NASD Series 7 & 63 Text Book & Exam Prep Software Package
Books/Exam Info
•
Series 7: General Securities Representative
Series 7: General Securities RepresentativeQualifies an individual to solicit, purchase, and/or sell all securities products, including corporate securities, municipal securities, municipal fund securities, options, direct participation programs, investment company products, and variable contracts.
•Series 63: Uniform Securities Agent State Law Examination
Series 63: Uniform Securities Agent State Law ExaminationThe examination covers the principles of state securities regulation reflected in the Uniform Securities Act; these laws are sometimes called "Blue Sky" laws.
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Series 63 Text Book - Uniform Securities Agent Examination
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Sample Chapter:
SECTION TWO
DEFINITION OF TERMS
Introduction
In order to successfully complete the Series 63 exam, it is important to have an in-depth
understanding of the terms used within the securities industry—specifically within the
framework of the Uniform Securities Act. The terms used by the USA, also known as the
Act, may have broader meanings than we are accustomed to in everyday usage.
Security
A security is anything that can be exchanged for value that involves a risk to the holder.
A security also represents an investment in an entity managed by a third party. The
Howey Test was used by the Supreme Court to determine a security, and states that a
security must meet the following four characteristics. It must:
- Be an investment of money
- Involve a common enterprise
- Give the investor an expectation of a profit
- Entail the management of a third party
The following are examples of securities:
- Stocks
- Bonds
- Notes
- Debentures
- Evidence of indebtedness
- Transferable shares
- Warrants, rights, or options for securities
Most times when you see the term “certificate,” you have a security that is a:
- Certificate of interest in profit sharing or a partnership agreement
- Preorganization certificate
- Collateral trust certificate
- Voting trust certificate
- Certificate of interest in oil or a gas mining title
- Certificate of deposit for a security such as an American depository receipt (ADR) or an American depository share (ADS)
The term “variable” will also identify a security, as in:
- Variable annuity
- Variable life insurance
- Variable contract
The phrase “interest in” is another key to identifying a security on the Series 63 exam.
All of the following are securities:
Interest in:
- Farmland and animals
- Whiskey warehouse receipts
- Commodity options (not futures)
- Insurance company separate accounts
- Real estate condominiums or cooperatives
- Merchandise marketing programs, franchises, or schemes
- Multilevel distributorships such as Amway
The term “option” is also a good way to identify a security, such as:
- Stock option
- Index option
- Futures option
- Commodity futures option
The following are not considered securities:
- Real estate
- Retirement plans (IRAs and 401(k)s)
- Bank accounts
- Collectibles
- Precious metals
- Fixed annuities/fixed contracts
- Whole and term life policies
- Antiques
- Futures contracts (commodities)
- Trade confirmations
- Prospectuses
The term “future” as it appears alone is an indication that a security is not involved. If
the question is asking about a commodity future option, however, then a security is
involved. Also the term “fixed” is a good indication that a security is not involved.
Person
The term “person” as it is used in the USA, refers to any entity that may enter into a
legally binding contract. Any entity that can enter into a legally binding contract may
transact business in the securities markets. Agreeing to buy or sell a security represents a
legally binding contract. For the Series 63, a person is any of the following:
- Natural person
- Corporation
- Trust
- Government organization
- Partnership
- Joint stock company
- Sole proprietor
- Association
- Unincorporated organization
A non-person is an individual or entity that may not enter into a legally binding contract
and therefore may not transact business in the securities market. A non-person is:
- A minor
- Someone deemed to be legally incompetent
- A deceased individual
Broker Dealer
A broker dealer is a person or a firm that maintains a place of business and affects
transactions in the securities markets for its own account or for the account of others. A
broker dealer must be registered in its home state as well as in the states of its
“individual” clients. A broker dealer is not:
- An agent
- A bank
- A savings and loan
- A person with no place of business in the state, who deals exclusively with financial institutions or issuers
- A person who conducts business with existing clients who do not reside in the state and are in state for less than 30 days
Agent
An agent or Registered Representative may only be an individual who represents the
issuer or a broker dealer in the purchase and sale or the attempted purchase and sale of
securities with the public. Agents are required to register in their home state, their state
of employment, and the state of residence of their customers. An agent is not required to
register if:
- They represent the issuer or a broker dealer in an underwriting transaction
- They represent a bank or a savings and loan in the issuance of securities
Agents who represent exempt issuers are not required to register. Examples of exempt
issuers are:
- U.S. Government
- State and municipal governments
- Canadian federal and municipal governments
- Commercial paper with maturities of less than 270 days, sold in denominations exceeding $50,000
- Investment contracts associated with employee pension plans, profit sharing, stock purchase, or savings plans
- Foreign national governments recognized by the United States
Issuer
An issuer is any person that issues or simply proposes to issue a security. Issuers include:
- Corporations
- U.S. government and agencies
- State and local governments
In an issuer or primary transaction, the issuer receives the proceeds from the sale.
