following SEC filings would you typically look to for such data?

    1. Form 10-K
    2. Schedule 13D
    3. Form 10-Q
    4. Form 3
    1. I and II
    2. II and III
    3. III and IV
    4. I and III

This format is also used in items that ask you to rank or order a set of items from highest to lowest (or vice versa), or to place a series of events in the proper sequence.

In marketing a proposed acquisition, a sell-side investment banker typically provides the following materials to prospective buyers in which order?

    1. Confidentiality agreement
    2. Teaser
    3. Bidding procedures letter
    4. Confidential information memorandum
    1. I, II, IV, III
    2. III, II, I, IV
    3. II, III, I, IV
    4. II, I, IV, III

Answers: A, A, B, D, D

For an even better idea of the possible question types you might encounter on the Series 79 exam, try Solomon Exam Prep’s free Series 79 Sample Quiz.

Test-Taking Tips for the Series 79 Exam

If taking the test at a test center, you will be given a dry erase pen and whiteboard or a pencil and scratch paper, a basic electronic calculator, and an Exhibits Book. The Exhibits Book may be presented on your computer or as a physical pamphlet. You cannot bring notes, paper, or your own calculator. Phones and watches are not permitted either. Many of the questions will refer to tables or charts in the Exhibits Book, and some questions will require you to perform calculations.

The exam is administered electronically, but the computer format can be tricky. Before the exam, you will be able to take a tutorial on how the electronic system works. You should take the tutorial, since some people find the system awkward to use at first, and you don’t want to use valuable test time dealing with technical issues. There is no scheduled break during the test; you’re allowed to take an unscheduled break, but the clock doesn’t stop.

Due to COVID-19, the Series 79 exam can also be taken online. Candidates must submit an Online Exam Administration Request Form to FINRA. Be sure to review the online system requirements for online testing before submitting the form.

Pacing

The Series 79 exam has 85 questions to answer in 150 minutes, which is a little under two minutes per question. This means you’ll need to work at an average pace of about 105 seconds per question. Keep in mind that 105 seconds per question is an average speed that you must maintain over two and a half hours. This would be challenging even if every question was short and straightforward. Unfortunately, a number of questions are detailed and time-consuming, and will certainly take more than 105 seconds. You’ll need to work faster on the remaining questions to maintain the necessary pace.

Read and Understand the Question Before You Answer 

Questions on the Series 79 exam can be intentionally confusing. You should carefully read each question before you answer it and understand exactly what the question is asking. While it is important to make a serious effort on each question, avoid spending a large amount of time on any single question. In general, you should dedicate no more than five minutes to any one question. If you find yourself spending more than five minutes, give it your best guess, flag the question, and move on.

Getting to the Point of the Question

As many of the questions on the Series 79 exam are paragraph length, it is often a good idea to read the last line or two of the question before reading the whole question. This technique will allow you to focus on the aspects of the long-form question that are most relevant, thereby saving you time.

Predict an Answer Choice if Possible

Many test-takers quickly read the question and immediately skip to the answer choices. A better technique is to formulate what you believe is the correct answer before going through the answer choices. If your pre-phrased answer is one of the choices, you should be comfortable in selecting that answer. This technique will also help you increase your speed.

Read Every Answer Choice

You should always read every answer choice. The exam is full of attractive but incorrect answers. Also, if you notice several correct answers, you may have missed an “except” or “not” in the question. If you consider every answer choice before making your selection, you are less likely to be tricked into picking a wrong but superficially appealing answer.

Answer Every Question, and Don’t Dawdle

There is no penalty for guessing. If you honestly don’t know an answer, pick an answer choice and move on. Don’t dawdle. Even a random guess has a 25% chance of being right. If you spend too long trying to narrow down answer choices on one question, you’ve lost precious time on later questions.

Mark for Review and Return Later

If you’re struggling with a question or have no idea what the answer is, mark the question and return to answer it later. Not only does this strategy allow you to efficiently answer the ones you know, but it can also help because you may learn something later in the exam that may help you answer an earlier question. Just remember to save enough time to return to the questions you didn’t answer. However, it is not a good idea to simply skip all of the difficult questions with the intention of answering them later. You should make a serious effort to answer each question before moving on to the next one, as your thoughts are often clearer early on in the exam-taking process than they will be later.

How to Study for the Series 79 Exam

Follow Solomon Exam Prep’s proven study system:
    • Read and understand. Read the Solomon Study Guide, carefully. The Series 79 is a knowledge test, not an IQ test. Many students read the Study Guide two or three times before taking the exam. To increase your ability to focus while reading, or as an alternative to reading, listen to the Solomon Series 79 Audiobook, which is a word-for-word reading of the Study Guide.
    • Answer practice questions in the Solomon Exam Simulator. When you’re done with a chapter in the Study Guide, take 4–6 chapter quizzes in the Solomon Series 79 Online Exam Simulator. Use these quizzes to give yourself practice and to find out what you need to study more. Make sure you read and understand the question rationales. When you’re finished reading the entire Study Guide, review your handwritten notes once more. Then, and only then, start taking full practice exams in the Exam Simulator. Aim to pass at least six full practice exams and try to get your Solomon Pass Probability™ score to at least an 80%; when you reach that point, you are probably ready to sit for the Series 79 exam.
Use these effective study strategies:
    • Take handwritten notes. As you read the Study Guide, take handwritten notes and review your notes every day for 10 to 15 minutes. Studies show that the act of taking handwritten notes in your own words and then reviewing them strengthens learning and memory.
    • Make flashcards. Making your own flashcards is another powerful and proven method to reinforce memory and strengthen learning. Solomon also offers digital flashcards for the Series 79 exam.
    • Research. Research anything you do not understand. Curiosity = learning. Students who take responsibility for their own learning by researching anything they do not understand get a deeper understanding of the subject matter and are much more likely to pass.
    • Become the teacher. Studies show that explaining what you are learning greatly increases your understanding of the material. Ask someone in your life to listen and ask questions. If you don’t have anyone, explain it to yourself. Studies show that helps almost as much as explaining to an actual person (see Solomon’s previous blog post to learn more about this strategy!).
Take advantage of Solomon’s supplemental tools and resources:
    • Use all the resources. The Resources folder in your Solomon student account has helpful information, including a detailed study schedule that you can print out – or use the online study schedule and check off tasks as you complete them.
    • Watch the Video Lecture. This provides a helpful review of the key concepts in each chapter after reading the Solomon Study Guide. Take notes to help yourself stay focused.
  • Good practices while studying:
    • Take regular breaks. Studies show that if you are studying for an exam, taking regular walks in a park or natural setting significantly improves scores. Walks in urban areas or among people did not improve test scores.
    • Get enough sleep during the period when you are studying. Sleep consolidates learning into memory, studies show. Be good to yourself while you are studying for the Series 79: exercise, eat well, and avoid activities that will hurt your ability to get a good night’s sleep.

You can pass the FINRA Series 79 Exam! It just takes focus and determination. Solomon Exam Prep is here to support you on your path to becoming a registered investment banking representative.

To explore all Solomon Exam Prep’s Series 79 study materials, including product samples, visit the Solomon website here.

For more helpful securities exam-related content, study tips, industry updates, and promotional offers, join the Solomon email list. Just click the button below:

Join the List

How to Pass the NASAA Series 66 Exam

What can you do with a Series 66 license? What does the exam cover and how should you prepare for it? Keep reading for answers to your Series 66 questions. Continue reading

What does the Series 66 exam allow me to do?

