Chapter 01 : Registration and Supervision Flashcards
1
Q
Identify the acronym: SRO
A
Self-Regulatory Organization (such as FINRA)
2
Q
What must be done by the carrying firm when opening an account for an employee of another Finra member firm?
A
The carrying firm must receive written consent from the employer
3
Q
Hearing Panel findings may be appealed to the ___________________________,then the _____, and then ________________.
A
Hearing Panel findings may be appealed to the National Adjudicatory Council (NAC), then the SEC, and then federal court.
4
Q
What is the continuing education (CE) requirement of an RR who is currently serving in the military?
A
His registration is in Special Inactive Status and the CE requirement is halted.
5
Q
May a Series 6 registered person engage in the sale of closed-end funds?
A
Only if the product is being sold in a primary (new issue) distribution.
6
Q
May FINRA send an RR to prison?
A
No
7
Q
What is FINRA?
A
The Financial Industry Regulatory Authority; created by the merger of the NASD and NYSE regulatory authorities
8
Q
True or False: A person whose registration is terminated is still subject to FINRA jurisdiction for two years.
A
True
9
Q
Form U5 is filed with FINRA within ____ days of resignation or termination of association with a member firm.
A
Form U5 is filed with FINRA within 30 days of resignation or termination of association with a member firm.
10
Q
List some of the items found on an associated person’s Form U4.
A
Personal data, address, 10-year employment history, personal bankruptcy within the last 10 years, SEC or SRO discipline
11
Q
Jill, an RR, leaves her BD and takes a position with a new BD. Is she again subject to the fingerprinting requirement?
A
Yes
12
Q
What is the statute of limitations for arbitration?
A
6 years
13
Q
True or False: An office established as a back-up, to be used during emergency situations, is a branch office.
A
False. A temporary office used as part of a BD’s contingency plan is not considered a branch office.
14
Q
Within a firm, who performs the supervisory functions as they pertain to options?
A
The Registered Options Principal (ROP)
15
Q
If a municipal representative is convicted for forgery, it would be reported to ______.
A
If a municipal representative is convicted for forgery, it would be reported to FINRA.
16
Q
What are the justifiable reasons for denying an individual’s registration?
A
Conviction for any felony or securities-related misdemeanor within the last 10 years
17
Q
True or False: A Series 6 representative may only engage in primary market offerings.
A
True
18
Q
A producing branch manager must be supervised by someone who is _______ to, and ____________ of, that manager.
A
A producing branch manager must be supervised by someone who is senior to, and independent of, that manager.
19
Q
If not registered with a firm during military service, when does an RR’s two-year expiration clock begin counting down?
A
90 days after military discharge
20
Q
True or False: Four gifts, valued at $30 each, given to one person would be excessive.
A
True. Since gifts are aggregated, the $100 limit would be exceeded.
21
Q
May a Series 6 registered person engage in option trades?
A
No
22
Q
True or False: Blue-Sky Laws apply to broker-dealers and agents operating within a state.
A
True
23
Q
May a customer be forced to use arbitration?
A
No, but signed pre-dispute arbitration agreements are binding.
24
Q
True or False: A non-OSJ branch office may be supervised by either a registered representative or a principal.
A
True. Firms may use a principal or designate one of the RRs to be in charge.
25
How often are registered personnel required to participate in a compliance meeting?
Annually
26
True or False: Rule violations are handled by the Code of Arbitration.
False. Rule violations are covered by the Code of Procedure.
27
What is an RR's concern if her client moves to a new state?
Ensuring that the RR is properly registered in the new state (Uniform Securities Act)
28
True or False: RRs currently serving in the military can receive a CE waiver.
True
29
When a minor dispute is handled through simplified arbitration, is the ruling final and binding?
Yes, all arbitration decisions are final.
30
True or False: Decisions arising from arbitration may be appealed to the federal court system.
False. Decisions are binding on both parties and may NOT be appealed.
31
What is required of an employee seeking part-time employment outside of her brokerage firm?
Firm notification before the activity starts
32
True or False: The Code of Procedure can be used by a customer against a member firm to resolve a monetary dispute.
False. This situation would be handled under the Code of Arbitration.
33
Ben terminates his registration with his BD. If hired by another BD, when must the firm review his Form U5?
