The rules and regulations of FINRA are referred to as ______. These fall into 4 main categories: 1. The ______ relates to dealings between member firms, covering all transactions in nonexempt securities while providing orderly completion of dealer-to-dealer transactions. 2. The ______ relate to a member firm's dealings with the public. 3. The ______ outlines the procedural process in the event of violations and complaints. 4. The ______ is concerned with settling disputes between dealers or brokers and the public.

0. Bylaws 1. Uniform Practice Code (UPC) 2. Conduct Rules 3. Code of Procedure 4. Code of Arbitration

Chapter 12: Regulations Flashcards by Tom Brandt

The ______ is responsible for supervision of the capital markets.

Securities and Exchange Commission (SEC)

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The ______ actually writes the laws that govern the financial markets. It also has the ability to enforce those laws, even if the broker/dealer or associated person is registered with a(n) ______.

Securities and Exchange Commission (SEC)

2. Self-Regulatory Organization (SRO)

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The ______ governs publicly traded companies as well as industry professionals. The ______ can revoke the registration of a broker/dealer, but it has few punitive powers. However, it refers criminal cases to the judicial system.

Securities and Exchange Commission (SEC)

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In both the OTC and exchange secondary markets, the ______ regulates the SROs and supervises their enforcement responsibilities.

Securities and Exchange Commission (SEC)

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The ______ of the United States appoints SEC board members for terms of ______, with advice and consent of the ______.

President
5 Years
U.S. Senate

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The ______ was established to regulate the trading of securities after they have been issued (secondary market) and to regulate exchanges and broker/dealers.

Securities Exchange Act of 1934

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The rules and regulations of FINRA are referred to as ______. These fall into 4 main categories:

The ______ relates to dealings between member firms, covering all transactions in nonexempt securities while providing orderly completion of dealer-to-dealer transactions.
The ______ relate to a member firm’s dealings with the public.
The ______ outlines the procedural process in the event of violations and complaints.
The ______ is concerned with settling disputes between dealers or brokers and the public.

Bylaws
Uniform Practice Code (UPC)
Conduct Rules
Code of Procedure
Code of Arbitration

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FINRA Bylaw

The ______ relates to dealings between member firms, covering all transactions in nonexempt securities while providing orderly completion of dealer-to-dealer transactions.

Uniform Practice Code (UPC)

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FINRA Bylaw

The ______ relate to a member firm’s dealings with the public.

Conduct Rules

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FINRA Bylaw

The ______ outlines the procedural process in the event of violations and complaints.

Code of Procedure

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FINRA Bylaw

The ______ is concerned with settling disputes between dealers or brokers and the public.

Code of Arbitration

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FINRA’s ______addresses how broker/dealers interact with each other and with associated persons. These rules establish standard industry practice for procedures such as regular way settlement, confirmation delivery, filing of forms such as U4s, U5s, and Form BDs.

Uniform Practice Code (UPC)

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Any broker/dealer who is authorized to transact securities business in the U.S. is eligible for ______ membership, except those who have been suspended or barred from membership due to securities violations.

FINRA

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The By-Laws define a(n) ______ as a firm who is registered with the Commission under the Act of ‘34.

Registered Broker/Dealer

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The By-Laws define a(n) ______ as:

An individual registered under the rules of FINRA.
An individual who is directly or indirectly controlled by a member firm, regardless if the person is registered.

Associated Person

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Personnel of FINRA members are required to be qualified with respect to both ______ and ______ under the UPC.

Training

2. Experience

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The ______ by-law addresses broker/dealer interaction with one another as well as associated persons.

Uniform Practice Code (UPC)

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The two registration categories of FINRA personnel are ______ and ______. Both categories require FINRA registration and the passing of a qualifying examination.

Principals

2. Representatives

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Any FINRA member who has passed a qualifying examination and later terminates registration is required to pass the examination again if the termination is for a period of ______ or longer.

2 Years

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All registration applications require the applicant’s ______, and must contain an agreement by the applicant by FINRA ______ and ______.

Signature
Rules
By-Laws

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Persons associated with a member, who are actively engaged in the management of the member’s securities business, including supervision, solicitation, or the training of persons associated with a member, must be registered as ______.

Principals

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The following persons are included in the definition of ______:

Sole proprietors
Officers
Partner
Managers of Offices of Supervisory Jurisdiction
Directors of corporations

Principal

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A principal may register as a(n) ______ if activities are limited to dealings of shares of open-end investment companies, closed-end investment companies during the IPO only, and variable contracts and insurance premium funding programs.

Limited Principal - Investment Company and Variable Contracts (Series 26)

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Any person associated with a member firm that is engaged in the investment banking or securities business must be ______. The process is started through the filing of a(n) ______, which requires personal information, ______ of address information, and ______ of employment history.

Registered
Form U-4
5 Years
10 Years

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Persons whose activities are limited solely to investment company shares and variable contracts may seek a limited registration by passing a(n) ______ examination (______) or the ______ examination (______).

1. Investment Company Product / Variable Contract Limited Representative (Series 6) 2. General Securities Representative (Series 7)

Registered representatives with ______ can only sell closed-end investment companies during the initial offering. A(n) ______ is required to sell closed-end companies shares in the secondary markets.

1. Series 6 Limited Registrations | 2. Series 7

Industry employees who do not require ______ are persons who are not engaged in the sale of securities, or do not regularly have access to the keeping, handling, or processing of securities, money, or original books and records relating to securities or money.

Fingerprinting

______ training must be completed by registered persons on the ______ anniversary date of their original registration and every ______ thereafter. They have ______ from registration date for completion.

1. Regulatory Element 2. Second 3. 3 Years 4. 120 Days

______ training applies to a continuing and current education program maintained by members for their covered persons to enhance their securities knowledge, skills, and professionalism.

Firm Element

At a minimum, each member must evaluate and prioritize its training needs and develop a(n) ______ at least ______.

1. Written Training Plan | 2. Annually

If a registered representative is called to active duty military, the representative's registration is put on special ______. During this freeze, if the representative is in the ______ window to complete continuing education, the window is frozen. The representative may continue to receive ______ from existing clients.

1. Inactive Status 2. 120-Day 3. Commissions

If the representative terminates registration while on military leave, the representative has ______ to re-associate with a new employer before the ______ time limit begins.

1. 90 Days | 2. 2-Year

FINRA requires continuing education for registered persons, which consists of the ______ and the ______.

1. Regulatory Element | 2. Firm Element

The ______ is a computer-based FINRA training program that focuses on compliance, ethics, and sales practices and regulatory issues.

Regulatory Element

The ______ requires broker/dealer firms to provide formal training and education to their registered persons, all of which is based on the education and training needs of the firm.

Firm Element

______ requires that all applications must be properly signed by the applicant, submitted to ______ electronically via the CRD, and contain an agreement to comply with all federal securities laws, to pay dues and assessments to ______, and to keep each member's application current at all times.

FINRA CRD = Central Registration Depository

Registered representatives may voluntarily terminate FINRA registration at any time by written notice (______), which must be filed by the member firm through the CRD within ______ of termination. The firm must forward a copy to the ______.

1. Form U5 2. 30 Days 3. Terminated Representative CRD = Central Registration Depository

The old broker/dealer has no responsibility to give a copy of the ______ to the new broker/dealer. The new broker/dealer can receive a copy through the ______ or ask the ______ for a copy.

1. Form U5 2. Central Registration Depository (CRD) 3. Applicant

If the new broker/dealer requests a copy of the Form U5 from the applicant, the applicant must provide it within ______.

2 Business Days

Persons terminating registration are still under the jurisdiction of FINRA, and subject to any complaint filings for ______ following the termination.

2 Years

Persons not requiring ______ registration include: 1. Those whose sole functions are limited to clerical or ministerial duties. 2. Not actively engaged in the investment banking or securities business. 3. Associated persons of member firms whose only participation within the firm is the need for a nominal corporate officer or for capital participation. 4. Those who effect securities transactions only on the floor of an exchange, only transact exempt securities, or only transact commodity futures transactions.

FINRA

If an applicant has previously been registered, the member firm shall obtain a copy of the ______ filed with FINRA. The member firm shall obtain the ______ no later than ______ following the filing of the application for registration.

1. Uniform Termination Notice of Securities Industry Regulation (Form U5) 2. Form U5 3. 60 Days

Firms may become ______ for membership with FINRA, or subject to ______, for the following reasons: 1. Broker/dealers (B/Ds) who have been suspended or expelled from a registered national securities association or national securities exchange. 2. B/Ds who have been barred or suspended for conduct inconsistent with just and equitable trade practices. 3. B/Ds enjoined by a court from engaging as investment advisers, underwriters, brokers, dealers, or in any other capacity in connection with the securities business.

1. Ineligible | 2. Disqualification

FINRA may refuse or discontinue membership of any broker/dealer who makes a(n) ______ or ______ of a material fact on their membership application, or ______ to state any required material fact.

1. False 2. Misleading Statement 3. Omits

Any individual membership may be refused or revoked if the applicant has been convicted of any misdemeanor involving a(n) ______ transaction, ______, ______ conversion, and/or ______ of funds.

