Ch. 18 Flashcards
True or False: The findings of an arbitration panel may be appealed.
False. Arbitration decisions are final and binding.
Who should a client contact if she finds a discrepancy on her account statement?
She should contact her RR or ask to speak with the firm’s branch manager.
$_____ is the MSRB gift rule limitation.
$100 is the MSRB gift rule limitation (same as FINRA).
On what form does an employing BD report disciplinary actions?
Form U6
Define municipal finance professional (MFP).
An employee of a BD who is engaged in municipal business, solicits municipal business, or supervises other MFPs
True or False: Tickets valued at $500 given to four people are considered excessive.
True. The gift limit considers both the dollar value and number of intended recipients.
An individual may be out of the securities industry for up to _____ years before having to requalify.
2 years
If a mutual fund wholesaler gives away golf balls to BDs, is a record of the gift required to be kept?
Yes. BDs must record gifts given to ensure they do not violate the $100 limit per year.
The BrokerCheck system provides information on individuals who have been registered within the last __ years.
10 years
What is needed for an RR to receive compensation for selling limited partnership interests outside the scope of his BD?
1) Written notice to his employer, 2) Employer approval, and 3) Transaction recorded on the BD’s books
True or False: FINRA must approve all gifts in excess of $100.
False. FINRA approval is not required for gifts. Generally, gifts in excess of $100 are prohibited.
A client was screaming at an RR on the telephone. Is a record of this complaint required to be maintained?
No. Only records related to written complaints are required to be maintained.
What is required if an RR effects a transaction outside her BD, but does NOT receive compensation?
Written notice to her employer
What is the purpose of BrokerCheck?
To allow investors to obtain information about registered individuals in the securities industry
Is a $300 political contribution from a joint checking account a violation if the check is only signed by the MFP?
Yes. To avoid a violation, the check must be signed by both owners.
Form U4 requires an applicant to disclose her employment history and convictions covering the last ____ years.
10 years
__________________________ expenses are not subject to the Gift Rule.
Entertainment/business expenses are not subject to the Gift Rule.
Can a mutual fund distributor pay for a training conference?
Yes. As long as the location is appropriate, this is an acceptable practice.
May an RR have an outside job?
Yes, but she must notify her employer.
For how long may an RR leave the financial services industry without having to requalify?
2 years
A political contribution made from a joint checking account may exceed $250 if signed by ___________.
Both owners
If an individual’s registration is inactive for ____ years, he must requalify by examination.
2 years
Political contribution rules allow (Municipal Finance Professional) MFPs who may vote for a candidate to contribute a maximum of $_____ (per election).
$250
True or False: Failure to file a tax return would trigger an amendment to Form U4.
False
_____________ is when a RR effects a private securities transaction for a syndicator without telling his employer.
Selling Away
True or False: A gambling-related misdemeanor must be reported on Form U4.
Only gambling felonies
Is it acceptable for an RR of one BD to take an employee of another BD to an NFL game costing $300 per person?
Yes. If the RR attends with the recipient, it is considered a legitimate entertainment expense.
Upon receipt, to whom are written complaints forwarded?
Supervising principal
On termination of an RR’s employment, when must Form U5 be filed with FINRA and a copy provided to the RR?
Within 30 days
Would a civil lawsuit filed by a customer against an RR be reported on the RR’s Form U4?
Yes. Arbitration cases and civil lawsuits are reportable events.
If an RR is selling viatical policies on the side without his employer’s knowledge, he is guilty of _______________.
Selling Away
What form must be filed with FINRA at the time an associated person’s registration is terminated?
Form U5
A RR who leaves a member firm has ___ years to become employed by another FINRA firm before he must requalify by exam.
2 years
If a red flag event occurs, what steps must a principal take?
1) Investigate the situation, 2) document the investigation, and 3) pursue the investigation to a conclusion.
How often must clients be notified of the availability of the BrokerCheck system?
Annually
What is the industry policy regarding an RR who sets up an outside business that involves paid public speaking?
This is considered employment and the RR must provide notice to his or her employer.
Political contribution rules allow MFPs NOT able to vote for a candidate to contribute a max. of $___ (per election).
$0
FINRA members are required to file _________ statistical summaries regarding customer complaints.
Quarterly
FINRA maintains information regarding RRs on the _______ system.
CRD System
Where would a customer find information about the disciplinary history of a member firm and its RRs?
Public Disclosure Program (PDP), also known as BrokerCheck
Sara, an RR of a BD, has recently been elected to the board of directors of a corporation. What is Sara required to do?
Provide her BD with written notification of her position on the board
True or False: A gift in excess of $100 is allowed if given to a family member employed by another BD.
True. Gifts to family members are excluded from the Gift Limit Rule.
A BD’s new applicant admits to a prior drug conviction (a misdemeanor). Is he subject to statutory disqualification?
No
True or False: A registered person must be terminated if he is indicted for a statutory disqualification event.
False, only if convicted
Due to the violation of a firm rule, Frank was fined $5,000 and suspended for three weeks. To whom is this reported?
