Series 79

Study Question of the Week: July 10, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 24, Series 55, Series 62, and Series 79. –ANSWER POSTED– Continue reading

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

Question (Relevant to the Series 7, Series 24, Series 55, Series 62, and Series 79):

An issuer would like to buy back shares and has already made a once-per-week block transaction this week. The inside quote for the security is 18.30 – 18.34. The last transaction was 18.32. Under SEC Rule 10b-18, which two of the following statements are true?

I. The maximum number of shares the issuer could buy in a day is 25% of the ADTV for the previous four weeks.

II. The maximum number of shares the issuer could buy in a day is 30% of the ADTV for the previous four weeks.

III. The highest price the issuer could buy at would be $18.32.IV. The highest price the issuer could buy at would be $18.34.

Answers:

A. I and III

B. II and IV

C. I and IV

D. II and III

Correct Answer: A. I and III

Rationale: Under SEC Rule 10b-18,when an issuer buys back their own shares, the bid may not be higher than the last transaction or the highest independent bid, whichever is greater. The maximum daily purchase cannot exceed 25% of the ADTV (average daily trading volume) over the previous four weeks.

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Study Question of the Week: July 2, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 79, Series 82 and Series 99. –ANSWER POSTED– Continue reading

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

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 79, Series 82 and Series 99):

A registered representative wishes to participate in a securities transaction outside of the jurisdiction of his firm. He does not receive compensation for the transaction. Which of the following is true?

Answers:

A. The registered representative needs to inform his firm prior to participating and adhere to any conditions that the firm puts on the rep in connection with the rep’s participation

B. The registered representative does not need to inform his firm because he is not receiving compensation

C. The registered representative needs to inform his firm and await permission before participating in the securities transaction

D. The registered representative cannot participate in any outside securities transactions because it is considered selling away and it is prohibited

Correct Answer: A.

Rationale: A “private securities transaction“ shall mean any securities transaction outside the regular course or scope of an associated person’s employment with a member. A registered representative who wishes to participate in private securities transactions needs to notify his firm and await permission if he will be receiving compensation. If he will not receive compensation, he must notify his firm. The firm shall provide the representative prompt written acknowledgement of the notice and at the firm’s discretion require the person to adhere to specified conditions in connection with the rep’s participation in the transaction.

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

Study Question of the Week: May 15, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 24, Series 62, Series 79, Series 82. –ANSWER POSTED– Continue reading

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

Question (Relevant to the Series 7, Series 24, Series 62, Series 79, and Series 82):

Placement agents for private placements almost always engage in a __________ commitment with the issuer.

Answers:

A. firm

B. best efforts

C. shelf

D. primary

Correct Answer: B

Rationale: Placement agents for private placements almost always engage in a best efforts commitment with the issuer.

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

Study Question of the Week: May 1, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, Series 79, and Series 82. –ANSWER POSTED– Continue reading

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

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, Series 79, and Series 82):

Which of the following Treasury securities does not pay interest semi-annually?

Answers:

A. T-bills

B. T-notes

C. T-bonds

D. TIPS

Correct Answer: A

Rationale: Treasury bills, or T-bills are issued at a discount from the par value (face value) and the interest payment is paid one time, on maturity, and it is the difference between the par value and the purchase price. T-notes, T-bonds and TIPS pay interest semi-annually (twice a year).

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

Study Question of the Week: April 17, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 62, Series 65, Series 79, Series 82, and Series 99. –ANSWER POSTED– Continue reading

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

Question (Relevant to the Series 7, Series 62, Series 65, Series 79, Series 82, and Series 99):

A reverse stock split:

I. Reduces the value of shareholder equity

II. Requires SEC approval

III. May be done to maintain an exchange listing and to attract institutional investors

IV. Can result in fewer shareholders

Answers:

A. II, III

B. III, IV

C. I, II

D. I, IV

Correct Answer: B. III, IV

Rationale: A reverse stock split is the opposite of a stock split, so instead of ending up with more shares in the case of a stock split, in a reverse stock split shareholders end up with fewer shares. For example, in a 1 for 3 reverse split, shareholders receive one new share for three old shares, but the value of each share increases proportionately resulting in an increase in the value of each share but no change in the value of shareholder equity. The increase in the share price is a primary reason for reverse stock splits; a common reason for the reverse split is to keep a share price above some exchange-required minimum share price, such as $1. A higher share price is also desirable because it can broaden the base of potential investors to include institutions which may be prohibited from purchasing low-priced stocks. Stock splits are governed by state law and by company bylaws, they do not require SEC approval. Reverse stock splits that involve large reductions in the number of shares, for example a 1 for 100 reverse split, may result in shareholders not having enough of the old shares to exchange in return for the new shares, when this happens the shareholders are paid cash for their shares. This results in an overall reduction in the number of shareholders.

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

Study Question of the Week: April 9, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 24, Series 62, Series 65, Series 66, and Series 79. –ANSWER POSTED– Continue reading

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

Question (Relevant to the Series 24, Series 62, Series 65, Series 66 and Series 79):

From an owner’s perspective which business structure offers the most flexibility in profit retention?

Answers:

A. S corporation

B. LLC

C. Partnership

D. C corporation

Correct Answer: D. C corporation

Rationale: S corporations, LLCs and partnerships are pass-through tax entities. This means that profits and losses are allocated to the owners and reported on their individual tax returns, regardless of whether earnings have been distributed or retained. In contrast, a C corporation, the traditional corporate entity, may distribute earnings via dividends or keep the profits in the business as retained earnings without the earnings being taxed to the owners’ individual returns.