The Series 66, also known as the Uniform Combined State Law Exam, is created by the North American Securities Administrators Association (NASAA), which represents state securities regulators in the United States, Canada, and Mexico. Passing the Series 66 exam is like passing both the Series 63 (Uniform Securities Agent State Law Examination) and the Series 65 (Uniform Investment Adviser Law Examination). However, to register as an investment adviser representative with the Series 66, you must also pass the FINRA Series 7 General Securities Representative exam. In conjunction with the Series 7 license, the Series 66 license qualifies you as both an investment advisor representative and a securities agent.

As an investment adviser representative, an individual can perform the following tasks:  

    • Make recommendations and render general advice regarding securities
    • Manage accounts or portfolios of clients
    • Solicit, offer, or negotiate for the sale of investment advisory services
    • Supervise employees who perform any of the above tasks.

Note that the Series 7 exam is a co-requisite to the Series 66, so you can take the exams in either order. However, Solomon recommends passing the Series 7 before the Series 66 since much of the information tested on the Series 7 is likely to appear on the Series 66 exam.

About the Exam

The Series 66 exam consists of 100 scored and 10 unscored multiple-choice questions covering the four sections of the NASAA Series 66 exam outline. The 10 additional unscored questions are ones that the exam committee is trying out. These are unidentified and are distributed randomly throughout the exam. The NASAA updates its exam questions regularly to reflect the most current rules and regulations.

About the Series 66 exam

Note: Scores are rounded down to the next lowest whole number (e.g. 72.9% would be a final score of 72% – not a passing score for the Series 66 exam).

Topics Covered on the Exam

The NASAA divides the Series 66 exam into four sections:

Topics on the Series 66 exam

The Series 66 exam covers many topics including the following:

    • Business Cycles and Economic Factors
    • Fundamental Analysis
    • Types of Risk
    • Equity and Debt Securities
    • Investment Companies
    • Discounted Cash Flow
    • Derivatives
    • Alternatives and Insurance Products
    • Clients and Client Profiles
    • Capital Market Theory, Portfolio Management, and Taxation
    • Taxation of Debt and Equity Securities
    • Retirement Plans, ERISA, Special Accounts
    • Trading and Performance Measures
    • Regulations of Securities Professionals
    • Regulations of Securities and Issuers
    • Remedies and Administrative Provisions
    • Recordkeeping Requirements
    • Net Worth/Net Capital Requirements
    • Business Practices for IAs and IARs
    • Performance-based fees
    • Wrap fees
    • Custody
    • Communication with Clients and Prospects
    • Compensation and Client Funds
    • Conflicts of Interest

Question Types on the Exam

The Series 66 exam consists of multiple-choice questions, each with four options. You will see these question structures:

Closed Stem Format:

This item type asks a question and gives four possible answers from which to choose.

Which of the following is not a current asset?

    1. Inventory
    2. Accounts receivable
    3. Cash
    4. Trademarks
Incomplete Sentence Format:

This kind of question has an incomplete sentence followed by four options that present possible conclusions.

Callable preferred stock is more likely to be called when:

    1. Interest rates go up.
    2. Interest rates go down.
    3. The price of the common stock rises.
    4. The price of the common stock falls.
“EXCEPT” Format:

This type requires you to recognize the one choice that is an exception among the four answer choices presented.

An investor calculating the investing merits of a payment or payments not yet received might potentially use all of the following except:

    1. Present value
    2. Net present value
    3. Future value
    4. Internal rate of return
Complex Multiple-Choice (“Roman Numeral”) Format:

For this question type, you see a question followed by two or more statements identified by Roman numerals. The four answer choices represent combinations of these statements. You must select the combination that best answers the question.

Pick two statements that best represent time-weighted and dollar-weighted returns:

    1. Conceptually, the time-weighted return is the compounded growth rate of the initial investment over a given period of time, and is calculated using the geometric mean rather than the arithmetic mean.
    2. Conceptually, the dollar-weighted return is the compounded growth rate of the initial investment over a given period of time and is calculated using the geometric mean rather than the arithmetic mean.
    3. Conceptually, a time-weighted return is the internal rate of return on an investment.
    4. Conceptually, a dollar-weighted return is the internal rate of return on an investment.
    1. I and III
    2. I and IV
    3. II and III
    4. II and IV

This format is also used in items that ask you to rank or order a set of items from highest to lowest (or vice versa), or to place a series of events in the proper sequence.

Rank the following categories of mutual funds in order of volatility, from highest to lowest.

    1. Growth and income
    2. Balanced
    3. Growth
    4. Equity income
    1. I, III, II, IV
    2. III, II, I, IV
    3. III, I, II, IV
    4. III, I, IV, II

Answers: D, B, C, B, D

For an even better idea of the possible question types you might encounter on the Series 66 exam, try Solomon Exam Prep’s free Series 66 Sample Quiz.

How to Study for the Series 66 Exam

Follow Solomon Exam Prep’s proven study system:
    • Read and understand. Read the Solomon Study Guide, carefully. The Series 66 is a knowledge test, not an IQ test. Many students read the Study Guide two or three times before taking the exam. To increase your ability to focus while reading, or as an alternative to reading, listen to the Solomon Series 66 Audiobook, which is a word-for-word reading of the Study Guide.
    • Answer practice questions in the Solomon Exam Simulator. When you’re done with a chapter in the Study Guide, take 4–6 chapter quizzes in the Solomon Series 66 Online Exam Simulator. Use these quizzes to give yourself practice and to find out what you need to study more. Make sure you read and understand the question rationales. When you’re finished reading the entire Study Guide, review your handwritten notes once more. Then, and only then, start taking full practice exams in the Exam Simulator. Aim to pass at least six full practice exams and try to get your Solomon Pass Probability™ score to at least an 80%; when you reach that point, you are probably ready to sit for the Series 66 exam.
Use these effective study strategies:
    • Take handwritten notes. As you read the Study Guide, take handwritten notes and review your notes every day for 10 to 15 minutes. Studies show that the act of taking handwritten notes in your own words and then reviewing them strengthens learning and memory.
    • Make flashcards. Making your own flashcards is another powerful and proven method to reinforce memory and strengthen learning. Solomon also offers digital flashcards for the Series 66 exam.
    • Research. Research anything you do not understand. Curiosity = learning. Students who take responsibility for their own learning by researching anything they do not understand get a deeper understanding of the subject matter and are much more likely to pass.
    • Become the teacher. Studies show that explaining what you are learning greatly increases your understanding of the material. Ask someone in your life to listen and ask questions. If you don’t have anyone, explain it to yourself. Studies show that helps almost as much as explaining to an actual person (see Solomon’s previous blog post to learn more about this strategy!).
Take advantage of Solomon’s supplemental tools and resources:
    • Use all the resources. The Resources folder in your Solomon student account has helpful information, including a detailed study schedule that you can print out – or use the online study schedule and check off tasks as you complete them.
    • Watch the Video Lecture. This provides a helpful review of the key concepts in each chapter after reading the Solomon Study Guide. Take notes to help yourself stay focused.
  • Good practices while studying:
    • Take regular breaks. Studies show that if you are studying for an exam, taking regular walks in a park or natural setting significantly improves scores. Walks in urban areas or among people did not improve test scores.
    • Get enough sleep during the period when you are studying. Sleep consolidates learning into memory, studies show. Be good to yourself while you are studying for the Series 66: exercise, eat well, and avoid activities that will hurt your ability to get a good night’s sleep.

