Solo 401(k), SEP, & SIMPLE: Retirement Plans for Small Businesses

Be prepared for questions about SIMPLE, SEP, and solo 401(k) retirement account plans on the FINRA Series 6 and Series 7 exams. Continue reading

If you are studying for the FINRA Series 6 or Series 7 exam, you will need to learn about the different types of retirement plan accounts. A retirement account may be an individual plan that is managed by the participant or the participant’s agent, such as an investment firm or a trust bank. Or it may be employer-sponsored, meaning that it is organized and managed by the participant’s employer.
  
Private employers of any size and structure, from the largest C corporation to a sole proprietorship consisting of a single self-employed individual, may set up and use an employer-sponsored retirement plan. For small business owners, retirement plans offer significant tax advantages and can help attract employees. Since there are several types of retirement plans available for small businesses, it’s important to understand the features of each option. Three plans commonly chosen by small businesses are solo 401(k) plans, SEP plans, and SIMPLE plans.

Solo 401(k) Plans  

A business owner can open a solo 401(k) if the business does not employ anyone else. The owner of the business creates a 401(k) plan much like any other employer. Then, as an employee, the owner opens a 401(k) account within that plan.
 
Both employer and employee contributions can be made in a solo 401(k). The maximum employee contribution is the same as for other 401(k)s. As of 2022, this limit is $20,500 per year, with a catch-up contribution of $6,500 for those aged 50 and above. As an employer, the maximum annual contribution is 25% of what the owner pays herself. The combined annual contribution (employee and employer) cannot exceed $61,000.
 
The business owner is allowed to employ her spouse and still make use of a solo 401(k) plan. The spouse can open their own 401(k) account using the business’s solo 401(k) plan. A solo 401(k) can be created whether the business is set up as a corporation, LLC, or sole proprietorship. Self-employed people who haven’t set up a business can also create a solo 401(k), although their contribution limits are calculated differently.
  
Unlike most employer-sponsored retirement plans, solo 401(k)s do not need to comply with ERISA (the Employee Retirement Income Security Act). This is a federal law that requires employers to give employees fair access to the employer’s retirement plan. These concerns do not apply when the business has no other employees.

SEP 

Simplified Employee Pension (SEP) plans are IRA-based retirement plans for any size business but are usually favored by small businesses. Under this type of plan, the business owner can make pre-tax contributions into IRA accounts set up for eligible employees and also for herself if the owner is self-employed.

The plan allows employers to skip contributions in years when business is bad, but if the owner makes a contribution for herself, she must also make contributions for her employees. When contributions are made, they must be made for all participants who actually performed work during the year for which the contributions are made, including those over 72 years of age (the latter feature is unique to the SEP plan). Contributions for all participants generally must be uniform, for example the same percentage of hourly wage.
 
The business owner can make contributions of up to 25% of an employee’s salary, or an annual maximum of $61,000, whichever is less. Only the employer, and not the employee, makes contributions to the SEP IRA, but an employee is always 100% vested in his SEP IRA. Generally, the employer can take an income tax deduction for contributions made to each employee’s SEP. SEP contributions are not included on the employee’s W-2 statement for tax purposes. Rules for withdrawal of funds are generally the same as for any other IRA, meaning that withdrawals are subject to income taxes, and early withdrawals are usually subject to a penalty.

SIMPLE 

Savings Incentive Match Plan for Employees (SIMPLE) plans are retirement plans for businesses having no more than 100 employees. With a SIMPLE IRA or SIMPLE 401(k), the employee may make pre-tax contributions to the plan. The contribution is expressed as a percentage of the employee’s compensation and is limited to $14,000 a year ($17,000 for employees aged 50 and over). The employer is required to either match these contributions up to 1% to 3% of the employee’s compensation or to contribute 2% whether the employee makes a contribution or not. The employer chooses which type of contribution (and if matching, the maximum percentage it will match). This choice applies to all employees. So an employer who chooses matching contributions is not obligated to contribute 2% to an employee who chooses not to contribute.
 
Any employee who previously earned at least $5,000 during any two years and is reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate in this plan. Unlike the SEP plan, however, premature SIMPLE IRA distributions (withdrawals of account funds) will incur a 25% penalty in the first two years the account exists if made before age 59 1/2.
 
