Udates to Rule 144 for securities exams

The Holding Period for Rule 144 has been Reduced to 6 Months

Individuals who are not affiliated with the company (non affiliates) may freely sell their unregistered securities without any volume restrictions after 6 months. Affiliates who are officers, directors or 10% holder may also sell unregistered securities after 6 months but are still subject to the volume limitations of Rule 144 and must still file form 144 at the time of sale.


De Minimis Threshold Raised

The volume and dollar amount of securities an affiliate may sell with out reporting has been increased. An affiliate in any 90-day period, may sell up to 5,000 shares or may sell stock with a value of $50,000 or less without having to file Form 144.

Standard Rule 144 Volume Restrictions Still Apply

Under Rule 144 the maximum number of shares that can be sold by an affiliate in any 90-day period is the greater of:
· 1% of the issuer's total shares outstanding; or
· the weekly average of the prior four weeks trading volume.

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New Series 24 Exam 2/12/2008

The new series 24 exam outline effective 2/12/2008 will have the following test focus points.


Supervision of Investment Banking, Underwriting & Research 33 Questions
Supervision of Trading and Market Making 31 Questions
Supervision of Brokerage Office Operations 29 Questions
Sales Supervision & General Supervision of Employees 43 Questions
Compliance with Financial Responsibility Rules 14 questions

Some of the new material on the series 24 exam includes:

Regulation S-K
Regulation S-X
Regulation M-A
Regulation NMS
Regulation ATS
Regulation SHO
Sarbanes –Oxley
Step out trades
Net trading


Here are some excerpts from our new series 24 textbook:

Sarbanes-Oxley Act

The Sarbanes - Oxley Act also known as the Public Company Accounting Reform and Investor Protection Act of 2002 was enacted to help restore confidence in the financial reports and accounting standards of publicly traded companies. The Act created the Public Company Accounting Oversight Board to oversee, regulate and discipline accounting firms’ activities when performing auditing functions for publicly traded companies. Section 302 of the Sarbanes- Oxley Act requires the management of publicly traded companies affirm the accuracy of the company’s financial reports and to accept responsibility for the content of the reports by signing all annual and quarterly reports filed under The Securities Exchange Act of 1934. The principal executive officer as well as the principal financial officer must:

Sign an acknowledgement that they have read the report
Certify to their knowledge that the financial reports do not contain any untrue or misleading statements
Certify that to their knowledge the reports do not omit any material fact and accurately represent the company’s financial condition for the period covered by the report
Establish internal controls to ensure the accurate reporting of all of the issuer’s subsidiaries
Have evaluated the effectiveness of the internal controls within 90 days prior to the filing of the report and must file a report relating to the effectiveness of the internal controls
Disclose to the audit committee and the board of directors any deficiencies with internal controls or any act of fraud involving management or any employee significantly involved in the company’s internal controls
Disclose any material changes to the internal controls or any weaknesses or corrective actions taken

Section 401 of the Sarbanes-Oxley Act requires financial reports to contain detailed information regarding any off balance sheet transactions, obligations and liabilities the company may have engaged in or have outstanding. The statement may not contain any false or misleading information.

Section 402 of the Sarbanes-Oxley Act enhanced conflict of interest rules regarding loans made by the company to any officer. Section 402 of the act made it unlawful for any company to extend or maintain personal loans either directly or indirectly through a subsidiary to or for any officer of the company.

Section 403 of the Sarbanes-Oxley Act requires that the company’s management as well as any owner of 10% or more of the company’s securities file reports regarding holdings and transactions in the company’s securities. These reports must be filed within 10 days of the person becoming an officer or 10% holder. If any person subject to the reporting requirements of section 403 purchases or sells the company’s securities or enters into a security based swap agreement a report of the transaction must be filed within two business days. Such reports may be filed electronically.

Section 404 of the Sarbanes-Oxley Act requires that management file with the annual report a report detailing the company’s internal controls over financial reporting. The company’s independent auditor is required to certify management’s report regarding its internal controls.


SEC Regulation NMS

SEC Regulation NMS was designed to improve the regulation of the U S markets as a result of the development of multiple market centers. Under the “order protection rule” SEC Regulation NMS requires market centers to establish and enforce policies and procedures to ensure that trades do not get executed at inferior prices to those protected prices displayed in other market centers. A protected price or quote is one that is displayed in a market center that is immediately and automatically accessible. The access rule of Regulation NMS requires fair and non discriminatory access to quotations and establishes uniform fees for access to various trading platforms and market centers. Regulation NMS prohibits members from engaging in any activity designed to intentionally lock or cross markets and prohibits members from quoting securities valued at more than $1 in sub penny prices.


SEC Regulation ATS

Technological innovations have allowed an increasing number of market participants to develop alternative trading systems. As market participants developed new trading systems they often chose to allow access to these systems only to subscribers and as a result hidden markets developed. Trading activity in these systems has not been regulated in the way that trading is regulated on a registered exchange. As a result customer orders entered in the systems were not protected to the same degree as if the orders were entered on a registered exchange. As the trading volume and level of services offered through alternative trading systems increased, alternative trading systems began offering services traditionally only offered by registered exchanges. SEC Regulation ATS was designed to help regulate these alternative trading systems and to bring more uniformity to the national market place. Regulation ATS allows operators of alternative trading systems the choice to register with the SEC as an exchange or as a broker dealer. Regulation ATS also updated the definition of an exchange to include Any organization association, or group of persons that brings together the orders of multiple buyers and sellers and uses established, non-discretionary methods (whether by providing a trading facility or by setting rules) under which such orders interact with each other, and the buyers and sellers entering such orders agree to the terms of a trade. The SEC also further defined the definition of an exchange by excluding from the definition of an exchange systems provided by broker dealers that:

Merely route orders to other facilities for execution;
systems operated by a single registered market maker to display its own bids and offers and the limit orders of its customers, and to execute trades against such orders; and systems that allow persons to enter orders for execution against the bids and offers of a single dealer

Good luck on your Exam!

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