You can pass the NASAA Series 66 Exam! It just takes focus and determination. Solomon Exam Prep is here to support you on your path to becoming a registered securities agent and investment advisor representative.

To explore all Solomon Exam Prep’s Series 66 study materials, including product samples, visit the Solomon website here.

For more helpful securities exam-related content, study tips, and industry updates, join the Solomon email list. Just click the button below:

Join the List

How to Pass the FINRA Securities Industry Essentials (SIE) Exam

Thinking about taking the SIE exam? Keep reading to learn what the SIE is, what topics the exam covers, and how you should prepare for it. Continue reading

Updated June 9, 2022

Should I Take the SIE Exam?

Are you interested in the world of stocks, bonds, and investments? Thinking about a career as a financial advisor? Or perhaps your goal is to become an investment banker or a hedge fund manager? There are many attractive career options in the securities industry, but no matter which path you’re considering, you’ll probably need to take the Securities Industry Essentials (SIE) Exam.

If you’re not sure whether a career as a securities industry professional is right for you, the SIE is a great way to test the waters. For college students, the SIE provides a broad overview of the securities industry and financial knowledge that will be helpful even if you don’t pursue a securities industry career. And passing the SIE will make you more competitive when looking for a financial or investment-related internship.

For job seekers in general, having the SIE under your belt shows potential employers that you are serious about a career in the industry and have mastered industry fundamentals. And because the SIE is a co-requisite to several securities industry qualification exams, passing it allows you to jumpstart your career goals.

What is the SIE Exam?

The SIE exam is an introductory-level exam that covers fundamental securities industry knowledge. The SIE focuses on industry terminology, securities products, the structure and function of the markets, regulatory agencies and their functions, and regulated and prohibited practices.

The SIE is a co-requisite of several qualification exams, including the Series 6, Series 7, Series 22, Series 79, Series 82, and Series 99. Passing the SIE does not qualify you to become a registered securities industry professional, but it is usually the first step. Because the SIE is “co-requisite,” instead of “pre-requisite,” you don’t have to take the SIE before taking other FINRA exams. However, taking the SIE first is highly recommended because what you learn on the SIE is extremely helpful to you when you take any other security exam. The knowledge that you learn on the SIE is wind in your sails when you take any other registered representative level securities qualification exam, such as the Series 6 or Series 7.

Any individual 18 or older may take the SIE exam. Unlike other FINRA securities exams, employment and sponsorship by a FINRA member firm is not required in order to take the SIE, and exam results are valid for four years. Individuals can sign up to take the SIE exam on the FINRA website by creating an account, paying the $80 exam fee, and scheduling the exam. The SIE can be taken at a Prometric test center or online via the ProProctor platform.

About the Exam

The SIE exam consists of 75 scored and 10 unscored multiple-choice questions covering the four sections of the FINRA SIE exam outline. The 10 additional unscored questions are ones that the exam committee is trying out. These are unidentified and are distributed randomly throughout the exam. FINRA updates its exam questions regularly to reflect the most current rules and regulations.

About the SIE exam

Note: Scores are rounded down to the next lowest whole number (e.g. 69.9% would be a final score of 69% – not a passing score for the SIE exam).

Topics Covered on the Exam

FINRA divides the SIE exam into four sections:

SIE exam topics

The SIE exam covers many topics including the following:

    • Common Stock
    • Preferred Stock, Warrants, Rights and ADRs
    • Bonds and Yields
    • Types of Bonds
    • Treasury Securities, ABS, CMOs, and Munis
    • Mutual Funds and Other Investment Companies
    • Life Insurance Products and Municipal Fund Securities
    • Options, Partnerships, Hedge Funds, and Private Placements
    • Risks
    • Customer Disclosures & Taxation
    • Underwriting, Issuing, and Registering Securities
    • Exemptions from Registration & Types of Broker-Dealers
    • Markets, Financial Institutions, and Clearance & Settlement
    • Economic Factors and Business Cycles
    • Tools of Government Policy and International Factors
    • Opening an Account & Types of Accounts
    • Cash and Margin Accounts
    • Order Processing
    • Handling Corporate Actions, Account Compliance, and SIPC Rules
    • Prohibited Activities and Trading Rules
    • FINRA Conduct Rules
    • FINRA Membership

Question Types on the SIE Exam

The SIE exam consists of multiple-choice questions, each with four options. You will see these question structures:

Closed Stem Format:

This item type asks a question and gives four possible answers from which to choose.

When interest rates go up, what happens to the price of typical preferred stock?

    1. It rises.
    2. It falls.
    3. It stays the same.
    4. It is unrelated to interest rates, so it is impossible to tell.
Incomplete Sentence Format:

This kind of question has an incomplete sentence followed by four options that present possible conclusions.

ADRs trade in:

    1. The foreign currency that underlies the ADR
    2. U.S. dollars
    3. A combination of foreign currency and U.S. dollars
    4. A special exchange rate that takes into consideration how much foreign currency can purchase one U.S. dollar
“EXCEPT” Format:

This type requires you to recognize the one choice that is an exception among the four answer choices presented.

All of the following are advantages to the issuer of debt financing over equity financing except:

    1. No ownership dilution
    2. No loss of control
    3. Interest payments are a deductible business expense
    4. Fixed repayment schedule
Complex Multiple-Choice (“Roman Numeral”) Format:

For this question type, you see a question followed by two or more statements identified by Roman numerals. The four answer choices represent combinations of these statements. You must select the combination that best answers the question.

The prices of which of the following two types of preferred stock are least sensitive to changes in interest rates?

    1. Participating preferred
    2. Cumulative preferred
    3. Adjustable-rate preferred
    4. Convertible preferred
    1. I and II
    2. II and III
    3. I and IV
    4. III and IV

This format is also used in items that ask you to rank or order a set of items from highest to lowest (or vice versa), or to place a series of events in the proper sequence.

Rank the following yields for a premium bond held to maturity from highest to lowest.

    1. Yield to call
    2. Coupon rate
    3. Yield to maturity
    4. Current yield
    1. II, IV, III, I
    2. IV, I, III, II
    3. II, IV, I, III
    4. III, I, IV, II

For an even better idea of the possible question types you might encounter on the SIE exam, try Solomon Exam Prep’s free SIE Sample Quiz and SIE Sample Exam.