Non-Issuer
A non-issuer is anyone who does not issue or propose to issue a security. All secondary
market transactions that take place on an exchange or in the over-the-counter (OTC)
market are non-issuer transactions, and the selling security holder receives the proceeds
from the sale.
Investment Advisor
An investment advisor is any person who is actively involved in and receives a fee for
any of the following:
- Issuing research reports or analysis
- Publishing a market letter with an annual subscription price of $200 or more
- Advising clients as to the advisability of the purchase or sale of a security
- Providing investment advisory services as a complement to their services and claiming to provide such services for a fee
- Presenting themselves as investment advisors, also known as the Shingle Rule
An investment advisor is not:
- A bank or savings and loan
- A broker dealer
- An agent
- A lawyer, accountant, teacher, engineer (LATE) whose services are incidental to their business and who do not receive a specific fee for such services
- Any person exempted by the administrator
- A federally covered advisor
- Publishers of newspapers and magazines
Investment Advisor Representative
An investment advisor representative is a person who is under the control of the
investment advisor and includes:
- Officers and directors
- Partners
- Solicitors
- Supervisors
Clerical employees are not considered investment advisory representatives and are not
required to register.
Institutional Investor
An institutional investor is a person or firm that trades securities for his or her own
account or for the account of others. Institutional investors are generally limited to large
financial companies. Because of their size and sophistication, fewer protective laws
cover institutional investors. It is important to note that there is no minimum size for an
institutional account. Institutional investors include:
- Broker dealers
- Investment advisors
- Investment companies
- Insurance companies
- Banks
- Trusts
- Savings and loans
- Government agencies
- Employment benefit plans with more than $1,000,000 in assets
Accredited Investor
An accredited investor is an individual who meets one or more of the following criteria:
- Has a net worth of $1,000,000 excluding their primary residence
or
- Earns $200,000 per year or more for the last two years and has the expectation of earning the same in the current year
or
- Is part of a couple earning $300,000 per year or more
Qualified Purchaser
A qualified purchaser must meet strict minimum financial requirements. Securities sold
to qualified purchasers are not required to register in the state where the qualified
purchaser resides. A qualified purchaser is:
- An individual with at least $5,000,000 in investments
- A family owned business with at least $5,000,000 in investments
- A trust sponsored by qualified purchasers
Private Investment Company
A private investment company is an unregistered investment company or hedge fund that
raises funds through the sale of securities to qualified purchasers for any business
purposes.
Offer/Offer to Sell/Offer to Buy
An offer is any attempt to solicit the purchase or sale of a security for value. An offer is
considered to have been made in the state where the offer originated, as well as in the
state where it is received or directed. An offer will not be considered to have been made
if it was received through a television or radio broadcast originating outside the state.
Additionally, an offer will not be considered to have been made if received by a
newspaper or magazine published out of the state or by a magazine published in state that
has two-thirds of its paid circulation outside of the state.
Sale/Sell
To sell a security, its ownership must be conveyed for value. A sale is considered to have
been made at the time of the contract (trade). A sale of a security that has warrants or a
right attached is also considered a sale of the attached security. A sale of any security
that is convertible or exercisable into another security is considered to include a sale of
the security for which the security is convertible or exercisable. A gift of assessable
stock is also considered a sale. Assessable stock is stock that may require the holder to
make additional payments as a term of ownership. A sale does not include a dividend or
the pledge of a security for a collateral loan.
Guarantee/Guaranteed
The term guarantee means that another party other than the issuer of the security has
guaranteed the payment of principal, interest, or dividends. Only three parties may
guarantee something. They are:
- U.S. government
- Insurance company
- Parent company—they may guarantee obligations of a subsidiary
Contumacy
Contumacy is the willful display of contempt for the administrator’s order. An act of
contumacy may result in the agent’s or firm’s registration being revoked or other
disciplinary action.
Federally Covered Exemption
A federally covered exemption provides for a full exemption from state registration for
federally covered investment advisors and federally covered securities.
A federally covered investment advisor is one that has more than $25,000,000 in assets
under management and is registered with the Securities Exchange Commission (SEC).
