Everyone would like to feel confident when they take their securities exam, but how do you know if you’re ready for test day? Solomon Exam Prep can help – with Pass Probability™. Continue reading
Everyone would like to feel confident when they take their securities exam, but how do you know if you’re ready for test day? Solomon Exam Prep can help! With Pass Probability™, now available for the FINRASeries 82 exam, Solomon takes the guesswork out of deciding when to sit for your exam.
Pass Probability™ is Solomon Exam Prep’s innovative technology that measures your readiness to pass your securities exam. Once you take five practice exams in the Solomon Exam Simulator, the Pass Probability™ tool calculates the probability that you will pass your test, with a percentage out of 100.
"A securities licensing exam is hard work and high stakes. Your enemy is uncertainty. Solomon's industry-leading Pass Probability™ feature is based on the results of thousands of Solomon securities students and uses a proprietary algorithm to reduce uncertainty. So you can enter the exam room with confidence."
Co-founder and President of Solomon Exam Prep
But what should you do if you take five practice exams, and the Solomon algorithm determines that you are not ready to take your exam? This is where Solomon’s brand-new feature, the Remediation Report, comes in.
The Remediation Report is an individualized report outlining how to focus your efforts BEFORE taking your exam. It provides an added level of customized study support – sent right to your email.
Learn about the Solomon Remediation Report, a new analytical feature designed to help students pass their securities licensing exams the first time. Continue reading
Solomon Exam Prep is delighted to announce an advanced analytical feature called a Remediation Report. The Solomon system analyzes a student’s five most recent practice exams and determines whether a student is ready to take his or her exam. If Solomon AI determines that a student is not ready to sit for their exam, then it creates an individual report with personalized guidance on how to remediate and prepare to pass. This custom Remediation Report is sent to the Solomon student’s email inbox.
The Solomon Remediation Report is connected to the Solomon Pass Probability tool, the industry-leading measure of a security exam prep student’s readiness to pass an exam. Solomon Pass Probability is based on thousands of student data points. Once a Solomon student has taken at least five practice exams, the Solomon Pass Probability feature is activated, and the Pass Probability metric is available in the student’s dashboard. The Solomon Remediation Report provides an additional level of customized study support by helping students focus their efforts and remediate before they sit for their exam.
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.
Read Solomon Exam Prep’s expert guide for answering state registration questions on the Series 63, Series 65, and Series 66 exams. Continue reading
If you’re planning to take the NASAASeries 63, Series 65, or Series 66 exam, you can expect to see questions about when broker-dealers and their securities agents need to register in a particular state. You can also expect to see questions about when investment advisers and investment adviser representatives need to register in a state. Instead of feeling intimidated when confronted with such questions, you should relax, smile, and feel confident. That’s because if you follow the simple rules that we’re about to describe, you should get each of these questions right.
Broker-Dealers and Their Agents
First let’s deal with questions about state registration for broker-dealers (BDs) and their agents. Rule number one here is that when a U.S.-based BD or one of its agents has an office located in a state, that BD or agent must register in the state. It does not matter which types of clients a BD or BD agent with an office in a state has or what types of securities those clients buy from the BD or agent. A BD or agent with an office in a state must register in that state. Period.
What about a BD or BD agent that doesn’t have an office in a state? If a BD or BD agent without an office in a state has any non-institutional clients in that state, the BD or agent must register there. However, if the BD or agent without an office in a state has only institutional clients in the state, no registration in that state is required. Institutional clients include the issuers of securities involved in a specific transaction; other broker-dealers; and institutional buyers, which are big-money entities such as banks, insurance companies, mutual funds, and pension and profit-sharing plans.
So when presented with a question about whether a specific broker-dealer or one of its agents must register in a given state or states, there are two potential questions to ask yourself. The first question is: “Does the broker-dealer or BD agent have an office in the state?” If the answer is yes, it’s simple: the BD or agent must register in that state. End of questions. However, if the answer is no, move on to the second question: “Does the BD or BD agent have any non-institutional clients in the state?” If the answer is yes, the BD or agent must register in the state; if the answer is no, they do not need to register in the state.
Here’s a flowchart to help you remember the question-answering process:
Investment Advisers and Their Representatives
Now let’s look at the state registration requirements for investment advisers that do not register with the SEC. If the investment adviser has an office in the state, it must register there. If the investment adviser doesn’t have an office in the state but has had more than five non-institutional clients in the state during the past twelve months, it also must register there. The rules are the same for investment adviser representatives who work for an investment adviser that does not register with the SEC.
Investment adviser representatives who work for investment advisers that register with the SEC — also known as federal covered advisors — may need to register with the state if they have an office in the state.
So if you see a question about state registration requirements for non-SEC registered investment advisers or their investment adviser representatives, the first question to ask yourself is: “Does the IA or IAR have an office in the state?” If the answer is yes, you know the IA or IAR must register there. If the answer is no, move on to the second question: “Has the IA or IAR had more than five non-institutional clients in the state during the preceding twelve months?” If the answer is yes, they must register in the state; if the answer is no, they don’t need to register in the state.
Here’s another flowchart to help you with this type of question:
Remember that if an investment adviser registers with the SEC, it is a federal covered adviser and does not need to register in any state. Instead, a federal covered adviser must notice file to provide investment advice to residents of that state. When it comes to notice filing requirements for federal covered advisers, follow the same thought process as that described above. If the federal covered adviser has an office in a state, it must notice file there. If it has no office in the state but it has had more than five non-institutional clients in the state in the past twelve months, the firm must also notice file there.
Simple, right? So let’s put the suggested thought process into practice by looking at a question like one you may see on your exam.
XYZ Broker Dealer has its main office in State A. It also has offices in States B and C. ABC has non-institutional clients in states A and B, but it only has institutional clients in State C. It does not have an office in State D, but it has three non-institutional clients there. In which states does XYZ need to register?