Within 60 days of Ben's filing of a new Form U4
34
A location effects fewer than 25 securities trades annually. What is this location considered?
A non-branch location
35
What rules govern the registration of an issue in any state in which it will be offered?
Blue-Sky Laws
36
What two types of securities registrations would allow an individual to offer variable annuities?
Series 6 or Series 7
37
How can a client access information maintained on the Central Registration Depository (CRD)?
Either through a toll-free number or through FINRA's Web site.
38
__________________________ expenses are not subject to the Gift Rule.
Entertainment/business expenses are not subject to the Gift Rule.
39
What products may be sold by a municipal securities representative?
Municipal bonds and 529 plans, but NOT municipal bond funds
40
What types of employment disputes may be settled through the court system, rather than using arbitration?
Employment discrimination and sexual harassment disputes
41
A branch office must be inspected every ____________.
A branch office must be inspected every three years.
42
A client sends a letter to his BD alleging unsuitable recommendations. What is the letter and what steps are taken?
The letter is a written complaint and must be reviewed by a principal. Firms submit periodic complaint reports to FINRA.
43
Under the Code of Procedure, a sanction becomes effective ____ days after the firm has received final notice.
Under the Code of Procedure, a sanction becomes effective 30 days after the firm has received final notice.
44
A representative works from and meets clients at his home. What is the RR's residence considered?
A branch office
45
For how long may an RR leave the financial services industry without having to requalify?
2 years
46
Any fine against an RR for greater than $______ must be reported to _______.
Any fine against an RR for greater than $2,500 must be reported to FINRA.
47
How many days are representatives given to complete the Regulatory Element of Continuing Education?
120 days from the anniversary date of their initial securities registration
48
List two activities that non-registered personnel may perform.
Sending invitations to company-sponsored events and distributing retail communication
49
Is a Series 9/10 registration sufficient to manage a brokerage underwriting department?
No. A Series 24 is required for general securities underwriting, while Series 53 is required for municipal underwriting.
50
To apply for a securities license, one must file Form _____ with FINRA.
To apply for a securities license, one must file Form U4 with FINRA.
51
After resignation of registration, how long does FINRA's jurisdiction last?
Two years
52
An individual may be out of the securities industry for up to _____ years before having to requalify.
An individual may be out of the securities industry for up to two years before having to requalify.
53
May an RR have an outside job?
Yes, but she must notify her employer.
54
Firm Element continuing education is subject to ______________ to show completion, but not ________ with FINRA.
Firm Element continuing education is subject to recordkeeping to show completion, but not filing with FINRA.
55
What is the maximum fine that may be imposed by FINRA?v
Unlimited
56
Upon receiving a second notice from the Dept. of Enforcement regarding a complaint, firms must respond within ____ days.
Upon receiving a second notice from the Dept. of Enforcement regarding a complaint, firms must respond within 14 days.
57
True or False: RRs serving in the military may receive commissions.
True. However, the RR's clients' accounts will be serviced by another RR.
58
Generally, how are minor rule violations handled?
A sanction/fine is offered, with the respondent accepting the offer and waiving his right to an appeal.
59
What actions may the hearing panel take regarding rule violations?
Censure, fine, suspension, request to requalify, or expulsion of the respondent
60
True or False: Form U4 provides information regarding the schools the associated person has attended.
False
61
Simplified arbitration may be used if a dispute does not exceed $_______.
Simplified arbitration may be used if a dispute does not exceed $50,000.
62
May an RR force a client into an arbitration proceeding?
No. Clients are not bound by arbitration unless they have given prior consent.
63
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.
64
Simplified arbitration procedures are used for monetary disputes not exceeding $__________.
Simplified arbitration procedures are used for monetary disputes not exceeding $50,000.
65
What is the name of a location used occasionally, and always by appointment, to meet with customers?
An office of convenience
66
From a registration standpoint, what may be the result of a DUI felony conviction?
Statutory disqualification
67
True or False: Failure to file a tax return would trigger an amendment to Form U4.
False
68
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
69
Trades executed outside the scope of an RR's employment with a BD are known as ___________________ transactions.
Trades executed outside the scope of an RR's employment with a BD are known as private securities transactions.
70
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
71
True or False: Predispute Arbitration Agreements may limit awards.