1. Securities 2. Embezzlement 3. Fraudulent 4. Misappropration

Any person who has been convicted within the past ______ of application for registration of a felony or a securities related misdemeanor may be subject to ______.

1. 10 Years | 2. Disqualification

Persons may be barred from performing duties of a registered representative because of prohibited practices and other violations of ______.

Conduct Rules

Member firms cannot represent ______ in a way that would suggest that they are endorsed by the Authority.

FINRA Membership

If a broker/dealer conducts business in an office inside a(n) ______ , the broker/dealer must be clearly delineated with separate identification. Customers must be notified that the broker/dealer offers security products which are not ______ and are not ______.

1. Bank 2. FDIC-Insured 3. Bank Obligations

The registration process for personnel requires that applicants complete a(n) ______ that is submitted to FINRA electronically and contains an agreement to comply with all federal securities laws, pay dues and assessments to FINRA, and keep information on the application current at all times.

Form U4

Information on a(n) ______ includes the following: 1. Name 2. Social Security number 3. Physical characteristics 4. Past residential addresses (for the previous ______) 5. Employment history (for the previous ______) 6. Financial history relative to bankruptcy (for the previous ______) 7. Unsatisfied liens 8. Any disciplinary history (if applicable), such as felony convictions, and misdemeanors that involve securities or theft, forgery, or embezzlement.

1. Form U4 2. 5 Years 3. 10 Years 4. 10 Years

Form U4 information is stored in FINRA's ______ database. Any changes to Form U4 information must be updated in ______.

1. Central Registration Depository (CRD) | 2. 30 Days

All candidates for registration must submit ______ as part of the registration process. The ______ requirement is also extended to persons that have access to processing transactions and handling of securities, money, or firm financial records, whether or not they are registered.

1. Fingerprints | 2. Fingerprinting

According to FINRA Rule 1122, members or associated persons cannot file membership and registration that is ______, or fail to correct ______ once informed of it.

1. Misleading | 2. Misleading Information

According to FINRA, ______ is information that is incomplete or inaccurate to the point of being misleading or intending to mislead.

Misleading Information

Filing false, inaccurate, and/or misleading information may result in ______, which, in turn, may prevent a person from becoming registered, or can result in a revocation of registered status.

Statutory Disqualification

Final responsibility for proper supervision rests with the ______.

Member

A member's supervisory system must provide, at a minimum, for the following: 1. Establishing and maintaining ______. 2. Designation of an appropriately ______ with the authority to carry out the supervisory responsibilities of the member. 3. Designation as a(n) ______ of each location. 4. Designation of one more appropriately ______ in each OSJ, including the main office, and one or more appropriately registered ______ or ______ in each non-OSJ branch office. 5. ______ of each registered person to an appropriately registered representative and/or principal for his/her supervision. 6. ______ to determine that all supervisory personnel are qualified by virtue of experience or training to carry out their assigned responsibilities. 7. Participation of each registered representative, at least ______, in an interview or meeting conducted by persons designated by the member at which compliance relevant to the activities of the representative(s) are discussed. 8. Each member must designate and specifically identify to FINRA one or more ______ who will review the supervisory system, procedures, and inspections implemented by the member.

1. Written Procedures 2. Registered Principal(s) 3. Office of Supervisory Jurisdiction (OSJ) 4a. Registered Principals 4b. Representatives 4c. Principals 5. Assignment 6. Reasonable Efforts 7. Annually 8. Principals

FINRA's ______ addresses how member firms and associated persons interact with the public. The basic intent of ______ is to treat customers fairly and ethically.

Code of Conduct

______ is a free resource provided FINRAs Public Disclosure Program that allows public persons to research the professional backgrounds of current and former FINRA-registered brokerage firms and brokers. Accessible by phone or online, it provides information that has been stored in the ______ as part of the registration process.

1. BrokerCheck | 2. Central Registration Depository (CRD)

Available information found on ______ includes the following: 1. The person's employment history and other business experience required to be reported on Form U4. 2. Currently approved registrations for the member or associated person. 3. The main office, legal status, and type of business engaged in by the member. 4. Any event or proceeding required to be reported under the Rule.

BrokerCheck

It is each member's responsibility to keep in each ______ one of the following: 1. A separate file of all written complaints of customers with explanation of action taken by the member, if any. 2. A separate file of all written complaints and a clear reference to the files containing the correspondence related to them (as maintained in the office).

Office of Supervisory Jurisdiction

Use of ______, ______, or other ______ devices when communicating with the public is strictly prohibited.

1. Manipulative 2. Deceptive 3. Fraudulent

Distribution of advertisements, sales literature, or marketing materials that contain ______ information or are in any way ______ are specifically prohibited.

1. False | 2. Misleading

______ are defined as any material used in the media (newspapers, magazines, radio, television, telephone recordings, or other public media).

Retail Communications

Any promotional communications sent to more than ______ customers or prospects within a(n) ______ period are considered to be retail communications.

1. 25 | 2. 30 Calendar-Day

______ are included in the definition of retail communications since they directed at or made available to the public. ______ refer to participation in seminars, radio or television interviews, or other public speaking activities.

Public Appearances

______ include any reprint of an article or its excerpt issued by a publisher not affiliated with the member using the reprint, or to any report concerning a registered investment company prepared by an independent entity.

Independently Prepared Reprints

Independently prepared reprints are considered ______, and must be approved by a(n) ______ before first use.

1. Retail Communications | 2. Principal

The term ______ refers to any written or e-mail messages distributed to either existing customers or to 25 or fewer customers within any 30 calendar-day period.

Correspondence

Any ______ or endorsement of a security by a third party which is misleading is unlawful.

Testimonial

Any presentation of such testimonial must state all of the following: 1. If any ______ or other ______ was paid for the testimonial or endorsement. 2. If the statement implies that the person is ______ by special experience or knowledge, such ______ must be listed. 3. Include the statement "______".

1a. Fee 1b. Compensation 2a. Qualified 2b. Qualifications 3. Past Performance Does Not Indicate Future Results

Any offer of ______ must indeed be furnished entirely free and without conditions or obligations on the part of the respondent. Such offers are prohibited if the respondent must assume any sort of obligations as a result.

Free Services

Prior to use, ______, including ______, must be approved by a registered principal of the member firm.

1. Retail Communications | 2. Advertisements

Member firms that have not previously filed a retail communication must file their initial retail communication with FINRA at least ______ prior to use, and must continue to file at least ______ prior to use for a period of ______.

1. 10 Business Days 2. 10 Business Days 3. 1 Year

Retail communication materials must be kept on file for ______, along with the name of the preparing person and the name of the approving person. Required information also includes the ______ of any statistical tables, charts, graphs, or illustrations used in communications with the public.

1. 3 Years | 2. Sources

While ______ does not need to be approved by a registered principal prior to use, it is subject to supervision and review requirements; however, the review may be either pre or post.

Correspondence

Specific communications with ______, ______ memorandums, ______ announcements, routine announcements discussing member firm personnel changes, and ______ are excluded from the scope of FINRA approval rule.

1. Individuals 2. Internal 3. Tombstone 4. Prospectuses

______ is communication with institutional investors, defined as any: 1. Banks. 2. Savings and loans associations. 3. Insurance companies. 4. Registered investment companies. 5. Registered investment advisers. 6. Person or entity with assets of at least $50 million. 7. Government entities or subdivisions. 8. Employee benefit plans and qualified plans with at least 100 participants. 9. FINRA member firms and registered associated persons. 10. Persons acting solely on behalf of any institutional investor.

Institutional Sales Material

A firm's ______ are excluded from the definition of institutional communication.

Internal Communications

______ is defined as any written or electronic communication that is directed only toward institutional investors, such as banks, thrifts, savings and loans, insurance companies, mutual funds, and other broker/dealers.

Institutional Sales Communications

Institutional communications must be reviewed or approved by a(n) ______. This review or approval may be executed after the first use of the material as long as the firm has training in place for their associated persons.

Registered Principal

All institutional communications, including the name of the person who prepared each item, must be maintained for a period of ______ from the date last issued. Included with this filing requirement is information about the ______ of any statistical tables, charts, graphs, or illustrations used in communication with the public.

1. 3 Years | 2. Sources

All institutional communications, as well as correspondence and retail communications, are subject to ______ by FINRA for at least ______ from last use.

1. Spot-Check | 2. 3 Years

Predicting future performance based on illustrations showing past performance is considered ______.

Misleading

______ are defined as transactions effected outside the normal business of an associated person's employment with a member firm. These are transactions that are not recorded on the firm's books and records.

Private Securities Transactions

Participating in private securities transactions is known as "______," and is a violation of FINRA Conduct Rules.

Selling Away

______ may include (but are not limited to) new offerings of securities which are not registered with the ______.

1. Private Securities Transactions | 2. SEC

Transactions among immediate family members for which an associated person receives no compensation, or personal transactions in investment company and variable annuity securities, are not considered ______.

Private Securities Transactions

Associated persons of member firms are prohibited from entering into private transactions without prior ______ to the member firm.