While the SEP plan is discretionary, in that the employer can decide when to fund the plan, funding the SIMPLE IRA plan is mandatory, no matter what kind of year the business had. A SIMPLE 401(k) functions similarly to a SIMPLE IRA. Both have the same contribution limits and are 100% vested from the beginning.

Good to know:

SEP and SIMPLE IRAs have characteristics in common with traditional IRAs. For example, contributions are generally made with pre-tax dollars, must be earned income, and must only be in cash. Taxes on contributions and earnings are deferred until withdrawal, as long as withdrawals occur after the age of 59 1/2. Required minimum distributions (RMDs) must begin the year the participant turns age 72, although the participant may choose to delay the first payment until April 1 of the following year. After that, RMDs must be taken by December 31 each year. Funds can be distributed as a lump sum or in periodic payments. If the account owner fails to withdraw an RMD or the full amount of the RMD before the deadline, the amount not withdrawn is taxed at 50%.

Common Retirement Plans for Small Businesses

Anyone who plans to become a registered representative by passing the Series 6 or Series 7 exam and assist customers with retirement plans must understand the complexity of retirement planning. The Solomon Exam Prep Series 6 Study Guide and Series 7 Study Guide both cover retirement plan accounts so that you can be prepared for questions about this topic on exam day. Visit the Solomon website to explore study materials for 21 different securities exams, including the Series 6 and 7.

Pass Probability™ Now Available for the Series 24

If you’re studying for the FINRA Series 24 exam, take the guesswork out of knowing when you’re ready to take your exam with Solomon’s Pass Probability feature. Continue reading

Preparing for a challenging securities licensing exam like the FINRA Series 24, also known as the General Principal Qualification Exam, can be a stressful experience. In particular, determining when you’ve studied enough and are ready to sit for your exam isn’t always easy. How do you know if those weeks of preparation have paid off?  

Pass Probability

With the Solomon Exam Prep Pass Probability™ feature, now available in the Solomon Series 24 Exam Simulator, you don’t have to guess whether you’re truly prepared to sit for the Series 24 exam. Pass Probability™ is Solomon Exam Prep’s innovative AI technology that measures your readiness to pass a securities exam. Pass Probability is based on a mathematical model involving the performance of thousands of Solomon students. A correlation analysis has shown that Pass Probability is highly effective at predicting a student’s likelihood of passing.

Here’s how it works: Once you take five full practice exams in the Solomon Series 24 Exam Simulator, the Pass Probability™ tool is activated. Based on your scores on these five practice exams, the tool calculates the probability that you will pass the real test, with a percentage out of 100. Solomon recommends aiming for a Pass Probability of 75% (80% is even better) before taking your exam.

Remediation Reports  

But if your Pass Probability is below 75%, Solomon can help! Connected to the Pass Probability tool, the Solomon Remediation Report provides an additional level of customized study support. If your Pass Probability is lower than 75%, you will receive an individual report with detailed suggestions on how to focus your study efforts BEFORE taking your exam. The Remediation Report is sent straight to your email and includes the following: 

    • Summary of current study progress
    • Personalized recommendations on areas for growth
    • Study tips for the homestretch
    • Reminders about student support elements

Solomon Pass Probability and Remediation Reports are also available for these exams: SIE, Series 6, Series 7, Series 63, Series 65, Series 66, Series 79, and Series 82.

Used Solomon materials for both the SIE and S7. So grateful to these materials for helping me achieve a passing score on my first attempts of both exams. The study guide and videos were thorough, comprehensive and easy to follow. I found the pie charts extremely useful in helping me identify areas where I needed more study, and was grateful for the Pass Probability feature in giving me a bit of extra confidence before sitting for the exam. I would absolutely recommend all of their materials to anyone taking this journey.