How to Study for the SIE Exam

Follow Solomon Exam Prep’s proven study system:
    • Read and understand. Read the Solomon SIE Study Guide, carefully. The SIE is a knowledge test, not an IQ test. Many students read the Study Guide two or three times before taking the exam. To increase your ability to focus while reading, or as an alternative to reading, listen to the Solomon SIE Audiobook, which is a word-for-word reading of the Study Guide.
    • Answer practice questions in the Solomon Exam Simulator. When you’re done with a chapter in the Study Guide, take 4–6 chapter quizzes in the Solomon Online Exam Simulator. Use these quizzes to give yourself practice and to find out what you need to study more. Make sure you read and understand the question rationales. When you’re finished reading the entire Study Guide, review your handwritten notes once more. Then, and only then, start taking full practice exams in the SIE Exam Simulator. Aim to pass at least six full practice exams and try to get your Solomon Pass Probability™ score to at least an 80%; when you reach that point, you are probably ready to sit for the SIE exam.
Use these effective study strategies:
    • Take handwritten notes. As you read the SIE Study Guide, take handwritten notes and review your notes every day for 10 to 15 minutes. Studies show that the act of taking handwritten notes in your own words and then reviewing them strengthens learning and memory.
    • Make flashcards. Making your own flashcards is another powerful and proven method to reinforce memory and strengthen learning. Solomon also offers digital flashcards for the SIE exam.
    • Research. Research anything you do not understand. Curiosity = learning. Students who take responsibility for their own learning by researching anything they do not understand get a deeper understanding of the subject matter and are much more likely to pass.
    • Become the teacher. Studies show that explaining what you are learning greatly increases your understanding of the material. Ask someone in your life to listen and ask questions. If you don’t have anyone, explain it to yourself. Studies show that helps almost as much as explaining to an actual person (see Solomon’s previous blog post to learn more about this strategy!).
Take advantage of Solomon’s supplemental tools and resources:
    • Use all the resources. The Resources folder in your Solomon student account has helpful information, including a detailed study schedule that you can print out – or use the online study schedule and check off tasks as you complete them.
    • Watch the Video Lecture. This provides a helpful review of the key concepts in each chapter after reading the Solomon SIE Study Guide. Take notes to help yourself stay focused.
  • Good practices while studying:
    • Take regular breaks. Studies show that if you are studying for an exam, taking regular walks in a park or natural setting significantly improves scores. Walks in urban areas or among people did not improve test scores.
    • Get enough sleep during the period when you are studying. Sleep consolidates learning into memory, studies show. Be good to yourself while you are studying for the SIE: exercise, eat well, and avoid activities that will hurt your ability to get a good night’s sleep.

You can pass the FINRA SIE Exam! It just takes focus and determination. Earning this certification will provide valuable knowledge and open up rewarding career opportunities. Solomon Exam Prep is here to support you on your first step to entering the securities industry.

To explore all Solomon Exam Prep’s SIE study materials, including product samples, visit the Solomon website here.

For more helpful securities exam-related content, study tips, and industry updates, join the Solomon email list. Just click the button below:

Join the List

How to Pass the FINRA Series 6 Exam

Learn what the FINRA Series 6 qualifies you to do, what the exam covers, and how you should prepare for it. Continue reading

What does the FINRA Series 6 exam allow me to do?

The Series 6, also known as the Investment Company Products/Variable Contracts Representative Exam, qualifies individuals to solicit, purchase, and/or sell certain investment products. These include mutual funds, initial offerings of closed-end funds, variable life insurance, variable annuities, municipal fund securities, and unit investment trusts (UITs).

The Series 6 does not entitle you to sell all securities products – for that, you’ll need the Series 7. But if you intend to only sell the products listed above, then the Series 6 exam may be an attractive option since it is shorter than the Series 7.

Common jobs in the securities and financial services industries that use the Series 6 are investment advisers, financial advisers, insurance agents, retirement plan specialists, and private bankers. Be aware, though, that some jobs might require other exams or qualifications in addition to the Series 6, depending on the duties required for a particular job. Salary ranges vary among these types of jobs, but the average base salary of people with a Series 6 certification is $56,000 per year (payscale.com).

To take the Series 6 exam, you must be sponsored by a FINRA member firm. The firm files a Form U4 application on your behalf through FINRA’s Central Registration Depository (CRD). Candidates must pass the co-requisite Securities Industry Essentials (SIE) exam in addition to the Series 6 to obtain the Series 6 license. Although you can take the exams in any order, Solomon Exam Prep recommends taking the SIE exam first because it is a foundational exam. Anyone 18 or older can take the SIE exam, and it doesn’t require firm sponsorship.

About the Exam

The Series 6 exam consists of 50 scored and 5 unscored multiple-choice questions covering the four sections of the FINRA Series 6 exam outline. The 5 additional unscored questions are ones that the exam committee is trying out. These are unidentified and are distributed randomly throughout the exam. FINRA updates its exam questions regularly to reflect the most current rules and regulations.

Note: Scores are rounded down to the next lowest whole number (e.g. 69.9% would be a final score of 69% – not a passing score for the Series 6 exam).

Topics Covered on the Exam

FINRA divides the Series 6 exam into four sections which represent the four job functions of a Series 6 registered representative:

The Series 6 exam covers many topics including the following:

    • Securities Registration
    • Communications
    • Client Accounts
    • Retirement Plans
    • Equity Securities
    • Debt Securities
    • Taxation
    • Options
    • Investment Companies
    • Annuities
    • Portfolio Management and CAPM
    • Investment Goals
    • Securities Analysis
    • Completing and Confirming Transactions

Question Types on the Series 6

The Series 6 exam consists of multiple-choice questions, each with four options. You will see these question structures:

Closed Stem Format:

This item type asks a question and gives four possible answers from which to choose.

In the cooling-off period, which of the following would not be allowed?

    1. Making an offer to sell a security with a preliminary prospectus
    2. Taking orders for the security
    3. Publishing a tombstone ad
    4. Distributing a preliminary prospectus
Incomplete Sentence Format:

This kind of question has an incomplete sentence followed by four options that present possible conclusions.

Regulation S-P helps protect customers from:

    1. Recommendations to purchase high-risk securities such as S&P 500 index derivatives
    2. Abusive commissions and sales charges
    3. Having their private information misused
    4. Money laundering
“EXCEPT” Format:

This type requires you to recognize the one choice that is an exception among the four answer choices presented.

All of the following would be considered a security except:

    1. Publicly traded stock
    2. Publicly traded bond
    3. A variable annuity
    4. A commodities future
Complex Multiple-Choice (“Roman Numeral”) Format:

For this question type, you see a question followed by two or more statements identified by Roman numerals. The four answer choices represent combinations of these statements. You must select the combination that best answers the question.

Regarding its telemarketing efforts, a firm or its representative must do which of the following?

    1. Identify themselves and the purpose of their call
    2. Compare potential prospects against the FTC’s National Do Not Call Registry
    3. Be licensed by FINRA as a telemarketer
    4. Establish a 900 number for potential complaints
    1. I and IV
    2. I and II
    3. II and III
    4. III and IV

This format is also used in items that ask you to rank or order a set of items from highest to lowest (or vice versa), or to place a series of events in the proper sequence.

Rank the following yields for a premium bond held to maturity from highest to lowest.

    1. Yield to call
    2. Coupon rate
    3. Yield to maturity
    4. Current yield
    1. II, IV, III, I
    2. IV, I, III, II
    3. II, IV, I, III
    4. III, I, IV, II

For an even better idea of the possible question types you might encounter on the Series 6 exam, try Solomon Exam Prep’s free Series 6 Sample Quiz.

