Chapter 1 Flashcards
The mission of the SEC
Is to protect investors, maintain orderly fair and efficient markets and to facilitate capital formation
Finra new member
Begins with new member application thru Finra firm gate way. Opens a 180 day application review period
Finra Has Obligation To:
Interpret rules, compliance, investigate members and AP’s, dispute resolutions, CRD, EXAMS, membership, Fees, TRF, OTCBB, ORF, TRACE, ADF, Market Data
Broker
any person engaged in the business of effecting transaction in accounts.
DBA
Doing Business as is acceptable provided the name is filled with Finra.
Entitled
Satisfy requirement to apply online. Includes notarized form BD
FORM BD
BD’s are required to promptly ( no later than 30days) update form BD whenever form is inaccurate or incomplete,
FORM CMA
Change in Ownership, control or business operations
NASD 1014 Standards for admission
Biz plan, org chart, financial projections trial balance, bal sheet net capital comp. Supervisory system. Statement that applicant and AP’s comply with state, fed and finra laws. Clearing and banking, biz facilities Comms, list all AP’s. Form BD , U$ Fees
All Applicants for memberships
Except for sole proprietorship must have a t least 2 officers registers as AP’s. Limited to sale of Inv Company products, 2 series 26 qualified people
DMR issues a written decision within how many days of the premembership interview
30 days
DMR issues decisions within 30 days to
Grant application
Grant with restrictions
Deny
FORM BR
30 days. to register or notice file their branch offices in the appropriate jurisdiction and/or with SROs
Info : Supervisor in charge, located physically at branch, location, OSJ telephone number . BD or IA, Jurisdication.
OSJ
Finra Requires there be at least one Principle at each OSJ. The rules do not require the PIC to be a principal at all non OSJ branch offices.
Location must be under supervision of OSJ.
Finra notified within 30days
FINRA or SRO is required by SEC to conduction inspection of newly registered firm with how many months
6 months
FORM MC-400
member firm wishes to sponsor a person who was permanently barred or convicted of a felony
Tier 1
Member firms successful in petition to employ otherwise disqualified person must pay a fee of $1500 annually
Tier 2
Member firms successful in petition to employ otherwise disqualified person must pay a fee of $1000 annually
If Finra or SEC suspends an AP, the member cannot:
Pay salary, commission, profit or any other remuneration that results directly or indirectly from any transaction may have earned during the suspension
Rule 9522
Department of member regulation has authority to approve an applicant to remain in a clerical or ministerial capacity. Still nust fiel a form MC-400. can appeal to NAC
Form 4530
promptly but later than 30 days a violation of Securities laws. Complaint alleging theft, expelled by another SRO, plead guilty to any criminal offense( no traffic violations), withholding of commissions or fines in excess of $2500. 15k in any securities or commodities fine( 25k if its the member itself)
Form BDW
used to withdraw from registration as a broker dealer. Becomes effective on 60th day from filing unless SEC deems necessary to public interest.
A firm operating under restrictions is required to request and obtain finra approval to remove or modify restriction: Before or After
BEFORE
FORM BD amendments
within 30 days, address, phone numbers, ownership, officers, branch openings or closings
After being expelled by the NYSE, a firm may be granted membership in FINRA if it files FORM BD and a form U-4 for each associated person. True or False
False. A firm will statutorily denied member ship if it has been expelled by another SRO
A restriction agreement prohibiting certain activities of a member firm remain effective through out the life of the firm
True. A membership agreement remains in force including any restriction agreement unless the firm changes its line of business and satisfies rules 1014 and 1017
Member firms are obligated to notify finra after merger with another company
False. Membership agreement stipulates that a firm must notify FINRA 30 days prior to an acqusition or merger with another member firm
Member firms are obligated to notify finra within 30days if an AP is subject to a customer complaint
True Member firms are obligated under rule 4530 to promptly ( no later than 30 days) report an event found to have violated securities lasw or rules of any country
If a member firm fails to pay fees and assessments in a timely manner, its membership may be revoked or suspened upon 21 days written notice
TRUE
How long must a candidate wait if fails a test.
Candidate must wait 30 days before retesting Following 3 or more attempts the wait is 180 days
Series 6
Allows holder to offer investment Company Products and variable contracts BY PROSPECTUS, Includes closed end funds by prospectus only. May only sell as a new issue, once trade on secondary market the need a 7 or 62
Series 3
Commodity or Futures, both physical and financial futures are not securities.
Series 11
Sales assistant. Comp must be salary no comms or per transaction…can pay bonuses
Series 22
DPP
Series 57
trade equites, OTC equity and Covertible debt
Series 62
Corporate securities, common stockm preferred stock, bonds and closed end funds
Series 86
research Analysis and valuation
Series 87
research rules and regs
Series 99
Senior managers with direct responsibilty to supervise or manage client on boarding, fund collection, re-investment
In how many days register as a principal if a RR is given addtl responsibilities such as supervision, training.