Andrew Nerys, Square Inc., Portland, OR

If you have a current subscription to the Solomon Series 24 Exam Simulator, Pass Probability and Remediation Reporting have been added to your product free of charge. These tools are in addition to the other helpful Exam Simulator features:

    • Huge Question Database: Over 3,500 original Series 24 practice questions with robust rationales that clearly explain why a specific answer is correct
    • Free Updates: Questions updated continually to keep up with regulatory and industry changes
    • Strength Breakdowns: Refine your practice with detailed exam results and self-assessment tools that help you identify areas that require more study
    • Interactive Review: Makes it easy to review the questions you’ve gotten wrong on quizzes and exams
    • Unlimited Quizzes & Exams: 
      ◦ 20-question quizzes based on the FINRA exam sections 
      ◦ 160-question untimed practice exams with immediate answer feedback 
      ◦ 160-question timed practice exams

New to Solomon Exam Prep? Learn more about the Solomon Series 24 Exam Simulator and other study materials available for the Series 24 by visiting the Solomon website here. And click here or the button below to try a free Series 24 sample quiz from the Solomon Exam Simulator!

MSRB Announces Results of Series 54 Exam for Municipal Advisor Principals

Solomon Exam Prep congratulates the 810 individuals who have passed the Series 54 exam and are now qualified to work as municipal advisor principals. Continue reading

On December 16, 2021, the Municipal Securities Rulemaking Board (MSRB) announced that 810 individuals at 474 municipal advisor firms have passed the Series 54 exam and are now appropriately qualified as municipal advisor principals. Individuals who manage, direct, or supervise a firm’s municipal advisory activities must pass The Series 54, or Municipal Advisor Principal Qualification Examination.

Initially, the MSRB gave municipal advisors a one-year period within which to pass the exam. Due to COVID-19, the deadline was extended twice, and November 30th, 2021, was the final deadline.

Solomon Exam Prep has helped many of those 810 individuals prepare for the Series 54 exam. Solomon offers several study materials for the Series 54, which can be purchased individually or in four package options. Visit the Solomon Series 54 product page to learn more.

The Solomon material was invaluable in helping me pass this exam [Series 54]. The organization of the content, the tests, the video and lecture material, were all exactly on point. Thank you!
Mark Melio
Melio & Company, LLC, Northfield, IL

Before taking the Series 54 exam, individuals must have already passed the Municipal Advisor Representative Qualification Exam, also known as the Series 50. The Series 50 is required of anyone working as a municipal advisor. Passing the Series 50 qualifies individuals to provide advice about municipal financial products to, or on behalf of, municipal entities.

According to the MSRB, 2,953 people have passed the Series 50 exam and are currently associated with a municipal advisor firm.

Solomon Exam Prep has helped 1732 students prepare for the Series 50 exam. Solomon offers materials for self-study, plus live web classes for the Series 50. The Series 50 live web class is five days of intensive instruction with a Solomon professor, focused on the major content areas of the exam. For more information about Solomon Series 50 study products and live classes, visit the product page here.

I prepared for the Series 50 (Municipal Advisor) exam using your materials and was extremely satisfied. Having the materials in multiple written and audio formats provided a lot of flexibility in where and when I could study. The scope of the Series 50 exam is so broad that even very experienced individuals would benefit by this type of preparatory course. I highly recommend this product.
Derek Morse
Morse Associates Consulting, LLC, Reno, NV

Big Changes to FINRA CE Requirements

FINRA announced several important changes to its CE rules affecting registered representatives and principals. Learn how these changes may affect you. Continue reading

On November 17th, FINRA announced the adoption of important amendments to its continuing education (CE) rules. These changes will affect individuals with representative or principal registrations, such as the Series 7, Series 24, Series 79, and Series 82. Some of the changes go into effect as soon as March 15, 2022, while others become effective on January 1, 2023.

FINRA’s current CE program consists of a Regulatory Element and a Firm Element. The Regulatory Element focuses on regulatory requirements and industry standards and must be taken every three years by registered individuals. The Firm Element is provided by each firm to its registered persons yearly, and covers the firm’s securities products, services and strategies, policies, and industry trends. Currently, the FINRA CE program does not allow individuals to maintain terminated qualifications by completing CE. Instead, individuals must requalify by examination if they have not reregistered within the two-year qualification period.

The upcoming changes to FINRA CE are outlined in Regulatory Notice 21-41, which states that the changes to Rules 1210 and 1240 will: “(1) provide eligible individuals who terminate any of their representative or principal registration categories the option of maintaining their qualification for any terminated registration categories by completing annual CE through a new program, the Maintaining Qualifications Program (MQP); (2) require registered persons to complete CE Regulatory Element annually for each representative or principal registration category that they hold; and (3) expressly allow firms to consider other required training toward satisfying an individual’s annual CE Firm Element and extend the Firm Element requirement to all registered persons.”