How to Study for the Series 6

Follow Solomon Exam Prep’s proven study system:
    • Read and understand. Read the Solomon Study Guide, carefully. The Series 6 is a knowledge test, not an IQ test. Many students read the Study Guide two or three times before taking the exam. To increase your ability to focus while reading, or as an alternative to reading, listen to the Solomon Series 6 Audiobook, which is a word-for-word reading of the Solomon Series 6 Study Guide.
    • Answer practice questions in the Solomon Exam Simulator. When you’re done with a chapter in the Study Guide, take 4–6 chapter quizzes in the Solomon Online Exam Simulator. Use these quizzes to give yourself practice and to find out what you need to study more. Make sure you read and understand the question rationales. When you’re finished reading the entire Study Guide, review your handwritten notes once more. Then, and only then, start taking full practice exams in the Series 6 Exam Simulator. Aim to pass at least six full practice exams and try to get your Solomon Pass Probability™ score to at least an 80%; when you reach that point, you are probably ready to sit for the Series 6 exam.
Use these effective study strategies:
    • Take handwritten notes. As you read the Study Guide, take handwritten notes and review your notes every day for 10 to 15 minutes. Studies show that the act of taking handwritten notes in your own words and then reviewing them strengthens learning and memory.
    • Make flashcards. Making your own flashcards is another powerful and proven method to reinforce memory and strengthen learning. Solomon also offers digital flashcards for the Series 6 exam.
    • Research. Research anything you do not understand. Curiosity = learning. Students who take responsibility for their own learning by researching anything they do not understand get a deeper understanding of the subject matter and are much more likely to pass.
    • Become the teacher. Studies show that explaining what you are learning greatly increases your understanding of the material. Ask someone in your life to listen and ask questions. If you don’t have anyone, explain it to yourself. Studies show that helps almost as much as explaining to an actual person (see Solomon’s recent post to learn more about this strategy!).
Take advantage of Solomon’s supplemental tools and resources:
    • Use all the resources. The Resources folder in your Solomon student account has helpful information, including a detailed study schedule that you can print out – or use the online study schedule and check off tasks as you complete them.
    • Watch the Video Lecture. This provides a helpful review of the key concepts in each chapter after reading the Solomon Study Guide. Take notes to help yourself stay focused.
  • Good practices while studying:
    • Take regular breaks. Studies show that if you are studying for an exam, taking regular walks in a park or natural setting significantly improves scores. Walks in urban areas or among people did not improve test scores.
    • Get enough sleep during the period when you are studying. Sleep consolidates learning into memory, studies show. Be good to yourself while you are studying for the Series 6: exercise, eat well, and avoid activities that will hurt your ability to get a good night’s sleep.

You can pass the FINRA Series 6! It just takes focus and determination. Solomon Exam Prep is here to support you on your journey to becoming a registered Investment Company Products/Variable Life Contracts Representative.

To explore all Solomon Exam Prep Series 6 study materials, including product samples, visit the Solomon website here.

For more helpful securities exam-related content, study tips, and industry updates, join the Solomon email list. Just click the button below:

Join the List

How to Pass the NASAA Series 65 Exam

What is the Series 65 exam and how should you prepare for it? Read Solomon Exam Prep’s guide to the NASAA Series 65 exam. Continue reading

What does the NASAA Series 65 allow me to do?

The Series 65, also known as the Uniform Investment Adviser Law Examination, qualifies individuals to give investment advice for a fee. Investment adviser representatives (IARs) use their knowledge to give financial advice and help clients build investment portfolios. IARs might provide general investment advice or recommend a client to invest in a specific security. IARs can also manage client accounts and supervise other IARs.

The organization that creates the test—the North American Securities Administrators Association, or NASAA—works to protect investors in every state, territory, the District of Columbia, Canada, and Mexico. Requiring investment adviser representative candidates to pass the Series 65 is a key tool in the NASAA’s investor protection arsenal. Regulators want to make sure people who are giving investment advice in their state or jurisdiction are competent and will behave legally and ethically.

About the Exam

The Series 65 exam consists of 130 scored and 10 unscored multiple-choice questions covering the four sections of the NASAA Series 65 exam outline. The 10 additional unscored questions are ones that the exam committee is trying out. These are unidentified and are distributed randomly throughout the exam. NASAA updates its exam questions regularly to reflect the most current rules and regulations.

Note: Scores are rounded down to the lowest whole number (e.g. 71.9% would be a final score of 71%–not a passing score for the Series 65 exam).

Topics Covered on the Exam

The NASAA divides the Series 65 exam into four sections:

The Series 65 exam covers many topics including the following:

    • Economics
    • Financial reporting
    • Quantitative methods
    • Risks
    • Cash investments
    • Fixed income
    • Equities
    • Pooled investments, such as mutual funds, ETFs, and REITs
    • Derivatives
    • Alternatives
    • Annuities and other insurance-based investments
    • Client types
    • Client profiles
    • Capital market theory
    • Portfolio management
    • Taxes
    • Retirement plans
    • ERISA
    • Special accounts, such as college savings plans
    • Trading securities
    • Performance measures
    • State and federal securities acts and regulations
    • Ethical practices and fiduciary obligations

Question Types on the Series 65

The Series 65 exam consists of multiple-choice questions, each with four options. You will see these question structures:

Closed Stem Format:

This item type asks a question and gives four possible answers from which to choose.

Which of the following actions might the Federal Reserve take if it wishes to stimulate the economy?

    1. Buy Treasuries
    2. Raise the discount rate
    3. Raise the bank reserve requirements
    4. Raise the margin requirements
Incomplete Sentence Format:

This kind of question has an incomplete sentence followed by four options that present possible conclusions.

A recession is a protracted period of decline in the national economy, typically defined as:

    1. More than two quarters of decreasing GDP
    2. More than two quarters of decline in the housing market
    3. More than two quarters of shrinking M1
    4. More than two quarters of a falling PPI
“EXCEPT” Format:

This type requires you to recognize the one choice that is an exception among the four answer choices presented.

All of the following are tools that the Federal Reserve uses to implement monetary policy except:

    1. Open market operations
    2. Discount window lending
    3. Altering bank reserve requirements
    4. Altering the value of the dollar
Fill-in-the-Blank Format:

This question type has a missing word or phrase, which you must select from the four options provided.

A situation in which short-term securities pay higher yields than long-term securities is considered a(n) _____ yield curve.

    1. Normal
    2. Inverted
    3. Flat
    4. Barbell
Complex Multiple-Choice (“Roman Numeral”) Format:

For this question type, you see a question followed by two or more statements identified by Roman numerals. The four answer choices represent combinations of these statements. You must select the combination that best answers the question.

A stronger dollar benefits which group?

    1. U.S. exporters
    2. U.S. importers
    3. U.S. investors who want to invest in foreign assets
    4. Overseas investors who want to invest in U.S. assets
    1. I and II
    2. II and III
    3. III and IV
    4. I and IV

This format is also used in items that ask you to rank or order a set of items from highest to lowest (or vice versa), or to place a series of events in the proper sequence.