A federally covered security is any of the following:
- A security listed on a U.S. stock exchange or on the NASDAQ National Market System (NMS)
- An investment company security issued under the Investment Company Act of 1940
- Securities sold to qualified purchasers
Series 7 Exam Information
Time Limit: 6 Hours (the series 7 exam is broken into two parts, each has a time limit of 3 hours)
Number of Questions: 260 total. 125 for each part, and 10 pre-test questions that do not count towards the exam grade (and are not indicated in the exam).
Passing Score: 70%
Format: Multiple Choice
Enrollment Fee: $250 US. This includes a $110 examination enrollment fee, and a $90 NYSE development fee. Please visit the FINRA Registration/Exam Fee Schedule for more information.
Pre-requisites: You must be sponsored by a firm who is a member of the FINRA or is a Self Regulatory Organization (SRO).
Corequisites: N/A
Exam Date(s): Any weekday
Exam Locations: Find your U.S. or international exam center here
Official Exam Website: http://www.nasdr.com
Updated March 02, 2009
NASDR Notices to Members
Reporting Requirements for Settlements of Customer Disputes Involving Auction Rate Securities
FINRA reminds firms that reach settlements of claims related to the sale of auction rate securities that, in determining the settlement amount for the purpose of potential reporting obligations pursuant to NASD Rule 3070 and Incorporated NYSE Rule 351 (Reporting Requirements) and Forms U4 and U5, firms must include the full dollar amount that was refunded to the customer as part of a repurchase agreement, plus any other damages identified in the settlement.
SEC Approval and Effective Date for New Consolidated FINRA Rule on Trading Ahead of Research Reports
Following the consolidation of NASD and the member regulation, enforcement and arbitration functions of NYSE Regulation into FINRA, FINRA established a process to develop a new consolidated rulebook (Consolidated FINRA Rulebook), which FINRA has discussed in previous Information Notices. FINRA is proposing new consolidated rules in phases for SEC approval as part of the Consolidated FINRA Rulebook. In January 2009, the SEC approved a new consolidated FINRA Rule relating to trading ahead of research reports, which will take effect on April 20, 2009.
SEC Approves Rule Relating to Supervision of Market Letters
Effective February 5, 2009, firms may supervise "market letters" as correspondence rather than sales literature, unless the letters are distributed to 25 or more existing retail customers within any 30-calendar-day period and make a financial or investment recommendation or otherwise promote the firm's product or service.
Customer Account Statements and Due Diligence Requirements for Unlisted Real Estate Investment Trusts (REITs) and Direct Participation Programs (DPPs)
FINRA is issuing this Notice to address certain requirements that apply to the per-share customer account statement values and dividend distributions of REITs and DPPs (collectively, "real estate investment programs") that are sold through broker-dealers, invest in real estate and do not trade on a national securities exchange.
SEC Approves Amendments to FINRA Trade Reporting Rules
Effective Monday, August 3, 2009, firms' trade reporting obligations for over-the- counter (OTC) equity transactions will change. Specifically, amendments to FINRA trade reporting rules will:
replace the current market maker-based trade reporting structure with an "executing party" structure; and
require firms with the trade reporting obligation that are acting in a riskless principal or agency capacity on behalf of another member firm(s) to submit non-tape report(s) to FINRA, as necessary, to identify such other firm(s) as a party to the trade.
09-07 SEC Approves New Motion to Dismiss Rule and Amendment to the Eligibility Rule in Arbitration
Effective February 23, 2009, FINRA will implement new procedures for handling motions to dismiss in arbitration. The SEC approved a proposal to adopt Rule 12504 of the Code of Arbitration Procedure for Customer Disputes and Rule 13504 of the Code of Arbitration Procedure for Industry Disputes (collectively, the Codes) to establish procedures that will govern motions to dismiss. The proposal also amends Rules 12206 and 13206 to address motions to dismiss based on eligibility grounds.
09-06 FINRA Requests Comment on Proposed Rule to Establish a Leverage Limitation for Retail Forex
FINRA is requesting comment on a proposed rule prohibiting any member firm from permitting a customer to: (1) initiate any forex position with a leverage ratio of greater than 1.5 to 1; and (2) withdraw money from an open forex position that would cause the leverage ratio for such position to be greater than 1.5 to 1.
