Chapter 1 Flashcards
Which of the following is NOT a requirement under Regulation S-P?
[A] Maintaining the confidentiality of aggregated firm data such as the total volume of trades executed by the firm and total assets handled by the firm.
[B] Maintaining the confidentiality of personally identifiable financial information that the firm collects and maintains to better service client accounts.
[C] Delivery of an initial privacy notice to each client upon opening an account with the firm.
[D] Delivery of a privacy notice to clients a minimum of annually after clients open an account and receive the initial privacy notice.
[A] Maintaining the confidentiality of aggregated firm data such as the total volume of trades executed by the firm and total assets handled by the firm.
Under Regulation S-P, a firm is not required to maintain privacy related to aggregated firm data that contains no personal information. Information such as the total number of trades executed by a firm or the total assets managed or handled by a firm is aggregated and need not be kept private under Reg S-P. Personally-identifiable financial information related to clients must be kept confidential under Reg S-P. As well, a privacy notice must be delivered upon opening the account (initial) and a minimum of once per year following the opening of the account.
All of the following must be included on an option confirmation EXCEPT:
[A] The name of the underlying security.
[B] The price of the option.
[C] The type and strike price.
[D] The name of the contra-broker.
The name of the contra-broker.
Which of the following would NOT be considered a “contribution” under the Pay-to-Play rules?
[A] A donation of time by an individual at campaign headquarters
[B] A donation of time by an individual where the member’s empty office is being used for campaign purposes
[C] A donation of time by an individual where the donor is using their own company’s phone system to make phone calls
[D] A donation of time and office space by a firm and its employees to be used for campaign purposes
[A] A donation of time by an individual at campaign headquarters
A donation of time by an individual, provided the covered member has not solicited the individual’s efforts and the covered member’s resources such as office space and telephones are not used, would not be classified as a contribution but if such resources are used it would be considered a contribution.
Mutual funds must send financial reports to their shareholders at least
[A] with each trade confirmation which contains a link to the reports
[B] Upon request by the customer
[C] Semi-annually
[D] Annually
[C] Semi-annually
Which of the following would not require some form of filing or registration prior to execution:
[A] the sale of restricted stock by a public customer
[B] the sale of listed common stock by a public customer
[C] the sale of a new issue of common stock
[D] the sale of listed common stock by a director of the corporation
[B] the sale of listed common stock by a public customer
A secondary market trade of fully registered stock by a public customer would not require registration (Exempt Transaction).
John is a big fan of ABC Company and has been buying shares of ABC common stock over the years. Recently, John was advised that he will have to begin to file reports with the SEC regarding his ownership of ABC common stock. This means that John is now considered an Insider and has become the owner of more than
[A] 3% of the outstanding common stock of ABC.
[B] 8% of the outstanding common stock of ABC.
[C] 10% of the outstanding common stock of ABC.
[D] 15% of the outstanding common stock of ABC.
[C] 10% of the outstanding common stock of ABC.
Among the “securities” exempt from registration with the SEC under the Federal Securities Act of 1933 are:
I. Whole life insurance
II. Endowment policies
III. Fixed annuities
IV. Variable Annuities
[A] I & II only
[B] I, II & III only
[C] I & IV only
[D] I, II, III, IV
I. Whole life insurance
II. Endowment policies
III. Fixed annuities
Choices I, II & III are issued by life insurance companies and have fixed, guaranteed values. They are regulated by state insurance laws. Although they are not technically “securities,” they are included on the list of “exempt securities” in the ‘33 Act. Regarding choice IV, Variable Annuities are defined as a “security” according to the SEC.
Brokerage Firms are required under SEC Rules to maintain books and records for certain periods of time. SEC Rule 17a-4 requires FINRA Member Firms to maintain Order Tickets for which of the following time periods?
Order Tickets must be kept under SEC Rule 17a-4 for a period of three years. Customer account records must be kept for six years.
State security laws are normally referred to as “Blue Sky Laws” and apply to which of the following?
Securities issued or traded within a particular state. Tombstone ads. Registered representatives. Real Estate Investment Trusts (REITs).
[A] I and II
[B] III and IV
[C] I, II and IV
[D] All
all
If a Member Firm becomes aware of a suspicious transaction, under AML Rules, the Member Firm must file a Suspicious Activity Report: [A] Within 10 days. [B] Within 30 days. [C] Within 90 days. [D] Within 180 days.
[B] Within 30 days.
Under Regulation D Private Placement Rules the restricted securities that are issued may be sold to a maximum of
[A] 35 accredited investors
[B] 35 non-accredited investors
[C] unlimited number of sophisticated investors
[D] unlimited number of accredited and non-accredited investors
Reg D Private Placement Rules allow the restricted securities to be sold to no more than 35 non-accredited investors and an unlimited number of accredited investors.
Which of the following statements is NOT true of a mutual fund prospectus?
[A] It contains the objectives of the fund.
[B] It contains the rate of return of the fund for the next year.
[C] It is the most dependable location of all information for the mutual fund.
[D] It contains information on discounts to sales charges if breakpoints exist.
[B] It contains the rate of return of the fund for the next year.
The prospectus of a fund is the most reliable source of all information for the fund. The prospectus also contains discounts of sales charges and the fund’s objectives. The prospectus cannot make predictions; therefore, the rate of return for the upcoming year will NOT be included.
Under Rule 144, which of the following conditions must be met for an affiliated person to sell restricted securities?
The securities can only be sold on an agency basis The securities must have been owned by the seller for at least 6 months Immediately after the sale, Form 144 must be completed. The securities must have been fully paid for at least 6 months
[A] I and III
[B] II and IV
[C] I, II, and IV
[D] I, II, and III
The securities must have been owned by the seller for at least 6 months
The securities must have been fully paid for at least 6 months
III Form 144 must be filed concurrent with the sale.
Assume a broker enters buy and sell orders creating activity in the shares of ABC. The broker’s sole purpose is to give appearance of heavy trading in ABC’s stock. This practice is a violation of Federal Securities Laws referred to as:
[A] Backing away
[B] Pegging
[C] Churning
[D] Painting the tape and is a form of price manipulation
Creating false activity by buying and selling repeatedly is referred to as “Painting the Tape” and is done in an attempt to push the market price of a stock higher.
The primary regulatory agency for the issuance and regulation of the securities market is the:
[A] Securities Exchange Commission
[B] Financial Industry Regulatory Authority
[C] Federal Reserve Board
[D] New York Stock Exchange
[A] Securities Exchange Commission