Written Notice

The private transaction written notice must describe in detail the following: 1. The proposed ______. 2. The person's proposed ______. 3. ______ conditions.

1. Transaction 2. Role 3. Compensation

In the case where a series of related private transactions without selling compensation are involved, an associated person needs to provide only a(n) ______.

Single Written Notice

______ refers to any compensation paid directly or indirectly as a result of the purchase or sale of a security, including commissions, finder's fees, rights of participation in profits, tax benefits, expense reimbursement, etc.

Selling Compensation

If the associated person will be compensated for a private transaction, the member firm must ______ the transaction and ______ it on their books. Once the transaction is ______, it is the member's responsibility to ______ the person's participation in the transaction, as if it is executed on behalf of the member.

1. Approve 2. Record 3. Recorded 4. Supervisor

If the member disapproves a person's participation in a private transaction, the person _____ participation in the transaction in any manner, directly or indirectly.

May Not

No member or associated person can accept any ______ in the form of cash, non-cash compensation, securities, payments, or gifts from anyone other than the ______ with which the person is associated unless special arrangements, permissions, and recordkeeping are in place.

1. Compensation | 2. Member

The following non-cash compensation arrangements are permitted: 1. Gifts that do not exceed an annual amount of ______ per person and are not preconditioned on achievement of a sales target. 2. An occasional ______, a(n) ______ to a sporting event or the theater, or comparable ______, which is not frequent or contingent upon a preconditioned sales target. 3. ______ or ______ for the purpose of training or education of associated persons of a member.

1. $100 2a. Meal 2b. Ticket 2c. Entertainment 3a. Payment 3b. Reimbursement

FINRA prohibits members from using ______ in retail communications unless the rankings are created by and published by a ranking entity, or based on performance ratings by a ranking entity.

Mutual Fund Rankings

FINRA defines a(n) ______ as an "entity that provides general information about investment companies to the public, that is independent from the investment company and its affiliates, and whose services are not procured by the investment company or any of its affiliates to assign the investment company a ranking."

Ranking Entity

A(n) ______ is an investment information service that is completely independent from the investment company (mutual fund) or its affiliates, and is not being paid for a ranking by the investment company.

Ranking Entity

An example of a(n) ______ is Morningstar.

Ranking Entity

FINRA prohibits the display of a headline or prominent statement that says a fund is a(n) ______ in an investment category, unless the statement is true.

Top Performing Fund

Retail communications containing investment company rankings must prominently display the following disclosures: 1. The fund's investment ______ (income, growth, balanced). 2. The ______ of investment companies, or, if applicable, investment company families in the category. 3. If the investment company itself created the ______ or ______. 4. The ______ of the ranking entity. 5. The ______ of the period being ranked, including the first and last day of the period. 6. ______ criteria (total return, yield, etc.).

1. Category 2. Number 3a. Category 3b. Subcategory 4. Name 5. Length 6. Ranking

Retail communications containing investment company rankings must also include these required disclosures: 1. A statement that past performance is no guarantee of ______. 2. Whether or not the ranking has taken ______ and ______ into account. 3. The ______ of the ranking (such as a magazine). 4. If the ranking is a(n) ______ system (like the star system) and the meaning of the ______. 5. If the ranking is based on total returns or yields that do not include ______ and ______ which had a material effect on the return or yield during the ranking period, then there must be a statement to that effect.

1. Future Results 2a. Loads 2b. Sales Fees 3. Publisher 4. Symbol(s) 5a. Fees 5b. Expenses

Rankings must be current, or at least to the end of the most recent ______. If the ranking entity does not have a ranking of the most recent ______, the most current ranking may be used as long as it is not ______.

1. Calendar Quarter 2. Quarter 3. Misleading

With the exception of ______, the following rules apply to time periods for investment company rankings in retail communications: 1. Rankings cannot show a time period less than ______ (unless it based on yield). 2. Investment that have been in existence for one year may show a total return ranking for a(n) ______ period. 3. Companies in existence for 5 years that show ______ of total returns must also show ______ of total returns. 4. Companies in existence for 10 years that show ______ of total returns must also show ______ and ______ returns.

0. Money Market Funds 1. One Year 2. 1-Year 3a. One Year 3b. 5 Years 4a. One Year 4b. 5-Year 4c. 10-Year

FINRA defines a(n) ______ as a report issued by an independent third party that describes the way the price of a bond fund (net asset value) changes in reaction to market conditions and the economy.

Bond Mutual Fund Volatility Rating

FINRA further states that a(n) ______ contains an objective analysis of a bond fund's performance and other considerations like the credit quality of individual bond holdings, interest rate risk, currency risk, prepayment risk, and currency risk, that can affect the value of the portfolio.

Bond Mutual Fund Volatility Rating

When used in ______, bond mutual fund volatility ratings must be accompanied or preceded by a(n) ______ (supplemental sales literature). There must be a(n) ______ that includes all of the recent bond mutual fund volatility ratings issued on the fund, the names of the ratings' issuers, the most current rating, and the date of the rating.

1. Retail Communications 2. Prospectus 3. Disclosure Statement

When used in retail communications, there must be a(n) ______ of the bond mutual fund volatility rating written in narrative form that includes the following disclosures: 1. A statement that no ______ exists for assigning ratings. 2. A description of the ______ and ______ used to ascertain the rating. 3. The type of ______ that the rating measures (such as long-term volatility or short-term volatility). 4. A statement that not all bond funds have ______, and that the portfolio may have changed since the rating was issued. 5. A statement that there is no ______ that the fund will continue to have the same rating or to performance as it has in the past. 6. Any ______ or ______ that was paid for the rating.

0. Description 1. Standard Method 2a. Criteria 2b. Methodologies 3. Risk 4. Volatility Ratings 5. Guarantee 6a. Fee 6b. Compensation

The bond volatility rating must meet the following criteria: 1. The rating must not refer to volatility a "______". 2. The supplemental sales literature uses the most ______ ratings available, and the information is current to at least the end of most recent calendar ______. 3. The rating and disclosure statement must be ______, ______ and ______, and based only on factors that are objective and quantifiable. 4. The issuer of the rating must provide detailed disclosure of its ______ and make it available to investors through a website, a toll-free number, or both.

1. Risk Rating 2a. Up to Date 2b. Calendar Quarter 3. Clear, Concise, and Understandable 4. Methodology

Members must maintain ______ containing all purchases and sales of securities as well as company and customer ______. Members are also required to retain ______.

1. Daily Blotters 2. Ledgers 3. Records

It is illegal to ______, ______, or ______ any account, book, or other documents that are required to be maintained by the firm.

Destroy, Mutilate, or Alter

Books and records must be "______" times. Information in this format cannot be modified once it is written.

Write-Once, Read Many (WORM)

Any person who has access to or handles books and records must be ______.

Fingerprinted

Firms can submit fingerprints without registering an individual by completing ______.

Form NRF (Non-Registered Fingerprint).

Type of Record: Account Records | Retention Requirement: ______

6 Years

Type of Record: Customer Complaints | Retention Requirement: ______

4 Years

Type of Record: Confirmations | Retention Requirement: ______

3 Years

Type of Record: Retail Communications | Retention Requirement: ______

3 Years

Type of Record: Institutional Communications | Retention Requirement: ______

3 Years

Type of Record: Correspondence | Retention Requirement: ______

3 Years

1. Retail communications: ______ retention requirement 2. Correspondence: ______ 3. Account records: ______ 4. Confirmations: ______ 5. Customer complaints: ______ 6. Institutional communications: ______

1. Retail communications: 3 years 2. Correspondence: 3 years 3. Account records: 6 years 4. Confirmations: 3 years 5. Customer complaints: 4 years 6. Institutional communications: 3 years

What type of record has a retention requirement of 6 years?

Account Records

What type of record has a retention requirement of 4 years?

Customer Complaints

For the first ______, records must be kept in an easily accessible place and readily available to regulators upon request.

2 Years

Elder abuse with regard to financial exploitation warning signs may include: 1. ______ financial products and services. 2. Unusual or erratic ______. 3. Frequent, large ______. 4. Selling investments or closing accounts without regard to the ______. 5. Large ______ out of the account that are not characteristic of past activity. 6. Sudden change in ______ or appointment of a(n) ______.

1. Inappropriate 2. Transactions 3. Withdrawals 4. Penalties 5. Wire Transactions 6a. Beneficiaries 6b. Power of Attorney

FINRA permits member firms that suspect financial exploitation of seniors and other adults who have mental or physical disabilities to place a(n) ______ on the disbursement of funds or securities from the customer's account.

Temporary Hold

The temporary hold is authorized for ______, but could be extended for another ______ if warranted.

1. 15 Business Days | 2. 10 Days

Members are required to make reasonable efforts to obtain the name and contact information of a(n) ______ for a customer's account.

Trusted Contact Person

At the time of ______ and when ______, the member firm must provide written disclosure to the customer that is authorized to contact the trusted contact person and disclose information about the customer's account.