Changes to Regulatory Element

There will be several changes to the FINRA CE Regulatory Element, effective January 1, 2023. Instead of every three years, registered individuals will have to complete CE every year by December 31st. In addition, individuals must complete CE content for each registration category they hold. Another change is that failure to complete the Regulatory Element by Dec. 31 will result in a CE inactive status. However, if “good cause” is shown, FINRA reserves the right to extend the deadline.

The initial annual Regulatory Element completion date will depend on an individual’s registration status: 

The initial completion date will be Dec 31, 2023 if…

    • An individual’s registration status stays the same after Jan 1, 2023, and the individual has completed Regulatory Element in 2021 under the current requirements.
    • An individual reregisters in 2023 for a registration category without having done one of the following: completed Regulatory Element for that registration category in 2023, passed an exam for that registration category, or obtained an unconditional exam waiver for that registration category.

On the other hand, the initial completion date will be Dec 31, 2024 if…

    • An individual reregisters in 2023 for a registration category after having done one of the following: completed Regulatory Element for that registration category in 2023, passed an exam for that registration category, or obtained an unconditional exam waiver for that registration category.
    • An individual registers in 2023 for the first time for a registration category after having passed an exam for that registration category or obtained an unconditional exam waiver for that registration category.

Changes to Firm Element

Also, effective January 1, 2023, the annual Firm Element CE requirement is being extended to include all registered individuals, not just “covered registered persons.” Covered registered persons include registered persons who work with customers, who are registered as research analysts, and individuals who supervise such persons. Starting in 2023, all registered persons will be required to complete the annual Firm Element CE.

Another rule amendment includes allowing training related to the anti-money laundering compliance program under Rule 3310(e) and annual compliance meeting under Rule 3110(a)(7) to go towards satisfying an individual’s Firm Element CE requirement.

New MQP Program

FINRA says that to better accommodate registered persons, “particularly women and underrepresented minorities, whose personal circumstances take them away from the industry for a time,” the regulator is creating the new Maintaining Qualifications Program (MQP). Eligible individuals will be able to complete annual CE through the MQP to maintain their qualification for any terminated registration categories. This program will go into effect March 15, 2022, with MQP content available by July 1, 2022. See Regulatory Notice 21-41 for details on eligibility and participation conditions.

Currently, registered persons must retake their qualification licensing exams after two years of losing their representative or principal registration. MQP participants will have a maximum of five years following the termination of a representative or principal registration category to reregister without having to retake their licensing exam or having to obtain an exam waiver.

Starting November 17, 2021, FINRA will begin notifying individuals who were registered as a representative or principal between March 15, 2020, and March 15, 2022, and those participating in the Financial Services Affiliate Waiver Program (FSAWP) prior to March 15, 2022, of their potential eligibility to participate in the MQP. These individuals can start notifying FINRA on January 31, 2022, that they intend to participate in the MQP. This is done through their FinPro accounts. Individuals will have until March 15, 2022, to notify FINRA of their intention. If an individual’s registration category has been terminated but the firm has not submitted a Form U5 to FINRA, the individual may let FINRA know about their intent to participate in the MQP by sending an email to mqpnotice@finra.org by March 15, 2022, at the latest.  

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What Does “Tender” Mean on Securities Exams?

For a number of securities exams, you should understand the term “tender.” Solomon explains what the term means and how it’s used in the securities industry. Continue reading

When studying for a securities exam such as the FINRA Securities Industry Essentials (SIE) exam and the Series 7, Series 14, Series 24, Series 79, or the MSRB Series 50, Series 52, Series 53, or Series 54, it’s likely you will encounter the word “tender.” This bit of terminology may be confusing at first. But learning the ways “tender” is commonly used in the securities industry will prevent you from getting tripped up when you see it on an exam.

You may have heard this word in connection with stock buybacks. When a company offers to buy its shares back from stockholders, the company is said to be conducting a tender offer. The stockholders who take the company up on the offer are said to be tendering their shares. A company may also make a tender offer to a different company’s shareholders, for example if it wants to acquire the other company. 
  