False
72
FINRA maintains information regarding RRs on the _______ system.
FINRA maintains information regarding RRs on the CRD (Central Registration Depository) system.
73
As it relates to securities law, what does the acronym USA mean?
The Uniform Securities Act, also known as the blue-sky laws
74
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.
75
Identify the acronym: CRD
Central Registration Depository
76
The hearing panel may not impose a ___________________ due to rule violations.
The hearing panel may not impose a prison sentence due to rule violations.
77
True or False: FINRA regulates accounts of member firm employees opened at another firm.
True. The rule also covers accounts for the employee's spouse or dependent children.
78
True or False: Firm Element CE must be completed every three years after initial qualification.
False. Participation in firm element CE is an annual requirement.
79
When must RRs complete the Regulatory Element of Continuing Education?
On the 2-year anniversary of their registration and every 3 years thereafter.
80
True or False: Firm Element Continuing Education requires BDs to update employees on job and product-related subjects.
True
81
For accounts opened for employees of another member firm, what is provided to the individual's employer upon request?
Duplicate confirmations and statements
82
What should an RR do if she receives a written complaint?
Immediately forward it to her manager
83
If an associate requests a copy of his U5, how long does the member firm have to respond?
Response must be made within 2 business days of request.
84
Identify the acronym: COP
Code of Procedure
85
What type of compensation may a Series 11 representative receive?
Wage, salary, bonus, but not commissions
86
Whose approval is required before changing or updating customer account information?
A supervisory principal
87
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.
88
In a simplified industry arbitration, __________________ decides the case without a hearing.
In a simplified industry arbitration, one non-public arbitrator decides the case without a hearing.
89
When are charges related to DUI or shoplifting required to be reported to FINRA?
If it results in a felony charge, reporting is required. If it results in a misdemeanor charge, it is not reported.
90
A non-branch office must be reviewed on a ________ cycle.
A non-branch office must be reviewed on a periodic cycle.
91
How often are summaries of written customer complaints filed with FINRA?
Quarterly
92
What restrictions are placed on an RR who has been suspended by a regulator?
She may not receive commissions or other compensation, and may not perform clerical work
93
True or False: A general securities principal is responsible for financial reporting.
False, a Financial and Operations Principal performs that function.
94
The ______ is the office providing final approval of retail communication.
The OSJ (Office of Supervisory Jurisdiction) is the office providing final approval of retail communication.
95
True or False: An indictment on a felony charge is reportable to FINRA.
True
96
Who approves option retail communication?
A Registered Options Principal (ROP)
97
While in the military, an RR has special inactive status. Must he return to the same BD to obtain registration benefits?
No, he may return to his previous BD or go to a new firm.
98
True or False: At the time of registration termination, the employee must sign Form U5.
False. A copy of Form U5 is provided to the terminated employee, but his signature is not required.
99
To not be a branch office, a location may not be used for securities business more than ____ business days per year.
To not be a branch office, a location may not be used for securities business more than 30 business days per year.
100
A BD must file Form U5 with FINRA when a person's association with that firm ______________.
A BD must file Form U5 with FINRA when a person's association with that firm ends/ceases.
101
True or False: FINRA reporting is required if an RR associates with a person who would be subject to disqualification.
True
102
True or False: The findings of an arbitration panel may be appealed.
False. Arbitration decisions are final and binding.
103
May a Series 6 registered person engage in the sale of individual stocks or bonds?
No. Series 6 RRs may only sell packaged products, such as mutual funds and annuities.
104
At what level does an internal fine become reportable to FINRA?
$2,500
105
Form U4 contains details about settlements exceeding $______ related to complaints, arbitration, or civil litigation.
Form U4 contains details about settlements exceeding $15,000 related to complaints, arbitration, or civil litigation.
106
True or False: The industry requirement for fingerprinting extends to back office personnel.
True
107
When arbitration involves public customers, __________ of arbitrators must be from outside the securities industry.
When arbitration involves public customers, a majority of arbitrators must be from outside the securities industry.
108
Gifts exceeding $_____ are considered excessive.
Gifts exceeding $100 are considered excessive.
109
If a trainee fails his Series 6 examination on the third attempt, he must wait _____ months to re-test.
If a trainee fails his Series 6 examination on the third attempt, he must wait 6 months to re-test.