1. Account Opening | 2. Updating Account Information

If a hold is placed on the account, the member firm is required to provide ______, and the ______, the hold to the trusted contact person and the customer within ______ of the hold.

1. Notification Of 2. Reason For 3. 2 Business Days

The ______ is the section of FINRA By-Laws that concerns the handling of securities violations and complaints.

Code of Procedure

A customer (or the ______) with a complaint against a member firm or its personnel may submit a written complaint to any ______.

1. Board of Governors | 2. Department of Enforcement (DOE)

The ______ has the initial jurisdiction for the handling of complaints. The ______ has appellate and review jurisdiction.

1. Department of Enforcement (DOE) | 2. National Adjudicatory Council (NAC)

A report of customer complaints must be submitted to FINRA each ______, no later than the last day of the month following the ______'s end.

1. Calendar Quarter | 2. Quarter

If a customer complaint results in a statutory disqualification, a report must be sent to FINRA within ______.

10 Business Days

If the firm has assessed internal disciplinary measures in the amount of ______ or more, this information must be filed with FINRA.

$2,500

The ______ deals with discipline of a representative, principal, or firm. The civil (money) part of disputes is a separate process called ______.

1. Code of Procedure | 2. Code of Arbitration

______, the ______, or a(n) ______ can initiate a complaint.

1. FINRA 2. SEC 3. Customer

When a written customer complaint has been received, the ______ starts the process by advising representatives and broker/dealers in writing, and conducts hearings to gather enough facts to make a fair decision. After the hearing, the ______ will make a written decision.

Department of Enforcement

If the Department of Enforcement determines that a violation has occurred, a(n) ______ or ______ may result. For more serious violations, a(n) ______, ______, or ______ from association with a member firm may be imposed. ______ may also be revoked.

1. Censure or Fine 2. Suspension, Expulsion, or Bar 3. FINRA Registration

A person that has been ______ may not be associated with a member firm in any capacity, including clerical. ______ persons cannot be compensated in any manner, including remuneration from securities transactions, during the period of ______.

1. Suspended 2. Suspended 3. Suspension

Appeals of Department of Enforcement decisions go to the ______, then to the ______, then to the ______.

1. National Adjudicatory Council 2. SEC 3. Courts

If FINRA and the respondent agree, a penalty may be imposed through ______, ______, and ______ (similar to plea bargaining). This ______ process is only available if the respondent does not dispute the allegations in the complaint, and waives the right to a hearing and the right to an appeal.

1. Acceptance, Waiver, and Consent | 2. AWC

For less serious violations, usually of an administrative nature, a Minor Rule Violation procedure will apply with a maximum fine of ______ with no appeals.

$2,500

If the summary complaint procedure is offered, the respondent has ______ to accept it. By signing the ______ letter the respondent gives up the right to appeal the decision. Should the summary complaint procedure not be accepted, the ______ will proceed with a formal hearing under the Code of Procedure.

1. 10 Business Days 2. Minor Rule Violation (MRV) 3. Department of Enforcement

FINRA requires members to report customer complaints involving theft, misappropriations of funds or securities, or forgery within ______ of the ______. Reporting is required whether the member knew or should have known of the event.

1. 30 Days | 2. Event

Filings received after ______ will appear as late on the firm's 4530 Disclosure Timeliness Report Card.

30 Calendar Days

Members must report if an associated person has been ______, ______, or has had compensation or any other remuneration in excess of ______ withheld, has had fines imposed in excess of ______, or is otherwise ______ in any manner that would significantly limit the individual's activities, either temporarily or permanently.

1. Suspended 2. Terminated 3. $2,500 4. $2,500 5. Disciplined

Members are required to promptly file copies of documents related to ______ with FINRA. This may be done ______. Filings may be edited or amended for ______ after submission.

1. Reportable Events 2. Electronically 3. 30 Days

The purpose of ______ is to settle inter-industry disputes. For example, one member firm against another, or against a bank, or a transfer agent.

Arbitration

______ is an alternative to litigation and mediation.

Arbitration

Arbitration provides a(n) ______ method through which disputes are typically ______ than they would be if pursued through the courts.

1. Cost-Effective | 2. Settled Much Sooner

______, in contract to arbitration, is voluntary and informal. A trained ______, who is an impartial party, acts as a facilitator between the disputing parties to help find a mutually acceptable solution.

1. Mediation | 2. Mediator

______ can be initiated at any time before, during, or after arbitration. Any party may withdraw from the ______ process prior to the execution of a written settlement by providing written notice to the ______, the other parties, and the Director.

1. Mediation 2. Mediation 3. Mediator

Unlike arbitration, ______ does not impose a solution. It is not binding until the parties reach and sign a(n) ______.

1. Mediation | 2. Settlement Agreement

The ______ instructs that the following disputes be submitted to arbitration: 1. Between or among members. 2. Between or among members and associated persons.

Code of Arbitration

A customer seeking monetary damages may go to ______, but the customer must first agree to use ______ as a means of settlement. Customers normally agree to ______ as part of the process of opening their accounts.

Arbitration

There are no appeals to ______.

Arbitration

The statute of limitations for a submission to arbitration is ______ after the event giving rise to the claim.

6 Years

The ______ appoints a panel of arbitrators to hear a dispute. The panel includes arbitrators from both the public and investment industry sectors and consists of a(n) ______ of ______, ______, or possibly ______ members.

1. National Arbitration Committee 2. Odd Number 3. 1, 3, or 5

The ______ hear the evidence of the dispute and make their determination for awards and settlements as deemed appropriate. Unless the law instructs differently, the decision of the ______ is final and binding on both members and customers.

Arbitrators

For disputes involving amounts of ______ or less, simplified arbitration is available. Under this proceeding, there is no opportunity for a(n) ______. ______ renders a decision on the case based upon a review of ______ by both parties.

1. $50,000 2. Hearing 3. One Arbitrator 4. Written Submissions

Awards under arbitration are ______ and ______ without opportunity for ______.

1. Final 2. Binding 3. Appeal

Any resulting monetary award from arbitration is required to be paid within ______. If a member firm or registered rep fails to pay an award under arbitration, they are subject to ______.

1. 30 Days | 2. Suspension

All awards must be honored by a(n) ______ in the exact dollar amount stated in the award, unless stated otherwise and agreed by the parties in writing.

Cash Payment

The term "manipulative, deceptive, or other fraudulent device or contrivance," as used in the Act, is hereby defined to include: 1. Any act which operates or would operate as a(n) ______ or ______ upon any person. 2. Any ______ statement of a material fact and any ______ of a material fact necessary for the investor to have known in order for them to make a reasonable decision. 3. Any ______ acts that are ______ or ______ , including churning, which is excessive trading in time or frequency with the sole purpose of generating commissions.

1a. Fraud 1b. Deceit 2a. Untrue 2b. Omission 3a. Manipulative 3b. Misleading 3c. Deceptive

Violations of the Securities Exchange Act of 1934 or SEC rules and regulations, including the use of false or misleading statement, are subject to ______.

Criminal Penalties

The maximum fine for breaking SEC rules for any person is ______, imprisonment for ______, or both.

1. $1 million | 2. 10 Years

The maximum fine for breaking SEC rules for a business entity is ______.

$2.5 million

If violators can prove they were unaware of the SEC rule or regulation, the ______ can be imposed, but the violator cannot be ______.

1. Fine | 2. Imprisoned

The 1934 Act mandates that all publicly held companies, broker/dealers engaging in interstate business, national securities exchanges, and FINRA must file a(n) ______ to the ______.

1. Annual Report | 2. SEC

A(n) ______ is defined as any individual, corporation, or other legal entity engaged in transacting securities business for the account of others. When acting in the capacity of a(n) ______, the firm is acting as a middle man and charges a(n) ______.

1. Broker 2. Broker 3. Commission

A(n) ______ is defined as any individual, corporation, or other legal entity that performs securities transactions for its own account as a part of regular business. When acting in the capacity of a(n) ______, the firm is acting on its own behalf and selling out of ______.

1. Dealer 2. Dealer 3. Inventory

The ______ provides that the SEC can review FINRA disciplinary actions, disapprove rules, and suspend or revoke FINRA registration for failure to comply with its rule.

Maloney Act of 1939

Every corporate bond of more than ______ dollars and ______ maturity or longer must have a trust document stating whether the bond is secured or unsecured.

1. $5 Million | 2. 5 Years

If ______, the trust indenture must specify the kind of property and whether the indenture is open-end or closed-end.

Secured

The ______ lists the covenants or promises that the issuer has made to a trustee for the protections and benefit of the bondholders.

Trust Indenture

The ______ was established to regulate investment advisory activities and define requirements for registration.

Investment Advisers Act of 1940

Investment advisers for an investment company registered under the Investment Company Act of 1940 are considered ______ required to register with the ______.

1. Federal Covered Advisers | 2. SEC

Under the Investment Advisers Act of 1940, a(n) ______ is a firm that is paid a fee to advise others, either directly or indirectly, as to the advisability and merit of purchasing or selling securities.

Investment Adviser

A(n) ______ may also be defined as any firm that, in the regular course of business, issues reports or analyses concerning securities, and charges for such information.

