Chapter 1 - Sales Supervision Flashcards
FINRA Code of Procedure
Disputes between customers and members
Uniform Practice Code
Regulations the control member-to-member relationships
Doesn’t need FINRA Registration
If their business consists solely in exempt securities (Govt/Muni dealers)
OR
If their business is performed exclusively outside United States
Non-member restrictions
Cannot join in common stock underwriting.
Can only receive public prices.
Form BD
Application to become a member (broker-dealer)
Statutory Disqualification for FINRA membership
- suspended/expelled from any other SRO
- person caused another firm’s suspension/expulsion
- lied on application
- willfully violated or failed to supervise securities or commodities laws
- convicted of securities misdemeanor or any felony within past 10 years
- temporarily or permanently enjoined
Reverse Statutory DQ?
Must request permission from FINRA, and if approved will then be reviewed by SEC. If denied by FINRA, SEC can be appealed.
Member resignation
Must be done in writing, but not effective for 30 days and/or up to two years if there are outstanding customer complaints or funds due to FINRA.
OSJ
Responsible for creating and enforcing WSPs over branches and firm, including annual (not periodic) compliance meeting
Each branch can be their OSJ, or it can be regional, or the main office for all branches.
Branch Office
Securities business is conducted regularly.
The location is advertised to the public.
Form BR
Must be submitted to register branch. Any changes must be submitted within 30 days of learning.
Primary Residence location exception
Not a branch if:
1. just the rep
2. no customers
3. isnt advertised
4. no funds handled
5. communications through firm
6. stationary has rep’s branch address
7. member has list of rep’s residence and WSP for supervising location
Vacation Home exclusion
Not a branch if used for less than 30 business days a year
Office of convenience
isnt a branch if only used occasionally and by appointment only.
Satellite Office
isnt a branch if it engages in non-securities activities and 25 or less securities trades.
Not Not May
Not FDIC Insured
Not deposits guaranteed
May lose value as securities products
Branch in bank
- physical location must be separate from deposit area
- member’s name shall be clearly displayed
- must give not-not-may orally and in writing
Form U4
Reps, IAs, or Issuers must use this form to become registered in appropriate jurisdictions and/or SROs
U4 changes
Must be amended promptly- within 30 days, or if it will result in statutory DQ, 10 days.
U4 Form info
5 yrs of residence history
10 yrs of employment history
OBAs
Arrests
Convictions
Complaints over $15K
Sales violation proceedings
Verify U4
Member must do this within 30 days.
Verify prior 3 yrs employment, ascertain good character, search public records,
Regulatory Element
Due 2nd anniversary, and then every 3 years thereafter.
(Effective 2023, must be completed annually.)
If not completed, registration inactive. Rep cannot perform registered actions & get paid.
Firm element
Annual training plan that covers relevant product, regulatory and compliance issues.
Military Duty
Registration is inactive, but can still be paid.
CE suspended for 90 days while they reassociate.
If they already left business, their 2 yr inactive status is also put on hold