Weekly study questions are from Solomon's industry-leading Online Exam Simulator.

Study Question of the Week: April 3, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 62, Series 65, Series 66, and Series 79. –ANSWER POSTED– Continue reading

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

Question (Relevant to the Series 62, Series 65, Series 66 and Series 79):

All of the following are true of futures contracts except:

Answers:

A. A futures contract is an agreement to buy or sell an asset at a future date

B. Futures contracts are traded on exchanges

C. Futures contracts trade in standard units

D. Purchasing a futures contract represents a right to do something rather than an obligation to do something

Correct Answer: D

Rationale: A futures contract is an agreement to buy or sell an asset at a future date. Futures contracts trade on exchanges in standard amounts. For example, 5,000 bushels of soybeans is one futures contract. Futures contracts are different from options contracts because they always involve an obligation on both sides of the contract. For example, purchasing a futures contract represents an obligation to deliver or receive an asset on a future date. If the buyer does not want to receive the asset on this date, he can trade the position before the exercise date.

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

Study Question of the Week: March 18, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 24, Series 62, and Series 79. –ANSWER POSTED– Continue reading

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

Question (Relevant to the Series 24, Series 62, Series 79):

Flash Dance Corporation, a popular web-based dance academy, is issuing new common stock securities. The company went public 5 years ago and has a public float of $80 million. The company is listed on NASDAQ. What form should Flash Dance Corporation fill out to register the new securities?

Answers:

A. S-1

B. S-2

C. S-3

D. S-8

Correct Answer: C

Rationale: The SEC offers forms for companies to use to file their Registration Statement. The S-3 form is briefer, and therefore much more desirable than the S-1 form. S-1 forms are used for initial public offerings or small, unseasoned reporting companies who are issuing new securities. The S-3 form is used for large, seasoned companies that already report with the SEC. These companies must have a public float of at least $75 million or have their securities listed on a public exchange. The public float is the total market value of the company’s stock not held by insiders or affiliates. The S-1 form requires a full prospectus which includes extensive information about the corporation. In contrast, the S-3 form allows a briefer prospectus which only describes the particular offering, and issuers simply refer to annual reports and other reporting documents that have already been filed. The S-2 form is no longer used by the SEC. The S-8 form is used for employee stock purchase plans. Flash Dance Corporation would file an S-3 form because they are listed on a national stock exchange, and they have a public float over $75 million.

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Study Question of the Week: March 7, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 79, and Series 82. –ANSWER POSTED– Continue reading

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

Question (Relevant to the Series 6, Series 7, Series 62, Series 79, and Series 82):

Which of the following are not true of CMOs?

Answers:

a. CMOs tend to be more sensitive to interest rates than most fixed income securities

b. Most CMOs protect against both prepayment risk and extension risk

c. A decrease in interest rates may lead to CMO investors getting their principal payments sooner than expected

d. CMOs can be issued as a government agency CMO or as a private-label CMO

Correct Answer: B

Rationale: A sequential pay CMO is the most basic of CMO structures, also known as a plain vanilla offering. Each tranche receives regular interest payments, but principal payments are made to the first tranche alone until it is completely retired, after which principal payments are applied to the next tranche until it is fully retired, and so on until the last tranche is retired in sequence. While most CMOs protect against prepayment risk better than a traditional mortgage backed security, they are still subject to prepayment risk and extension risk. CMOs are also more sensitive to interest rate changes than other fixed income securities because when interest rates fall, prepayment speeds usually accelerate, and CMO investors may receive their principal back sooner than they expected. They then have to reinvest this principal at lower interest rates.

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

Study Question of the Week: February 27, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 24, Series 62, Series 79, and Series 82. –ANSWER POSTED– Continue reading

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

Question (Relevant to the Series 24, Series 62, Series 79, and Series 82):

A company may file an 8-K after the closing of a PIPE transaction for all of the following reasons except?

Answers:

A. To alert investors of the possible dilutive effects of the transaction

B. To disclose any material non-public information that was revealed to the PIPE investors so that they are not precluded from trading in the stock after the close of the deal

C. To comply with Regulation S-X

D. To comply with Regulation FD

*Fun fact: only 55% of people get this question right

Corrrect Answer: C

Rationale: PIPE (Private Investment in Public Equity) transactions are when public companies raise funds by selling shares in a private offering. Because a PIPE transaction is a private offering, the company does not need to file a registration statement before the deal closes. Most companies typically register the offering after the deal closes, however, so that investors will not be subject to resale restrictions.
After the PIPE transaction, a company typically files an 8-K form to alert their shareholders, the public, and the SEC of the transaction. This serves to inform the shareholders that the PIPE transaction may dilute their current holdings. A more common reason to file an 8-K is to comply with Regulation FD (Fair Disclosure) which requires a company to file an 8-K if the company reveals material, non-public information to people who may trade on the information in the future. A PIPE transaction may require this disclosure because a PIPE transaction is material, non-public information and PIPE investors are privy to this information before the public. A company will usually get investors to agree to keep the information confidential until the close of the transaction, but then an 8-K is filed so that PIPE investors are not precluded from trading in the stock after the close of the deal. Many PIPE investors will require assurance that the 8-K will be filed after the transaction closes before they will agree to invest.

SEC Regulation S-X states that financial statements must be filed with a registration statement and sets forth guidelines as to the type and format of those statements.

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