110
How many people may work from a primary residence without it being considered a branch office?
One person or any immediate family members who also reside at the location
111
What is required for an RR to share in a client's profits or losses?
Approval from the client and firm is required and any sharing must be in proportion to the money invested
112
A penalty imposed by a hearing panel is generally effective ____ days after assessment.
A penalty imposed by a hearing panel is generally effective 30 days after assessment.
113
True or False: Only registered personnel are required to be fingerprinted.
False. Any individuals handling funds or securities are required to be fingerprinted.
114
A mutual fund wholesaler may provide non-cash compensation up to $____ per person, per year.
A mutual fund wholesaler may provide non-cash compensation up to $100 per person, per year.
115
Under FINRA rules, what office regulates other offices?
An Office of Supervisory Jurisdiction (OSJ)
116
True or False: Mediation is often cheaper and quicker than an arbitration proceeding.
True
117
4
| The______________________ covers disciplinary actions by FINRA against member firms and their employees.
The Code of Procedure covers disciplinary actions by FINRA against member firms and their employees.
118
True or False: A General Securities Principal may approve an option account.
False. The approval must be provided by an ROP.
119
May a firm conduct its annual compliance meeting via webcast?
Yes, provided participants have the ability to have questions answered on a timely basis.
120
True or False: All employee-to-employer disputes must be submitted to arbitration.
False. Sexual harassment and discrimination cases may be taken to court.
121
When is a firm required to acknowledge a written client complaint?
Within 15 days of receipt
122
What is the most severe non-monetary penalty that may be imposed by a FINRA Hearing Panel?
Expulsion from FINRA
123
If a qualification exam has been failed for the third time, what waiting period applies?
After the third unsuccessful attempt, the waiting period is 180 days after each additional attempt.
124
May an RR have an outside brokerage account?
Yes, but the carrying firm must notify the RR's employer.
125
44
| True or False: A broker's broker deals with other BDs, but does not deal with the public or underwrite new issues.
True
126
If a person fails an exam three times, how long must he wait before retesting?
180 days
127
Registration status becomes __________ if the Regulatory Element of CE is not completed within the prescribed period.
Registration status becomes inactive if the Regulatory Element of CE is not completed within the prescribed period.
128
What type of registration designation is required to manage an OSJ?
A principal designation
129
The statute of limitations for submitting an arbitration claim is ___ years from the occurrence of the event.
The statute of limitations for submitting an arbitration claim is 6 years from the occurrence of the event.
130
True or False: A representative currently serving in the military may receive commissions during this period.
True
131
An RR's employer is referred to as a ________________.
An RR's employer is referred to as a Broker-Dealer (BD).
132
If a trainee fails his Series 6 examination on the first attempt, he must wait _____ days to re-test.
If a trainee fails his Series 6 examination on the first attempt, he must wait 30 days to re-test.
133
After receiving notice from the Dept. of Enforcement regarding a complaint, the firm must respond within ____ days.
After receiving notice from the Dept. of Enforcement regarding a complaint, the firm must respond within 25 days.
134
Identify the acronym: RR
Registered Representative
135
U4 and U5 forms must be retained for ______ years after the associated person's employment is terminated.
U4 and U5 forms must be retained for three years after the associated person's employment is terminated.
136
A branch that supervises one or more non-branch locations must be inspected ____________.
A branch that supervises one or more non-branch locations must be inspected annually.
137
The person supervising a producing branch manager must be either _______ to, or ____________ of, the manager.
The person supervising a producing branch manager must be either senior to, or independent of, the manager.
138
True or False: A difference between arbitration and mediation is that mediation is binding and arbitration is not.
False. Arbitration is binding on all parties, whereas mediation is not.
139
True or False: An employee of a BD who wants to open an account with another BD must obtain her employer's permission.
False. The employer must be provided with written notification.
140
Industry disputes are handled through ______________.
Industry disputes are handled through Arbitration.
141
Any awards granted by an arbitrator must be paid within how many days?
30
142
True or False: All employees of a BD are required to be fingerprinted.
False. Clerical employees are not fingerprinted if they do not handle customer accounts, assets, or books and records.
143
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.
144
If a firm receives a fine exceeding $______, FINRA reporting is required.
If a firm receives a fine exceeding $25,000, FINRA reporting is required.