Investment Adviser

______: registration, conduct, and identification of fee-based Investment Advisers (IAs).

Investment Advisers Act of 1940

______: established definitions and oversight of management companies, FACs, and UITs.

Investment Company Act of 1940

Financial planners and those providing financially related services are defined as investment advisers if they do any of the following: 1. Provide advice, analysis, or reports concerning ______. 2. Provide these services as a ______ of their business. 3. Receive ______ for those services.

1. Securities 2. Regular Course 3. Compensation

The definition of investment adviser DOES / DOES NOT include the following: 1. Bank, savings institutions, or trust companies. 2. Broker/dealers or their agents whose advice is incidental to their normal business practice and who receive no special compensation for this advice. 3. Employees of investment advisers who are registered as investment adviser representatives. 4. Publishers, their employees, and columnists of newspaper, magazines, or business periodicals but only if the advice is not tailored to the individual needs of a specific client or being use to promote particular securities. 5. Any person so designated by the state administrator or exempted by the SEC. 6. Professionals, such as lawyers, accountants, teachers, and engineers, whose investment advice is an incidental portion of their business practice.

Does Not Lawyers Accountants Teachers Engineers

A(n) ______ must register by filing an application for registration with the ______. The application must include the following: 1. The name and form of organization under which the ______ engages or intends to engage in business. 2. The name of the state where the ______ is organized and the location the principal business office and branch offices, if any. 3. The names and addresses of its partners, officers, directors and persons performing similar functions 4. The education, the business affiliations for the past 10 years, and the present business affiliations of the ______ and its partners, officers, directors and persons performing similar functions and of any controlling persons. 5. The nature of the business of the ______, including the manner of giving advice and rendering analyses or reports. 6. A balance sheet certified by an independent public accountant and other financial statements. 7. The nature and scope of the authority of the ______ with respect to client's funds and accounts. 8. The basis or bases upon which such ______ is compensated. 9. Whether the adviser or any of its associated persons are subject to any disqualification which would be a basis for denial, suspension, or revocation of registration under the Investment Advisers Act of 1940. 10. Whether the principal business of the ______ is to consist of acting as ______ or the rendering of investment supervisory services.

1. Investment Adviser* 2. SEC *All other blanks are Investment Adviser

______ and their employees, except those who perform only ______, are required to be registered in any state in which they do business.

1. Investment Advisers | 2. Clerical Functions

Advisers with AUM between ______ and ______ may register with the state administrator or the SEC.

1. $100 Million | 2. $110 Million

Advisers with AUM greater than ______ are required to register with the SEC, and are known as ______.

1. $110 Million | 2. Federally Registered Advisers

Advisers with AUM of less than ______ are required to register only at the state level.

$100 Million

Advisers with AUM greater than ______ are required to register with the SEC, and are known as ______. Advisers with AUM between ______ and ______ may register with the state administrator or the SEC. Advisers with AUM of less than ______ are required to register only at the state level.

1. $110 Million 2. Federally Registered Advisers 3. $100 Million 4. $110 Million 5. $100 Million

Investment advisers with no place of business in a particular state, or whose only clients are institutional accounts, are ______ from registration.

Exempt

In a(n) ______, a mutual fund manager directs buy and sell transactions to a broker/dealer, for which the broker/dealer receives commissions. In exchange, the broker/dealer provides research and brokerage services.

Soft-Dollar Arrangement

In a(n) ______, a mutual fund manager directs buy and sell transactions to a broker/dealer, for which the broker/dealer receives commissions. In exchange, the broker/dealer pays for the services in cash.

Hard-Dollar Arrnagement

A(n) ______ encourages mutual fund managers to form an alliance with specific broker/dealers. However, a possible ______ exists because the manager may direct business to a broker/dealer simply because of the alliance regardless of the quality of transaction execution. Therefore, the investment adviser must regularly review its ______ for any ______.

1. Soft-Dollar Arrangement 2. Conflict of Interest 3. Soft Dollar Relationships 4. Conflicts of Interest

Soft dollars may only be spent on items which directly benefit investment adviser ______. Examples include securities research, subscriptions to research or other securities publications, applicable software, and educational seminar fees.

Customers

The ______ applies to any offering or sale of non-NASDAQ OTC securities priced at $5 bid or lower. These equities are quoted only in the "______".

1. Penny Stock Rule | 2. Pink Sheets

Because these securities are highly speculative, penny stock sales require use of strict ______ determination and ______ prior to the placement of a buy order. In addition, the firm must not only discuss the compensation the ______ received but also the compensation the ______ received.

1. Customer Suitability 2. Risk Understanding 3. Firm 4. Individual Representative

Regarding penny stocks and their suitability requirements, a formal ______ must be furnished to the customer before any transactions are made. The customer must then ______ the form and ______ it to the firm, and the broker/dealer must indicate why it concluded that the customer is ______ to buy these securities.

1. Suitability Statement 2. Complete 3. Return 4. Suitable

The penny stock customer is required to sign the ______ until they become an established customer. The broker/dealer is required to send out the ______ whether or not the customer is established.

1. Suitability Statement | 2. Disclosure Document

A(n) ______ is defined as a customer who has established and funded an account with the broker/dealer for more than a year. The definition also includes a customer who has done ______ trades on ______ different days in ______ different penny stocks with the broker/dealer.

1. Experienced (Established) Customer 2. Three 3. Three 4. Three

The Penny Stock Rule does not apply to ______ investors, ______ trade instructions received from a customer, transactions where the mark-up in the security has not exceeded ______ for ______, nor securities in which the broker/dealer has not made a market for ______.

1. Accredited 2. Unsolicited 3. 5% for 3 Months 4. 12 Months

The ______ is a controversial piece of legislation that enabled a sweeping review of homeland security; addressing several social, economic, and global initiatives to fight and prevent terrorist activities.

Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act

Since the USA PATRIOT Act's enactment, the ______ has required banks, broker/dealers, and several other financial institutions to establish new ______ standards.

1. Financial Crime Enforcement Network (FinCEN) | 2. Anti-Money Laundering (AML)

To secure the goals of the Act, ______ has implemented a(n) ______ that requires the monitoring of all financial transactions and reporting of any suspicious activity to the government, along with prohibited correspondent accounts with foreign shell banks.

1. Financial Crime Enforcement Network (FinCEN) | 2. Anti-Money Laundering (AML) Program

Per FinCEN's AML Program, a comprehensive customer identification and verification procedure requires firms to: 1. Establish ______, ______, and ______ based on an in-house risk assessment. 2. Appoint a qualified ______ responsible for administering the AML program and ensuring all employees are aware of their duties. 3. Provide ______ for applicable employees, producers, and others. 4. Schedule ______ of the program on a regular basis.

1. Policies, Procedures, and Internal Controls 2. AML Compliance Officer 3. Continual Training 4. Independent Testing

Each member must develop and implement a(n) ______ designed to achieve and monitor the member's compliance with the requirements of the Bank Secrecy Act. Each member organization's anti-money laundering program must be approved, in ______, by a member of senior management.

1. Written Anti-Money-Laundering Program 2. Anti-Money-Laundering Program 3. Writing

Successful ______ are required under the PATRIOT Act. As standard procedures, firms must require complete and truthful information for authentication of all customer identities.

Customer Identification Programs (CIPs)

Minimum information that must be collected before account opening is: 1. ______ 2. ______ 3. ______ 4. ______ 5. ______

1. Name 2. Address 3. Date of Birth 4. Location of Birth 5. Social Security Number

The ______ outlines and strengthens the due diligence requirements for financial institutions. It also adds a new requirement for financial institutions to identify and verify the identity of the beneficial owners of legal entity customers who own, control, and profit from companies when those companies open accounts.

Customer Due Diligence Rule (CDD Final Rule)

The CDD Final Rule was issued by ______, a government bureau of the U.S. Treasury Department that oversees and implements policies to detect and prevent money laundering.

Financial Crime Enforcement Network (FinCEN)

Under the CDD Rule, financial institutions must establish and maintain written policies and procedures that are designed to: 1. Identify and verify the identity of ______. 2. Identify and verify the identity of the ______ of companies opening accounts. 3. Understand the nature and purpose of ______ to develop customer risk profiles. 4. Conduct ______ to identify and report suspicious transactions to maintain and update customer information.

1. Customers 2. Beneficial Owners 3. Customer Relationships 4. Ongoing Monitoring

According to the new requirement to obtain beneficial ownership information, financial institutions must identify and verify the identity of any individual who owns ______ or more of a legal entity, and an individual who ______ the legal entity.

1. 25% | 2. Controls

Under the Money Laundering Act, all broker/dealers are required to file ______ to identify and describe suspicious transactions.

Suspicious Activity Reports (SARs)

Deposits, withdrawals, transfers, or any other business deals involving ______ or more are required to be reported via ______ if the financial company or insurer "knows, suspects, or has reason to suspect" that the transaction: 1. Has no business or lawful purpose. 2. Is obtained to exaggerate other reporting constraints. 3. Uses the financial institution or insurer to assist in criminal activity. 4. Is obtained using fraudulent funds from illegal activities. 5. Is intended to mask funds from other illegal activities.