Order the following from lowest to highest:

    1. Broker call rate
    2. Federal funds rate
    3. Prime rate
    4. Discount rate
    1. I, IV, III, I
    2. III, II, I, IV
    3. IV, III, I, II
    4. II, IV, I, III

How to Study for the Series 65

Follow Solomon Exam Prep’s proven study system:
    • Read and understand. It’s simple: read the Solomon Study Guide, carefully. The Series 65 is a knowledge test, not an IQ test. Many students read the Study Guide two or three times before taking the exam. To increase your ability to focus while reading, or as an alternative to reading, listen to the Solomon Audiobook, which is a word-for-word reading of the Solomon Study Guide.
    • Answer practice questions in the Solomon Exam Simulator. When you’re done with a chapter in the Study Guide, take 4 – 6 chapter quizzes in the Solomon Online Exam Simulator. Use these quizzes to give yourself practice and to find out what you need to study more. Make sure you read and understand the question rationales. When you’re finished reading the entire Study Guide, review your handwritten notes once more. Then, and only then, start taking full practice exams in the Exam Simulator. Aim to pass at least six full practice exams and try to get your average score to at least an 80; when you reach that point, you are probably ready to sit for the Series 65 exam.
Use these effective study strategies:
    • Take handwritten notes. As you read the Study Guide, take handwritten notes and review your notes every day for 10 to 15 minutes. Studies show that the act of taking handwritten notes in your own words and then reviewing them strengthens learning and memory.
    • Make flashcards. Making your own flashcards is another powerful and proven method to reinforce memory and strengthen learning. Solomon also offers digital flashcards for the Series 65 exam.
    • Research. Research anything you do not understand. Curiosity = learning. Students who take responsibility for their own learning by researching anything they do not understand get a deeper understanding of the subject matter and are much more likely to pass.
    • Become the teacher. Studies show that explaining what you are learning greatly increases your understanding of the material. Ask someone in your life to listen and ask questions. If you don’t have anyone, explain it to yourself. Studies show that helps almost as much as explaining to an actual person (see Solomon’s recent post to learn more about this strategy!).
Take advantage of Solomon’s supplemental tools and resources:
    • Use all the resources. The Resources folder in your Solomon student account has helpful information, including a detailed study schedule that you can print out – or use the online study schedule and check off tasks as you complete them.
    • Watch the Video Lecture. This provides a helpful review of the key concepts in each chapter after reading the Solomon Study Guide. Take notes to help yourself stay focused.
  • Good practices while studying:
    • Take regular breaks. Studies show that if you are studying for an exam, taking regular walks in a park or natural setting significantly improves scores. Walks in urban areas or among people did not improve test scores.
    • Get enough sleep during the period when you are studying. Sleep consolidates learning into memory, studies show. Be good to yourself while you are studying for the Series 65: exercise, eat well, and avoid activities that will hurt your ability to get a good night’s sleep.

You can pass the NASAA Series 65! It just takes work and determination. Solomon Exam Prep is here to support you on your journey to becoming a registered Investment Adviser Representative.

For more helpful securities exam-related content, study tips, and industry updates, join the Solomon email list. Just click the button below:

Join the List

What Are the Permitted Activities of a Series 7 General Securities Representative?

Solomon Exam Prep explains what a Series 7 General Securities Representative can and cannot do and how this compares to other rep-level registrations. Continue reading

Of the representative-level FINRA registrations categories, the General Securities Representative (Series 7) registration is considered by many to be the most valuable, due to the range of products it allows you to sell. But how “general” is it? Are there other representative-level registrations that permit you do things a Series 7 representative cannot?

What is a Series 7 representative permitted to do?

FINRA allows a General Securities Representative to solicit the purchase and sales of all securities products, including:

    • Stocks, whether from IPOs, private placements, or secondary market trading
    • Other corporate securities, such as bonds, rights, and warrants
    • Mutual funds
    • Closed-end funds
    • Money market funds
    • Unit investment trusts (UITs)
    • Exchange-traded funds (ETFs)
    • Real estate investment trusts (REITs)
    • Variable contracts (insurance products whose funds are invested in securities)
    • Municipal securities
    • Municipal fund securities, such as 529 plans
    • Options
    • Government securities
    • Direct participation programs (DPPs)
    • Venture capital
    • Hedge funds

This long list of products means that a Series 7 registered rep may perform the functions of an Investment Company and Variable Contracts Representative (Series 6), Direct Participation Programs Representative (Series 22), or Private Securities Offerings Representative (Series 82).

Besides sales, General Securities Representatives may also perform certain activities closely related to sales. They may:

    • recommend investments after performing a suitability analysis for the customer
    • accept unsolicited orders
    • open customer accounts, subject to approval by a principal

What is a Series 7 representative NOT permitted to do?

Though a General Securities Representative may solicit purchases of IPO shares, he may not work on underwriting or structuring an IPO, or any other securities offerings. This means that he is not permitted to advise an issuer on an offering. This work requires registration as an Investment Banking Representative (Series 79). Likewise, working on municipal underwriting requires registration as a Municipal Securities Representative (Series 52).

A Series 7 representative is also not qualified to perform the back-office functions of an Operations Professional (Series 99). Among these functions are maintaining possession or control of the firm’s securities, calculating margin for margin accounts, and sending trade confirmations and account statements.

Of course, every registered representative must also pass the FINRA Securities Industry Essentials (SIE) exam. The SIE doesn’t qualify you to do anything, instead it is a foundational exam that focuses on industry terminology, securities products, the structure and function of the markets, regulatory agencies and their functions, and regulated and prohibited practices. Unlike other FINRA securities exams, you do not need to be employed or sponsored by a broker-dealer in order to take the SIE. The only requirement is that you be 18 years old.

If you’re considering taking the Series 7 exam, Solomon Exam Prep is here to help. Solomon provides a wide variety of study materials, together with resources such as study schedules, the Ask The Professor function, and helpful exam information. Explore Solomon’s Series 7 study materials.

Shop Series 7

For more helpful securities exam-related content, study tips, and industry updates, join the Solomon email list. Click the button below:

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How to Calculate Gains and Losses on Exercised Options

Options are a common topic on the Series 6, Series 7, Series 65, Series 66, and SIE exams. Read our guide to calculating gains and losses on exercised options. Continue reading

Options are a topic that many taking the Series 6, Series 7, Series 65, Series 66, and SIE exams have to deal with. One of the biggest problems that students have with options questions occurs when they are asked to calculate gains and losses on exercised options. As long as you understand a few basic points, these types of questions can be a breeze and definitely nothing to lose sleep over.  

First of all, let’s remind ourselves of what an option is.  An option is a contract between two parties that gives the buyer of the contract the right to buy or sell an underlying asset to the other party in the future for a specific price. The specific price is called the “exercise” or “strike” price.  The seller of the option, on the other hand, is obligated to buy or sell, at the strike price. The option to buy is a “call” option, the option to sell is a “put” option.   

To calculate gains and losses on exercised options, you first need to understand what is happening as a result of an options transaction.  When an option is exercised, that means its holder chooses to either buy or sell the underlying security at the strike price. With an exercised call option, the holder purchases shares of the underlying security from the options seller; with an exercised put option, the holder sells shares of the underlying security to the options seller. The sale in each case occurs at the option’s strike price.

Buying – Exercised Call Option

When a call options holder exercises her option by purchasing the underlying shares, she must add the cost of those shares to the premium she paid to obtain the option in the first place. This sum represents the option holder’s total money spent as a result of her options transaction. If the option holder then elects to sell the underlying securities she’s just purchased at their current market price, the money she receives from the sale will be money she takes in. To calculate her gain or loss, subtract the money she paid out from the money she took in. It’s as simple as that. 

So, if, for instance, Marie paid $200 in premiums to purchase a call option with a strike price of $20 and then exercised the option by purchasing 100 shares of the underlying stock, the money she spent as a result of her options transaction will be $2,200 ($200 premium paid + $2,000 purchase price for underlying securities). If she then sells those 100 shares at the market price of $25, she will receive $2,500 in sales proceeds. Subtracting the money she spent from the amount she received will result in a $300 gain ($2,500 sale proceeds – $2,000 purchase price – $200 premium paid = $300 gain.)