Appropriate SRO (e.g., FINRA)
A BD must file Form U5 with FINRA when a person’s association with that firm ______________.
Ends/ceases
The $100 gift limit may be exceeded if the gift is given to a _______________.
Family member
True or False: Firms must send to FINRA statistics and summary information regarding written customer complaints.
True
If an RR is involved with a charity, does she need to provide written notification to her employer?
If compensation is not received, notification will NOT be required.
Bill, an RR of High Mark Brokerage, has been hired as a bartender on the weekends. What step must Bill take with his BD?
Since Bill will be compensated as a bartender, he must provide written notice to his BD.
Is it acceptable for a BD to give two tickets to a Broadway show (valued at $250) to an employee of another BD?
No. It is unacceptable. However, the gift limit would not be violated if the RR attends with the recipient.
What is required of an employee seeking part-time employment outside of her brokerage firm?
Firm notification before the activity starts
Omitting a _________ fact in an application or report to an SRO is grounds for statutory disqualification.
Material
Gifts exceeding $_____ are considered excessive.
$100
Hank, an RR, was charged with misdemeanor DUI last week. Is this reported to FINRA?
No, since it was a misdemeanor
True or False: The manager of a syndicate giving each of its members a gift of $250 would violate the gift rule.
True. The maximum gift is $100 per person/per year and includes gifts between member firms.
True or False: An associated person whose registration is terminated must sign Form U5.
False, signature is NOT required
Dan, an RR of a BD, is the coach of his son’s Little League team. Must Dan notify his BD of his coaching position?
If no compensation is received (for hobbies or charitable service), written notification is NOT required.
To whom are written or electronically-sent grievances (complaints) forwarded?
Supervisor
What is the penalty for political contributions that violate the rule?
A two-year ban on obtaining negotiated underwriting business from the issuer
___________ is FINRA’s tool for allowing public access to certain information found in the CRD.
BrokerCheck
True or False: FINRA notification is NOT required if an associated person is disciplined by another SRO.
False. FINRA must be promptly notified of such disciplinary action.
What should an RR do if she receives a written complaint?
Immediately forward it to her manager
Do all outside activities of an RR require notification to an employer?
No. Notification is only required for employment activities, not hobbies.
Hank, an RR, was arrested and charged with grand theft (a felony). Is this reported to FINRA?
Yes. Since the charge involves a felony, SRO notification is required.
To apply for a securities license, one must file Form _____ with FINRA.
U4
If an RR leaves a BD and later wants to return without being required to requalify, she must do so within ____ years.
2 years
True or False: Any response provided to clients regarding a complaint must be in written form.
False; no requirement that responses be written
If an RR plans to engage in outside activities and receive compensation, who must the RR notify?
The RR’s firm must receive prior written notification from a principal. Notification to regulators isn’t required.
True or False: Complaints may be oral or written, including e-mail or text message.
False. A complaint is any written communication in which a customer complains about the activities of a member firm.
What is the use of Form U6?
Form U6 reports disciplinary actions against registered representatives and firms, as well as final arbitration awards.
If an associate requests a copy of his U5, how long does the member firm have to respond?
2 business days
Form U5 is filed with FINRA within ____ days of resignation or termination of association with a member firm.
30 days
Would a fine assessed by the CFTC (commodities-related) be reported on an RR’s Form U4?
Yes
What is required of an RR participating in a private securities transaction where compensation is received?
Written approval and recording the transaction on the books of the firm
Who is the associated person who primarily engages in or supervises municipal securities business?
Municipal Finance Professional (MFP)
If a written complaint is received from a customer, what must be kept in the firm’s complaint file?
The original complaint, the firm’s response, as well as any action taken
True or False: If a BD receives a written complaint from a client, it may be ignored if the complaint seems baseless.
False. Failing to respond to a formal written complaint is prohibited.
What is required for an agent to receive compensation for effecting transactions outside his BD?
1) Written notice and response from, his employer, 2) Employer approval and 3) Transactions recorded on the BD’s books
After resignation of registration, how long does FINRA’s jurisdiction last?
2 years
What is the statute of limitations for arbitration?
6 years
What is an MFP?
Municipal Finance Professional (those subject to political contribution rules)
By signing Form U4, to what is a person agreeing in the event of an industry dispute?
His willingness to accept arbitration, rather than litigation, to settle a dispute
Is an agent permitted to execute securities trades for compensation and not record the trades on his BD’s books and records?
No. This is referred to as “selling away.”
Written customer complaints should be documented, investigated, and responded to by a __________.
Principal
Define selling away.
The execution of transactions by an associated person outside his employment with a member firm
True or False: An RR who is convicted for shoplifting is allowed to work for a member firm in an unregistered capacity.
False. An RR who is convicted for a statutory disqualification event is not allowed to work for a B/D in any capacity.
What should a firm do if a customer complains that she has received a forged account statement?
Complaints alleging theft or forgery require an investigation and must be reported to FINRA within 30 calendar days.