1. $5,000 | 2. Suspicious Activity Reports (SARs)

Some "red flags" to look for in ______: 1. Customer uses fake ID. 2. Two or more customers use similar IDs. 3. Customer changes a transaction after learning that he or she must show ID. 4. Customer conducts transactions so that they fall just below amounts that require reporting or recordkeeping. 5. Two or more customers, trying to evade BSA requirements, seem to be working together to break one transaction into two or more transactions. 6. Customer, trying to evade BSA requirements, uses two or more locations or cashiers on the same day to break one transaction into smaller transactions. 7. When opening the account, the customer is not concerned about the services provided, cost of services, or the securities to be invested in, but is very interested in the firm's AML program.

Suspicious Activity

Relevant SARs must be filed with ______ within ______ of ______. Reporting takes place ______ Form 108.

1. FinCEN 2. 30 Days 3. Initial Discovery 4. FinCEN

If the firm is filing a SAR, they ARE / ARE NOT allows to disclose this action to the subject party.

ARE NOT

FINRA requires member firms and their associated persons to abide by the ______ while opening and servicing their accounts. This involves gathering information about customers by asking specific questions.

Know Your Customer (KYC) Rule

Many the KYC questions are related to ______, including those focusing on investment objectives, experience, and time horizon, as well as age, financial situation, other investments, tax status, liquidity needs, and risk tolerance.

Suitability

For the KYC Rule, the ______ also requires firms to attempt to obtain a customer's name, tax identification number, address, telephone number, date of birth, employment status, annual income, net worth (excluding primary residence), and investment objectives regarding certain accounts.

SEC

Before opening an account, a firm must obtain, at a minimum, the ______, ______, ______, and ______ of a customer.

1. Name 2. Date of Birth 3. Address 4. Identification Number

The ______ was designed to help identify the source, volume, and movement of currency transported into or out of the United States, or deposited in financial institutions.

Bank Secrecy Act (BSA)

The ______ authorizes the U.S. Department of Treasury to require financial institutions to maintain records of financial transactions and to report any suspicious transactions.

Bank Secrecy Act (BSA)

The ______ enforces the BSA.

Financial Crime Enforcement Network (FinCEN) BSA = Bank Secrecy Act

For wire transmittals of funds in excess of ______, broker/dealers must obtain and keep specified information about the transmitter and the recipient of those funds. This information must also be included on the actual transmittal order.

$3,000

For wire transmittals of funds in excess of ______, financial intuitions must verify the identity of persons conducting the transaction.

$10,000

Broker/dealers are required to file a(n) ______ for single transactions involving currency that exceed $10,000, or multiple transactions during any one business day that total more than ______.

Currency Transaction Report (CTR)

CTRs must be filed with the ______ with the Bureau of the U.S. Treasury within ______. Records of these reports must be kept for ______.

1. Financial Crime Enforcement Network (FinCEN) 2. 15 Days 3. 5 Years

Broker/dealers must implement privacy policies to protect ______.

Consumer Nonpublic Personal Information

Consumers must be provided with an initial ______, and those who become customers must receive ______ that detail a broker/dealer's information-sharing policies and inform customers of their rights.

1. Privacy Notice | 2. Annual Privacy Notices

Broker/dealers must establish ______ to ensure that customer records and information are secure, confidential, and protected from unauthorized access or use.

Safeguards

A broker/dealer cannot share a customer's ______ with nonaffiliated third parties, unless: 1. The institution (such as a joint marketer or service provider) provides certain information to the customer. 2. The customer has not elected to opt out of the information-sharing program.

Nonpublic Personal Information

Customers must be given a reasonable means and a reasonable way and amount of time to ______ of sharing with nonaffiliated third parties.

Opt Out

A(n) ______ may include a response link in an email, a prepaid postcard addressed to the broker/dealer, or a toll-free phone number. However, it would not be ______ to require the customer to write a letter or to require to fill out a form to opt out.

1. Reasonable Means | 2. Reasonable

Both the ______ and ______ notices that are sent to customers must include the policies that the firm has in place to protect the security of nonpublic information.

1. Customer Privacy | 2. Opt-Out

______ requires client accounts be kept confidential and that written policy must be provided annually.

Regulation S-P (Privacy)

Per ______, the only reasons to release client account information include: 1. Legal decree or court order. 2. If requested by SEC, IRS, or FINRA.

Regulation S-P (Privacy)

A(n) ______ is an individual who obtains products or services from a financial institution, but who usually has no contact with that institution beyond the one-time delivery of products or services to be used for personal or family purposes.

Consumer

A(n) ______ is an individual or entity with which a financial institution expects to have a continuing relationship.

Customer

As defined by the Telephone Consumer Protection Act (TCPA) of 1991, ______ (______) is a telephone call or message directed toward an individual with whom the marketing organization has no relationship, for the purpose of encouraging the purchase or rental of, or investment in property, goods, or services.

1. Telemarketing | 2. Telephone Solicitation

______ may be initiated when a telemarketer has established a business or personal relationship with another person, or received a consumer's prior express consent in writing.

Telemarketing Calls

No private residence can be contacted before ______ or after ______ (the called party's time), unless specific arrangements were made with the called party.

1. 8 A.M. | 2. 9 P.M.

Any persons that have stated that they do not wish to receive outbound telephone calls made by or on behalf of the ______, or have registered their phone number on the Federal Trade Commission's ______ may not be contacted.

1. Member | 2. National Do-Not-Call Registry

Telemarketers must always identify their ______, ______ of the person or entity on whose behalf the call is being made, and the ______ or ______ at which the person or entity can be contacted.

1. Name 2. Name 3. Telephone Number 4. Address

______, which is the use of information that is unavailable to the general public (______) for the purposes of manipulating or exploiting a market opportunity, is prohibited by law.

1. Insider Trading | 2. Nonpublic Information

The ______ can bring civil action against any inside trader in a federal court. Charges can also be brought against any person who directly or indirectly ______ such a person.

1. SEC | 2. Controls

______ penalties for insider trading violations are determined by the court, and vary according to the circumstances. The maximum penalty is ______ from the use of the information. This is also known as ______.

1. Civil 2. Three Times the Profit Gained or the Loss Avoided 3. Treble Damages

______ penalties for insider trading violations are more severe. The court will determine the penalty that will be imposed on any person who, at the time of the violation, directly or indirectly controlled the person who committed the insider trading violation. Penalties may include ______, ______, and ______. The monetary penalty may be up to ______ for individuals, and up to ______ for corporations. The prison sentence for individuals may be up to ______.

1. Criminal 2. Fines 3. Expulsion 4. Incarceration 5. $5 Million 6. $25 Million 7. 20 Years

The Securities Exchange Act of 1934 defines a(n) ______ as a director, officer, or owner of ______ or more of the stock of a corporation.

1. Insider | 2. 10%

Persons who become insiders are required to notify the ______ within ______ of becoming an insider. Insiders are also required to report changes in their positions within ______ of the change.

1. SEC 2. 10 Days 3. 2 Days

Any ______ must be made public via a press release and disseminated through a wide medium and the appropriate document must be on file with the ______ before anyone can act on the information.

1. Inside Information | 2. SEC

______ result from trades or sales of securities held by a company insider for less than 6 months.

Short-Swing Profits

______ must be paid back to the corporation. However, the insider remains responsible for ______ owed on the profit. This is called a(n) ______.

1. Short-Swing Profits 2. Taxes 3. Disgorgement

The Securities and Exchange Act of 1934 requires that broker/dealers establish, maintain, and enforce written policies to prevent the misuse of ______ by any person associated with the firm.

Nonpublic Information

______ are internal procedures that limit and control the passing of potentially sensitive, nonpublic information between the departments of a firm.

Chinese Walls

In addition to the 1934 Act, there is also the ______, which provides further clarification on the penalties for violating insider trading rules.

Insider Trading and Securities Fraud Enforcement Act of 1988

Firms are required to have a business continuity plan that includes ______. The concept is that since firms are responsible for customer records, assets, and regulatory reporting, they must have plans in place in case ______ strikes. These planes must be updated ______ and approved by ______.

1. Disaster Recovery 2. Disaster 3. Annually 4. Senior Management

As part of the business continuity plan, each firm must have contact information for at least ______ principals available on their website. These contact persons serve as firm spokespersons in case of disaster.

Two

The ______ must provide for backup documentation and storage location. It must also address how trading continues if the firm is shut down due to natural or manmade disaster.

Disaster Recovery Plan

______ rules are generally stricter than ______ rules, although they are very similar, if not identical in most cases.

1. NYSE | 2. FINRA

Both NYSE and FINRA treat ______ more seriously than ______. ______ is mass-media (television and Internet) and is therefore untargeted. ______ is targeted, directed toward existing clients or their friends and relatives.

1. Advertising 2. Sales Literature 3. Advertising 4. Sales Literature

NYSE member firms that provide research must ensure that their research is either written or approved by a(n) ______, Series ______.