The word “tender” comes from the field of law. To tender is to make a binding offer to enter into an agreement. (It also has a second meaning of presenting payment, which is why your dollar bill has the phrase “legal tender” on it.) So when you tender a security you own, you are offering to sell it on terms that have been spelled out between you and the other party. In the case of a tender offer, the company must specify these terms when it makes the offer and shareholders must take them or leave them. In many cases, the U.S. Securities and Exchange Commission (SEC) requires that these terms include a window of time during which shareholders who tendered their shares may change their minds. In that case, the “binding offer” is not binding right away. 
  
Another securities-related use of “tender” is when a security gives its owner the right to sell it back to the issuer. Exercising this right is sometimes called tendering the security. For example, a municipal bond might have a tender option that gives the bondholder the right to sell it back to the municipality at a certain time for a certain price. Additionally, some variable-rate municipal securities come with a mandatory tender that is triggered when the rate is adjusted. When this happens, the bondholder must choose between tendering the bond or accepting the new rate. 
  
So if you see the word “tender” on a securities exam, it means that the owner of a security is offering to sell it under specific terms and conditions, and the owner’s ability to back out of the offer may be limited.

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Should Cryptocurrency Be Regulated as a Security or a Commodity? Solomon customers speak.

Read the results of Solomon Exam Prep’s latest poll on the topic of cryptocurrency regulation – and learn which license you’d need for either outcome. Continue reading

With the regulatory status of Bitcoin and other cryptocurrencies still up in the air, a recent Solomon LinkedIn poll found that 60% of Solomon customers think cryptocurrencies should be treated as commodities, while 40% said they thought cryptocurrencies should be regulated as securities.

Thus far the SEC has avoided clearly stating that cryptocurrencies are securities. To do so, the SEC would likely have to show that cryptocurrencies meet the “Howey Test,” which says that securities must have four characteristics. According to this test, a security involves (1) an investment of money that (2) involves a common enterprise (3) in which the investors expect to make a profit, and (4) the profits will be derived from the efforts of someone other than the investor.

If the SEC, Congress, or the courts declare that cryptocurrencies meet the Howey Test and are therefore securities, Solomon’s got you covered with the Series 7 General Securities Representative Exam Guide. This FINRA license allows you to engage in “the solicitation, purchase and/or sale of all securities products.”

If cryptocurrencies don’t meet the Howey Test, they could be regulated as commodities. These are goods such as wheat, gold, and pork bellies. Why might cryptocurrencies fit in with these others? Because commodities are all highly standardized so that they can be freely bought and sold on exchanges without worrying about differences in quality—every ounce of gold is pretty much like every other ounce of gold. Likewise, every Bitcoin is like every other Bitcoin.

If cryptocurrencies end up being treated like commodities, consider the Solomon Series 3 National Commodities Futures Exam Guide. The Series 3 is the main qualification exam for the National Futures Association and is required if you want to become a Commodity Trading Advisor.

The Power of Explaining: A Study Strategy Backed by Research

If you’re studying for the Series 65, Series 7, or another securities licensing exam, try this evidence-based study strategy. Continue reading

Solomon Exam Prep’s learning system is built on understanding how people learn. Solomon Exam Prep is always looking for new ways to help our students.  

Research from Dr. Tania Lombrozo of UC Berkeley, published in the journal Trends in Cognitive Science, shows that explaining a new concept to another person is an enormously helpful learning technique. When you explain an unfamiliar concept to another person, your brain makes crucial learning connections. However, many people do not have a person around them that is ready to listen to their new knowledge. Thus, Dr. Lombrozo recommends self-explanation, which is the practice of explaining concepts to yourself in order to better understand them.

Why does explaining work?

Dr. Lombrozo found that the positive effects of self-explanation can be attributed to the generalization process. Explaining requires you to put new information in the context of “prior beliefs,” which makes you generalize the information. In doing so, you are forced to pick out what is most necessary for understanding the concept. In thinking about how to explain something, you in fact learn more about the thing itself!  

Dr. Lombrozo describes an experiment by psychologists Amsterlaw and Wellman that demonstrates the power of explaining in understanding. In Amsterlaw and Wellman’s experiment, they administered logic tests to children under various conditions. During the course of the experiment, the children were split into groups. One group would answer, and then they would be asked to explain the correct answer once it was revealed. A comparison group did the same, but only for half the problems. The third group was a control group and gave no explanation at all. According to Amsterlaw and Wellman, “children in the explanation condition significantly outperformed the comparison and control groups….” In other words, explaining increases understanding.

