January Study Question of the Month

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

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

***Comment below or submit your answer to info@solomonexamprep.com to be entered to win a $20 Starbucks gift card.***

This question is relevant to the SIE, Series 6, 7, 22, 24, and 82 exams.

Question:

Which of the following people would be considered a specified adult?

Answer Choices:

A. A 16 year old with autism

B. A 30 year old

C. A 60 year old with a heart condition

D. An 18 year old in a coma

December Study Question of the Month

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

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

***Comment below or submit your answer to info@solomonexamprep.com to be entered to win a $20 Starbucks gift card.***

This question is relevant to the Series 6, 7, 14 and 79 exams.

Question: 
 
Which of the following is not typically part of an underwriting agreement?
 
Answer Choices:
 
A. Description of the per-share underwriting spread
 
B. Description of a Greenshoe option
 
C. Terms between syndicate members and selling group dealers
 
D. Terms under which the underwriter can terminate the contract
 
 

Correct Answer: C

Explanation: The underwriting agreement, which is typically signed the evening before or the morning of the effective date of a securities issue typically includes the per-share underwriting spread, an over-allotment (Greenshoe) option if granted, and the underwriter’s termination rights. It also is the document that contains the public offering price or a formula to derive it.

 

SEC Announces Major Revisions to Registration Exemptions Aimed at “Harmonizing” Regulation A Offerings, Regulation D Private Placements, and Crowdfunding

On November 2, the SEC announced a collection of rule changes meant to, in the announcement’s words, “harmonize, simplify, and improve” its “overly complex exempt offering framework.” Continue reading

On November 2, the SEC announced a collection of rule changes meant to, in the announcement’s words, “harmonize, simplify, and improve” its “overly complex exempt offering framework.” The changes affect Regulation A, which governs small public offerings; Regulation D, which governs private placements; and Regulation CF, which governs crowdfunding. This system of exemptions allows various small offerings to avoid the normal registration process required by the Securities Act.  
 
The rule changes should provide a clearer choice as to which exemption is most appropriate to an issuer, based on how much the issuer needs to raise and other factors.
 
The changes also seek to clarify how issuers can avoid “integration” of exempt offerings. Integration is the risk that exempt offerings will be considered a single offering by the SEC, because the offerings are too similar.
 
Highlights of the changes include:
 
  • If two exempt offerings are conducted more than 30 days apart, they are almost always protected from integration.
  • An issuer can “test the waters” with potential investors before deciding which exemption it will use for an offering. Test-the-waters communications solicit interest in a potential offering before the issuer has filed anything with the SEC. Previously, an issuer could only test the waters after deciding that its potential offering would take place under Regulation A.
  • Caps on the amount that may be raised through these exemptions have been increased:
    • Crowdfunding: from $1.07 million to $5 million
    • Regulation A, Tier 2: from $50 million to $75 million 
    • Regulation D, Rule 504: from $5 million to $10 million
  • Make “bad actor” exclusions more consistent across different exemptions.
The rule changes will take effect early next year. Until the changes take effect, securities exam questions will continue to be based on the old rules. FINRA Exams affected by these rule changes include the SIE, Series 6, Series 7, Series 14, Series 22, Series 24, Series 65, Series 66, Series 79, and Series 82.

Testing integrity in times of COVID-19

Test candidates are bound by guidelines that prohibit cheating or using any unfair means during the exam. Continue reading

On July 13, 2020, FINRA and NASAA responded to the pandemic testing challenge posed by in-person test centers with Prometric’s ProProctor, an online testing service, for certain qualifications exams. The exams for which online testing is permitted are the FINRA Securities Industry Essentials (SIE), Series 6, Series 7 and the NASAA Series 63, Series 65, and Series 66 exams. Read more about the announcement here

Curious about what the ProProctor online testing experience looks like? Click here to find out.

It is interesting to note that although the exams are proctored remotely, candidates are still bound by guidelines that prohibit cheating or using any unfair means during the exam. The checks that have been put in place especially for remote testing are as follows:

  • Candidates are required to provide a 360° view of his/her workstations and surrounding environment;
  • A camera (external or embedded) is required during the course of the exam. If an embedded camera is used, a large free-standing mirror is also required in order to reflect unseen areas;
  • Candidates are asked to participate in a visual person check (including a sleeve, pocket and glasses check);
  • While the exam is in progress, candidates are prohibited from leaving, moving out of or obstructing the camera view while the exam is in progress without prior authorization from the proctor; and
  • Additional requirements that are listed in the ProProctor User Guide.

Warning: a candidate found cheating in an online test will be subject to the same disciplinary actions that he/she would be subject to in a physical test, and if found guilty, can be permanently barred from the broker-dealer industry.

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.***

Study Question

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 – November

This month’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, 7, 62, 65 and 79. –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.***

Study Question

Question (Relevant to the Series 6Series 7Series 62Series 65 and Series 79): A few years back ABC Corporation issued callable bonds yielding 6%. The call price is 104, and the call protection period has ended. The bonds are trading at 105 today. Which of the following are true:

I. The current yield on these bonds is 6.3%

II. The current yield on these bonds is 5.7%

III. There is a good chance the bonds will be called

IV. There is a good chance the bonds will not be called

Answers: 

A. I and III

B. I and IV

C. II and III

D. II and IV

Correct Answer: C. II and III

Rationale: The formula for calculating current yield is the annual interest on the bond ($60) divided by the current price of the bond ($1050) which is equal to 5.7%. Because ABC can finance the debt at a lower interest rate than they are currently paying there is a good chance that they will call the bonds.

Congratulations Stephen Z., this month’s Study Question of the Month winner!

All study questions are from Solomon’s industry-leading Online Exam Simulator.

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

Exam AlertFINRA 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

Exam Alert: FINRA Provides Guidance on Communications

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

Exam Alert

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

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

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

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