1. Supervisory Analyst | 2. 16

Under NYSE rules, the approval of a new account is done by a(n) ______ or a(n) ______ of the firm. Also, the ______ is responsible for keeping track of the customer's positions in the securities whether the customer is long or short. Additionally, the ______ must keep customers positions records by individual security.

1. Partner 2. Principal 3. Registered Rep 4. Registered Rep

Member firms are permitted to hold ______, such as trade confirmations and account statements, if the firm receives a prior ______ from the customer.

1. Customer Mail | 2. Written Request

NYSE member firms must maintain a central file of ______ and ______ customer complaints. Although copies of the complaints are often held at the office where received, the NYSE requires all complaints be placed in the central file at the ______.

1. Written 2. Oral 3. Home Office

Resolution of complaints for an NYSE member firm must be supervised by a qualified ______ who is qualified under Series ______.

1. Principal / Compliance Professional | 2. 14

Upon ______ with an NYSE member firm, an associated person falls under the NYSE constitution and rules. Associated persons with NYSE member firms have an apprenticeship period of ______, in which they are not allowed to communicate with the public.

1. Employment | 2. 120 Days (Four Months)

An employee of an NYSE and FINRA member must receive ______ to open a securities account at another broker/dealer. ______ must be sent to the employing member firm.

1. Written Permission | 2. Duplicate Trade Confirmations

______ is a prohibited practice where a securities professional executes personal or firm trades prior to the client's trade.

Front-Running

______ is a prohibited practice where the investment adviser copies the trades in the client's account.

Shadowing

______ is executing false trades with no change in beneficial ownership to create the illusion of trading volume in a security.

Painting the Tape

A broker buys 20,000 shares at $100 each for himself just before buying a large block of 200,000 shares of the same stock for his client. These transactions drive up the price of the stock share by $1.75. The broker then decides to sell his personal shares at $101.75 each, making $35,000 individual profit and possibly adding costs for his client. What is this practice called?

Front-Running

A customer owns a stock and trades it back and forth with a registered representative numerous times throughout the day. At the end of the day, the customer still owns the stock. This was done to creature the appearance of high traffic in the stock. What is this practice called?

Painting the Tape

An employee of a broker/dealer buys a stock just before the firm's analyst issues a buy recommendation on that stock. What is this practice called?

Trading Ahead of the Public Distribution of Market Research

Registered representatives are never allowed to ______ against loss or ______ profit on any security or strategy.

Guarantee

A registered representative may not offer to ______ a security back at the ______ from a customer if it goes down in value. However, put features and repurchase agreements on exempt securities are allowed.

1. Buy | 2. Original Price

______ is a prohibited practice where a broker/dealer places another broker/dealer between itself and the customer.

Interpositioning

To fill a customer purchase, B/D A instructs B/D B to buy the security and sell to B/D A, who then sells to its customer. The customer pays two sales charges instead of one. What is this practice called?

Interpositioning

An exception to interpositioning is using a(n) ______ in a(n) ______. A(n) ______ is used to protect the identity of the buyer/seller and to get a better price for the customer.

1. Broker's Broker 2. Municipal Trade 3. Municipal Broker's Broker

A(n) ______ trades only with other dealers, on a wholesale basis.

Municipal Broker's Broker

In an instance where a customer needs only a small amount of a bond, the ______ probably achieves a better price because it can combine this small trade into a larger block.

Broker's Broker

In circumstances where a customer is selling a large block, the ______ can achieve a better price by selling small increments to a variety of its contacts.

Broker's Broker

______ is a prohibited trade practice, in which an associated person or a public customer places buy orders either at or just above the strike price to ensure that short put option positions will not be exercised.

Pegging

______ is an attempt to stabilize a stock and keep it from falling by buying calls, selling puts, and buying the stock.

Pegging

______ occurs when an associated person or a public customer puts sell pressure at or just below the strike price, keeping the price from going up. This is designed to ensure that short calls don't get exercised.

Capping

Issuers are not allowed to pay ______ for making markets in their stock. ______ must remain independent and free of bias when trading securities.

Market Makers

The ______ is made up of ______ and creates rules for municipal firms and broker/dealers involved in municipal activities.

1. Municipal Securities Rulemaking Board (MSRB) | 2. 21 Individuals

Although the MSRB writes the rules and regulations, they are simply a(n) ______ and have no ______ authority.

1. Rulemaking Board | 2. Enforcement

The MSRB rules are enforced by ______ and ______. Because munis are traded OTC, ______ is the enforcement authority over NYSE representatives.

1. the SEC 2. FINRA 3. FINRA

MSRB rules require that everyone be ______ and take either the Series ______ or the Series ______ test if they have any responsibility in the firm, other than clerical and ministerial. This includes credit analysts, training personnel, and anyone handling orders, money, or securities, or anyone analyzing or making recommendation, etc.

1. Registered 2. 7 3. 52

MSRB rules also require full and fair disclosure for: 1. ______ of a brokerage working, or associated with, the municipality. 2. ______ of the municipality working, or associated with, the brokerage. 3. ______, such as an adviser serving as an underwriter in a negotiated underwriting, or a firm recommending the municipal bonds to a discretionary account that they have in inventory, or an underwriter submitting orders which may benefit the retail operations of the firm, orders called member or member-related.

1. Control Persons 2. Control Persons 3. Conflicts of Interest

Always remember that in rules and regulations, you should have the point of view of the ______, and, above all, you must be ethical.

Customer

In order for a general securities broker/dealer to engage in municipal activity, it must have at least one ______, qualified with a Series ______. If, however, the broker/dealer's business is limited to doing just municipal fund such as 529 plans, a Series ______ ______ is sufficient.

1. Municipal Principal 2. 53 3. 51 4. Limited Municipal Principal

A full-service municipal firm is required to have at least one Series ______-qualified ______. Registered representatives who sell the full range of investment products including municipals need the Series ______.

1. 53 2. Municipal Principal 3. 7

An individual whose sales activity is limited to exempt securities (municipals and treasuries) ONLY may qualify with the Series ______ ______ exam. A Series ______-qualified representative may ONLY sell management companies (funds) or UITs, which hold municipals or treasury securities.

1. 52 2. Municipal Registered Representative 3. 52

If the municipal firm has cause to discipline an associated person in-house, a report must be made to the SRO if the fine exceeds ______. Also, any arbitration case or any other disciplinary action that exceeds ______ must also be reported to the appropriate SRO.

1. $2,500 | 2. $15,000

MSRB records which must be permanently kept are the same as FINRA's: ______, ______, ______, and ______.

1. Stock Certificates 2. Partnership Papers 3. Articles of Incorporation 4. Minutes of the Meetings Stock certificates Partnership papers Articles of incorporation Minutes of the meetings

The list of MSRB records that must be kept for 6 years is the same as FINRA's (______), plus ______ and ______ where the broker/dealer was the managing or co-managing underwriter.

0. Account Records 1. Customer Complaints 2. Syndicate Records

Customer account information required by the MSRB includes the minimum information required by FINRA (______, ______, ______, and ______), plus the investor's ______, ______, and ______.

1. Name 2. Date of Birth 3. Address 4. Identification Number 5. Tax Status 6. Investment Objective 7. Financial Condition

If a municipal broker/dealer, or a registered representative receives a written customer complaint, the firm is required to send out the ______, which gives the customer a detailed description of their rights or the actions they can take against the firm or its associated persons.

Investor Brochure

Remember that the MSRB does not govern the ______, so be careful of any questions that relates to the MSRB having jurisdiction over a(n) ______.

1. Issuer | 2. Municipality

When issuing new municipal bonds, the issuing municipality often employs a(n) ______. There is potential for ______ here, so the broker/dealer acting in a ______ relationship with the issuer must disclose the relationship.

1. Financial Advisor 2. Conflicts of Interest 3. Financial Advisory

If the issue is a(n) ______, the financial adviser must get the issuer's permission to bid on the offering.

Competitive Bid

In a(n) ______, the adviser must terminate the financial advisory relationship, as well as disclose any conflicts of interest and any remuneration, or underwriting spread, which they've received.

Negotiated Underwriting

The term "______" pertains to the way municipal firms, whether bank dealers or broker/dealers, interact with each other.

Uniform Practices

Municipals trade ______.

Over-The-Counter (OTC)

A(n) ______ is the actual price at which the municipal dealer is willing to buy or sell the securities.

Firm Quote

In the case where the firm is acting as a dealer, a(n) ______ from the offering price is charged. A(n) ______ from the bid price applies when the firm is selling to a customer.

1. Markup | 2. Markdown

If the firm was going to be acting in an agency capacity or as a broker, a(n) ______ would be charged.

Commission

A(n) ______ indicates more information is needed. Also called a(n) ______, these quotes are nonbinding. They are for information purposes only and cannot be represented as a firm quote for the bonds.

1. Subject Quote | 2. Nominal Quote

Sometimes, a dealer gives a quote "out firm for an hour with a five-minute recall." The dealer who is the recipient of this quote has a(n) ______ which is good for a(n) ______, so it can attempt to sell the bonds before it must buy them. However, the dealer who owns the bonds and gave the quote may accelerate the deadline to ______ at any time through this hour.

