Series 24

Market Circuit Breakers — A Post-Brexit Reminder

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

stop-634941_1280 With post-Brexit vote market turmoil, it’s good to remember that the Securities Exchange Commission requires trading halts across US markets in the event that stocks fall more than specified percentages in one day. This information is also important to know if you are studying for securities licensing exam such as the Series 7, Series 24, Series 26, Series 62, Series 79, and the Series 65.

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

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

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

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

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

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

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

FINRA qualification exam restructure update

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

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

Goals of exam restructure:

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

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

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

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

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

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

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

Essentials Exam features:

Essentials exam currently envisioned to be 100 questions long.

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

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

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

What if you are currently registered?

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

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

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

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

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

Next steps:

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

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

Prepare CRD and other FINRA systems for new exam
structure

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

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

FINRA says exam restructure will do the following for firms:

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

Impact on firms

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

Other info related to exam restructure:

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

Principal Exams

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

Example – Series 24 Exam major topic areas include:

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

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

Study Question of the Month – April 2016

This month’s study question from the Solomon Online Exam Simulator question database is now available! Relevant to the Series 6, 7, 24, 26, 62, and 82. –ANSWER POSTED– Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available!

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

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, and Series 82): Which of the following would most likely be classified as a branch office?

Answers:

A. The floor of a registered exchange

B. A vacation home where the registered representative works for 45 business days a year

C. A customer service office where no sales activities are conducted

D. A location used primarily for non-securities activities and from which 25 securities transactions are effected a year

Correct Answer: B. A vacation home where the registered representative works for 45 business days a year

Rationale: A branch office is any location where one or more associated employees is in the business of soliciting or effecting (but not executing) the purchase or sale of any security.

A location outside of a primary residence, for example, a vacation home, is considered a non-branch location as long as it is used for securities business fewer than 30 business days per year.

The floor of a registered exchange is also considered a non-branch office if it is where a member firm conducts business with public customers.

Other examples of non-branch offices include:

Any location that is used primarily to engage in non-securities activities and from which the associated persons effect no more than 25 securities transactions in any one calendar year (provided that any retail communication identifying such location also sets forth the address and telephone number of the location from which the associated persons conducting business at the non-branch locations are directly supervised)
Any office location established solely for customer service and/or back office type functions where no sales activities are conducted

Congratulations to Alexa M. this month’s Study Question of the Month winner!

Study Question of the Month – March 2016

This month’s study question from the Solomon Online Exam Simulator question database is now available! Relevant to the Series 24 and 26. –ANSWER POSTED– Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available!

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

Question (Relevant to the Series 24 and Series 26):

Member firms that execute investment company transactions for their customers must transmit payments to underwriters, investment companies or their designated agents by the later of: the end of the _______business day after receiving a customer’s order or the end of _________ after receiving a customer’s payment for such shares.

Answers:

A. seventh, 3 business days

B. second, 1 business day

C. third, 1 business day

D. fifth, 3 business days

Correct Answer: C. third, 1 business day

Rationale: Member firms that execute investment company transactions for their customers must transmit payments to underwriters, investment companies or their designated agents by the later of: the end of the third business day after receiving a customer’s order or the end of 1 business day after receiving a customer’s payment for such shares.

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

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

Study Question of the Month – February 2016

This month’s study question from the Solomon Online Exam Simulator question database is now available! Relevant to the Series 7, 24, and 62. –ANSWER POSTED– Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available!

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

Question (Relevant to the Series 7, Series 24, and Series 62): When a transaction is executed at 3:00pm Eastern Time, what are the TRACE reporting requirements (assuming the transaction is not a list or fixed offering price transaction, a takedown transaction, or an asset-backed securities transaction)?

Answers:

A. It must be reported within 10 seconds of execution

B. It must be reported within 15 minutes of execution

C. It must be reported within 30 seconds of execution

D. It must be reported by 8:15 on the next business day

Correct Answer: B. It must be reported within 15 minutes of execution

Rationale: Transactions executed between 8:00 am and 6:15 pm must be reported to TRACE within 15 minutes of execution, and do not receive a designation.

Congratulations to Jessi B., this month’s Study Question of the Month winner!

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

Study Question of the Month – January 2016

This month’s study question from the Solomon Online Exam Simulator question database is now available! Relevant to the Series 7, Series 24, Series 55, and Series 62. –ANSWER POSTED– Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available!

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

Question (Relevant to the Series 7, Series 24, Series 55, and Series 62): A market maker has a listed a quote of 32.20 – 32.80, 12 x 7 for ABCD stock on NASDAQ. The market maker accepts a buy limit order from a customer for 200 shares at 32.60. What quote will the market maker have to display to comply with a SEC rules?

Answers:

A. 32.60 – 32.80, 10 x 7

B. 32.20 – 32.80, 12 x 7

C. 32.60 – 32.80, 2 x 7

D. 32.20 – 32.80, 2 x 7

Correct Answer: C. 32.60 – 32.80, 2 x 7

Rationale: The SEC requires market makers to immediately (within 30 seconds) display customer limit orders that are better than their current best quote for NMS stocks. In this case, the buy limit order is better than the market maker’s current bid (32.60 > 32.20) so the market maker must immediately display the adjusted quote.

Congratulations to David A., this month’s Study Question of the Month winner!

FINRA Enacts New Rule 2040 on Payments to Unregistered Persons

FINRA Rule 2040 became effective August 24, 2015. It replaces NASD Rules 2420 and 1060(b). This change affects the Series 6, 7, 24, 26, 27, 28, 62, and 82 exams. Continue reading

FINRA Rule 2040 became effective August 24, 2015. It replaces NASD Rules 2420 and 1060(b). This change affects the Series 6, 7, 24, 26, 27, 28, 62, and 82 exams.

FINRA Rule 2040 explains that an entity must register as a broker-dealer in order to receive commissions and fees for a securities transaction, unless it is a transaction that does not require registration. FINRA does not explicitly outline which transactions do not require registration, but it states that member firms can make this determination on their own by:

Relying on releases, no-action letters, and interpretations from the SEC
Requesting a no-action letter from the SEC
Seeking a legal opinion

Rule 2040 further states that retired representatives may continue to be paid commissions on customer accounts if the representative and member have agreed upon the continuing payments before retirement.

Finally, Rule 2040 (c) states that members may conduct transactions with foreign finders as long as certain requirements are met, including:

The member firm is sure that the finder does not need to register as a broker-dealer in the U.S. and the compensation arrangement doesn’t violate foreign law
Neither the finder nor the customer is a U.S. citizen, and both live abroad
Customers receive a document disclosing the compensation paid to the finder by the member firm
Customers acknowledge receipt of this disclosure to the member firm in writing, which the firm retains and keeps available for inspection
Confirmation of each transaction indicates that a finder’s fee is being paid by written agreement

Source: Regulatory Notice 15-07

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

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

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

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

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

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

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

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

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

Source: Regulatory Notice 15-30

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

FINRA Admits Series 24 Exam Score Error

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

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

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

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

Source: Statement Regarding Series 24 Exam