09-05 FINRA Reminds Firms of Their Obligations to Determine Whether Securities are Eligible for Public Sale
FINRA reminds firms of their responsibilities to ensure that they comply with the federal securities laws and FINRA rules when participating in unregistered resales of restricted securities. These responsibilities are particularly important in situations where the surrounding circumstances place the firm on notice that it may be participating in illegal, unregistered resales of restricted securities, such as when a customer physically deposits certificates or transfers in large blocks of securities and the firm does not know the source of the securities.
09-04 SEC Approves Proposed Rule Change to Amend the Submission Agreement and Related Rules in the Arbitration Codes for Customer and Industry Disputes
On February 9, 2009, an amendment to the Submission Agreement and related rules of the Codes of Arbitration Procedure for Customer and Industry Disputes becomes effective and applies to claims filed on or after February 9, 2009.
09-02 FINRA Requests Comment on Proposed Consolidated FINRA Rule Governing Information and Data Reporting and Filing Requirements
As part of the process of developing a new Consolidated FINRA Rulebook, FINRA is requesting comment on proposed new FINRA Rule 4540 (Member Information and Data Reporting and Filing Requirements). The proposed rule:
establishes a new information reporting requirement;
requires member firms to report additional applicable contact information; and
consolidates, streamlines and modifies into one rule several separate reporting and filing requirements in the NASD and Incorporated NYSE Rules.
The proposed rule also supports FINRA's efforts to consolidate several existing electronic reporting platforms into a single electronic platform that all firms will use to report required information.
09-01 Broker-Dealer, Investment Adviser Firm, Agent and Investment Adviser Representative, and Branch Renewals for 2009
FINRA is issuing this Notice to help firms review, reconcile and respond to their Final Renewal Statements and reports that are currently available on Web CRD and IARD for the 2009 registration renewal process.
09-01 Broker-Dealer, Investment Adviser Firm, Agent and Investment Adviser Representative, and Branch Renewals for 2009
FINRA is issuing this Notice to help firms review, reconcile and respond to their Final Renewal Statements and reports that are currently available on Web CRD and IARD for the 2009 registration renewal process.
NASD Securities and Futures Prep Series 7 & 63 Text Book & Exam Prep Software Package. General Securities Representative & Uniform Securities Agent State Law Examination.
Series 7:
General Securities Registered Representative
(Pub. 2007, 480+ pages)
Copyright © 2007
The Securities Institute of America, Inc.
All Rights Reserved.
NASD Securities
Education & Training
Exam Prep Software
Series 7 Exam Prep
1,700 Questions!
Copyright © 2007
The Securities Institute of America, Inc.
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SECURITIES AND FUTURES PREP
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Series 63 Exam Prep
Hundreds of Questions!
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Series 7 Exam Information
Time Limit: 6 Hours (the exam is broken into two parts, each has a time limit of 3 hours)
Number of Questions: 260 total. 125 for each part, and 10 pre-test questions that do not count towards the exam grade (and are not indicated in the exam).
Passing Score: 70%
Format: Multiple Choice
Enrollment Fee: $250 US. This includes a $110 examination enrollment fee, and a $ 90 NYSE development fee.
Please visit the NASD Registration/Exam Fee Schedule for more information.
Prerequisites: You must be sponsored by a firm who is a member of the NASD or is a Self Regulatory Organization (SRO).
Corequisites: N/A
Exam Date(s): Any weekday
Exam Locations: Find your U.S. or international exam center here
Official Exam Website: http://www.nasdr.com
Series 63 Exam Information
Time Limit: 1 hour and 15 minutes
Number of Questions: 65 questions. 5 of the 65 questions do not count towards your grade as they are pre-test questions for future examinations. Note that the exam does not indicate which questions these are.
Passing Score: 70%
Format: Multiple Choice
Enrollment Fee: $82 US. Note that this is the examination enrollment fee ONLY--other fees may also apply.
Please visit the FINRA Registration/Exam Fee Schedule for more information.
Pre-requisites: There are no prerequisites for registration. If registering as an individual, you must complete
Form U-10.
Corequisites: N/A
Exam Date(s): Any weekday
Exam Locations: Find your U.S. or international exam center here
Official Exam Website: http://www.nasdr.com
The Series 63 is designed to qualify candidates as securities agents. The examination covers the principles of state securities regulation reflected in the Uniform Securities Act.
Series 63:
Uniform Securities Exam
(Pub. 2007)
Copyright © 2007
The Securities Institute of America, Inc.
All Rights Reserved.
NASDSecurities and Futures Prep Series 7 & 63 Text Book & Exam Prep Software Package General Securities Representative & Uniform Securities Agent State Law Examination