Buying – Exercised Put Option

In order for a put options holder to exercise his option, he must have 100 shares of the underlying security to sell to the options seller. That means he needs to go out in the market and purchase shares at their market price. The money he pays for those securities plus the premium he paid to purchase his put option in the first place represents money spent as a result of his options transaction. The options holder will then sell those 100 shares to the options seller at the strike price. When he does this, he receives the sale proceeds. Subtracting the money spent on the put from the sale proceeds will result in the put investor’s gain or loss.   

So, if, for instance, Pierre paid $300 in premiums to purchase a put option with a strike price of $30 and then purchases 100 shares of the underlying stock when its market price drops to $25, he will have spent $2,800 as a result of his options transaction ($300 premium + $2,500 purchase price for underlying shares). He will then sell those 100 shares to the options seller at their strike price of $30 and take in $3,000 from his sale. Thus, Pierre will make a total of $200 on his options transaction ($3,000 sale proceeds - $300 premium – $2,500 purchase price = $200 gain). 

Selling an Option

Now let’s look at gains or losses from the perspective of an options seller. Remember that when someone sells an option, he receives the premium from the options buyer. If the option expires unexercised, the seller gets to keep his entire premium received, which represents his maximum potential gain. If the option is exercised, he will either be required to sell shares of the underlying security to the option holder in the case of a call option or buy shares from the option holder in the case of a put option. Each of an exercised call or an exercised put option transaction is made at the option’s strike price.

Selling – Exercised Call Option

When a call option is exercised, the option seller must obtain 100 shares of the underlying stock to sell to the options holder. To do so, he will have to purchase the shares at their current market price, which will be higher than the option’s strike price. He will then sell them to the option holder at the strike price. The money he takes in from the sale is added to the premiums he received when shorting the option, and this totals the money he takes in as part of his options transaction. The money he paid to obtain the underlying securities is the money he pays out. Subtracting the money he pays out from the money he takes in results in his overall gain or loss.

For example, let’s say Michael sells a call option with a strike price of $50 and receives premiums totaling $500. If the option is exercised, and Mike purchases the underlying shares at $55, he will have paid out $5,500 as a result of his options transaction. At the same time, he will have received $5,500 ($500 premium + $5,000 strike price). Thus, Mike will break even on this transaction; money taken in will be equal to money paid out.

Buying – Exercised Put Option

When a put option is exercised, the option seller must purchase 100 shares of the underlying security from the options holder at the strike price. This represents money the options seller pays out. The options holder has already received the premium when she sold the option, and after purchasing the 100 shares, she can sell them for their current market price. The combination of the seller’s sale proceeds and the premium received represents money taken in. Subtracting money paid out from money taken in will result in the investor’s gain or loss. 

Let’s say Maribel shorts a put option and receives premiums totaling $400. The option has a strike price of $40, and the option holder exercises it when the underlying stock is trading at $35. This means Maribel is obligated to pay $4,000 total for the 100 underlying shares. This is money she pays out. She has already taken in $400, and if she chooses to sell the underlying stock at its current market price, she will take in an additional $3,500 in sales proceeds. This means she will receive a total of $3,900 from his options transaction ($3,500 sale proceeds + $400 premium) and paid out a total of $4,000. As a result, she has lost $100 on his options transaction ($3,900 money in – $4,000 money out = -$100).

As long as you understand what is occurring when an option is exercised, calculating gains and losses is as simple as comparing the money the investor takes in to the money she pays out. Calculating gains and losses on exercised options requires an understanding of the transaction and some simple math. Follow the guidance above and you will be able to correctly answer this type of question on your securities licensing exam.

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What Are QIBs and Accredited Investors? What’s the Difference?

If you’re studying for securities licensing exams, such as the SIE or the Series 7, then you should understand the terms “accredited investor” and “QIB.” Continue reading

If you’ve been studying for the Series 7, 6, 14, 22, 24, 65, 79, or 82, or the Securities Industry Essentials (SIE), then you’ve had to learn about Regulation D private placements and Rule 144A sales. Regulation D private placements are securities offerings that are exempt from the normal SEC registration process and in many cases are sold only to “accredited investors” or limit the involvement of investors who are not accredited. Rule 144A sales are sales of unregistered securities to large institutional investors known as “qualified institutional buyers” or QIBs for short. 
 
You may have wondered about the difference between accredited investors and QIBs. On the surface, these may seem similar. Each refers to a category of investor with resources and/or knowledge above and beyond the average retail investor. So why not just have one standard for buyers under both Rule 144A and Regulation D? After all, the purpose of both Regulation D and Rule 144A is the same: to allow wealthier and more sophisticated investors easier access to investments that may be too risky for the average investor.  
 
To begin to answer this question, we have to start with the fact that wealth and sophistication fall on a spectrum. Investors aren’t neatly divided between small retail investors and huge financial institutions that move millions around without blinking an eye. 

Accredited Investors

You could think of accredited investors as a middle ground between these two extremes. Accredited investors are investors whose financial status or investment knowledge may give them a greater ability to handle the risks inherent in a private placement. There are many ways to qualify as an accredited investor but they all have one thing in common, which is that the SEC believes they indicate an ability to take on risks that regulators believe are unsuitable for most retail investors.

Accredited investors are investors whose financial status or investment knowledge may give them a greater ability to handle the risks inherent in a private placement.

All of the following are considered accredited investors:
  • Banks, broker-dealers, investment advisers, insurance companies, and investment companies
  • Corporations, trusts, partnerships, and LLCs with more than $5 million in assets
  • Most employee benefit plans with more than $5 million in assets
  • The issuer’s directors, executive officers, and general partners
  • If the issuer is a privately owned fund, (such as a hedge fund), a knowledgeable employee of the fund, which means an employee with at least 12 months’ experience working on the fund’s investment activities
  • Individuals with income of $200,000 in each of the last two years, or $300,000 in combination with a spouse or spousal equivalent such as a domestic partner
  • Individuals with a net worth more than $1 million, alone or with a spouse or spousal equivalent, not including primary residence
  • Individuals who hold any of these three designations in good standing:
    • Licensed General Securities Representative (Series 7)
    • Licensed Investment Adviser Representative (Series 65)
    • Licensed Private Securities Offerings Representative (Series 82)
  • Any firm where all owners are accredited investors (e.g., venture capital firms)
  • Any other entity with more than $5 million in investments that was not formed specifically to qualify as an accredited investor; the purpose of this category is to include entities that don’t neatly fit into any of the above categories, such as:
    • Native American tribes
    • Labor unions
    • Government bodies, including those of foreign governments
    • Investment funds created by government bodies
    • New types of business entities that may be introduced by new laws

An accredited investor that is not an individual—such as a business, governmental, or nonprofit entity—is sometimes called an institutional accredited investor (IAI).

Qualified Institutional Buyers

QIBs are a narrower group of large institutional investors. A QIB is a large institutional investor that owns at least $100 million worth of securities, not counting securities issued by its affiliates. For registered broker-dealers, the threshold is lower, just $10 million. A bank must also have a net worth of at least $25 million in order to be considered a QIB. 
 
If a firm has discretionary authority to invest securities owned by a QIB, those securities count toward whether the firm itself is considered a QIB. So if a broker-dealer has $9 million worth of securities in its own accounts, and holds $1 million worth of securities in a discretionary account belonging to a QIB, then the broker-dealer is itself a QIB.  

Common examples of QIBs include broker-dealers, insurance companies, investment companies, pension plans, and banks. However, any corporation, partnership, or LLC could qualify as a QIB. So can an IAI that owns at least $100 million in securities. Individuals can never be QIBs, regardless of their assets or financial sophistication.