A. State A only
B. States A and B only
C. States A, B, and C only
D. States A, B, C, and D
Remember the process to follow when you see questions about where a BD must register. There are two possible questions to address as part of that process.
First question: Does the broker-dealer have an office in a state? Answer: XYZ has offices in each of States A, B, and C. Recall that if the answer the first question is “yes, the BD has an office in the state”, then the BD must register in that state. So XYZ needs to register in States A, B, and C.
If the answer to the first question is no, as it is for State D, you move on to the second question: Does the BD have any non-institutional clients in the state? XYZ has non-institutional clients in State D, so the answer is yes to that question. If the answer to the second question is yes, this means the BD must register in the state. Thus, XYZ has to register in State D as well as States A, B, and C. So Choice D is the correct answer.
So now you’re an expert, and you’re one step closer to passing your Series 63, Series 65, or Series 66 exam!
Want more exam tips?
Watch a video version of “How to Answer State Registration Questions on the Series 63, Series 65, and Series 66” on the Solomon YouTube channel, where you’ll find even more exam and study tips!
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.
Do your customers know the difference between an IA and BD? Do you know the importance of this distinction and how it may affect your registration status? Continue reading
Do your customers know the difference between an investment adviser and broker-dealer? Do you know the importance of this distinction and how it may affect your registration status?
For many retail customers, the difference between an investment adviser (IA) and a broker-dealer (BD) may not seem important. A customer may have received an investment recommendation from a BD, or owned securities through an IA account. However, which kind of firm you work for is important for knowing which services you may provide, how you may provide them, and which qualification exams you must pass.
Investment advisers are usually firms, though they can be an individual operating as a sole proprietor, whose primary business is providing investment advice, and who are paid for the advice itself. Investment adviser representatives (IARs) are individuals who work for IAs and advise the IA’s clients on the IA’s behalf. IAs and IARs are not “stockbrokers” and cannot directly buy or sell securities for their customers. While many have IA accounts through which they own stocks, mutual funds, and other securities, in fact these are accounts an IA opens on the customer’s behalf with a BD.
Broker-dealers are usually firms, though they can be an individual operating as a sole proprietor, that execute securities transactions for customers. An individual who is employed by a BD to handle customer accounts is called an “agent of a broker-dealer” on some exams, or a “registered representative” (RR) on others. BDs can offer investment advice incidental to their work with customers but cannot be compensated for the advice itself. If a BD acts as an intermediary between a buyer and a seller, then the BD can charge a commission on the trade. If a BDs buys or sells from its own inventory, then the BD makes money by charging a markup on securities that they sell and taking a markdown on securities that they buy.
So, if you’re an IAR, you…
…can provide advice
…can be paid for that advice
…cannot execute trades
…cannot charge commissions or markups on your customer’s trades
If you’re a BD agent (also known as a registered representative), you…
…can provide advice
…cannot be paid for that advice
…can execute trades
…can charge commissions or markups on your customer’s trades
Testing and Licensing
Finally, many firms, especially larger ones, maintain both IA and BD registrations. When working for these “dual registrants,” you may be asked to qualify as an IAR, BD agent, or both, depending on your role.
In fact, an increase in dual registrations is one of the note-worthy trends Solomon discusses in our recent white paper, “Optimizing On-Boarding in 2021: 7 Key Trends for the Securities Industry,” available for download from this blog post.
On December 22, the SEC announced a major rule change that it hopes will clarify what investment advisers can and can’t do when it comes to marketing their services. Continue reading
On December 22, the SEC announced a major rule change that it hopes will clarify what investment advisers are permitted to do when it comes to marketing their services.
The SEC cited the need to adapt its rules to changing communications technology. “The marketing rule reflects important updates to the traditional advertising and solicitation regimes, which have not been amended for decades, despite our evolving financial markets and technology,” said SEC Chairman Jay Clayton in announcing the overhaul.
The SEC’s current rules about advertisements and paying for client referrals will be consolidated into a single rule. Paying a third party to solicit new clients will now be considered a form of advertising, as will paid testimonials and endorsements and some one-on-one communications with clients.
Currently, each of these activities is subject to a separate set of requirements. By bringing them under the definition of advertising, the new rule replaces this complex system with a set of six broad principles that all forms of IA advertising must adhere to:
No untrue statements or omissions of material facts
No unsubstantiated statements
No statements that imply something untrue or misleading
When the benefits of the IA’s services are discussed, there must be a fair and balanced discussion of material risks
“Anti-cherry picking”: the IA must present its track record in a fair and balanced way
No advertisements that are otherwise materially misleading (intended as a “catch-all provision” for misleading advertising not covered above)
The rule change is expected to take effect sometime in the spring of 2021 and will affect the Series 65 and Series 66 exams.
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 SECannounceda 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.
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
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.
This question comes from the Solomon Exam Prep Online Exam Simulator question database for Series 65 & 66:
Under modern portfolio theory, which of the following is the most efficient set?
A. Expected return 9%, Standard deviation 8
B. Expected return 9%, Standard deviation 9
C. Expected return 11%, Standard deviation 8
D. Expected return 11%, Standard deviation 9
Correct Answer: C. Expected return 11%, Standard deviation 8
Rationale: According to modern portfolio theory (MPT), the investment opportunity set consists of all available risk-return combinations. Standard deviation is the measure of volatility used in MPT. Assuming a normal distribution of returns, 68% of all returns will fall within one standard deviation of the mean return and 95% of all returns will fall within two standard deviations of the mean return. An efficient portfolio is a portfolio that has the highest possible expected return for a given standard deviation. In this question, the highest expected return with the lowest standard deviation is 11% and 8.