Ch 1 S2 Registration of Personnel Flashcards
REGISTRATION OF PERSONNEL GENERAL PRINCIPAL (SERIES #24)
Every person engaged in managing or supervising Series #7 registered persons must be registered as a general principal General Principals include: Sole Proprietors Officers, Partners, Managers of Office of Supervisory Jurisdiction Directors of Corporations • each new membership applicant must have at least 2 principals (outside of a Sole Proprietor) • prerequisite is the Series #7
Registration of Personnel. LIMITED PRINCIPALS are:
Sales Supervisor (Series #9/#10) Financial and Operations Principal (Series #27) Limited Financial and Operations Principal (Series #28) Registered Options and Security Futures Principal- ROP (Series #4) Investment Companies and Variable Annuities Principal (Series #26) Direct Participation Program (D.P.P.) Principal (Series #39) Municipal Fund Securities Limited Principal (Series #51))
Sales Supervisor (Series #9/#10) roles
supervising sales activities but cannot: • be involved supervising underwritings or market making • approve advertising or sales literature • be responsible for overall compliance pre-requisite is the Series #7
Financial and Operations Principal (Series #27) role
a clearing finn’s supervising accountant responsible for the finn’s financial reports which are filed with FINRA and SEC
Limited Financial and Operations Principal (Series #28) role
each non-clearing firm has one of these responsible for less-involved financial reports filed with SEC and FINRA
Registered Options and Security Futures Principal- ROP (Series #4)
for supervising all options transactions this individual: • approves each options account; • reviews all options transactions; and • provides general supervision over options accounts in addition, each firm must have a Designated Registered Options Principal (a designated ROP) who is the main office compliance person in charge of options compliance and approval of options advertising, educational material, and sales literature
Investment Companies and Variable Annuities Principal (Series #26)
for a firm that solely engages in the sale of redeemable securities and has no other securities business • these firms are allowed to participate in the original distribution of closedend funds, BUT no secondary market activity is allowed in these shares [§ prerequisite is the Series #6 or Series #7
Direct Participation Program (D.P.P.) Principal (Series #39)
for a firm solely engaged in the sale of limited partnerships and has no other securities business prerequisite is the Series #22 (D.P.P. Registered Rep. exam) or Series #7
Municipal Fund Securities Limited Principal (Series #51))
responsible for all of the dealer’s supervisory functions, but only as they relate exclusively to municipal fund securities broker-dealers who do not need a Series #53 principal, but have a Series #24 or #26 - thus, this is a limited principal for 529 Plans, this person supervises the following as it relates to municipal fund securities: • underwriting, trading, or sales • financial advisory or consulting services for issuers in connection with the issuance of municipal fund securities • processing, clearing, and safekeeping • research or investment advice • communications with the public • maintenance of records related to the above activities • training of municipal fund securities principals or reps
GENERAL SECURITIES REGISTERED REPRESENTATIVE (SERIES #7)
anyone who solicits or conducts business in securities for a member firm; anyone who makes recommendations to customers who is NOT a RR: persons whose duties are solely clerical or who solely handle exempt securities employees of foreign dealers who deal exclusively outside the U.S.
LIMITED REPRESENTATIVES:
Investment Companies/Variable Annuities (Series #6) • DPPs (Series #22) • Options (Series #42) • Municipals (Series #52) • Corporates (Series #62) • U.S. Govt’s (Series #72) ADDITIVE LICENSES • if all the above licenses are taken by an individual, that person has the equivalent (more or less) of a Series #7
SECURITIES TRADER (SERIES #57)
licenses an individual to be an equity and options trader
SALES ASSISTANT (SERIES #11)
can qualify new customers • accepts unsolicited orders only • works on an hourly or salaried basis • cannot hold any other license • Exempt from #11 if individuals only: • relay last sale price information for customers • write memoranda of unsolicited customer orders 8 then the person does not need # 11 • once again, the NYSE does NOT accept this license (only FlNRA)
U-4 FORM
Uniform Securities Application
• to register as a representative or principal, this
form must be completed and filed with FlNRA
• the U-4 has a questionnaire in it that inquires
about arrests, convictions, etc. and includes
whether the applicant was convicted of
possession of drugs, assault. etc …
– the SRO is permitted by the SEC to approve
these individuals convicted of a nonsecurities
felony on a “case-by-case” basis
this application essentially asks, “Is this
person a risk to investors?”
