Ch 5 Deck 6

Question 1

A person cannot guarantee a customer against loss in connection with

Answer 1

a securities transaction or in a securities account.

Question 2

Agents who share in customer accounts must have the approval of

Answer 2

the company and the customer.

Question 3

Agents who share in customer accounts can share in profits and losses only

Answer 3

in direct proportion to the amount contributed

Question 4

The direct proportion requirement for agents who share in customer accounts does not apply to immediate family including

Answer 4

Immediate family
parents
parents-in-law
spouses
children

Question 5

The direct proportion requirement for agents who share in customer accounts does not apply to investment advisers who

Answer 5

receive compensation based on profits or gain in an account (with prior written authorization)

Question 6

Registered representatives can only take a loan from a customer if

Answer 6

1. the member firm has written procedures allowing lending agreements
   AND
2. the member pre-approves the loan in writing.

Written approval from the customer is not enough.

Question 7

A permissible relationship for lending by a customer to a member is that the customer is a member

Answer 7

of the registered reps immediate family
IF includes in this case
grandparents, grandchildren, cousins, aunts, uncles, nieces, and nephews

Question 8

A permissible relationship for lending by a customer to a member is that the customer is in the

Answer 8

business of lending money

Question 9

A permissible relationship for lending by a customer to a member is if the customer and the registered rep

Answer 9

work at the same firm

Question 10

A permissible relationship for lending by a customer to a member is if the lending agreement is based on

Answer 10

a personal or business relationship outside of the broker-customer relationship

Question 11

In the FINRA definition of “customer complaint” the complaint must be in the form of

Answer 11

a written statement

Question 12

In the FINRA definition of “customer complaint” the complaint must allege a grievance involving the activities of persons

Answer 12

associated with a member firm

Question 13

In the FINRA definition of “customer complaint” the grievance must be in connection with

Answer 13

the solicitation or execution of a securities transaction

Question 14

All client complaints must be kept in writing in either

Answer 14

in a separate file
OR
with a clear reference to the location of those files.

Question 15

A member or associated person is required to report to FINRA within 30 days a complaint involving a member or associated person subject to

Answer 15

statutory disqualification

Question 16

A member or associated person is required to report to FINRA within 30 days A complaint claim in which damages exceed

Answer 16

$15,000 for an associated person ($25,000 for a member)

Question 17

FINRA has the authority to investigate members and associated persons for violations of both FINRA regulations and

Answer 17

Federal securities laws and regulations

Question 18

FINRA’s powers include compelling

Answer 18

testimony

Question 19

FINRA’s powers include requiring

Answer 19

production of documents

Question 20

FINRA’s powers include inspecting

Answer 20

books, records and accounts

Question 21

FINRA’s powers include ability to share

Answer 21

information with SEC, other SROs, or state regulators

Question 22

Possible Sanctions that FINRA can impose:

Answer 22

Censure
Fines
Membership or registration suspension, expulsion, or cancellation
Prohibition of association with all members
Cease and desist order
Any other fitting sanction

Question 23

Arbitration is a process that is used to settle disputes between:

Answer 23

all combinations of:
Members (and members, etc)
associated persons
Clients

Question 24

In arbitration, one or more arbitrators decide a

Answer 24

verdict.

Question 25

In arbitration there is no

Answer 25

judge or jury

Question 26

Customers cannot be forced into arbitration, but an arbitration clause is often required when

Answer 26

opening a new account

Question 27

Firms are required to point out that U4’s contain

Answer 27

a pre-dispute clause

Question 28

clause in which employees agree to settle disputes (with their firm or a customer) via arbitration

Answer 28

pre-dispute clause

Question 29

signing a pre-dispute clause gives up the right to

Answer 29

sue

Question 30

In arbitration, awards are

Answer 30

binding AND public

Question 31

In arbitration, discovery is

Answer 31

more limited than law suits

Question 32

In arbitration, arbitrators do not have to explain

Answer 32

their reason for the award

Question 33

In arbitration, Arbitrators can work

Answer 33

in the securities business or may be public arbitrators

Question 34

In arbitration, Typically, the statute of limitations is

Answer 34

6 years from the event

Question 35

In arbitration, arbitration awards cannot

Answer 35

imprison

Question 36

In arbitration Awards need to be paid within

Answer 36

30 days or they accrue interest

Question 37

Simplified arbitration is appropriate for claims

Answer 37

claims involving less than 50,000

Question 38

In simplified arbitration, Single arbitrator gives a binding decision within

Answer 38

30 days

Question 39

Member firms or associated persons can only give to or receive from individuals in relation to the business

Answer 39

$100 per year

Question 40

$100 limit does not extend to personal gifts such as

Answer 40

wedding gifts or promotional items of minimum value

Question 41

$100 limit does not extend to gifts to

Answer 41

Employees

Question 42

$100 limit does not extend to Sporting events if

Answer 42

You go with the person, Then it is considered business entertainment.

Question 43

FINRA prohibits firms from giving anything of value to a media person so they’ll write something to influence

Answer 43

The value of a security

Question 44

The exception to firms giving something of value to media persons is

Answer 44

Clearly paid advertising
OR
Disclosure of compensation by media person

Question 45

Gifts which do not qualify for the personal gift exception to the $100 limit are

Answer 45

Gifts paid for by the firm

CHRISTMAS GIFTS

Question 46

The action taken in response to a customer complaint must be

Answer 46

Written and filed

Question 47

A member or associated person is required to report to FINRA within 30 days customer complaints regarding

Answer 47

forgery
theft
misappropriation of funds

Question 48

A member or associated person is required to report to FINRA within 30 days complaints involving violations of

Answer 48

securities law or regulations

Question 49

Complaint records are kept for

Answer 49

4 years

Question 50

Complaints must be kept in a file at the

Answer 50

OSJ

Question 51

Complaint files must state the resolution

Answer 51

in writing

Question 52

Complaint files must be signed by

Answer 52

the principal

Question 53

All complaint information must be filed with FINRA within

Answer 53

15 days of the end of the quarter

Question 54

In applying penalties, FINRA cannot

Answer 54

Imprison

Question 55

For claims involving a customer, the majority of the arbitrators must be

Answer 55

public arbitrators

Question 56

For claims involving a customer involving 50K or less, the panel will have how many arbitrators?

Answer 56

one arbitrator

Question 57

For claims involving a customer between 50K and 100K, have how many arbitrators?

Answer 57

one arbitrator unless the parties agree in writing to three

Question 58

For claims involving a customer in excess of 100K have how many arbitrators

Answer 58

three arbitrators unless the parties agree in writing to one

Question 59

If the customer is the claimant, the customer may demand that a panel of three arbitrators be composed

Answer 59

entirely of public arbitrators instead of just a simple majority