1. Firm Quote 2. Hour 3. 5 Minutes

A(n) ______ is a likely bid; it is a nonbinding estimate. This quote is used to price a bond for a portfolio or to determine a buyer's interest level before pursuing a more specific, binding quote.

Workable Indication

When quoting a bond yield, it is important to always quote the "______", meaning the lower yield between yield to maturity and yield to call. This yield must be disclosed on the ______.

1. Yield to Worst | 2. Trade Confirmation

Premium bonds generally quote ______. Discounted bonds generally quote ______.

1. Yield-To-Call | 2. Yield-To-Maturity

Only a bond with a(n) ______ is quoted YTC on the confirmation. If the issuer were to call the entire issue in, this would be known as a(n) ______.

In-Whole Call or Make-Whole Call

With a(n) ______, bonds are called through a random or lottery selection. Therefore, there would be no way of knowing if the bonds would be called.

Partial Call or Random Call

______ call features and ______ calls are too uncertain to be quoted.

1. Partial / Random | 2. Catastrophic

A(n) ______ would occur if there were certain acts of nature, such as a hurricane or earthquake, that would destroy the facility. Another type of ______ would occur eminent domain, which happens when the facility is condemned.

Catastrophic Call

Municipal bond dealers report secondary market trades through the ______. MSRB rules require that only trades which actually occurred are reported to the system.

Short-Term Obligation Rate Transparency (SHORT) System

The MSRB requires that the broker/dealer's ______ is disclosed on trade confirmations, along with all the same confirmation disclosure requirements as FINRA.

Phone Number

MSRB rules require that broker/dealers get customers a(n) ______ price, and do not ______ among customers.

1. Fair and Reasonable | 2. Discriminate

The MSRB does not have a 5% guideline and because municipals are ______ they do not have to abide by the FINRA 5% guideline. However, the price must be ______ in light of current market conditions. Remember that customers can often view the last trade in a particular bond on ______.

1. Exempt Securities 2. Fair and Reasonable 3. SHORT

When an investor sells outstanding municipal bonds in the secondary market, the investor must deliver the ______ in order to settle the trade.

Bond Certificates

Bond certificates must be in ______, or ______, form, must be in the proper ______, and must be ______.

1. Deliverable 2. Negotiated 3. Denomination 4. Legible

The name of the ______, the ______, and ______ must be legible on the bond certificates.

1. Issuer 2. Coupon Rate 3. Maturity Date

If any of the required information is missing, the bond certificates are considered ______ and are not in deliverable form.

Mutilated

Bond certificates must contain the ______ and all future interest payment coupons. If the next coupon is missing, a(n) ______ may be attached for that interest payment.

1. Legal Opinion | 2. Check

If the bonds are registered, they must be endorsed by the ______.

Registered Owner

Part of determining municipal suitability is determining the customer's ______. IF the broker/dealer does not know the customer's exact ______, it must determine at a minimum that the customer is in a(n) ______.

1. Tax Bracket 2. Tax Bracket 3. High Bracket

Municipal bonds are not suitable to investors in ______ because they can achieve higher returns in ______.

1. Low Tax Brackets | 2. Taxable Bonds

In addition to tax advantages, ______ must meet the customer's investment objectives, risk tolerance, and investment budget.

Municipal Bonds

MSRB's gift and gratuities rule mirrors the FINRA rules and is limited to ______. However, it is important to remember that ______ is not subject to the limit. For example, a municipal financial professional may take an employee of another broker/dealer out to dinner or a sports event, etc., and spend over the limit.

1. $100 per year per person | 2. Consumption

According to MSRB rules, and written communication is considered ______ except the ______, the ______, and a(n) ______ of the dealer's inventory.

1. Advertising 2. Official Statement 3. Preliminary Official Statement 4. Listing

The official statement and preliminary official statement are both ______ and not considered ______ per the MSRB.

1. Disclosure Documents | 2. Advertising

Because the ______ does not recognize sales literature, all other written communication is considered advertising.

MSRB Aside from official statement, preliminary official statement, and a listing of inventory.

When a municipal broker/dealer receives a(n) ______ from another broker/dealer, it has ______ to validate account securities positions and then ______ to complete asset transfer to the new broker/dealer.

1. Automated Customer Account Transfer Service (ACATS) 2. 3 Days 3. 4 Days

The MSRB requires that municipal account activity is supervised by a(n) ______ with a Series ______. A(n) ______ with a Series ______is required for municipal fund securities such as 529 plans.

1. Municipal Securities Principal 2. 53 3. Limited Municipal Securities Principal 4. 51

At the branch level, municipal securities can be supervised according to their sales function by a Series ______ or ______ ______.

1. 9 2. 10 3. Branch Officer Manager (BOM)

It's important to note that a BOM cannot approve ______. However, BOMs can handle ______, and ______.

1. Advertising 2. Customer Complaints 3. Account Activity BOM = Branch Office Manager

For bank dealers, municipal account activity and all municipal documentation must be supervised by a(n) ______. The bank is also required to have a(n) ______ with a Series ______. Bank dealers, however, are not required to have a(n) ______ with a Series ______.

1. Bank Officer 2. Municipal Securities Principal 3. 53 4. Financial and Operations Principal 5. 27

Municipal Finance Professionals (MFPs) that open an account at another broker/dealer must first get ______ permission. ______ confirmations or statements must be sent to their ______ once the account is opened. These rules are similar to the New York Stock Exchange rules.

1. Employing Dealer's Permission 2. Duplicate 3. Employing Broker/Dealer

A(n) ______ is a disclosure document used for new issues of municipal securities. It is the equivalent of the prospectus.

Official Statement

The MSRB doesn't govern whether the issuer has a(n) ______ or not, they simply govern whether the broker/dealer can ______ the new issue.

1. Official Statement | 2. Sell

If the municipal offering has an aggregate principal price of ______ or less, no official statement is required. Also, if the municipal debt instrument is to mature in less than ______ or has the ability to be tendered every ______, no official statement is required. Finally, if the municipal security has a par value of ______ and is sold to no more than ______ sophisticated investors, no official statement is required.

1. $1 million 2. Nine Months 3. Nine Months 4. $100,000 5. 35

Any control relationship between a municipal broker/dealer and the issuer must be disclosed on ______ as well as ______.

1. Secondary Trades | 2. New Issues

The ______ obtains the CUSIP number for new issues, which stands for ______.

1. CUSIP | 2. Committee on Uniform Securities Identification Procedures

In a(n) ______ underwriting, the CUSIP number is acquired by the winning underwriter when the bid is awarded.

Competitive Bid

In ______ underwriting, the underwriter gets the CUSIP number upon signing the underwriting agreement.

Negotiated

If the bonds are altered in the secondary market, it is the ______ responsibility to assign a new CUSIP to that group of bonds. For example, a put feature may be attached to a portion of the outstanding bonds, allowing investors to sell the bonds back to the broker/dealer or municipality.

Broker/Dealer's

Political contributions must be reported ______. The report is due in the month ______ the calendar ______.

1. Quarterly 2. Following 3. Quarter

A political contribution from a MFP to a candidate creates ______ over the municipality. MFPs must report their contributions to their ______, who then must report to the ______ quarterly.

1. Influence 2. Employing Broker/Dealer 3. Self-Regulatory Organization (SRO)

MFPs can only make contributions to those individuals whom they have the ability to ______, and there is a contribution limit per ______.

1. Vote For | 2. Each Election

If the MFP does not have the ability to vote for the candidate, then the MFP may contribute ______.

Nothing

The municipal broker/dealer is not allowed to contribute to the campaign of any candidate who has ______ over the municipality.

Influence

If an MFP contributes more than ______, or contributes to a candidate that the MFP cannot vote for, the broker/dealer is prohibited from engaging in a(n) ______ for ______.

1. $250 2. Negotiated Underwriting 3. 2 Years

If the MFP who violated the political contribution rule moves to another firm, both the ______ and the ______ cannot be involved in negotiated underwritings for the remaining portion of the ______ period.

1. Old Firm 2. New Firm 3. 2-Year

A municipal broker/dealer is allowed to ______ in bonds it does not own as long as it willing to obtain the bonds if asked, and is not aware that the bonds are no longer available.

Solicit Interest

When a broker/dealer needs information on a bond, it may enter a(n) ______ or a(n) ______. When soliciting transactions, the broker/dealer may request a(n) ______, which is a likely bid in the interest of a sale.

1. Bid Wanted 2. Offer Wanted 3. Workable Indication

The municipal broker/dealer must update its in-house do-not-call list from the national do-not-call list every ______.

31 Days

Each municipal broker/dealer or municipal bank dealer must appoint an individual who is responsible for electronic communication with the ______. This individual must be registered as a(n) ______, either a Series ______ or ______. Communications that are required to be sent to the ______ must be sent within ______ after the end of each calendar quarter.

1. MSRB 2. Municipal Principal 3. 53 or 51 4. MSRB 5. 17 Business Days