Investment Management Alert


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Investment Management Alert

  1. 1. Investment Management Alert October 13, 2009 SEC Approves Rule Amendments Creating New Limited Representative - Investment Banker Registration Category and Series 79 Investment Banking Exam Under amendments to NASD Rules 1022 and 1032, pricing of such securities and managing the allocation individuals whose activities for FINRA members include and stabilization activities of such offerings, or investment banking and principals who supervise such • advising on or facilitating mergers and acquisitions, activities will be required to pass the new Limited tender offers, financial restructurings, asset sales, Representative – Investment Banking Qualification divestitures or other corporate reorganizations or Examination (Series 79 Exam). The amendments become business combination transactions, including but not effective on November 2, 2009. Individuals who have limited to rendering a fairness, solvency or similar passed the General Securities Representative (Series opinion.” 7 Exam) or equivalent exams (Series 17, Series 37 or Series 38 Exams) and are registered as general securities If individuals are also involved in other activities not representatives with a registered broker-dealer and who specified above, they would need separately to qualify and engage in a FINRA member firm’s investment banking register in the appropriate registration category relating to business will be permitted to opt into the new registration such activities (by, i.e., maintaining a Series 7). category until May 3, 2010. Transition Opt-In Period Pepper Point: The SEC rule change approval order (available at During the six-month transition period commencing finra/2009/34-59757.pdf ) only applies to FINRA on November 2, 2009 and ending on May 3, 2010, members and their registered representatives. investment banking personnel who hold the Series 7 registration or who have registered with a Series 7 Investment Banking Activities equivalent exam may opt into the new investment banking registration category provided that on the date they opt Pursuant to NASD Rule 1032, a person who functions as a in, they are engaged in investment banking activities registered representative must pass the Series 7 examination described in NASD Rule 1032(i). Those individuals opting or certain equivalent examinations, unless the person’s in will retain their Series 7 or Series 7 equivalent registration. activities are so limited as to qualify him for a limited Following May 3, 2010, all persons desiring to engage in representative category that has an examination associated activities limited to investment banking would be required with it. Under NASD Rule 1032(i) and effective as of to pass the Series 79 Exam. During the transition period, November 2, 2009, an associated person of a broker will be new investment banking personnel would be permitted to required to register with FINRA as an investment banking take either the Series 7 Exam or Series 7 equivalent exam or representative and pass the Series 79 Exam or obtain a the Series 79 Exam. Those individuals taking the Series 7 waiver if such person’s activities are limited to: Exam or the Series 7 equivalent exam would then opt into the investment banking representative registration. • “advising on or facilitating debt or equity securities offerings through a private placement or a public Individuals who currently hold the Series 7 or Series 7 offering, including but not limited to origination, equivalent registration and perform investment banking underwriting, marketing, structuring, syndication, and activities may opt in to the new investment banker registration category by having their firm submit an
  2. 2. Investment Management Alert amended Form U4 to request the Limited Representative – Principals Investment Banking registration during the opt-in period. After the opt-in period has expired, individuals holding The Series 79 Exam will be included, along with the the Series 7 or Series 7 equivalent registration who wish to Series 7, among the list of representative exams that engage in activities limited to investment banking would satisfy the prerequisite requirement for the Series 24 be required to pass the Series 79 Exam. General Securities Principal Exam. Anyone wishing to act as a general securities principal for investment banking Training Program Exception activities described in NASD Rule 1032(i) must become registered as an investment banking representative by There is an exception for member firms running training passing the Series 79 Exam (or opting in) and must also programs where individuals rotate among departments pass the Series 24 General Securities Principal Exam. If an including investment banking. Employees participating individual wishes to act as a general principal for a broader in such a program would not need to register as an range of securities-related activities, he must pass another investment banking representative for a period of six appropriate qualification exam, in addition to the Series 24 months from the time the employee first engages in Exam. activities that would normally require such registration. The exception runs for a period of two years from the time Series 79 Exam Content the employee commences the training program. Candidates taking the Series 79 Exam must answer 175 multiple-choice questions within five hours and will receive their pass/fail status at the end of the exam. The content outline for the exam is available at www.finra. org/brokerqualifications/series79. The test questions are allocated among the following four functions as described below: Function Number of Questions Collection, analysis and evaluation of data 75 Underwriting/new financing transactions, types of offerings and 43 registration of securities Mergers and acquisitions, tender offers and financial restructuring 34 transactions General securities industry regulations 23 -2-
  3. 3. Investment Management Alert Series 7 Exam Content groups/industry/@ip/@comp/@regis/documents/industry/ p038201.pdf. This registration qualifies a candidate for the In contrast, candidates opting to take the Series 7 Exam solicitation, purchase, and/or sale of all securities products, must answer 250 multiple-choice questions administered including corporate securities, municipal securities, in two parts of 125 questions each. Candidates will have municipal fund securities, options, direct participation three hours of testing time for each part. The content programs, investment company products, and variable outline for the exam is available at contracts. The questions are allocated among the following critical functions as described below: Critical Function Number of Questions Seeks business for the broker-dealer through customers and potential 9 customers Evaluates customers in terms of financial needs, current holdings, and 4 available investment capital, and helps them identify their investment objectives Provides customers and prospective customers with information on 123 investments and makes suitable recommendations Opens, transfers, and closes customer accounts and maintains 27 appropriate account records Explains the organization, participants, and functions of various 53 securities markets and the principal factors that affect them Obtains and verifies the customer’s purchase and sale instructions, 13 enters orders, and follows up on completion of transactions Monitors the customer’s portfolio and makes recommendations 21 consistent with changes in economic and financial conditions as well as the customer’s needs and objectives Authors: Carol M. Degener 212.808.2705 Matthew R. Silver 215.981.4117 Gregory J. Nowak 215.981.4893 -3-
  4. 4. Investment Management Alert Gregory J. Nowak Publishes Book, Hedge Fund Agreements Line by Line, 2nd Edition: A User’s Guide to LLC Operating Contracts As hedge funds continue to accelerate as widely-employed investment vehicles, understanding the agreements that establish, define and protect them is essential for all parties involved. In Hedge Fund Agreements Line by Line, Second Edition, Pepper Hamilton partner Gregory J. Nowak, takes a fund operating agreement and atomizes it, explaining why things are drafted as they are and how they work. From forming a fund, to liquidating assets and dissolving the partnership, covering everything from the role and distinct responsibilities of the manager, to all critical points around capital contributions, the admission of new members and permissible withdrawal of capital, this book is indispensable for any hedge fund manager. The Second Edition addresses the market meltdown of 2008 and the various legal tools – gates, side pockets, special asset desig- nations – used to deal with modern markets. With a standard operating agreement included in the text, coupled with extensive commentary and detailed explanations, this book offers a swift yet informative read on the legal rules governing this popular investment vehicle. To purchase the book, visit The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. Please send address corrections to Berwyn | Boston | Detroit | Harrisburg | New York | Orange County Philadelphia | Pittsburgh | Princeton | Washington, D.C. | Wilmington © 2009 Pepper Hamilton llp. All Rights Reserved. This publication may contain attorney advertising. -4-