How to use this strategy for licensing exams:

What does this mean if you’re studying for the Series 65 or the Series 7 or some other securities licensing exam? Solomon Exam Prep suggests finding someone in your life who will listen to you explain topics from your securities exam prep. The person you choose does not need to have any knowledge of securities. The person just needs to be a good listener; even better, someone who will ask questions. What if you don’t have anyone who can do that for you? Well, as Dr. Lombrozo showed, the practice of self-explanation is also helpful and will increase your understanding of the material you are trying to learn.

Other recommended Solomon study strategies include:  
  • Listen to the Solomon audiobook while you read the Solomon study guide.   
  • As you read the Solomon study guide and watch the Solomon video lectures, take notes by hand.
  • When practicing in the Solomon exam simulator, read and re-read the question at least twice. 
  • If you answer a question correctly, explain to yourself why it was correct before reading the question rationale.  
  • If you answer a question incorrectly, read the rationale carefully. Explain to yourself what the right answer is, and why. Write down the explanation in your notes. 
  • Study with a partner. Trade off testing each other on concepts and asking for an explanation.  

Solomon Exam Prep has helped thousands pass their securities licensing exams, including the SIE and the Series 3, 6, 7, 14, 22, 24, 26, 27, 28, 50, 51, 52, 53, 54, 63, 65, 66, 79, 82 and 99.

What is a SPAC and should you care about it for the FINRA Series 79 exam?

SPACs have grown by leaps and bounds in recent years, and the growth is only accelerating. What will this mean for regulations and the Series 79 exam? Continue reading

It sounds like a securities-industry riddle: what do you call a blank check company with no hard assets that holds a multimillion dollar IPO? But the answer is very real: SPACs (special purposes acquisition companies) are an alternative to traditional IPOs that have exploded in popularity.

What’s a “blank check company?”  A blank check company is an exchange-listed shell company that, according to the SEC, has “no specific business plan or…its business plan is to engage in a merger or acquisition.”

The purpose of a SPAC is to raise money to acquire a privately held company. Think of it as crowdfunding on a massive scale. First, the SPAC sells shares of itself in an IPO. Then it uses the IPO proceeds to fund a merger between itself and a target company. When the merger is complete, the SPAC’s shareholders become shareholders in the target company. Investors buy SPAC shares based on their confidence that the SPAC’s management will complete the merger, and the anticipated value of the shares after the merger.

SPACs have grown by leaps and bounds in recent years, and the growth is only accelerating. The amount raised by SPAC IPOs in 2020 more than quadrupled the amount they raised in 2019. According to Reuters, the total value of SPAC mergers in 2021 has already exceeded the total size of SPAC mergers for all of 2020.

What does this mean for regulations?

As investor excitement around SPACs has heated up, there are indications that the SEC is beginning to take a closer look at this new kind of IPO. On March 10th, the SEC issued a warning against investing based on celebrity involvement with a SPAC. Celebrities with high-profile ties to SPACs include A-Rod, Shaquille O’Neal, Serena Williams, and former Speaker of the House Paul Ryan. Acting SEC Chair Allison Herren Lee recently warned of “more and more evidence on the risk side of the equation for SPACs as we see studies showing that their performance for most investors doesn’t match the hype.”

While none of this guarantees that new rules for SPACs are around the corner, it does make it more likely that FINRA’s Series 79 investment banking exam may begin to include mention of SPACs. They are a topic that investment bankers are increasingly likely to encounter in practice, and therefore are increasingly likely to be viewed as fair game for the exam.

Solomon Exam Prep is ahead of the curve with new material in our Series 79 Study Guide. Series 79 customers can find material on SPACs now included in the online edition of Solomon Study Guide.

Potentially testable points about SPACs include:
  • SPAC are formed by “sponsors,” commonly institutional investors or high net worth individuals, who are compensated with both a portion of the IPO proceeds, as well as an equity stake in the SPAC of up to 20%.
  • SPAC’s typically avoid committing to merge with a specific company, even if the SPAC was formed with the intention of targeting that company. The SPAC’s management may respond to changing market conditions by choosing a different target, subject to approval from the SPAC’s shareholders.
  • After a SPAC goes public, its shares trade freely on exchanges even before it completes a merger.
  • A SPAC must hold at least 85% of proceeds from its IPO in an escrow account.
  • The SPAC commits to return investor funds if it fails to complete a merger within a specified timeframe.
  • As a blank check company with no business operations of its own, a SPAC cannot take advantage of certain options available to more established securities issuers. For example, a SPAC is not permitted to make an electronic version of its road show presentation.