Individuals can never be QIBs, regardless of their assets or financial sophistication.

Rule 144A allows QIBs to buy unregistered securities at any time, and freely trade these shares to other QIBs. In effect, QIBs can trade unregistered shares among themselves with almost the same ease as trading registered shares. Selling unregistered securities to anyone other than a QIB commonly requires a the seller to hold the securities for a period of up to 12 months. 

A QIB will virtually always meet the criteria to be an accredited investor, whereas an accredited investor may fall well short of QIB status.

Over time, other securities laws and regulations have made use of these two well-known categories. For example, in 2019 the SEC gave issuers more flexibility to test the waters with potential investors before deciding whether to go through with a public offering. When deciding which investors were sophisticated enough to receive test-the-waters communications, the SEC limited these communications to QIBs and institutional accredited investors. Additionally, references to institutional accredited investors have become more common, such as when the SEC revamped its rules around integration of offerings in March 2021.  
 
Know your QIBs from your accredited investors and be ready to pass your securities exam with Solomon Exam Prep.

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How to Pass the FINRA Series 14 and Become a FINRA-registered Compliance Officer

Looking to become a compliance officer for a broker-dealer? Read Solomon Exam Prep’s guide to effective preparation for the FINRA Series 14 exam. Continue reading

What does the FINRA Series 14 allow me to do?

The FINRA Series 14, also known as the Compliance Officer Exam, is a principal-level exam that qualifies you to serve as a compliance officer for a broker-dealer, including being designated as the Chief Compliance Officer (CCO) of a broker-dealer in its SEC registration. The Series 14 was designed to make sure that individuals who have day-to-day compliance responsibilities or supervise others engaged in compliance activities have the knowledge necessary to carry out their job responsibilities.

There are two ways to achieve the Compliance Officer qualification: pass the SIE, Series 7, and Series 24 exams, or pass just the Series 14 exam. In other words, by taking the Series 14, you get to take one exam instead of three. For this reason, the Series 14 is broader, deeper, and more difficult than most FINRA exams. Passing the Series 14 requires knowledge of compliance issues related to a broad range of broker-dealer activities, from the mechanics of trading to the details of the underwriting process to the publication of research reports.

You must be associated with a FINRA member firm in order to take the Series 14.

About the Exam

The Series 14 exam consists of 110 multiple-choice questions covering the nine sections of the FINRA Series 14 exam outline. FINRA updates its exam questions regularly to reflect the most current rules and regulations.

Note: Scores are rounded down to the lowest whole number (e.g. 69.9% would be a final score of 69%–not a passing score for the Series 14 exam).

Topics Covered on the Exam

FINRA divides the Series 14 exam into nine areas. These areas are organized by the types of knowledge that a compliance officer will need to know to complete various job functions.

The Series 14 exam covers many topics including the following:

    • Components of a satisfactory supervisory system as defined by FINRA
    • Rules and mechanics of the securities markets
    • Margin requirements
    • Sales practices
    • Types of brokerage accounts
    • Separation of research and investment banking
    • Net capital requirements
    • Registration requirements for firms and associated persons
    • Business continuity plans
    • Customer identification and anti–money laundering compliance

Question Types on the Series 14

The Series 14 exam consists of multiple-choice questions, each with four options. You will see these question structures:

Closed Stem Format:

This item type asks a question and gives four possible answers from which to choose.

Under Rule 144, what is the holding period for stock purchased in the open market by a control person?

    1. Two years
    2. One year
    3. Six months
    4. No holding period
Incomplete Sentence Format:

This kind of question has an incomplete sentence followed by four options that present possible conclusions.

According to NYSE rules, a block of stock is defined as:

    1. 10,000 shares, or a quantity with a market value of $150,000 or more, whichever is less.
    2. 10,000 shares, or a quantity with a market value of $200,000 or more, whichever is less.
    3. 20,000 shares, or a quantity with a market value of $200,000 or more, whichever is less.
    4. 20,000 shares, or a quantity with a market value of $200,000 or more, whichever is more.
“EXCEPT Format”

This type requires you to recognize the one choice that is an exception among the four answer choices presented.

All of the following require the successful completion of one or more exams except a:

    1. specialist
    2. trader
    3. securities lending representative
    4. two-dollar broker
Complex Multiple-Choice (“Roman Numeral”) Format:

For this question type, you see a question followed by two or more statements identified by Roman numerals. The four answer choices represent combinations of these statements. You must select the combination that best answers the question.

Which two of the following employees of a member organization must be registered and qualified under NYSE Rule 345?

    1. An employee with authority to bind the firm to a contract involving securities activities
    2. An employee who only trades for the firm’s account and does not transact business with the public
    3. An employee with duties and responsibilities similar to those of a registered representative
    4. A supervisor of an employee who solicits business for the firm from another member firm
    1. I and III
    2. I and IV
    3. II and III
    4. II and IV

This format is also used in items that ask you to rank a set of statements from high to low or to place a series of events in the proper sequence.

In which order, from first to last, are the following actions performed during the underwriting of an issue of corporate securities?

    1. The holding of a due diligence meeting
    2. Investigation and analysis of the issuer
    3. The filing of a registration statement
    4. Distribution of the red herring to customers giving indications of interest
    1. I, II, III, IV
    2. II, III, I, IV
    3. III, I, II, IV
    4. IV, II, III, I

Study Strategies for the Series 14

    • Use all the resources. The Resources folder in your Solomon student account has helpful information, including a detailed study schedule that you can print out – or use the online study schedule and check off tasks as you complete them.
    • Read and understand. It’s simple: read the Solomon Study Guide, carefully. The Series 14 is a knowledge test, not an IQ test. Many students read the Study Guide two or three times before taking the exam.
    • Take handwritten notes. As you read the Solomon Series 14 Study Guide, take handwritten notes and review your notes every day for 10 to 15 minutes. Studies show that the act of taking handwritten notes in your own words and then reviewing these notes strengthens learning and memory.
    • Make flashcards. Making your own flashcards is another powerful and proven method to reinforce memory and strengthen learning.
    • Research. Research anything you do not understand. Curiosity = learning. Students who take responsibility for their own learning by researching anything they do not understand get a deeper understanding of the subject matter and are much more likely to pass.
    • Answer practice questions in the Solomon Exam Simulator. When you’re done with a chapter in the Study Guide, take 4 – 6 chapter quizzes in the Solomon Exam Simulator. Use these quizzes to give yourself practice and to find out what you need to study more. Make sure you read and understand the question rationales. When you’re finished reading the entire Study Guide, review your handwritten notes once more. Then, and only then, start taking full practice exams in the Exam Simulator. Aim to pass at least six full practice exams and try to get your average score to at least an 80; when you reach that point, you are probably ready to sit for the Series 14 exam.
    • Take regular breaks. Studies show that if you are studying for an exam, taking regular walks in a park or natural setting significantly improves scores. Walks in urban areas or among people did not improve test scores.
    • Get enough sleep during the period when you are studying. Sleep consolidates learning into memory, studies show. Be good to yourself while you are studying for the Series 14: exercise, eat well, and avoid activities that will hurt your ability to get a good night’s sleep.

You can pass the FINRA Series 14! It just takes work and determination. Solomon Exam Prep is here to support you on your journey to becoming a FINRA-registered Compliance Officer.

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