Chapter 1 - Brokerage office procedures Flashcards
U4 - Uniform application for securities industry registration.
Used to collect the applicants personal and professional history, including:
- 10 year employment history
- 5 year resident history
- legal name and any aliases used
- Any legal or regulatory actions
Changes to U4 (timeframes)
30 days - general changes impacting U4
10 days - felony or misdemeanor charges
U5 - uniform termination notice for securities industry registration
- volunteer separation (not violation related)
- new employer obtains from FINRA or employee. Not from old employer.
Firm Element (timeframe)
Yearly
CE requirements (timeframe)
Base date = exam passing
Start in year 2, then every 3 years after (2, 5, 8, 11…)
Failure to complete = suspension status
Registration exemptions
- clerical
- non-supervising officers and managers not dealing with customers
- non-US citizens working abroad
- floor personnel
U6
FINRA will submit disciplinary actions that are taken on form U6
Selling away
If a representative sells investment products that the employing member does not conduct business in without the members knowledge, then the representative has committed a violation known as selling away.
Gift rule (to an employee of another B/D)
- must be valued less than $100 per person, per year
- must be given directly to employing firm for distribution to employee
- have employing firm pre-approval
Exclusions:
- occasional meal
- business related travel
- lucite prospectus and awards
- occasional tickets to sporting events
Note: giver attends = not a gift (considered entertainment)
Order tickets
Prior to executing a customers order the representative must fill out the appropriate order ticket and present it to the trading department or wire room for execution.
Tickets will include:
- buy/sell
- name of security
- number of shares/bonds
- account name and number
- account type
- price & time limits (if any)
- solicited or unsolicited
- discretionary exercised
- time stamp
Trade date
The trade date is the day when the order is actually executed
Settlement date
The buyer of a security actually becomes the owner of record on the settlement date. The settlement date is two business days after the trade day. This is known as T+2.
ADRs and municipal bonds settle on the third business day, or T+3.
Regular-way transactions in government securities settle on the next business day, or T+1.
Payment date
The payment date is the day when the buyer of security has to have the money to the brokerage firm to pay for the purchase. Industry rules are 4 business days after the trade date, or T+4
Calculating accrued interest
Corporate & municipal:
(Principal x interest rate) x (# of days/360)
To calculate the accrued interest for a government issue, use the actual number of calendar days in the month and a 365 day year.
Close out
In the case where the selling broker dealer fails to deliver the securities to the buying broker dealer, the buying broker dealer may close out the trade by purchasing the securities in the open market. This is known as a buy-in, and the selling broker dealer will be responsible for any loss as a result of the buy-in.