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Series 26 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

In which Act did most of the the terms we use in the industry originate?

A

The Securities Exchange Act of 1934

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2
Q

What is the definition of a “person” in the securities industry?

A

It is basically anyone or entity that has the legal capacity to open a brokerage account

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3
Q

What is the definition of a broker?

A

A broker is any “person” that is engaged in the business of effecting transactions in securities for the accounts of others

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4
Q

What is a dealer?

A

A dealer is any “person” engaged in buying and selling securities for its own account, either through a broker or otherwise as part of its regular business.

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5
Q

Why are some entities referred to as a broker/dealer?

A

In some transactions they may act in both capacities.

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6
Q

The US Supreme Court in the Howey decision defined what as the primary characteristics of a security?

A

Constitute an investment of money, in a common enterprise, with the expectation of profits, to be derived primarily from the efforts of a third party.

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7
Q

What does SRO stand for?

A

Self-regulatory organization

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8
Q

What is the priority of any SRO?

A

Promote ethics and equality and protect investors

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9
Q

Give some examples of SROs

A

NYSE, MSRB, registered clearing agencies, FINRA

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10
Q

What does F’INRA stand for?

A

Financial Industry Regulatory Authority

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11
Q

What SRO is the largest in the US for securities firms?

A

FINRA

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12
Q

What form does a firm file to become a FINRA member?

A

BD

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13
Q

What items must accompany a form BD from a firm applying for membership to FINRA?

A

A new member assessment report, new member contact questionnaire, a check for the appropriate fee, and U4 forms and fingerprint cards for each associated person in the firm.

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14
Q

Besides a check and a form BD what must a firm applying for membership to FINRA do?

A

Register with the SEC as a broker/dealer

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15
Q

Applying to FINRA commits the firm to what three things?

A
  1. comply with federal securities laws 2. comply with FINRAs rules and regulations 3. pay any dues, etc. set by FINRA
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16
Q

Is FINRA membership available to banks?

A

No. but it is to a bank holding company.

17
Q

Where does a firm apply for membership?

A

The FINRA district office where the firm has its headquarters.

18
Q

Who approves the firms application to FINRA?

A

The district committee where the firm submitted the NMA or new member application with the BD, etc.

19
Q

Before the district committee can approve a firms membership what must the committee do?

A

Schedule the PMI or pre-membership interview

20
Q

What is the purpose of the PMI?

A

To make sure the firm has the resources, both financially and practical knowledge, to operate without posing an obvious risk to the investing public.

21
Q

How soon after the PMI will the firm receive the committees determination?

A

Within 30 days.

22
Q

What is an executive representative?

A

A member of senior management with a member firm who votes and acts on the firms behalf on FINRA matters

23
Q

What is the Public Disclosure Program?

A

It is information that must be provided to customers in writing at least once per calendar year.

24
Q

What information must be provided to customers to satisfy the Public Disclosure Program every year?

A

FINRAs BrokerCheck hotline number, FINRAs website address, and a statement providing the availability of a brochure that describes the PDP

25
Q

Disciplinary actions by any SRO within how many years results in statutory disqualification(SD) from FINRA membership?

A

within 10 years

26
Q

What kind of misdemeanors could result in an SD?

A

Securities or money related misdemeanors within the past 10 years.

27
Q

What form does an individual subject to an SD submit to initiate eligibility proceedings with FINRA and gain membership?

A

MC - 400

28
Q

What form does a firm subject to an SD submit to initiate eligibility proceedings with FINRA to gain membership?

A

MC - 400A

29
Q

How much is the filing fee for firms or individuals initiating eligibility proceedings with FINRA to gain membership in spite of an SD?

A

$1500

30
Q

Who makes the determination either way about firms and individuals who initiated eligibility proceedings with FINRA to gain membership because of an SD?

A

The National Adjudicatory Council(NAC) must review and approve the case and the decision is rendered by the Department of Member Regulation

Series 26 (2 decks)

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