Ch 5 Deck 6 Flashcards
A person cannot guarantee a customer against loss in connection with
a securities transaction or in a securities account.
Agents who share in customer accounts must have the approval of
the company and the customer.
Agents who share in customer accounts can share in profits and losses only
in direct proportion to the amount contributed
The direct proportion requirement for agents who share in customer accounts does not apply to immediate family including
Immediate family parents parents-in-law spouses children
The direct proportion requirement for agents who share in customer accounts does not apply to investment advisers who
receive compensation based on profits or gain in an account (with prior written authorization)
Registered representatives can only take a loan from a customer if
- the member firm has written procedures allowing lending agreements
AND - the member pre-approves the loan in writing.
Written approval from the customer is not enough.
A permissible relationship for lending by a customer to a member is that the customer is a member
of the registered reps immediate family
IF includes in this case
grandparents, grandchildren, cousins, aunts, uncles, nieces, and nephews
A permissible relationship for lending by a customer to a member is that the customer is in the
business of lending money
A permissible relationship for lending by a customer to a member is if the customer and the registered rep
work at the same firm
A permissible relationship for lending by a customer to a member is if the lending agreement is based on
a personal or business relationship outside of the broker-customer relationship
In the FINRA definition of “customer complaint” the complaint must be in the form of
a written statement
In the FINRA definition of “customer complaint” the complaint must allege a grievance involving the activities of persons
associated with a member firm
In the FINRA definition of “customer complaint” the grievance must be in connection with
the solicitation or execution of a securities transaction
All client complaints must be kept in writing in either
in a separate file
OR
with a clear reference to the location of those files.
A member or associated person is required to report to FINRA within 30 days a complaint involving a member or associated person subject to
statutory disqualification
A member or associated person is required to report to FINRA within 30 days A complaint claim in which damages exceed
$15,000 for an associated person ($25,000 for a member)
FINRA has the authority to investigate members and associated persons for violations of both FINRA regulations and
Federal securities laws and regulations
FINRA’s powers include compelling
testimony
FINRA’s powers include requiring
production of documents
FINRA’s powers include inspecting
books, records and accounts
FINRA’s powers include ability to share
information with SEC, other SROs, or state regulators
Possible Sanctions that FINRA can impose:
Censure
Fines
Membership or registration suspension, expulsion, or cancellation
Prohibition of association with all members
Cease and desist order
Any other fitting sanction
Arbitration is a process that is used to settle disputes between:
all combinations of:
Members (and members, etc)
associated persons
Clients
In arbitration, one or more arbitrators decide a
verdict.
In arbitration there is no
judge or jury
Customers cannot be forced into arbitration, but an arbitration clause is often required when
opening a new account
Firms are required to point out that U4’s contain
a pre-dispute clause
clause in which employees agree to settle disputes (with their firm or a customer) via arbitration
pre-dispute clause
signing a pre-dispute clause gives up the right to
sue
In arbitration, awards are
binding AND public
In arbitration, discovery is
more limited than law suits
In arbitration, arbitrators do not have to explain
their reason for the award
In arbitration, Arbitrators can work
in the securities business or may be public arbitrators
In arbitration, Typically, the statute of limitations is
6 years from the event
In arbitration, arbitration awards cannot
imprison
In arbitration Awards need to be paid within
30 days or they accrue interest
Simplified arbitration is appropriate for claims
claims involving less than 50,000
In simplified arbitration, Single arbitrator gives a binding decision within
30 days
Member firms or associated persons can only give to or receive from individuals in relation to the business
$100 per year
$100 limit does not extend to personal gifts such as
wedding gifts or promotional items of minimum value
$100 limit does not extend to gifts to
Employees
$100 limit does not extend to Sporting events if
You go with the person, Then it is considered business entertainment.
FINRA prohibits firms from giving anything of value to a media person so they’ll write something to influence
The value of a security
The exception to firms giving something of value to media persons is
Clearly paid advertising
OR
Disclosure of compensation by media person
Gifts which do not qualify for the personal gift exception to the $100 limit are
Gifts paid for by the firm
CHRISTMAS GIFTS
The action taken in response to a customer complaint must be
Written and filed
A member or associated person is required to report to FINRA within 30 days customer complaints regarding
forgery
theft
misappropriation of funds
A member or associated person is required to report to FINRA within 30 days complaints involving violations of
securities law or regulations
Complaint records are kept for
4 years
Complaints must be kept in a file at the
OSJ
Complaint files must state the resolution
in writing
Complaint files must be signed by
the principal
All complaint information must be filed with FINRA within
15 days of the end of the quarter
In applying penalties, FINRA cannot
Imprison
For claims involving a customer, the majority of the arbitrators must be
public arbitrators
For claims involving a customer involving 50K or less, the panel will have how many arbitrators?
one arbitrator
For claims involving a customer between 50K and 100K, have how many arbitrators?
one arbitrator unless the parties agree in writing to three
For claims involving a customer in excess of 100K have how many arbitrators
three arbitrators unless the parties agree in writing to one
If the customer is the claimant, the customer may demand that a panel of three arbitrators be composed
entirely of public arbitrators instead of just a simple majority