90 days or firm and individual subject to finra santctions and fines
Series 4
options principal
Series 26
qualifies to sell of investment company products and variable products offered by insurance cvompanies
Series 27
Prepare firms financials such as FOCUS Part II . the FINOP is responsible to perform the weekly reserve computation, maintenance of books and records. Only principal with no prerequisite
Series 79
Investment banking
Series 51
Muncipal fund securities, 529 and local government investment pools
Series 53
Muni Principal
Series 9/10
sales supervisor.
Series 16
analyst for NYSE to approve research for general investing public
Series 14
Compliance supervisor of 10 or more people
NASD RULE 1160
requires firms to update contact info promptly but no later than 30 daysand update info theu the FINRA Gateway with 17 bd’s after the end of the calendar year.
U-4
Name, SS#, Birth date, 10 year history of biz, Residence for 5 years, Denial suspension, Temporary or permanent injunctions, bankruptcy, fidelity bond refusal, alias.
Statutory disqualification within 10 dyas
U-4 Marital status
Info on marital status or educational background is not required. Original signatures must be obtained with the initial form
Employment verification u-4
Principal must verify for the prior 3 years. Signed U4 no pre-registration search written consent form is needed
AP’s
Even outside directors or partners whose only contribution is capital are considered associated persons of the broker dealer.
Form u-5 how long for firm to file?
Member has 30 days to file after termination. A person terminated/resigns subject to complaint filings for 2 years. Strictly FINRA still subj to state and fed laws
Permitted to Resign Box U-5
if checked all relevant details must be included. updates must be within 30 days. No time limit on how long after termination an amend U5 is required.
U5 review by new employer
in addition to getting a new U-4, new employer must review U5 within 60 days. Former employer is not required to provide form U-5 to new employer, 2 business days to provide
Licenses good for how long between Employment
within 2 years after effective termination date or revocation or cancellation of registration
Except active Military Service. 2 years begins on the date person enters service and will end 90 days after completion
Continuing ED
Regulatory element
Firm element
120days 2nd registration anniversary and every 3 years after
An amendment to form U-4 involving possible statutory disqualification requires submission of an amended form must be made when?
10days, other amendments must be done promptly but no later than 30 days
If a member learns that info on a U% is inaccurate or incomplete, it must file an amended form U5 when?
with in 30 days
A stock exchange that wishes to join finra must submit form BD to where?
application made to FINRA district office where applying firm has its home office
Finra members that hold customer funds or securities must supply to their customers at least once per calendar year
Broker Check hot line number, Finra website and access information regarding their investor brochure
Foreign associates of a member firm who are non citizens and who conduct business outside the united states must
be registered with Finra but are exempt from passing a qualification exam
A member firm may grant discounts, concessions or other allowances to…..
be registered with finra but are exempt from passing a qualification exam to other members but an exception is allowed for foreign non members/
A registered person leaves industry and 18 months later reassociates with another member. This persons cycle for determining dates for the RE of continuing ed is based on…..
Provided reassociation occurs within 2 years, the cycle for determining the dates for the RE is based on initial registration. After 2 years, the cycle is based on the reassociation date.
Before signing FORM U4, a principal must verify the applicants employment history for the previous…..
U4 requires 5 year residency and 10 year employment history….but principle bust verify thru writing or on the phone 3 years.
under FINRA rules, amendment to form BD must be made within
within 30 days of any change.
Under FINRA rules which of the following must be registered as Principals
Managers of OSJ’s and officers must be registered as principles
a member firm may join with a nonmember in underwriting exempt and non exempt securities….True or False
False
Only FINRA members can be part of a group underwriting nonexempt securities. Nonmembers can join with members in underwriting exempt securities
Under FINRA rules, a registered rep must complete the regulatory element of continuing ed within how many days of a registration anniversary date?
120 days
A member firm files FORM U5 with FINRA for a former employee. 2 years later the member learns of facts that would cause the information filed to accurate. Under FINRA rules. the member must file an amended form U% with how many days?
30 days
Which of the following statements regarding various forms are correct?
1 Form ADV is used to terminate an AP
2Form MC-400 is used when employing a statutorily disqualified individual
3 FORM U5 is used to register an IA with the SEC
4 Form u4 is used to register an AP
2 and 4
Where is the Broker Check program located ?
CRD Central Registration Depository
WWW.FINRA.org
FINRA member firm’s executive representation must be:
Individual must be a member of the firms senior management
Individual must be registered as a principal
Changes made to executive representation must be noted in writing to FINRA
The Code of arbitration would handle….
Disputes involving a member and the public if brought by the public customer
If a member wishes to merge with another member, finra must be notified
at least 30 days pror to the closing date