Uniform Securities Application
application includes:
applicant’s name and address
broker-dealer’s name and address
old broker-dealer’s address if transferring
from another firm
5 year consecutive residence history
10 year consecutive employment history
any other businesses in which registrant is
engaged
any aliases
disclosure of any arrests,
convictions, .. .involving investments,
fraud, …
disclosure of any felony charge or
conviction (including felony DUis); and any
misdemeanor charge or conviction involving
money, securities, theft, perjury, …
• misdemeanors not reported are DUis,
traffic offenses, assault/battery, and
not filing an income tax return
disclosure of any customer complaint settled
for more than $ l 5K
disclosure of any customer complaint
alleging a sales practice violation ( even ones
where the case is heard, decided, or settled)
Uniform Securities Application
registration is only effective…
after the
appropriate exam(s) are taken and passed
if an exam is failed, 30 days must elapse
before another attempt
if the individual fails 3 successive times, a
re-attempt is only allowed after 180 days
elapse - if failed again, another 180 must
elapse before another attempt is allowed
Additional U-4 infoL
if anything changes, the U-4 filing must be
amended promptly
individuals convicted of a non-securities felony
can be registered ( on a case-by-case basis)
the U-4 is signed by the applicant
principal verifies prior 3 years’ employment
history
dual registration is permitted if disclosed on U-4
(and approval of the employer is given)
OUTSOURCING
The b/d can outsource…
functions to
third parties (like payroll, IT, asset allocation
software … ), provided that the functions
outsourced are NOT functions that can only be
performed by a registered persons
i.e. sales solicitation. determining suitability.
making a recommendation, or writing an
order ticket (these functions canNOT be
outsourced)
• furthermore, if functions are outsourced, the
member still has responsibility for supervision
and compliance over these functions
CENTRAL REGISTRATION DEPOSITORY (CRD)
each registered person’s record is on file at CRD
• any disciplinary action is part of the U-4
information and is recorded in that person’s file
• one can find out about a rep’s disciplinary
record at www.finra.org
CONTINUING EDUCATION
Regulatory Element
Firm Element
Regulatory Element
computerized regulatory training session
must be completed on the registrant’s 2nd
anniversary of registration and every 3 years
thereafter
• if not completed within 120 days of
notice, the person’s registration is
suspended; the person cannot be paid
and cannot function as a RR until the
element is completed
Firm Element
annual training plan must be prepared by
member firms to cover relevant compliance
issues
MILITARY DUTY
if a registered rep. is called for active military
duty, that person becomes “inactive” and both
the CE Regulatory and Firm Elements are
suspended
• the employing broker-dealer sends a letter to
CRD along with the rep.’s name, CRD #. and
the date the firm received notification of the
“call to duty”
once the rep. is discharged from military
service, a copy of the discharge is sent to CRD
so that the person’s registration can be reinstated
(basically from the point where he/she left off)
note that the rep. can reassociate with the
same firm or with another broker-dealer at
this point
also note that the firm can still pay the
individual while on military duty and the
rep. can arrange for another rep. at the same
firm to service his/her customers and can
share commissions with that other rep.
the individual must reassociate with the
member firm within 90 days of returning to
civilian life, or the registration is terminated
12 Registration Rules
• lastly, “special inactive status” is granted to
currently registered individuals who are called
to active military duty AND to anyone who is
called up for active military duty in the 24
months following termination of association
with a member
U-5
FORM
Should have happened to Andy Bunce.
terminates registration
• must be filed with FIN RA within 30 days of
termination (to be reinstated, another U-4 must
be completed)
• member firm is required to give a copy of the
U-5 to the representative upon termination and
must state the reason for the termination, either
voluntary or for cause
• if a person leaves a member and associates with
another member:
the person must provide a copy of the U-5 to
the new employer within either:
• 2 business days of request ifU-5 has
been obtained from the ex-employer;
OR
• 2 business days of receipt from the
ex-employer
_with Web-CRD, a member can get this
info electronically once it becomes
available, though the old rule is still on
the books and could still be tested!_
• if bank employee registered through a
separate broker-dealer is terminated. in addition
to the U-5, the member must promptly notify
the bank
• if information becomes known about the
individual that was not included on the U-5, the
member must amend the U-5 within 30 days,
regardless of when the information becomes
discovered (i.e. after 5 years ofleaving the
industry, for instance)
, NOT signed by applicant
• after 2 years being unassociated with a
member finn. individual must re-qualify by
exam
Hanging Licenses ls Prohibited
• FINRA retains jurisdiction over the terminated
person for 2 years
