Market Circuit Breakers — A Post-Brexit Reminder

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

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

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

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

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

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

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

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

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Study Question of the Month – May 2016

This month’s study question from the Solomon Online Exam Simulator question database is now available! Relevant to the Series 7, 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 7Series 62 and Series 82): Which of the following is not true of commercial paper?

Answers:

A. It is used to cover an issuer’s short-term needs such as payroll and inventory

B. It typically matures in less than 90 days, but it can have a term as long as 397 days.

C. It is generally issued in lots of $100,000, but they can be sold at a discount in the primary market

D. Highly rated commercial paper is generally considered safe enough to be purchased by money market funds, but it is rarely purchased by retail investors.

Correct Answer: B. It typically matures in less than 90 days, but it can have a term as long as 397 days.

Rationale: Large corporations, banks, and financial firms with high credit ratings may issue commercial paper to cover short-term needs, such as payroll and inventory, and to finance general operations. Commercial paper is unsecured and issued at a discount, and typically matures in less than 90 days, although it can have a term as long as 270 days. It is generally issued in lots of $100,000, but they can be sold at discount in the primary market. Even though it is unsecured, because it is short-term and issued only by banks and large corporations with high credit ratings, commercial paper is generally considered safe enough to be purchased by money market funds, but it is rarely purchased by retail investors.

Congratulations Alexander B. this month’s Study Question of the Month winner!

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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 – 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.***

Study Question

Question (Relevant to the Series 7Series 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!

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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.***

Study Question

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!

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

Study Question of the Month – October

This month’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, 52, 62, 65 and 66. –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 7, Series 52, Series 62Series 65 and Series 66):

The interest rate on a SLGS certificate or bond can never fall below:

Answers:

A. The Treasury rate

B. One basis point above the Treasury rate

C. One basis point below the Treasury rate

D. Zero

Correct Answer: D. Zero

Rationale: The SLGS interest rate is always one basis point below the Treasury security that has a comparable maturity, unless the Treasury rate itself equals zero, which is the floor below which the interest rate on a SLGS cannot go. In this case the Treasury rate and the SLGS rate will be equal.

 

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