Solomon Exam Prep will continue to follow industry trends and how they affect your licensing exams.

Solomon Exam Prep has helped thousands pass their securities licensing exams, including the SIE and the Series 3, 6, 7, 14, 22, 24, 26, 27, 28, 50, 51, 52, 53, 54, 63, 65, 66, 79, 82 and 99.

Understanding Trading Halts

The market’s intense reaction to the coronavirus has caused something not seen since 1997: trading halts. Continue reading

Understanding Trading Halts

The market’s intense reaction to the coronavirus has caused something not seen since 1997: trading halts. If you’re studying for the FINRA Series 7 General Securities Representative exam or the FINRA Series 24 General Securities Principal exam, FINRA may test you on the subject. Rest assured, Solomon Exam Prep’s Series 7 and Series 24 study materials cover the topic in detail. Here’s a little background on trading halts.
 
Sometimes called “circuit breakers,” these trading halts were first put in place after the 1987 stock market crash known as Black Monday. Part of the reason the Black Monday crash was so bad was the panic selling that happened once the market started dropping. A trading halt is meant to prevent this panicked free fall.
 
A trading halt may apply to the entire market, or a single security.
 

Market-Wide Trading Halts

A market-wide trading halt will be triggered when the S&P 500 drops sharply from where it was the day before. A Level 1 halt is triggered by a 7% drop and lasts for 15 minutes. If the drop reaches 13%, it triggers a Level 2 halt. A level 2 halt also lasts 15 minutes. Finally, a 20% drop in the S&P 500 triggers a Level 3 halt, which stops trading for the rest of the day. These kind of halts stop securities and options trading on all the exchanges, as well as the OTC markets.  
 
Trading Pauses in a Single Security
 
When a company makes a major announcement, it’s stock price may move dramatically. Pausing trading of a particular stock or security protects smaller investors who generally cannot react as quickly to the news as larger investors. If the price of a security drops a certain amount below what it normally trades at, the security is said to be “limit down.” If it stays limit down for 15 seconds, then trading in that security is paused for 5 minutes. Unlike market-wide trading halts, the same goes if the price of a single security rises rapidly. If a security is “limit up” for 15 seconds, trading pauses for 5 minutes. How much a security has to move to be limit up or limit down depends on the type of stock and its normal price range.
 
Your Securities Exams
 
Trading halts are topics on the FINRA Series 7 and Series 24 exams. Solomon Exam Prep covers trading halts in Solomon study guides, audio guides, video lectures, exam simulators and digital flashcards. For more information, go to www.SolomonExamPrep.Com or call 503.601.0212.
 

Solomon Exam Prep Updates Cookie Policy

Cookies are small pieces of dough that have been baked in an oven and then cooled and served as a desert or snack. Continue reading

Cookies are small pieces of dough that have been baked in an oven and then cooled and served as a dessert or snack.

Solomon Exam Prep believes that cookies can be a positive part of any day, particularly as a reward when studying for a securities licensing exam like the Series 7 or the Series 65.

Solomon Exam Prep is committed to protecting the privacy of its cookie-eating customers and does not track or monitor its customers’ consumption or use of cookies.

Solomon Exam Prep does not judge the relative merits of which cookies are better, although, Jeremy Solomon, president of Solomon Exam Prep says that he prefers home-made cookies over store-bought.

Solomon Exam Prep may share cookies with others, usually family, friends and co-workers, but depending on the situation, sometimes with strangers. Such shared cookies are always freely given, there is no expectation by Solomon Exam Prep that the recipient will reciprocate or owe Solomon Exam Prep anything. Of course, a “thank you” is always appreciated.

Solomon Exam Prep has helped thousands of cookie- and non-cookie-eating customers pass securities licensing exams including the Series 3, 6, 7, 24, 26, 27, 28, 50, 51, 52, 53, 62, 63, 65, 66, 79, 82, 99 and SIE exams.