Like many of the other FINRA exams, the Series 63’s hardest questions come from the same topics for most of our students. In today’s post we compile the top three most frequently asked questions. Below we go through these topics so that you can know where to focus your study time.
Series 63’s Hardest Questions: State Registered vs Federally Covered
The Series 63 Exam is hard enough. We recommend that you hit the hardest sections quick so that you have time to learn them thoroughly. One specific area that gives our students a lot of problems is determining the difference between a state registered Investment Advisor and a federally covered one. There are a few minor differences but the key points to remember here are:
- State registered advisors AND federally covered advisors BOTH have to register in the state in which they have an office….however…
- State registered advisors must register in a state where they have solicited over 5 retail (non-institutional) clients within 12 months. Whereas federally covered advisors don’t have to. Remember that the office location is the main determinant of whether or not the federally covered advisors need to register, not the number of clients in a state.
Series 63’s Hardest Questions: Offer to Sell vs Gifts
We get a lot of questions from students around offers to sell. Namely, what is a gift vs. what is an offer to sell?
What we tell students here is that if it sounds like the receiver of the security is getting something for free then it’s a gift. In other words, if I gave you a non-assessable stock (e.g., a regular stock like Apple, Microsoft, or Google) then that is a gift. However, if I give you warrants BUT only under the condition that you buy a bond from me first, then that is a sale.
Note that the free warrants are conditioned upon buying the bonds. In simple terms – these warrants aren’t really a gift if you have to buy something to get them.
Assessable stock is also a confusing concept. This is stock where the investor may be called up to “pony up” more money if asked to. Imagine you receive a cell phone as a gift. It’s a nice thing to get, but if you want to use it then you will have to pay your monthly bill. Similar to the assessable stock, it is a gift that requires payments made over time. Since there are payments that will be required over time, the authorities don’t consider this a gift.
Series 63’s Hardest Questions: Exempt Transactions vs Exempt Securities
Lastly, one of the most important areas that we recommend you get straight when it comes to the Series 63 is exempt securities vs exempt transactions. To make sure you give yourself a chance with a decent Series 63 pass rate, put some time into this section. The word “exempt” often confuses people. When the curriculum refers to “exempt” they basically mean that the investor or the securities “don’t have to” register with the SEC. This is important for many investors or issuers because that can be an arduous, and expensive (e.g., legal fees) process.
The types of securities that are “exempt” typically involve a government (e.g., Munis, Treasuries, Canadian gov’t, etc.), and/or financial institutions. On the other hand, the transactions that are “exempt” usually include those that are between institutions. If you see a question where three of the multiple choice answers include transactions via an institution, and one involving an individual, then that’s a hint. Remember Sesame Street‘s “one of these things just doesn’t belong here”? 🙂
There are many more details we have left out so consult your text for each of these topics.
Overall, some topics cause more trouble than others. We highly recommend that you start mastering the three above. The sooner you capitalize on the hard stuff, the sooner it will come easy. If you need a Series 63 tutor (or a Series 7 tutor, or a SIE Exam tutor), you know where to find us! Good luck!